A difficult year has passed for the Zen refinery company. The Corona epidemic brought down world fuel prices when in April oil even reached a negative barrel price for the first time in history. Later, Zen became a target for environmental organizations, which accuse it of unreasonable pollution of Haifa Bay and call for the evacuation of factories from the Gulf. If that is not enough then in June part of one of the famous “bricks” that became a symbol of Haifa Bay was cut off and a month later the bricks collapsed and the green organizations celebrated and called it “the beginning of the end of the variety”.
Following the public pressure, the government decided to set up a committee of directors headed by the directors of government ministries, to examine the issue and decide whether to evacuate the factories from the Gulf, for all the economic significance to the area residents, and reduce air pollution. The three months allotted to the committee have passed and the committee decided in early February this year to “set up work teams” – that is, to smear the issue once more (at least for now). In the meantime, Israel is going to the polls and at least for the time being, Bezan can smile.
Indeed, In an interview with BizPortal following the publication of Bazan’s (worst) financial statements for 2020, Bazan CEO Moshe Kaplinsky sounded smiling and even optimistic Regarding the macro risks on the part of the government: “As soon as the CEOs’ Committee convened, it realized that there are separate slogans and separate realities. The directors of government ministries have realized that, contrary to the slogans, there are weighty strategic issues here and they are not ready to make such a decision – not about the future of the fuel economy in Israel, not about how Israel is treated as an energy island, how to provide long-term solutions. Of the Israel Land Authority (which I do not want to call derogatory names).
“I am glad that Remi also recovered and understood that the plan is not budgeted, uncoordinated and out of sync with the needs on the ground, and I hope that the continuation of the Executive Committee will be much more professional. Now they have set up professional committees and I hope they will take the time, learn and come up with strategic plans and not with fantasy. What we have heard to date about the closure of the factories in 2025 or even in 2023 are fantasies and public relations, but suddenly even in the government realized that it does not work that way. The story is not the environment at all, but real estate – and now we are moving to professional tracks. ”
Bezen adds that they “respect the environmental organizations and the actions they take. Some of their activities are positive and some are sinful to reality. They are not the professionals – and that’s fine – but us, and we strive to do so for the best, and certainly maintain daily contact with them.” .
Kaplinsky agrees that reports on Zen for 2020 are bad, but believes that the corona crisis has actually shown Zen’s strength.. He said: “Bazen’s power is reflected in this year. There have been endless negative effects, ranging from fuel prices, closures that have stopped movements, uncertainty that always affects oil prices and these have led to these dismal results, but Bazen knows how to be flexible enough in its operation, to find The more correct niches for production, for example, we shifted weight in favor of polymers during the year, and they were even more significant this year than in previous years.
“In addition, despite the challenging period of the Corona, we have also managed to reduce the debt by $ 200 million and for us it is an expression of trust both on the part of the financial system and on the part of our suppliers and customers who have helped us do it.”
Oil prices plunged to a negative level in April hit Bezen hard. Oil is already trading at $ 60-70 a barrel. Where do you think he will go?
Kaplisenki: “We see in recent months the encouraging signs in the market and understanding Brent oil’s recovering from the corona ‘or perhaps’ defeating the corona’ and stabilizing at $ 70 a barrel, we estimate it will remain at these levels for the long term. These estimates are also based on companies The world’s leading research, but it will not reach $ 100 or more. We look at the margins and are finally starting to see signs of encouragement. There are all kinds of margins. We refer to the Bloomberg Azeri margin that is in the region of $ 5 per barrel, “Two dollars and we estimate – and large research companies like IHS Markit estimate – that it will continue to rise, which allows us to expect that we are on our way out of the crisis. The polymer margins above naphtha are also above $ 1,100 per tonne.”
According to forecasts by the consulting firm IHS Markit, which formed the basis for assessing the value of the activity of the Zen refinery sector, conducted by EY, the demand for global transportation fuels is expected to return to its pre-Corona crisis level during 2021, except for demand for DSL (Delek Siloni. ) Which is expected to recover at a slower rate.
Bazen believes that the trend in oil prices will remain and Kaplinsky explains: “We are seeing a reduction in supply following the storm in the US, along with the closure of production facilities and also an increase in demand in the Far East.”
Is Zen planning to turn green?
“As a group in Zen, we are not waiting, but looking for alternatives. Under the radar we are in the midst of a strategic plan for the group in which we will make an appropriate transformation for next-generation fuels – that is, beyond clean fuels and digitization of our systems.
“We are investing in hydrogen development. We have won a grant for manufacturing and marketing a transportation industry from the Ministry of Energy and we are engaged in it with high intensity. We are advancing in our research and development in the field of polymers The CEOs … we were the first to produce low-sulfur diesel in the country. There are so many parts of the economy that depend on fuel, and it is impossible in one day to just stop distilling and switch to green fuels“.
Still, your name automatically calls for pollution in Haifa. No?
“Zen will know how to adapt to any government decision, but you should know that the Ministry of Environmental Protection, not us, explicitly says that Zen is not the polluting factor in Haifa Bay. There are many slogans, but the facts must be said: treat the port and the bay as pollutants.” We pollute less than Ashdod, which produces a third of us. We have to do a lot of things before treating Bazen, and we are not waiting – we have reduced emissions by 90%. What will solve the pollution problem – if it exists in Haifa Bay – is not evacuation in Zen. “.
Zen made a net annual loss of $ 274 million
As mentioned, reports in Zen for the “Corona Year” show the depth of the damage to the company that began with the outbreak of the crisis in the country – in March last year. In 2020, Zen made a net annual loss of approximately $ 274 million, compared to an annual profit of approximately $ 99.3 million in 2019, a decrease of 377%.
In the fourth quarter, Zen recorded a net loss of $ 68 million, compared to a loss of $ 50 million in the previous quarter, and a loss of about $ 3.7 million in the fourth quarter of 2019.
The annual adjusted EBITDA for 2020 was $ 121 million, while in the fourth quarter the adjusted EBITDA was $ 39 million, compared to zero (!) In the third quarter, compared to $ 69 million in the corresponding quarter last year. Divided into operating segments – fuels ended the year with zero EBITDA and the polymers were responsible for almost all of the neutralized EBITDA. In the fourth quarter, EBITDA adjusted for polymers was $ 36 million (out of $ 39 million in total). With the improvement in the fourth quarter continued well into 2021 in parallel with the rise in energy prices and especially the rise in refining margins. The margins were negative at some point last year and in the last quarter they rose to $ 3.4. Bazen says that the margin continues to rise, and this of course improves the business results – this margin is actually a kind of gross profit margin of the company.