The past year ushered in a series of challenges for the companies in the fuel sector. The decisions made by us have demonstrated that we are able to take rapid steps to adapt to a demanding environment and ensure the desired profitability for our projects.
The segmental management model we have implemented enhances management efficiency, delivering cost and revenue synergies across the organization.
2014 ushered in a series of challenges for the companies in the fuel sector. The decisions made by the LOTOS Group have demonstrated that we are able to take rapid steps to adapt to a demanding environment and ensure the desired profitability for our projects.
The key factor that had a strong impact on both the global and Polish petroleum markets in 2014, with significant consequences for the LOTOS Group’s performance, was the price of crude oil, which also determined the price of petroleum products.
The LOTOS Group’s Strategy is designed to strengthen our position as a strong, innovative and efficient business which plays a major role in ensuring national energy security.
Our operations consist in crude oil production and processing, as well as wholesale and retail sale of petroleum products, among which are: fuels (unleaded gasoline, diesel oil and light fuel oil), heavy fuel oil, bitumens, aviation fuel, naphtha, propane-butane LPG and base oils.
At the LOTOS Group, we identify a range of diverse risks, which may affect all areas of our business. The key risks in terms of their impact on our operations are the financial risks as well as risks affecting the exploration and production area. In the analysis of the risks, we also factor in issues related to sustainable development.
With revenue of ca. PLN 28.5bn in 2014, we rank fourth in the group of 500 largest businesses in Poland.
10. Income tax
|PLN '000||Note||Year ended
Dec 31 2014
Dec 31 2013
|Total income tax charged to net profit or loss||10.2||(657,343)||(98,104)|
|Tax expense recognised in other comprehensive income (net), including:||(112,756)||22,909|
|- cash flow hedging||23||(111,099)||22,945|
|- actuarial gain/(loss) relating to post-employment benefits||(1,657)||(36)|
For the entities operating in Poland, the current and deferred portion of income tax was calculated at the rate of 19% of taxable income..
In the case of Norwegian subsidiary LOTOS Exploration and Production Norge AS, the marginal tax rate is 78% of the tax base. LOTOS Exploration and Production Norge AS’s activities are subject to taxation under two parallel tax systems: the corporate income tax system (27% tax rate) and the petroleum tax system (additional tax rate of 51%).
In the case of Lithuanian subsidiaries (AB LOTOS Geonafta Group), the current and deferred portion of income tax was calculated at the rate of 15%.
10.2 Corporate income tax calculated at effective tax rate and reconciliation of pre-tax profit to taxable income
|PLN '000||Dec 31 2014
Dec 31 2013
|Income tax at 19%||(403,506)||(11,148)|
|Unrecognised deferred tax asset under tax loss carry-forward||60,145||-|
|Tax effect of tax losses incurred in the period||-||1,418|
|Tax effect of tax losses deducted in the period||(1,416)||(395)|
|Tax effect of share in profit of equity-accounted entities||4,648||3,445|
|Tax effect of the bio-component tax credit (1)||-||(10,935)|
|Adjustments disclosed in current year related to tax for previous years||454||178|
|Difference resulting from the application of tax rates other than 19%:||(322,100)||(86,528)|
|- Netherlands Antilles||1||(1)|
|Income tax expense||(657,343)||(98,104)|
(1) The Group used higher tax credit than was expected based on the preliminary estimates which served as the basis for recognition of the relevant deferred tax assets. Therefore, as at December 31st 2013, the deferred tax assets related to bio-component tax credit were recognised on the basis of the full amount of tax credit left to be used in the coming years. In 2014, the Group used the full available tax credit amount and reversed the related deferred tax asset. For more information on the basis and rules for the use of bio-component tax credit, see Note 30.2.
