Q2 2019 Earnings Presentation - Microsoft...Hizmete Özel / Confidential Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2019 07/08/2019 Earnings Presentation 6 Compared to Q2

Hizmete Özel / Confidential

Q2 2019 Earnings Presentation

7 Agu 2019 Our energy never ends…


Disclaimer

www.tupras.com.tr07/08/2019Earnings Presentation 2

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

changes in underlying assumptions that could cause actual results to differ materially.

Neither Tüpraş nor any of its directors, managers or employees nor any other person shall have any liability whatsoever for any loss arising from use of this presentation.


Q2 2019 Tüpraş Highlights

www.tupras.com.tr 307/08/2019Earnings Presentation

In Q2 20196.9 1,4957.1

Million tons of

Total Production

RUP Maintenance Completed Ahead of Schedule

• Maintenance and improvement works were finalized 14 days earlier than the planned completion date

• All RUP units started production at full capacity on May the 13th

Million TL

EBITDA

Million tons of

Total Sales

Improvementin Working Capital Continues

• Working capital requirement decreased by 2.4 billion TL in Q2 2019 and showed a greater improvement since year end 2018

Expanding Our TradeCapabilities

• Transferring export business to Tupras Trading UK for a wider integration to global energy landscape

• First bitumen cargo went abroad; ~250 k tons were exported in H1 2019

4.70

1.61

-0.75

Dec-18 Mar-19 Jun-19

BillionTL


5.63

5.93 5.92

5.76

1/4 11/4 21/4 1/5 11/5 21/5 31/5 10/6 20/6 30/6

$/TL

Q2 2019 Key Market Highlights


TL depreciation slowed down in Q2

Diesel-12.3%

Jet Fuel-21.6%

HS Fuel Oil+19.8%

Gasoline-17.5%

+0.30 TL -0.01 TL

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19

Brent($/bbl)

-0.16 TL

Brent prices increased by 9% in Q2

Glo

bal

Oil

Mar

ket

Turk

ish

Mar

ket

Diesel demand contracted in the first 5M

Main product cracks underperformed except HSFO

63.1 $/bbl

68.9 $/bbl

Diesel

-7.4% +11.3%

Fuel Oil

+3.0%

Jet Fuel*

+1.1%

Gasoline

*Including transit flight consumption

Compared to Q2 2018


Market


Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2019


Compared to Q2 2018, Mid-distillate and Gasoline performed weaker in Q2 while HSFO cracks were stronger.

12.3

13.9 14.6

16.815.4

12.2

Q1 Q2 Q3 Q4

Diesel

13.3

13.8 13.4

15.9

13.8

10.8

Q1 Q2 Q3 Q4

Jet Fuel

Slow down in economic activities

High product flows from Asia & US to Europe

10.912.7 12.6

4.74.5

10.5

Q1 Q2 Q3 Q4

Gasoline

-12.6 -12.4

-10.0

-7.2

-5.8

-9.9

Q1 Q2 Q3 Q4

High Sulphur Fuel Oil

2019 2018 2019-2015 Min - Max

Lower Asian air traffic

Imports from Asia to Europe kept markets well supplied

Lighter shale gas processing leading to increase in gasoline yields globally

Lower naphtha demand due to decreased petrochemical driven consumption

Lower supply due to decreased heavy crude availability

Higher HSFO demand in power generation replacing crude oil


Crude Price Differentials to Brent ($/bbl)

www.tupras.com.tr 7

-12

-10

-8

-6

-4

-2

0

2

Q1

20

15

Q2

20

15

Q3

20

15

Q4

20

15

Q1

20

16

Q2

20

16

Q3

20

16

Q4

20

16

Q1

20

17

Q2

20

17

Q3

20

17

Q4

20

17

Q1

20

18

Q2

20

18

Q3

20

18

Q4

20

18

Q1

20

19

Q2

20

19

Arab Heavy Basrah Heavy CPC Kirkuk Kuwait Libya Ural Average*

OPEC Cut Decision

OPEC Cut Decision

Iran Sanctions

*Simple average of listed differentials

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.

07/08/2019Earnings Presentation


Operations


Capacity Utilization and Quarterly Production Volume


5.2

6.2

6.76.9

Q1 Q2 Q3 Q4

Quarterly Production (Million Tons)

2015 2016 2017 2018 2019

98

10

1

10

1

87

67

85

10

7

89 89 91

4 4 7

9

11

7

7

9 4 5

103 105 108

96

78

92

115

9994 97

2015 2016 2017 2018 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19

Capacity Utilization (%)

Crude Oil Semi Product Feedstock Total

*Capacity utilization calculation is based on 30 mn tons for Q1 2019 and onwards.

