| Preview of Income Statement, 1st quarter of 1996 |
1. INTRODUCTIONRepsol's net income for the first quarter of 1996 was 35,406 million pesetas, 8% higher than that for the same period in 1995. Operating income was 53,119 million pesetas in comparison to 61,422 million pesetas for the first quarter last year, and net cash flow was 66,186 million pesetas against 67,078 million pesetas a year earlier. Overall investments rose by 42.5% over the previous year, reaching 48,765 million pesetas. Net debt at the end of the first quarter was 209,300 million pesetas, showing a rise of 34 billion pesetas since the beginning of this financial year, although average net debt was some 50 billion pesetas lower. The cause for this increase was the debt assumed upon exercising the purchase option on 91% of Sagane. If this transaction had not taken place, net debt would have reached a figure of 179 billion pesetas, after payment in this quarter of the interim dividend against the 1995 financial year and the aforementioned investment outlay. The following aspects have affected company performance over the period:
Two other important events took place in the first quarter of 1996:
Other outstanding events were:
The next part of our report provides a more detailed study of the company's various activities over the first quarter of 1996. 2. ANALYSIS OF RESULTS BY ACTIVITIES2.1. Exploration and productionOperating income for this activity, at 4,338 million pesetas, was 16.4% lower than that obtained for the same quarter of 1995. However, if we deducted from the latter revenues from an extraordinary production at the Gaviota field to set up the gas cushion for its current use as an underground storage facility, 1996 income for the period would be 5.3% higher than in 1995. Operating cash flow was 10,872 million pesetas in comparison to 11,639 million pesetas last year. Production was 6.1% lower than for the first quarter of 1995 and, as has just been mentioned, when comparing quarterly figures, the end of gas production from the Gaviota field at the close of the period last year has made a great difference. Exploration has also progressed at a faster rate in 1996 causing unsuccessful exploration amortizations to be 44% higher than in the first three months of 1995. Investments in E & P were 19.2% higher, at 8,565 million pesetas. 1,207 million pesetas of this were spent on exploration and 7,358 million on development. 2.2. Refining and Marketing Operating income was 20,249 million pesetas and registered an increase of 23.3% over the previous year. These operating figures were curtailed by more than 2 billion pesetas because the time lag implicit in the price fixing system for oil products in Spain has a negative effect when, as happened in the first quarter of 1996, prices for oil products on international markets are constantly rising. However, when oil product prices fall - and this will probably occur over the second quarter - this effect is reversed and works to our benefit. The previously mentioned improvement in international refining margins and stock revaluation as a consequence of higher crude oil prices boosted Repsol's income statement. In logistics, higher productivity and greater activity continued. In fact, 4.2% more product was transported in comparison to the first quarter of 1995. A new source of income has also arisen from leasing storage capacity to CORES. On the other hand, marketing margins fell for two reasons: firstly, the strength of the peseta, especially against the deutschmark, and, secondly, the price war being waged in the United Kingdom, for average prices in that country are involved in the process for calculating price ceilings in Spain. Finally, it should be recalled that the discount policy on gasoils went into effect at the end of the first quarter of 1995. Sales of light products rose by 1.1% on the
home market, but this figure would have been 3.5% if a special sales operation to Spanish
