52 slides from Turkiye Petrol Rafinerileri A.s's investor presentation, August 2019
Slide 1: Investor Presentation August 2019
Investor Presentation Investor Presentation August 2019 www.tupras.com.tr Hizmete Özel / Confidential Hizmete Özel / Confidential
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by a variety of variables and c
Slide 3: Content
Content • Refining Market Slides 4-10 • Turkish Market Slides 11-14 • Company Overview Slides 15-19 • Operations Slides 20-24 • Key Financials Slides 25-39 • Outlook Slides 40-45 • Appendix Slides 46-51 Investor Presentation www.tupras.com.tr CONTENT 3
Slide 4: Refining Market
REFINING MARKET = NE Bw
Slide 5: Brent Crude Oil Prices ($/bbl)
Brent Crude Oil Prices ($/bbl) Brent 100 90 PROS 80 • OPEC+ supply cut 70 • Political instabilities in Middle East, Africa and Latin America 60 54.5 • Impact of sanctions 55.2 50 40 30 CONS • Increase in shale production in US 20 • Inventory Levels 10 • Impact of trade disputes • Weak PMI in Europe
Slide 6: Refinery Capacity Change (mb/d)
Refinery Capacity Change (mb/d) 2012-2018 Net Capacity Additions by Region 2019-2024 Net Capacity Additions 2.7 Asia & Middle East Other Europe -1.4 1.9 2.0 N. America 0.2 1.5 Japan -1.0 Other 1.3 0.5 0.5 Other Asia 0.5 Middle East 1.7 2019 2020 2021 2022 2023 2024 India 1.0 China 2.1 2019-2024 Addi
Slide 7: Middle Distillate Cracks ($/bbl)
Middle Distillate Cracks ($/bbl) 2016 2017 2018 2019 20 Diesel 19.5 Jet Fuel 20 18.1 16.2 15.9* 15.5 14.9 15.0 14.3 15.0 16.1* 15 14.1 15.9 14.1 14.8 13.6 13.7 15 14.4 14.4 14.4 13.7 13.9 12.6 12.9 13.2 15.2 12.1 12.2 13.6 14.4 11.4 13.8 14.3 11.5 13.3 12.2 13.2 11.2 10.4 12.5 11.9 11.4 10 10.9 10.0
Slide 8: Gasoline and High Sulphur Fuel Oil Cracks ($/bbl)
Gasoline and High Sulphur Fuel Oil Cracks ($/bbl) 2016 2017 2018 2019 Gasoline High Sulphur Fuel Oil 20 0 18.6 -3.7 -5.0 14.7 14.4 -5 -5.5 15 13.0 13.1 -7.0 -6.9 12.1 13.5 12.0 12.1 11.9 -8.6 13.4 13.4* -8.5 -6.8 -9.1 10.6 10.2 10.0 -8.7 -8.3 9.6 10 9.0 -10 -9.1* 9.7 -9.8 -10.2 9.4 -11.9 -12.5 -12.7
Slide 9: Quarterly Crack Margin Comparison in 2015 – 2019 ($/bbl)
Quarterly Crack Margin Comparison in 2015 – 2019 ($/bbl) Compared to Q2 2018, Mid-distillate (Diesel: -12%, Jet -22%) and Gasoline (-17%) performed weaker in Q2 while HSFO (+20%) cracks were stronger. Diesel Jet 16.8 15.9 15.4 Slow down in economic 13.9 14.6 13.8 13.8 Lower Asian air traffic activit
Slide 10: Crude Price Differentials to Brent ($/bbl)
Crude Price Differentials to Brent ($/bbl) Heavy crude differentials continued narrowing in Q2 with lower availability mainly due to OPEC+ cuts, Iran sanctions and limitations on Venezuelan supply. Ural and CPC differentials both widened in June due to ample oil supplies in the European Market. 2 Ar
Slide 11: Turkish Market
TURKISH MARKET
Slide 12: Turkish Consumption 2015-2018 (Million tons)
Turkish Consumption 2015-2018 (Million tons) Diesel Jet Fuel 2018 23.58 2018 4.99 -2.4% +10.4% 2017 24.17 2017 4.52 +8.3% +2.7% 2016 22.31 2016 4.40 +8.5% -3.9% 2015 20.56 2015 4.58 0 4 7 11 14 18 21 25 Gasoline Fuel Oil* 2018 2.34 2018 0.39 +1.8% -20.1% 2017 2.30 2017 0.49 +3.1% -15.7% 2016 2.23 20
Slide 13: Turkish Market, 5M 2019 (Million tons)
Turkish Market, 5M 2019 (Million tons) Diesel contracted in the first 5M of 2019. Diesel Jet Fuel* -7.4% 2019 5M 1.86 +3.0% 2019 5M 9.28 2018 5M 1.80 2018 5M 10.03 0 1 1 2 2 3 3 0 2 4 6 8 10 12 Gasoline Fuel Oil** 2019 5M 0.91 +1.1% 2019 5M 0.21 +11.3% 2018 5M 0.90 2018 5M 0.19 0 * Transit flight co