• 96.5% capacity utilization was achieved in Q2 2019 despite RUP maintenance.

• Our year-end guidance for capacity utilization and production remains unchanged.


Sales in Q2 (Million Tons)

www.tupras.com.tr 10

We generated 7.1 million tons of total sales in Q2 2019.

5.46.4 6.6 6.7

5.5

1.9

1.31.4

0.7

1.6

7.37.7

8.1

7.4 7.1

Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019

Total Sales

Domestic Sales Exports

2.22.7 2.9 3.1 2.7

1.3

1.2 1.21.3

1.0

0.5

0.5 0.60.6

0.60.6

0.9 0.90.9

0.4

Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019

Domestic Sales of Selected Products

Diesel Jet Fuel Gasoline Bitumen



Financials


Tüpraş Net Margin and Med Complex Margin Comparison ($/bbl)


7.5

5.2

7.8

12.3

2.8

4.9

3.2

5.8

4.4

1.7

Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019

Q2 Margins

Tüpraş Net Med Margin

• Tüpraş’ 2.8 $/bbl Net Refining Margin in Q2 2019 was 1.1 $/bbl higher than Med Margin.

• Weaker oil macro conditions and RUP maintenance were the main factors of decrease in net margin compared to Q2 2018.

• Our year-end guidance for refining margin remains unchanged.

Effect of hedging operations excluded from above calculations.


Income Statement (Million TL)


We generated 1.5 bn TL EBITDA and 870 mn TL net income in Q2 2019.

Q2 2019

Q2 2018

%6M

20196M

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 52% -793 -545 46%

Income/Loss from other operations 82 -877 -309 -988

Operating Profit 1,333 1,066 25% 1,561 1,756 -11%

Income/Loss from equity investment 47 86 -45% 110 138 -20%

Operating Profit before financial income/loss 1,379 1,152 20% 1,671 1,894 -12%

Financial income/expense -796 -227 -1,397 -497

Profit Before Tax 584 925 -37% 274 1,397 -80%

Net Profit (excluding minority interest) 870 1,027 -15% 495 1,405 -65%

EBITDA* 1,495 2,210 -32% 2,346 3,243 -28%

Inventory Gain/Loss 675 1,016 -34% 976 1,283 -24%

EBITDA CCS* 820 1,194 -31% 1,370 1,960 -30%

*On CMB reports. EBIT includes extra items such as FX impacts of trade receivables and payables. In our EBITDA calculation. FX related items are excluded from EBIT as customary in international practices.


Q2 Profit Before Tax Bridge (2018-2019, Million TL)


Decline in profit before tax was driven by weaker cracks, narrower differentials and RUP maintenance.


Financial Highlights


495 mn TL Net Income recorded in H1 2019.

367 3351,575 1,033 851

1,080 688

1,542 2,2101,4951,144

867

1,528

3,778

1,2081,505

1,237

1,887

2015 2016 2017 2018 2019

EBITDA (mn TL)

Q1 Q2 Q3 Q4

3,799

275 79869

378-375

710331

1,457

1,027870

750

581

992

542815

803

493

1,766

2015 2016 2017 2018 2019

Net Income* (mn TL)

Q1 Q2 Q3 Q4

1.8 1.8

1.1

1.3

1.3

1.01.1 1.2

1.3

1.1

2015 2016 2017 2018 Q2 2019

Current Ratio & Net Debt / R. EBITDA

Net Debt / R. EBITDA Current Ratio

35%

22%

41%37%

27%

2015 2016 2017 2018 Q2 2019

Return on Average Equity**

*Excluding minority interest **Calculation based on rolling net income

3,396

5,882

8,908

2,346

2,550

1,793

3,812 3,713

495


Balance Sheet Analysis (Billion TL)


Tight balance sheet management improved working capital.

4.0

7.5

1.6 1.5 1.0

4.4

1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years

Redemption Schedule (Billion TL)

Loan Eurobond TL bond

0.8

-0.2

2.1

4.7

1.6

-0.7

Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19

Working Capital Requirements (Billion TL)

6.96.1 6.2

12.010.6 10.1

Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19

Net Debt (Billion TL)

Proactive Financial Management • Ensured diverse funding base with

favorable rates

• Working Capital continues to improve with better payable terms


FX Exposure Management (30 June 2019)


Cash

1,057

Forward & CFH2,082

Stock1,406

Receivables & Other Assets

97

Payables2,193

ST Financial Loans528

• RUP: 179• Other: 349

LT Financial Loans1,919

• RUP: 688• Eurobond: 700• Other Loans: 531

Consolidated Assets Consolidated Liabilities

Million $

+2 mn $

Tüpraş continues to employ strict FX

policies to mitigate currency risks

stemming from volatility.

