PAZ OIL COMPANY LTD YAKUM, Israel, Nov. 22, 2018 /PRNewswire/ -- Paz Oil Company Ltd. (TASE: PZOL), Israel's leading Energy and Retail Group and a supplier of a third of Israel's fuel products, today reported its consolidated results for the third quarter and nine month period ended September 30, 2018.
Management Comment
Yona Fogel, CEO of Paz Group Commented: "We ended the third quarter with relatively good results despite a reduction in the regulated gasoline octane 95 marketing margin in Israel and the significant increase in the price of crude oil. This led to adjusted net income of NIS 139 million, and adjusted EBITDA of NIS 303 million. The refining segment had a good quarter with adjusted operating income of NIS 75 million despite a decrease in the product margins for gasoline, naphtha and LPG, thanks to efficient production that led to an increase in output, and from an increase in diesel margins. This quarter, the off gas recovery (OGR) unit in which we invested NIS 145 million began its operation. The unit which began operating in August contributed about 55 cents per barrel in the third quarter. Compared to the corresponding quarter in 2017, refining profitability decreased. This was primarily due to the impact of Hurricane Harvey in the third quarter of last year, which resulted in record gasoline margins at the time due to a number of refinery closures in the USA.
"The Retail and Wholesale segment contributed approximately 56% of the Group's adjusted operating income and totaled NIS 117 million. We succeeded in moderating the negative impact of the decrease in the regulated gasoline margin by increasing revenues from the Yellow convenience store chain and from rental income. At the same time, we are continuing to develop digital tools and online services as part of the infrastructure required to transform from a company of users, to a company of customers while expanding the number and type of products sold in the Yellow convenience stores and the Yellow online website "Click & Pick".
"In addition, during the quarter, we expanded our Yellow Box services and launched a customer to customer delivery service (C to C) that enables customers to send products to each other. This service is in addition to the service we provide to business owners and companies to send their products to customers through this service (B to C). This is another activity that expands and solidifies our activity in the E-commerce world by providing a solution to the last mile problem through the unique advantage of Paz's prime locations throughout the country. Additionally, we launched the YELLOW app during the quarter, and about 200,000 customers have already downloaded the app and enjoy its services."
Main highlights for Paz Group by Segment
Refining Segment
The adjusted operating income of the Refining segment totaled NIS 75 million in Q3/2018 compared to NIS 108 million in Q3/2017 during which the market experienced relatively higher refining margins, particularly gasoline product margins, due to the impact of Hurricane Harvey in that quarter. During the current quarter, the Refinery maintained a high level of production and operated at an optimum level while maintaining high premiums compared to the benchmark refining margins.
In Q3/2018, the Paz Ashdod Refining margin totaled $8.8/barrel, representing a $3.3/barrel premium compared to the KBC benchmark margin and a $3.7/barrel premium compared to the Ural benchmark margin. The average price of crude oil in Q3/2018 was about $23 higher than the corresponding quarter.
The rise in the price of the barrel hampers the refining results due to the cost of self-consumption and losses derived from the price of crude oil.
The new OGR unit which began operating in Q3/2018, is expected to generate an additional profit of about 40 cents per barrel, which amounts to more than $14 million a year.
Retail and Wholesale Segment
Operating income for the Retail and Wholesale segment in Q3/2018 totaled NIS 117 million compared with NIS 122 million in Q3/2017 despite the reduction of the regulated gasoline marketing margin of NIS 0.05 (5 Agurot) per liter, representing a loss of about NIS 9 million per quarter. Despite the decrease in the regulated marketing margin, the decrease in the segment was only NIS 5 million, thanks to an increase in sales from non-fuel related operations, Yellow and rental income.
The Yellow convenience store chain demonstrated another strong quarter with revenue growth of 6% compared to Q3/2017 which is due to the increase in the number of transactions which already reached about 100,000 per day at Yellow convenience stores. Yellow's revenue for the quarter amounted to NIS 244 million.