|PLN '000||Note||Statement of financial position||Change|
|Dec 31 2014
||Dec 31 2013
|Deferred tax assets||1,488,901||924,534||564,367|
|Deferred tax liabilities||(55,527)||(275,823)||220,296|
|Net deferred tax assets/(liabilities)||10.3.1||1,433,374||648,711||784,663|
|Exchange differences on translating deferred tax of foreign operations||65,745|
|Deferred tax disclosed under other comprehensive income/(loss), net||10.1||(112,756)|
|- uplift (1)||(6.337)|
|- reclassification to non-current assets held for sale (or disposal groups)||1,727|
|Deferred tax expense recognised in net profit or loss||10.1||726,720|
(1) Tax credit applicable in Norway (uplift). The determined uplift rate is 5.5% pa. The uplift is calculated based on the capitalised investment expenditure (offshore production installation) and is settled against taxable income over a period of four years from the year the expenditure was incurred. Any uplift unused in a given period may be settled in the future until fully used, with no time limit. The amount of LOTOS Production and Exploration Norge AS's unused uplift increased the deferred tax asset under the Group's tax losses carried forward, and had no effect on tax disclosed in the consolidated statement of comprehensive income.
|PLN '000||Note||Dec 31 2013
|Deferred tax charged to net profit or loss||Deferred tax disclosed under other comprehensive income/(loss)||Exchange differences on translating deferred tax of foreign operations||Other differences||Dec 31 2014|
|Deferred tax assets|
|Employee benefit obligations||49,561||3,038||1,657||(232)||(1,724)||52,300|
|Impairment losses on property, plant and equipment and other intangible assets||115,837||17,213||-||(7,901)||-||125,149|
|Impairment losses on assets related to the YME field||714,882||(714,882) (1)||-||-||-||-|
|Negative fair value of derivative financial instruments||13,734||6,182||-||-||-||19,916|
|Exchange differences on revaluation of foreign-currency denominated items||6,446||(6,292)||-||226||-||380|
|Impairment losses on receivables||16,200||1,225||-||-||-||17,425|
|Finance lease liabilities||28,068||(3,735)||-||-||-||24,333|
|Provisions for decommissioning of oil and gas facilities and land reclamation||187,827||100,157||-||(12,426)||-||275,558|
|Unrealised margin assets||8,545||619||-||-||-||9,164|
|Tax losses carried forward||1,089,325||947,917 (1)||-||(74,829)||12,656||1,975,069|
|Bio-component tax credit||4,463||(4,463)||-||-||-||-|
|Cash flow hedge accounting||-||-||96,787||-||-||96,787|
|Deferred tax liabilities|
|Difference between the current tax value and carrying amount of property, plant and equipment and other intangible assets||1,493,672||(273,812)||-||(30,900)||-||1,188,960|
|Positive fair value of derivative financial instruments||140||(140)||-||-||-||-|
|Tax liabilities associated with the acquired exploration and production licences in Lithuania||49,522||(20,905)||-||1,010||-||29,627|
|Cash flow hedge accounting||14,312||-||(14,312)||-||-||-|
|Net deferred tax assets/(liabilities)||10.3||648,711||726,720||112,756||(65,745)||10,932||1,433,374|
(1) In connection with the recognition in 2014 of impairment losses on all capital expenditure on the YME development project (see Note 13.1.2) and in relation to cease of tax depreciation of those assets in accordance with Norwegian tax regulations all deferred tax assets related to the impairment losses on capital expenditure on the YME project were transferred to tax losses carried forward.
Taxable temporary differences are expected to expire in 2015–2083.
As at December 31st 2014, the amount of unrecognised deferred tax assets under losses carried forward was PLN 63,025 thousand (December 31st 2013: PLN 6,452 thousand).
The Notes to the consolidated financial statements are an integral part of the statements.
(This is a translation of a document originally issued in Polish)
- Financial highlights - consolidated the LOTOS Group
- Consolidated Financial Statements for 2014
- Auditor’s opinion
- Auditor’s report
- Management's discussion and analysis
- Interactive LOTOS Databook