(HELLAS) 2003 2003 annual report CORINTH REFINERIES S.A. CORINTH
(HELLAS) A N N U A L R E P O R T 2 0 0 3 (HELLAS) ∞thens - GREECE Maroussi 151 24 12A Irodou Attikou str., CORINTH REFINERIES S.A. website: http://www.moh.gr (HELLAS) CORINTH REFINERIES S.A.
annual report 20032003
DISCLAIMER The translation in the present English version of the Annual Report of year 2003 of MOTOR OIL is unofficial. Should there be any differences between the content of the two versions (Greek, English) of the Annual Report of year 2003 of MOTOR OIL it is the Greek version which will prevail. The complete form of the Appendix of the 2003 Annual Report of MOTOR OIL is available at the Company’ s site www.moh.gr at the menu option Investor Relations.
T A B L E OF C O N T E N T S
1. INFORMATION CONCERNING THIS ANNUAL REPORT ...... 6
2. SHAREHOLDERS’ RIGHTS ...... 7 2.1. General ...... 7 2.2. Dividend Taxation ...... 9
3. MARKET INFORMATION AND STRUCTURE ...... 10 3.1. Structure of the Greek Oil Refining Market...... 10 3.2. Regulatory Framework ...... 11 3.3. Recent Developments in the World Oil Market ...... 13
4. COMPANY PROFILE...... 14 4.1. General Information ...... 14 4.2. Background ...... 16 4 4.3. Company Activity ...... 17 4.4. Fixed Assets ...... 18 4.5. Sales & Distribution Network – Customers ...... 19 4.6. Share Capital ...... 20 4.7. Shareholders’ Equity – Share Book Value ...... 21 4.8. Company Shareholders ...... 22 4.9. Company Administration and Management ...... 23 4.10. Organization Chart ...... 26 4.11. Personnel...... 26 4.12. 2001 – 2003 Capital Expenditure ...... 27 4.13. Use of Proceeds from the last share capital increase ...... 29 4.14. MOTOR OIL and Society ...... 30
5. PERFORMANCE REVIEW ...... 32 5.1 Company Activities ...... 32 5.2 Company Turnover and Earnings’ Review 2001 – 2003...... 36 5.3 Company Balance Sheet Statements’ Review 2001 – 2003 ...... 43 5.4 Sources and Uses of Funds ...... 53 5.5 Company Key Financial Ratios ...... 54
ANNUAL REPORT 2003 5.6 Company Cash Flow Statements ...... 56 5.7. Share Market Price Review ...... 58 5.8. Consolidated Financial Statements ...... 59
6. AFFILIATED COMPANIES...... 72 6.1. MOTOR OIL (HELLAS) S.A Subsidiaries ...... 72 6.2. MOTOR OIL (HELLAS) S.A Affiliated Companies ...... 76 6.3. MOTOR OIL (HELLAS) S.A Related Companies ...... 78 6.4. Companies Participating in MOTOR OIL (HELLAS) S.A ...... 79 6.5. Participation of MOTOR OIL Principal Shareholders and of Board of Directors Members in the management and/or the share capital of other companies ...... 81 6.6. Subsidiaries of MOTOR OIL (HELLAS) S.A subsidiaries or related companies ...... 84 6.7. Intercompany Transactions ...... 84
7. FUTURE GOALS ...... 85 5 7.1. Goals – Strategy...... 85 7.2. Prospects ...... 85
8. DIVIDEND POLICY ...... 88
9. APPENDIX ...... 89 ◗ Invitation to the Annual General Meeting of June 1, 2004...... 91 ◗ MOTOR OIL 2003 Balance Sheet ...... 92-93 ◗ MOTOR OIL 2003 Consolidated Balance Sheet ...... 94-95 ◗ AVIN OIL 2003 Balance Sheet ...... 96-97
(HELLAS) CORINTH REFINERIES S.A. 1. INFORMATION ON THIS ANNUAL REPORT AND ON COMPANY AUDITORS
This Annual Report contains all the information and financial data needed for a correct assessment of the property, the activities, the financial position, the profitability and the prospects of the Company "MOTOR OIL (HELLAS) CORINTH REFINERIES S.A" (henceforth called the "Company" or "MOTOR OIL"), on the part of the investors and their investment consultants.
Investors interested in additional pieces of information may inquire during working days and hours with Messrs. Spyros Balezos (Investor Relations Officer), Themis Iriotis (Shareholder Relations Officer) and Ioannis Dimakis (Corporate Announcements Officer) at the Company Headquarters, 12A Irodou Attikou str., Marousi 151 24, (tel. ++30 210 8094042 and ++ 30 210 8094194).
This Annual Report was compiled and distributed in accordance with decision 5/204/14.11.2000 of the Hellenic Capital Market Commission.
The following persons are responsible for the writing of this Report and the accuracy of the data contained herein:
◗ Petros Tzannetakis, Finance Director and Member of the Company’s Board of Directors, 12A Irodou Attikou str., Marousi 6 151 24, (tel. ++ 30 210 8094162)
◗ James Douglas McTurk, General Manager of Finance and Information Systems, 12A Irodou Attikou str., Marousi 15124, (tel. ++ 30 210 8094167) and
◗ Spyros Balezos, Investor Relations Officer - Banking and Investments Manager, 12A Irodou Attikou str., Marousi 15124, (tel. ++ 30 210 8094169).
The Company Board of Directors declare that all its Members have reviewed the content of this Annual Report and jointly with its authors confirm that:
◗ All information and data contained in the Annual Report are accurate and true.
◗ There are no other data, neither have any events occurred, the concealment or omission of which might render the totality or part of the data and information contained in this Annual Report misleading.
◗ There are no legal disputes pending against the Company or the companies in which the Company has a controlling interest that might have serious consequences on its financial position.
The Company is audited by Certified Public Accountants. The regular audits of the Company’ s financial statements for the years 2001 – 2003 were conducted by the Auditing Company DELOITTE & TOUCHE, 250-254 Kifisias Avenue, Chalandri, tel. ++ 30 210 6781100, responsible Certified Public Accountant Mr. Emmanuel Pelidis REG No. ICPA (GR) 12021.
The published 2003 Balance Sheet Statements, both on Company and Consolidated basis, are included in the Appendix of the present annual report.
ANNUAL REPORT 2003 2. SHAREHOLDERS’ RIGHTS
2.1. GENERAL
Following the Share Capital Increase decided by the Extraordinary General Assembly of Company Shareholders on June 2, 2000, September 28, 2000, January 25, 2001 and May 17, 2001, the number of company shares increased by 5,275,380, while the Company’s total Share Capital consists of 110,782,980 common registered shares. In addition, based on the December 19, 2002 decision of the General Assembly of Company Shareholders and ruling K2-17690/14.1.2002 of the Ministry of Development the nominal value of shares increased to ª 0.30.
◗ Every Company share embodies all the rights and obligations specified by Codified Law 2190/1920 (henceforth "the Law") and the Company Codified Memorandum and Articles of Association. Possession of a Company Share automatically denotes acceptance, on the part of its owner, of the Company Codified Memorandum and Articles of Association and of the lawful decisions of the General Assembly of Company Shareholders.
◗ Based on the ruling of the Prefecture of Athens with protocol number EM – 193 / 01/ 13.2.2001 the minutes of the Extraordinary General Assembly of Company Shareholders dated December 22, 2000 were verified along with the decisions taken at that Meeting to: 7 a. Amend article 14 of the Company Codified Memorandum and Articles of Association so that each of the two shareholders of MOTOR OIL – ARAMCO OVERSEAS COMPANY B.V. and MOTOR OIL HOLDINGS S.A. – has the right to appoint two Members of the Board of Directors on condition that each is in possession of at least 10% of the share capital of MOTOR OIL. It is noted that the required percentage prior to this amendment was 1%.
b. Amend articles 18 and 20 of the Company Codified Memorandum and Articles of Association with regard to convening Board-of-Director Meetings, definitions of quorums and majorities and setting their authorities and jurisdictions in relation to those of Company Administration. Specifically, the clause calling for increased majority voting from 11 out of 12 Board-of-Directors Members for specific, limited Company issues was removed.
Company shares do not embody any special privileges of any sort and the Company has not issued any ownership stock or shares participating in earnings, neither any common or preferred founders’ shares.
Shareholder responsibility is limited to the nominal value of the shares they own. Each share entitles its owner to a right on the Company’s property and proportionate participation in Company’s earnings in accordance with the Law and the Company Codified Memorandum and Articles of Association. The rights and obligations that accompany each share are transferred to every universal or special shareholder successor.
Shareholders exercise their rights in relation to Company management only through General Assemblies of Company Shareholders.
Shareholders have a right in every future share capital increase of the Company, proportionally to their shareholding prior to the increase, as prescribed by article 13, paragraph 5 of Codified Law 2190/1920.
Creditors of a shareholder and their successors may in no way cause the confiscation or placement of any restriction on the use or disposal of any Company asset or of Company accounting Ledgers, neither may they demand its distribution or its liquidation, nor may they in any way interfere in its administration or management.
(HELLAS) CORINTH REFINERIES S.A. Every shareholder regardless of his/her actual place of residence, is considered as having as his legal address the Company’s headquarters and is subject to Greek Law with respect to his/her relations to the Company. Any difference or dispute between the Company on the one hand and its shareholders or any third party on the other belongs to the exclusive jurisdiction of the regular courts, while the Company may be sued only before the courts of its domicile.
Every share is indivisible and entitles its owner to the right of one vote. Joint owners of common shares must appoint in writing to the Company their representative who will represent them at the General Assembly of Company Shareholders. In case no common representative is appointed, the rights of joint owners of shares cannot be exercised at a General Assembly of Company Shareholders.
Every shareholder has the right to participate in a General Assembly of Company Shareholders either in person or through a fully authorized representative. In order to be able to participate in an Extraordinary or Ordinary General Assembly of Company Shareholders, a shareholder must block his/her shares with the Securities Dematerialization System (SAT) or the Central Securities Depository (CSD) at least five (5) days prior to the date set for the General Assembly of Company Shareholders. Within the same deadline the Company must receive certification of this blocking placed on the shares as well as representation documentation in return for a receipt that is given to the shareholder or representative for his/her admission to the General Assembly of Company Shareholders. Those who fail to comply with these terms can only be admitted to the General Assembly of Company Shareholders by permission of the latter. 8 Company Shareholders representing at least 5% of paid up Share Capital: a. Have the right to submit petition to the First Instance Court of the Company’s domicile to conduct an audit of the Company in accordance with articles 40, 40e of Codified Law 2190/1920, and
b. May ask the convention of General Assembly of Company Shareholders. The Board of Directors is obliged to convene the Meeting no later than thirty (30) days from the day the relevant petition is submitted to the Chairman of the Board of Directors. On their petition, the petitioning shareholders have to state the issues on which the General Assembly will have to decide upon.
Every shareholder may request, ten (10) days prior to the Ordinary General Assembly of Company Shareholders, copies of the annual financial statements as well as of the relevant Board-of-Directors reports and of Auditors’ reports.
Shareholders entitled to dividend are the ones who appear on the Shareholders’ Registry, which is kept by the Company, on the date the annual accounting statements are approved by the Ordinary General Assembly of Company Shareholders or on whichever date specified by the Ordinary General Assembly of Company Shareholders.
Dividend first day of payment is within two (2) months from the date of the Ordinary General Assembly of Company Shareholders that approved the annual financial statements. The place and method of payment is acknowledged to the shareholders through announcements on the daily press.
Dividends not claimed for five years since they became payable are written off in favor of the State.
All procedural matters regarding share blocking, so that shareholders may participate in General Assemblies of Company Shareholders, and dividend payment are provided for by the Regulation of Operation and Clearance of the Securities Dematerialization System of the Central Securities Depository as this Regulation is in force.
ANNUAL REPORT 2003 2.2. DIVIDEND TAXATION
Under Greek Corporate Law (Law 2238/1994 article 109), as it is in force, the rate of income tax for companies listed on the Athens Stock Exchange (ASE), with the exemption of banks, is 35% and is applied on taxable earnings prior to any appropriation. In this way, dividends are paid out from already taxed corporate earnings and, therefore, the shareholder has no further tax obligation on the dividend amount he collects.
The date on which the General Assembly of Company Shareholders approves the Company Balance Sheet Statement is regarded by the shareholders as the one that dividend income is generated.
It must be noted that, under Greek Corporate Law, in case a subsidiary proceeds with a dividend distribution from its earnings, the portion of the dividend attributable to the parent company can only be distributed by the latter to its shareholders during the next fiscal year (unless the parent company decides to distribute an interim dividend during the current fiscal year) and, consequently, this portion of dividend is recorded as income on next fiscal year’ s earnings of the parent company.
That part of parent company earnings accounted for by dividend income received by its subsidiaries can only be distributed to parent company shareholders in the next fiscal year following its collection.
9
(HELLAS) CORINTH REFINERIES S.A. 3. MARKET INFORMATION AND STRUCTURE
3.1. Structure of the Greek Oil Refining Market
3.1.1. General
Production of crude oil in Greece is limited. The Prinos reserves hardly cover 2% of domestic demand and consequently nearly all of the country’s needs in crude oil is covered by imports. Once processed in domestic refining units, crude oil is exported or sold in the domestic market.
The following chart depicts the structure of the domestic oil market:
10
ANNUAL REPORT 2003 3.2. Regulatory Framework
3.2.1. General
Fuel production and distribution in Greece takes place within a unique regulatory framework. Until the mid-eighties there was heavy state intervention. The Greek government set pricing policy and ruled that petroleum product commercial enterprises could only get their supplies from the two state-owned refineries (Hellenic Petroleum). Gradually the market liberalized completely and at present its operation is regulated by Law 3054/2002. Based on this recent Law 3054/2002 a legal entity may obtain more than one licenses (e.g., oil refining, fuel trading, retail customer sales activities/ gas stations’ operation etc.) on condition that the licensee fulfills the requirements of the Law for each separate activity.
3.2.2. Oil Refining
This regulatory framework allows oil refining companies to freely import and process crude oil and petroleum products from any country on condition that they pay taxes relating to imports from non European Union Member States in harmonisation to European Union directives.
3.2.3. Fuel Trading 11
For the Ministry of Development to grant an operating license to a Company engaged in fuel trading the latter must fulfill the following requirements: a) the Company share capital must exceed a stipulated floor, b) the Company must be in possession of its own storage premises or must be entitled to the usage of storage premises the storage capacity of which is dependent upon the type of license the Company has applied for, c) the Company technical installations must be suitable for the safe transport and distribution of the products, and d) the Company must be in possession of a tank truck fleet with a minimum number of vehicles. The Law enforces restrictions regarding the usage of tank trucks and of the vessels which carry oil products from refineries.
Companies engaging in fuel trading may obtain finished products either from domestic refineries or through imports from any country under the sole condition that they pay taxes in harmonization to European Union directives relating to imports from non EU Member States. Based on the new Law 3054 / 2002, these companies may operate gas outlets and have the right to be owners of land and gas outlet equipment. In addition, gas outlet owners may, as long as they form joint ventures of at least five (5) gas station operators, get their supplies directly from the refineries and/or through imports as well as from companies engaging in fuel trading with which the operators of the outlets have entered into an exclusive cooperation agreement and use these commercial companies’ trademark or not ("independent" gas outlets).
3.2.4. Mandatory Reserves
Based on the new Law 3054/2002 domestic refineries or importers of crude and oil products have to maintain mandatory reserves equal [in value] to 90/365 of previous calendar year’ s net imports as a means to meet up with the country’s strategic needs. Compliance with the law calling for maintenance of mandatory reserves results in Greek refineries adding a mark up when selling their products in the domestic market to compensate for the additional cost of storage.
(HELLAS) CORINTH REFINERIES S.A. 3.2.5. Pricing
Product prices are fully liberalised and set according to supply and demand prevailing conditions. For reasons relating to protection of competition, refineries acknowledge to the Ministry of Development their way of ex factory price determination, while companies engaging in petroleum product commerce acknowledge the actual selling prices at which they supply the gas outlets. The government has kept the right to impose on a national or local level maximum selling prices.
3.2.6. Taxes
Law 2127/93 and Law 1642/86 as amended on 1/1/93, deal with all issues relating to Excise Tax and VAT on fuels.
3.2.7. Product Specifications
Specifications regarding oil products targeted for the domestic market are prescribed by Law 549/70 and its consequent ministerial decrees. Product testing regarding specifications fulfilment is carried out by the State General Chemical Laboratory. In the context of European Union’s environmental protection policy, new specifications on sulfur content as well as other qualities for gasoline and automotive diesel fuel oil were set recently. The new specifications will become effective through a two step process the respective 12 deadlines of which have been announced as the years 2005 and 2009. These new specifications are presented in the next table. NEW SPECIFICATIONS (FOR GASOLINE & GASOIL) DEADLINE 1/1/2005 1/1/2009 3 Unleaded Gasoline Sulfur content (ppm) 50 MAX 1 10 MAX Aromatics (% vol.) 35 MAX 35 MAX Olefins (% vol. ) 18 MAX 18 MAX Benzene (% vol.) 1 MAX 1 MAX Oxygenates (% vol.) 2.7 MAX 2.7 MAX Automotive Gasoil (Diesel) Density at 15oC (kg/l) 0.845 MAX 0.845 MAX Sulfur content (ppm) 50 MAX 1 10 MAX 2 Cetane number 51 MIN 51 MIN Polyaromatics (% wt) 11 MAX 11 MAX Distillation at 95% vol. (oC) 360 MAX 360 MAX
1 As of January 1, 2005, each European Union Member State must in addition make available gasoline and automotive diesel fuel with maximum sulfur content 10mg/kg. The availability of the 10 mg/kg sulfur gasoline and automotive diesel must be made on an appropriately balanced territorial basis within the own boundaries of each E.U Member State.
2 A re-examination of the final deadline for the full application of the 10 mg/kg sulfur content specification is scheduled for the end of 2005.
3 A re-examination of all specifications, with the exemption of sulfur, is scheduled for the end of 2005.
ANNUAL REPORT 2003 3.3. Recent Developments in the World Oil Market
2003 was characterised by a continuous crude supply uncertainty from Iraq and Venezuela, a slower than expected growth rate of production from the oil producing countries other than OPEC and by anticipation for seasonal drops in oil demand. Within this setting the market remained nervous and this pushed the prices of crude at high and volatile levels.
Moreover, on the other side of the Atlantic, the low inventory levels of crude at the U.S.A as well as the heavy winter were the major causes which pushed prices further up. The inventories remained low while increased demand for crude was faced from the Middle East and China that now consumed a great percentage of crude production from West African countries which in the past headed for the States.
As regards oil product prices these also increased. The price of gasoline remained high throughout the year on the back of unusually strong demand from the USA and this led to an increase of European exports.
Low inventory level coupled with a shortage of the product were the reasoning behind the jet fuel prices remaining at high levels. Strong demand faced from the USA and the Middle East kept possible imports away from the European market and consequently contributed to price increases. Demand for jet fuel has been restored at pre-September 11th levels.
High prices were also recorded in automotive gasoil the demand for which proved much higher than that for heating gasoil. In the Mediterranean region the price for heating gasoil remained high as a result of low Russian production and strong demand from East Mediterranean countries. 13 Ultimately, following the new sulfur specifications applicable since the beginning of 2003, High Sulfur Fuel Oil can only be sold in a limited number of markets and is heavily dependent upon exports for the absorption of any excess surplus. This indicates that since the beginning of 2003 prices are even more dependent upon freight rates than previously. This situation is likely to become worse when the new sulfur specifications for shipping become effective. Nevertheless, the absence of demand from the European market during 2003 in conjunction with high freight rates, weakened the opportunities for exports, influencing the price of High Sulfur Fuel Oil which did not increase as much as that of the other products.
On average, the prices of crude increased by 13% in relation to 2002 while those of products by approximately 21%.
To sum up, the prices of petroleum products increased at a higher rate than those of crude and this resulted in the 2003 refining margins amounting to 34.4 $/MT on average.
(HELLAS) CORINTH REFINERIES S.A. 4. COMPANY PROFILE
4.1. General Information
MOTOR OIL is one of the most important companies in Greece in the oil refining and trading industry.
In 2002 the Company acquired 100% of AVIN OIL (henceforth called "AVIN OIL"), which ranks 4th amongst the retail petroleum products companies in the domestic market, thus obtaining a strong arm in retail sales.
MOTOR OIL is the only refining company that possesses a lubricants complex and together with Hellenic Petroleum’s Aspropyrgos refinery, are the only complex oil refineries in Greece. Besides the basic complexes (atmospheric distillation, catalytic reforming and hydrotreating) it includes other conversion units such as catalytic and thermal cracking.
The Company was founded through the notarial deed nr 4105/1970 with initial shareholders the Vardinoyannis Group companies "VARNIMA CORPORATION OF PANAMA" and "SEKA SA VESSEL FUELING STATIONS". Its founding permit was based on Ministry of Commerce decision 23020/1339 that ratified its charter (Government Journal - FEK - nr 511/7.05.1970) under the name "MOTOR OIL (HELLAS) LUBRICANT REFINERIES S.A.", that was subsequently changed, following a decision at its General Assembly of Company Shareholders of 31.10.1972 (Government Gazette – FEK – nr 1896/29.11.1972), into "MOTOR OIL (HELLAS) CORINTH REFINERIES S.A." - as accurately translated from the Greek, this is the Company’s official 14 trade name used in its transactions with foreign business entities.
The Company’s headquarters are located in the municipality of Amarousion of Attica (official address: 12A Irodou Attikou str.) and is registered as an incorporated firm ("Societé Anonyme") with the Prefecture of Athens, East Attica Sector, with Incorporated Company Registration number 1482/06/B/86/26.
The Company’s term was set to 50 years, up to 7/5/2020. License number D3/A/4124/20.3.2001, issued by the Ministry of Development provides the Company the right to infinitely operate its premises in the area of Aghii Theodori of Corinthia.
According to article 3 of the Codified Memorandum and Articles of Association of the Company, its corporate objectives are:
◗ To establish and operate industrial units for the production and processing of gasoline, light diesel, illuminating kerosene, fuel oil, heating gasoil, LPG (liquid petroleum gas), basic and final lubricants, mineral oils and other petroleum products and by-products of any kind as well as to establish units for the packaging and preservation thereof and develop the various types of products and by-products being produced or manufactured.
◗ In accordance with Decision nr 805/729/1970 of the Ministers of Coordination, Finance and Industry to carry on any commercial or industrial activities for the development or marketing, in Greece and abroad, with respect to the above mentioned products and any products, in general, being produced by the Company, i.e petroleum products and by- products and services to automobiles, vessels, aircraft and establish machine repair shops, motor inns, restaurants and coffee-shops and any other relevant activities.
