MOL GROUP ANNUAL REPORT Economic, social and environmental performance
Table of contents
Summary of 2011 results

In 2011 MOL delivered strong operational result despite the still challenging environment. HUF 645 bn EBITDA represented a 6% y-o-y improvement, while operating profit of HUF 337 bn (both excluding special items) practically the same as the result of the previous year. International operations, especially in upstream had a increased share in the operating profit in 2011. Upstream delivered more than 70% of Group EBITDA in line with higher realized hydrocarbon prices and increasing production. Performance was hit by higher royalty payment (in Hungary HUF 102 bn, +14% yoy) and regulated gas prices in Hungary. Downstream delivered losses due to depressed external environment and refinery stoppages in Croatia. Gas Midstream remained an important contributor showing further year-on-year increase on operating profit level. Furthermore, implementation of net investment hedge accounting led to a significant improvement on the financial line. As a result, net profit of the Group reached HUF 154 bn in 2011 after HUF 104 bn net profit in 2010.

MOL remained committed to keep its financial stability: As a response of the new wave of crisis our CAPEX spending (HUF 274 bn, 18% lower than in the previous year) remained below our operating cash flow, our net debt position decreased resulting in an improved, 28% gearing ratio at the end of December 2011 compared to 31.3% at the end of 2010. Continuation and finalization of the key development projects established an outstanding position for the upturn period in each business division.

  • Upstream operating profit, excluding special items increased by 16% to HUF 330 bn in 2011 compared to the previous year. This profit growth derived from the combination of positive effects, such as increased production volumes in foreign markets and 26% higher realized hydrocarbon prices in line with increasing international quotations. Positive effects were moderated by the lack of Syrian revenues in Q4 and stronger HUF against USD. Royalties on Hungarian production of MOL amounted to HUF 102 bn, which is 14% increase compared to the prior period. As a result of remarkable exploration successes achieved in the previous years, first of all in Russia and Kazakhstan, MOL booked 117 MMboe reserves in 2011, representing a reserve replacement ratio of over 200%. Total approved 2P reserves according to SPE guidelines were 682 MMboe as of 31, December 2011, while the current best estimate of the recoverable resource potential is 1.4 Bboe.
  • Downstream realized an operating loss of HUF 0.5 bn in 2011, excluding special items. Profitability was negatively influenced by external factors, like higher oil price, which increased the costs of own consumption, lower average crack spreads, worsening petrochemical environment as well as refinery stoppages. The improving product slate and further internal efficiency improvements just partly mitigated the negative effect of the depressed environment. On the other hand, operating profit of the segment, excluding INA contribution and special items was still relatively high and reached HUF 59 bn. 
  • Gas Midstream segment’s operating profit, excluding special items accounted for HUF 66 bn in 2011. The most important profit contributor remained the FGSZ Ltd (gas transmission business), however the temporary freeze of gas tariffs from 1 July 2010 carried over negative effect for the H1 2011 result of gas transmission business.
  • The net financial expenses were halved compared to 2010 level and amounted to HUF 55 bn in 2011. In 2011 a net foreign exchange gain of HUF 56 bn was recognized (due to the fact that from Q3 2011 foreign exchange losses has been recognized in equity due to the implementation of net investment hedge accounting), compared to the loss of HUF 47 bn in 2010. Fair valuation gain on the conversion option embedded in the capital security issued in the monetization of treasury shares by Magnolia Finance Ltd. was HUF 10.5 bn. In addition, a loss of HUF 60.8 bn has been incurred on the fair valuation of the call option on MOL shares owned by CEZ. The change in the fair values of both instruments reflects the stressed MOL share prices and weakening HUF against EUR experienced in H2 2011.
  • CAPEX spending was HUF 275 bn (17% lower than in the previous year) in full year. The investments focused on CEE region, Russia and Kurdistan Region of Iraq in Upstream, on Thermal Power Plant revamp at Bratislava refinery and finalization of Rijeka refinery modernization in Downstream.
  • Net profit for the period increased to HUF 154 bn in 2011, increasing by 48% year-on-year, as a combined effect of stable operating performance and improving financial line.
  • Operating cash inflow decreased by 2% compared to FY 2010 and amounted to HUF 373 bn. Operating cash flow before movements in working capital increased by 19%.
  • Net debt position decreased to HUF 871 bn during the year, despite weakening forint, resulting in an improved, 28.0% gearing ratio at the end of December 2011 compared to 31.3% at the end of 2010.





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