interim report january - june 2004...shipping and other oil fortum´s january - june 2004 •good...
TRANSCRIPT
Interim ReportJanuary - June 2004
28 July 2004
28 July 2004 2
Very strong first six months
• Financial performance improved significantly– Positive development throughout the Group
• Operating profit up by 32%, excluding non-recurring items up by 22%
• Earnings per share up by 55%
• Net debt down by 333 million (compared to year-end), gearing decreased to 76%
• Preparations to list the oil businesses continued.
Comparison: January - June 2003
328 July 2004
Strong variations in market prices
• Decrease of 29% in Nord Pool price of electricity– averaging EUR 29.1 (40.9) per MWh.
• Increase of 62% in the oil refining reference margin– averaging USD 4.7 (2.9) /bbl
• Increasing price of crude oil– averaging USD 35.3/bbl in Q2, USD 32.0 in Q1 2004
Comparison: January-June 2003
428 July 2004
Nord Pool Market Price of Electricity
0102030405060708090
100110
2003
EUR / MWh
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004
528 July 2004
International oil refining reference margin
2003 2004
-2
0
2
4
6
8
10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
USD/bbl
Brent Complex refinery in NW Europe
6
Crude oil price
20
22
24
26
28
30
32
34
36
38
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42003 2004
USD/bbl
Brent dated
728 July 2004
Significant performance improvement
Operating profit EUR 1,005 (761) million
Earnings per share EUR 0.76 (0.49)
Net cash from operating activities EUR 1,043(1,060) million
Net debt EUR 5,293 (5,626 at the end of 2003) million
Return on capital employed 13.3% (LTM)Return on shareholders´ equity 14.7% (LTM)
Gearing 76% (85% at the end of 2003)
828 July 2004
Further strategic steps
• Agreement of the purchase of additional shares in Lenenergo
• Preparations to list the oil businesses continued
• Investment to add sulphur-free diesel production proceeded
• Divestments of non-core businesses- ETV-Eröterv and Fortum Teknik och Miljö- Partnership between Neste Engineering and Jacobs Engineering
24 July 2003
Focus on the Nordic area
928 July 2004
Water & snow reservoirs in Norway & Sweden week 29/2004
40
50
60
70
80
90
100
110
120
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
rese
rvoi
r con
tent
[TW
h]
1996 2001 20022003 2004 reference level
1028 July 2004
Nordic Power Market Prices (EUR)
0
20
40
60
80
100
120
1/19
95
1/19
96
1/19
97
1/19
98
53/1
998
52/1
999
52/2
000
52/2
001
52/2
002
52/2
003
52/2
004
51/2
005
51/2
006
51/2
007
EUR
/ M
Wh
Actual System Price Forward Prices 21 July 2004
1128 July 2004
Power GenerationFortum´s January - June 2004
Fortum´sNordic Power GenerationTWh
0
5
10
15
20
25
30
Q1-Q2 2004 Q1-Q2 2003
Hydro Nuclear Thermal
27.4 26.7
• Group´s Nordic power generation up by 3%, share 14% (14%) of Nordic consumption
• Increase of 2% in hydro power production, still under normal level
• Group´s Nordic sales of electricity unchanged, market share 15% (15%)
• Price of electricity sold by Fortum downby 6%, price of Q2 up by 4% compared to Q1 2004.
Comparison: January - June 2003
1228 July 2004
Power Generation
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 1,052 1,533
Operating profit 366 328- excl. non-recurring items 344 329
Net assets 6,188 6,276
RONA, % 11.7 10.3
Business units:Generation, Portfolio Management and Trading, Service
+ flexible production portfolio, successful hedging, internalefficiency improvements
- lower market prices for electricity
1328 July 2004
HeatFortum´s January - June 2004
Fortum´sHeat sales by areaTWh
0
5
10
15
20
Q1-Q2 2004 Q1-Q2 2003
Sweden Finland Other countries
12.3 12.0
• Heat sales up by 3%, 12.3 (12.0) TWh
• Sales of electricity produced in CHP plants up by 4%, 2.7 (2.6) TWh
• A number of new heat contracts in Finland
• Investments in Sweden progressed as planned.
