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Financial information
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.
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Segment performance
The segmental management model we have implemented enhances management efficiency, delivering cost and revenue synergies across the organization.
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Letter from the Vice-President of the Board
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.
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Business environment
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.
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Strategic objectives
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.
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Business model
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.
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Risk and opportunities
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.
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Key data 2014
With revenue of ca. PLN 28.5bn in 2014, we rank fourth in the group of 500 largest businesses in Poland.
← Statement Notes index
31. Financial instruments
31.1 Carrying amount
| Dec 31 2014 PLN ’000 |
Note | Categories of financial instruments | Total | |||
|---|---|---|---|---|---|---|
| Financial assets/liabilities at fair value through profit or loss – held for trading | Loans and receivables | Financial assets available for sale (1) | Financial liabilities at amortised cost | |||
| Classes of financial instruments | ||||||
| Financial assets | ||||||
| Derivative financial instruments | 28; 31.2 | 4,430 | - | - | - | 4,430 |
| Trade receivables | 18 | - | 1,406,501 | - | - | 1,406,501 |
| Cash and cash equivalents | 20 | - | 348,215 | - | - | 348,215 |
| Other financial assets | 18 | - | 1,322,281 | 9,752 | - | 1,332,033 |
| Total | 4,430 | 3,076,997 | 9,752 | - | 3,091,179 | |
| Financial liabilities | ||||||
| Borrowings, other debt instruments and finance lease liabilities | 27 | - | - | - | 6,663,668 | 6,663,668 |
| Derivative financial instruments | 28; 31.2 | 198,543 | - | - | - | 198,543 |
| Trade payables | 30 | - | - | - | 1,692,839 | 1,692,839 |
| Other financial liabilities | 30 | - | - | - | 196,844 | 196,844 |
| Total | 198,543 | - | - | 8,553,351 | 8,751,894 | |
| Dec 31 2013 (restated) PLN ’000 |
Note | Categories of financial instruments | Total | |||
|---|---|---|---|---|---|---|
| Financial assets/liabilities at fair value through profit or loss – held for trading | Loans and receivables | Financial assets available for sale (1) | Financial liabilities at amortised cost | |||
| Classes of financial instruments | ||||||
| Financial assets | ||||||
| Derivative financial instruments | 28; 31.2 | 73,935 | - | - | - | 73,935 |
| Trade receivables | 18 | - | 1,591,649 | - | - | 1,591,649 |
| Cash and cash equivalents | 20 | - | 495,839 | - | - | 495,839 |
| Other financial assets | 18 | - | 381,887 | 9,746 | - | 391,633 |
| Total | 73,935 | 2,469,375 | 9,746 | - | 2,553,056 | |
| Financial liabilities | ||||||
| Borrowings, other debt instruments and finance lease liabilities | 27 | - | - | - | 6,211,386 | 6,211,386 |
| Derivative financial instruments | 28; 31.2 | 74,153 | - | - | - | 74,153 |
| Trade payables | 30 | - | - | - | 2,395,237 | 2,395,237 |
| Other financial liabilities | 30 | - | - | - | 189,729 | 189,729 |
| Total | 74,153 | - | - | 8,796,352 | 8,870,505 | |
(1) As at December 31st 2014 and December 31st 2013, the Group held shares in other undertakings measured at historical cost less impairment.
As at December 31st 2014 and December 31st 2013, the fair value of financial assets and liabilities did not materially differ from their carrying amounts.
