In Q1 2012, LOTOS earned a net profit of PLN 597m, which represents a seven-fold increase on Q4 2011. The Company’s operating profit was PLN 419m, up by 193% quarter on quarter.
General
In Q1 2012, LOTOS generated revenue of PLN 7,832.3m, down by 6.4% quarter on quarter and up by 20.2% year on year.
- In the first quarter of 2012, we made a full use of our potential. We increased the production of crude oil, while its prices stood high, and improved our share in the Polish fuel market - says Paweł Olechnowicz, President and CEO of Grupa LOTOS S.A. - Importantly, since the beginning of the second quarter, we have seen the macroeconomic environment having a positive effect on the Company’s financial performance.
After February 2012, the total share of LOTOS in the domestic fuel market was 35.1%, up by 1.6 pp. on the end of last year. Given the general decline in liquid fuel consumption in Poland (7% in January and February), that was a noteworthy achievement.
In Q1 2012, the macroeconomic environment was highly volatile. The factors with a material impact on the performance of LOTOS included a 10.6% appreciation of the US dollar over Q1 2011, which affected the value of the Company's debt, mostly denominated in the dollar.
The results of implementation of the Optimum Expansion Programme in Q1 2012 included PLN 57m of benefits from efficiency enhancement measures, PLN 25m of savings generated by curbing administrative, marketing and sponsorship costs, and PLN 60m of savings obtained by suspending implementation of some running investment projects, which represents a total of PLN 142m of savings – 65% of the Company’s plan for the whole year.
More oil, higher sales
The growing revenue of the upstream segment (up by PLN 160.5m year on year and by PLN 125m quarter on quarter) was mainly attributable to an increase in the Rozewie crude sales volumes following the launch of temporary production from the B8 field. Higher crude prices were also a contributing factor.
In Q1 2012, in the Baltic Sea, LOTOS Petrobaltic produced oil and gas from the B3 field and continued temporary production of crude from the B8 field. Throughout the anticipated period of production from the B8 field, i.e. Q4 2011 – Q2 2012, the company expects to extract about 48 thousand tonnes of crude.
In Q1 2012, LOTOS Geonafta produced crude oil from the Girkaliai, Kretinga, Nausodis and Genciu on-shore fields in Lithuania, while UAB Manifoldas conducted production from the Liziai and Veziaciai fields.
LOTOS benefits from the demand for gasoline
The 20.0% rise in the downstream segment’s revenue in Q1 2012 relative to Q1 2011 was mostly attributable to growing prices of crude oil and petroleum products on the global markets, appreciation of the US dollar and optimised sales structure. In the discussed period, the average price for Brent crude (Dated Brent) was 118.60 USD/bbl, up by 13.17 USD/bbl (or 12.5%) on Q1 2011. Compared with the previous quarter, revenue fell mainly as a result of the 9.7% decline of the segment's sales volume. Factors having a negative effect on the downstream segment’s operating result in Q1 2012 included chiefly lower Brent/Urals differential (y/y), lower margin on sales of products other than fuels and bitumens, and higher cost of own consumption in connection with higher prices of crude oil.
With two independent crude distillation lines at the Gdańsk refinery, Grupa LOTOS now enjoys greater flexibility in selecting crude blends to adequately respond to market conditions (depending on the margins that can be generated on the individual petroleum products). In Q1 2012, the share of Rozewie light crude produced by LOTOS Petrobaltic rose by 10.3% on Q1 2011 and by 27.4% on Q4 2011. The share of light Aasgard crude with gasoline potential also remained high. Such processing structure enabled LOTOS to benefit from high crack margins on gasolines in Q1 2012, which had a positive effect on the Company’s financial performance.
In Q1 2012, the effects of solvent deasphalting unit (ROSE) coming on stream became fully visible. This unit enabled LOTOS to reenter some of the heavy residue for further processing into fuels, and consequently to limit the output and sales of low-margin heavy fuel oil.
LOTOS increases its share in retail market
After first two months of 2012, the share of LOTOS in the Polish retail fuels market (in terms of total fuel sales volumes) was 8.2% (7.5% in the corresponding period of 2011). The Company’s share in the retail diesel oil market at the end of February 2012 was 10%. According to the strategy until 2015, LOTOS intends to achieve at least a 10% share in Poland's retail fuel market.
The larger market share and a 3.1% increase in retail sales volumes in Q1 2012 relative to Q1 2011 were attributable to the launch of LOTOS OPTIMA, a new brand of economy service stations on the Polish market.
Marcin Zachowicz, spokesperson for Grupa LOTOS S.A., ul. Elbląska 135, 80-718 Gdańsk, Poland, tel. +48 58 308 75 70, +48 505 050 454, e-mail: marcin.zachowicz@grupalotos.pl