* Cash flow hedge accounting : 899 mn $


Outlook for 2019


H1 2019 Results


3.5

2.7

0 1 2 3 4 5 6 7 8

H1

Refining Margins ($/bbl)

Med Margin Tüpraş Net Margin

95% total capacity utilization in H1 2019.

13.7

28

14.4

30

H1 2019 Target

Operationals

Production Sales 14.4 mn tons of sales and 13.7 m tons of production in H1 2019.

70

200

H1 2019 Target

Capex (mn $)

70 mn$ CAPEX in H1 2019.

95.0

0 20 40 60 80 100

H1

Capacity utilization (%)

+3.5 $/bbl net refining margin in H1 2019.

Med FY Exp

Tüpraş FY Target


2019 Refinery Maintenance Schedule


Unit QuarterDuration(weeks)

Reason Status

İzmir

Plt 100 CDU Q4 2-3 Periodic

Plt 9200 CCR Q1 3 Completed

İzmit

RUP Q1&Q2 11 Completed

Plt 2 Crude Oil & Vacuum Q4 7-8 Periodic

Plt 7 FCC Q4 5-6 Periodic

Kırıkkale

BatmanPlt 100/1100 Crude Oil &

VacuumQ1 10 Completed

RUP Maintenance Preparation and Planning Phase: 2018

Maintenance Start: Feb 26• Catalyst changes• Checks on distillation

columns, heat exchangers and furnaces

• Detailed planned maintenance

Completed at May 13th


2019 Expectations


Med Complex

• Med Complex Margin expectation is around 3.75-4.25 $/bbl in 2019

Tüpraş

• Net Tüpraş refinery margin expectation is around 6.0-7.0 $/bbl in 2019

• Capacity utilization expectation is around 95-100%

• Production: ~28 million tons

• Total sales: ~30 million tons

Investments

• Refining investments expectation is revised as ~200 million $

Hizmete Özel / Confidential www.tupras.com.tr07/08/2019Earnings Presentation 22

Appendix


Turkish Market, Jan-May (Million tons)


10.03

9.28

0 2 4 6 8 10 12

5M 2018

5M 2019

Diesel

-7.4%

0.90

0.91

0.0 0.5 1.0 1.5 2.0

5M 2018

5M 2019

Gasoline

1.80

1.86

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

5M 2018

5M 2019

Jet Fuel*

0.19

0.21

0.0 0.1 0.2 0.3 0.4 0.5 0.6

5M 2018

5M 2019

Fuel Oil**

* Including transit flight consumption **Excluding bunker

+3.0%

+1.1% +11.3%


OPET


Opet has 1,635 stations as of June 2019.

885 915 938 966 1,009 1,073 1,126 1,152 1,169

394 410 418 427435

431434 463 4661,325 1,325 1,356 1,393

1,4441,504

1,5601,615 1,635

2011 2012 2013 2014 2015 2016 2017 2018 Jun-19

Opet Sunpet

Market Shareas of May 2019

18.6 %

White Product

28.5 %

Black Product


Crack Margin Effect on Tüpraş in Q2 (FOB Italy Prices)


ProductProduct Price ($/ton) Tüpraş 2019

Production YieldsCrack Margin ($/bbl)

2019 Q2 2018 Q2 2019 Q2 2018 Q2

LPG 431 488 3.4% -30,5 -30,9

Gasoline 644 707 19.6% 10,5 12,7

Naphtha 504 618 1.6% -11,9 -4,6

Jet Fuel 626 693 16.5% 10,8 13,8

Diesel 603 657 31.4% 12,2 13,9

Diesel 1000 588 643 0.5% 10,2 12,1

Fuel Oil 1% 412 414 1.1% -5,2 -10,6

Fuel Oil 3.5% 382 401 13.9% -9,9 -12,4

Others 336 358 7.3% -12,8 -14,6

Dated Brent ($/bbl) 68.8 74.4 95.3%

Total Crack Margin ($/bbl) Total Processed2019 Q2 (mn bbl)

Total Effect (mn $) Total Effect (mn TL)2019 Q2 2018 Q2 Difference

4.1 5.1 -1.03 51.5 -53.1 -311.3


LPG4%

Gasoline20%

Naphtha1%

Jet16%

Gasoil36%

Other1.6%

Kok2%

Fuel Oil10

Asphalt10%

Q2 Product Yields


LPG4%

Gasoline20%

Naphtha1%

Jet20%

Gasoil32%

Other3%

Kok3%

Fuel Oil3%

Asphalt14%

Light Distil.23.7%

Mid. Distil

.52.2%

Other 3.2%

Black Prod.20.9%

2018 Q2

White Product Yield (%) 78.0%

Production 6.2 mn tons

API 30.98

2019 Q2

Light Distil.25.1%

Mid. Distil

.51.5%

Other 1.6%

Black Prod.21.7%

White Product Yield (%) 77.4%

Production 6.9 mn tons

API 32.39


Yield Breakdown (%)


