Q3 2019 Earnings Presentation 7 November 2019
Q3 2019 Earnings Presentation
7 November 2019
Disclaimer
2
This presentation contains forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the expectations reflected in these statements are reasonable, they may be affected by variables and changes in
underlying assumptions that could cause actual results to differ materially.
Neither Tüpraş nor any of its directors, managers or employees nor any other person shall have any liability whatsoever for any loss arising from use of this presentation.
www.tupras.com.tr07/11/2019Earnings Presentation
Q3 2019 Tüpraş Highlights
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In Q3 20197.5 9567.8
Million tons of
Total Production
Million TL
EBITDA
Million tons of
Total Sales
13,6
15,914,09
14,1
16,2 16,6
July Aug Sep
2018 2019
• IMO driven crack marginenvironment have not been seen until late Q3.
• Beginning from September, diesel cracks started to outperform last year but still being overshadowed by global slowdown.
Heavy crude remains scarce
• Limited availability of heavy barrels continued to narrow the light-heavy crude price differentials, capping Tüpraş profitability.
Diesel Cracks
Fully ready for IMO 2020
• Leaving behind RUP maintenance in 1H, all refineries including RUP reached full capacity utilization in Q3 2019.
• Bitumen cargo exports reached ~600 k tons in 9M 2019.
IMO 2020 effect becoming visible
Q3 2019 Key Market Highlights
4
Diesel+7.1%
Jet Fuel+19.3%
HS Fuel Oil-22.1%
Gasoline-0.5%
Brent continues to remain volatile
Glo
bal
Oil
Mar
ket
Turk
ish
Mar
ket
Contraction in diesel demand is softening
IMO impact becoming visible for both diesel, jet and HSFO
Diesel
-5.1% +5.3%
Fuel Oil
+3.4%
Jet Fuel*
+1.5%
Gasoline
*Including transit flight consumption
Crack margins compared to Q3 2018 Q3 2018 Ave.75.2 $/bbl
Q3 2019 Ave.62.0 $/bbl
8M 2019 vs 2018
5,76
5,52
5,81
5,66
1.7 11.7 21.7 31.7 10.8 20.8 30.8 9.9 19.9 29.9
$/TL
TL has been floating within a limited range
-0.24 TL +0.29 TL -0.15 TL
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Market
12,3
13,9
14,6
16,815,4
12,2
15,6
Q1 Q2 Q3 Q4
Diesel
Quarterly Crack Margin Comparison ($/bbl) in 2015 - 2019
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Compared to Q3 2018, Mid-distillate cracks performed stronger in Q3 while HSFO cracks were depressed due to
preparations for IMO regulation change.
13,3
13,8
13,4
15,9
13,8
10,8
16,0
Q1 Q2 Q3 Q4
Jet Fuel
Higher global refinery outages /maintenances
10,912,7 12,6
4,74,5
10,5
12,5
Q1 Q2 Q3 Q4
Gasoline
-12,6 -12,4
-10,0-7,2
-5,8
-9,9
-12,3
Q1 Q2 Q3 Q4
High Sulphur Fuel Oil
2019 2018 2019-2015 Min - Max
Lighter shale oilprocessing leading to increase in gasoline yields globally
Unexpected refinery outages
Increasing IMO 2020 pressure
+
+
Strong seasonal demand
+
+
-
-
-
+ Elevated stock levels
Decrease in jet cargos to Europe
Early signs of shift in demand for IMO 2020
Heavy Crude Price Differentials to Brent ($/bbl)
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-12
-10
-8
-6
-4
-2
0
2Q
1 2
01
6
Q2
20
16
Q3
20
16
Q4
20
16
Q1
20
17
Q2
20
17
Q3
20
17
Q4
20
17
Q1
20
18
Q2
20
18
Q3
20
18
Q4
20
18
Q1
20
19
Q2
20
19
Q3
20
19
Arab Heavy
Basrah Heavy
Kirkuk
Kuwait
Ural
Average*
0
OPEC+ Cut Decision
OPEC+ Cut Decision
Iran Sanctions
*Simple average of listed differentials
Compared to Q3 2018, differentials were narrower mainly due to lower heavy crude availability in Q3 2019.