Slide 14: Turkey’s Import / Export Balance (Net)
Turkey’s Import / Export Balance (Net) (Million Tons) 2013 2014 2015 2016 2017 2018 4 Export 2.4 2.4 1.0 1.4 0.0 0 -0.4 -4 -3.1 -3.2 -8 Import -12 -12.0 -13.6 -16 LPG Gasoline Diesel Fuel Oil Jet Investor Presentation www.tupras.com.tr REFINING INDUSTRY 14
Slide 15: Company Overview
COMPANY OVERVIEW
Slide 16: Tüpraş Shareholder Structure
Tüpraş Shareholder Structure *Distribution of Domestic/ Foreign Ownership of Tüpraş Energy Investments Inc. (SPV) Shares Domestic Ownership 16% Free Float 84% Foreign Ownership *As of December 31st, 2018. Investor Presentation www.tupras.com.tr COMPANY OVERVIEW 16
Slide 17: Tüpraş Refining Assets & Distribution Network
Tüpraş Refining Assets & Distribution Network Turkey Storage Capacity Tüpraş : 50% Opet : 7% Other Companies : 43% Total Capacity : 30.0 mn ton Nelson Complexity : 9.5 Tüpraş Storage Cap. : 7.0 mn m3 OPET Storage Cap. : 1.0 mn m3 İzmir İzmit Kırıkkale Batman • 11.9 MT Capacity • 5.4 MT Capacity • 11
Slide 18: Nelson Complexity of Refining Companies
Nelson Complexity of Refining Companies Investor Presentation www.tupras.com.tr COMPANY OVERVIEW 18
Slide 19: Tüpraş Subsidiaries
Tüpraş Subsidiaries OPET, Distribution, Tüpraş Share: 40% DİTAŞ, Marine Transport, Tüpraş Share: 79.98% 1,635 stations as of 30 June 2019 3 Crude Oil Tanker: 480,859 DWT As of May 2019 Market share: 18.6% in white products; 28.5% in black 1 Crude Oil - Product Tanker: 51,532 DWT products 9
Slide 20: Operations
Slide 21: Crude Suppliers of Tüpraş
Crude Suppliers of Tüpraş In 2018, Tüpraş purchased 20 different types of crude oil from 12 countries, with gravities ranging between 19-47 API. Crude oil imports by region (%) 90 Africa America Europe CIS Middle East 80 81 79 76 70 71 65 67 60 63 50 40 30 20 17 10 12 1315 1311 14 14 14 10 10 10 10
Slide 22: Q2 Product Yields
Q2 Product Yields 2018 2019 LPG LPG Asphalt 4% Asphalt 4% 14% 10% Gasoline Gasoline 20% 20% Fuel Oil Fuel Oil Black Black Kok 10 Kok 3% Prod. Prod. 3% 2% 21.7% Light Distil. Other 20.9% Light Distil. Other Naphtha 23.7% Naphtha Other 25.1% 3% Other 1.6% 1% 1% 1.6% 3.2% Mid. Mid. Distil Distil . . Je
Slide 23: Capacity Utilization and Quarterly Production Volume
Capacity Utilization and Quarterly Production Volume 96.5% capacity utilization was achieved in Q2 2019 despite RUP maintenance. Quarterly Production Quarterly (Million Production (Million Tons)Tons) Capacity CapacityUtilization* Utilization (%) (%) 2015 2016 2017 2018 2019 Crude Oil Semi Product Fe
Slide 24: Sales (Million Tons)
Sales (Million Tons) Tüpraş generated 29.8 million tons of total sales 2018. Jet fuel and diesel sales increased by 7.4% and 5.3% compared to 2017, respectively. Bitumen; Customer Export; 10% Military; 30.3 31.5 14% 1% Total Sales 30.25 28.7 29.8 Groups 5.5 5.8 4.2 24 22.2 6.5 Other; 6% 24.8 25.7 25
Slide 25: Key Financials
Slide 26: Margin Environment ($/bbl)
Margin Environment ($/bbl) Tüpraş’ 3.5 $/bbl Net Refining Margin in H1 2019 was higher than 2.7 $/bbl Med Complex margin. 12 Med Complex Month Premium to the benchmark Mediterranean 10 Annual peers’ refining margin due to: 8 6 5.5 5.4 4.8 4.6 4.2 4.0 • Refined products deficit characteristic to 4 2.
