HELLENiQ ENERGY — Margins troughed in Q3, expect Q4 improvement

HELLENiQ ENERGY (ASE: ELPE)

Last close As at 03/12/2024

EUR6.99

0.02 (0.29%)

Market capitalisation

EUR2,138m

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Research: Energy & Resources

HELLENiQ ENERGY — Margins troughed in Q3, expect Q4 improvement

HELLENiQ ENERGY’s Q324 results were held back by a weak refining environment, as previously guided by the company, but showed an impressive operational performance. The company noted that the Q424 refining margin is likely to be $2/bbl to $3/bbl above the average for Q3. Q3 refining sales volumes of 4.163m tonnes were up 8% y-o-y, adjusted EBITDA of €183m was down 54% y o y and adjusted net income of €49m was down 77% y-o-y. HELLENiQ’s Q324 benchmark refining margin declined to $3.6/bbl, from $5.5/bbl in Q224, as anticipated by the company at the Q2 results, and at its lowest level since 2021. HELLENiQ announced a €0.2 per share dividend to be paid in January 2025, implying an interim yield of c 3.0%. Management was more confident on the Q424 outlook, expecting a better market and potentially some progress on its DEPA and ELPEDISON business associations that might continue the streamlining of the group.

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Written by

Nick Paton

Energy & Resources

HELLENiQ ENERGY

Margins troughed in Q3, expect Q4 improvement

Q324 results

Oil and gas

19 November 2024

Price

€6.8

Market cap

€2.1bn

Net debt (€bn) at 30 September 2024

1.77

Shares in issue

305.6m

Free float

28.4%

Code

ELPE

Primary exchange

Athens

Secondary exchange

LSE

Share price performance

Business description

HELLENiQ ENERGY is a leading energy group located in South-East Europe. It offers a range of products and services from refining and trading of petroleum products, petrochemicals manufacture and fuel marketing through to renewable energy.

Analysts

Nick Paton

+44 (0)20 3077 5700

Andrew Keen

+44 (0)20 3077 5700

HELLENiQ ENERGY is a research client of Edison Investment Research Limited

HELLENiQ ENERGY’s Q324 results were held back by a weak refining environment, as previously guided by the company, but showed an impressive operational performance. The company noted that the Q424 refining margin is likely to be $2/bbl to $3/bbl above the average for Q3. Q3 refining sales volumes of 4.163m tonnes were up 8% y-o-y, adjusted EBITDA of €183m was down 54% yoy and adjusted net income of €49m was down 77% y-o-y. HELLENiQ’s Q324 benchmark refining margin declined to $3.6/bbl, from $5.5/bbl in Q224, as anticipated by the company at the Q2 results, and at its lowest level since 2021. HELLENiQ announced a €0.2 per share dividend to be paid in January 2025, implying an interim yield of c 3.0%.  Management was more confident on the Q424 outlook, expecting a better market and potentially some progress on its DEPA and ELPEDISON business associations that might continue the streamlining of the group.

Year end

Revenue (€bn)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

9.2

407

1.1

0.1

6.2

1.4

12/22

14.5

1,420

2.9

1.2

2.3

17.6

12/23

12.8

604

1.6

0.9

4.3

13.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The Q324 results were characterised by a market that in terms of benchmark margins was at its lowest since 2021, before the outbreak of the Ukraine war that precipitated wholesale change in the European market, but HELLENiQ reported a positive operational performance driven by company initiatives across several sectors. Despite Q3 benchmark margins that averaged $3.6/bbl, lower even than the recent trough of $4.4/bbl in Q223, the company generated adjusted EBITDA of €183m, down 54% compared to Q323, when refining margins were $12.6/bbl, which was the margin peak since 2021. Q324 reported net income was a loss of €198m, compared to a €300m profit Q323, however the Q324 result included a one-off ‘solidarity tax’ impact of €173m.

HELLENiQ’s Refining, Supply and Trading business generated a 6% y-o-y increase in production to 4.317m tonnes, with all refineries apart from Elefsina showing an increase. Exports, Aviation & Bunkering and Domestic all saw an increase in sales year-on-year. The Domestic Marketing business saw sales drop 6% y-o-y to €1,017m, but due to increased volume of 8% y-o-y across the various segments, adjusted EBITDA for this business increased 17% y-o-y to €36m. Within that, volumes were up 5% y-o-y in Autos, up 8% in Aviation and up 6% in Bunkers. International Marketing saw sales fall 5% y-o-y to €534m, although adjusted EBITDA saw an increase of 13% y-o-y to €26m. The Renewables business had a good quarter with installed capacity reaching 384GW, up 8% y-o-y, sales up 10% to €17m and EBITDA up 5% to €13m. The company commented that it expects to add an additional 120MW in photovoltaic parks by year end, and the longer-term target capacity is 1GW by 2026 and 2GW by 2030.

HELLENiQ made positive comments about its DEPA and ELPEDISON businesses, expecting a solution to the ownership situations in the near future, as soon as Q4 for DEPA, and perhaps even in the next few weeks in the case of ELPEDISON.

General disclaimer and copyright

This report has been commissioned by HELLENiQ ENERGY and prepared and issued by Edison, in consideration of a fee payable by HELLENiQ ENERGY. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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London │ New York │ Frankfurt

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United Kingdom

General disclaimer and copyright

This report has been commissioned by HELLENiQ ENERGY and prepared and issued by Edison, in consideration of a fee payable by HELLENiQ ENERGY. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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