Drone Attack to
KSA
•Iran Sanctions
•Venezuela Sanctions
•OPEC+ Cut decision in 2018 andover-compliance
•Drone attack to Saudi fields
Supply Shocks on Heavy Crude
A total of ~4 mbd is missing from heavy crude pool since December
2018, leading to price increases and narrowing differentials
January February March April May June July August September October November December
Taking a Look at 2019…
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Weak Crack Margin Environment in 1HDiesel +5% Jet -9% Gasoline -36% HSFO -37% IMO Impact on Cracks
Elevated Concerns on Global Slowdown
Sanctions on Iran crude
OPEC Supply Cut <100% Compliance
Venezuela Crude Exports
Drone Attack to Aramco Oil Fields
Druzba Pipeline Contamination
OPEC Supply Cut >%120 Compliance
All waivers expiredon Iran
IMO Impact on Differentials
Cra
cks
Dif
fere
nti
als
OPEC Supply Cut 100-120% Compliance
Operations
Capacity Utilization and Quarterly Production Volume
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5,2
6,2
7,7
6,66,7
6,9
7,5
Q1 Q2 Q3 Q4
Quarterly Production (Million Tons)
2015 2016 2017 2018 2019
98
10
1
10
1
87
67
85
10
7
89 89 91 96
4 4 7
9
11
7
7
9 4 59
103 105 108
96
78
92
115
9994 97
105
2015 2016 2017 2018 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
Capacity Utilization (%)
Crude Oil Semi Product Feedstock Total
*Capacity utilization calculation is based on 30 mn tons for Q1 2019 and onwards.
• Capacity utilization returned to peak levels after completion of RUP Maintenance.
• Our year-end guidance for capacity utilization and production remains unchanged.
Sales in Q3 (Million Tons)
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6,8 6,97,7 7,7
6,4
1,2 1,2
1,2 1,0
1,4
7,9 8,1
8,9 8,7
7,8
Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019
Total Sales
Domestic Sales Exports
2,6 2,9 3,2 3,42,8
1,51,3
1,5 1,5
1,4
0,6 0,6
0,7 0,6
0,7
1,1 1,2
1,3 1,1
0,7
Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019
Domestic Sales of Selected Products
Diesel Jet Fuel Gasoline Bitumen
07/11/2019Earnings Presentation
• We generated 7.8 million tons of total sales in Q3 2019.
• Our year-end guidance for total sales remains unchanged.
Financials
Tüpraş Net Margin and Med Complex Margin Comparison ($/bbl)
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8,3
5,7
8,9
13,5
4,0
4,9
3,8
6,5
5,1
3,3
Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019
Q3 Margins
Tüpraş Net Med Margin
• Narrow differentials and inventory loss were the main factors behind the decrease in net margin compared to Q3 2018.
Effect of hedging operations excluded from above calculations.
Income Statement (Million TL)
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Tüpraş generated 956 mn TL EBITDA in Q3 2019.
*On CMB reports. EBIT includes extra items such as FX impacts of trade receivables and payables. In our EBITDA calculation. FX related items are excluded from EBIT as customary in international practices.
Million TLQ3 Q3
%9M 9M
%2019 2018 2019 2018
Net Sales 23,309 30,247 -23 67,970 63,749 7
COGS -22,152 -26,337 -16 -64,150 -56,549 13
Gross Profit 1,157 3,910 -70 3,820 7,200 -47
Operating Expenses -451 -324 39 -1,244 -870 43
Income/Loss from other operations -98 -2,783 -407 -3,771
Operating Profit 608 802 -24 2,169 2,559 -15
Income/Loss from equity investment 63 47 34 172 185 -7
Operating Profit Before Fin. Income/Loss 671 849 -21 2,341 2,743 -15
Financial Income /Expense -817 -171 -2,214 -668
Profit Before Tax -146 678 127 2,075
Net Profit (excluding minority interest) -155 542 340 1,947
EBITDA *(mn.TL) 956 3,778 -75 3,301 7,021 -53
Inventory Gain/Loss -692 1,667 283 2,950 -90
EBITDA* (mn. TL) CCS 1,648 2,111 -22 3,018 4,071 -26
Q3 Profit Before Tax Bridge (2018-2019)
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Decline in profit before tax was driven by narrow differentials and natural gas price hikes.
