Delek Group Announces Consolidated Results for the Fourth Quarter and Full Year of 2008
(TASE: DLEKG) (hereinafter: “Delek Group” or “The Group”) announced today its
results for the three and twelve month period ending
full financial statements will be available in English on Delek Group’s
website on
Full Year 2008 Highlights
- Exiting Real Estate sector, distributing holding in Delek Real Estate
as a Dividend in Kind; Exit will significantly reduce consolidated debt
by 45% to NIS 17 billion
- Consolidated revenues up 13% year over year reaching NIS 47.9 billion
- Net loss, including non-cash write downs, totalled NIS 1.8 billion, NIS
1.45 billion of which in fourth quarter
- Macroeconomic crisis impacted the Group mainly through non-cash asset
write-downs in both real-estate sectors as well as insurance and
financial service holdings
On
distribute the shares of Delek Real Estate (TASE: DLKR) held by the Company
to the Company’s shareholders. This step will significantly reduce Delek
Group’s consolidated debt by
receive 8.8 Delek Real Estate shares for each Delek share.
The Company announced that the record date for distribution is
2009
details included at the end of this press release).
Group revenues for the full year 2008 were
compared with
2008 decreased 43% reaching
the same period last year.
Results for Delek Group and its subsidiaries were negatively impacted by
the sharp global macroeconomic slowdown and credit crisis, as well as the
sharp exchange rate and oil price volatility throughout 2008, and in
particular by the intensified financial upheaval in the fourth quarter.
This affected results across many of the Company’s holdings. Furthermore,
the Company’s US based insurance holding (Republic Companies Inc.) was also
affected by the three hurricanes which hit certain regions insured by
Republic, during the summer months of 2008. These negative impacts throughout
the year were partially offset by the strong performance of the energy and
infrastructure sectors, and the automotive sector in the first 9 months of
the year.
Net loss, which includes a number of one-time items, totaled
billion
loss for the fourth quarter of 2008 totaled
contributor to the net loss for the year.
The net loss in 2008 and in the fourth quarter, were significantly
impacted by a series of events, the majority of which were non-cash and
one-time in nature. The one-time effects on the Company’s operating profit
are detailed in the table below:
2008 Q4 2008
Real estate segment 1,267 827
Insurance segment 575 338
Impairment of fuel inventory 157 103
Impairment of financial assets 320 155
Write-off of investments in oil drillings found to be dry 74 28
Expenses in respect of reorganization at Delek Europe 80 80
Write-down of goodwill 40 40
Mr.
portfolio over a variety of different sectors and regions, enables us to
partially offset the unprecedented global economic and financial upheavals.
Our energy and infrastructure sectors have shown strong performance, the most
prominent being the recent very significant natural gas field discovery off
the coast of
already contribute in 2012. Furthermore, earlier this week, we received
initial positive results on a second local drilling, showing the existence of
additional natural gas. Our automotive sector also performed well throughout
2008, though suffered from the macro-environment towards the end of the year.
This holding still has substantial untapped potential and remains the market
leader in certain major vehicle categories. While our financial services and
insurance business are being strongly affected by the slowdown, the Group’s
diversity, focus on efficiencies, as well as our robust financial basis, will
enable us to emerge the crisis an improved company and primed for growth.”
Mr.
focusing on carefully managing our balance sheet, building up our cash
levels, which now stand at approximately
well spread over a number of years, allowing us to continue to meet all of
our financial obligations. Furthermore, we recently signed a refinancing
agreement through two wholly owned subsidiaries; Delek Investments and Delek
Petroleum for approximately
2009 to between 2010 and 2012.”
Continued Mr. Bartfeld, “Looking ahead, in 2009 we already see some
improvements in the business environment. Our long-tenured management teams,
whom have successfully managed our globally diverse portfolio through prior
cyclical economic troughs, serve as a key asset in the current crisis. We
continue to adjust and refine our growth strategy as the macro-environment
evolves to remain ahead of developments, while remaining steadfastly
committed to building and maximizing long-term value for all our
shareholders. Our stable financial standing, the recent natural gas finds,
the diversity of our operation and our efficiency measures, will ensure we
continue to grow and develop the Group.”
