MOL GROUP Annual Report

InterviewwithFerenc HorváthWhat was the biggest success in 2010?2010 was the first full year of operations in 12 markets with 5production assets. Our goal was to build on the high performanceof previous years. We significantly improved our asset structureby adding to it a world- level hydrocracking unit to match ourproduction structure with market demand. The new units in ourRijeka and Sisak refineries now enable us not only to serve localdemand but their new EU-conforming grades also provide us withaccess to EU marketplaces. These projects were the first stepstowards creating efficient and profitable Croatian Downstreamoperations and show our commitment to elevate INA assetperformance to the level of our Duna and Bratislava refineries. Theoptimisation of five refineries and two additional petrochemicalssites has created synergies which we are gradually exploiting byde-bottlenecking our logistics network.What specific steps did you take to achieve theseimprovements?The efficiency improvement programmes in Croatia, startedin 2009, delivered initial results and generated close to USD100 million EBITDA improvement throughout the entire valuechain. The “OptINA” project identified several areas whereimplementation of current MOL Group standards wouldadd significant value to day-to-day operations and increaseprofitability as well.On the commercial side, we are continuously improving customerrelations management. As a reliable and high-quality supplier,we have started the harmonisation of our commercial frameworkwith INA, including the implementation of a new business policyand contract standards, the application of strict financial rulesto INA sales credit risk management and the introduction of asingle sales channel for motor fuels in Croatia and Bosnia andHerzegovina.Sales expansion in South Eastern Europe gained momentum byextending our logistics capacity in Serbia and Romania.Ferenc HorváthExecutive Vice President, Refiningand Marketing (MOL Group)How do you see the externalenvironment in 2011? Will it be a morefavourable year for complex refiners likeMOL?In 2010, the global refining environmentgradually improved and we think that2011 will be characterised by a slightlyimproved margin environment. Wethink that the recovery of the dieselmarket will continue and our refineryassets are well positioned to exploit such amarket opportunity. In our core markets -Central and South East European - demandwill slowly pick up and we will be able to ridethe tide with our extensive sales channels andlogistics assets.What will the focus of MOL Downstream be in 2011?The size and complexity of our operations calls for a focus onmanaging execution. We need to deliver results through efficiencyimprovements and enhanced flexibility which will help us keepcosts under stricter control.We plan to continue our quest to develop value-creating growthby increasing our market share in the motor fuel markets of SEE,moving into the recently-opened Serbian motor gasoline marketand by expanding our market presence in Romania too.In Retail we intend to pursue a selective investment strategy. Wewill concentrate on regional consolidation and offering relevantservices to our customers. Ultimately, we aim to offer an enhancedtotal customer value proposition. Thus we will broaden our ‘fitto-drive’concept: the open-air family fitness park providing anopportunity for each member of the family to take a short activebreak whilst travelling.What will MOL’s biggest challenges be in the coming years?Our aim is to become the premium Downstream company in Europe. We would like tostrengthen our regional stronghold along 3 dimensions:Firstly, we will maintain strong emphasis on increasing the efficiency of our currentassets (focusing on energy consumption and maintenance in particular) as well ason further improving logistics and marketing operational optimisation. As partof MOL Group-level efficiency programmes, Downstream is aiming at a USD 280million EBITDA improvement by 2013. In the meantime we shall maintain the leadingpositions of our Duna and Bratislava refineries in terms of net cash margin generationand exploitation of MOL Group-level synergies.Secondly, we aim to initiate organic growth projectsthat focus on the elevation of our Rijeka refinery to thelevel of top European plants, increasing its complexityto convert fuel oil output to more valuable motor fuels.Petchem investment in Bratislava could ensure flexibilityin the long term and exploit existing synergies fromrefining-petrochemicals integration. On the other hand,in the long term, we also plan to increase diesel output atour Duna refinery by building a new hydrocracking unit.Thirdly, we will pursue a selective non-organic growthinvestment strategy by continuously monitoring theregional asset market but considering only thosewhich fit into the current portfolio in the region withspecial regard to logistics and retail developments. Thebiggest challenges in Retail will be the rationalisationand efficiency improvements in the Croatian operationas well as managing the modernisation project with asizable investment.Refining and production are coming under moreand more stringent legislation and are the focus ofenvironmental protection laws.From the workforce point of view, we will face achallenge in the future: to keep the right balancebetween aging and swift knowledge improvement. Oneof our key tasks is to ensure the succession of key people.We have started several projects through partnershipswith Universities even down to elementary schoolprogramme level to secure the engagement of the newgeneration with the oil industry. We have launched aMasters course at the University of Pannonia to supportinternally the education of new graduates and the ‘PIMSAcademy’ in the Supply Chain Management.What other factors are youconsidering to achieve your goals inthe future?We constantly focus on environmentalchanges and challenges. With thecontribution of our Research &Development team, we want to beable to provide adequate and timelysolutions. Apart from ‘hardware’,we believe that investing in humanresources and sustainable operationswill enable us to achieve our goals andmaintain our competitive advantage.Refining and Marketing28 MOL Group annual report 2010 29