Moody's upgrades Poland's Orlen on improved operating performance

06 November 2013 16:30  [Source: ICIS news]

LONDON (ICIS)--Moody's has upgraded its issuer rating on Polish oil and petrochemicals group PKN Orlen to Baa3 from Ba1 noting its improved operating performance and financial metrics despite a challenging operating environment, the rating agency said on Wednesday.

In its report on the upgrade, which also changed the rating outlook on Orlen to 'stable' from 'positive', Moody's said, “Since the downturn of 2009, PKN Orlen's operating profitability has recovered to healthier, albeit lower than pre-crisis, levels.

“This has benefited from robust petrochemical volumes (boosted by the commissioning of a new paraxylene [PX] and PTA [purified terephthalic acid] plant in Plock) and margins, as well as resilient contributions from retail activities underpinned by volume growth, which partially offset downward margin pressure,”the agency added.

Moody's said “Moody's notes that PKN Orlen's financial results have continued to fluctuate significantly quarter on quarter. This has reflected persistent volatility in refining margins, Ural-Brent differentials and petrochemical margins.”

State-controlled Orlen has set plans in its 2013-17 strategy to improve its core business while expanding into the energy and upstream sectors, Moody’s noted.

Orlen's total capital expenditure (capex) budget for 2013-17 is zloty (Zl) 22.5bn ($7.2bn,  €5.4bn), but this is split into Zl 7.4bn of maintenance capex, Zl 8.2bn of growth capex and Zl 6.9bn of discretionary accelerated growth capex, it added.

“Should the macro environment prove tougher than Orlen's strategy plan assumes, Moody's expects that the group would curtail its accelerated growth capex... in order to keep with management's conservative financial objectives,” Moody's said.  

($1 = €0.74, $1 = Zl 3.11, €1 = Zl 4.18)

By: Tom Brown
+44 208 652 3214

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