Despite economic challenges: TAIF-NK keeps the leading position in oil refinery market
The oil refining company of Tatarstan summed up the results of 2016
Unfortunately, the year of 2016 cannot be called financially successful for TAIF. The company did not reduce the volume of processed raw material but even increased its figures of commodity output despite the fact that the annual revenue of TAIF-NK decreased by 5 billion rubles. Objective factors, a decrease in quotations for oil products on the world market and an increase in excise taxes on motor fuel on the domestic market, have counted against the only independent refining company of Tatarstan. At the annual meeting, the shareholders of the company summed up the results of financial and economic activity for 2016.
Investments are the basis for development and stability
The past year continued to test to the limit the global economy. Following general trends of lost positions recovery dynamics, in difficult conditions of macroeconomic instability and constant volatility of the market, in the reporting year TAIF-NK PSC fully switched to production of motor fuels only of the environmental standard Euro-5, mastered the production of new marketable products — polymer-bitumen binder of WSP 60 brand.
''TAIF-NK adapted to difficult conditions of global macroeconomic instability and currently exhibits qualitative stability of production and financial performance, effectiveness of the implementation of its strategic initiatives, continuing to take a worthy place among the largest oil companies in the country,'' Director General Rushan Shamgunov said in an address to the shareholders of the company.
TAIF-NK adapted to difficult conditions of global macroeconomic instability and currently exhibits qualitative stability of production and financial performance, effectiveness of the implementation of its strategic initiatives, continuing to take a worthy place among the largest oil companies in the country
Today in the structure of the refining industry of Russia there are 35 major refineries (with primary processing capacity of over 1 million t/year), 3 gas processing plants and more than 220 mini refineries. Meanwhile, in the ownership of vertically integrated oil companies there are more than 80% of the capacity of primary oil refining in Russia. As for TAIF-NK, it is one of few oil companies that are not included in the structure of vertically integrated companies and is practically the only enterprise processing only purchased raw materials.
In 2016, the volume of processed by TAIF-NK raw materials amounted to 8.3 million tonnes, which put the Nizhnekamsk company on the 12th line among the largest oil refineries by processing volume. Against the background of a decline in the past year in the industry average capacity utilization for primary processing from 88,8% to 86,4%, TAIF-NK provided 100% process utilization rate, conceding by this indicator only to six refineries in Russia.
TAIF-NK also achieved positive dynamics in the conversion rate of raw materials: in comparison with the figure of 2015, the conversion rate increased by 2,3 percentage points — to 75.2%. The investments in modernization, reconstruction and construction of new plants, as well as carried out organizational-technical actions in the framework of special programs, played the positive role here.
The processes of modernization of production capacities in the oil refining industry of Russia influenced the change of the product line: by the end of 2016, mazut production in the country compared with the previous period fell by almost 21%. In relation to one of the most popular products — diesel fuel — refineries of Russia retained the volume of production at the level of 2015 — 76,4 million tonnes (+0,3%). The output of gasoline in the country increased by 2% — up to 40 million tonnes.
As for the changes in the structure of commodity products of TAIF-NK PSC, in 2016 the company lowered production volumes of mazut by 9%, increased the production of naphtha, completely switched to the production of motor gasoline of environmental class Euro-5, and expanded the product line, including through the production of new marketable product — the polymer-bitumen binder of WSP 60 brand.
In the total volume of oil refining industry of Tatarstan by the results of 2016, TAIF-NK owns 100% of the volume of production of naphtha, 88% of motor gasoline, 58% of diesel fuel and more than 61% of heating oil.
It is investments in production have become the basis of stability and played the key role in maintaining the stable position of TAIF-NK in both manufacturing and financial sectors during the economically challenging year of 2016. At the same time, the economic and financial crisis of recent years has halted the activity in the country of the process for commissioning of new plants. In the past year, in Russia there were modernised and introduced only 12 new units, the volume of investments in the oil refining industry in 2016 amounted to 138 billion rubles, one-third of which is the share of investments belonging to the Nizhnekamsk oil refining – the company TAIF-NK.