Main Business Highlights for the Full Year and Fourth Quarter
Contribution of Principal Operations to Net Profit* (NIS millions)
Q1/08 Q2/08 Q3/08 Q4/08 2008 2007
US Fuel Sector Operations 1 45 27 (73) - 353
Israeli Fuel Sector Operations 23 31 31 (20) 65 138
Capital Gains on Sale of Amisragas - - - - - 86
Delek Europe 11 42 10 (21) 42 31
Delek Europe Reorganization - - - (81) (81) -
Expense
Oil and Gas Exploration 33 (14) 40 6 65 90
Oil Exploration Expenses (26) (13) (7) (28) (74) (58)
Automotive Operations 85 105 110 (12) 288 245
Insurance and Finance Operations 37 (76) (198) (326) (563) 178
Reduction in value of financial (13) (20) (95) (67) (195) -
derivatives
Capital Gains & Others 13 (11) (102) 10 (89) 24
Net Income attributed to 164 89 (184) (612) (542) 1,097
shareholders excluding Real Estate
Operations
Real Estate Operations 30 (42) (428) (827) (1,267) 210
Net Income 194 47 (612)(1,439) (1,809) 1,297
* This table has been extracted from Delek Group's Fourth Quarter 2008
Directors Report. Please review the full report available on the
Group's website http://www.delek-group.com to view the notes for each
of the items above. Please note that 2007 results are restated
according to IFRS accounting principles.
Energy Sector
Delek US (NYSE: DK; Delek Group holds 73% end-Q4 2008): Net income for
the year ending
million
It should also be noted that for the purpose of Delek Group’s financial
statements, the income statements of Delek US are converted from US GAAP to
IFRS accounting, and translated from US dollars into Israeli shekel at the
average exchange rates for each period. The conversion and translation caused
a negative impact on the Delek US results as it appears in the Delek Group
income statement. The average exchange rate in the period ended
2008
in 2007 of NIS/US$ of 4.1, constituting a decline of
Results were positively affected by a rise in profitability from retail
sales of fuels during the year, which was partially offset by a decline in
sales as a result of a shortage of fuels in the period after the hurricane
season. In addition, the considerable decrease in refining margins in 2008
and an increase in the operating expenses due to a general rise in prices of
natural gas, which is a source of energy for the refineries, negatively
affected the results.
The Delek US Tyler refinery has been offline since a fire in
2008
note that Delek US is covered by business interruption insurance which went
into effect on
interruption claim will recognize current market conditions, thereby allowing
Delek US to benefit from the favourable contango crude oil market structure
and improved Gulf Coast crack spread that the refinery would have enjoyed
during January and February had the refinery been online. At the same time,
Delek US intends to proceed with a series of capital projects at Tyler during
the offline period, which will improve the refinery’s ability to process
crude at greater efficiency.
Delek – the Israel Fuel Company Ltd. (TASE: DLKIS; Delek Group holds 86%
end-Q4 2008): Net income for 2008 was
million
Delek Israel had a non-recurring capital gain of approximately
from the sale of 39% in Amisragaz.
Revenue, gross and operating profit were higher in 2008 and were driven
by improved operating efficiencies, an increase in volume of sales, an
increase in the contribution of the convenience store chain and the inclusion
of the production and storage operations acquired
However, these increases were partially offset in the last quarter of
2008, due to a sharp decrease in fourth quarter fuel prices. This affected
gross and operating margins due to steep inventory losses in the fourth
quarter compared with an inventory profit last year.
Delek Benelux was established in
869 gas stations in the Benelux region. Net loss for 2008 was
compared with net profit of
Delek Benelux’s results were affected by the economic downturn that led
to a reduction in sales, in addition to heavy inventory losses in the fourth
quarter due to the sharp fall in oil prices.
The company also took the decision to streamline processes in the fourth
quarter, and relocated offices from their present locations in
result, in the fourth quarter of 2008 the Company made a material provision
of approximately
The Oil and Gas Exploration, and Gas Production sector, generated a net
loss of
2007. The loss in the year was primarily due to the abandonment of drills in
the North Sea and
the sale of gas in
cubic meters of natural gas.
Delek Group is proud to announce that in early
confirmed the discovery of a very large and commercially viable natural gas
well called Tamar-1 in the Matan license area, off the Northern Coast of
142 billion cubic meters. Work on the Tamar development plan is currently in
its initial stages, and is intended to bring first production to
2012.
In addition, natural gas was also discovered at the Dalit-1 well in the
Michal license area, and production testing will soon commence to establish
the commercial viability of the well, which is estimated at 20 billion cubic
meters. The additional discovery at Dalit enhances the exploration potential
which exists within the extensive offshore area owned by the company. Thus,
the Company is currently contemplating further exploration activity in the
area, including conduction of 3D seismic surveys.
