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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
36. Related parties
36.1 Transactions with related entities in which the Group holds shares
| PLN ’000 | Year ended Dec 31 2014 |
Year ended Dec 31 2013 (restated) |
|---|---|---|
| Equity-accounted joint ventures | ||
| Sale | 456,244 | 20,103 |
| Purchases | 510 | 1,032 |
| Purchase of property, plant and equipment | 14 | - |
| Interest income | 2 | - |
| PLN ’000 | Note | Dec 31 2014 |
Dec 31 2013 (restated) |
Jan 1 2013 (restated) |
|---|---|---|---|---|
| Equity-accounted joint ventures | ||||
| Receivables | 18 | 23,318 | 16,670 | 5,014 |
| Liabilities | 30 | 208 | 215 | 276 |
In 2014 and 2013, the Group traded primarily with LOTOS-Air BP Polska Sp. z o.o. The transactions involved sale of aviation fuel. The aggregate value of these transactions executed in 2014 was PLN 455,578 thousand (2013: PLN 19,533 thousand). As at December 31st 2014, the balance of outstanding receivables under these transactions was PLN 23,291 thousand (December 31st 2013: PLN 16,321 thousand).
In addition, in 2013 LOTOS Petrobaltic S.A. (upstream segment), as the other limited partner in Baltic Gas spółka z ograniczoną odpowiedzialnością i wspólnicy sp.k., increased its equity interest in the partnership in exchange for contributions, including an in-kind contribution worth PLN 51,700 thousand in the form of non-current assets related to the B-4 and B-6 fields.
For general information on joint ventures in which the Group holds interests see Note 2, and for key information on equity-accounted joint ventures, see Note 16.
36.2 Entity having control of the Group
As at December 31st 2014 and December 31st 2013, the State Treasury held a 53.19% interest in Grupa LOTOS S.A. In 2013 and 2014, no transactions were concluded between Grupa LOTOS S.A. and the State Treasury.
36.2.1 Transactions with related entities of which the State Treasury has control, joint control or significant influence
In 2014, the Group executed transactions with parties related to it through the State Treasury. The aggregate value of the transactions was material. They were concluded at arm’s length in the course of the Group’s regular business activities and involved mainly sale of fuels, sale and purchase of storage services, purchase of transport services, energy, natural gas and other fuels.
| PLN ’000 | Year ended Dec 31 2014 |
Year ended Dec 31 2013 |
|---|---|---|
| Sale | 640,112 | 353,978 |
| Purchases | 1,447,552 | 1,649,885 |
| PLN ’000 | Dec 31 2014 | Dec 31 2013 |
|---|---|---|
| Receivables | 27,205 | 39,231 |
| Liabilities | 134,198 | 241,626 |
36.3 Remuneration of members of the Management and Supervisory Boards, along with information on loans and other similar benefits granted to members of the management and supervisory staff
The remuneration paid to members of the Company’s Management and Supervisory Boards was as follows:
| PLN ’000 | Year ended Dec 31 2014 |
Year ended Dec 31 2013 |
|---|---|---|
| Management Board | ||
| Short-term employee benefits (salaries), including: | 1,346 | 1,580 |
| - annual bonus paid | - | 249 (1) |
| - length-of-service awards (jubilee benefits) | 57 | 41 |
| Management Board - subsidiaries (2) | ||
| Short-term employee benefits (salaries and wages) | 3,646 | 3,562 |
| Supervisory Board | ||
| Short-term employee benefits (salaries and wages) | 228 | 246 |
| Total (3) | 5,220 | 5,388 |
(1) Remuneration paid in 2013 on account of annual bonus for 2012.
(2) Remuneration paid to members of the Company’s Management Board for serving in corporate bodies of direct and indirect subsidiaries.
(3) The amount reflects changes in the composition of the Company's Supervisory Board.
Other employee benefits
| PLN ’000 | Dec 31 2014 | Dec 31 2013 |
|---|---|---|
| Management Board | ||
| Post-employment benefits, length-of-service awards and other benefits | 631 | 522 |
| Current liabilities under annual bonus (1) | 156 | 311 |
| Total | 787 | 833 |
(1) Pursuant to the Act on Remunerating Persons Who Manage Certain Legal Entities (the Public Sector Salary Cap Act).
In 2014 and 2013, the Company did not grant any loans or similar benefits to members of its management and supervisory staff. No other material transactions were concluded with members of the Company’s Management and Supervisory Boards. Grupa LOTOS S.A. did not become aware of any transactions concluded with the Company or a company of the LOTOS Group by the spouses, relatives by blood or marriage in the direct line up to the second degree, of members of the Management and Supervisory Boards, or persons related to them through guardianship or adoption or other persons with whom they have personal relationships.
36.4 Remuneration paid or payable to other members of key management staff
Remuneration paid to members of key management staff (other than members of the Management Board of Grupa LOTOS S.A.)
| PLN ’000 | Year ended Dec 31 2014 |
Year ended Dec 31 2013 |
|---|---|---|
| Short-term employee benefits (salaries), including: | 26,918 | 30,187 |
| - annual bonus paid | 3,331 (1) | 5,606 (2) |
(1) Remuneration paid in 2014 on account of annual bonus for 2013.
(2) Remuneration paid in 2013 on account of annual bonus for 2012.
Other employee benefits
| PLN ’000 | Dec 31 2014 | Dec 31 2013 |
|---|---|---|
| Post-employment benefits, length-of-service awards and other benefits | 12,190 | 8,886 |
| Current liabilities under annual bonus | 3,875 | 7,163 |
| Loans and other similar benefits | 31 | 6 |
| Total | 16,096 | 16,055 |
In 2014, the Group granted loans to members of its key management staff for a total amount of PLN 30 thousand. In 2013, the Group did not provide any loans or similar benefits to members of its key management staff.
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)
