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Widening Horizons. Increasing Sales
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5.4.2. Widening Horizons. Increasing Sales
The production of the refinery has increasingly been directed toward export. As noted above, this is promoted by the production quality and the geographical situation of the refinery on the European “crossroads”, availability of the developed rail and motorway networks, as well as the product pipeline to the Danube River.
Export of products is planned to expand geographically. By way of the ports of the Baltic countries delivery of fuel product to customers in Northern and Western Europe is undertaken. Currently, more than 80% of the refinery’s output is exported. The ultra low sulphuric compound content of the products and the good performance specifications make the refinery’s products attractive to densely populated European countries.
This has lead to the Refinery’s annual sales, in nominal terms before taxes, to exceed $500 million USD. Over the period 2000 to 2003, this represents an average annual growth of 22.9% in sales (before taxes). Over the same timeframe, based on cost data provided by the Refinery1), the following were observed (nominal dollars, % is average annual change over 2000 to 2003, inclusive).
- Raw Materials and Other Materials increased by 37% and now cost over $200 million US.
- Fuel costs have increased by 10% (but declined in over 2003 relative to 2002).
- Energy costs declined.
- Depreciation of capital assets was 45%.
- Capital Costs increased by 90% (but declined in over 2003 relative to 2002).
- While return on products sold was negative between 2000 and 2001, growth has been positive over the last two years (24.6% in 2002 over 2001, and 29.6% in 2003 over 2001).
It is also noted that employment at the Plant has been growing steadily – averaging 4.2% per annum over the four-year timeframe. Although the average wage in nominal terms grew on average by 35.4%, in real terms they appear to be declining. This is a consequence on staggering inflation in Belarus’ economy.
Of note, with regards to wastewater treatment, the plant charges more than it receives for these services (over the last three years). With electricity rates having increased dramatically, there is a reluctance of reidents and businesses to pay higher rates for water as well. As a preliminary review indicates, this is a subsidized service to local residents and industries.
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1) – Please note, based on consultant verification, that the Total Material Expenditures for 2003 were approximately $9.9 million more than identified.