◗ To acquire, purchase, store, import, export, be a broker with respect to, transport, sell and /or distribute crude oil, petroleum products and by-products and of other hydrocarbons, minerals and ores, chemicals (both organic and inorganic), and by-products and products used as substitutes therefore and generally to be involved in the marketing and distribution business and have any other activities which are necessary or useful for doing and developing such business.
ANNUAL REPORT 2003 ◗ To establish and operate facilities for the production of steam and electric power as well as port facilities, hydraulic facilities, sewage facilities and other similar facilities serving the Company’ s objectives and the objectives of other companies to be established or of entities that are related or cooperate with the Company as well as to render various general services to these companies or entities.
◗ To establish and operate factories for the industrial processing and storage of LPG, packaging materials, and to perform any marketing related thereto as well as to perform any industrial or commercial activity or business relating to this purpose.
◗ To hold, license and otherwise possess and manage in any way whatsoever trademarks, copyrights and letters patent, methods of elaboration/preparation of plans/designs, production methods, etc.
◗ To establish, operate and exploit liquid fuel outlets.
◗ To engage in the business of handling, transporting and disposing of hydrocarbon wastes
◗ To establish other companies of any legal form with identical, similar or complementary objectives or companies simply useful in any way, even on an indirect manner, for the accomplishment of the objectives of the Company.
◗ To participate in and cooperate with other business entities/ groups of whatever form with similar, relevant, complementary or even simply useful in any way for the accomplishment, even on an indirect basis, of the objectives of the Company as well as to represent, directly or indirectly, Greek or foreign companies having similar objectives. 15 ◗ To purchase, rent, and lease tangible and intangible assets as a means to fulfill the above mentioned objectives.
◗ To grant third party guarantees or ordinary guarantees or any security of any form whatsoever (real or personal) in favor of natural persons or legal entities and in general to perform any act that aims directly or indirectly at achieving any of the above mentioned objectives.
It is noted that the corporate objectives of the Company, as set forth in its Codified Memorandum and Articles of Association, have not been amended in the last five years.
The industry in which the Company carries out its business activities is defined as "Production of Oil Refining Products" (Statistical Codification of Economic Activity -STAKOD- 232.0).
(HELLAS) CORINTH REFINERIES S.A. 4.2. BACKGROUND
The main milestones in the Company’s history are:
1970-1972 Foundation and beginning of operation of the refinery comprised of a crude oil refining unit, a basic lubricant production unit, a jetty with loading terminal, and truck loading terminals.
1975 Entrance to fuel production with the addition of the Atmospheric Distillation Unit.
1978
Construction of the Catalytic Reforming Unit (further downstream processing of naphtha).
1980
Installation of the Catalytic Cracking Unit (further downstream processing of fuel oil to turn it into high value-added products).
16 1984 Construction of an Electric Power Production Unit that uses gaseous fuel as raw material. Right to sell energy to the domestic market.
1993
ISO 9002 accreditation for the entire spectrum of activities of the Company.
1996
Purchase of 50% of the Company’s shares by Aramco Overseas Company BV, 100% subsidiary of Saudi Arabian Oil Company (Saudi Aramco). Relocation of Company Headquarters to a modern building in Marousi, Attica.
2000
Completion of investment projects aiming at the production of products in harmonization to European Union specifications for 2000. During the same year the Environmental Protection System of the Company is ISO 14001 accredited.
2001
Installation of a new gas turbine in the electric power station. Upgrading of the lubricants’ vacuum unit. Company share capital increase through public offer of shares and listing in the Athens Stock Exchange.
2002
Acquisition of 100% of AVIN OIL which engages in fuel trading in the domestic market.
2003
ISO 9001:2000 accreditation for the Quality regarding the whole spectrum of Company activities.
ANNUAL REPORT 2003 4.3. Company Activity
Together with its ancillary units and its fuel custody transfer premises the refinery constitutes the largest private industrial complex in Greece and is considered one of the most flexible refineries in Southeast Europe.
Up until 1989 MOTOR OIL exported its entire production. From 1989 until today, following the liberalization of the market, the Company acquired approximately 25% of the domestic market remaining at the same time a strong export refinery. Consequently, business risk is reduced through the geographical distribution of sales between domestic and foreign markets as well bunkering (maritime and aviation).
The refinery is one of the most modern industrial complexes, capable of processing low-quality raw material and turn it into high-value-added finished products. The refinery is vertically integrated to the highest degree possible and apart from that its facilities include extensive storage space the capacity of which amounts to approximately 2.2 million cubic meters, loading premises and, port installations consisting of three jetties with maximum berthing capacity of 450,000 tons.
Saudi Aramco is the major supplier according to the Strategic "Crude Oil Supply Agreement" signed in 1996 thus securing the steady uninterrupted flow of raw material to the Company.
The Company uses crude oil as its primary raw material to produce a full range of products, i.e., gasoline, diesel, fuel oil, asphalt, jet fuel and lubricants with the emphasis being placed on high-value-added products and on new-specification products thus catering to the needs of large companies engaging in petroleum product commercial activities in Greece and 17 abroad. It is also the only producer of lubricants in Greece. The basic and final lubricants produced are approved by international organizations (ACEA, API) and by the United States Armed Forces.
MOTOR OIL: Production Output By Product Category Quantities in thousand MT 2001 2002 2003 Lubricants 170 170 177 LPG 143 144 153 Gasoline 1,497 1,492 1,345 Jet Fuel 554 506 533 Gasoil 1,323 1,313 1,466 Special Products 214 262 325 Fuel Oil 1,437 1,413 1,702 TOTALS 5,339 5,300 5,701
The Quality Management System of MOTOR OIL was recently certified according to ISO 9001:2000 standards for the production and supply of fuels and lubricants. Moreover, the Environmental Management System (EMS) of the Company has been certified according to ISO 14001 standards. It must be stressed that MOTOR OIL is the unique refinery in Greece and one of only a handful in Europe with such high degree of complexity which has been certified with both systems.
Besides its industrial production activity, the Company is active in commerce through buying and selling finished products, taking advantage of any market opportunities as they appear.
(HELLAS) CORINTH REFINERIES S.A. The clientele of MOTOR OIL includes all large Greek companies engaging in petroleum product activities as well as companies engaging in ship refueling, while part of the revenue is generated from exports to the countries of the Southeast Mediterranean, the Balkans etc.
It must also be stressed that there has never been an interruption in Company activities throughout the period since its foundation.
4.4. Fixed Assets
4.4.1. Land – Property
Total area of land sites privately owned by the Company amounts to 2,048 royal acres.
Area Year of (in m2) Purchase Land site area of Company Premises 2,014,593 1971-2001 2003 MOTOR OIL Purchases of land sites 30,495 2003 Less: Expropriated land sites -46,000 Area Privately Owned by MOTOR OIL 1,999,088 18 Area of land sites at Kavala 48,887 1999 Total Area Privately Owned by MOTOR OIL 2,047,975
All land sites described above comprise privately owned Company property valued at ª 30,060 thousand according to the Company Balance Sheet Statement as of 31/12/2003.
4.4.2. Buildings
Total covered area at refinery premises concerns mainly storage tanks and building complexes. These building complexes accommodate the monitoring equipment of the production facilities, the ancillary power stations, the maintenance-repair units, the storage premises for auxiliary production material – equipment, and management offices.
Most of those building complexes were built in the period 1972-3 and are situated on the seashore side of the old Athens – Corinth National Road. Major additions to buildings were effected gradually throughout the decade of the 1980s. As of 31.12.2003 the net book value of the building complexes amounted to ª 15,506 thousand.
Furthermore, the Company rents office space at the building at Marousi (12A Irodou Attikou str., 151 24 Athens) in which it houses its headquarters.
It is emphasized that the Company has all required licenses relating to its operation while no administrative penalty has ever been imposed or is pending for any violation on these licenses.
ANNUAL REPORT 2003 4.4.3. Insured Value
According to the insurance contract in force, the insured value of the refinery of MOTOR OIL equals:
a) USD 1.3 billion for the refinery premises, and
b) USD 200 million for product inventories.
4.5. Sales & Distribution Network – Customers
The bulk of the Company’s product output is delivered to its customers FOB at the refinery premises at Aghii Theodori. That part of the output targeted for consumption in the large cities is carried with vessels to third party premises, while the remainder is either carried through pipelines at the nearby storage tanks of AVIN OIL or delivered onto tank-trucks directly from the refinery.
In order to serve the needs of Northern Greece and to promote its exports in the Balkans, the Company is building modern storage and loading premises in the area of Kavala.
Finally, it is emphasized that MOTOR OIL will be one of the major aircraft fuel suppliers of the new Athens Airport at Spata. More specifically, the Company participates in the share capital of the "ATHENS AIRPORT FUEL PIPELINE COMPANY" assigned the project to construct and handle the pipeline which will carry fuel directly from the Aspropyrgos Hellenic Petroleum Refinery 19 to the new Athens Airport, and in the share capital of "OLYMPIC FUEL COMPANY" assigned the task to handle the fuel tanks and the fuel pipeline within the new Athens Airport area (please see chapter 6 for share capital participation percentages).
4.5.1. Customer Service
Further to its commercial activities, the Company offers its customers various types of services taking full advantage of its infrastructure. These services include product storage facilities as well as crude oil refining for third parties.
(HELLAS) CORINTH REFINERIES S.A. 4.6. Share Capital
The development of the share capital of the Company is summarized hereunder:
Increase Amount (Grd) G.S.M Date (FEK) Number Cash Reserve Number of Total Share Total Share Total Share Government Capitalization New Shares Number Nominal Capital Capital Gazette (Fixed Assets of Shares Value (GRD) (GRD) (Euros) Revaluation) Initial Share Capital 30,000,000 1,000 1,000 30,000 30,000,000 88,041.09 22-06-73 1479/31.7.1973 30,000,000 1,000 2,000 30,000 60,000,000 176,082.17 02-12-74 54/18.1.1975 190,200,000 6,340 8,340 30,000 250,200,000 734,262.66 17-05-77 2545/28.7.1977 151,295,940 0 8,340 48,141 401,495,940 1,178,271.28 Increase in Share Nominal Value 16-11-82 43/12.1.1983 825,504.060 27,517 40,900 30,000 1,227,000,000 3,600,880.41 Decrease in Share Nominal Value 29-06-84 3157/16.11.1984 390,000,000 13,000 53,900 30,000 1,617,000,000 4,745,414.53 04-12-85 157/20.1.1986 885,000,000 29,500 83,400 30,000 2,502,000,000 7,342,626.56 30-06-89 3668/16.10.1989 120,000 1,712,550,000 57,089 140,489 30,000 4,214,670,000 12,368,804.11 20 25-02-92 651/4.3.1992 222,000,000 7,400 147,889 30,000 4,436,670,000 13,020,308.14 30-06-93 4808/11.8.1993 58,157 3,280,111,843 109,339 257,228 30,000 7,716,840,000 22,646,632.43 07-08-96 1662/21.4.1997 300,000,000 10,000 267,228 30,000 8,016,840,000 23,527,043.29 13-02-98 5817/17.7.1998 74,100,000 2,470 269,698 30,000 8,090,940,000 23,774,504.77 30-06-98 1007/23.2.1999 49,074 2,459,770,926 81,994 351,692 30,000 10,550,760,000 30,963,345.56 2.6.2000, 28.9.2000, 25.1.2001, 17.5.2001 Decrease in Share Nominal Value 105,507,600 100 10,550,760,000 30,963,345.56 Pre Offering Total 105,507,600 10,550,760,000 30,963,345.56 Offering 527,538,000 5,275,380 110,782,980 100 11,078,298,000 32,511,512.84 Post Offering Total 110,782,980 11,078,298,000 32,511,512.84 (amounts in euros) Increase in Share Nominal Value 29-12-01 326/15.1.2002 723,381,16 110,782,980 0.30 33,234,894.00
It must be noted that there is not any authorized but not yet issued share capital and no issue of shares which do not represent share capital has taken place.
Moreover, there are not any outstanding convertible to shares bonds (or any other form of debt), and there are not any terms in the Codified Memorandum and Articles of Association relating to changes of share capital which are more restrictive than those terms specified by the law.
ANNUAL REPORT 2003 4.7. Shareholders’ Equity – Share Book Value
The Shareholders’ Equity and Share Book Value as of 31.12.2003 are presented hereunder:
(amounts in thousand euros) 31.12.2003 Number of Shares 110,782,980 Share Nominal Value (in ª) 0.30 Share Capital 33,234.90 Share Premium Reserve 52,064.87 Revaluation Reserve – Fixed Asset Subsidies 1,991.99 Ordinary Reserve 15,894.38 Special Reserves 2,006.68 Extraordinary Reserves 2,589.94 Tax-Exempt Reserves 44,882.12 Own Shares Reserve 1,384.96 Retained Earnings 11,768.72 Shareholders’ Equity 165,818.54 Share Book Value (in euros) 1.50 21 The Restated Shareholders’ Equity and Share Book Value as of 31.12.2003 according to the Auditor’ s Report remarks are presented hereunder. RESTATED SHAREHOLDERS’ EQUITY (amounts in thousand Euros) 31.12.2003 Shareholders’ Equity according to published Balance Sheet 165,818.54 Less: Restatements in accordance with Auditor’ s Report remarks Provision for employee pension plan scheme compensation - 22,000.00 Provision for shortfall of employee private insurance program - 8,100.00 Uncharged Depreciation - 1,100.00 Restatement Aggregate - 31,200.00 Restated Shareholders’ Equity 134,618.54 Restated Share Book Value (in euros) 1.22
(HELLAS) CORINTH REFINERIES S.A. 4.8. Shareholders
The Company’ s shareholding as of 31.12.2003 is presented hereunder:
Shareholder Number of Shares % PETROVENTURE HOLDINGS LTD 56,499,320 51.0% MOTOR OIL HOLDINGS SA 18,173,690 16.4% ARAMCO OVERSEAS COMPANY BV 18,173,690 16.4% MOTOR OIL (HELLAS) S.A (own shares) 205,890 0.2 % Free Float 17,730,390 16.0% TOTAL 110,782,980 100.0%
PETROVENTURE HOLDINGS LTD was founded on 25.1.2001 in Jersey Channel Islands and it operates according to 1991 Jersey law. MOTOR OIL HOLDINGS SA and ARAMCO OVERSEAS COMPANY BV are the founding shareholders of PETROVENTURE HOLDINGS LTD each having a 50% interest in the share capital. The only activity of the company is its participation in the share capital of MOTOR OIL.
MOTOR OIL HOLDINGS SA is a Luxembourg based holding company controlled by the Vardinoyannis family. 22 ARAMCO OVERSEAS COMPANY BV (A.O.C.) is based in the city of Leiden in the Netherlands. AOC is a wholly owned subsidiary of the Dutch Antilles based holding company "BOLANTER CORPORATION N.V." that belongs 100% to Saudi Aramco.
SHARE BUYBACK Following the decision of the Extraordinary General Assembly of Company shareholders dated 19.2.2003 for the acquisition of own shares so that the share market price reflects the prevailing Stock Exchange market conditions as well as the financial standing and the prospects of MOTOR OIL (HELLAS) S.A, the management of the Company enacted the share buy back program.
More specifically, the above mentioned Extraordinary General Assembly of Company shareholders defined the maximum number of own shares to be acquired (up to 1,107,800 shares that is a percentage of 1% of the share capital), the maximum and minimum purchase price per share (ª 10.30 and ª 5.00 respectively) and the period of time available for the implementation of the share purchases (within the 12 month period following the relevant decision).
The Board of Directors of the Company on its meeting dated 24.2.2003 defined the share buy back period from 3.3.2003 till 19.2.2004.
The share buy back program terminated on 19.2.2004 and during its course the Company acquired an aggregate of 205,890 own shares (that is a percentage of 0.1858 % of the share capital) at a total acquisition cost of ª 1,384,954.60.
On 31.12.2003 the Company had in its possession the total of the above mentioned 205,890 shares at a total acquisition cost of ª 1,384,954.60 recorded in the balance of the account "Securities" on the Assets’ side of the Balance Sheet while the "Reserve for Own Shares" for an equal amount was created from year 2003 Company earnings and it appears on the Liabilities’ side of the Balance Sheet under the heading Own Capital & Reserves.
ANNUAL REPORT 2003 The Board of Directors of the Company in its meeting dated April 13th, 2004 decided the sale of the aggregate of the 205,890 own shares through the market during the period from April 16th till June 15th, 2004 declaring as the minimum sale price the amount of ª 7.50 per share. On the trading day of April 16th, 2004 of the Athens Exchange the above mentioned shares were sold through the market and as a result the procedure for the sale of the own shares was completed. 4.9. Company Administration & Management
The Board of Directors of the Company is presented hereunder:
First Name and Surname BoD Position Member Identity * 1. Vardis J. Vardinoyannis Chairman Executive 2. Abdulhakim A. Al-Gouhi B’ Vice-Chairman & Executive (citizen of Saudi Arabia) Managing Director 3. Panayotis N. Kontaxis, A’ Vice-Chairman Non-Executive 4. George P. Alexandridis Member Non-Executive 5. Ioannis N. Kosmadakis Member Executive 6. Petros T. Tzannetakis Member Executive 7. Leonidas C. Georgopoulos Member Non-Executive Independent 8. Abdullah Mohammed Al Warthan Member Executive (citizen of Saudi Arabia) 23 9. Ali A. Al Muhareb, Member Non-Executive (citizen of Saudi Arabia) 10. Omar S. Bazuhair Member Non-Executive (citizen of Saudi Arabia) 11. Jamal A. Al-Rammah Member Non-Executive (citizen of Saudi Arabia) 12. Ali A. Saleh Al-Ghamdi Member Non-Executive Independent (citizen of Saudi Arabia) * According to Corporate Governance Law 3016/2002
The term of the above Board of Directors expires on the next General Assembly of the Company Shareholders which will approve the Company Financial Statements of year 2003.
The top executives of the Company are presented below:
◗ Vardis J. Vardinoyannis, Chairman. He is one of the founders of the Company and has been a member of the top management team since 1972. Apart from MOTOR OIL, he has exploited a wide array of entrepreneurial endeavours in Greece and abroad.
◗ Abdulhakim A. Al-Gouhi, Managing Director and B’ Vice-Chairman of BoD. He worked with Saudi Aramco since 1982 and held various positions in its hierarchy. In May 2001 he took office at MOTOR OIL Board of Directors as B’ Vice Chairman and he also holds the position of Managing Director of the Company.
◗ Ioannis N. Kosmadakis, General Manager Marketing. He has been working with the Company since 1978.
(HELLAS) CORINTH REFINERIES S.A. ◗ Petros T. Tzannetakis, Finance Director. He has been working with the Company since 1986, and he is also the Financial Coordinator for the Vardinoyannis Group.
◗ Constantinos E. Vassilakis, General Manager Production (Refinery). He has been working with the Company since 1973.
◗ Abdullah Mohammed Al Warthan, General Manager of Corporate Planning and Human Resources. He has been working with Saudi Aramco Group for more than 20 years. He joined the Company in July 2002.
◗ James Douglas McTurk, General Manager of Finance and Information Systems. He has extensive working experience obtained with large multinational companies and the Saudi Aramco Group. He has been working with the Company since September 2000.
Mr. Constantinos Thanopoulos is the Internal Audit Manager.
Top Management and Administration remuneration for year 2003 amounted to ª 1,791.6 thousand while BoD members’ fees from Company earnings appropriation amounted to ª 213.0 thousand.
TOP MANAGEMENT REMUNERATION (amounts in thousand euros) 2001 2002 2003 Top Management and Administration Remuneration 1,346.2 1,498.9 1,791.6 24 BoD Members’ Fees 201.0 201.0 213.0 Total 1,547.2 1,699.9 2,004.6
In addition, Mr. Ioannis Kosmadakis, in his capacity as BoD member of OLYMPIC FUEL COMPANY SA and of ATHENS AIRPORT FUEL PIPELINE COMPANY SA, receives the aggregate amount of ª 1,024.9 per month provided that he participates in at least one BoD meeting every month.
Moreover, the total number of Company shares in possession of top management and administration executives equalled 15,770 as of 31.12.2003.
ANNUAL REPORT 2003 4.9.1. Individuals of Article 8 of Capital Market Commission Decision 5/204/14.11.2000
The table below includes all individuals meeting the criteria of Article 8 of Capital Market Commission Decision 5/204/14.11.2000 as it is in force today.
S/N Name & Surname Title 1 Vardis J. Vardinoyannis Chairman of the Board of Directors 2 Abdulhakim A . Al-Gouhi B’ Vice-Chairman of B.O.D. & Managing Director 3 Panayotis Kontaxis A’ Vice-Chairman of B.O.D. 4 Petros Tzannetakis B.O.D Member & Finance Director 5 Ioannis Kosmadakis B.O.D Member & General Manager Marketing 6 Abdullah Mohammed Al Warthan B.O.D Member & General Manager Strategic Planning & Human Resources 7 James Douglas McTurk General Manager Finance & Information Systems 8 Theodore Porfyris Manager Accounting Department 9 Constantinos Thanopoulos Internal Audit Manager 10 Spyros Balezos Investor Relations Officer 11 Themistocles Iriotis Shareholder Relations Office Head 12 Ioannis Dimakis Corporate Announcements Officer 13 George Prousanidis Legal Advisor 14 PETROVENTURE HOLDINGS LTD. Shareholder with greater than 20% stake 25 15 Emmanuel Pileidis Auditor – CPA, Deloitte & Touche 16 Epameinondas Youroukos Auditor – CPA, Deloitte & Touche 17 AVIN OIL Affiliated Company (article 42e of CL 2190/1920) 18 MOTOR OIL HOLDINGS S.A Affiliated Company (article 42e of CL 2190/1920) 19 ARAMCO OVERSEAS COMPANY B.V Affiliated Company (article 42e of CL 2190/1920)
(HELLAS) CORINTH REFINERIES S.A. 4.10. Organization Chart
26
4.11. Personnel
The Company is one of the biggest employers in Greece. In 2003 MOTOR OIL employed, on average, 1,078 persons of whom 890 worked at the refinery and 188 at the Company headquarters.
PERSONNEL HEADCOUNT (average) 2001 2002 2003 Refinery Staff 839 842 890 Headquarters Personnel 192 190 188 TOTAL 1,031 1,032 1,078
ANNUAL REPORT 2003 The Company places particular emphasis to the employee educational background as this provides a comparative advantage against competition given the international and technologically advanced character of the refining sector. Today 20% of Company personnel have graduated from Institutions of Higher or Highest Education while intra-company educational programs are offered and seminars are held on a regular basis each year.
