The Management Board of Grupa LOTOS S.A. hereby reports that Current Report No. 29/2006 of April 28th 2006 contained an incorrect measurement unit for the presentation of the consolidated net profit of the LOTOS Group for 2005 (along with the comparable data for 2004) taking into account the estimated impact of using the LIFO method for inventory valuation. The corrected report reads as follows: The Management Board of Grupa LOTOS S.A. (“Grupa LOTOS”, “the Company”) hereby publishes information on the impact of the LIFO inventory valuation on the consolidated net results of the LOTOS Group in 2005. In line with its inventory valuation policies, the LOTOS Group (“the Group”) uses the weighted average of the acquisition cost to measure decrease in inventories. This method of stock valuation delays the effects of changes in oil prices on the prices of finished products. Thus, an increase in oil prices on the global market has a positive impact on the financial performance of the Group, while a decrease drives such performance down. The consolidated net profit of the LOTOS Group for 2005 (along with the comparable data for 2004), which takes into account the estimated impact of using the LIFO method for inventory valuation, is as follows: - 2005: PLN 739m - 2004: PLN 486m. Some of the assumptions made in calculating the 2005 net profit of the LOTOS Group (along with the comparable data for 2004), which takes into account the estimated impact of using the LIFO method for inventory valuation, were as follows: a. Comparison of the effects of differences between the valuation methods will start as of January 1st 2001; it was agreed that on that day the value of inventories was the same under the currently-used method and the LIFO method. b. The estimations take account of the inventories of oil, as well as of semi-finished and finished petroleum products – the calculations were made for groups of similar inventory items. c. Increases in quantity (difference in balance between the end of period and beginning of a given period) are measured at unit cost of the earliest period of a given year. d. Decreases in quantity are valued at unit cost of the last determined LIFO layer. e. The analysis takes into account the need, if any, to make valuation allowances on inventories under LIFO in compliance with the prudence principle f. Estimation of the impact of using the LIFO method for inventory valuation takes into account the temporary difference attributable to deferred tax. Legal basis: Par. 56.1.1 of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, dated July 29th 2005.
Correction of Current Report No. 29/2006 Concerning the Impact of the LIFO Inventory Valuation on the 2005 Consolidated Results of the LOTOS Group
Report no. 96/20052006-05-04