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Orlen Q1 profit falls 70% on windfall tax, weaker refining

Poland's Orlen logo displayed at fuel station in Bialystok

WARSAW (Reuters) -Orlen's first-quarter net profit slumped 70% to 2.77 billion zlotys ($704.82 million) due to the impact of a windfall tax and a weaker refining performance, Poland's top oil refiner said on Wednesday, missing expectations.

Earnings before interest, tax, depreciation and amortisation (EBITDA) in the quarter fell by 53% year-on-year to 7.73 billion zlotys, while revenue declined to 82.33 billion, the company said.

Analysts' estimates were for net profit of 3.24 billion zlotys.

Orlen's payment of a windfall tax used to stabilise gas prices rose by 4.2 billion zlotys to 7.7 billion in the first quarter. The contribution will amount to about 15 billion zlotys in the full year, Orlen said.

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First-quarter operating profit in the refining business

slumped by 52% to 1.9 billion zlotys, due to weaker margins and volumes.

Orlen said its upstream segment had an operating loss of almost 5.5 billion zlotys in the first quarter due to the windfall tax and the drop of gas prices by 48%. Gas segment operating profit fell 15% year-on-year to 7.4 billion zlotys on lower prices, it said.

Orlen said it needs to speed up investments to meet strategic goals by 2030.

"In order to achieve strategic goals, some investment projects require significant acceleration," CEO Ireneusz Fafara said. He said Orlen would publish an updated strategy by the end of 2024.

The company said its capital expenditure in the first quarter stood at 6.4 billion zlotys compared with a full-year target of 38.6 billion.

Going forward, lower gas prices would help petrochemical margins improve, while oil prices were likely to rise compared with 2023 amid increased global demand, Orlen said in the full-year outlook.

Electricity prices will likely remain below 2023 levels amid increased renewable generation and cheaper carbon emission rights, while natural gas prices would be 26% lower compared with last year.

($1 = 3.9301 zlotys)

(Reporting by Anna Koper and Marek Strzelecki in GdanskEditing by Jane Merriman and Matthew Lewis)