15.519.0 17.5

14.3 15.8 16.7 18.916.0

19.4 20.1 18.6 17.4 17.4 15.8

29.9

32.4 34.1 38.5 36.0 34.4 31.9

31.0

34.2 32.132.2 35.4 33.5 35.8

45.4

51.4 51.6 52.8 51.7 51.1 50.8

47.0

53.652.2

50.852.8

50.9 51.5

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Middle Distillates

Jet Diesel

1.5 2.7 2.5 3.1 3.2 3.1 3.2 2.53.9 3.2 2.6 3.1 2.1 2.1

9.4

12.6 14.3 13.1

5.5

11.7

15.3 16.4

9.6

14.513.3

8.8

4.6

9.8

15.2 5.44.7 5

12.2

6.7

4.76.3

6.9

3.2 7.2

9

14.9

9.8

26.1

20.721.6 21.2 20.9 21.4

23.2

25.2

20.4 20.9

23.1

21 21.6 21.7

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Heavy Distillates

Coke Bitumen Fuel Oil


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 65Receivables 8,700 5,429 3,271 60Derivatives 270 176 95 54Inventories 8,384 6,765 1,620 24

Pre-paid expenses 256 109 148 136Other Current Assets 2,230 2,502 -271 -11

Long Term Assets 26,550 19,074 7,477 39Financial Assets & Subsidiaries 1,308 1,271 37 3

Fixed Assets 20,260 12,397 7,863 63Derivatives 140 168 -28 -17

Pre-paid expenses 257 378 -121 -32Deferred Tax 3,131 3,566 -435 -12

Other Long Term Assets 1,455 1,293 162 13

Total Assets 56,281 40,036 16,245 41

Short Term Liabilities 26,992 15,950 11,042 69Financial Loans 4,063 4,113 -50 -1

Payables 17,949 7,663 10,286 134Derivatives 193 236 -43 -18Provisions 206 80 126 156

Other ST Liabilities 4,581 3,857 724 19Long Term Liabilities 16,264 14,140 5,203 15

Financial Loans 15,968 13,836 2,132 15Payables & Provisions 259 257 2 1

Derivatives 28 42 -14 -34Other LT Liabilities 9 5 4 91

Total equity attributable to equity holders of the parent 12,885 9,825 3,060 31Minority Interests 140 121 19 16

Total Liabilities & Equity 56,281 40,036 16,245 41


Tüpraş and Med Margins ($/bbl)

www.tupras.com.tr 29

Gross Margin Inventory Effect Clean Gross Margin Clean NET Margin Med Margin

2019 Q2 8.1 0.4 7.7 2.5 1.7

2019 H1 8.9 0.7 8.3 2.8 2.7

2018 Q2 17.9 3.3 14.6 9 4.4

2018 H1 15.0 2.0 12.9 6.8 4.2

6.2

4.0

8.28.9

3.5

5.4

3.5

5.4

4.2

2.7

2015 2016 2017 2018 2019

H1 Margins

Tüpraş Net Med Margin



Finished Product and Semi Product Imports

07/08/2019Earnings Presentation 30

281 332

603

1,438

95

HS Diesel ULSD Jet Fuel

Product Imports (Thousand Tons)

H1 2019 H1 2018

239216

330

40

273

738

222

2041

HVGO ASR F. Oil LSFO Naphtha MTBE

Intermediate Imports (Thousand Tons)

H1 2019 H1 2018

www.tupras.com.tr


Tüpraş: Growing, Resilient, Profitable


• Operating in a diesel short market (supplies 45% of the market) along with strong jet growth.

• Well poised to capture future opportunities including IMO 2020 with its output complexity.

• Continuous investment in logistics,infrastructure and trading capabilities.

• Strong balance sheet with no immediate rollover requirement.

• Secure receivables portfolio andtight working capital management

• Pricing mechanism in place to address commodity and FX fluctuations.

• Benefits from full system optimization given high complexity,procurement and logistics flexibility.

• Prudent hedging practices to ensure stable earnings outlook.

• High dividend pay-out ratio annually.

Growing Resilient Profitable

Tüpraş is a compelling investment case with strong sales growth, resilient and profitable operational and financial structure.

Hizmete Özel / Confidential www.tupras.com.tr07/08/2019Earnings Presentation 32

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Documents

Q2 2019 Earnings Presentation - Microsoft...Hizmete Özel / Confidential Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2019 07/08/2019 Earnings Presentation 6 Compared to Q2