Company employees may take advantage of a comprehensive program of educational courses and seminars conducted in Greece or abroad. In this way continuous development of Company personnel is achieved to the benefit of MOTOR OIL and of society at large.
In addition, the Company places emphasis on the optimization of working conditions and above all on workforce safety, employing 3 doctors, medical personnel, and owning 3 fully equipped ambulances. As part of its interest in employee welfare, the Company offers its personnel and their families a private life insurance and medical care program covering all hospital treatment expenses that may arise. This insurance program is considered to be innovative as a result of the benefits and compensations it involves. The Company also has a multi-member security section and a specialized safety technician who is assigned the responsibility to supervise and secure hygiene and safety conditions at workplace as well as to prevent work accidents. As an aid to workplace accident prevention the Company owns 5 fire extinction vehicles and a multitude of stable and portable fire & smoke detection systems and extinguishers.
The accident prevention policy is implemented through the following methods: ◗ Strict adherence to legislation and internationally accepted codes, protocols and safety operation rules. 27 ◗ Continuous improvement of all safety and hygiene control systems. ◗ Record keeping of all accidents, accident evaluation and adopting appropriate corrective action and preventive measures. ◗ Continuous upgrade of all resources relating to individual safety and fire prevention, combined with personnel training on the use of these resources.
4.12. 2001– 2003 Capital Expenditure
During the last three years capital expenditure amounted to ª 169.3 million aiming at the expansion and upgrading of the production units of the refinery. In addition, the Company has invested in participations ("Olympic Fuel Company", "Athens Airport Fuel Pipeline Company") the most significant of which is the acquisition of «AVIN OIL» at a price of ª 37.6 million completed in March 2002.
(amounts in million euros) Year 2001 2002 2003 Total Investment Amount* 38.0 45.1 86.2 169.3 * Excluding capital expenditure for acquisitions and participations A) The greatest part of capital expenditure during the period 2001–2003 aimed at the maximization of the refinery margin. The most significant of these investments are presented next:
◗ Installation of a Hydrocracking Unit (total expenditure ª 344 million) for the production of the new "clean" fuels according to the specifications of the European Union effective as of 2005 and 2009 (Auto Oil II) which includes the installation of a Hydrocracker in combination with a High Pressure Automotive Gasoil Desulfurization Unit, other auxiliary units, improvements in the existing units of the refinery, as well as other necessary units and supply systems (hydrogen production, sulfur recovery, electric power production, desalinated water production etc.).
(HELLAS) CORINTH REFINERIES S.A. It must be stressed that following the completion of this particular investment, the Company will attain the capacity to produce "clean" fuels meeting not only the European Union specifications of 2005 for low sulfur content in fuels, but also those of 2009. Moreover, this project will facilitate increased production of middle distillates, of which there is a shortage in Greece and Europe in general, and greater flexibility in the production of either automotive gasoil or of gasolines depending on seasonal demand. Ultimately, the environmental conditions at the refinery will improve as a result of the emissions of gaseous pollutants (mainly sulfur and nitrogen oxides) from the Fuel Catalytic Cracking Unit (FCC) being drastically reduced.
Upon completion of the investment in 2005 the Nelson Complexity Index rating will improve dramatically thus strengthening one of the key competitive advantages of the Company even more.
During 2003 the capital expenditure for the above mentioned investment amounted to approximately ª 55 million.
◗ Installation of a new (3rd) gas turbine in the electric power production station (total expenditure ª 23.3 million). As a result of the installation of the new gas turbine the refinery became independent and autonomous energy wise, and this consequently set the foundation for operating cost reduction of the Company as well as for consistency improvement of the refinery. Moreover, it provided the Company with the opportunity to export surplus electric power capacity to the network of Public Power Corporation (PPC - DEH).
◗ Installation of electronic Distributed Control System (total expenditure ª 20.9 million). This investment, which was completed in 2003, involves computer usage for monitoring the production process at refinery level. The system contributes 28 to production procedures becoming fully automated and consequently to production quality improvement and uniformity. At the same time, the system provides flexibility in relation to production and diagnostic procedures at refinery level.
◗ Moreover, the installation of an Advanced Process Control System that constitutes an extension of the Distributed Control System and which will contribute to the maximization of the refining profit margin of the Company was instituted. Among other things, the system will allow the Company to boost production of high value-added products, to use production units more rationally and, to achieve operating cost reduction. In 2003 the system was applied on the FCC Unit with exceptionally satisfactory results and its application is planned to be extended on the rest refinery units during the next three year period (total capital expenditure ª 8.8 million).
◗ Automation of operations will touch upon the important activity of vessel loading, which accounts for the carrying of the bulk of petroleum products produced at the refinery, with the upgrade of the custody transfer system at the refinery jetty (total project budget ª 1.6 million). This will support vessel loading reliability, safety and efficiency.
B) In addition, aiming at the promotion and sale of all refinery products at the best possible price, the Company as part of its investment program is proceeding with the construction of two new truck loading terminals. More specifically:
◗ Construction of a new Truck Loading Terminal (TLT) in Kavala as a means to increase the Company’s market share in Northern Greece and to improve its access to the markets of Balkan countries (project budget ª 11.7 million).
◗ Construction of a new Truck Loading Terminal (TLT) at the refinery as a means to improve and optimize the distribution system of the Company. This new loading terminal, the operation of which started on 31.3.2004, will contribute to the Company’ s increasing its market share in the areas of Peloponissos and Western Greece (total project budget ª 20.5 million).
ANNUAL REPORT 2003 C) During the three year period 2001–2003 the Company completed, as part of its firm policy, a number significant projects for the improvement of environmental conditions and safety standards of the refinery.
◗ In the beginning of 2003 the installation of a new sulfur-recovery unit was completed (total project budget ª 9.3 million). This investment will make a substantial contribution to environmental protection and to the additional boost of productivity of refinery units.
For the year 2004 the capital expenditure of the Company is estimated at approximately ª 200 million, the greater part of which concerns the installation of the Hydrocracker Unit. There is also programmed the upgrading of the Liquid Waste Processing Unit as well as the further improvement of the environmental conditions at the Fuel Catalytic Cracking Unit.
The above projects are financed by own funds and bank debt.
4.13. Use of Proceeds
During 2003 the absorption of the net proceeds from the share capital increase of the Company through Initial Public Offering in the context of its listing in the Main market of the Athens Stock Exchange in August 2001 was completed. According to the Offering Circular of the issue, which was approved by the Capital Market Commission and the Athens Stock Exchange, the new funds were projected to finance part of the following investment projects: 29 ◗ Full automation of the refinery. ◗ Installation of an «Advanced Process Control» system. ◗ Upgrade of the lubricant complex. ◗ Construction of a new truck loading terminal in the area of Kavala. ◗ Construction of a new truck loading terminal in the area of the refinery. ◗ Installation of a new sulfur recovery unit
The net proceeds from the share capital increase of MOTOR OIL through public offering (that is, after the deduction of the commissions of the Underwriters and the rest expenses relating to the listing of the Company in the ASE) amounted to ª 49,787,765. Out of these funds an aggregate amount of ª 15,848,708 was finally absorbed by the project of the Hydrocracker which was not included in the initial investment program of the offering circular for the listing of MOTOR OIL in the ASE.
The Use of Proceeds Amendment was enacted according to the decisions of the Board of Directors of the Company dated 28.3.2003 and 12.11.2003 which were approved by the General Assemblies of the shareholders of the Company of 30.5.2003 (Ordinary) and of 19.12.2003 (Extraordinary). The necessity for the Use of Proceeds Amendment was in essence dictated by the priority assigned in the completion of the Hydrocracker project which will enable the Company to produce "clean" fuels according to the specifications of the European Union effective as of 2005 as well as those effective as of 2009.
It must be stressed that there will be no consequences in the investment program of the Company as a result of the transfer of funds from the other investment projects to the project of the Hydrocracker because these projects will be completed at a later phase financed with own funds and bank debt.
The Company also produced an Information Memorandum for the Use of Proceeds Amendment to the information of the investors and to the Competent Authorities as required by the Athens Stock Exchange Board of Directors decision No. 64.
(HELLAS) CORINTH REFINERIES S.A. 4.14. MOTOR OIL and Society
4.14.1. Environment – Quality
From the beginning of its operation MOTOR OIL focused its efforts on the production of quality products having as a main objective to satisfy the needs of its customers. Another Company objective is to offer its customers dependable quality products through total mobilization of its management and to resolve any potential problems before they arise.
As a result of the previously mentioned objectives, in 1992 the Company initiated the planning and development of a Quality Assurance System which covered all Company activities and fulfilled the requirements of the ISO 9002 standards. This system was firstly certified in December 1993.
Since then, the Quality System has become an integral part of MOTOR OIL operations.
In 2002 started the restructuring of the existing system in order to develop a new Quality Management System fulfilling the ISO 9001:2000 standards. This new system was certified in January 2003 by Bureau Veritas Quality International (BVQI).
The Administration and personnel of the Company are fully committed to continuous quality improvement.
The adoption of methods and procedures that protect the environment comprise top priority for MOTOR OIL. The refinery operation conforms to the environmental regulation of the Ministry of Urban Planning and the Ministry of Development and 30 is fully harmonized with the most stringent international environmental standards. The employment of advanced processing methods that do not cause any environmental harm contributed to the refinery’ s certification with ISO 14001 in December 2000 and recertification in January 2004 with certificates valid up until January 2007.
It is important to note that MOTOR OIL is the unique refinery in Greece and one among only a handful in Europe which with such a high complexity index has been certified with both systems which are part of the Integrated Management System.
In order to accomplish and adhere to the above mentioned environmental objectives, the Company seeks to:
◗ Reduce its consumption needs for natural resources and energy while at the same time increase its self-produced energy capacity.
◗ Produce products and use technologies that are environmental friendly.
◗ Control the management of gaseous emissions and continue the monitoring of the quality of the atmosphere.
◗ Promote recycling and effective management of solid and liquid waste.
◗ Tackle environmental emergencies through the development and implementation of emergency response plans such as the Oil Spill Contingency Plan.
ANNUAL REPORT 2003 An indicative list of Company investments undertaken during the last three year period in the refinery units, which contributed to the reduction of environment polluting emissions, is presented below:
– Construction of a new sour water stripping unit.
– Construction of a new sulfur recovery unit.
– Upgrading of the Refinery’s gasoline units in order to produce products in harmonization with the European Union specifications established to accomplish environmental protection goals.
– Replacement of the refinery jetty custody transfer system in order to eliminate the hazard of sea pollution and prevent any fire breaking on the ship from getting to the shore.
4.14.2. Social responsibility
MOTOR OIL is a member of the "Hellenic Network for Social Corporate Responsibility". The "Network" was founded in 1996 in London in the aftermath of a corporate executive meeting which put into place the European Companies’ Statement Against Social Exclusion. The Greek (Hellenic) Local Office of the "Network" was founded in 1999.
The "Network" focuses on the promotion of the idea of social volunteerism within companies, the smooth entry of minority groups to society, the support of programs tackling unemployment as well as environmental protection issues. 31 The "Network" also supports the discovery of various Social Responsibility programs, the analysis of the philosophy and the methodology of these programs, the collection of new data relating to ideas about dealing with social problems, the development of methods for the corporations to become more responsive to Social Cohesion issues as well as the enrollment of new "Network" members.
By participating in the "Network", the Company aims to contribute to the strengthening of social cohesion and to support social peace and development through the utilization of "best practices".
4.14.3. Subsidies – Sponsorships – Educational Programs
The Company engages in various areas of social activities. More specifically, MOTOR OIL supports international sports events, athletic clubs, art events, hospitals, educational institutes and social organizations by the means of sponsorships and grants while it organizes festive events for children every year.
MOTOR OIL was "Golden Sponsor" of the Greek Olympic Team for physically challenged persons in the "Special Olympics" Games held in Sydney, Australia, while the Company is permanent sponsor of the Greek Special Olympics Teams. More specifically, in 2003 the Company was the sponsor of 5 athletes who were members of the Greek Team for the Games which took place in Ireland.
In addition to providing on-the-job intra-company training seminars to its personnel, MOTOR OIL holds every year a series of educational sessions at the refinery to visiting university students who receive up to date information on various technical and commercial matters as well as advice on professional orientation.
Moreover, every year MOTOR OIL accommodates a large number of university students doing their practice, as part requirement of their studies, either at the refinery or Company Headquarters.
(HELLAS) CORINTH REFINERIES S.A. 5. PERFORMANCE REVIEW
5.1. Company Activities
Company turnover for year 2003 amounted to ª 1,560.1 million compared to ª 1,361.8 million in 2002 demonstrating an increase of 14.6%. The development of Company turnover by type of activity (industrial – commercial) and geographic market during the last three year period is presented hereunder:
TURNOVER BREAKDOWN (amounts in million euros) 2001 2002 2003 Industrial Activity Domestic647.5 642.8 632.5 Exports 670.8 492.7 609.8 Total Industrial Activity 1,318.3 1,135.5 1,242.3 Commercial Activity Domestic103.6 145.1 177.9 32 Export 87.0 81.2 139.8 Total Commercial Activity 190.6 226.3 317.8 TOTAL TURNOVER 1,508.8 1,361.8 1,560.1
TURNOVER BREAKDOWN (% of total) 2001 2002 2003 Industrial Activity Domestic42.9% 47.2% 40.5% Exports 44.5% 36.2% 39.1% Total Industrial Activity 87.4% 83.4% 79.6% Commercial Activity Domestic 6.9% 10.7% 11.4% Exports 5.8% 6.0% 9.0% Total Commercial Activity 12.6% 16.6% 20.4% TOTAL TURNOVER 100.0% 100.0% 100.0%
The industrial activity concerns sales of products produced in the refinery of MOTOR OIL.
The commercial activity concerns sales generated as a result of imports of finished products from the international market and their resale in the domestic market and/or abroad. The Company has the flexibility and is in a position to respond and take full advantage of the favorable market conditions whenever these arise, as well as of any exceptional and unpredictable event, meeting the increased demand in the domestic and international market with imports.
ANNUAL REPORT 2003 5.1.2. Turnover
The major objective of MOTOR OIL is to achieve the optimum selling price for its products and to increase its market share in Greece. At the same time the Company aims to accomplish emerging market penetration. To this end, MOTOR OIL has created a coherent sales and distribution network for the promotion of its products as a means to strengthen its presence in the oil market. It is important to note that the Company responds to customer demand without neglecting workplace hygiene, workforce safety and environmental protection issues. Through these moves MOTOR OIL aims to increase its profitability and maximize shareholder value.
MOTOR OIL MARKET SHARE BY PRODUCT CATEGORY IN THE GREEK MARKET 2001 2002 2003 Domestic Market LPG 16.4% 21.8% 18.8% Gasoline 29.0% 33.4% 30.7% Jet Fuel 0.4% 0.4% 0.5% Automotive Diesel – Heating Gasoil 21.0% 20.0% 19.6% Fuel Oil 10.5% 11.8% 10.2% Asphalt 30.4% 35.5% 32.3% 33 Domestic Market Total (Fuels) 20.8% 22.0% 20.8% Bunkering - Aviation Jet Fuel 22.2% 19.5% 25.3% Fuel Oil 29.4% 25.6% 30.1% Bunker Gasoil 23.0% 17.0% 16.2% Bunkering – Aviation Total (Fuels) 27.2% 23.0% 26.9% Lubricants 50.9% 58.9% 61.6% INLAND MARKET TOTAL 22.6% 22.4% 22.4%
The following tables include summary data of MOTOR OIL’ s turnover breakdown by type of activity, market, product and customer for the last three years.
By Type of Activity (thousand MT) (million EURO) 2001 2002 2003 2001 2002 2003 Industrial Activity 5,590 5,054 5,562 1,318.2 1,135.5 1,242.2 Commercial Activity 790 941 1,199 190.6 226.3 317.9 TOTAL 6,380 5,995 6,761 1,508.8 1,361.8 1,560.1
(HELLAS) CORINTH REFINERIES S.A. By Type of Market (thousand MT) (million EURO) 2001 2002 2003 2001 2002 2003 Domestic2,874 3,153 3,157 751.0 787.7 809.8 Exports 2,164 1,821 2,375 533.0 401.0 550.4 Bunkering - Aviation 1,343 1,021 1,229 224.8 173.1 199.9 TOTAL 6,381 5,995 6,761 1,508.8 1,361.8 1,560.1
Domestic Market
The domestic sales of the Company in 2003 by volume remained at the same level as the previous year while by value increased by approximately 3%.
Exports
In 2003 MOTOR OIL exports increased compared to the previous year by both volume (30.4%) and value (37.3%). This increase is mainly accounted for by the sale and promotion of products in the international markets, in which traditionally MOTOR OIL is very active, as a result of the improved margins these markets offered during 2003. 34 Bunkering - Aviation
The sales of the Company in this market increased compared to the previous year by both volume (20.4%) and value (15.5%). This increase is accounted for by the sales recovery of jet fuel which had dropped in 2002 as a consequence of September 11th, 2001 events.
By Product Category The breakdown of MOTOR OIL sales by product category is presented in the following table:
(Amounts in thousand Metric Tons) 2001 2002 2003 Asphalt 168 166 130 Fuel Oil 1,458 1,427 1,593 Diesel 2,008 2,018 2,297 Jet Fuel 852 470 591 Gasoline 1,527 1,532 1,653 LPG 142 144 150 Lubricants 180 190 196 Other 45 48 150 TOTAL 6,380 5,995 6,761
ANNUAL REPORT 2003 By Customer The clientele of MOTOR OIL includes fuel trading companies which operate in the domestic market and abroad, domestic and foreign refineries, as well as end customers.
The major customers of MOTOR OIL (HELLAS) S.A for 2003 are presented hereunder:
2003 TURNOVER Customer million Euros Percentage Shell (Group) 271.6 17.4% Avin Oil 243.1 15.6% BP (Group) 239.3 15.3% USA Government 160.6 10.3% National Oil Corporation 54.4 3.5% Mamidoil – Jetoil 46.8 3.0% Hellenic Petroleum 41.0 2.6% Cyclon 34.7 2.2% SEKAVIN 33.0 2.1% Vitol Energy 31.6 2.0% 35 Others 404.0 25.9% TOTAL 1,560.1 100%
(HELLAS) CORINTH REFINERIES S.A. 5.2. Company Turnover and Earnings Review 2001-2003
The development of Company earnings for the period 2001-2003 is presented in the following table:
(amounts in thousand euros) 2001 2002 2003 Turnover (Sales) 1,508,808 1,361,797 1,560,059 Less: Cost of Sales (before Depreciation) -1,371,386 -1,234,126 -1,427,532 Gross Profit (before depreciation) 1 137,422 127,671 132,527 % on turnover 9.11% 9.38% 8.49% Plus: Other operating income 7,431 6,865 6,454 Total 144,853 134,536 138,981 Less: Administrative expenses (before depreciation) -15,454 -14,673 -15,829 % on turnover -1.02% -1.08% -1.01% Less: Selling expenses * (before depreciation) -11,533 -11,829 -11,361 % on turnover -0.76% -0.87% -0.73% Total operating expenses (before depreciation) -26,987 -26,502 -27,191 % on turnover -1.79% -1.95% -1.74% Operating income (before depreciation) 1 117,866 108,034 111,790 % on turnover 7.81% 7.93% 7.17% Plus: Income from participations and Securities 63 0 5,000 Plus:Extraordinary & Non–operating Income 43,753 29,472 35,708 36 Less:Extraordinary Expenses & Non-operating losses -33,430 -22,636 -28,670 Total 10,386 6,836 12,038 Earnings before interest, depreciation & tax 128,252 114,870 123,828 % on turnover 8.50% 8.44% 7.94% Plus: Interest & other related income 2,964 499 371 Less: Interest & other related expenses -12,973 -6,635 -5,340 Total -10,009 -6,135 -4,969 Earnings before depreciation & tax 118,243 108,734 118,860 % on turnover 7.84% 7.98% 7.62% Less: Depreciation -23,225 -24,903 -23,796 Earnings Before Tax 95,018 83,832 95,064 % on turnover 6.30% 6.16% 6.09% Less: Income tax -33,235 -29,368 -29,688 Less: Other taxes -235 -178 -178 Income tax & other taxes -33,470 -29,546 -29,866 Less: Board of Directors fees 2 -201 -201 -213 Net Income after BoD fees 2 61,347 54,085 64,984 % on turnover 4.07% 3.97% 4.17% Tax audit differences 3 000 Net Income after BoD fees and Tax audit differences 2,3 61,347 54,085 64,984 % on turnover 4.07% 3.97% 4.17% Total dividend 58,715 55,391 55,391 Weighted number of shares 4 107,705,675 110,782,980 110,782,980 Number of shares at year end 110,782,980 110,782,980 110,782,980
ANNUAL REPORT 2003 PER SHARE DATA (in euros) 2001 2002 2003 Earnings before depreciation and tax 5 1.10 0.98 1.07 Earnings Before Tax 5 0.88 0.76 0.86 Net Income after BoD fees 2,5 0.57 0.49 0.59 Net Income after BoD fees and Tax audit differences 3,5 0.57 0.49 0.59 Dividend per share 6 0.53 0.50 0.50 * The "Selling expenses" include provision amount ª 2,054 thousand for doubtful debtors for the year 2001 and ª1,000 thousand for the year 2002.
Notes:
1. Gross Profit and Operating Income figures for the years 2001 – 2003 as these appear in the above table differ from the respective figures as they appear in the published accounting financial statements of the Company since in the published statements total depreciation charges are deducted from "Earnings before taxes and depreciation". Gross Profit and Operating Income figures as these appear in the above table exceed published figures by the amount corresponding to depreciation charges relating to Cost of Sales and Administrative & Selling Expenses. Depreciation breakdown is presented in the section "Depreciation" of the present chapter.
2. BoD fees for 2001–2002 amounted to ª 201 thousand for each year and to ª 213 thousand for 2003.
3. Tax audit differences for previous years appear in the table above as they appear in the published financial statements.
4. For the weighted number of shares there has been taken into consideration the cash share capital increase (July 2001), the capitalization of reserves, and, the capitalization of the asset revaluation reserve.
5. Based on the weighted number of shares.
6. Based on the number of shares at year end adjusted only for the stock split approved by the GSMs of 2.6.2000, 28.9.2000 and 19.12.2000 which decided the reduction of the nominal value of each Motor Oil share from ª 88.04 to ª 0.30. The 2003 dividend amount per share regards the proposal of the Company BoD to the General Assembly of Company Shareholders. 37
RESTATED COMPANY EARNINGS The restated Company Earnings for the fiscal years 2001, 2002 and 2003 according to the Auditors’ Report remarks are presented hereunder.
