SWOT ANALYSIS OF MOTOR OIL HELLAS

CORINTH REFINERIES S.A IN GREECE

BY EIRINI TOUGLI
PENNY VLAGOS
GLOBAL STRATEGIES
NEW YORK COLLEGE
25/03/2020
 SWOT Analysis of Motor Oil Hellas Refinery

STRENGTHS WEAKNESSES

 Well-known brand name  It has high inelastic refining cost.

 The refinery has a high standard of  Limited profit margins.

activity( Hydrocracker complex,Lubes
production).  It has liquidity problems (duty and tax
advances), high working capital requirement.
 Strong dealer network and Increased demand for
petroleum products.

 Valuable Human resource

 It has an inlet / outlet system at the fuel stations.

OPPORTUNITIES THREATS

 Implementation of energy efficiency, renewable  Coronavirus epidemic.

hydrogen and Greener feedstocks
 Market risks.
 Production and trade of petrochemicals
 Currency risks.
 Exploitation of domestic hydrocarbon deposits.
 Interest rate risks.
 Production and trading of petrochemicals.
 Substitution of petroleum with gas or other
green energy forms.

 Technological upgrading of internal combustion

engines of vehicles turning them into hybrid-
electric vehicles and hydrogen-powered
vehicles.

In the Greek oil refinery sector there is oligopoly. The competition is not great. There are two dominant

companies, Motor oil Hellas and Hellenic petreleum. However, there are five refineries, three of which are

state-owned, which owns to Hellenic Petroleum Company in Aspropyrgos, Thessaloniki and Elefsina and two

privately owned by the MOH Company, in Agioi Theodoroi in Corinth and Elefsina. Hellenic petroleums plays

a leading role in the market following the successful discovery of hydrocarbons. It currently accounts more

than 65% of domestic oil refining while MOH holds only 25%(Elpe - Refining, Supply & Trading, 2020).

Motor Oil Hellas Corinth refineries S.A is a dominant leader in refinery sector in Greece, contributing

significantly with 4% on Greece gross domestic product. In my paper below i aim to evaluate the internal
situation of Motor Oil Hellas that is important for company's size up. However, i am going to identify

company's competitively important resources and capabilities, weaknesses and competitive deficiencies, market

opportunities and threats, that is vital for a well-conceived and well-executed strategy for the immediate future

of firm's well-being. Resources ( tangible and intangible) are competitive advantage of a firm because cannot be

copied by rivals, since are protected with legal framework, such as trademarks, copyrights and patents.

Strengths
The Motor Oil Hellas Refineries has created a well-known brand with market loyalty. The refineries, however,

benefit from Greece's privileged position, located between Europe and the Middle East, being Greece's largest

private industrial complex. Motor Oil Hellas Refineries have high operating standards by constantly upgrading

modern systems. The MOH refineries have a production capacity of 185,000 barrels per day and cover a wide

range of products such as LPG, gasoline, fuel oil, bitumen and lubricants. However, M.O.H refineries could

also be characterized as one of Europe's most flexible refineries, as they produce high-quality products that

satisfy the most stringent domestic and international customers. In addition, it is the only company producing

and packing lubricants in Europe. The lubricants are also approved by international organizations (Association

des Constructer Europeans d'Automobiles, American Petroleum Institute) and the US Armed Forces. Another

advantage of the organization is that it produces specialties according to specific customer requirements (Motor

Oil, 2020).

MOH has a strong dealer network through its subsidiaries. Therefore, through the marketing of its products

through its subsidiaries in the Middle East, Great Britain, Cyprus, the Balkans has strengthened its export

activity, reducing credit risk from customers, increasing demand for its products and securing long-term lending

and liquidity. Motor Oil Finance plc, a wholly owned subsidiary of motor oil based in London, has already been

able to issue fixed interest rate bond loans since 2014, with access to a variety of financing options. However,

Brexit, Great Britain's withdrawal from the European Union is not expected to affect the activities of its

subsidiary (2020).