refining companies had not taken place a year ago. 2.3 Chemicals Chemicals registered an operating income of 5,564 million pesetas as opposed to 20,122 million pesetas for the first quarter of 1995. This fall may be attributed to lower margins. Over the second half of last year, a sharp drop in imports of plastics by China, and the policy followed by top European consumers of allowing a depletion in stocks, drastically reduced profit margins. Once these circumstances had disappeared, gross margins on the main types of plastics gradually improved throughout the first quarter of 1996. At this respect, March results more than doubled those of January. As yet, these higher margins have not been entirely reflected on the operating income statement because a certain delay in applying new prices to all customers is unavoidable. Furthermore, operating income was negatively affected by the higher peseta/DM exchange rate (4.6% up on the first quarter of 1995). At the end of the quarter, however, coverage operations were conducted to counteract this effect and ensure that, for the rest of the year, chemical sales will take place with an exchange rate at least similar to that budgeted. Investments for the activity amounted to 4,533 million pesetas, in contrast to 825 million pesetas last year. The main projects under way include a new polypropylene plant, a cogeneration unit at Tarragona, and revamping of the low density polyethylene plant at Tarragona and the polypropylene plant at Puertollano. 2.4 Gas Operating income for this activity rose by
16.2% with respect to the same period of last year, reaching 23,229 million pesetas. Low temperatures in February and March favoured the consumption of fuels for heating. Demand for LPG rose by 5.2% over last year, to reach 784,000 Mt. However, this positive effect was mitigated by a narrowing of feedstock margins. The current system of price ceilings only permits adjustment in prices when the sum of the international spot price for LPG plus freight costs varies by over 10%, thus it was not possible to pass on the higher cost of feedstocks to the consumer until April, when the maximum price for LPG rose by 3.92%. Yet this will have a beneficial effect on margins in the second quarter of the year, for the price ceiling for LPG may not drop until the international spot price for feedstocks has fallen significantly. Higher income in the natural gas sector basically reflected a favourable evolution by all markets. Demand from the residential-commercial sector rose by 20.9% over first quarter figures for 1995. Consumption by the industrial sector was 6.2% higher and the number of customers was 5.9% greater, reaching a total of 3,453,000. Investments in the gas activity as a whole were 87.2% higher than for this period of 1995, at 14,647 million pesetas. Expenditure in LPG rose by 54.1% to 1,909 million pesetas, and was dedicated to developing new markets and continuing the factory automation programme. 12,738 million pesetas (93.5% more than in the first quarter of 1995) were invested in natural gas. 9.8 billion pesetas were to improve transmission infrastructure (including 2.5 billion pesetas to acquire the Maghreb pipeline) and 2,938 million pesetas to extend distribution networks. 3. FINANCIAL RESULTSFinancial expenses for the first quarter of 1996 were 1,254 million pesetas, in comparison to 4,274 million pesetas a year earlier. There are two main reasons for this lower figure:
4. GOODWILL AMORTIZATION AND EXTRAORDINARY ITEMSFollowing advanced goodwill amortization paid over several quarters of 1995, this caption amounted to only 125 million pesetas, as opposed to 3,843 million pesetas for the first quarter of 1995. Extraordinary items at March, 1996 showed a positive balance of 1,023 million pesetas. Although this figure was the net of several revenues and expenses, the most important entry under this heading responded to 876 million pesetas' profit from the sale of Repsol Naviera Vizca�na shares. 5. INCOME TAXAccording to the information at our disposal, the effective tax rate for the Repsol group in 1996 is approximately 29.5%. This rate was higher last year on account of provisions and write-offs that were not tax deductible. REPSOL SUMMARISED INCOME STATEMENT(Million pesetas)- NON -AUDITED FIGURES-
______________________________________ ANALYSIS OF REPSOL OPERATING INCOME BY ACTIVITY(Million pesetas)- NON -AUDITED FIGURES-
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ANALYSIS OF REPSOL OPERATING REVENUES BY ACTIVITY(Million pesetas)- NON -AUDITED FIGURES-
______________________________________ REPSOL'S INVESTMENTS BY ACTIVITIES(Million pesetas) - NON -AUDITED FIGURES-
_________________________________________ REPSOL COMPARATIVE BALANCE SHEET(Million pesetas)- NON -AUDITED FIGURES-
REPSOL CONSOLIDATED STATEMENTS OF CASH FLOWS FIRST QUARTER - 1995 AND 1996(Million Pesetas) - NON -AUDITED FIGURES-
OPERATING HIGHLIGHTS- NON -AUDITED FIGURES-
___________________________________________________ Madrid, May 13th, 1997 |
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