Economic
environment
In 2018, the overall economic environment was still quite favourable for the Group. While in 2017, the global economic growth reached the highest level of the last decade, i.e. 3.1%, according to the data provided by the Global Bank, in 2018, it was expected to be on the matching level, i.e. 3.0%. In the following years, the Global Bank expects economic growth to be at the level of 2.8-2.9% per year.
In 2018, the Estonian economic environment was also characterized by continued growth. According to Statistics Estonia, the GDP in Estonia increased by 3.9%, which, compared with 4.9% in 2017, was more moderate, but still it increased both the preceding years and the global economic growth on the average. The Group is still concerned by the brisk growth of the average gross salary, which went up by 7.3% in 2018 (as compared with 6.5% in 2017), exceeding the average economic growth for the seventh year in a row. With due consideration of the peculiarities of the Estonian labour market, we cannot expect the slowing down of the growth in salaries in the nearest future, which is why, in order to provide competitive ability, the added value that accompanies workplaces should go up continuously.
Since a large share of the turnover of VKG is made up of the sale of oils, the financial indicators of the Group are mainly affected by what is happening at the global oil market. Against the background of the favourable of macro-environment, in 2018, the prices for different kinds of fuels continued to grow. On the one hand, the reason for that was an increasing demand for fuels, i.e. according to the estimates of the International Energy Agency (IEA), the global demand for fuels increased by 1.2%, reaching 99.2 millions of barrels per day. On the other hand, the growth in prices was promoted by an agreement made between the OPEC and Russia concerning cutting down on production volumes as well as an abrupt decline in production in Venezuela. Even though the growth rate of production of shale oil in the USA has partially compensated for a decrease in production volumes in the OPEC, the decision made by the American president in May concerning the renewal of sanctions against Iran increased the price pressure even more, and by October, the prices for Brent crude oil reached 86 USD/bbl as compared with 66 USD/bbl at the beginning of the year. An increase in production volumes in the OPEC, as well as a relief of sanctions against Iran and the signs of the economic slowdown, brought Brent prices down to 50 USD/bbl fast enough by the end of the year.
VKG sells a major part of manufactured oils with 1% of sulphur content on the basis of the price for fuel oil, and since the expenses incurred by the company are in euros, the financial indicators of the Group are bet of all characterized by the fuel oil price curve below.
1-% price of crude oil, 2017 -2018
As compared with Brent crude oil, the 1% fuel oil market is less liquid, which is why the price for fuel oil can fluctuate differently from Brent, depending on the ratio between offer and demand existing at the market. In addition to that, the financial indicators of VKG are also affected by the dollar rate, which in 2018 strengthened once again and facilitated an increase in profitability. All in all, the situation in the market in 2018 was favourable for VKG. It was only a fast decrease at the end of the year that caused some uncertainty with respect to the future.
Economic indicators
Consolidated income statement
in thousands of euros| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| Sales revenue | 166 788 | 104 270 | 161 282 | 208 924 |
| Revenue from sales of products | -189 159 | -106 147 | -149 630 | -170 353 |
| Gross profit | -22 371 | -1 877 | 11 652 | 38 563 |
| Marketing expenditure | -3 360 | -3 213 | -4 046 | -5 841 |
| General administrative expenditure | -9 109 | -9 471 | -9 480 | -9 724 |
| Other business revenue | 9 973 | 10 153 | 7373 | 12 225 |
| Other business expenditure | -1 745 | -2 218 | -1 485 | -853 |
| Business profit | -26 612 | -6 626 | 4 014 | 34 370 |
| Financial revenue and expenditure | -5 269 | -8 589 | -9 776 | -6 901 |
| Profit before income tax | -31 881 | -15 214 | -5 762 | 27 469 |
| Unplanned expenditure | ||||
| Income tax | -300 | -560 | ||
| Net profit of financial year | -32 181 | -15 214 | -5 762 | 26 909 |
Investments into developments activities
in millions of eurosInvestments into environment and occupational safety
in millions of eurosConsolidated balance sheet
in thousands of euros| 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|
| ASSETS | ||||
| Current Assets | 71 086 | 65 398 | 75 552 | 108 992 |
| Fixed Assets | 485 513 | 518 354 | 479 175 | 613 357 |
| TOTAL ASSETS | 556 599 | 583 752 | 554 727 | 722 348 |
| LIABILITIES AND EQUITY CAPITAL | ||||
| Short-Term Liabilities | 75 383 | 52 343 | 50 093 | 172 469 |
| Long-Term Liabilities | 182 724 | 234 758 | 201 373 | 39 074 |
| Total Liabilities | 258 107 | 287 101 | 251 466 | 211 543 |
| Equity Capital | 298 493 | 296 652 | 303 261 | 510 805 |
| TOTAL LIABILITIES AND EQUITY CAPITAL | 556 599 | 583 753 | 554 727 | 722 348 |
Balance sheet total
in millions of euros- Equity capital
- Liabilities