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PETROL d.d., Ljubljana

The Supervisory Board Discussed the Report on the Operations of the Petrol Group and Petrol d.d., Ljubljana in the First Nine Months of 2020

The information contained in this announcement will remain posted on the website of Petrol d.d., Ljubljana (www.petrol.si) at least 5 years from the date it is published.

Ljubljana, 19 November 2020 – At its 54th meeting held today, the Supervisory Board of Petrol d.d., Ljubljana was briefed on the Report on the operations of the Petrol Group and Petrol d.d., Ljubljana in the first nine months of 2020.

In January and February 2020, the Petrol Group operated without any disruption and according to plan in all of its markets. In March 2020, however, the business environment deteriorated considerably with the onset of the pandemic. Measures through which governments restricted movement between countries and local communities in order to contain the pandemic gave rise to traffic restrictions which depressed the sales of petroleum products significantly. Petrol Group companies have been closely monitoring the situation since the outbreak of the epidemic and have implemented the necessary measures to contain the spread of the virus and ensure uninterrupted energy-product supply. When developing measures and putting them into practice, the Petrol Group complies fully, in all of its markets, with instructions issued by authorities. In the second wave of the pandemic, the Petrol Group's primary focus is still on measures aimed at protecting the health of Petrol's customers and employees. There is no disruption in the energy-product supply, and all points of sale are operational.

The Petrol Group's adjusted gross profit for the first nine months of 2020 stood at EUR 301.9 million, a year-on-year decrease of 13 percent. This was due to a drop in petroleum product sales resulting from movement restrictions introduced by governments to contain the pandemic and from the economic downturn the pandemic had caused. EBITDA totalled EUR 114.4 million, which was 25 percent less than in the first nine months of 2019 but still better compared to main competitors in the region. The Petrol Group generated 44 percent of its EBITDA through petroleum product sales, 21 percent through merchandise sales and related services, 17 percent through the sale of other energy products (natural gas, electricity, LPG), 15 percent through the sale of energy and environmental solutions, and 3 percent through renewable electricity production. The Petrol Group's net profit stood at EUR 40.5 million, down 49 percent relative to the same period of the previous year.

In the first nine months of 2020, the Petrol Group sold 2.3 million tons of petroleum products, down 21 percent year-on-year (mostly due to a decrease in retail sales arising from the pandemic). The sales of liquefied petroleum gas totalled 114.3 thousand tons, which was 17 percent less than in the same period of the previous year. Electricity sales stood at 15.7 TWh in the first nine months of 2020 and natural gas sales at 19.9 TWh. During this period, EUR 345.2 million was generated in revenue from the sale of merchandise, a decrease of 3 percent compared to the same period of the previous year. At the end of September 2020, the Petrol Group operated 510 service stations, of which 318 in Slovenia, 110 in Croatia, 42 in Bosnia and Herzegovina, 15 in Serbia, 15 in Montenegro and 10 in Kosovo.

The Petrol Group responded to the crisis caused by the epidemic in a comprehensive manner. Initially, activities were focused on ensuring the continuity of operations in the changed circumstances and on identifying and managing risks. Further activities, however, have a long-term focus so that the Petrol Group can operate without interruption in a very different business environment.

Due to the natural disaster (the pandemic) and the resulting economic crisis, which could not have been predicted, the 2020 business plan cannot be achieved.

Measures to contain the epidemic taken by countries in which the Petrol Group operates have caused a significant decline in economic activity and restricted movement, which has had a very detrimental impact on the Petrol Group’s sales. Because it is uncertain how the situation will develop, the Petrol Group prepared different scenarios for operations in 2020. Considering the results achieved so far and current developments, the 2020 operating performance is expected to correspond to the scenarios developed at the onset of the pandemic. The scenarios considered various cases ranging from the possibility that restrictions on movement within countries are lifted in May but certain restrictions on transit traffic and tourism still remain, which will have a major impact especially on operations in the summer months, to the possibility that the last quarter of 2020 will again see major restrictions on movement and further deterioration in business conditions as a result of that. It is thus expected that the volume of petroleum products sold in 2020 could reach between 83 and 86 percent of the 2019 figure (without the sales to the Agency of the Republic of Slovenia for Commodity Reserves). Given the estimated decrease in sales in the coming months, the streamlining of costs and the adjusted volume of investments, the Petrol Group's EBITDA for 2020 could amount to between 73 and 79 percent of the 2019 EBITDA, or to between 77 and 84 percent of the 2019 EBITDA if one-off events are not taken into account (the 2019 EBITDA does not include the reversal of provisions for lawsuits and penalties relating to procedures ended in 2019, the cumulative effect of which totals EUR 11.1 million).

In October, Slovenia and most other European countries faced a second wave of the epidemic. Due to a sharp increase in the number of infections in Slovenia, the Government of the Republic of Slovenia re-introduced measures to contain the epidemic, many of which have to do with movement restrictions, which will again have a negative impact on the Petrol Group's sales. The Petrol Group operates strictly in conformity with measures and recommendations aimed at curbing the epidemic.

Considering that the Company has outperformed its main competitors in the region in terms of EBITDA dynamic while maintaining the BBB- credit rating with a stable outlook, the Supervisory Board of Petrol d.d., Ljubljana is of the opinion that the Management Board of Petrol d.d., Ljubljana responded appropriately to the pandemic and has control of the situation in the current circumstances.


Sašo Berger
President of the Supervisory Board

Nada Drobne Popović
President of the Management Board
Date: 20.11.2020