Realities and consequences of economic phenomena of 2016
Amid the positive and stable production indicators of the company, its financial performance looks much worse. According to the reporting document of the company, as evidenced by the economic realities of the past year, the continuing economic crisis in both domestic and world economy has had a significant impact on the financial results of 2016.
Of course, enormous volatility of world prices for oil products, continuing not for the first year, with its peak contraction in the first quarter of the year, affected the income of the independent oil refining companies operating on free market such as TAIF-NK. As a result, in 2016 the export accounted for just little more than 52% of the revenue despite the fact that in the previous year the share of foreign supplies exceeded 57% of revenues. The total volume of oil products exported to the EU countries, the Persian Gulf, the United States, amounted to 4 million tonnes, to the near abroad and the CIS countries — 0,2 million tonnes.
By optimizing revenues, the company reallocated a part of the volumes from exports to the domestic market. However, the revenues of the domestic market were also under the influence of unpleasant ''surprise''. First, in January 2016, the excise tax on diesel fuel increased by 20% compared to 2015, and for gasoline — by more than 40%, then in April it was followed by another increase in the excise tax on diesel fuel — by another 28%, the excise tax on gasoline of Euro-5 increased by 35%. These new introductions in taxation significantly reduced the yield of TAIF-NK and became one of the main reasons for a decline in revenue at the end of 2016.
As a result, overall net revenue of the company in the reporting year amounted to 138 billion rubles against 143 billion rubles a year earlier. As before, the basic commodity positions of the company were diesel fuel and kerosene, naphtha and automobile gasoline, vacuum gasoil and mazut. The company managed to keep its leading position in the country in terms of production of naphtha, which is consumed by the neighbouring Nizhnekamskneftekhim, as well as in the sector of production of automobile gasoline, where more than 88% is accounted for TAIF-NK.
Stability and sustainability of the company in the challenging 2016, in addition to investments in development, provided the assets of the company, the amount of which by the end of the year exceeded 170 billion rubles. The value of net assets amounted to 46 billion rubles, which characterizes the financial stability of TAIF-NK and the degree of protection of the interests of shareholders and creditors.
Despite a decline in earning yield in 2016, TAIF-NK continues to be a key budget-taxpayer not only in Tatarstan but also in Russia. The total volume of tax payments in budgets of all levels for the year amounted to nearly 23 billion rubles, the largest part of which is excise taxes and customs duties directed to the federal budget.
Almost 3 billion rubles — in social programs
In 2016, TAIF-NK did not suspend the action of several corporate social programs to promote healthy lifestyle, improve living conditions and quality of life of employees and their families, material support for veterans and pensioners.
With the support of a shareholder — the company TAIF — in the reporting year, TAIF-NK PSC continued the implementation of the corporate mortgage program. So, during the year, 206 employees of TAIF-NK received new apartments. The total area of granted in the past year apartments in the framework of the corporate mortgage program was 12,200 square meters, which has become a historical high for the company.
Besides, TAIF-NK is an active participant in municipal and regional charitable programs and projects: targeted assistance to veterans of war and labour, pensioners and disabled people, supporting professional and children's sports, orphanages and children's educational institutions, health care institutions, active assistance in the revival of cultural and spiritual heritage of Tatarstan. Social responsibility and social partnership are the basis of traditional sponsorship in the implementation of major projects of the Volga Federal District — KaDetstvo and the regional project Cultural Heritage of Tatarstan.
In the result of such multifaceted social activity, TAIF-NK PSC has been included in the Russian Register of businesses and institutions that are actively involved in socio-economic development of the subject of the Federation and municipal entities, and by the decision of the Ministry of Industry and Trade of RT, the company has been included in the Book of Honour for 2016.
In total, the company allocated 1,4 billion rubles in all above-mentioned programmes in 2016, and taking into account the environmental programs, programmes on labor protection and industrial safety, the amount of social investment of TAIF-NK increased to 2,8 billion rubles – it is a huge investment in the quality of life and potential development of the company and the region.