Comparison: January - June 2003
1428 July 2004
Heat
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 556 540
Operating profit 134 99- excl. non-recurring items 134 99
Net assets 2,393 2,302
RONA, % 11.0 8.5
Business units: Heat, Värme
+ positive development of Fortum Värme
1528 July 2004
• 1,375 (1,360) thousand customers
• Electricity transmitted in distribution networks up by 2%
• Electricity transmitted in regional networks down by 14%, 9.6 (11.1) TWh
• Unchanged tariffs
• Major project to reduce the risks for outages in western Sweden
DistributionFortum´s January - June 2004
Comparison: January - June 2003
Fortum´sElectricity Transmission inDistribution NetworksTWh
0
5
10
15
Q1-Q2 2004 Q1-Q2 2003
Sweden Finland Norway Others
11.6 11.4
1628 July 2004
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 363 359
Operating profit 141 142- excl. non-recurring items 141 121
Net assets 3,103 3,046
RONA, % 9.1 9.0
Business unit: Distribution
Distribution
+ internal efficiency measures
1728 July 2004
SwedenFinlandNorway
1.1 millionelectricitycustomers• private• business• electricity
companies
MarketsFortum´s January - June 2004
• Sales of electricity volumes down by 9%, 22.4 (24.5) TWh
• Reduction of retail prices in the spring
• New products based on specific customer expectations
Comparison: January - June 2003
1828 July 2004
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 722 890
Operating profit 15 5- excl. non-recurring items 15 5
Net assets 177 124
RONA, % 25.2 12.7
Business Unit: Markets
+ better risk management, improved business processesand cost reductions
- lower margins
Markets
1928 July 2004
Refining margins in North West Europemonthly averages
-2.0
0.0
2.0
4.0
6.0
8.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
USD/barrel
Average refinery in North West Europe
Product prices: cargoes NWE FOB
2028 July 2004
Oil Refining Fortum´s January-June 2004
• International reference marginUSD 4.7 (2.9)/bbl, up by 62%
• Strong own premium margin
• 5% increase in sales volumes
• Production of a bio component for gasoline started in Porvoo
• Porvoo investments progressed as planned to add
- sulphur-free diesel production- synthetic type of EHVI lube oil
component
Comparison: January - June 2003
FortumBrent complex
USD/bbl
0
1
2
3
4
5
6
19951996199719981999 2000 20012002 2003
Refining Margins
2128 July 2004
+ strong refining margin, favourable product slate, excellent availability at the refineries, inventory gains
- a weaker US dollar
Oil Refining
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 2,938 2,962
Operating profit 280 135- excl. non-recurring items 215 149
Net assets 1,111 1,075
RONA, % 52.2 24.5
Business units: Oil Refining, Components
2228 July 2004
Oil RetailFortum´s January - June 2004
Retail Outlets30 June 2004
• Total retail sales of main products 1,897 (1,908) thousand cubic metres
• Sales of traffic fuels up by 5%1,245 (1,183) thousand cubic metres
• Launching sulphur-free gasoline and diesel in Finland
• Number of outlets 887 (895) in Finland, 160 (147) in other countries in the Baltic Rim
887Finland
Russia30
Estonia30
Latvia31
Lithuania28
Poland41
Comparison: January - June 2003
2328 July 2004
Oil Retail+ increased volumes of traffic fuels- lower margins
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 1,097 1,107
Operating profit 26 25- excl. non-recurring items 20 24
Net assets 281 285
RONA, % 17.5 16.0
Business unit: Oil Retail
2428 July 2004
Shipping and other OilFortum´s January - June 2004