The subsidiary of Motor Oil Hellas LPC SA signed a joint venture with NAFTAL SPA in Algeria to build a

lubricant manufacturing plant.

A valuable physical asset of the company is the storage capacity of the industrial complex, estimated at 2'5

million meters, designed for the refinery's operational needs such as storage of raw materials and products

(Motor Oil, 2020). However, a notable asset of the company resources is its valuable human resource. For this

reason, M.O.H invests in intellectual capital through continuous training of its employees to integrate

knowledge, experience with know-how in combination with best practices.

Weaknesses
Like any organization, Motor oil has weaknesses. Initially, it has high inelastic refining costs, limited profit

margins, because Motor oil covers 25% of the internal market, while Elpe covers about 75%. The decline in the

gross profit of the company for the fiscal year 2019 is caused from the decrease refining margins. However, it

has liquidity problems because Motor oil invests a huge amount of its revenues each year for storage fees and to

the construction of storage tanks. Respectively the operating expenses at Group level faced an increase of

1.44% for the year 2019. Additionally, Motor oil's turnover for the fiscal year 2019 was 9.372.543 €, the

EBITDA was 359,607 €with a decrease 12.52% from 2018, while the earning before depreciation /

Amortization and Tax was 348.836, the earnings before Tax(EBT) was 268,665 € with a decline 15,25%, as

well as the earnings after Tax (EAT) was 205,523 with a decrease 9,90% from previous year (2020).

Opportunities

Oil and gas emissions globally accounts the 42%. However ,activist shareholders and climate policies forces

industry executives to examine planned policies or technologies to reduce 90% of their emissions at least and

to transition their operation up to net zero- emissions. Renewable energy integration is the game changer of

oil industry especially in refinery sector. The oil industry will challenge an energy transition and decarbonation

through renewable energy generation with a solar photovoltaic system and battery, which will not only
reduce emissions but also is cost-effective and will replace in a large percentage diesel fuel. However, current

technological opportunities that the firm can take advantage for the reduction of emissions, can make a huge

difference in any stage of the industry (The future is now: How oil and gas companies can decarbonize, 2020).

For the Refinery heat and power systems the firm can implement energy efficiency and renewable hydrogen,

as well as Greener feedstocks. For example, Waste-heat-recovery technology and medium-temperature heat

pumps in refineries, change fuel to biogases or hydrogen. Additionally, Hydrogen production is a recent

technological trend that is essential for the reduction of emissions. Hydrogen steam methane reforming

reduce the emissions through electrolysis that is why is called " green hydrogen". Finally, greener feedstocks

refers to replacing refinery feedstock from the crude to vegetable oil. This also extend the lifetime of refinery

business in terms of assets (The future is now: How oil and gas companies can decarbonize, 2020).

The new demand in oil industry is petrochemicals. Petrochemicals are products produced by further

processing of products such as propylene, polypropylene, soluble and inorganic, derived from crude oil, other

petroleum fuels, natural gas, renewable sources such as lettuce. Developing economies are heavily influenced

by petrochemicals such as plastic, since they are essential in our daily lives and the consumption of plastics is

expected to increase. Although this sector does not receive the necessary attention, the demand for

petrochemicals will increase (The Future of Petrochemicals – Analysis - IEA, 2020).

Therefore, the introduction of the company into new business activity, such as the production and sale of

petrochemicals, is a significant opportunity for a significant increase in its profits, as petrochemicals are the

major factor in global oil demand. Petrochemical demand is projected to increase petroleum demand by one

third by 2030 and half petrochemical demand for trucks, shipping and aviation. Today, competitor of Motor

Oil Hellas, Greek oil holds 50% of the Greek petrochemical market, explaining 70% of their products in Turkey,

Italy, the Balkans and the Iberian Period. Petrochemical products are used in these countries as raw material

for industrial activities (The Future of Petrochemicals – Analysis - IEA, 2020), (Elpe - Production & Trading of

Petrochemicals /Chemicals, 2020).

