Capital Markets presentation 13.11.2018
The information included in the presentation and any other information communicated by the Company while the presentation is being given (all such information as aforesaid or any part thereof the "Information") is presented for convenience purposes only. The Information does not constitute a basis for investment decision, or replace the need for carrying out independent collection of information and analysis of the Information nor does the Information purport to make or give any recommendation and/or opinion and/or to substitute for the independent judgment of any potential investor. Disclaimer The Company does not warrant the completeness or accuracy of the Information or of its the translation into English and it disclaims any responsibility for any damages and/or losses whatsoever resulting from the use of the Information. In case of contradiction or inconsistency between the Information and information recorded in the Company's ledgers and/or appearing in official publications, such recorded information will prevail. The Information may contain various forward looking statements based on current data and expectations. Actual operations, results and other data may differ materially from those stated in such forward looking statements, owing to various uncertainties and risks, including the risk factors referred to and discussed in the Company's financial statements and Management Discussion and Analysis as published by the Company. The Company assumes no obligation to update the said data and expectations or any other part of the Information. www.orl.co.il 2
An excellent quarter Strong performance in operating and financial parameters Financial improvements Net debt to EBITDA ratio X1.9 Net financial debt decreased $ 126 million from the beginning of the year Excellent quarter Net Profit $ 16 million Adj. EBITDA $ 123 million Polymers sector EBITDA $ 44 million Strong operating results Successful completion of the periodic maintenance cycle Adj. refining Margin (*) $/bbl 8.1 (*) $/Bbl 8.6 without the periodic maintanace www.orl.co.il 3
Business Environment www.orl.co.il 4
Brent, $/Bbl 90 83.7 77.9 75 54.9 60 45 51.9 47.4 57.2 66.5 67.3 Price increased from $/Bbl 78 to 84 OPEC is still committed to production cuts Other countries joined OPEC policy Expected sanctions on Iranian oil exports In October and November, supply increases lead to a drop in prices to $ 68 a barrel 30 12/16 03/17 06/17 09/17 03/18 12/16 03/17 06/17 09/17 12/17 06/18 09/18 12/17 03/18 06/18 09/18 5
Reuters - Ural Med Margin, $/Bbl 12 2017 Avg $/bbl 5.3 Avg Q1 18 $/Bbl 4.0 Avg Q2 18 $/Bbl 4.4 Avg Q3 18 $/Bbl 5.2 10 8 6 4 Margin increase from the beginning of the year High volatility and increase in middle distillated margins 2 12/16 0 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 6
Bloomberg - Ural Med HY/FC Margin, $/Bbl 12 10 8 6 4 2017Avg $/Bbl 6.0 Avg Q1 18 Avg Q2 18 Avg Q3 18 $ /Bbl 5.4 $/Bbl 6.0 $/Bbl 6.2 The weighted Ural Bloomberg margin is the weighted average of two refining margins in the Mediterranean Sea, hydrogen cracking and catalytic cracking. The weighted Bloomberg margin includes 50% hydrogen cracking capability, 50% catalytic cracking capability and full use of natural gas as an energy source 2 12/16 0 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 7
Products margin (CIF Med) vs Brent, $/Bbl 20 10 Diesel crack increased during the quarter to $/Bbl 16 Gasoline crack stable on $/Bbl 11 0-10 01/17 04/17 07/17 12/16 03/17 06/17 10/17 09/17 01/18 12/17 04/18 03/18 07/18 06/18 10/18 09/18 Gasoline Prem Unl CIF Med Diesel ULSD CIF Med Fuel Oil 1% CIF Med Source: REUTERS 8
Polymers prices above Naphtha, $/Ton 1,100 Avg 2017 Polypropylene 754 $/T Polyethylene 887 $/T Avg Q1 18 Polypropylene 831 $/T Polyethylene 824 $/T Avg Q2 18 Polypropylene 751 $/T Polyethylene 662 $/T Avg Q3 18 Polypropylene 729 $/T Polyethylene 608 $/T 900 700 500 300 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 Margin decreased moderately due to Naphtha hike Polyethylene (LDPE FD NEW Spot Naphtha CIF NEW) Polypropylene (PP FD NEW Spot Naphtha CIF NEW) Polypropylene prices above Propylene, $/Ton Avg 2017 Q1 18 Avg Q2 18 Avg Q3 18 Avg 400 290 $/T 283 $/T 234 $/T 190 S/T 300 200 100 PP FD NEW Spot Propylene FD NEW Contract 0 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 9
Paraxylene prices above Xylene, $/Ton 600 2017Avg Avg Q1 18 Avg Q2 18 Avg Q3 18 121 $/T 141 $/T 120 $/T 276 $/T 400 Paraxylene FOB ARA Solvent Xylene FOB ARA 200 0 12/16 03/17 06/17 09/17 12/16 03/17 06/17 09/17 12/17 03/18 06/18 06/18 09/18 Source: ICIS,PLATTS 10
