In Q3 2012, LOTOS posted PLN 626m in net profit.  The Company’s revenue came in at over PLN 8.5bn, up by 13% year on year and 2% quarter on quarter.  At PLN 604m, operating profit was nearly seven times higher than the Q3 2011 result. Net profit for the first three quarters of 2012 was PLN 694.2m.

The financial performance turned in by LOTOS in Q3 2012 was driven by a further increase in the average model refining margin, which leveled out at USD 6.95/bbl in the period (+6.6% qoq and +197% yoy), higher prices of Brent Dated (1.1% qoq) as well as favourable crack margins on liquid fuels.  On the other hand, lower Brent/Ural differential (-67.8% qoq and -9.2% yoy) was a factor detracting from the Company’s performance.

- The reported results clearly show the positive effects of the 10+ Programme, which is now our major competitive advantage - stresses Paweł Olechnowicz, CEO of Grupa LOTOS S.A. - What deserves particular attention is the fact that LOTOS has been increasing both its sales and market shares despite the prevailing downtrend in the consumption of liquid fuels by Poles.  This attests to the superior quality of our products, the flexibility of our offering and the policy of treating customers as partners. 

Consolidation of Lithuanian assets, producing field in Norway 

In Q3 2012, production of crude oil from the Baltic Sea averaged 3,233 bbl/d. In the same period, the respective figure for Lithuanian fields stood at 1,579 bbl/d. LOTOS Petrobaltic was producing crude oil and natural gas from the B3 field. The drilling of new boreholes as part of the B8 field development project confirmed the viability of achieving the target oil recovery ratio.  At the end of September in Vilnius, LOTOS Geonafta signed an agreement whereby it purchased 50% of the shares in UAB Manifoldas. The transaction will be closed by the end of this year, provided that the Lithuanian anti-trust authority’s clearance is obtained.  The acquisition of the shares in Manifoldas represents another stepping stone toward further consolidation of the exploration and production assets in Lithuania.
In Norway, active steps are being taken to acquire an interest in a producing field, given the potential financial benefits arising from the possibility to realise the tax asset relating to impairment losses recognised on the Yme field.

High margins on diesel oil supported the EBIT figure

In Q3 2012, the Gdańsk refinery’s processing capacities were utilised at 98.7% (+6.5 p.p. qoq). Thanks to the versatility of units built as part of the 10+ Programme, the Company was able to process crude types other than Rozewie and Ural (Basrah Light, Troll and Arab Extra Light). Increased diesel oil yields (up 72.4 thousand tonnes on Q2 2012), accompanied by an increase in crack margin on diesel oil (up 20.5% qoq and 38.3% yoy), considerably strengthened the contribution of the higher crack margin to the Company’s operating performance.
The consumption of liquid fuels fell by 6.6% after the eight months of 2012 (relative to the end of August 2011), reflecting a downswing of Polish economy.  As at the end of August 2012, Polish demand for diesel oil shrank by 7.1% (yoy). Negative performance of the construction sector coupled with the growing cost base of the transport industry provided no stimulus for demand for diesel oil.  Despite all this, LOTOS managed to increase its share in the domestic fuel market to 34% (+0.7 p.p. yoy).

LOTOS as Poland’s fastest expanding network 

In Q3 2012, work was continued to expand and restructure the LOTOS retail network.  In the period under review, LOTOS maintained its lead on the Polish market in terms of new additions to its service station network (+13.6% yoy). The network expansion translated into higher retail margin.  Even as the Polish market saw the retail consumption of fuels dwindle (-6% yoy as at the end of August 2012), LOTOS recorded an improvement in both retail sales volumes (+5.3% qoq) and revenue from retail sales (+7.3% qoq and +10% yoy). At PLN 4m, the retail segment’s operating profit was up 48.1% quarter on quarter.  It was driven primarily by the higher sales volumes and improved retail margin on the domestic market.
As the consumption of liquid fuels in Poland continued to weaken, LOTOS’ share in the retail fuel market in terms of the volumes of gasoline and diesel oil sold at the end of August 2012 was 8% (vs. 7.6% yoy).

Information Office, Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. (+48) 58 308 87 31, (+48) 58 308 83 88, e-mail: media@grupalotos.pl