Million TL
FX
Inventory
+2,473
-2,384
Financial Highlights
16www.tupras.com.tr07/11/2019Earnings Presentation
Tüpraş recorded 3,301 MTL EBITDA in 9M 2019.
367 3351.575 1.033 851
1.080 688
1.542 2.2101.4951.144
867
1.528
3.778
9561.2081.505
1.237
1.887
2015 2016 2017 2018 2019
EBITDA (mn TL)
Q1 Q2 Q3 Q4
3,799 3,301
275 79869
378-375
710331
1.457
1.027870
750
581
992
542
-155
815
803
493
1.766
2015 2016 2017 2018 2019
Net Income¹ (mn TL)
Q1 Q2 Q3 Q4
1,8 1,8
1,1
1,3
1,7
1,01,1 1,2
1,3
1,1
2015 2016 2017 2018 Sep. 2019
Current Ratio & Net Debt / R. EBITDA
Net Debt / R. EBITDA Current Ratio
35%
22%
41%37%
21%
2015 2016 2017 2018 Sep. 2019
Return on Average Equity²
1) Excluding minority interest 2) Calculation based on rolling net income
3,396
5,882
8,908
2,550
1,793
3,8123,713
340
Balance Sheet Analysis (Billion TL)
17www.tupras.com.tr07/11/2019Earnings Presentation
Strong balance sheet maintained.
3,9
6,8
1,5 1,50,9
4,2
1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years
Redemption Schedule (Billion TL)
Loan Eurobond TL bond Total
0,8
-0,2
2,1
4,7
1,6
-0,7
-2,3
Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 Sep-19
Working Capital Requirement (Billion TL)
6,96,1 6,2
12,010,6 10,1
8,7
Dec-15 Dec-16 Dec-17 Dec-18 Mar-19 Jun-19 Sep-19
Net Debt (Billion TL)
Proactive Financial Management
• Delevering continues despite operational headwinds
• Dynamic liquidity management ensures optimal cash and receivables management
FX Exposure Management (30 September 2019)
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Cash
342
Forward & CFH2,463
Stock1,682
Receivables & Other Assets
98
Payables2,252
ST Financial Loans533
• RUP: 191• Other: 342
LT Financial Loans1,789
• RUP: 707• Eurobond: 700• Other Loans: 382
Consolidated Hard Currency Assets
Consolidated Hard Currency Liabilities
Million $
+11 mn $
Tüpraş continues to employ strict FX
policies to mitigate currency risks
stemming from volatility.
* Cash flow hedge accounting : 864 mn $
Outlook for 2019
2019 Refinery Maintenance Schedule
20www.tupras.com.tr07/11/2019Earnings Presentation
Unit QuarterDuration(weeks)
Reason Status
İzmir
Plt 100 CDU Q4 2-3 Periodic
Plt-8200 Hydrocracker Q4 2-3 Periodic
Plt-8100 Vacuum Q4 2 Periodic
Plt 9200 CCR Q1 3 Completed
İzmit
RUP Q1&Q2 11 Completed
Plt 2 Crude Oil & Vacuum Q4 7-8 Periodic
Plt 7 FCC Q4 5-6 Periodic
Kırıkkale
Batman Plt 100/1100 Crude Oil & Vacuum Q1 10 Completed
Revisions to 2019 Expectations
21www.tupras.com.tr07/11/2019Earnings Presentation
• Ural-Brent differential was mostly positive in 1H and remains narrow in 2H
• HSFO cracks dropping sharply in 2H with IMO 2020
Med Complex Refining Margin Revised Down to 2.75-3.25 $/bbl
• Mid distillate cracks are supported by IMO 2020 in 2H, but concerns on demand limits full potential
• Gasoline cracks remain resilient
• Heavy Crude Differentials remain narrow in 2H
• No changes to our production (~28 mt), sales (~30 mt) and capacity utilization (95 – 100 %) targets
Tüpraş Net Refining Margin Revised Down to 4.00-4.50 $/bbl
• Some projects have been postponed in order to assess the full impact of IMO 2020 on feasibility and basic engineering studies.