• Good shipping freight rates, very strong for crude oil during the first quarter
• High utilisation rate of fleet
• Total deliveries 20.1 (20.4) million tonnes
• Share of oil production in Russia (SeverTEK) about 13,000 bbl/d
Shipping Freights for Crude Oil
Actual 2003 Actual 2004
North sea/Cont Aframax 80 000t
80
130
180
230
280
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
WS
Source: Brokers' consensus
Comparison: January - June 2003
2528 July 2004
Shipping and other Oil + high freight rates, good utilisation rate of fleet- a weaker US dollar
EUR million Q1-Q2 2004 Q1-Q2 2003
Net sales 179 181
Operating profit 67 46- excl. non-recurring items 63 49
Net assets 168 139
RONA, % 88.7 66.7
Business unit: Shipping
2628 July 2004
Income statement
MEUR Q1-Q2/04 Q1-Q2/03 2003
Net sales 5 653 6 028 11 392
Expenses -4 648 -5 267 -9 972
Operating profit 1 005 761 1 420
Financial expenses, net -142 -135 -236
Profit before taxes 863 626 1 184
Income taxes total -194 -167 -325
Minority interests -20 -47 -90
Net profit for the period 649 412 769
EPS (EUR) 0.76 0.49 0.91Return on capital employed,(%) 16.1 12.1 11.4Return on shareholders equity,(%) 19.4 11.9 12.3
2728 July 2004
Operating profit
MEUR Q1-Q2/04 Q1-Q2/03 2003Power Generation 366 328 603Heat 134 99 173Distribution 141 142 247Markets 15 5 35Oil Refining 280 135 281Oil Retail 26 25 44Shipping and other Oil 67 46 79Other -24 -19 -42Fortum Group 1,005 761 1,420
2828 July 2004
Balance sheetMEUR June 30 June 30 Dec 31
2004 2003 2003
Fixed assets and otherlong-term investments 14,235 13,908 14,172Current assets 2,005 2,586 2,390ASSETS 16,240 16,494 16,562
Shareholders' equity 6,709 6,027 6,406Minority interests 250 1,434 232Interest-bearing liabilities 5,489 5,168 6,065Interest-free liabilities 3,792 3,865 3,859EQUITY AND LIABILITIES 16,240 16,494 16,562
Gearing (%) 76 60 85Equity per share (EUR) 7.89 7.13 7.55
2928 July 2004
Cash flow statementMEUR June 30 June 30 Dec 31
2004 2003 2003Net cash from operating activities 1,043 1,060 1,577Capital expenditures -248 -244 -550Acquisition of shares -30 -503 -570Proceeds from sales of fixed assets 29 80 142Proceeds from sales of shares 16 1,219 1,227Change in other investments -136 -32 -67
Cash flow before financing activities 674 1,580 1,759Net change in loans -562 -1,204 -399Dividends paid -359 -264 -264Other financing items 2 -40 -1,245
Net cash from financing activities -919 -1,508 -1,908
Net increase (+)/decrease (-)in cash and marketable securities -245 72 -149
3028 July 2004
Outlook for power and heat businesses
• Annual Nordic electricity consumption predicted to increase by about 1% over the next years.
• Improved operational efficiency
• In July, Nordic electricity forwards for the rest of 2004 have been EUR 32 - 35 per MWh. Fortum´s hedging for the next 12 months is approximately 60%
• Good position considering possible impacts of emissions trading
3128 July 2004
• The July average oil refining reference margin has been at the level of USD 7 /bbl.
• Fortum´s premium margin in 2004 is expected to remain at the strong levels of previous years.
• No major maintenance shutdowns planned atthe refineries during 2004.
• Hedging mitigates the negative impact of weakened US dollar
Outlook for oil businesses
3228 July 2004
Potential to excel
• Very strong first six months
• Structures in place
• Well performing businesses
• Strong cash flow
• Fair market outlook
• New opportunities by listing the oil businesses
Further strengthened confidence in 2004 as a good year