However, the rise of the US dollar could be considered as an opportunity, because it will have a positive

economic effect on the company's revenue, as the demand of products increasing from the strengthening of

the dollar , as happened in 2019 (2020).

Threats
Threats that are likely to affect the Group's operations and hence the future profitability of Motor Oil Hellas

include primarily financial risks, technological improvements and sudden health threats. In short, threats are:

the spread of covid-19, market risks, currency risks, interest rate risks, substitution of petroleum with gas or

other green energy forms and technological upgrading of internal combustion engines of vehicles turning them

into hybrid-electric vehicles and hydrogen-powered vehicles. Initially, the spread of coronavirus is expected to

significantly affect the global market as well as the business activity of the company. Due to the necessary

protection measures to eliminate the virus and to ensure the health of human capital, sales volume may be

reduced. However, the company cannot evaluate exactly the financial consequences of the virus, as no one

knows how long it will take the normalization of situation. At the same time, the international price of oil

traded in US dollars may be affected by the exchange rate fluctuations. Consequently, this pressures the

business profit margins. In addition, although the firm has managed to have favorable lending conditions from

domestic and international capital markets, the fluctuation of the interest rate variables can affect the company's

gross profit accordingly (2020).

The urgent need for reducing emissions due to the climate change crisis, has led engineers to experiment with

hydrogen-powered vehicles that run on oxygen fuel cells. Although it is in the early stages, research and

experiments are underway on how to make this patent practical, but also cost effective. Parallel, experiments

are also carried out on oil vegetable fuels. Ethanol, the key ingredient of corn which contains the E85 and oil

and fat based biodiesel has already begun to be used in public transport in several countries. In countries, where

a lot of sugar cane is produced, such as Brazil, it is quite efficient and cheaper. Also, the replacement of classic

vehicles with electrically powered vehicles will reduce the demand for petroleum fuels. Electric cars have

competitive advantages since operating and maintenance costs are much lower than conventional diesel or gas
cars. However, the electric car owner is expected to save $ 10,000 in five years on fuel costs. At the same time,

the government is promoting the purchase of electric vehicles by offering taxpayers tax credits and credits,

thereby reducing purchase and maintenance costs (Can Electric Cars Replace Gas Guzzlers?, 2020).
Work cited

Helpe.gr. 2020. Elpe - Refining, Supply & Trading. [online] Available at: <https://www.helpe.gr/en/the-

group/what-we-do/refining-supply-trading/> [Accessed 31 May 2020].

Helpe.gr. 2020. Elpe - Petrochemicals. [online] Available at: <https://www.helpe.gr/en/investor-relations/key-

data/our-businesses/petrochemicals/> [Accessed 31 May 2020].

International Comparative Legal Guides International Business Reports. 2020. Oil & Gas Regulation 2020 |

Greece | ICLG. [online] Available at: <https://iclg.com/practice-areas/oil-and-gas-laws-and-regulations/greece>

[Accessed 31 May 2020].

IEA. 2020. The Future Of Petrochemicals – Analysis - IEA. [online] Available at:

<https://www.iea.org/reports/the-future-of-petrochemicals> [Accessed 31 May 2020].

Investopedia. 2020. Can Electric Cars Replace Gas Guzzlers?. [online] Available at:

<https://www.investopedia.com/articles/personal-finance/051515/can-electric-cars-replace-gas-guzzlers.asp>

[Accessed 31 May 2020].

2020. [online] Available at: <https://www.mckinsey.com/industries/oil-and-gas/our-insights/the-future-is-now-

how-oil-and-gas-companies-can-decarbonize> [Accessed 31 May 2020].

Moh.gr. 2020. Motor Oil. [online] Available at: <https://www.moh.gr/Default.aspx?a_id=10538> [Accessed 31

May 2020].
Moh.gr. 2020. [online] Available at:

<https://www.moh.gr/media/PDF_inside_texts/Ethsies_Oikonomikes_Ektheseis/Full%20Year%20Financial

%20Reoprt%202019%20EN.pdf> [Accessed 31 May 2020].