OMV Shares Decline Following Trading Update

OMV’s shares experienced a decline on Tuesday following a trading update that revealed disappointing performance and indicated potential challenges ahead.

As of 6:40 am (1040 GMT), OMV’s stock was trading down by 1.9% at €38.92.

The update, which pertains to the third quarter of 2024, suggested small but gradual reductions to consensus estimates, with negative adjustments anticipated due to underperformance in crucial areas.

In a note, Jefferies highlighted various factors contributing to the lackluster results. It pointed out that the company’s Fuels and Feedstock segment was affected by several one-time incidents, particularly the temporary suspension of operations at the Burghausen refinery, which negatively impacted margins and sales volumes.

OMV’s indicator margin reached $5.0 per barrel, which was slightly above Jefferies’ forecast of $4.8, but still fell short of the broader consensus expectation of $6.1 per barrel. Utilization rates were disappointing as well, with OMV reporting an 84% rate, significantly lower than Jefferies’ anticipated 90%.

While some components of OMV’s Chemicals & Materials segment showed modest improvement, these gains were not enough to counterbalance the overall decline from other divisions. Polyolefin sales volumes increased by 0.06 million tonnes quarter-over-quarter, primarily driven by joint ventures, but had a limited effect on profitability. Margins for monomers and polymers saw slight enhancements, yet overall performance was hindered by external factors, including disruptions in energy production.

Energy challenges, especially in Libya, posed significant difficulties. OMV produced 332,000 barrels of oil equivalent per day, barely surpassing Jefferies’ estimates, but falling below consensus expectations. The political instability and operational interruptions in Libya placed considerable pressure on the company, with an estimated EBIT impact exceeding €200 million. Although OMV was able to partially recover some losses through higher production in other areas, the net effect indicated a substantial financial hit.

Analysts at Jefferies had already anticipated some of these issues, but noted that the scale of the disruptions and their impact on profitability were greater than previously expected. They emphasized that energy disruptions and the temporary halt at Burghausen contributed to a less favorable outlook for the remainder of the year.

The trading update also noted ongoing volatility in commodity pricing. OMV’s average realized crude price of $78.4 per barrel surpassed Jefferies’ prediction of $75.5 but did not meet the consensus expectation of $76.8. Likewise, gas prices exceeded estimates, with OMV reporting an average realized price of €24.9 per MWh, compared to Jefferies’ expectation of €22.6.

The uncertainty surrounding OMV’s exposure to geopolitical risks, coupled with operational setbacks and mixed pricing performance, has shaken investor confidence. With the company’s results set to be announced on October 29, market sentiment remains cautious, and the possibility of further downward revisions to earnings estimates is high.

The Austrian government holds a 32% stake in OMV, while Abu Dhabi’s IPIC owns 25%, making the company’s strategic decisions closely monitored by both local and international stakeholders. Jefferies highlighted that OMV’s exposure to volatile geopolitical regions such as Libya and Romania, along with operational disruptions, indicates a challenging path ahead.