Slide 27: Income Statement (Million TL)
Income Statement (Million TL) We generated 1.5 bn TL EBITDA and 870 mn TL net income in Q2 2019. Q2 Q2 6M 6M % % 2019 2018 2019 2018 Net sales 23,953 20,081 19% 44,661 33,502 33% COGS -22,282 -17,860 25% -41,998 -30,212 39% Gross Profit 1,671 2,221 -25% 2,662 3,290 -19% Operating Expenses -420 -277
Slide 28: Financial Highlights
Financial Highlights Tüpraş generated 851 MTL EBITDA in Q1 2019. EBITDA (mn TL) Net Income* (mn TL) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 8,908 3,812 3,713 1,887 493 5,882 2,550 992 1,766 1,237 3,778 1,793 3,799 3,396 815 1,528 1,457 542 1,208 2,346 750 803 1,505 1,542 2,210 495 1,144 1,495 1,027 867 710 581 1,08
Slide 29: Balance Sheet Analysis
Balance Sheet Analysis Tight balance sheet management improved working capital. Net Debt (Billion TL) Redemption Schedule (Billion TL) Loan Eurobond TL bond 12.0 10.6 10.1 7.5 6.9 6.2 6.1 4.0 4.4 1.6 1.5 1.0 Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 1 year 1-2 years 2-3 years 3-4 years 4-5 years Ove
Slide 30: Q2 Profit Before Tax Bridge (2018-2019)
Q2 Profit Before Tax Bridge (2018-2019) Decline in profit before tax was driven by weaker cracks, narrower differentials and RUP maintenance. Million TL Investor Presentation www.tupras.com.tr 30
Slide 31: 2018 Profit Before Tax Bridge
2018 Profit Before Tax Bridge 2018 PBT was lower mainly due to Crude Oil Differential and Crack Margin impacts. With the help of FX based pricing, FX losses incurred from payables were recovered with Inventory Gains. Million TL 311 660 2.129 , 293 1.779 , 164 4.474 , 3.724 , 2017 Inventory Gain Crac
Slide 32: Dividend (TL)
Dividend (TL) 18 Earings per Share Gross Dividend Total Payout 4500 16 One of the highest dividend 15.22 14 14.83 15.15 3500 yield in BIST 13.60 12 2500 10 10.18 8 1500 7.16 6 6.50 6.20 5.83 4 4.96 4.78 500 3.93 3.85 3.24 2.94 2.98 2 2.31 2.50 1.73 1.58 0.00 0.00 0 -500 2008 2009 2010 2011 2012 2013
Slide 33: Investments (Million $)
Investments (Million $) • 9.5 Nelson complexity • High white product yield • Process more heavier and sour crudes • Run all refineries with 100% capacity utilization • 6.5 bn USD investments since privatization Ongoing Projects Avg. 943 mn$ 1,213 974 959 • Revamp of Crude Unit • FCC Modernization •
Slide 34: H1 2019 Results
H1 2019 Results Capacity utilization (%) Refining Margins ($/bbl) Med Margin Tüpraş Net Margin H1 95.0 95% total capacity utilization in H1 2019. Med FY Tüpraş FY 0 20 40 60 80 100 Exp Target Operationals Production Sales 14.4 mn tons of sales 2.7 28 30 and 13.7 m tons of production in H1 2019. H1 1
Slide 35: Tüpraş Balance Sheet
Tüpraş Balance Sheet Million TL 30.06.2019 31.12.2018 Diff. Diff. (%) Current Assets 29,731 20,962 8,769 42 Cash & C. Equivalents 9,889 5,983 3,907 65 Receivables 8,700 5,429 3,271 60 Derivatives 270 176 95 54 Inventories 8,384 6,765 1,620 24 Pre-paid expenses 256 109 148 136 Other Current Assets 2,
Slide 36: Creating Competitive & Sustainable Shareholder Value
Creating Competitive & Sustainable Shareholder Value Tüpraş has one of the highest Corporate Governance Ratings. Foreign Currency Long Term Board 92.9 Tüpraş BB- (Neg.) B1 (Negative) Türkiye BB- (Neg.) B1 (Negative) B+ (Stable) Stakeholders 99.5 Koç Holding B1 (Negative) BB- (Stable) Transparency 94
Slide 37: Financial Policy
Financial Policy Financial Discipline: Risk management policies focusing on areas such as leverage, liquidity, counterparty risk, commodity, interest rate and currency exposure. Leverage Proactive in liquidity risk management & targets/limits for financial ratios: • Net financial debt/EBITDA • Curre
Slide 38: FX Exposure Management (30 June 2019)
