The activities of the oil and liquefied natural gas (LNG) terminal operator KN in 2020 were mostly affected by the slowdown in the global economy caused by the coronavirus pandemic, leading to a drop in demand for petroleum products and stabilizing oil refining margins in record lows. Despite these global challenges, according to unaudited data, the KN group managed to secure similar revenue as in previous years and earned 10.4 million EUR adjusted net profit.
According to unaudited data, in 2020 the KN group earned 80.5 million EUR income, while in 2019 the revenue of the KN group amounted to 104.4 million EUR. However, the decisions made by the KN to reduce the security supplement of the LNG terminal, which amounted to 26.8 million EUR per year, had the largest impact on the decrease in revenue, which directly decreased KN revenue.
Adjusted net profit of KN group in 2020 amounted to 10.4 million EUR while the KN's adjusted net profit a year ago was 12.7 million EUR. Adjusted EBITDA for 2020 was 50.3 million EUR (71 million EUR in 2019).
Assessing only the Q4 of 2020, the KN group had 1.5 million EUR adjusted loss (adjusted profit of 5.4 million EUR a year ago). This result was mainly influenced by the reduced volumes of oil product handling due to the pandemic effect and, accordingly, revenues from this segment. The financial result was also affected by the effect of deferred income tax due to the application of IFRS 16 “Lease”. Adjusted EBITDA of KN group in October-December 2020 was 11.4 million EUR (20.5 million EUR for a comparative period a year ago). KN group’s revenue in 2020 amounted to 19.7 million EUR in the Q4.
"Looking at the past year, firstly, we would like to emphasize those positive things that have been achieved in this complicated business environment. We ensured the continuity of our activities, avoided coronavirus outbreaks in the organization and at the same time achieved quite a good result in terms of business – each of the terminals we manage operated at a sufficiently high utilization level and contributed to a profitable result. Unfortunately, with the start of 2021, we still have to say that the coronavirus pandemic will continue to affect the refining segment and the energy sector as a whole. The likelihood of a rapid recovery will depend directly on the pace of vaccination in key consumer markets and the associated growth forecasts for demand. Therefore, 2021 will remain a challenging period not only for us, but also for a large part of other businesses,” says Darius Šilenskis, CEO of KN.
KN CEO notes that the year is memorable not only for business results, but also for the company's internal achievements. "We started the year with important achievements – a new business strategy until 2030 was adopted, and we also became the operator of a terminal in Brazil and thus took a strong new step in international business. Even in the pandemic year, with part of the organization working remotely, we implemented several LEAN instruments, and ended the year with three ISO certificates confirming that quality, environmental, occupational health and safety management systems of KN meet international standards. The results of the annual survey of employees show that the implementation of LEAN has been assessed as one of the most positive organizational changes,” adds D. Šilenskis.
However, the 2021 for the KN group will also be challenging. At the end of the last year, KN received a notification from the Belarusian company BNK (UK) about the temporary suspension of the export of oil products by concluding new contracts through the KN terminal in Klaipeda. The nature of the tenders announced by the Belarusian refineries in January shows that Klaipeda is not mentioned as a possible alternative to the export of products. Belarusian oil cargo in February or subsequent periods is not nominated through KN-operated oil terminals.
"In 2021 we no longer expect for stable Belarusian product transhipment through KN oil terminals, which inevitably puts pressure on KN's business performance and, accordingly, our efforts to continue the process of streamlining and improving operations in order to further diversify operations and compensate for potential losses through alternatives to other services and cost savings. We will have to transform our activities faster than we expected in the initial strategic assumptions, so the challenge for the organization is really big. At the same time, this situation confirms that the long-term strategy we have adopted is the right one and that the main strategic goal remains the same - KN must have several equivalent activities that contribute to shareholder return, thus reducing the potential short-term negative impact on one or another business segment,” D. Šilenskis emphasizes.
Depending on the circumstances, KN will review its investment plans this year, deferring investments that are not related to business continuity, undertake other projects related to cost reduction and operational efficiency, and work on diversifying the portfolio of services and products.
Main financial indicators of the Group comparing 12 months of 2020 and 2019:
|
|
Financial results for 12 months of 2020 |
Change, compared to 12 months of 2019 |
Adjusted results for 12 months of 2020 |
Change, compared to12 months of 2019 |
|
Revenue |
80.5 million Eur |
-22.9% |
80.5 million Eur |
-22.9% |
|
Net profit |
32.9 million Eur |
4.3 times |
10.4 million Eur |
-18.0% |
|
EBITDA |
72.9 million Eur |
10.7% |
50.3 million Eur |
-29.1% |