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.
18. Trade receivables and other assets
18. Trade receivables and other assets
|PLN ’000||Note||Dec 31 2014
||Dec 31 2013
|Jan 1 2013
|Non-current financial assets|
|Other financial assets:||31.1||71,102||194,002||86,435|
|Security deposits receivable||20,631||23,089||28,555|
|Finance lease receivables||18.2||9,111||8,061||6,180|
|Oil and Gas Extraction Facility Decommissioning Fund (1)||32.4.1||30,911||29,866||27,481|
|Security deposits (margins)||32.4.1||-||11,029||11,163|
|Cash blocked in bank accounts||32.3.1; 32.4.1||-||110,379||-|
|Current financial assets|
|- including from related entities||36.1||23,318||16,670||5,014|
|Other financial assets:||31.1||1,260,931||197,631||172,787|
|Security deposits receivable||10,085||23,089||10,483|
|Cash blocked in bank accounts||32.3.1; 32.4.1||179,377||103,559||18,320|
|Adjustment to the pro and contra settlement of acquisition of Heimdal assets||6.1||-||12,323||-|
|Settlements under joint operations (Norwegian fields) (2)||26,100||-||-|
|Security deposits (margins) related to the use of gas fuel distribution and transmission system||7,342||-||-|
|Restricted cash - issue of shares||996,939||-||-|
|Total financial assets||2,738,534||1,983,282||1,884,937|
|Non-current non-financial assets|
|Prepayments for lease of railway locomotives||-||6,663||8,990|
|Fees and commissions related to B8 project financing||23,839||-||-|
|Current non-financial assets|
|Value-added tax receivable||71,262||51,895||165,152|
|Other receivables from the state budget other than income tax||178||632||2,114|
|Property and other insurance||16,729||4,522||5,704|
|Prepayments for lease of railway locomotives||2,336||2,336||2,336|
|Settlements under joint operations (Norwegian fields) (2)||357||27,158||41,756|
|Excise duty on inter-warehouse transfers||36,661||27,237||29,678|
|Total non-financial assets||194,289||156,419||282,410|
|- trade payables||1,406,501||1,591,649||1,625,715|
(1) Cash deposited in the bank account of the Oil and Gas Extraction Facility Decommissioning Fund (created pursuant to the Geological and Mining Law of February 4th 1994 and the Minister of Economy’s Regulation of June 24th 2002) to cover future costs of decommissioning of oil extraction facilities (see Decommissioning Fund for the Oil and Gas Extraction Facility in the Baltic Sea in Note 30.1).
(2) Receivables of LOTOS Exploration and Production Norge AS (LOTOS Petrobaltic Group, the upstream segment) under mutual settlements between the operator and consortium members concerning specific Norwegian fields. Information on the Group's interests and status in joint operations in Norway is presented in Note 13 to the consolidated financial statements for 2013 (see ‘Acquisition of interests in Norwegian production and exploration licences − Heimdal’).
As at December 31st 2014 and December 31st 2013, the item Deposits included the Parent’s deposits securing payments of interest under credit facilities contracted for the financing of projects executed under the 10+ Programme, as well as for financing and refinancing of inventories, referred to in Note 27.1.
As at December 31st 2014, Restricted cash - issue of shares comprised cash proceeds from the issue of Series D shares in Grupa LOTOS S.A., deposited in a separate bank account of the Polish National Depository for Securities (see Note 21) until the day of registration of the share capital increase (see Note 37). The objectives of the issue of Series D shares, outlined in the Prospectus published on November 13th 2014, included the construction of a delayed coking unit (EFRA Project) and development of the B-4 and B-6 gas fields.
As at December 31st 2014, Cash blocked in bank accounts comprised cash held in an escrow account associated with the agreement concluded between the parties involved in the YME Project in Norway (for more details on the agreement, see Note 35.1, see also Note 30.1 and Note 13). As at December 31st 2014, the blocked cash totalled PLN 179,377 thousand (December 31st 2013: PLN 213,938 thousand).
As at December 31st 2013, Investment receivables included mainly receivables of LOTOS Exploration and Production Norge AS under the sale of a drilling rig and receivables of LOTOS Asfalt Sp. z o.o. under the sale of assets related to the Waterproofing Materials Production Plant in Jasło. The receivables of Lotos Asfalt Sp. z o.o. were collected in 2014. Cash proceeds of the transaction were disclosed in the statement of cash flows from investing activities under Sale of organised part of business.