• Some TL based capex is reduced in USD terms
Refining Capex Revised Down to ~150 million $
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Appendix
Turkish Market, Jan-Aug (Million tons)
23www.tupras.com.tr07/11/2019Earnings Presentation
16,92
16,05
0 5 10 15 20
8M 2018
8M 2019
Diesel
-5.1%
1,61
1,63
0,0 0,5 1,0 1,5 2,0
8M 2018
8M 2019
Gasoline
3,38
3,50
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0
8M 2018
8M 2019
Jet Fuel*
0,24
0,26
0,0 0,1 0,2 0,3 0,4 0,5 0,6
8M 2018
8M 2019
Fuel Oil**
* Including transit flight consumption **Excluding bunker
+3.4%
+1.5% +5.3%
OPET
24www.tupras.com.tr07/11/2019Earnings Presentation
Opet has 1,640 fuel stations as of September 2019.
885 915 938 966 1.009 1.073 1.126 1.152 1.171
394 410 418 427435
431434 463 4691.325 1.325 1.356 1.393
1.4441.504
1.5601.615 1.640
2011 2012 2013 2014 2015 2016 2017 2018 Sep-19
Opet Sunpet
Market Shareas of August 2019
18.9 %
White Product
31.7 %
Black Product
Crack Margin Effect on Tüpraş in Q3 (FOB Italy Prices)
25www.tupras.com.tr07/11/2019Earnings Presentation
Product
Product Price ($/ton) Tüpraş 2019 Crack Margin ($/bbl)
2019 Q3 2018 Q3 Production Yields 2019 Q3 2018 Q3
LPG 312 567 3,3% -34,2 -24,8Gasoline 604 712 18,3% 12,4 12,5Naphtha 459 638 1,2% -10,2 -3,3Jet Fuel 613 697 17,4% 16,1 13,4Diesel 577 669 33,6% 15,6 14,5Diesel 1000 570 658 1,3% 14,6 13,1Fuel Oil 1% 384 433 0,2% -2,7 -8,5Fuel Oil 3.5% 321 422 12,6% -12,4 -10,1Others 290 376 7,4% -13,5 -12,5
Dated Brent ($/bbl) 61,9 75,3 95,3%
Total Crack Margin ($/bbl) Total Processed 2019 Q3 (mn bbl)
Total Effect (mn $)
Total Effect (mn TL)
2019 Q3 2018 Q3 Difference6,7 6,6 0,1 57 5,5 31
LPG4%
Gasoline19%
Naphtha1%
Jet18%
Gasoil37%
Other2%
Kok3%
Fuel Oil7%
Asphalt9%
LPG Gasoline Naphtha Jet Gasoil
Other Kok Fuel Oil Asphalt
Light Distil.20%
Mid. Distil.55%
Other White 4%
Black Prod.20%
Q3 Product Yields
26www.tupras.com.tr07/11/2019Earnings Presentation
LPG4%
Gasoline19%
Naphtha1%
Jet19%
Gasoil32%
Other2%
Kok3%
Fuel Oil7%
Asphalt13%
LPG Gasoline Naphtha Jet Gasoil
Other Kok Fuel Oil Asphalt
Light Distil.21%
Mid. Distil.51%
Other white4%
Black Prod.24%
2018 Q3
White Product Yield (%) 75.8%
Production 7.7 mn tons
API 30.7
2019 Q3
White Product Yield (%) 79.5%
Production 7.5 mn tons
API 31.49
Yield Breakdown (%)
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15,519,0 17,5
14,3 15,8 16,7 18,916,0
19,4 20,1 18,6 17,4 17,4 15,8 18,2
29,9
32,4 34,1 38,5 36,0 34,4 31,9
31,0
34,2 32,132,2 35,4 33,5 35,8
36,6
45,4
51,4 51,6 52,8 51,7 51,1 50,8
47,0
53,652,2
50,852,8
50,9 51,554,8
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Middle Distillates
Jet Diesel
1,5 2,7 2,5 3,1 3,2 3,1 3,2 2,53,9 3,2 2,6 3,1 2,1 2,1 3,1
9,4
12,6 14,3 13,1
5,5
11,7
15,3 16,4
9,6
