Financial Performance analysis of Mol Group regarding the price volatility of oil between 2014-2018
Kocsis, David (2019)
2019
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https://urn.fi/URN:NBN:fi:amk-2019060514941
https://urn.fi/URN:NBN:fi:amk-2019060514941
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2014 saw the decline of oil prices, causing many oil and gas companies to rethink their strategies as OPEC production cuts did not bring any long-term results. The aim of this research is to provide a financial performance analysis of Mol Group regarding the price volatility of oil. Information is obtained from the company’s public annual reports and extracting and analyzing results from its official financial statements between 2014-2018.
Financial performance by segment is analysed to give a holistic picture about the company’s main cash flow generator during oil price volatility. Another analysis that is investigated in depth in financial statement analysis of Mol Group, includes trend analysis and vertical analysis of the balance sheet and income statement between 2014-2018. The results will be compared against the oil price fluctuations during the same period to determine which part of the company’s financial statements were affected the most.
In order to determine to what extent did the oil price decline effect Mol Group’s financial performance, key financial ratios will be analysed between 2014-2018 as part of financial statement analysis. Benchmarking these financial ratios against its largest local competitor OMV gives an idea about the performance of the company. The key financial ratios that will be analysed includes profitability, liquidity, financial leverage and shareholder equity ratios.
The major key findings focused on Mol Groups ability to generate positive cash flow even during lower oil prices due to exceptional performance by its Downstream division, while its Upstream division generated much less cash flow. As net sales revenues declined, operating profit and net income turned negative due to oil prices falling in 2015, resulting in working capital being negative as well during lower oil prices between 2014-2016. Profitability, liquidity leverage and shareholder equity ratios were negatively impacted during 2015 when oil prices declined the most, except EBITDA margin and debt to EBITDA ratios which have improved due to operating cash flow exceeding capital expenditure. Solvency ratio improved as well due to lower levels of debt. From 2016 sales revenues, operating profit and net income started to increase and all financial ratios have improved as well due to Mol Group having lower operating expenses and capital expenditure, while oil price increase generating higher operating cash flow. MOL managed to outperform OMV in profitability ratios while OMV outperformed MOL in liquidity ratios between 2014-2018.
In conclusion, Mol Group managed to perform well during low oil price environment excluding 2015 when it made considerable losses, due to its integrated business model, involving both extraction and refinery of crude oil that generated high operating cash flow throughout the period.
Financial performance by segment is analysed to give a holistic picture about the company’s main cash flow generator during oil price volatility. Another analysis that is investigated in depth in financial statement analysis of Mol Group, includes trend analysis and vertical analysis of the balance sheet and income statement between 2014-2018. The results will be compared against the oil price fluctuations during the same period to determine which part of the company’s financial statements were affected the most.
In order to determine to what extent did the oil price decline effect Mol Group’s financial performance, key financial ratios will be analysed between 2014-2018 as part of financial statement analysis. Benchmarking these financial ratios against its largest local competitor OMV gives an idea about the performance of the company. The key financial ratios that will be analysed includes profitability, liquidity, financial leverage and shareholder equity ratios.
The major key findings focused on Mol Groups ability to generate positive cash flow even during lower oil prices due to exceptional performance by its Downstream division, while its Upstream division generated much less cash flow. As net sales revenues declined, operating profit and net income turned negative due to oil prices falling in 2015, resulting in working capital being negative as well during lower oil prices between 2014-2016. Profitability, liquidity leverage and shareholder equity ratios were negatively impacted during 2015 when oil prices declined the most, except EBITDA margin and debt to EBITDA ratios which have improved due to operating cash flow exceeding capital expenditure. Solvency ratio improved as well due to lower levels of debt. From 2016 sales revenues, operating profit and net income started to increase and all financial ratios have improved as well due to Mol Group having lower operating expenses and capital expenditure, while oil price increase generating higher operating cash flow. MOL managed to outperform OMV in profitability ratios while OMV outperformed MOL in liquidity ratios between 2014-2018.
In conclusion, Mol Group managed to perform well during low oil price environment excluding 2015 when it made considerable losses, due to its integrated business model, involving both extraction and refinery of crude oil that generated high operating cash flow throughout the period.