RESTATED COMPANY EARNINGS (amounts in thousand euros) 2001 2002 2003 Earnings Before Tax according to published income statement 95,018 83,832 95,064 Less: Restatements according to Auditors’ Report remarks Provision for employee pension plan scheme compensation - 3,700 - 5,100 - 4,900 Provision for shortfall of employee private insurance program - 1,630 - 1,942 3,057 Plus: Previous years’ depreciation charges 856 600 3,900 Restated Earnings Before Tax 90,544 77,390 97,121 Less: Income tax and other taxes - 33,470 - 29,546 - 29,866 Restated Net Income 57,074 47,844 67,255 Less: Tax audit differences 0 0 0 Less: BoD members’ fees - 201 - 201 - 213 Restated Net Income after BoD fees and tax audit differences 56,873 47,643 67,042 RESTATED EARNINGS PER SHARE (amounts in euros) 2001 2002 2003 Restated Earnings Before Tax 0,84 0,70 0,88 Restated Net Income 0,53 0,43 0,61 Restated Net Income after BoD fees 0,53 0,43 0,61
(HELLAS) CORINTH REFINERIES S.A. ◗ Turnover
In principle, the turnover increase or decrease of oil refining and trading companies is mainly a function of the following factors:
a) Volume of Sales b) Crude Oil and Petroleum Product prices. c) Euro / U.S Dollar parity.
The turnover of the Company in 2003 amounted to ª 1,560.1 million from ª 1,361.8 million in 2002 demonstrating a 14.6% increase. In this development of Company turnover the positive catalysts were the increase of the volume of sales by 12.8% (from MT 5,995 thousand in 2002 to MT 6,761 thousand in 2003) and the increase of the weighted average of the prices of the petroleum products by approximately 21% while the negative catalyst was the devaluation of the U.S Dollar in relation to the Euro (average parity) by 16.4%.
The increase in the volume of sales is attributed to the rise of the sales of gasolines, diesel, jet fuel and fuel oil.
It must be stressed that the bulk of Company sales regards industrial activities (that is, refining of crude) comprising 79.6% of turnover in 2003, 83.4% in 2002 and 87.4% in 2001.
◗ Cost of Sales (before Depreciation) - Gross Profit
38 The Cost of Sales before depreciation amounted to ª 1,427.5 million in 2003 from ª 1,234.1 million in 2002 (an increase of 15.7%). As a result, the Gross Profit (before depreciation) increased as an absolute figure by 3.8% from ª 127,671 thousand in 2002 to ª 132,532 thousand in 2003 but decreased as a percentage of sales (8.5% in 2003 from 9.4% in 2002).
It must be emphasized that the Cost of Sales figure includes the Refinery Operating Cost (ROC) the development of which in the last three years is presented hereunder:
(amounts in thousand euros) 2001 2002 2003 Refinery Operating Cost 56,761 68,270 75,713 Percentage change over previous year 5.4% 20.3% 10.9%
The increase by 20.3% noted in 2002 in the Refinery Operating Cost (ROC) was accounted for by the significant rise in the insurance premium for the refinery premises, which amounted to ª 9.0 million in 2002 from ª 1.0 million in 2001 as a consequence of the September 11, 2001 events. In 2003 the insurance premium was down to ª 6.5 million, a development which had a positive impact on maintaining the Refinery Operating Cost at low level, nevertheless, in this particular year the Company paid an amount of ª 4.1 million for the shortfall of the private insurance program1, an amount of ª 2.5 million for the scheduled turnaround maintenance works of the Fuel Catalytic Cracking Unit and the Naptha Catalytic Reformer and, an amount of ª 2.4 million as salary increase to the production staff. Due to the above a 10.9% increase occurred in the Refinery Operating Cost in 2003.
1 According to the relevant remark of the Auditor’ s report, following an actuarial study for the private insurance program offered to Company personnel, the amount of the necessary provision was limited to ª 8.1 Million in 2003 from ª 11.2 million in year 2002. This positive development is attributed to higher payments enacted by the Company in 2003 a policy which will be followed in the future dependent on its cash flow convenience.
ANNUAL REPORT 2003 Excluding the Refinery Operating Cost, the Gross Profit increased to ª 208.2 million in 2003 from ª 195.9 million in 2002 (an increase of 6.3%) and from ª 194.2 million in 2001, confirming the continuously high and stable profitability of the Company despite the significant devaluation of the USD in relation to the Euro.
The reasoning behind the increase of the Gross Profit (before depreciation) is twofold: a) the notable increase in the volume of Company sales, and b) the ability of the Company to engage in all three main markets (domestic, bunkering/aviation, exports) allowing it to optimize its sales and its profit margins according to the prevailing market conditions.
The development of the Company Gross Profit Margin in USD/MT for the last three years is shown below:
GROSS PROFIT MARGIN (IN $/MT) 2001 2002 2003 Profit Margin from Crude Oil Refining 31.3 33.8 39.6 Profit Margin from Commercial Activities 5.7 9.3 12.5 Weighted Profit Margin 27.2 30.8 34.6
39
(HELLAS) CORINTH REFINERIES S.A. ◗ Other Operating Income
Other operating income amounted to ª 6,454 thousand in 2003 declining by 6.0% in relation to ª 6,865 thousand in 2002. These revenues comprise 0.4% of Company turnover. ◗ Operating Expenses (Administrative and Selling)
In 2003 the administrative expenses (before depreciation) amounted to 1.01% of Company turnover and reached to ª 15,829 thousand from ª 14,673 thousand in 2002, demonstrating an increase of 7.9%. The most significant elements of administrative expenses are the salaries of administration personnel, the rent payment for Company Headquarters and the special exports rates the Company has the right to levy according to the relevant Law. The increase in the administrative expenses in 2003 is, by and large, accounted for by the salary increase granted to the administration personnel.
The selling expenses (before depreciation) amounted to ª 11,361 thousand in 2003 compared to ª 11,829 thousand in 2002 demonstrating a decrease of 4.0%. These expenses comprised 0.73% of the Company’ s turnover in 2003.
It is mentioned that the provisions for doubtful receivables for the years 2002 and 2001 amounting respectively to ª 1,000 thousand and ª 2,054 thousand are included in the selling expenses.
The development of the Company’s operating expenses (before depreciation) for the period 2001 – 2003 is presented hereunder: 40 (amounts in thousand euros) 2001 2002 2003 Administrative expenses 15,454 14,673 15,829 % change 1.16% -5.05% 7.88% % on turnover 1.02% 1.08% 1.01% Selling expenses 11,533 11,829 11,361 % change 14.10% 2.57% - 3.95% % on turnover 0.76% 0.87% 0.73% Total operating expenses 26,987 26,502 27,191 % change 6.31% -1.80% 2.60% % on turnover 1.79% 1.95% 1.74%
ANNUAL REPORT 2003 ◗ Operating Income
In 2003 the Company Operating Income (before depreciation) increased as an absolute figure by 3.5% and amounted to ª 111,790 thousand from ª 108,034 thousand in 2002. This development of the operating income is mainly attributed to the 6.3% increase in the Gross Profit (before depreciation) part of which was offset by the 2.6% increase in the operating expenses.
◗ Income from Participations
The income from participations amounted to ª 5 million and concerns the dividend amount paid to the Company by the 100% subsidiary AVIN OIL from the 2002 yearly earnings of the latter. It is reminded that MOTOR OIL (HELLAS) S.A acquired the aggregate of the shares of AVIN OIL in March 2002 and for this reason the dividend amount in question was recorded as parent Company income for the first time in 2003.
◗ Interest and Other Related Income
Interest earned in 2003 amounted to ª 371 thousand reduced by 25.7% compared to the respective 2002 figure (ª 499 thousand) mainly because of lower interest rates applied on customer receivables. 41 ◗ Interest and Other Related Expenses
Financing expenses for 2003 amounted to ª 5,340 thousand compared to ª 6,635 thousand in 2002 despite the increased working capital needs of the Company. This decrease in financing expenses was mainly the result of the descending course of the interest rates as well as of the financial policy adopted by the Company which facilitated the significant reduction in the average cost of borrowing.
◗ Extraordinary Income & Non – Operating Earnings
95.5 % of the Company’s "Extraordinary Income" concerns Foreign Exchange gains (ª 34.1 million) generated mainly from purchases of crude oil, exports of products and repayment of loans denominated in foreign currency. This type of income, with the exception of grants received by the Organization of Labor Force Employment (OAED in Greek) and receipts from insurance policies, relates only to the realized Foreign Exchange gains since the unrealized ones, according to the Greek Accounting Standards, are recorded in the account "Other Provisions" of the Balance Sheet and do not influence yearly earnings (as of 31.12.2003 the balance of the account "Other Provisions" was ª 38 million).
The "Non – Operating Earnings" amounted to ª 16.7 thousand in 2003 compared to ª 8 thousand in 2002 and mainly concern profit from the sale of fixed assets.
(HELLAS) CORINTH REFINERIES S.A. ◗ Extraordinary Expenses & Non – Operating Loss
99% of the Company’ s "Extraordinary Expenses" concerns the Foreign Exchange loss (ª 27.3 million) also generated from purchases of crude oil, exports of products and repayment of loans denominated in foreign currency during the year which, according to the Greek Accounting Standards, both realized and unrealized are charged to yearly earnings.
The "Non – Operating Losses" amounted to ª 58 thousand in 2003 from ª 1,211 thousand in 2002 and mainly concern losses from destroyed inventory.
◗ Depreciation
The breakdown of the depreciation charge in the Cost of Sales, the Administrative Expenses and the Selling Expenses for the last three year period is presented in the next table:
DEPRECIATION BREAKDOWN (amounts in thousand euros) 2001 2002 2003 Cost of Sales 21,556 23,474 22,351 Administrative Expenses 1,615 1,396 1,408 42 Selling Expenses 54 33 37 TOTAL DEPRECIATION 23,225 24,903 23,796
It is clarified that in 2003 the calculation of the depreciation charge was based on the lower rates provided by PD 299/2003 while in the previous years on the rates provided by PD 100/1998.
◗ Earnings Before Tax
The 2003 Earnings Before Tax as an absolute figure amounted to ª 95.1 million compared to ª 83.8 million in 2002 (an increase of 13.5%) keeping the Company at a steady course of high profitability.
◗ Tax
Company Tax for 2003 amounted to ª 29,866 thousand compared to ª 29,546 thousand in 2002. For the year 2003 the effective tax rate as a percentage of Company Earnings Before Tax is equivalent to 31.4% because the income from participations corresponding to ª 5 million is tax exempted since it comes from the already taxed earnings of the 100% subsidiary AVIN OIL.
ANNUAL REPORT 2003 5.3. Company Balance Sheet Statements’ Review 2001 - 2003
ASSETS The development of the balance of the accounts of the Assets’ side of the Company Balance Sheet as of 31.12.2001, 31.12.2002 and 31.12.2003 is presented in the following table:
ASSETS (amounts in thousand euros) 2001 2002 2003 Establishment Expenses 5,863 6,256 12,572 Less: Accumulated depreciation -2,278 -3,398 -5,721 Net Book Value of Establishment Expenses 3,585 2,858 6,850 Net Book Value of intangible assets 872 708 531 Tangible Assets 354,826 398,927 478,614 Less: Accumulated depreciation -161,949 -185,383 -206,573 Net Book Value of Tangible assets 192,877 213,543 272,041 Participations in affiliated and other companies 4,981 40,179 40,260 Other long term receivables 11,184 7,157 2,298 Total fixed assets 209,914 261,587 315,130 43 Current Assets Inventories 108,709 125,221 151,329 Receivables Debtors, Promissory notes and Cheques in arrears 122,867 112,165 110,198 Short term receivables from related companies 1,308 0 0 Various debtors 24,762 25,764 22,906 Other receivables 358 406 346 Total Receivables 149,295 138,335 133,449 Securities 0 0 1,385 Cash 59,158 37,562 40,513 Total Current Assets 317,162 301,118 326,676 Prepayments 14,803 3,759 2,295 TOTAL ASSETS 545,464 569,322 650,952 Memo accounts 391,739 364,759 300,045
(HELLAS) CORINTH REFINERIES S.A. ◗ Establishment Expenses
The analysis of the balance of the accounts included in this section of the Assets’ side of the Company Balance Sheet at the end of each of the last three years is presented below:
(amounts in thousand euros) 2001 2002 2003 Foreign Exchange differences on loans received for the purpose of fixed assets purchase 0 0 0 Accumulated depreciation 0 0 0 Net Book Value of foreign exchange differences on loans received for the purpose of fixed assets purchase 0 0 0 Other Establishment Expenses 5,863 6,256 12,572 Accumulated depreciation -2,278 -3,398 -5,721 Net Book Value of Other Establishment Expenses 3,585 2,858 6,850 TOTAL VALUE OF ESTABLISHMENT EXPENSES (AT COST) 5,863 6,256 12,572 Accumulated depreciation -2,278 -3,398 -5,721 NET BOOK VALUE OF ESTABLISHMENT EXPENSES 3,585 2,858 6,850
44 The approximately ª 6 million increase in the balance of the account "Other Establishment Expenses" as of 31.12.2003 compared to the respective balance as of 31.12.2002 concerns the capital outlay incurred by MOTOR OIL for the "Refinery Profitability Improvement Program" which was completed within 2003.
◗ Intangible Assets
The balance of the account of "Intangible Assets" (at cost) concerns the research and development (R & D) expenses of the Company.
◗ Tangible Assets
An analysis of the balances of the accounts of "Tangible Assets" as of 31.12.2003 is included in the Appendix of the 2003 Company Balance Sheet. It is clarified that the noted cumulative ª 80 million increase in the balance (at cost) of the "Tangible Assets" relates to the investments completed during 2003 in the context of the 2003 – 2005 Company investment program the capital expenditure of which is in the region of ª 350 million.
◗ Participations in affiliated and other companies
The balance of the account "Participations in affiliated Companies" as of 31.12.2003 relates to the evaluation of the participation of MOTOR OIL in the companies PYRROS and AVIN OIL.
The balance of the account "Participations in other Companies" as of 31.12.2003 relates to the evaluation of the participation of MOTOR OIL in the companies OLYMPIC FUEL COMPANY S.A and ATHENS AIRPORT FUEL PIPELINE COMPANY S.A.
ANNUAL REPORT 2003 The method adopted for the appraisal of the Company participations is described in the Appendix of the 2003 Balance Sheet. The percentages of MOTOR OIL participation in the share capital of the companies are presented in the table hereunder:
% participation "AVIN OIL SA" 100% "OLYMPIC FUEL COMPANY SA" 14% "ATHENS AIRPORT FUEL PIPELINE COMPANY SA" 16% "PYRROS" Shipping company SA (under liquidation) 100%
The AVIN OIL acquisition was completed on 7.3.2002 following the decision of the Extraordinary General Meeting of 19.12.2001 of MOTOR OIL. The amount paid was ª 37.6 million.
◗ Other Long-Term Receivables
The balance of the account "Other Long-Term Receivables" as of 31.12.2003 amounted to ª 2,298 thousand compared to ª 7,157 thousand on 31.12.2002 as a result of the decrease in the amount of the prepayments of rental payments and guarantees. 45
◗ Inventories
Year-end inventories (finished goods, raw materials, consumables etc.) are valued at the lower value between the moving weighted average of purchase cost and the market value at the end of each accounting period as prescribed by the Greek Accounting Standards. Moreover, year end in-house produced product inventories (wastes and by-products not included) are valued in the lower price among cost of production, cost of reproduction at the end of the accounting period and net realizable value.
The Company adopts the weighted average method for the evaluation of its inventories. It must be stressed that because of the nature of Company products, economic depreciation of inventories is ruled out while the volume of transactions (purchases – sales) achieved during each accounting period eliminates the possibility of "slowly" moving inventories, in particular, with relation to petroleum products.
Moreover, as it turned out from the physical inventory measurement, the Company keeps a stock of spare parts which were purchased for the purpose to be used in maintenance and repair works of its machinery. This stock concerns a large number of items, some of which are of high value and slow moving in general. The management of the refinery has declared that this situation is acceptable because these spare parts are accompanying items of the new machinery and of the equipment purchased by the Company in order to be in operational readiness. More specifically, keeping a safety stock of such items is a prerequisite for the Company on two counts: firstly, in order to be in a position to meet the maintenance and repair needs of the refinery equipment without delays and, secondly in order to avoid any refinery units remaining idle as a consequence of a certain spare part not being immediately available since a shortage may have serious an impact on Company production.
(HELLAS) CORINTH REFINERIES S.A. On 31.12.2003 the value of the inventories of the spare parts (at cost) was ª 11,756 thousand compared to ª 11,318 thousand on 31.12.2002 and ª 10,509 thousand on 31.12.2001.
The total value of inventories on 31.12.2003 amounted to ª 151,329 thousand compared to ª 125,221 thousand on 31.12.2002 which is accounted for by the relatively increased volume kept by the Company because of the anticipated strong demand for its products. It is emphasized that a firm Company policy is to always keep low level of inventories.
◗ Debtors, promissory notes and cheques in arrears
The balance of the account "Debtors" (after the provision for doubtful debtors) amounted to ª 110,015 thousand on 31.12.2003 compared to ª 112,008 thousand on 31.12.2002. Debtor days from customers were 25.8 in 2003, 30.1 days in 2002, and 29.7 days in 2001.
The ageing analysis of the balance of the account "Debtors" as of 31.12.2003 (before provisions for doubtful debtors of approximately ª 6,276 thousand) is presented in the following table:
Amounts in thousand euros % Up to 30 days 96,687.1 83.1% 46 From 31 to 60 days 10,754.9 9.2% From 61 to 90 days 1,964.3 1.7% From 91 to 120 days 1,124.9 1.0% From 121 to 150 days 0.00 0.0% From 151 to 365 days 0.00 0.0% Over 365 days 5,759.8 5.0% TOTAL 116,290.8 100.0%
◗ Various debtors
The balance of the account "Various Debtors" amounted to ª 22,906 thousand as of 31.12.2003 compared to ª 25,764 thousand as of 31.12.2002 and includes mainly income tax prepayment and VAT return.
◗ Other receivables
The balance of the account "Other receivables" amounted to ª 346 thousand as of 31.12.2003 compared to ª 406 thousand as of 31.12.2002 and concerns mainly consignment of customs duties and prepayments.
◗ Cash
As of 31.12.2003 the balance of "Cash" amounted to ª 40,513 thousand compared to ª 37,562 thousand as of 31.12.2002.
ANNUAL REPORT 2003 ◗ Securities
As of 31.12.2003 the Company had in its possession 205,890 own shares. These shares were acquired in the context of the share buy back program, which lasted from 3.3.2003 till 19.2.2004, enacted by the Company following the relevant decision of the Extraordinary General Meeting dated 19.2.2003. The balance of the account "Securities" relates to the cost of purchase of the above mentioned shares which amounts to ª 1,384,954.60. At the same time the "Reserve for Own Shares" for an equal amount was created from 2003 Company earnings which appears on the Liabilities side of the Balance Sheet under the section Own Capital & Reserves.
◗ Prepayments
As of 31.12.2003 the balance of the account "Prepayments" amounted to ª 2,295 thousand compared to ª 3,759 thousand as of 31.12.2002.
◗ Memo Accounts
As of 31.12.2003 the balance of Memo Accounts amounted to ª 300,045 thousand and its analysis is provided in the Appendix of the 2003 Balance Sheet Statement 47
(HELLAS) CORINTH REFINERIES S.A. LIABILITIES & SHAREHOLDERS’ EQUITY The development of the balance of the accounts of the Liabilities & Shareholders’ Equity side of the Company Balance Sheet as of 31.12. of the years 2001 – 2003 is presented hereunder:
LIABILITIES & SHAREHOLDERS’ EQUITY (amounts in thousand euros) 2001 2002 2003 SHAREHOLDERS‘ EQUITY Paid up share capital 32,512 33,235 33,235 Share Premium Reserve 52,788 52,065 52,065 Revaluation Reserve – Subsidies 2,474 2,647 1,992 Reserves 55,680 59,089 66,758 Retained earnings 13,134 9,108 11,769 TOTAL SHAREHOLDERS’ EQUITY 156,587 156,144 165,819 PROVISIONS FOR CONTINGENT LIABILITIES 6,390 21,762 42,352 LIABILITIES Long term liabilities Bond loans 000 Bank loans 169,332 152,183 125,680 48 Other long term liabilities 2 2 2 Total Long term Liabilities 169,334 152,185 125,681 Short term liabilities Suppliers and Promissory Notes payable 62,347 55,775 62,949 Bank loans 332 67,304 138,225 Taxes and duties payable 28,552 28,406 31,174 Dividends payable 58,715 33,235 33,660 Other short term liabilities 11,314 4,495 4,459 Total Short Term Liabilities 161,260 189,215 270,467 TOTAL LIABILITIES 330,594 341,400 396,148 Accruals 51,893 50,015 46,633 TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 545,464 569,322 650,952 Memo accounts 391,739 364,759 300,045
ANNUAL REPORT 2003 ◗ Shareholders’ Equity
As of 31.12.2003 "Shareholders’ Equity" aggregate amounted to ª 165,819 thousand compared to 156,144 thousand as of 31.12.2002. The breakdown of the year end balance of "Shareholders’ Equity" for the last three accounting periods 2001 – 2003 is described in more detail in the next table:
SHAREHOLDERS‘ EQUITY ( amounts in thousand euros) 2001 2002 2003 I. Paid-up Share Capital 32,512 33,235 33,235 II. Share Premium Reserve 52,788 52,065 52,065 III. Revaluation Reserves–Investment Subsidies Fixed Assets Investment Allowances 2,474 2,647 1,992 IV. Reserves Ordinary Reserve 13,176 15,894 15,894 Special Reserves 2,006 2,007 2,007 Extraordinary Reserves 2,590 2,590 2,590 Tax-exempt Reserves 37,907 38,598 44,882 Reserve for own shares 0 0 1,385 Total Reserves 55,679 59,089 66,758 V. Retained Earnings 49 Retained earnings 13,134 9,108 11,769 Total Retained Earnings 13,134 9,108 11,769 TOTAL SHAREHOLDERS’ EQUITY 156,587 156,144 165,819
RESTATED SHAREHOLDERS’ EQUITY The restated Company Shareholders’ Equity as of 31.12 of the accounting periods 2001 – 2003 according to the Auditors’ Report remarks is presented hereunder.