14,513,3
8,8
4,6
9,89,1
15,2 5,44,7 5
12,2
6,7
4,76,3
6,9
3,2 7,2
9
14,9
9,87,2
26,1
20,721,6 21,2 20,9 21,4
23,2
25,2
20,4 20,9
23,1
21 21,6 21,7
19,4
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Heavy Distillates
Coke Bitumen Fuel Oil
Tüpraş Balance Sheet (Million TL)
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30.09.2019 31.12.2018 Diff. Diff. (%)Current Assets 28,945 20,962 7,983 38
Cash & C. Equivalents 10,106 5,983 4,123 69Trade Receivables 6,063 5,429 635 12
Derivatives 350 176 174 99Inventories 9,489 6,765 2,724 40
Pre-paid expenses 231 109 122 113Other Current Assets 2,707 2,502 205 8
Long Term Assets 26,735 19,074 7,662 40Financial Assets & Subsidiaries 1,368 1,271 97 8
Fixed Assets 20,290 12,397 7,893 64Derivatives 122 168 -46 -28
Pre-paid expenses 349 378 -29 -8Deferred Tax 3,114 3,566 -452 -13
Other Long Term Assets 1,492 1,293 199 15
Total Assets 55,681 40,036 15,645 39
Short Term Liabilities 27,358 15,950 11,408 72Financial Loans 3,860 4,113 -253 -6Trade Payables 17,834 7,496 10,337 138
Derivatives 288 236 52 22Provisions 201 80 120 150
Other ST Liabilities 5,175 4,024 1,152 29Long Term Liabilities 15,323 14,140 4,237 8
Financial Loans 14,990 13,836 1,154 8Payables & Provisions 278 257 21 8
Derivatives 46 42 4 10Other LT Liabilities 8 5 4 84
Total equity attributable to equity holders of the parent 12,839 9,825 3,014 31Minority Interests 161 121 40 33
Total Liabilities & Equity 55,681 40,036 15,645 39
Tüpraş and Med Margins ($/bbl)
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($/bbl)Gross Margin Inventory Effect Clean Gross Margin Clean NET Margin Med Margin
2019 Q3 9.1 -1.4 10.6 5.4 3.3
2019 9M 9.0 -0.1 9.1 3.8 2.9
2018 Q3 17.6 3.1 14.5 10.4 5.1
2018 9M 16.0 2.5 13.6 8.3 4.5
6,9
4,6
8,5
10,7
3,7
5,3
3,6
5,8
4,5
2,9
2015 2016 2017 2018 2019
9M Margins
Tüpraş Net Med Margin
07/11/2019Earnings Presentation
9M 2019 Results
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3,7
2,9
0 1 2 3 4 5 6
9M
Refining Margins ($/bbl)
Med Margin Tüpraş Net Margin
98.3% total capacity utilization in 9M 2019
21,2 22,228 30
Production Sales
Operationals9M 2019 Target
22.2 mn tons of sales and 21.2 m tons of production in 9M 2019
112150
9M 2019 Target
Capex (mn $)
112 mn$ refining CAPEX in 9M 2019
98,3
0 20 40 60 80 100
9M
Capacity Utilization (%)
3.7 $/bbl net refining margin in 9M 2019
Med FY Exp
Tüpraş FY Target
Finished Product and Semi Product Imports
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311 430
843
2.083
155
HS Diesel ULSD Jet Fuel
Product Imports (Thousand Tons)
9M 2019 9M 2018
389
549
407
0
100
395
939
351
20
81
HVGO ASR F. Oil LSFO Naphtha MTBE
Intermediate Imports (Thousand Tons)
9M 2019 9M 2018
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