Transportation Fuels Local consumption- KTon 953-14% -2% 845 822 832 Distillates Local Consumption Down 6% Q3 18 vs Q3 17 302 +10% 331 Transportation Fuels Local consumption Down 6% Q3 18 vs Q3 17 High demand for Jet fuel! דס Fuel "לJet בנזין Gasoline סולר Diesel Q3 2017 Q3 2018 Source : Infrastructure ministry 11
Other Fuels Local consumption- KTon 84 83 126 135-10% 121 121 Distillates Local Consumption Down 6% Q3 18 vs Q3 17 Stable consumption of Bitumen and Fuel Oil גפ LPG "מ Oil מזוט Fuel ביטומן Bitumen Q3 2017 Q3 2018 Source : Infrastructure ministry 12
IMO 2020 International product Light-Heavy spreads* 70 Spread, Constant 2016 dollars per 60 50 Post IMO 2020 40 30 20 10 0 2005 2010 2015 2020 2025 2030 2035 2040 *L/H spread = 0.5 * (Gasoline price + Diesel price) HSFO price 2018 IHS Markit At the beginning of 2020, a new standard for sulfur content in marine fuel fuels will take effect BAZAN examined the implications of the standard change with the assistance of IHS Markit According to the IHS forecast, BAZAN will be able to adjust refining operations to market conditions and needs, without makinginvestmentsinitsfacilitiesandmayevenbenefit from improved margins According to the IHS estimate, the expected impact of the new standard on Company's refining margins is an addition totherefiningmarginintherangeof0to4dollarsper barrel Note: These charts are part of a presentation published by the Company on 2.7.2018 in order to examine the full analysis, please review the full presentation as published In October 2018, the Carriage Ban was approved commencing March 1, 2020 13
Financial Results Q3 2018
Consolidated Results Q3 2018 $ Millions Consolidated Adj. EBITDA by Segments Consolidated Net Profit 182 3 Other Segments Fuels 124 123 8 71 92 Polymers Carmel & Ducor 55 44 16 Q3.17 Q3.18 Q3 17 Q3 18 Q3 17 Q3 18 Q3 17 Q3 18 15
Bazan Adj. Refining Margin Vs. Reuters Ural & Vs. Weighted Bloomberg Ural $ / barrel 9.3 (*) 8.6 Bazan Adj Margin. Weighted Ural Bloomberg Ural Reuters 6.4 7.2 5.2 6.2 Q3 2017 Q3 2018 Q3 17 Q3 18 (*) Adj. margin proforma as defined in the Company s Board Of Directors Report. The actual refining margin for the third quarter of 2018 is $/bbl 8.1 16
Polymer Segment Results* $ Millions 55 44 33 29 EBITDA Net Profit Q3 17 Q318 (*) Carmel & Ducor www.orl.co.il 17
Net Financial (*) Debt Millions $ 1,935 1,411 1,437 1,193 1,150 1,024 12/13 12/14 12/15 12/16 12/17 09/18 12.2013 12.2014 12.2015 12.2016 *Debt to Financial Institutions and Bond Holders 12.2017 9.2018 18
Net Financial Debt to Adj. EBITDA Ratio 7.4X 3.4X 2.8X 2.8X 2.1X 2.1X 2.1X 1.9X 12.2013 12/13 12.2014 12/14 12.2015 12/15 12.2016 12/16 12.2017 12/17 9.2018 09/18 Net Financial Debt to Financial Institutions and Bond Holders Adj. EBITDA as defined in the Company s Board Of Directors Report www.orl.co.il 19 19
Consolidated Cash Flow 9m 2018 $ millions 469 40 4 2 2 19 115 (*) 91 38 65 84 (*) 181 5 326 475 Cash 31.12.2017 Profit on cash basis Changes in fixed deposits Bonds issue Derivatives Dicrease in working capital Short term loans & deposits Lease liabilities Interest paid Net Loans repayments Dividend Bonds repayments Capex Tax Cash 30.09.2018 (*) Including payment of principal and interest in respect of a judgment given in respect of development levies in the amount of $ 67 million and $ 14 million, respectively www.orl.co.il 20
Main Balance Sheet Parameters Net Working Capital ($ M) Shareholders Equity ($ M) -405-401 111 185 400 549 785 654 874 1,037 1,204 1,359 12/13 12/14 12/15 12/16 12/17 09/18 12.2013 12.2014 12.2015 12.2016 12.2017 9.2018 12.2013 12.2014 12.2015 12.2016 12.2017 9.2018 12/13 12/14 12/15 12/16 12/17 09/18 Liquid Financial Assets ($ M) Equity to Assets Ratio 267 310 371 403 516 17% 18% 25% 28% 30% 32% 98 12.2013 12.2014 12.2015 12.2016 12.2017 9.2018 12/13 12/14 12/15 12/16 12/17 09/18 12.2013 12.2014 12.2015 12.2016 12.2017 9.2018 12/13 12/14 12/15 12/16 12/17 09/18 21
Bazan in the Capital Market 33.0% Israel Corp. Ltd Listed on TASE (ORL) TA 35, TA 125 Market Cap: Nis 5.9/ $ 1.6 bn November 2018 Bonds traded on TASE Telbond index Nis 4.4 bn in bonds traded November 2018 Shareholders as of 30.09.18 Dividend yield 3.7% November 2018 51.5% Free Float 15.5% IPE 4 www.orl.co.il 22
70% (*) +55% 60% 50% 40% 30% 20% 10% 0% 10% 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 31/12/2016 31/03/2017 30/06/2017 30/09/2017 31/12/2017 31/03/2018 30/06/2018 30/09/2018 Bazan Share TA 35 (*) for the period 1.1.2017 8.11.2018 www.orl.co.il 23
Thank you!