Unipetrol´s 1Q 2010 figures beat expectations - update

...sales reached CZK 18bn (+24.3% y/y) and were better than our forecast of CZK 17.8bn. Behind the growth are growing crude oil prices what lead to production prices increase in all segment as the volumes were lower y/y. EBIT at CZK 517m also beat expectation of CZK 403m due to better refinery margins. Finally also the net income was positively seen at CZK 309m vs. exp. CZK 257m. We expect positive market reaction due to stronger than expected figures what is showing currently up as the stock adds some 2.5% d/d.   Analysis   Sales Total consolidated sales reached CZK 18bn (up 24.3% y/y) i.e. above our estimates (AFT and market´s CZK 17.5-17.8bn) due to crude price increase what lead to price increases in all segments as the volumes sold were lower. The volumes at refinery segment were 14% lower y/y, at petrochemical segment down 2.0% and retail fuel sales down 7.0% (AFT expectation as Unipetrol did not reveal its data). Table 1: Sales CZK m Refinery Retail Petrochemicals Other Sum. 1Q2010 9,027 1,698 7,254 59 18,038 1Q2009 8,181 1,432 4,878 20 14,512 Source. Unipetrol.   Operations EBITDA at CZK 1.4bn (+90.7% y/y) was better than expected (CZK 1.3bn). the margin then grew to 7.4% (+2.5 p.p.) what is in line with projection. EBIT at CZK 517m strongly beat projections (CZK 403m). Depreciation was flat at CZK 835m vs. exp. CZK 860m. Behind the y/y and also y/y improvement lies better refinery efficiency i.e. growth of refinery margin to 4.0 USD/bbl. EBIT at refinery segment ended at CZK 279m surplus compared to CZK 329m loss in 1Q09. Also retail segment (Benzina) upgraded as the high margins from 2H09 hold and the EBIT from that segment ended in CZK 131m surplus. Petrochemical segment EBIT was y/y a bit weaker at CZK 97m compared to CZK 110m in 1Q09. Table 2: Operations (EBIT) CZK m Refinery Retail Petrochemicals Other Sum. 1Q2010 279 131 97 10 516 1Q2009 -329 57 110 35 -127 Source. Unipetrol.   Net income Net financial cost reached CZK 147m i.e. y/y increase from CZK 102m due to FX, what was higher than our projection of CZK 120m. Higher operational performance lead also to better net income what was only supported by lower effective tax rate (lower statutory rate) at CZK 309m i.e. beat expectation of CZK 257m. .   Recommendation We rate the news positive as the figures beat expectation. The trading is also positive as the shares add some 2.5% d/d to CZK 205 but at open it stood at CZK 210. Our investment recommendation is currently in revision and we will update it in coming days. We will factor in better efficiency from 1Q but on the other hand we do not assume that the refinery segment 1Q performance will hold for the whole year. We expect a correction in it in coming quarters as the 1Q was affected by one-off positive issues (some refinery shutdowns in Europe).   Table 3: 1Q 2010 Results summary cons. (IFRS), CZK m 1Q2010 r/r eMarket eAFT Sales 18,038 24.3% 17,766 17,482 EBITDA 1,352 90.7% 1,256 1,298    Margin 7.4% 2.5 p.b. 7.1% 7.4% EBIT 517 n.m. 403 438    Margin 2.5% 3.4 p.b. 2.3% 2.5% NI 309 n.m. 257 257 EPS (CZK p.a.) 6.8 n.m. 5.7 5.7 Source: Unipetrol, ATLANTIK FT projection.