Edited from: “Strategy” and annual report
PKN Orlen will focus on its updated strategy named “the creation of the company’s value” for 2009. The strategy is based on three pillars: continuation of performance enhancing measures, strengthening of core operations in home markets and active searching for new development possibilities in new markets, including mergers and acquisitions. The updated strategy aims at achieving increased financial targets in 2009.
During the first stage of the implementation of PKN Orlen’s strategy it has focused on improving the efficiency and organic growth, this includes:
(1) a change in corporate culture;
(2) restructuring of the Orlen group and implementation of segment management;
(3) restructuring and optimisation of the retail network;
(4) implementation of a new cost optimisation programme “OPTIMA”;
(5) successful integration of Unipetrol;
(6) implementation of Orlen Deutschland development plan; and
(7) completion of investment projects with high rates of return in key areas of activity.
One of PKN Orlens’s priorities was the integration with the Czech company Unipetrol. The implementation of the “partnership programme”, developed as a part of the integration process, generates extra synergy and benefits on the part of the company.
Following an analysis of different options, the company has started to implement a restructuring plan for Orlen Deutschland, a company managing the company’s German assets. As a part of the Orlen group restructuring, the company is planning to continue to sell non-core assets, including Polkomtel’s shares. PKN Orlen plans to sell its shares in Polkomtel in accordance with the adopted strategy.
The updated strategy envisages that over the next few years, more emphasis will be put on non-organic development. It is going to actively participate in mergers and acquisitions, although the number of potential targets is limited due to progressing consolidation in the industry.
The company will turn its attention to the markets of central, eastern and southern Europe. It will implement investment projects and make acquisitions forming the basis for the growth of value, only if strict investment assessment criteria are fulfilled.
Within the context of the implementation of the strategy for the development of operations in new markets with a considerable growth potential, it will continue to look for new attractive investment targets in the field of refining assets.
PKN Orlen believes that what gives the company a “strong competitive edge” is its long-term development of petrochemical operations. Positive macroeconomic trends and consumption forecasts for this segment, coupled with the integration of its petrochemical and refining operations is said to constitute an “essential element” of its competitive advantage.
Key areas of the “new” strategy
(1) Continuation of the cost-cutting programme;
(2) Group restructuring and implementation of segmental management;
(3) Retail network restructuring and optimisation by 2009;
(4) The prevention of further decline in market share and subsequently winning a 30% market share;
(5) Orlen Deutschland should be either developed to reach critical mass or considered for disposal;
(6) Management aimed at shareholder value creation and introduction of a performance-based employee compensation system; and
(7) New investment projects to be tested against stringent internal rules and criteria, to account for the projected rise in demand for diesel and mid-distillates, and, later, the projected market demand for petrochemicals (subject to further analysis).
Key projects and initiatives in the petrochemical segment
(1) Capital expenditure includes, among others, investments in capacity increase through installation of paraxylene (PX) and purified terephthalic acid (PTA);
(2) Increase of EBITDA share in total EBITDA of PKN Orlen group to 37% in 2009;
(3) Stream cracker expansion (Chemopetrol);
(4) Control system modernisation (Chemopetrol); and
(5) A new butadiene unit (Kaucuk).
Key projects and initiatives in the chemical segment
(1) Investment in polyvinyl chloride (PVC) (Spolana);
(2) Increase of storage capacity for PVC (Spolana);
(3) Increase of production capacity PVC (Anwil); and
(4) Increase of storage capacity (Anwil).
Please also see PKN Orlen to raise bioethanol output by 70% in 2010 and PKN Orlen hopes to raise Zl5.3bn from asset sale on ICIS news.
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Financial highlights: PKN Orlen, year ended 31 December
| | 2008 | 2007 | 2006 | 2005 | 2004 |
| Sales (PLN m) | 79,535 | 63,793 | 52,868 | 41,188 | 30,680 |
| EBIT (PLN m) | 758 | 2,604 | 2,577 | 4,948 | 2,687 |
| Net Profit (PLN m) | -632 | 2,480 | 2,060 | 4,638 | 2,538 |
| Total Assets (PLN m) | 49,286 | 46,103 | 45,419 | 33,404 | 20,869 |
| Diluted earnings per share (PLN) | -0.56 | 6.45 | 5.14 | 10.84 | 5.93 |
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PKN Orlen
Company Structure
Polski Koncern Naftowy (PKN) Orlen is one of the largest refiners of crude oil in Poland and Central Europe and a manufacture of petrochemicals and plastics. PKN Orlen was created from the merger, which took effect in September 1999, of PKN (formerly Petrochemia Plock), the largest crude oil refiner and manufacturer of petrochemical products in Poland, and CPN, supplier of motor fuels in Poland. On 19 May 1999, the general shareholders' meetings of each of Petrochemia and CPN adopted resolutions approving the merger by way of transfer of all of the assets and liabilities of CPN to Petrochemia. On 7 September 1999, CPN was deleted from the Commercial Register in Warsaw and the merger process was completed. On 12 April 2000, the dominant entity changed its name to PKN Orlen.
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