Industries and Services Segment
The Industries and Services segment operating income was NIS 36 million in Q3/2018 compared to NIS 42 million in Q3/2017. The decrease is primarily due to Pazgas that suffered from an increase in cost of raw materials and decrease in quantities sold to the Palestinian Authority and to Gaza. Recently, Paz Group won a tender with the Palestinian Authority to continue supplying 50% of its fuel consumption and 85% of its LPG consumption for the next two years.
The decrease is also due to reduced margins and quantities sold by Paz Lubricants which was partially offset by an increase in Paz Aviation Services and Assets. Paz management is working in these companies, as well as across the entire Group, to significantly reduce expenses and to examine new growth opportunities.
Consolidated Statement of Income | |||||
Nine | Nine | Three | Three | Year ended, | |
2018 | 2017 | 2018 | 2017 | 2017 | |
NIS Millions (except per share data) | unaudited | unaudited | unaudited | unaudited | audited |
Revenues | 10,494 | 7,985 | 3,770 | 2,803 | 11,285 |
Cost of Sales | 9,133 | 6,641 | 3,296 | 2,367 | 9,480 |
Gross Profit | 1,361 | 1,344 | 474 | 436 | 1,805 |
Selling and marketing expenses | 712 | 689 | 238 | 234 | 935 |
General and administrative expenses | 110 | 134 | 37 | 49 | 191 |
Other expenses (income), net | (1) | 20 | (1) | 3 | 13 |
Total operating expenses | 821 | 843 | 274 | 286 | 1,139 |
Operating income | 540 | 501 | 200 | 150 | 666 |
Financial income | 42 | 116 | 14 | 5 | 201 |
Financial expenses | 196 | 98 | 42 | 37 | 135 |
Financial income (expenses), net | (154) | 18 | (28) | (32) | 66 |
Income before income tax | 386 | 519 | 172 | 118 | 732 |
Income tax expenses | 82 | 114 | 35 | 28 | 157 |
Net income for period | 304 | 405 | 137 | 90 | 575 |
Attributable to: | |||||
Equity holders of the Company | 302 | 403 | 136 | 90 | 572 |
Non-controlling interests | 2 | 2 | 1 | - | 3 |
Net income for the period | 304 | 405 | 137 | 90 | 575 |
Net earnings per share attributable | |||||
Basic net earnings per share (in NIS) | 29.73 | 39.72 | 13.42 | 8.89 | 56.35 |
Diluted net earnings per share (in NIS) | 29.65 | 39.68 | 13.37 | 8.89 | 56.21 |
The information presented in this press release is presented solely for the convenience of the reader and does not constitute a basis for making any investment decisions or any recommendation or opinion nor is it a substitute for the exercise of judgment by an investor or a potential investor. This press release is presented in a condensed format only and in order to receive a full picture of the Company's operations, the reader is referred to the Company's full reports as submitted to the Securities Authority and to the Stock Exchange.
The Company has included in this press release forward-looking information, as defined in the Securities Law, 1968, in relation to itself and to its investees. Inter alia, such information contains forecasts, objectives, evaluations and estimates, which relate to future events or matters, whose realization is not certain and which are not under the Company's control. Forward-looking information does not constitute a proven fact and it is based solely on the Company's subjective evaluations. When making such assumptions, the Company relied, inter alia, on the analysis of general information available to it at the time of preparing this report, including publicly available information, research work and surveys, which did not contain a commitment as to the correctness or the completeness of the information therein and whose correctness has not been independently tested by the Company. In addition, the realization and/or the non-realization of the forward-looking information will be affected by factors that cannot be evaluated in advance and which are not under the Company's control, including the specific risk factors underlying the Company's operations, as detailed in the periodic report, as well as developments in the general environment and in external factors that affect the Company's operations. Accordingly, even though the Company believes that its expectations, as they appear in this press release, are reasonable, there can be no certainty that the Company's actual results in the future will be in accordance with said expectations, but rather, they may differ from the expectations presented in the forward-looking information presented in this report.
Contact Information:
Omri Arens
Investor Relations and Credit Risk Manager,
Finance DivisionPaz Oil Company, Ltd.
Office: +972-9-8930656
omriar@paz.co.il
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SOURCE Paz Oil Company, Ltd.