The collection period for trade receivables in the ordinary course of business is 7−35 days.
As at December 31st 2014, the Group’s receivables of PLN 31,676 thousand (December 31st 2013: PLN 3,156 thousand) were assigned by way of security for the Group’s liabilities.
For currency risk sensitivity analysis of financial assets, see Note 32.3.1.
For interest rate risk sensitivity analysis of financial assets, see Note 32.4.1.
The maximum credit risk exposure of financial assets is presented in Note 32.6.
|PLN ’000||Year ended
Dec 31 2014
Dec 31 2013
|At beginning the period||175,293||177,152|
|Exchange differences on translating foreign operations||12||34|
|Deconsolidation (LOTOS Tank Sp. z o.o.) (1)||-||(735)|
|At end of the period||177,694||175,293|
(1) In November 2013, the Group sold 50% of shares in LOTOS-Air BP Polska Sp. z o.o. (formerly LOTOS Tank
Sp. z o.o.) to a third party.
(2) Additional amounts awarded in court proceedings.
The amounts resulting from recognition or reversal of impairment losses on receivables are presented under other income or expenses (the principal portion) and under finance income or costs (the default interest portion). In the statement of comprehensive income, recognised and reversed impairment losses on receivables are presented on a net basis under: Other income/expenses (in accordance with the adopted accounting policy the Group offsets corresponding items of Other income and Other expenses in line with Section 34 and 35 of IAS 1 Presentation of Financial Statements).
Recognised impairment losses included PLN 15,928 thousand under the principal (2013: PLN 9,584 thousand) and PLN 2,149 thousand under interest (2013: PLN 2,371 thousand).
Reversed impairment losses include PLN 2,850 thousand on the principal portion (2013: PLN 1,279 thousand) and PLN 1,754 thousand on the interest portion (2013: PLN 862 thousand).
In 2014, the Group disclosed the recognised and reversed impairment losses on the principal under Other expenses in the amount of PLN 13,078 thousand, including: PLN 15,928 thousand under recognised impairment losses, and PLN 2,850 thousand under impairment loss reversal (see Note 9.4).
In 2013, the Group disclosed the recognised and reversed impairment losses on the principal under Other expenses in the amount of PLN 6,012 thousand, including: PLN 7,291 thousand under recognised impairment losses, and PLN 1,279 thousand under impairment loss reversal (see Note 9.4).
Moreover, in 2013 the Group offset the impairment losses for the principal of PLN 2,293 thousand against corresponding Other income items.
The table below presents aging of past due receivables for which no impairment losses were recognised:
|PLN ’000||Dec 31 2014||Dec 31 2013|
|Up to 1 month||41,973||47,503|
|From 1 to 3 months||5,752||8,051|
|From 3 to 6 months||956||5,694|
|From 6 months to 1 year||385||4,948|
|Over 1 year||24||6,341|
No impairment losses were recognised on past due receivables because they are secured against credit risk with a mortgage, pledge, insurance policy, bank guarantee or surety.
As at December 31st 2014 and December 31st 2013, the share of trade receivables from the Group’s five largest customers as at the end of the reporting period was approximately 25% and 27%, respectively, of total trade receivables (individually: 2%–12%). In the Group’s opinion, with the exception of receivables from the above-mentioned customers, there is no material concentration of credit risk. The Group’s maximum exposure to credit risk as at the end of the reporting period is best represented by the carrying amounts of those instruments.
The Group has developed and operates the “LOTOS Family” Franchise Programme, which defines the procedures for managing service stations. The Group has entered into franchise agreements with entities operating service stations at their own risk and for their own account (Partners). Receivables under franchise agreements represent mainly expenditure on the design of DOFO service stations operated by dealers under agreements executed for periods from 5 to 10 years.
|PLN ’000||Minimum lease payments||Present value of minimum
|Dec 31 2014||Dec 31 2013||Dec 31 2014||Dec 31 2013|
|Up to 1 year (1)||4,429||3,437||4,394||3,406|
|From 1 to 5 years||8,951||7,604||8,881||7,534|
|Over 5 years||232||532||230||527|
|Less unrealised finance income||(107)||(106)||-||-|
|Present value of minimum lease payments||13,505||11,467||13,505||11,467|
(1) Present value of minimum lease payments is disclosed under Trade receivables.
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