FX Exposure Management (30 June 2019) Tüpraş continues to employ strict FX policies to Consolidated Assets Consolidated Liabilities Tüpraş continues to employ strict FX policies to mitigate currency risks stemming from mitigate currency risks stemming from volatility. Million $ Cash Payables •volati
Slide 39: Tüpraş: Growing, Resilient, Profitable
Tüpraş: Growing, Resilient, Profitable Tüpraş is a compelling investment case with strong sales growth, resilient and profitable operational and financial structure. Growing Resilient Profitable • Operating in a diesel short market (supplies • Strong balance sheet with no • Benefits from full system
Slide 40: Outlook
OUTLOOK
Slide 41: 2019 Refinery Maintenance Schedule
2019 Refinery Maintenance Schedule Duration Unit Quarter Reason Status (weeks) RUP Maintenance Plt 100 CDU Q4 2-3 Periodic Preparation and planning phase: 2018 İzmir Plt 9200 CCR Q1 3 Completed Maintenance Start: Feb 26 RUP Q1&Q2 11 Completed • Catalyst changes • Checks on distillation columns, heat
Slide 42: 2019 Expectations
2019 Expectations Med Complex Med Complex margin expectation in 2019 is 3.75 – 4.25 $/bbl. Margin Tüpraş Net Tüpraş refinery margin expectation in 2019 is 6.0 – 7.0 $/bbl. Net Margin • Capacity utilization target is 95-100%. Operations • Production: ~28 million tons • Total sales: ~30 million tons I
Slide 43: Competition # 1 (SOCAR-STAR Refinery)
Competition # 1 (SOCAR-STAR Refinery) STAR Refinery (Total Cap. 10 mn ton) Production 2019 mn ton Turkish Balance • Goldman Sachs has acquired a 13% stake in SOCAR Turkey for $1.3 billion. Tüpraş Star Total Demand • Goldman Sachs has the right to resell 10% of its stakes to Socar, and the remaining
Slide 44: Competition # 2 (Regional Competition)
Competition # 2 (Regional Competition) • Tüpraş is competing with 71 refineries in the Mediterranean and Black Sea markets. • Mediterranean regional product balance is also affected from Middle East, North West Europe and Asia. Mediterranean Black Sea 54 Refineries 17 Refineries 7.8 mn bpd 1.8 mn bp
Slide 45: Marine Bunker Specification Changes and Its Effects
Marine Bunker Specification Changes and Its Effects IMO 2020: the sulphur cap for marine bunkers is reduced from 3.5% to 0.5% (5000ppm) - effective from 1 Jan 2020. HSFO Replacement Expected in 2020, million b/d Gradual Change in Marine Bunker Fuels, thousand b/d 6 0.6 0.5 3 1.1 3.5 1.3 0 Current HS
Slide 46: Appendix
Appendix
Slide 47: RUP feedstock and production (000 Tons)
RUP feedstock and production (000 Tons) Raw Materials Products Natural Gas 246 Vacuum Resid 1,214 Total Production 4,250 Atm. Resid 3,036 Total Feed 4,496 Investor Presentation www.tupras.com.tr APPENDİX 47
Slide 48: Tüpraş Production Flow and Yield Breakdown
Tüpraş Production Flow and Yield Breakdown • Increased conversion capacity • Strong integration among refineries Investor Presentation www.tupras.com.tr APPENDİX 48
Slide 49: European Pump Price Comparison
European Pump Price Comparison Gasoline (Krş / Lt) Diesel 10 (Krş / Lt) Pump No Tax Distr. Marg. Tax 889 898 1000 1,000 1000 1,000 854 809 820 878 791 900 900 847 865 900 733 782 801 800 800 800 739 750 709 604 700 700 700 601 596 600 600 406 504 524 540 600 554 595 434 516 529 528 349 398 409 500 5
Slide 50: Tüpraş - ESG
Tüpraş - ESG Environmental Responsibility Social Support Governance Excellence In 2018 Gender Equality One of the highest Corporate Governance Ratings3 HeForShe (Global cooperation with UN Women Amount of water recycled: and Fenerbahçe Sports Club) Board 92.9 20.8 mn m3 I Support Social Gender E
Slide 51: Koç Holding
Koç Holding Turkey’s Leading Investment Holding Company Turkey’s largest industrial and services group in terms of revenues, exports, employees, taxes paid and market capitalization. Turkey’s Leading Investment Holding Company Combined Revenues / GDP 8% • The only Turkish company in Fortuna 5001. To
Slide 52: CTupras
CTupras GA Koe