Paz earned NIS 30 million in the first quarter of 2021 - compared with a loss of NIS 97 million

The energy company Paz earned NIS 30 million in the first quarter of 2021, compared with a loss of NIS 97 million in the corresponding quarter in 2020. The background to the increase in profit is, among other things, an improvement in the refining margin.
Paz's adjusted profit in the past quarter increased by 62% compared to the corresponding quarter in 2020, and amounted to NIS 13 million. The adjusted profit deducts the effect of expenses or income from hedging transactions on crude oil prices, which are classified as speculative transactions according to the accounting rules, as well as the provisions for impairment of crude oil inventory and the effect of the change in crude oil price on crude oil inventory.
The revenues of Paz, which is managed by Nir Stern, fell by 22% in the first quarter of 2021 compared to the corresponding quarter in 2020, to NIS 2.2 billion. The decrease in sales is due to a 24% decrease in the amount of distillates that Paz sold as a result of a decrease in demand during the third closure period imposed due to the corona plague.
Paz's adjusted gross profit decreased by 7% in the first quarter of 2021, and amounted to NIS 311 million. The main reason for the decrease was a 15% decrease in the adjusted gross profit of the Paz Industries segment, to NIS 121 million in the last quarter. This segment includes the gas activity for cooking for heating and refueling of Pazgaz, production of sealing and insulation products for Pazkar's construction and infrastructure industry, and marketing of jet fuel. The gross profit of this segment decreased as a result of a decrease of 10% -20% in the wholesale sales of Pazgaz in the first quarter, and due to a decrease in the sales of Pazgaz to the private sector due to the warm winter.
Paz's adjusted operating profit decreased by 7% in the first quarter, to NIS 57 million. The decrease is due to a 17% decrease in the operating profit of the Paz Industries segment, to NIS 64 million - mainly due to the decrease in the oil and energy services company, and a 10% decrease in the operating profit of Pazgaz to NIS 51 million.
The refining segment's operating loss shrank as a result of an increase in the refining margin to $ 3.7 per barrel in the first quarter of 2021, compared to a margin of $ 2.3 per barrel in the corresponding quarter in 2020. The margin improved despite a 56% decrease in the diesel interval (38% of production), a 67% decrease in the diesel interval (7%), and a 26% decrease in the fuel oil interval (8%). Paz explains that the improvement in the overall interval is due to a decrease in the premium. The Azeri crude oil it buys, compared to the price of Brent crude oil.
Paz notes that in light of the decline in refining margins and demand for fuel, it has reduced production capacity efficiency to 70% starting in March 2020, and towards the end of the first quarter of 2021 increased production volume. In view of the sharp decline in demand for jet fuel, it shifted the distillation production mix in favor of diesel and gasoline production, which was 42% of output in the past quarter compared to 38% of output in the same quarter in 2020, and enjoyed an 11% increase in margin. In other words, the difference between the proceeds from the sale of gasoline and the cost of crude oil for its production, including protections, grew by 11%.
Paz's current operations generated a surplus of NIS 194 million in cash flow in the first quarter of 2021, compared with a cash flow surplus of NIS 257 million in the corresponding quarter in 2020.