RESTATED SHAREHOLDERS’ EQUITY (amounts in thousand euros) 31.12.2001 31.12.2002 31.12.2003 Shareholders’ Equity according to published balance sheet 156,587 156,144 165,819 Less: Restatements according to Auditors Report remarks Provision for employee pension plan scheme compensation - 12,000 - 17,100 - 22,000 Provision for shortfall of employee private insurance program - 9,215 - 11,157 - 8,100 Uncharged depreciation - 5,600 - 5,000 - 1,100 Restatement Aggregate - 26,815 - 33,257 - 31,200 Restated Shareholders’ Equity 129,771 122,887 134,619
(HELLAS) CORINTH REFINERIES S.A. ◗ Provisions
The balance of the account "Provision for Employee Pension Plan Compensation" amounted to ª 4.3 million as of 31.12.2003. It is noted that this amount has remained unchanged since 1994 as the Company has not created any additional provision for employee pension plan compensation based on the legal opinion 205/88 of the State Legal Council and pursuant to the tax regulation.
The development of the provision shortfall resulting from the difference between the provision amount MOTOR OIL should have created pursuant to Codified Law 2190/1920 and the actual provision amount as it appears in the published Company Balance Sheet Statements is presented in the next table:
(amounts in thousand euros) 2001 2002 2003 Provision for Employee retirement benefits (CL 2190/1920) 16,323 21,423 26,323 Provision amount on Company’ s Financial Statements 4,323 4,323 4,323 Provision amount shortfall (cumulative amount) 12,000 17,100 22,000
The balance of the account "Other Provisions" as of 31.12.2003 amounts to ª 38,029.4 thousand and relates to the unrealized gains from foreign exchange differences of short-term and long-term receivables and liabilities of the Company which, 50 according to the Greek Accounting Standards, are recorded in the Provisions and do not influence the yearly earnings.
◗ Long-Term Liabilities
As of 31.12.2003 the balance of this account was ª 125,681 thousand down from ª 152,185 thousand as of 31.12.2002. This reduction is the result of the favorable translation impact, according to the exchange rates prevailing at year end, of the loans denominated in other currencies which created this foreign exchange gain.
The balance of the account "Bank Loans" concerns mainly the long-term Syndicated Loan of USD 150,000,000 arranged by CITIBANK N.A, within the context of debt refinancing effected by the Company at the end of year 2000 (from short-term to long-term). This is a five year loan ending in December 2005 and its balance as of 31.12.2003 was ª 125,386 thousand.
◗ Suppliers and Promissory Notes Payable
As of 31.12.2003 the balance of the account "Suppliers and Promissory Notes Payable" amounted to ª 62,949 thousand compared to ª 55,775 thousand as of 31.12.2002. Moreover, number of creditor days equaled 15.8 in 2003, compared to 16.2 in 2002 and 16.3 in 2001. The increase in the balance of this account as of 31.12.2003 is attributed to the higher purchases of raw material and finished products during the accounting period.
ANNUAL REPORT 2003 The ageing analysis of suppliers’ balance as of 31.12.2003 is presented in the table below:
amounts in thousand euros Percentage Up to 30 days 53,663.0 85.2% From 31 to 60 days 9,286.2 14.8% From 61 to 90 days 0.0 0.0% Over 90 days 0.0 0.0% TOTAL 62,949.2 100.0%
◗ Short-Term Loans
As of 31.12.2003 Company short-term debt amounted to ª 138,225 thousand compared to ª 67,304 thousand as of 31.12.2002. The necessity for additional debt was dictated by the temporary financing of the investment projects completed during the accounting period as well as the increased working capital needs of the Company.
◗ Taxes and Duties payable The balance of this account as of 31.12.2003 relates mainly to the income tax liability of the Company for year 2003 earnings. 51
◗ Dividends Payable
The balance of this account as of 31.12.2003 relates to the liability of the Company for the payment of the remainder of the dividend amount for the year amounting to 30 eurocents per share. The proposed dividend amount per share equals 50 eurocents. It is reminded that the Company paid an interim dividend of 20 eurocents per share on 19.12.2003.
◗ Accruals
The balance of this account relates mainly to crude oil Bills of Lading not yet invoiced at year end. As of 31.12.2003 the balance of this account amounted to ª 46,633 thousand compared to ª 50,015 thousand as at 31.12.2002.
◗ Memo Accounts
As of 31.12.2003 the balance of Memo Accounts amounted to ª 300,045 thousand and its analysis is provided in the Appendix of the Balance Sheet Statement
(HELLAS) CORINTH REFINERIES S.A. 5.3.1. Transactions with related Companies
The development of the balance of accounts receivable and payable of the related companies PEDESTAL S.A - MERVEL S.A - CHARLES WAIN, which belong to the Vardinoyannis group of companies, during the three year period 2001-2003 according to the Company Balance Sheet Statements is presented hereunder:
Balance Sheet Accounts 2001 2002 2003 in thousand euro in thousand euros In thousand euros CUSTOMERS MERVEL 000 MERVEL/Interest 0 0 0 PEDESTAL/Interest 1,475 0 0 Total 1,475 0 0 VARIOUS DEBTORS CHARLES WAIN 0 0 0 CHARLES WAIN/Interest 537 0 0 Total 537 0 0 52 LONG TERM RECEIVABLES PEDESTAL 000 PEDESTAL/Interest 0 0 0 Total 0 0 0 SUPPLIERS PEDESTAL -47,332 -35,136 -35,975 Total -47,332 -35,136 -35,975 TOTAL -45,320 -35,136 -35,975
ANNUAL REPORT 2003 5.4. Sources and Uses of Funds
(Amounts in thousand euros) 2001 2002 2003 TOTAL % OF 2001-2003 TOTAL SOURCES OF FUNDS Earnings Before Tax 95,018 83,832 95,064 273,914 41.0 Depreciation 23,225 24,903 23,796 71,924 10.8 Provisions 1 -13,072 12,372 20,590 19,890 3.0 Share Capital increase with cash 54,336 0 0 54,336 8.1 Increase in Short Term bank debt 0 66,972 70,921 137,893 20.6 Decrease in working capital 100,422 0 0 100,422 15.0 Increase in other long term liabilities 0 0 0 0 0.0 Increase in long term bank debt 8,340 0 0 8,340 1.2 Increase in fixed asset subsidies 1,548 173 0 1,721 0.3 TOTAL 269,817 188,252 210,370 668,439 100.0
USES OF FUNDS Increase in working capital 0 8,491 14,196 22,687 3.4 Change in cash and bank balances 54,849 -21,596 2,951 36,204 5.4 Net change in establishment expenses 3 4,151 393 6,316 10,860 1.6 Net change in intangible assets 813 71 0 884 0.1 53 Net change in fixed assets 4 33,864 42,127 79,687 155,678 23.3 Increase (decrease) in participations and other long term receivables -51,692 31,171 - 4,778 -25,299 -3.8 Dividends 46,955 80,900 54,973 182,828 27.4 Decrease in other long term liabilities 0 0 0 0 0.0 Income tax , other taxes and tax audit differences (previous years) 33,470 29,546 29,866 92,882 13.9 Decrease in long term debt and bills of exchange payables 2 0 17,149 26,503 43,652 6.5 Decrease in short term bank debt 147,407 0 0 147,407 22.1 Decrease in fixed asset subsidies 0 0 655 655 0.1 TOTAL 269,817 188,252 210,370 668,439 100.0
1. Provisions = Closing Balance of «Provisions» (Liabilities’side) -Opening Balance of «Provisions» (Liabilities’side) + Closing Balance of «Provisions» (Assets’side) – Opening Balance of «Provisions» (Assets’side).
2. Increase / Decrease in Long-Term Bank Debt = Closing Balance of «Long-Term Bank Debt» – Opening Balance of «Long-Term Bank Debt» + Closing Balance of «Current portion of Long Term Bank Debt payable in the next accounting period» – Opening Balance of «Current portion of Long –Term Bank Debt payable in the next accounting period»
3. Net Change in Establishment Expenses =Closing Balance of «Establishment Expenses after depreciation» – Opening Balance of «Establishment Expenses after depreciation» + Depreciation Charges on Establishment Expenses.
4. Net Change in Fixed Assets = Closing Balance of «Tangible & Intangible Fixed Assets after depreciation» + Depreciation charge for the year on Tangible & Intangible Fixed Assets – Opening Balance of «Tangible & Intangible Fixed Assets after depreciation» – Net Revaluation of Tangible & Intangible Fixed Assets
(HELLAS) CORINTH REFINERIES S.A. 5.5. Company Key Financial Ratios
The key financial ratios of the Company for the period 2001-03 are presented hereunder:
KEY FINANCIAL RATIOS 2001 2002 2003 Growth Ratios (%) Turnover (Sales) -9.6% -9.7% 14.6% Earnings Before Tax -25.0% -11.8% 13.4% Net Income after BoD fees -26.2% -11.8% 20.5% Net Income after BoD fees and Tax Audit Differences (previous’ years) -25.6% -11.8% 20.5% Tangible Fixed Assets (valued at historic cost) 10.5% 12.4% 20.0% Total Assets -10.1% 4.4% 14.3% Earnings Margin Ratios (%) Gross Profit Margin (before depreciation) 9.1% 9.4% 8.5% Net Profit Margin Before Tax 6.3% 6.2% 6.1% Net Income after BoD fees 4.1% 4.0% 4.2% Return on Capital Ratios (Before Tax) (%) Average Shareholders’ Equity & Reserves 75.0% 53.6% 59.1% Average Total Assets 18.7% 16.2% 16.5% 54 Liquidity Ratios (:1) Current Ratio 1.56 1.27 1.04 Quick Ratio 1.05 0.75 0.56 Efficiency Ratios (number of days) Average Collection Period (Debtors, Bills of Exchange in arrears and Bankers’ Drafts Receivable) 29.7 30.1 25.8 Average Payment Period (Trade Creditors, Bills of Exchange and Bankers’ Drafts Payable) 17.0 16.2 15.8 Inventory Turnover 29.0 36.3 38.1 Interest Coverage Ratios (%) Interest Expense / Earnings before Interest Expense & Taxes 12.0% 7.3% 5.3% Interest Expense / Gross Profit 9.4% 5.3% 4.1% Capital Structure Ratios (:1) Debt / Equity 1.89 2.51 2.67 Bank Debt / Equity 1.08 1.41 1.59
The turnover growth ratio indicates 14.6% increase in sales in 2003 compared to 2002. The increase in turnover is explained by the rise in the sales volume of the Company and the increase in the prices of petroleum products.
The earnings before tax growth ratio indicates a 13.4% increase in 2003 EBT.
The gross profit margin (before depreciation) denotes that gross profit as a percentage of Sales amounted to 8.5% in 2003 from 9.4% in 2002 (as an absolute figure it increased by 3.8%).
ANNUAL REPORT 2003 The net profit margin (before tax) denotes that net profit as a percentage of Sales amounted to 6.1% in 2003 compared to 6.2% in 2002 (as an absolute figure it increased by 13.4%).
The return on average shareholders’ equity & reserves indicates a notable improvement from 53.6% in 2002 to 59.1% in 2003 as a result of the 13.4% increase of the Earnings Before Tax as an absolute figure. The same reasoning stands behind the improvement of the return on average total assets from 16.2% in 2002 to 16.5% in 2003.
The current and quick ratios of the Company declined from 1.27 and 0.75 respectively in 2002 to 1.04 and 0.56 in 2003.
The average collection period (Debtors, Bills of Exchange in arrears and Bankers’ Drafts Receivable) was 25.8 days in 2003 compared to 30.1 days in 2002. The average payment period (Trade Creditors, Bills of Exchange and Bankers’ Drafts Payable) was 15.8 days in 2003 compared to 16.2 days in 2002. Furthermore, inventory turnover was 38.1 days in 2003 compared to 36.3 days in 2002.
The debt/equity ratio was 2.67 in 2003 compared to 2.51 in 2002 and 1.89 in 2001. The increase in this ratio between 2003 and 2002 is accounted for by the increase in the short term bank debt of the Company. For the same reason the bank debt/ equity ratio increased to 1.59 in 2003 from 1.41 in 2002.
DESCRIPTION OF KEY FINANCIAL RATIOS GROWTH RATIOS (%) 55 Turnover (Sales) =[(Current Year’ s Turnover – Previous Year’ s Turnover)/ Previous Year’ s Turnover ] *100 Earnings Before Tax =[(Current Year’ s Earnings Before Tax – Previous Year’ s Earnings Before Tax) / Previous Year’ s Earnings Before Tax ] *100 Net Income after BoD fees =[(Current Year’ s Net Income after BoD fees – Previous Year’ s Net Income after BoD fees) / Previous Year’ s Net Income after BoD fees] *100 Net Income after BoD fees and Tax Audit \Differences (previous years) =[(Current Year’ s Net Income after BoD fees and Tax Audit Differences (previous years) - Previous Year’ s Net Income after BoD fees and Tax Audit Differences (previous years) )/ Previous Year’ s Net Income after BoD fees and Tax Audit Differences (previous years] * 100 Tangible Fixed Assets (valued at cost) =[(Current Year’ s Tangible Fixed Assets (valued at cost) – Previous Year’s Tangible Fixed Assets (valued at cost)) / Previous Year’ s Tangible Fixed Assets (valued at cost)] * 100 Total Assets =[(Current Year’ s Total Assets – Previous Year’ s Total Assets) / Previous Year’ s Total Assets ]*100 PROFIT MARGIN RATIOS (%) Gross Profit Margin (before depreciation) =[Gross Profit (before depreciation) / Turnover] * 100 Net Profit Margin before Tax =[Earnings Before Tax / Turnover] * 100 Net Income after BoD fees =[ Net Income after BoD fees / Turnover ] * 100
(HELLAS) CORINTH REFINERIES S.A. RETURN ON CAPITAL RATIOS (%) (before tax) Average Shareholders’ Equity & Reserves =[Current Year’ s Earnings Before Tax /((Current Year’ s Shareholders’ Equity & Reserves + Previous Year’ s Shareholders’ Equity & Reserves)/2)]*100 Average Total Assets ={(Current Year’ s Earnings Before Tax + Interest Expenses)/[(Current Year’ s Total Assets + Previous Year’ s Total Assets )/2]}*100 LIQUIDITY RATIOS (:1) Current Ratio =(Current Assets + Prepayments) / (Total Current Liabilities + Accruals) Quick Ratio =(Current Assets + Prepayments – Inventories) / (Current Liabilities + Accruals) EFFICIENCY RATIOS (number of days) Receivables =[Current Year’ s Trade Receivables (Debtors, Bills of Exchange and Cheques Receivable) /Current Year’ s Turnover]* 365 Payables =[Current Year’ s Trade Payables (Creditors, Bills of Exchange and Cheques Payable)/ Current Year’ s Cost of Sales] * 365 Inventories =[Current Year’ s Closing Stock of inventories / Current Year’ s Cost of Sales (before depreciation)]* 365 CAPITAL STRUCTURE RATIOS Liabilities / Equity =(Long-Term Liabilities + Current Liabilities + Accruals) / Total Shareholders’ Equity & Reserves 56 Bank Debt / Equity =(Long-Term Bank Loans + Short-Term Bank Loans + Current portion of Long Term Bank Loans payable in the next accounting period ) / Total Shareholders’ Equity & Reserves INTEREST COVERAGE RATIOS (%) Interest / Gross Profit =Interest and related Expenses / Gross Profit (before depreciation) Interest / Earnings before Interest and Tax =Interest and related Expenses / (Earnings Before Tax + Interest and related Expenses)
5.6. Cash Flow Statements
The Company Cash Flow Statements for the years 2001 – 2003 are presented in the next page:
ANNUAL REPORT 2003 Code Description Cash Flow Analysis Cash Flow Analysis Cash Flow Analysis ∞. CASH FLOW FROM OPERATING ACTIVITIES 184,149,264.08 76,020,271.50 74,697,178.44 ∞100 Cash Inflows 1,622,968,429.03 1,407,004,199.72 1,605,389,905.68 ∞101 (+) Turnover (Sales) 1,508,807,748.27 1,361,796,643.92 1,560,059,163.76 ∞102 (+) Other Operating Income 7,431,217.98 6,865,418.94 6,453,959.25 ∞103 (+) Extraordinary income 27,777,817.82 25,516,417.98 34,998,495.11 ∞104 (+) Prior period income 0.00 0.00 6,407.98 ∞105 (+) Interest Received and Related Income 3,027,092.15 499,359.90 371,430.85 ∞106 (+) Income from securities 0.00 0.00 0.00 ∞107 (+) Sale of securities 0.00 0.00 0.00 ∞108 (+) Decrease in receivables 75,924,552.81 12,326,358.98 4,885,403.33 ∞109 (-) Purchase of securities 0.00 0.00 (1,384,954.60) ∞110 (-) Increase in receivables 0.00 0.00 0.00 ∞200 Cash Outflows (1,382,513,220.33) (1,301,982,815.66) (1,504,277,902.85) ∞201 (-) Cost of Sales (1,371,386,105.74) (1,234,125,641.81) (1,427,532,189.88) ∞202 (-) Administration Expenditures (15,454,009.44) (14,673,207.11) (15,829,363.36) ∞203 (-) Research & Development Expenses 0.00 0.00 0.00 ∞204 (-) Distribution Expenditures (9,478,692.74) (10,828,987.28) (11,361,215.57) ∞205 (-) Idle capacity cost 0.00 0.00 0.00 ∞206 (-) Other Expenditure (33,009,245.36) (21,618,909.72) (28,666,126.25) ∞207 (-) Increase in inventories 0.00 (16,512,093.67) (26,107,855.44) ∞208 (-) Increase in Prepayments (12,273,912.59) 0.00 0.00 ∞209 (-) Decrease in Accruals 0.00 (1,877,733.63) (3,382,822.26) ∞210 (-) Decrease in short term liabs (other than Bank Loans) 0.00 (13,390,494.59) 0.00 ∞211 (+) Decrease in Inventories 13,660,094.80 0.00 0.00 ∞212 (+) Decrease in Prepayments 0.00 11,044,252.15 1,463,715.89 ∞213 (+) Increase in Accruals 24,145,104.13 0.00 0.00 ∞214 (+) Increase in short term liabs (other than Bank Loans) 21,283,546.61 0.00 7,137,954.02 A300 Cash Outflows for Taxes (56,305,944.62) (29,001,112.56) (26,414,824.39) ∞301 (-) Income tax (33,235,291.69) (28,677,129.60) (29,688,467.28) ∞302 (-) Other taxes (234,408.60) (177,947.25) (177,948.13) ∞303 (-) Tax audit differences 0.00 0.00 0.00 ∞304 (-) Decrease in Tax and Duties payable (22,836,244.33) (146,035.71) 0.00 57 ∞305 (+) Increase in Tax and Duties payable 0.00 0.00 3,451,591.02 µ. CASH FLOW FROM INVESTING ACTIVITIES 13,218,997.70 (79,232,852.14) (76,335,048.78) µ100 Cash Inflows 51,496,169.48 4,053,943.24 9,860,074.10 µ101 (+) Sale of Intangible assets 0.00 0.00 0.00 µ102 (+) Sale of Tangible assets 55,229.79 27,147.52 1,200.01 µ103 (+) Sale of affiliated and related companies 1,068,675.35 0.00 0.00 µ104 (+) Decrease in long term receivables 50,372,264.34 4,026,795.72 4,858,874.09 µ105 (+) Income from participations 0.00 0.00 5,000,000.00 µ106 (+) Interest income from long term receivables 0.00 0.00 0.00 µ200 Cash Outflows (38,277,171.78) (83,286,795.38) (86,195,122.88) µ201 (-) Purchase of Intangible Assets 0.00 0.00 0.00 µ202 (-) Purchase of Tangible Assets (37,973,187.95) (45,294,336.75) (79,798,614.69) µ203 (-) Purchase of affiliated and related companies 0.00 (37,564,471.06) (81,428.32) µ204 (-) Increase in long term receivables 0.00 0.00 0.00 µ205 (-) Increase in establishment expenses (303,983.83) (427,987.57) (6,315,079.87) C. CASH FLOW FROM FINANCING ACTIVITIES (142,518,881.97) (18,384,402.46) 4,589,184.99 C100 Cash Inflows 65,017,298.83 69,518,556.89 71,194,302.30 C101 (+) Proceeds from capital increase and premium account 54,336,414.00 0.00 0.00 C102 (+) Proceeds from grants for purchase of fixed assets 2,371,284.91 2,546,060.48 42,874.05 C103 (+) Increase in long term liabilities 8,309,599.92 0.00 0.00 C104 (+) Increase in short term bank loans 0.00 66,972,496.41 71,151,428.25 C200 Cash Outflows (207,536,180.80) (87,902,959.35) (66,605,117.31) C201 (-) Decrease in (return of) share capital 0.00 0.00 C202 (-) Decrease in grants for purchase of fixed assets 0.00 0.00 C203 (-) Decrease in long term liabilities 0.00 (195,646.86) (6,138,511.36) C204 (-) Decrease in short term bank loans (147,406,702.01) 0.00 0.00 C205 (-) Loan interest and related expenditure (12,973,233.01) (6,634,737.09) (5,340,139.86) C206 (-) Dividend payments (43,955,245.78) (80,871,575.40) (54,913,466.09) C207 (-) Profit distribution to staff 0.00 0.00 0.00 C208 (-) Board of Directors Fees (201,000.00) (201,000.00) (213,000.00) NET CASH FLOW FOR THE ACCOUNTING PERIOD 54,849,379.81 (21,596,983.10) 2,951,314.65 CHANGE IN CASH & CASH AT BANK 54,849,379.81 (21,596,983.10) 2,951,314.65
(HELLAS) CORINTH REFINERIES S.A. 5.7. Share Market Price Development
The closing of the market price of the share of the Company on the last business day of the Athens Stock Exchange, the total monthly share trading volume (both in quantity and value), and the closing prices of the ASE General and Refineries Indices on the respective dates, are presented in the following table:
MOTOR OIL (HELLAS) S.A CLOSING PRICES Share TRANSACTION VOLUME GENERAL ASE REFINERIES Date Closing Price in shares in Euros INDEX INDEX 31/12/2002 6.90 414,509 2,878,817.04 1,748.42 917.66 31/1/2003 6.14 180,589 1,113,874.72 1,683.59 859.41 28/2/2003 6.48 238,132 1,502,100.25 1,614.06 816.83 31/3/2003 6.30 4,518,215 29,018,069.42 1,467.30 806.59 30/4/2003 6.60 148,638 976,418.44 1,691.52 886.22 31/5/2003 7.00 828,963 5,686,818.13 1,707.54 998.97 30/6/2003 6.30 596,233 3,899,575.48 1,892.04 932.55 31/7/2003 6.84 369,543 2,472,167.52 2,158.64 1,024.57 29/8/2003 7.52 1,202,926 8,749,286.99 2,210.57 1,048.69 58 30/9/2003 6.90 652,375 4,590,949.30 2,019.76 1,052.06 31/10/2003 6.92 576,478 3,996,279.92 2,121.06 1,077.97 28/11/2003 7.00 506,133 3,527,218.66 2,170.05 1,060.72 31/12/2003 6.86 2,008,038 13,500,391.38 2,263.58 1,073.13
ANNUAL REPORT 2003 5.8. Consolidated Financial Statements
The Company produced Consolidated Financial Statements for the first time for the 1999 accounting period in which the following companies were included:
◗ MOTOR OIL (HELLAS) CORINTH REFINERIES S.A. ◗ AVIN OIL S.A. Up until March 7th 2002, AVIN OIL was not a MOTOR OIL subsidiary. Nevertheless, nine (9) members of the MOTOR OIL Board of Directos participated in the Board of AVIN OIL and this fact constituted condition for (horizontal) consolidation even though there was no direct participation of one company in the share capital of the other company.