31.2 Fair value hierarchy
| PLN ’000 | Dec 31 2014 | Dec 31 2013 |
|---|---|---|
| Level 2 | ||
| Financial assets | ||
| Commodity swap | - | 736 |
| Currency forward and spot contracts | 536 | 34,924 |
| Currency swap | 3,894 | 38,275 |
| Total | 4,430 | 73,935 |
| Financial liabilities | ||
| Commodity swap | 29,337 | - |
| Currency forward and spot contracts | 56,365 | 1,017 |
| Interest rate swap (IRS) | 75,484 | 72,263 |
| Currency swap | 37,357 | 873 |
| Total | 198,543 | 74,153 |
31.3 Items of income, expenses, gains and losses disclosed in the statement of comprehensive income by category of financial instrument
| Year ended Dec 31 2014 PLN ’000 |
Note | Categories of financial instruments | Total | |||
|---|---|---|---|---|---|---|
| Financial assets/ liabilities at fair value through profit or loss – held for trading | Loans and receivables | Financial assets available for sale | Financial liabilities at amortised cost | |||
| Classes of financial instruments | ||||||
| Trade receivables: | - | 27,055 | - | - | 27,055 | |
| Interest income | 9.5 | - | 6,349 | - | - | 6,349 |
| Foreign exchange (gains)/losses recognised in cost of sales | 9.1 | - | 32,523 | - | - | 32,523 |
| Foreign exchange gains/(losses) | 9.6 | - | 1,261 | - | - | 1,261 |
| Impairment losses | 9.4 | - | (13,078) | - | - | (13,078) |
| Cash and cash equivalents: | - | 12,813 | - | - | 12,813 | |
| Interest income | 9.5 | - | 1,249 | - | - | 1,249 |
| Foreign exchange gains/(losses) | 9.6 | - | 11,564 | - | - | 11,564 |
| Other financial assets: | - | 214,615 | - | - | 214,615 | |
| Interest income | 9.5 | - | 9,526 | - | - | 9,526 |
| Foreign exchange gains/(losses) | 9.6 | - | 205,089 | - | - | 205,089 |
| Derivative financial instruments (financial assets/liabilities): | (197,849) | - | - | - | (197,849) | |
| Gains/(losses) on fair value measurement of derivative financial instruments | 9.6 | (191,271) | - | - | - | (191,271) |
| Gains/(losses) on realisation of derivative financial instruments | 9.6 | (6,578) | - | - | - | (6,578) |
| Borrowings, other debt instruments and finance lease liabilities | - | - | - | (1,276,431) | (1,276,431) | |
| Interest expense | 9.6 | - | - | - | (166,675) | (166,675) |
| Gains/(losses) on cash flow hedge accounting charged to revenue | 8 | - | - | - | (7,992) | (7,992) |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | (517,111) | (517,111) |
| Gains/(losses) on measurement of cash flow hedges recognised in other comprehensive income | 23 | - | - | - | (584,653) | (584,653) |
| Trade and other payables | - | - | - | (96,993) | (96,993) | |
| Interest expense | 9.6 | - | - | - | (87) | (87) |
| Foreign exchange (gains)/losses recognised in cost of sales | 9.1 | - | - | - | (97,633) | (97,633) |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | 727 | 727 |
| Other financial liabilities: | - | - | - | (4,916) | (4,916) | |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | (4,916) | (4,916) |
| Total | (197,849) | 254,483 | - | (1,378,340) | (1,321,706) | |
| Year ended Dec 31 2013 PLN ’000 |
Note | Categories of financial instruments | Total | |||
|---|---|---|---|---|---|---|
| Financial assets/ liabilities at fair value through profit or loss – held for trading | Loans and receivables | Financial assets available for sale | Financial liabilities at amortised cost | |||
| Classes of financial instruments | ||||||
| Trade receivables: | - | 1,111 | - | - | 1,111 | |
| Interest income | 9.5 | - | 5,995 | - | - | 5,995 |
| Foreign exchange (gains)/losses recognised in cost of sales | 9.1 | - | 766 | - | - | 766 |
| Foreign exchange gains/(losses) | 9.6 | - | 362 | - | - | 362 |
| Impairment losses | 9.4 | - | (6,012) | - | - | (6,012) |
| Cash and cash equivalents: | - | (2,252) | - | - | (2,252) | |
| Interest income | 9.5 | - | 1,264 | - | - | 1,264 |
| Foreign exchange gains/(losses) | 9.6 | - | (3,516) | - | - | (3,516) |
| Other financial assets: | - | (26,237) | - | - | (26,237) | |
| Interest income | 9.5 | - | 8,606 | - | - | 8,606 |
| Foreign exchange gains/(losses) | 9.6 | - | (34,843) | - | - | (34,843) |
| Derivative financial instruments (financial assets/liabilities): | 112,861 | - | - | - | 112,861 | |
| Gains/(losses) on fair value measurement of derivative financial instruments | 9.5 | 55,148 | - | - | - | 55,148 |
| Gains/(losses) on realisation of derivative financial instruments | 9.5 | 57,713 | - | - | - | 57,713 |
| Borrowings, other debt instruments and finance lease liabilities | - | - | - | (144,905) | (144,905) | |
| Interest expense | 9.6 | - | - | - | (169,004) | (169,004) |
| Gains/(losses) on cash flow hedge accounting charged to revenue | 8 | - | - | - | (12,452) | (12,452) |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | (84,214) | (84,214) |
| Gains/(losses) on measurement of cash flow hedges recognised in other comprehensive income | 23 | - | - | - | 120,765 | 120,765 |
| Trade and other payables: | - | - | - | 75,800 | 75,800 | |
| Interest expense | 9.6 | - | - | - | (53) | (53) |
| Foreign exchange (gains)/losses recognised in cost of sales | 9.1 | - | - | - | 75,928 | 75,928 |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | (75) | (75) |
| Other financial liabilities: | - | - | - | 6,672 | 6,672 | |
| Interest expense | 9.6 | - | - | - | (125) | (125) |
| Foreign exchange gains/(losses) | 9.6 | - | - | - | 6,797 | 6,797 |
| Total | 112,861 | (27,378) | - | (62,433) | 23,050 | |
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)