Infrastructure
2008 was an eventful year for Delek Group’s infrastructure strategy, with
a focus on water desalination and power plant construction.
IDE, which is 50% (indirectly) held by Delek Group, is a world leading
manufacturer and operator of desalination facilities, industrial evaporator
centres and heat pumps, and operates. IDE won a tender in May to supply three
desalination plants for an Asian customer and signed a contract to establish
a desalination plant in July for an industrial client in
addition, IDE won a tender to extend its desalination project in Hadera
(
IPP Ashkelon, based in the South of
power producer, that operates on natural gas. During 2008 the plant began
working at full capacity and Delek signed two additional agreements to
establish private cogeneration plants. Outside of
into the Brazilian power plant market.
Insurance and Financial Services
The activities of the finance segment are primarily conducted through two
insurance companies; Israeli insurance company, Phoenix Holdings Ltd. (TASE:
PHOE) of which Delek holds 55% and majority owned general US insurer,
Republic Companies, Inc.
The insurance and financial services sector contributed a loss of
million
million
affected mainly by the volatile global and substantially weakening capital
markets, particularly towards the end of the year. However,
were positively affected by a 12% income growth in the health insurance
operation. In the US insurance business three major hurricanes hit the region
of
on the results of Republic that is based in the region.
Real Estate Operations
Delek Real Estate (TASE: DLKR; Delek Group holds 79% end-Q4). As
mentioned, Delek Group’s Board of Directors decided to distribute all or part
of the Delek Real Estate’s shares it shareholders.
Delek Real Estate’s net loss for 2008 reached
with a net profit of
to the net loss, but the main cause was a decrease in the value of the assets
due to negative market conditions in real estate globally, as well as the
decrease in value of financial derivatives, the increase in the Consumer
Price Index in
Automotive Operations
Delek Automotive Systems Ltd. (TASE: DLEA; Delek Group holds 54% end-Q4):
Delek Automotive maintains a 22% market share in the Israeli automobile
market through the exclusive import and distribution of the Mazda and Ford
brands.
Delek Automotive Systems’ completed a record year with 2008 net income
totalling
2007. The increase in net income was driven mainly by the strong growth in
sales of new cars in
In the fourth quarter, the number of cards sold dropped significantly due
to a number of local factors, including a general belief that prices would
fall in 2009 which delayed purchasing decisions. In addition, other external
factors affecting Delek Automotives results included the strengthening of the
Japanese Yen by 30% versus the Israeli shekel.
Details of Distribution of Delek Real Estate as Dividend in Kind
Following the immediate report published by the Company on
2008
Delek Real Estate Ltd. (hereinafter: “Delek Real Estate”) to its shareholders
(hereinafter: “the distribution”) the Company announces, as follows:
1. The company will distribute its shares in Delek Real Estate to
shareholders of the Company, in a manner that each owner shares in the
company will receive approximately 8.8 Delek Real Estate Shares for each
share of the Company held.
2. The record date is
date of payment (i.e., the actual distribution of the shares) is set for
3, 2009
3. The company will deduct tax at source from the shareholders of the
Company which are liable for paying taxes on dividends as a result of the
distribution (including individuals, partnerships and family owned Companies,
as determined in section 64 A of the Income Tax code). The deduction at
source will be executed by reducing the amount of shares distributed to those
shareholders.
4. The level of earnings of the Company before the distribution, on
approximately
equity as of
Conference Call Details
The Company will be hosting a conference call in English on
April 1st, 2008
call, CEO
answer your questions.
To participate, please call one of the following teleconferencing
numbers: US: 1-888-723-3164, UK: 0-808-101-2717 and
About The Delek Group
The Delek Group is one of the leading and most prominent and dynamic
investment groups in
following three major subsidiaries:
- Delek Petroleum, with its two subsidiaries: Delek Israel, a gasoline
and lubricants distributor in Israel, and Delek USA (NYSE), which
operates gas stations and convenience stores and an oil refinery in
Southern United States.
- Delek Investments and Properties, a holding company with subsidiaries
in the energy, infrastructure, automotive, finance and media sectors.
- Delek Real Estate, through its subsidiaries Dankner and Delek Belron
Investments, owns and manages prime global real-estate investments.
Contact
Dalia Black Kenny Green
Head of Investor Relations International Investor Relations
Delek Group GK Investor Relations
Tel: +972-9-863-8444 Tel: (US) +1-646-201-9246
Email: investor@delek.co.il E-mail: info@gkir.com
SOURCE Delek Group Ltd.