On March 8th, 2002 MOTOR OIL acquired 100% of the shares of AVIN OIL.
The consolidation was enacted according to the method of "Full Consolidation".
For the fiscal year 2003 the Company produced Consolidated Financial Statements in which the following companies are included:
◗ MOTOR OIL (HELLAS) CORINTH REFINERIES S.A. ◗ AVIN OIL S.A. (by the full consolidation method) ◗ OLYMPIC FUEL COMPANY S.A (by the net equity method) It must be emphasized that as a result of the acquisition of AVIN OIL by MOTOR OIL on March 8th, 2002, the Consolidated 59 Earnings figures as well as the balances of certain Consolidated Balance Sheet Statement accounts for the years 2002 and 2001 are not directly comparable. The same applies for the years 2002 and 2003 given that in the Consolidated Financial Statements of the last year the OLYMPIC FUEL COMPANY S.A was included for the first time with the method of "Net Equity".
In the following tables the development of MOTOR OIL consolidated financial figures is presented. The regular audits of the Consolidated Accounting Financial Statements of the years 2001 – 2003 were conducted by the Auditing Company DELOITTE & TOUCHE, 250-254 Kifisias Avenue, Chalandri, tel. +30 210 6781100, responsible Certified Public Accountant Mr. Emmanuel Pelidis REG No. ICPA (GR) 12021.
(HELLAS) CORINTH REFINERIES S.A. 5.8.1. Consolidated Turnover and Earnings Review 2001 - 2003
The development of the Consolidated Turnover and Earnings during the three year period 2001-2003 is presented in the following table:
Consolidated Yearly Earnings (amounts in thousand euros) 2001 2002 2003 Turnover (Sales) 1,790,362 1,591,910 1,843,473 Less: Cost of Sales (before depreciation)1 -1,613,428 -1,429,735 -1,666,816 Gross Profit 176,934 162,175 176,657 % on Turnover 9.9% 10.2% 9.6% Plus: Other Operating Income 10,247 9,289 9,511 Total 187,181 171,464 186,168 Less: Administrative Expenses (before depreciation)1 -20,523 -18,266 -22,305 Less: Selling Expenses (before depreciation)1 -36,908 -35,017 -38,396 Total Operating Expenses -57,431 -53,284 -60,701 % on Turnover - 3.2% - 3.3% - 3.3% Operating Income (before depreciation)1 129,750 118,181 125,467 % on Turnover 7.2% 7.4% 6.8% Plus: Income from Participations & Securities 63 0 586 60 Plus: Extraordinary & Non–Operating Income 44,620 31,122 37,488 Less: Extraordinary Exp. & Non – Operating Losses -34,070 -23,061 -29,535 Less: Provisions for Extraordinary Risks 0 0 0 Total 10,613 8,061 8,539 Earnings before Interest, Depreciation and Tax 140,363 126,241 134,006 % on Turnover 7.8% 7.9% 7.3% Plus: Interest and other related income 3,067 875 1,060 Less: Interest and other related expenses -15,383 -8,467 -7,412 Total -12,316 -7,592 -6,351 Earnings before Depreciation and Tax 128,047 118,649 127,654 % on Turnover 7.2% 7.5% 6.9% Less: Depreciation Charges -26,055 -29,018 -26,471 Less: Depreciation of AVIN OIL Goodwill 0 - 1,097 - 1,350 Earnings Before Tax 101,992 88,535 99,833 % on Turnover 5.7% 5.6% 5.4% Less: Income tax -35,630 -31,908 -33,462 Net income 66,362 56,627 66,371 % on Turnover 3.7% 3.6% 3.6% Tax Audit Differences (previous years’) 73 0 0 Net Income after tax audit differences (previous years’)2 66,435 56,627 66,371 % on Turnover 3.7% 3.6% 3.6% Weighted Number of Shares 107,705,675 110,782,980 110,782,980 Number of Shares at year end 110,782,980 110,782,980 110,782,980
ANNUAL REPORT 2003 DATA PER SHARE (in euros) 2001 2001 2003 Earnings before Depreciation and Tax 1.19 1.07 1.15 Earnings Before Tax 0.95 0.80 0.90 Net Income 0.62 0.51 0.60 Net Income after Tax Audit differences 0.62 0.51 0.60
1. For the calculation of Operating Income the depreciation charges relating to Cost of Sales, Administrative and Selling Expenses have not been taken into account. The depreciation charge breakdown is presented in the section "Depreciation" of this of chapter of the annual report.
2. The tax audit differences appear in the table above as they appear in the published financial statements.
RESTATEMENT OF CONSOLIDATED EARNINGS The restated Consolidated Earnings for the fiscal years 2001, 2002 and 2003 according to the Auditors’ Report remarks are presented hereunder.
RESTATED CONSOLIDATED EARNINGS (in thousand euros) 2001 2002 2003 Earnings Before Tax according to the published income statement 101,992 88,536 99,833 Less: Restatements according to Auditors Report remarks Provision for employee pension plan scheme compensation - 3,900 - 5,300 - 5,100 61 Provision for shortfall of employee private insurance program - 1,630 - 1,942 3,057 Depreciation on AVINOIL Goodwill 0 - 3,300 - 4,050 Plus: Previous years’ depreciation charges 856 600 3,900 Restated Earnings Before Tax 97,318 78,594 97,640 Less: Income tax and other taxes - 35,630 - 31,908 - 33,462 Restated Net Income 61,688 46,686 64,178 Less: Tax audit differences 74 0 0 Restated Net Income after tax audit differences 61,762 46,686 64,178
RESTATED CONSOLIDATED EARNINGS PER SHARE (amounts in euros) 2001 2002 2003 Restated Earnings Before Tax 0.90 0.71 0.88 Net Income 0.57 0.42 0.58 Net Income after Tax Audit Differences 0.57 0.42 0.58
(HELLAS) CORINTH REFINERIES S.A. ◗ Consolidated Turnover
Consolidated turnover for 2003 amounted to ª 1,843.5 million compared to ª 1,591.9 million in 2002 demonstrating a 15.8% increase. This increase is by and large attributed to the same factors which contributed to the increase in the turnover of the parent company MOTOR OIL (HELLAS) S.A.
The Consolidated Turnover breakdown by geographical market (domestic – exports) and type of activity (industrial – commercial) for the three year period 2001 – 2003 is presented in the next tables: CONSOLIDATED TURNOVER BY GEOGRAPHICAL MARKET (amounts in thousand euros) 2001 2002 2003 Domestic Sales 1,008,422 998,580 1,071,576 % on consolidated turnover 56.33% 62.73% 58.13% Export sales 781,940 593,330 771,897 % on consolidated turnover 43.67% 37.27% 41.87% CONSOLIDATED TURNOVER AGGREGATE 1,790,362 1,591,910 1,843,473
CONSOLIDATED TURNOVER BY TYPE OF ACTIVITY (amounts in thousand euros) 2001 2002 2003 62 Refining 1,318,250 1,135,510 1,242,308 % on consolidated turnover 73.63% 71.33% 67.39% Commercial 472,112 456,400 601,165 % on consolidated turnover 26.37% 28.67% 32.61% CONSOLIDATED TURNOVER AGGREGATE 1,790,362 1,591,910 1,843,473
◗ Cost of Sales and Gross Profit
In 2003 the Gross Profit (before depreciation) increased as an absolute figure by 8.9% compared to 2002 (ª 176,657 thousand from ª 162,175 thousand) while as percentage on consolidated turnover it decreased (9.6% compared to 10.2%) following a parallel course with the respective Gross Profit figure of the parent company.
The analysis of the consolidated Cost of Sales per type of activity is presented in the next table:
(amounts in thousand euros) 2001 2002 2003 Refining 1,185,816 1,022,119 1,131,395 Commercial 427,612 407,616 535,421 COST OF SALES (BEFORE DEPRECIATION) TOTAL 1,613,428 1,429,735 1,666,816
◗ Other Operating Income
Other operating income amounted to ª 9,511 thousand in 2003 compared to ª 9,289 thousand in 2002 and concerns mainly the recovery of the expenses relating to the C.I.F shipment of goods, the revenue generated for the use of the refinery truck loading terminal and storage fees. This type of income accounts for 0.5% of consolidated turnover.
ANNUAL REPORT 2003 ◗ Operating Expenses (Administrative and Selling)
Total operating expenses (before depreciation) at consolidated level amounted to ª 60,701 thousand in 2003 compared to ª 53,284 thousand in 2002 (an increase of 13.9%). As a percentage on consolidated turnover these expenses remained in 2003 at the 3.3% level as during 2002. ◗ Interest and other related expenses
Total financing expenses amounted to ª 7,412 thousand in 2003 compared to ª 8,467 thousand in 2002. This decrease in financing expenses in 2003 is attributed mainly to the fall in interest rates along with the financial policy adopted with the objective to reduce the average cost of borrowing. ◗ Income from participations
The "Income from Participations" relates to the proportion of MOTOR OIL and AVIN OIL (cumulatively 28%) to the 2003 earnings after taxes of the OLYMPIC FUEL COMPANY S.A. ◗ Interest Income and other related revenue
In 2003 interest income amounted to ª 1,060 thousand compared to ª 875 thousand in 2002. ◗ Extraordinary & other Non – Operating Income 63 In 2003 extraordinary & other non-operating income amounted to ª 37,488 thousand compared to ª 31,122 thousand in 2002 and concerned mainly foreign exchange gains from crude oil purchases, product exports, and payments on foreign currency denominated loans. This type of income, with the exception of subsidies received by the Organization of Labour Force Employment (OAED in Greek) and the receipts from insurance policies, relates only to the realized foreign exchange gains since the unrealized ones, according to the Greek Accounting Standards, are included in the Balance Sheet account "Other Provisions" (as of 31.12.2003 the balance of this account was ª 38.2 million) and do not affect yearly earnings. ◗ Extraordinary Expenses & other Non – Operating Losses
In 2003 extraordinary expenses & other non – operating losses amounted to ª 29,535 thousand compared to ª 23,061 thousand in 2002 and concerned mainly realized and unrealized foreign exchange losses from crude oil purchases, product exports and foreign currency denominated loans which, according to the Greek Accounting Standards, are charged to yearly earnings. ◗ Depreciation
Depreciation allocation on various cost accounts is presented in the following table: DEPRECIATION BREAKDOWN (amounts in thousand euros) 2001 2002 2003 Cost of sales 21,556 23,473 22,351 Administrative expenses 1,785 2,670 1,568 Selling expenses 2,714 2,874 2,552 TOTAL DEPRECIATION 26,055 29,018 26,471
(HELLAS) CORINTH REFINERIES S.A. DEPRECIATION OF GOODWILL 2001 2002 2003 (amounts in thousand euros) Depreciation charge of AVIN OIL Goodwill 0 1,097 1,350
◗Consolidated Earnings Before Tax
Consolidated Earnings Before Tax as an absolute figure amounted to ª 99,833 thousand in 2003 compared to ª 88,535 thousand in 2002 (an increase of 12.8%) confirming a steady course of high level profitability.
5.8.2. Consolidated Shareholders’ Equity – Share Book Value
The consolidated Shareholders’ Equity and Share Book Value as of 31.12.2003 are presented in the following table:
(amounts in thousand euros) 2003 Number of shares 110,782,980 Share Capital 33,235 Share Premium Reserve 52,065 Revaluation Reserve – Subsidies 1,992 64 Ordinary Reserve 16,489 Extraordinary Reserves 2,007 Special Reserves 2,590 Tax – Exempt Reserves 44,898 Reserve for own shares 1,385 Retained earnings 14,957 Own Capital & Reserves Aggregate 169,618 Share Book Value (in euros) 1.53
RESTATED CONSOLIDATED SHAREHOLDERS’ EQUITY – SHARE BOOK VALUE The restated Consolidated Shareholders’ Equity and Share Book Value as of 31.12.2003 according to the Auditors’ Report remarks are presented hereunder.
RESTATED CONSOLIDATED SHAREHOLDERS’ EQUITY (amounts in thousand euros) 31.12.2003 Shareholders’ Equity according to the published balance sheet 169,618 Less: Restatements according to Auditors’ Report remarks Provision for employee pension plan scheme compensation - 23,400 Provision for shortfall of employee private insurance program - 8,100 Depreciation on AVIN OIL Goodwill - 7,350 Uncharged depreciation - 1,100 Restatement Aggregate - 39,950 Restated Shareholders’ Equity 129,668 Restated Consolidated Share Book Value (in euros) 1,17
ANNUAL REPORT 2003 5.8.3. Review of Consolidated Balance Sheet Statements
The development of the balance of the Assets and Liabilities accounts of the Consolidated Balance Sheet Statements as of 31.12 of the years 2001 – 2003 is presented in the next tables:
ASSETS (amounts in thousand euros) 2001 2002 2003 Establishment expenses 7,733 8,278 15,925 Less: Accumulated Depreciation -3,815 -5,143 -7,713 NET BOOK VALUE OF ESTABLISHMENT EXPENSES 3,918 3,135 8,212 FIXED ASSETS Net Book Value of intangible assets 872 26,611 25,084 Tangible Assets 388,003 435,575 518,750 Less: Accumulated depreciation -176,671 -202,692 -226,136 Net Book Value of Tangible Assets 211,332 232,883 292,613 Participations in affiliated and other companies 5,885 3,663 5,379 Other long term receivables 13,068 10,875 12,806 TOTAL FIXED ASSETS 231,157 274,032 335,882 CURRENT ASSETS Inventories 113,113 129,938 156,995 Receivables Debtors, Promissory Notes and cheques in arrears 163,999 161,486 148,237 Short term receivables from related companies 1,308 0 0 65 Doubtful debtors less provisions 0 0 0 Various Debtors 27,809 29,438 26,221 Other accounts receivable 3,339 1,090 874 Total receivables 196,455 192,014 175,333 Securities 0 0 1,385 Cash 62,008 39,483 42,331 TOTAL CURRENT ASSETS 371,576 361,435 376,043 PREPAYMENTS 15,856 5,006 4,272 TOTAL ASSETS 622,507 643,608 724,410 Memo Accounts 435,820 433,678 417,540
◗ Establishment Expenses As of 31.12.2003 the establishment expenses (at cost) amounted to ª 15,925 thousand compared to ª 8,278 thousand as of 31.12.2002. This increase concerns the approximately ª 6 million expenditure for the "Refinery Profitability Improvement Program" completed in 2003.
◗ Tangible Assets As of 31.12.2003 the balance of tangible assets accounts (at cost) amounted to ª 518,750 thousand compared to ª 435,575 thousand as of 31.12.2002. This increase reflects the investments completed by the parent company during 2003 in the context of its 2003 – 2005 investment program the total expenditure of which is in the region of ª 350 million.
(HELLAS) CORINTH REFINERIES S.A. ◗ Participations in Affiliated & other Companies – Other long term receivables The balance of the accounts "participations in affiliated companies" and "participations in other companies" as of 31.12.2003 cumulatively amounted to ª 5,379 thousand compared to ª 3,663 thousand as of 31.12.2002 and concerns the following companies:
% participation "OLYMPIC FUEL COMPANY S.A." 28% "ATHENS AIRPORT FUEL PIPELINE COMPANY SA" 16% "HAFCO S.A." 50% "AVIN ALBANIA" 100% "PYRROS" Shipping Company S.A. (under liquidation) 100%
The balance of the account "other long term receivables" amounted to ª 12,806 thousand as of 31.12.2003 from ª 10,875 thousand as of 31.12.2002.
◗ Inventories 66 As of 31.12.2003 the value of the inventories, at consolidated basis, amounted to ª 156,995 thousand compared to ª 129,938 thousand as of 31.12.2002. This development is attributed to the relatively increased volume of inventories, compared to the previous year, kept by the parent company because of the anticipated strong demand for its products. It is emphasized that a firm policy of the parent company is to always keep low level of inventories.
◗ Receivables According to the Consolidated Balance Sheet Statement, as of 31.12.2003 the balance of receivables amounted to ª 175,333 thousand compared to ª 192,014 thousand as of 31.12.2002. The ageing analysis of the balance of the account "Debtors" (before provisions for doubtful debtors amounting to ª 8,270 thousand) is presented in the following table:
amounts in thousand euros % Up to 30 days 97,167.9 81.4% From 31 to 60 days 5,657.2 4.7% From 61 to 90 days 3,881.1 3.3% From 91 to 120 days 1,275.7 1.1% From 121 to 150 days 260.4 0.2% From 151 to 365 days 2,195.8 1.8% Over 365 days 8,891.7 7.5% TOTAL 119,329.8 100.0%
ANNUAL REPORT 2003 ◗ Securities The balance of this account as of 31.12.2003 relates to the purchase cost of the 205,890 own shares acquired by the parent company in the context of the implementation of the relevant decision of the Extraordinary General Meeting dated 19.2.2003. The cost of purchase of the above mentioned own shares equals ª 1,384,954.60. At the same time the "Reserve for Own Shares" for an equal amount was created from 2003 parent company earnings which appears on the Balance Sheet Statement under the section Own Capital & Reserves.
◗ Cash The balance of "Cash" concerns mainly current account deposits and time deposits amounting to ª 42,331 thousand as of 31.12.2003 compared to ª 39,483 thousand as of 31.12.2002.
LIABILITIES (amounts in thousand euros) 2001 2002 2003 OWN CAPITAL & RESERVES Paid up share capital 34,347 33,235 33,235 Share Premium Reserve 52,788 52,065 52,065 Revaluation Reserves – Fixed Assets Subsidies 2,799 2,647 1,992 Reserves 57,173 59,365 67,369 67 Retained earnings 18,668 11,175 14,957 TOTAL SHAREHOLDERS’ EQUITY 165,775 158,487 169,618 PROVISIONS FOR CONTINGENT LIABILITIES 6,750 22,191 42,631 LIABILITIES Long Term liabilities Bond loans 333 Bank loans 183,963 162,242 125,680 Other long term liabilities 1,480 1,290 1,212 Total Long Term liabilities 185,446 163,535 126,895 Short Term liabilities Suppliers and Promissory notes payable 76,753 72,266 66,243 Short term bank loans 27,864 100,707 178,369 Taxes payable and Social Security liabilities 34,319 34,339 37,523 Current portion of long term liabilities 3,130 4,598 10,153 Dividends payable 58,715 33,235 33,660 Other short term liabilities 10,199 3,447 2,969 Total Short Term liabilities 210,980 248,592 328,917 TOTAL LIABILITIES 396,426 412,127 455,812 ACCRUALS 53,556 50,803 56,349 LIABILITIES & SHAREHOLDERS’ EQUITY TOTAL 622,507 643,608 724,410 Memo Accounts 435,820 433,678 417,540
(HELLAS) CORINTH REFINERIES S.A. ◗ Consolidated Shareholders’ Equity As of 31.12.2003 Consolidated Shareholders’ Equity amounted to ª 169,618 thousand compared to ª 158,487 thousand as of 31.12.2002.
RESTATED CONSOLIDATED SHAREHOLDERS’ EQUITY The restated Consolidated Shareholders’ Equity as of 31.12 of the accounting periods 2001 – 2003 according to the Auditors’ Report remarks is presented hereunder.
RESTATED CONSOLIDATED SHAREHOLDERS’ EQUITY (in ª Euros) 31.12.2001 31.12.2002 31.12.2003 Equity according to the published balance sheet 165,775 158,486 169,618 Less: Restatements according to Auditors’ Report remarks Provision for employee pension plan scheme compensation - 13,100 - 18,400 - 23,400 Provision for shortfall of employee private insurance program - 9,215 - 11,157 - 8,100 Depreciation on AVIN OIL Goodwill 0 - 3,300 - 7,350 Uncharged depreciation - 5,600 - 5,000 - 1,100 Restatement Aggregate - 27,915 - 37,857 - 39,950 Restated Consolidated Shareholders’ Equity 137,861 120,629 129,668
68 ◗ Provisions As of 31.12.2003 the balance of the account "Provisions for contingent liabilities", on a consolidated basis, amounted to ª 42,631 thousand and includes the provision created for employee retirement benefits of ª 4,448 thousand and other provisions of ª 38,183 thousand that relate to the unrealized gains from foreign exchange differences of short-term and long-term receivables and liabilities which, according to the Greek Accounting Standards, are recorded in the account "Other Provisions" and do not affect yearly earnings.
The companies included in the Consolidated Balance Sheet, based on the legal opinion 205/1988 of the State Legal Council, have not created the minimum provision amount for employee retirement benefits as prescribed by the Codified Law 2190/1920. Had the Companies created provision for personnel retirement benefits according to the Law, this provision amount would exceed the amount appearing on the Consolidated Balance Sheet Statement as of 31.12.2003 by approximately ª 23.4 million and the Consolidated Shareholders’ Equity would consequently become equally less. The provision amount corresponding to year 2003 equals ª 5.1 million approximately.
◗ Long – Term Loans As of 31.12.2003 the long term debt liabilities, on a consolidated basis, amounted to ª 125,680 thousand compared to ª 162,242 thousand as of 31.12.2002. The reasoning behind this reduction is twofold:
The transfer from the long term liabilities to the short term liabilities of an amount of approximately ª 10 million concerning the final installment of the five year euro denominated syndicated bond loan of AVIN OIL which expires in December 2004 The positive impact from the translation of loans denominated in other currencies into Euros as a result of the devaluation of the US Dollar during 2003.
ANNUAL REPORT 2003 The balance of the account "Bank Loans" concerns mainly the long–term Syndicated Loan of USD 150,000,000 arranged by CITIBANK N.A, within the context of debt refinancing effected by MOTOR OIL at the end of year 2000 (from short–term to long–term). This is a five year loan maturing in December 2005 and its balance as of 31.12.2003 amounted to ª 125,386 thousand.
◗ Short-Term Loans
As of 31.12.2003 the balance of short term loans, on a consolidated basis, increased to ª 178,369 thousand from ª 100,707 thousand on 31.12.2002 because of the temporary financing of the investment projects completed by the parent company during 2003 as well the increased working capital needs.
