Price regulation pushes Petrol into the red

A petrol station at dusk.
Petrol, Slovenia's largest fuel retailer, posts a loss on record sales in 2022. Photo: STA

Slovenia’s energy group Petrol has been hit hard by the energy crisis and its fallout as governments responded by capping prices on energy products. Preliminary estimates released by the company on 20 January show the group incurred a net loss of €12.1 million on a record €9.4 billion in sales revenue in 2022.

The results are hugely inconsistent with Petrol’s business plan for 2022, which projected for the group to post a net profit of €158.3 million. The sales are 56% above the target and compare to just below €5 billion posted in 2021.

The deviations are “a result of the exacerbated business conditions brought about by the continuation of the energy crisis and measures taken by governments to mitigate the consequences thereof,” the company said in the regulatory filing.

The regulation of prices of fuels, electricity and natural gas in the markets where the group is present had “a profound effect on operations”.

An important negative effect on the performance came from Geoplin, the country’s largest natural gas trader in which Petrol holds a majority stake. The company was battered by the fallout from the war in Ukraine as Russia cut off its gas supplies and prices of natural gas were highly volatile.

One of the reasons for the strong growth in revenue was that low prices boosted sales of fuels and petroleum products. Another was the integration of the Croatian company Crodux Derivati Dva into the group.

The group sold 4.2 million tonnes of fuels and petroleum products last year, 13% more than it had planned.

Due to the high cost of all energy commodities and the effect of the regulation of motor fuels and other energy commodities, the increase in sales revenue did not reflect in the adjusted gross profit. The latter totalled €372.5 million, 58% of the planned figure.

Earnings before interest, taxes, depreciation, and amortization amounted to €95.9 million, which is 32% of the target figure. The negative effect of the regulation of motor fuels in all markets is estimated at €180.1 million.

The cost estimate, at €477.7 million, is 6% above the target. Most of the increase is attributed to the increased sales, especially the costs of logistics.

The company was also forced to adjust its investment plans to the changed circumstances. The 2022 plan earmarked €100 million for investment in development, but the estimate shows investment expenditure amounted to €60 million. More than a half went to energy transition projects.

The preliminary results do not take into account potential compensation that the company is seeking to offset the damage incurred in 2022 due to fuel price regulation in Slovenia (€106 million) and Croatia (€52 million).