◗ Suppliers and Promissory Notes Payable As of 31.12.2003 the balance of the account "Suppliers and Promissory notes Payable", on consolidated basis, amounted to ª 66,243 thousand compared to ª 72,266 thousand on 31.12.2002. The ageing analysis of suppliers’ balance on 31.12.2003 is presented hereunder:
Amounts in thousand euros % Up to 30 days 55,462.9 84.2% From 31 to 60 days 10,310.2 15.6% From 61 to 90 days 110.9 0.2% 69 From 91 to 120 days 0.0 0.0% From 121 to 150 days 5.0 0.0% From 151 to 365 days 0.0 0.0% Over 365 days 0.0 0.0% TOTAL 65,889.0 100.0%
◗ Current Portion of Long Term Liabilities The balance of this account amounted to ª 10,153 thousand as of 31.12.2003 compared to ª 4,598 thousand as of 31.12.2002 and mainly relates to the five year syndicated bond loan of AVIN OIL which matures in December 2004.
◗ Taxes Payable The balance of the account "Taxes Payable" as of 31.12.2003 relates mainly to the liabilities of the parent company and of AVIN OIL for the income tax of the year 2003.
◗ Dividends Payable The balance of this account reflects the liability of the parent company as of 31.12.2003 for the payment of the dividend remainder of 30 eurocents per share. The aggregate proposed dividend amount distributed by MOTOR OIL from 2003 earnings equals 50 eurocents per share. It is reminded that the parent company paid on 19.12.2003 the amount of 20 eurocents per share as interim dividend. The AVIN OIL dividend amount of ª 5 million from its 2002 earnings was paid to MOTOR OIL within 2003 and was included in the "Income from Participations" of the latter.
(HELLAS) CORINTH REFINERIES S.A. ◗ Accruals Accruals concern, by and large, crude oil Bills of Lading (for the parent company) and finished products Bills of Lading (for AVIN OIL) not yet invoiced at year end. As of 31.12.2003 the balance of this account amounted to ª 56,349 thousand compared to ª 50,803 thousand as of 31.12.2002.
5.8.4. Consolidated Cash Flow Statements
The Consolidated Cash Flow Statements for the years 2001–2003 are presented in the next page.
70
ANNUAL REPORT 2003 Cash Flow Analysis Cash Flow Analysis Cash Flow Analysis Code Description 2001 2002 2003 ∞. CASH FLOW FROM OPERATING ACTIVITIES 170,036,196.00 80,176,299.18 92,083,714.51 ∞100 Cash Inflows 1,884,800,275.96 1,633,818,300.91 1,905,821,095.66 ∞101 (+) Turnover (Sales) 1,790,362,478.25 1,591,910,057.50 1,843,472,932.25 ∞102 (+) Other Operating Income 10,247,476.30 9,289,180.45 9,510,944.22 ∞103 (+) Extraordinary income 27,625,122.86 27,051,748.13 36,458,313.75 ∞104 (+) Prior period income 36,077.53 184,685.15 22,228.45 ∞105 (+) Interest Received and related Income 3,066,722.91 875,413.79 1,060,304.39 ∞106 (+) Income from securities 62,981.39 0.00 0.00 ∞107 (+) Sale of securities 0.00 0.00 0.00 ∞108 (+) Decrease in receivables 53,399,416.72 4,507,215.89 16,681,327.20 ∞109 (-) Purchase of securities 0.00 0.00 (1,384,954.60) ∞110 (-) Increase in receivables 0.00 0.00 0.00 ∞200 Cash Outflows (1,658,315,052.39) (1,522,380,988.79) (1,784,030,392.17) ∞201 (-) Cost of Sales (1,613,428,865.16) (1,429,734,719.04) (1,666,815,780.95) ∞202 (-) Administration Expenses (20,522,702.19) (19,358,868.10) (22,305,063.77) ∞203 (-) Research & Development Expenses 0.00 0.00 0.00 ∞204 (-) Distribution Expenditures (34,545,851.60) (32,717,445.22) (38,396,295.05) ∞205 (-) Idle capacity cost 0.00 0.00 0.00 ∞206 (-) Other Expenditure (33,677,012.63) (22,043,682.94) (29,501,559.21) ∞207 (-) Increase in inventories 0.00 (16,657,966.18) (27,056,882.19) ∞208 (-) Increase in Prepayments (12,391,897.14) 0.00 0.00 ∞209 (-) Decrease in Accruals 0.00 (2,753,123.71) 0.00 ∞210 (-) Decrease in short term liabs (other than Bank Loans) 0.00 (9,965,617.78) (6,234,750.49) ∞211 (+) Decrease in Inventories 13,047,690.61 0.00 0.00 ∞212 (+) Decrease in Prepayments 0.00 10,850,434.18 733,738.52 ∞213 (+) Increase in Accruals 24,791,895.28 0.00 5,546,200.97 ∞214 (+) Increase in short term liabs (other than Bank Loans) 18,411,690.44 0.00 0.00 A300 Cash Outflows for Taxes (56,449,027.57) (31,261,012.94) (29,706,988.98) ∞301 (-) Income tax (35,382,372.56) (31,029,962.72) (33,274,973.68) ∞302 (-) Other taxes (248,088.68) (186,647.95) (187,238.42) ∞303 (-) Tax audit differences 73,787.89 0.00 0.00 ∞304 (-) Decrease in Tax and Duties payable (20,892,354.22) (44,402.27) 0.00 71 ∞305 (+) Increase in Tax and Duties payable 0.00 0.00 3,755,223.12 µ. CASH FLOW FROM INVESTING ACTIVITIES 10,513,632.42 (85,062,163.60) (93,913,165.83) µ100 Cash Inflows 51,798,740.08 2,547,600.42 732,881.55 µ101 (+) Sale of Intangible assets 0.00 0.00 0.00 µ102 (+) Sale of Tangible assets 271,920.51 354,759.12 146,585.48 µ103 (+) Sale of affiliated and related companies 1,068,682.19 0.00 0.00 µ104 (+) Decrease in long term receivables 50,458,137.38 2,192,841.30 0.00 µ105 (+) Income from participations 0.00 0.00 586,296.07 µ106 (+) Interest income from long term receivables 0.00 0.00 µ200 Cash Outflows (41,285,107.66) (87,609,764.02) (94,646,047.38) µ201 (-) Purchase of Intangible Assets 0.00 0.00 0.00 µ202 (-) Purchase of Tangible Assets (40,871,154.84) (49,321,883.20) (83,628,240.05) µ203 (-) Purchase of affiliated and related companies 0.00 (37,709,471.06) (1,432,970.91) µ204 (-) Increase in long term receivables 0.00 0.00 (1,930,992.78) µ205 (-) Increase in establishment expenses (413,952.82) (578,409.76) (7,653,843.64) C. CASH FLOW FROM FINANCING ACTIVITIES (126,687,360.31) (17,639,663.22) 4,677,397.13 C100 Cash Inflows 64,843,935.45 75,389,022.44 77,935,554.28 C101 (+) Proceeds from capital increase and premium account 54,336,413.99 0.00 0.00 C102 (+) Proceeds from grants for the purchase of fixed assets 2,371,284.91 2,546,060.48 42,874.05 C103 (+) Increase in long term liabilities 8,136,236.55 0.00 0.00 C104 (+) Increase in short term bank loans 0.00 72,842,961.96 77,892,680.23 C200 Cash Outflows (191,531,295.76) (93,028,685.66) (73,258,157.15) C201 (-) Decrease in (return of) share capital 0.00 0.00 0.00 C202 (-) Decrease in grants for purchase of fixed assets 0.00 0.00 0.00 C203 (-) Decrease in long term liabilities 0.00 (3,489,560.46) (10,719,916.20) C204 (-) Decrease in short term bank loans (128,991,686.62) 0.00 0.00 C205 (-) Loan interest and related expenditure (15,383,363.36) (8,466,549.80) (7,411,774.86) C206 (-) Dividend payments (46,955,245.78) (80,871,575.40) (54,913,466.09) C207 (-) Profit distribution to staff 0.00 0.00 0.00 C208 (-) Board of Directors Fees (201,000.00) (201,000.00) (213,000.00) NET CASH FLOW FOR THE ACCOUNTING PERIOD 53,862,468.11 (22,525,527.64) 2,847,945.81 CHANGE IN CASH & CASH AT BANK 53,862,468.11 (22,525,527.64) 2,847,945.81
(HELLAS) CORINTH REFINERIES S.A. 6. AFFILIATED COMPANIES
6.1. MOTOR OIL Subsidiaries
AVIN OIL Industrial, Commercial & Maritime Oil Company S.A
AVIN OIL Industrial, Commercial & Maritime Oil Company S.A was founded in Athens in 1977. In 1996 the company headquarters were relocated at Maroussi (12A Herodou Attikou str., 151 24). The main activity of the company is the sale of liquid fuels, lubricants, LPG and asphalt which have a wide array of applications (transportation, industrial and home use).
The share capital of AVIN OIL amounts to ª 4,400,004 and is divided into 1,496,600 common registered shares of a nominal value ª 2.94 each. The sole shareholder of the company is MOTOR OIL (HELLAS) S.A which, in March 2002 purchased the aggregate of the shares of AVIN OIL in the context of a relevant condition set during the process of the introduction of the Company shares in the main market of the Athens Stock Exchange (ASE) effected in August 2001. The acquired company was valued at ª 37,564,471.07 according to the evaluation report of a special committee of Athens Prefecture of Article 9 of Codified Law 2190/1920, while the acquisition was completed following the Ministry of Development approval Nr K2- 584/15.1.2002. 72 The acquisition of AVIN OIL gave MOTOR OIL a strong arm in the retail sector of fuels and lubricants since the acquired company ranks fourth among its competitors in the Greek market.
The gas outlet network of AVIN OIL numbers approximately 550 units and several representatives all over Greece while at the same time the company owns tank-trucks and employs specialized technical personnel.
Moreover, AVIN OIL has built and operates a twin grand station at Megara (70 km outside Athens), located on the new section of the Athens–Corinth highway, which, besides car repair works, offers banking, catering, and car maintenance services, at both sides of the road.
The primary objective of AVIN OIL is the development of its gas outlet network in the domestic front and the strengthening of its exports. The AVIN OIL participations, as a founding shareholder, in the companies AVIN ALBANIA and HAFCO (please see section 6.6 of the present chapter), as well as in the OLYMPIC FUEL COMPANY S.A (please see section 6.2 of the present chapter) fall within the context of the above mentioned objective.
ANNUAL REPORT 2003 The aggregate sales of AVIN OIL (domestic, exports) per product and the respective domestic market shares for the years 2001 – 2003 are presented hereunder:
AVIN OIL Turnover breakdown (in thousand Metric Tons) 2001 2002 2003 Gasoline 218 225 240 Automotive Diesel – Heating Gasoil 635 616 702 Fuel Oil 107 127 88 LPG 39 35 33 Jet Fuel 16 18 18 Asphalt 183 198 120 Lubricants 899 Domestic Market Total 1,206 1,228 1,209 Exports 99 97 96 Total Sales 1,305 1,325 1,306
AVIN OIL Domestic Market Share (%) 2001 2002 2003 Gasoline 6.4 6.4 6.6 Automotive Diesel – Heating Gasoil 11.0 10.0 10.3 Fuel Oil 16.1 18.9 14.8 LPG 9.5 9.4 8.7 73 Jet Fuel 1.4 1.6 1.5 Asphalt 44.2 45.8 31.2 Lubricants 8.4 9.0 9.3 TOTAL 10.1 9.9 9.3
AVIN OIL is included in the 2003 consolidated financial statements of MOTOR OIL (HELLAS) S.A with the full consolidation method.
The company is audited by certified public accountants (Auditing firm DELOITTE & TOUCHE, responsible certified public accountant Mr. Emmanuel Pelidis REG No. ICPA (GR) 12021).
The AVIN OIL Balance Sheet Statement as of 31.12.2003 is included in the appendix of the present annual report.
(HELLAS) CORINTH REFINERIES S.A. The AVIN OIL summary financial data for the years 2001-2003 are presented next:
ASSETS (amounts in thousand euros) 2001 2002 2003 Net Book Value of Establishment Expenses 333 276 1,362 Tangible Fixed Assets 33,177 36,649 40,136 Less: Accumulated Depreciation -14,722 -17,309 -19,563 Tangible Fixed Assets (net book value) 18,455 19,340 20,573 Participations in Other Companies 904 1,049 1,814 Other Long-Term Receivables 1,884 3,718 10,508 Total Fixed Assets 21,243 24,107 32,895 Current Assets Inventories 4,570 5,493 5,975 Receivables Trade Debtors, Promissory notes and Cheques Receivable 69,814 73,382 69,369 Other Receivables 6,029 4,358 3,844 Total Receivables 75,843 77,740 73,213 Cash at Hand & at Bank 2,850 1,921 1,818 Total Current Assets 83,263 85,154 81,006 Prepayments 1,054 1,247 1,977 TOTAL ASSETS 105,893 110,784 117,240 Memo Accounts 44,081 68,919 117,496
74 LIABILITIES & SHAREHOLDERS’ EQUITY (amounts in thousand euros) 2001 2002 2003 Shareholders’ Equity Paid-up Share Capital 1,836 4,400 4,400 Reserves, Revaluation Reserves and Retained Earnings 7,520 5,381 6,851 Total Shareholders’ Equity 9,356 9,781 11,251 Provisions For Risks And Expenses 359 429 279 Liabilities Long-Term Liabilities Bond Loans 333 Bank Debt 14,631 10,059 0 Other Long-Term Liabilities 1,478 1,289 1,210 Total Long-Term Liabilities 16,112 11,351 1,213 Short Term Liabilities Trade Creditors and Promissory Notes Payable 43,089 40,551 34,623 Short-Term Bank Loans 27,532 33,402 40,144 Prepayments received from Customers 518 814 501 Taxes Payable & Social Security Liabilities 4,084 4,184 4,484 Current portion of Long-Term Liabilities 2,935 4,402 9,958 Dividends Payable 0 5,000 5,000 Various Creditors 245 82 71 Total Short-Term Liabilities 78,403 88,435 94,780 Total Liabilities 94,515 99,786 95,993 Accruals 1,663 788 9,717 TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 105,893 110,784 117,240 Memo Accounts 44,081 68,919 117,496
ANNUAL REPORT 2003 INCOME STATEMENT (amounts in thousand euros) 2001 2002 2003 Turnover (Sales) 515,822 520,130 542,439 Less: Cost of Sales -477,593 -476,177 -498,777 Gross Profit 38,229 43,953 43,663 Plus: Other Operating Income 2,816 3,018 3,207 Less: Administrative Expenses (before Depreciation) -5,068 -5,758 -6,505 Less: Selling Expenses (before Depreciation) -25,376 -29,187 -27,156 Total Operating Expenses (before Depreciation) -30,444 -34,945 -33,661 Operating Income (before Depreciation) 1 10,601 12,026 13,209 Plus: Extraordinary and Non-operating Income 867 1,747 1,779 Less: Extraordinary and Non-operating Expenses -640 -489 -865 Total 227 1,259 915 Earnings Before Interest, Depreciation and Tax 10,828 13,285 14,124 Plus: Interest and Related Income 470 393 689 Less: Interest and Related Expenses -2,777 -2,218 -2,072 Total Financing Expenses -2,307 -1,825 -1,383 Less: Depreciation -2,830 -3,022 -2,675 Earnings Before Tax 5,691 8,437 10,066 Less: Income Tax -2,147 -3,004 -3,587 75 Less: Other Taxes -14 -9 -9 Less: Tax Audit Differences (previous years’) 74 0 0 Total Taxes -2,087 -3,012 -3,596 Net Income 3,604 5,425 6,470
1 For the calculation of Net Operating Income, the Depreciation charge relating to Administrative and Selling Expenses has not been taken into account. The analysis of this depreciation charge is presented hereunder:
DEPRECIATION BREAKDOWN (amounts in thousand Euros) 2001 2002 2003 Administrative Expenses 170 181 160 Selling Expenses 2,660 2,841 2,515 TOTAL DEPRECIATION 2,830 3,022 2,675
MOTOR OIL (HELLAS) S.A is the major supplier of AVIN OIL while the latter was the second largest customer of the refinery in 2003 (please see section 5.1.2 of the present annual report).
AVIN OIL sells fuels in the Greek market mainly through its privately owned storage premises located at Aghii Theodoroi in Corinth. The operation of the premises started in 1987 and constitute a modern truck loading terminal fully equipped with safety and environment protection systems. The insured value of the fixed assets of AVIN OIL amounts to ª 25 million and of the product inventories to USD 1 million.
AVIN OIL 2003 average personnel headcount amounted to 202.
(HELLAS) CORINTH REFINERIES S.A. The composition of the Board of Directors of AVIN OIL, the term of which ends on 30.6.2004, is as follows:
Vardis J. Vardinoyannis Chairman, Chief Executive Representative Abdulhakim A. Al Gouhi Managing Director & Member George P. Alexandridis Member Panayotis N. Kontaxis Member Ioannis N. Kosmadakis Member Petros T. Tzannetakis Member Abdullah Mohammed Al Warthan Member Omar S. Bazuhair Member Ali A. Al-Muhareb Member Jamal A. Al.Rammah Member
It is noted that the shipping company "PYRROS", currently under liquidation , is also a MOTOR OIL wholly (100%) owned subsidiary.
6.2. MOTOR OIL (HELLAS) S.A affiliated Companies 76 OLYMPIC FUEL COMPANY S.A. The company was founded in October 1998 at Athens with duration for 24 years (until 6.10.2022). The objective of the company, according to article 3 of its Codified Memorandum and Articles of Association, is to design, finance, construct and operate the aircraft fuel supply system and the storage facilities at the New International Athens Airport "Eleftherios Venizelos" at Spata of Attica, as well as to engage in other similar endeavors.
Following the decision of the Extraordinary General Meeting dated 12.12.2000, the headquarters of the company were relocated to Spata County and specifically to privately owned premises situated inside the Athens International Airport area on the 5th km of the Spata– Loutsa Avenue. The fixed assets of OLYMPIC FUEL COMPANY S.A include storage tanks of total capacity 24,000 mÑ, pipelines of total length 14km, 125 fuel supply pits and, a fully automated system to cater for fuel flow control as well as fire and environmental protection (hydrant system). The OFC premises as well as its methods of operation have been certified by IATA (International Air Transport Association), by the Athens International Airport, and by all international and national competent authorities.
The share capital of OLYMPIC FUEL COMPANY S.A amounts to ª 6,457,000 divided into 220,000 common registered shares of nominal value ª 29.347each while its current shareholding is as follows:
Shareholders No of Shares % Share Capital OLYMPIC AIRWAYS S.A. 145,200 66% MOTOR OIL (HELLAS) CORINTH REFINERIES S.A 30,800 14% AVIN OIL 30,800 14% BELGIAN FUELLING AND SERVICES COMPANY S.A./N.V. 11,000 5% HANSA CONSULT INGENIEURE GESSELSCHAFT MBH 2,200 1% Total 220,000 100%
ANNUAL REPORT 2003 The composition of the Board of Directors of the company, the term of which expires on 30.6.2008, is as follows:
Leonardos – Odysseas Vlamis Chairman Athanasios Mpinis Vice Chairman and Managing Director Ioannis Kosmadakis Member Vasilios Serafimakis Member Athanasios Aris Member Dimitrios Lekkas Member Panagiotis Mytas Member
The company is audited by Certified Public Accountants (Mr. Vasilis Petrides of SOL S.A, ICPA (GR) No. 11981) and its summary financial data for the years 2001 – 2003 are as follows:
Amounts in thousand euros 2001 2002 2003 Net Fixed Assets 34,126 31,470 28,982 Total Assets 41,616 38,227 37,240 Share Capital 6,456 6,456 6,457 Total Shareholders’ Equity 6,504 7,466 8,759 Total Liabilities & Shareholders’ Equity 34,679 30,343 28,123 Turnover (Sales) 10,746 11,317 12,975 77 Earnings Before Tax 89 1,487 3,220 Net Income 51 962 2,093
The OLYMPIC FUEL COMPANY S.A was included for the first time in the consolidated financial statements of MOTOR OIL (HELLAS) S.A of the year 2003 with the "Net Equity" method.
(HELLAS) CORINTH REFINERIES S.A. 6.3. MOTOR OIL (HELLAS) S.A related companies ATHENS AIRPORT FUEL PIPELINE COMPANY S.A. The company was founded in May 2000 at Maroussi (199 Kifisias Ave., zip code 151 25) with duration for 50 years. The objective of the ATHENS AIRPORT FUEL PIPELINE COMPANY S.A, according to article no. 3 of its Codified Memorandum and Articles of Association, is the execution of all works and activities relating to the design, financing, construction, completion, operation, maintenance and handling of the pipeline and its premises for the carrying of aircraft fuel from the "Hellenic Petroleum" (EL-PE) refinery at Aspropyrgos to the Athens International Airport "Eleftherios Venizelos" at Spata. The length of the pipeline is 53 km, the diameter is 26 cm and the advancement capacity is 300 m3 / hour.
This investment is anticipated to be beneficial to the environment as it will contribute to air pollution reduction and traffic relief at the greater Athens area (the aggregate distance covered every year by trucks carrying aircraft fuel to the airport is estimated at 2,000,000 km and the number of travels at 18,000). Additionally, thanks to the underground routing of the pipeline both the natural environment and the settlement will be unaffected.
The operation of the pipeline started in the beginning of 2004 and will help to the fulfillment of jet fuel needs while the economic viability of the project is guaranteed as a result of increasing demand for jet fuel at the airport area.
Today the share capital of the ATHENS AIRPORT FUEL PIPELINE COMPANY S.A amounts to ª 5,782,355 and is divided into 78 1,973,500 common registered shares, of nominal value ª 2.93 each. The last corporate action of the company, following a decision of the Ordinary General Meeting of the Shareholders dated 25.6.2003, concerned a cash share capital increase for the amount of ª 508,355 with the issuance of 173,500 new common registered shares at par. All the shareholders exercised their rights in the share capital increase. The amount paid by MOTOR OIL for its participation in the share capital increase amounted to ª 81,336.8.
The current shareholding structure of the Athens Airport Fuel Pipeline Company S.A is as follows:
Shareholders Number of Shares % Share Capital HELLENIC PETROLEUM 670,990 34% MOTOR OIL (HELLAS) CORINTH REFINERIES 315,760 16% OLYMPIC AIRWAYS 335,495 17% ATHENS INTERNATIONAL AIRPORT 335,495 17% PETROLA HELLAS 315,760 16% Total 1,973,500 100%
The composition of the Board of Directors of the company is as follows:
Ioannis Paraschis Chairman Konstantinos Athanasopoulos Vice Chairman Fotios Doudonis Managing Director & Member Pavlos Kotsailides Member Ioannis Kosmadakis Member Michael Karalis Member Afroditi Papathanasis Member
ANNUAL REPORT 2003 6.4. Companies which participate in MOTOR OIL (HELLAS) S.A A. PETROVENTURE HOLDINGS LTD The holding company PETROVENTURE HOLDINGS LTD was founded on 25.1.2001 in Jersey Channel Islands, where its headquarters are located, operates according to the 1991 Jersey law and is the majority shareholder of MOTOR OIL (HELLAS) S.A having in its possession 56,499,320 common registered shares corresponding to 51% of the share capital. The sole company activity is its participation in MOTOR OIL (HELLAS) S.A.
The current shareholding of PETROVENTURE is as follows:
Shareholders Number of Shares % participation MOTOR OIL HOLDINGS S.A. 500,000 50% ARAMCO OVERSEAS COMPANY B.V. 500,000 50% Total 1,000,000 100%
The composition of the Board of Directors is as follows: Vardis J. Vardinoyannis Chairman Abdulhakim A. Al – Gouhi Vice-Chairman Petros T. Tzannetakis Member M.R. Al Qurashi Member 79 B. MOTOR OIL HOLDINGS S.A. The company "MOTOR OIL HOLDINGS S.A." was founded in Luxembourg through the notary deed no. 586/22.02.1991, with indefinite duration and the initial legal name "WIND INVESTMENTS S.A." The Extraordinary General Assembly of 15.3.1995 decided the change of the legal name from "WIND INVESTMENTS S.A." to "MOTOR OIL HOLDINGS S.A." and the relevant amendment of article 1 of the company’s Articles of Association.
The founders of MOTOR OIL HOLDINGS S.A were Messrs. Vardis Vardinoyannis and Theodore Vardinoyannis, each of whom possessed 625 shares representing 50% of the initial share capital.
According to the Articles of Association of MOTOR OIL HOLDINGS S.A, its objective is the participation, in any manner, in Luxembourg companies or foreign companies and the acquisition, in any manner, of shares or other securities. In article 4 of its Charter, it is explicitly stated that MOTOR OIL HOLDINGS cannot directly engage in any industrial activity or maintain any commercial operation with premises open to the public. However, MOTOR OIL HOLDINGS can participate in companies the objective of which is the foundation and exploitation of any commercial, economic or industrial activity.
The Extraordinary General Assembly of 20.1.1998 decided the share capital increase and the subsequent amendment of article 5 of the Charter of the company. More specifically, the initial share capital of 1,250,000 Luxembourg francs increased by 148,750,000 Luxembourg francs, and hence the company’s share capital totaled 150,000,000 Luxembourg francs divided into 150,000 shares of nominal value 1,000 Luxembourg francs each. The Extraordinary General Assembly of 8.11.2001 decided the denomination of the nominal value of the company’ s shares to Euros from 1.1.2002 onwards and the subsequent amendment of Article 5 of the company’s Charter. Today, the share capital of the company amounts to ª 3,720,000 divided into 150,000 shares of nominal value ª 24.80 each. All the shares of MOTOR OIL HOLDINGS S.A belong to the Vardinoyannis family.
(HELLAS) CORINTH REFINERIES S.A. The Board of Directors of MOTOR OIL HOLDINGS S.A consists of three (3) members and its composition as of 31.12.2003 was as follows:
Vardis J. Vardinoyannis Chairman Ioannis V. Vardinoyannis Member Petros T. Tzannetakis Member
The company’s daily management has been assigned to Mr. Vardis J. Vardinoyannis, who can commit the company solely through his signature placed under the company’s seal.
C. ARAMCO OVERSEAS COMPANY B.V. The company "ARAMCO OVERSEAS COMPANY B.V." was founded in 1989 at the city of Leiden of the Netherlands and operates according to the laws of the Netherlands. The share capital of the company amounts to US$ 40,083,009 and its sole shareholder is a holding company with the legal name "BOLANTER CORPORATION N.V." domiciled in the Antilles of the Netherlands belonging 100% to Saudi Aramco.
The objective of ARAMCO OVERSEAS COMPANY B.V is the provision of consultation on engineering matters, the provision 80 of financing facilities relating to the promotion and wholesale activities of products, and the participation in the share capital and the management of companies including those engaged in the oil refining and trading sector etc.
As of 31.12.2003 the Supervising Board of Directors of ARAMCO OVERSEAS COMPANY B.V consisted of the following Director- Members:
◗ F.A. Al Wahaib ◗ S.B. K’aki ◗ S.S. Al Aydh ◗ I.A. Al Bayyat
ANNUAL REPORT 2003 6.5. Companies to the share capital and/or the management of which the Principal Shareholders and the Members of the Board of Directors of MOTOR OIL (HELLAS) S.A have a participation in A. Participations of the Principal Shareholders of MOTOR OIL (HELLAS) S.A in the Share Capital and/or the Management of Other Companies The companies to the share capital and/or the management of which the principal shareholders of MOTOR OIL (HELLAS) S.A participate in are presented hereunder:
Shareholders Company Domicile % Participation Motor Oil Holdings SA Centenia Finance SA Luxembourg 99.98% Pedestal Enterprises SA Panama 34% Vergin Sky Enterprises SA Panama 100% Petroventure Holdings Ltd. Jersey Channel Islands 50% Aramco Overseas Company BV Team Terminal BV Netherlands 34.35% S-Oil Corporation South Korea 35% Petron Corporation Philippines 40% 81 Texaco AOC Pumpstation Maatschap Netherlands 50% Team Maatschap Netherlands 34.35% Petroventure Holdings Ltd Jersey Channel Islands 50%
(HELLAS) CORINTH REFINERIES S.A. B. Participations of the Members of the Board of Directors of MOTOR OIL (HELLAS) S.A in the Management of other companies and/or the Share Capital with a percentage greater than 10%. The companies to the management and/or the share capital of which the members of the BoD of MOTOR OIL (HELLAS) S.A participate in with a more than 10% stake are presented in the following table:
B.O.D. Members Company Domicile % Interest Position in B.O.D. Vardis Vardinoyannis AVIN SA Luxembourg 50% Chairman SEA COAST INVESTMENTS SA Luxembourg 50% Chairman CENTENIA FINANCE SA Luxembourg Chairman MOTOR OIL HOLDINGS SA Luxembourg 42% Chairman AVINOIL Greece Chairman VARNIMA HOTEL & TOURIST OPERATIONS SA Greece Chairman PETROVENTURE HOLDINGS LTD Jersey Channel Islands Chairman NOVA PETROLEUM INT’ L AG Lichtenstein 99.9% Member GENERAL PRESS SA Greece 50% SEKAVIN SA Greece 25% PEDESTAL ENTERPRISES SA Panama 33% 82 GONIA [CORNER] SA Greece 50% DOKOS [POST] SA Greece 99% Panayotis Kontaxis AVINOIL Greece Member George Alexandridis AVINOIL Greece Member VARNIMA HOTEL & TOURIST OPERATIONS SA Greece Member PIRAEUS BANK SA Greece Member Ioannis Kosmadakis GONIA [CORNER] SA Greece V. Chairman DOKOS [POST] SA Greece V. Chairman KTIMA [ESTATE] SA Greece V. Chairman AVINOIL Greece Member OLYMPIC FUEL COMPANY SA Greece Member ATHENS AIRPORT FUEL [SUPPLY] PIPELINE SA Greece Member Petros Tzannetakis PETROVENTURE HOLDINGS LTD Jersey Channel Islands Member MOTOR √IL HOLDINGS SA Luxembourg Member AVINOIL Greece Member SIEMENS SA Greece Member OLYMPIC DDB HOLDINGS AE Greece Member A.G PETZETAKIS S.A Greece Member
ANNUAL REPORT 2003 B.O.D. Members Company Domicile % Interest Position in B.O.D. Leonidas Georgopoulos GEORGIA PACIFIC INDUSTRIAL & TRADING PAPER Co. SA Greece Member LYDIA TOURIST & TRADING OPERATIONS SA Greece Member EUOSMON [FRAGRANT] SA Greece Member GONTILAKIA AGRICULTURAL, TOURIST & TRADING OPERATIONS SA Greece Member BLONDY TOURIST & TRADING OPERATIONS SA Greece Chairman LCC BEVERAGES SA Greece Member VARDIANOI TRADING, AGRICULTURAL & TOURIST Co. SA Greece Member PALVI SA – PETROS ALIVIZATOS COMMERCIAL & REPRESENTATIVES Greece Member IERAPETRA SOUTHEAST CRETE HOTEL & TOURIST OPERATIONS SA Greece Member CRETESTATE HOTEL & TOURIST OPERATIONS SA Greece Member EAGLE ENTERPRISES Greece Member NETAFIM HELLAS AGRICULTURAL EQUIPMENT IMPORTS & TRADING SA Greece Member 83 BREWINVEST SA Greece Member GENERAL BOTTLING COMPANY SA Greece Member SARONIKOS AKTEXE Greece Secretary AMSTAR AKTEXE Greece Secretary ANDALEA AKTEXE Greece Secretary FIORI AKTEXE Greece Secretary HIGHGROVE AKTEXE Greece Secretary NEW CARINIA AKTEXE Greece Secretary ROSEBERRY AKTEXE Greece Secretary TAMIRO AKTEXE Greece Secretary FILLMORE AKTEXE Greece Secretary A. A. Al Muhareb AVINOIL Greece Member O. S. Bazuhair AVINOIL Greece Member Abdulhakim A. Al.- Gouhi AVINOIL Greece M. Director PETROVENTURE HOLDINGS LTD Jersey Channel Islands Member Jamal A. Al-Rammah AVINOIL Greece Member PANDLEWOOD N.V. CURACAO/Antilles Member ARABIAN STAR PRODUCT TANKER Co Liberia Member BRIGHT STAR SHIPPING Co Liberia Member GOLDEN STAR TANKER Co Liberia Member NIGHT STAR MARINE Co Liberia Member SOUTHERN STAR TRANSPORT Co Liberia Member Abdullah M. Al Warthan AVINOIL Greece Member Ali A.Saleh Al-Ghamdi ASEDCO S.A. Saudi Arabia 100% Chairman
(HELLAS) CORINTH REFINERIES S.A. 6.6. Subsidiaries of the MOTOR OIL (HELLAS) S.A Subsidiaries or Related Companies A. HAFCO S.A. This company was founded in 2000 by the founding shareholders AVIN OIL and TEXACO LUBRICANTS COMPANY S.A. The initial share capital amounted to ª 60,000 divided into 2,000 common registered shares of nominal value ª 30 each. Each of the above mentioned founding shareholders participated with a 50% stake in the share capital of the company.
The General Meeting of 30.12.2002 of HAFCO decided the cash share capital increase by the amount of ª 740,000 and the split of the nominal value from ª 30 to ª 10 per share. The share capital increase was completed within 2003 and each shareholder exercised his rights in full. As a result, the share capital of the company as of 31.12.2003 amounted to ª 800,000 divided into 80,000 common registered shares of nominal value ª 10 each. Each of AVIN OIL and TEXACO is in possession of 40,000 common registered shares (50% of the share capital).
The main objective of the company is to render ground services relating to aircraft fuel supply at various airports located in Greece and abroad.
It is clarified that HAFCO had not started its operations till the end of 2003.
84 B. AVIN ALBANIA S.A. This company was founded on 19.7.2001 by AVIN OIL, which is the sole shareholder, at Tirana of Albania. The share capital of AVIN ALBANIA amounts to ª 481,000. The objective of the company is the sale of petroleum products and the promotion of AVIN OIL exports in Albania.
It is clarified that AVIN ALBANIA has not started its operations.
6.7. INTERCOMPANY TRANSACTIONS
The following table presents the 2003 Sales and Purchases of MOTOR OIL (HELLAS) S.A to and from the affiliated companies (article 42 e of C.L 2190/1920) as well as the balance of receivables and liabilities as of 31.12.2003.
(amounts in thousand euros) Company Year Receivables Balance Year Liabilities Balance Sales 31.12.02 31.12.03 Purchases 31.12.02 31.12.03 AVIN OIL 246,956.2 24,263.2 22,407.4 12,219.4 21.1 8,921.9 MOTOR OIL HOLDINGS S.A 0 0 0 0 0 0 ARAMCO OVERSEAS CO. 0 0 0 0 0 0 PETROVENTURE HOLDINGS LTD 0 0 0 0 0 0 OLYMPIC FUEL COMPANY. 0 0 0 0 0 0 PYRROS SHIPPING 0 0 0 0 1,591.8 1,591.8
ANNUAL REPORT 2003 7. FUTURE GOALS – PROSPECTS
7.1. Goals & Strategy
The Company’s primary objective for the years to come is to establish itself as a major crude oil refining and trading enterprise in the greater Southeastern Mediterranean region. Interim goals on the way to achieving this primary objective are:
π) Maximization of the refining margin. The following tactics are adopted for the attainment of this goal: ◗ Meet all latest product specifications on time and in the most economical way utilizing the most up-to-date technology. ◗ Improve energy efficiency and thus reduce refinery operating cost. ◗ Fully automate refinery processing. ◗ Improve production efficiency and availability of production units. πI) Effective promotion and sale of all refinery products at the optimum price. This goal can be attained through the following strategic moves: ◗ Maximize Company market share in the domestic market through the improvement of the distribution system. ◗ Expand sales of Company products to developing markets which present good potential of high profit margins. πII) Operating the refinery with the highest possible degree of safety and placing heavy emphasis on the protection of the 85 environment. This goal will be attained through the following tactic: ◗ Continuation of investments which help to maintain the high level of programs pertaining to the environment, the hygiene and the safety at workplace.
7.2. Prospects
At the same time with its pursuance to establish itself in the oil refining and trading sector, MOTOR OIL investigates possible ways to achieve differentiation by entering into new activities and endeavours. To this end the Company proceeded with the following actions during 2003:
◗ It entered into a contract with the Natural Gas Corporation (DEPA) which caters for the connection of MOTOR OIL to the natural gas network in the future. The natural gas will be used for the thermal and energy needs of the refinery as well as for feedstock for the New Hydrogen Production Unit while at the same time it is expected to contribute to the improvement of the environmental conditions of the refinery.
◗ It formed along with the wholly owned subsidiary AVIN OIL a joint venture under the legal name "MOTOR OIL – AVIN OIL S.A" with the objective to submit an application to the Regulatory Authority for Energy (RAE) and to the Ministry of Development in order to obtain a license for the production of electricity, as well as, to establish a Company for the operation and exploitation of an electricity power production unit. The application was submitted to the Regulatory Authority for Energy in December 2003. In January 2004 RAE provided its consent and in the beginning of March 2004 the Ministry of Development granted its permission. It is clarified that the connection of the Company to the natural gas network will have a decisive contribution should MOTOR OIL decide to enter the electricity power production business.
(HELLAS) CORINTH REFINERIES S.A. As regards the key activity of the Company, the international prices for various types of crude and the petroleum products for the period 2001-2003 are presented in the tables that follow:
INTERNATIONAL CRUDE OIL PRICES ($/bbl) 2001 2002 2003 Dated Brent 24.44 25.02 28.83 Arab Light,fob 22.54 23.27 26.70 Arab Medium,fob 21.59 22.80 24.07 Urals,cif Med 22.96 23.72 27.03 Iranian Heavy,fob 21.95 23.10 26.35 Es Sider,fob 23.90 24.53 28.23
INTERNATIONAL PETROLEUM PRODUCT PRICES ($/MT) 2001 2002 2003 Naphtha 198 207 252 Leaded Gasoline 254 244 286 86 Unleaded Gasoline 248 238 283 Jet Kero / A1 (Aviation fuels) 217 214 261 Automotive Gasoil 219 211 262 Heating Gasoil 205 202 247 Fuel Oil 1% 119 137 168 Fuel Oil 3.5% 102 121 139
The above prices set the basis for the profit margin of the oil refining and trading companies at international level.
The following table presents the refining margin achieved by the refineries in the Mediterranean region compared to that achieved by MOTOR OIL during the last three year period: REFINING MARGIN ($/MT) 2001 2002 2003 MOTOR OIL (HELLAS) 31.3 33.8 39.6 Complex Mediterranean Refinery 28.1 18.7 34.4
As regards demand for petroleum products in Greece this ranged between 18.5 and 19.4 million MT during the period 2001- 2003. For 2004 total demand is expected to increase by 1.4%. This increase is anticipated to come mostly from gasoline, based on the GDP growth and on the forthcoming Olympic Games, and from jet fuel, the demand of which is closely correlated with the high transportation activity during the summer months in the country appointed to organise the Olympic Games.
An increasing trend is also expected with regard to asphalt which is correlated with the continuous progress speed up of the infrastructure projects. Ultimately, a slow pace drop in the demand for LPG is anticipated due to the gradual introduction of natural gas in household and industrial use.
ANNUAL REPORT 2003 Demand estimates per product category are presented in detail in the following table:
ESTIMATES FOR TOTAL DEMAND PER PRODUCT CATEGORY FOR 2004 2001 2002 2003 2004 (E) Lubricants 160 160 160 161 Asphalt 413 432 385 452 LPG 412 378 384 372 Jet Kero / A1 (Aviation fuels) 1,177 1,140 1,148 1,233 Gasoline 3,385 3,541 3,660 3,790 Fuel Oil 5,689 5,318 5,401 5,453 Diesel 7,279 7,526 8,242 8,187 TOTAL 18,515 18,494 19,379 19,648 % Change over previous year 1.2% -0.1% 4.8% 1.4%
Moreover, in 2004 oil refining and trading companies are expected to undertake large new investments in equipment in order to meet the new European Union specifications for the petroleum products.
87
(HELLAS) CORINTH REFINERIES S.A. 8. DIVIDEND POLICY
The dividend policy is determined taking into consideration the Company earnings and the need for capital expenditure for new investments.
As it becomes evident from the information presented in the following table, over time the dividend amount paid to the shareholders as percentage on the Company’s Net Income after Board of Directors fees and Tax Audit Differences is notably high. DIVIDEND POLICY (amounts in thousand Euros) 2001 2002 2003 Net Income after BoD fees & Tax Audit Differences 61,348 54,085 64,984 Total Dividend amount 58,715 55,391 55,391 Dividend as percentage on Net Income after BoD fees & Tax Audit Differences 95.71% 102.41 % 85.24 %
The Board of Directors will propose to the Annual General Meeting of Company Shareholders the distribution of an aggregate 88 dividend amount of 50 eurocents per share from 2003 Company earnings. It is noted that on 19.12.2003 the Company proceeded with the distribution of an interim dividend of 20 eurocents per share, based on the summary financial statement dated 30.9.2003, as advance payment for the year 2003 dividend.
According to Greek law, the minimum amount of dividend paid to Company shareholders equals at least 35% of net earnings (after the deduction of the corresponding income tax and of the legal reserves), or 6% of the paid up share capital, whichever of these two amounts is greater.
The payment of the dividend is effected within two months from the date of the Annual Ordinary General Meeting of Company Shareholders which approved the Company’s financial statements.
The Company aims to continue the high dividend payout policy.
ANNUAL REPORT 2003 9. APPENDIX
◗ Invitation to the Annual General Meeting of June 1, 2004. ◗ MOTOR OIL 2003 Balance Sheet ◗ MOTOR OIL 2003 Consolidated Balance Sheet ◗ AVIN OIL 2003 Balance Sheet dnbmzs,d,sdm,mdns INVITATION TO THE ANNUAL ORDINARY GENERAL SHAREHOLDERS’ MEETING
Pursuant to a resolution of the Board of Directors adopted on April, 26, 2004, and according to the provisions of the Law and of the Company’s Codified Memorandum and Articles of Association, the Company’s shareholders are invited to the Annual General Meeting on Tuesday June 1, 2004 at 12:30 hours, to be held at the NJV Athens Plaza Hotel, at A2 Vassileos Georgiou Street – Syntagma Square - Municipality of Athens, for discussion and decision on the following matters:
1. Receipt of reports from the Board of Directors and Auditors regarding the annual Financial Statements of the Company for the accounting period 1.1.2003-31.12.2003.
2. Approval of the Company’s Financial Statements, including the Balance Sheet, the Profit and Loss Account and the Profit Appropriation Account for the accounting period 1.1.2003-31.12.2003, together with the accompanying Auditor’s Opinion, the Appendix and the Board of Directors’ Report.
3. Approval of the 2003 consolidated financial statements of the Company and of its affiliated Sociétés Anonymes, including the consolidated Balance Sheet, the consolidated Profit and Loss Account, the Appendix and the Board of Directors’ Report.
4. Discharge of the members of the Board of Directors and the Auditors from any liability for damages with regard to the 2003 Financial Statements and activities during the above mentioned accounting period.
5. Election of the new Board of Directors as the term of service of the existing Board expires.
6. Approval of the changes in the composition of the Board of Directors occurring during its term of service. 7. Declaration of a dividend. 91 8. Election of two Chartered Auditors, that is, one ordinary and one substitute, for the fiscal year 2004 and approval of their fees.
9. Approval of payment of fees to the Members of the Board of Directors.
10. Approval of a Bond Loan according to article 6 of Law 3156/2003 up to the amount of ª 275 million for the financing needs of the 2003 – 2005 investment programme as well as authorising the Board of Directors to negotiate the specific terms with the banking institutions and attend to the procedural matters relating to the issuance of the loan.
11. Announcement of the registry of shareholders from whom the own shares of the Company were acquired during the period from 3.3.2003 until 19.2.2004 in the process of the share buy back programme which was initiated following the decision of the Extraordinary Shareholders’ Meeting of 19.2.2003.
12. Approval of a new share buy back programme, according to article 16 par. 5 of the C.L 2190/1920, up to the percentage of 1% of the total number of the outstanding shares of the Company.
13. Various issues and announcements.
Shareholders who wish to participate in the Ordinary Shareholders’ Meeting, according to the Law and the Company’s Codified Memorandum and Articles of Association, must block their shares, through the User of their Securities Account at the Dematerialised Securities System (S.A.T) or the Central Securities Depository, and deposit the relevant receipt together with the legal documentation, at least 5 days prior to the date of the Ordinary Shareholders’ Meeting.
Maroussi, 26 April 2004 THE BOARD OF DIRECTORS
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DESIGN - PRODUCTION: NEMESIS S.A.
ANNUAL REPORT 2003 (HELLAS) 2003 2003 annual report CORINTH REFINERIES S.A. CORINTH
(HELLAS) A N N U A L R E P O R T 2 0 0 3 (HELLAS) ∞thens - GREECE Maroussi 151 24 12A Irodou Attikou str., CORINTH REFINERIES S.A. website: http://www.moh.gr