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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
6. Change of information presented in previous reporting periods and change of accounting policies
In order to ensure transparency and comparability with the earlier financial data as at and for the period ended December 31st 2013 and as at January 1st 2013, a detailed list of all the necessary restatements of individual items of the financial statements is presented in the table in Note 6.4 below. Explanation of the reasons for these restatements is provided in Notes 6.1, 6.2 and 6.3.
6.1 Change of data following final accounting for the acquisition of interests in Norwegian production and exploration licences − Heimdal
On October 18th 2013, LOTOS Exploration and Production Norge AS (“LOTOS E&P Norge AS”), a LOTOS Petrobaltic Group company, entered into an agreement with Centrica Resources (Norge) AS and Centrica Norway Limited, subsidiaries of Centrica Plc. of the UK, to acquire the Heimdal assets on the Norwegian Continental Shelf.
On December 30th 2013, all conditions precedent to the agreement were fulfilled and all material risks and rewards related to the ownership of the acquired Heimdal assets were transferred to LOTOS E&P Norge AS (see Note 13 to the consolidated financial statements for 2013).
In accordance with the agreement, as at March 31st 2014 the parties finally settled the transaction (within three months of the acquisition date). The transaction had no impact on the consolidated profit or loss. The effect of the final accounting was applied retrospectively; accordingly, in these consolidated financial statements, the comparative data as at December 31st 2013 was adjusted. The finally determined amounts and their effect on the data as at December 31st 2013, are presented below.
| Initial accounting as at Dec 31 2013 | Final accounting as at Mar 31 2014 | Effect of final accounting for the acquisition recognised as adjustment in the statement of financial position as at Dec 31 2013 | ||||
|---|---|---|---|---|---|---|
| Reporting item | NOKm | PLNm | NOKm | PLNm | NOKm | PLNm |
| I. Property, plant and equipment | 634.2 | 314.1 | 628.2 | 311.1 | (6.0) | (3.0) |
| II. Intangible assets | 303.6 | 150.4 | 303.6 | 150.4 | - | - |
| Value of acquired Heimdal assets after pro and contra settlement, taking into account capitalised transaction costs and estimated future conditional payments (I + II)" | 937.8 | 464.5 | 931.8 | 461.5 | (6.0) | (3.0) |
| III. Decommissioning asset | 496.0 | 245.7 | 496.0 | 245.7 | - | - |
| Total (I + II + III) | 1,433.8 | 710.2 | 1,427.8 | 707.2 | (6.0) | (3.0) |
| Settlement of acquisition price (A + B): | 910.5 | 450.9 | 904.5 | 447.9 | (6.0) | (3.0) |
| A. Price paid after pro and contra settlement (USD 175.8m - USD 77m) | 631.6 | 312.8 | 606.8 | 300.5 | (24.8) | (12.3) |
| B. Tax resulting from pro and contra settlement, on cash flows generated in the transitional period (amount paid by Centrica to the Norwegian tax authorities, settled against deferred tax asset of LOTOS E&P Norge AS) | 278.9 | 138.1 | 297.7 | 147.4 | 18.8 | 9.3 |
| Capitalised transaction costs (C + D): | 27.3 | 13.6 | 27.3 | 13.6 | - | - |
| C. Amount of conditional future payments as per agreement | 10.2 | 5.1 | 10.2 | 5.1 | - | - |
| D. Capitalised transaction costs | 17.1 | 8.5 | 17.1 | 8.5 | - | - |
| E. Decommissioning provision | 496.0 | 245.7 | 496.0 | 245.7 | - | - |
| Total (A+B+C+D+E) | 1,433.8 | 710.2 | 1,427.8 | 707.2 | (6.0) | (3.0) |
6.2 The change of data following discontinuation of the proportionate consolidation and application of the equity method to account for the Group’s interest in joint venture UAB Minijos Nafta as at December 31st 2013.
Among the new IFRSs effective as of January 1st, the one that had a material impact resulting in a change of the Group’s accounting policies is IFRS 11 Joint Arrangements (see Note 3).
To ensure comparability of data presented in the consolidated financial statements for 2014, in accordance with IFRS 11 applied in the preparation of these financial statements, the interest held by the Group as at December 31st 2013 in UAB Minijos Nafta, a joint venture within the meaning of IFRS 11, was accounted for using the equity method, and the comparative data was appropriately restated.
In the approved financial statements as at December 31st 2013, UAB Minijos Nafta was consolidated using the proportionate method under IAS 31 Interests in Joint Ventures, which was applied in the past.
Under the proportionate method, all assets, liabilities, income and expenses of a jointly controlled entity were combined, line by line, with similar items in the financial statements in accordance with the Group’s share of the net assets of the company. However, given that proportionate consolidation can no longer be applied under IFRS 11, the Group made appropriate changes in this respect.
Under the equity method applied in preparing these financial statements, investments in joint ventures within the meaning of IFRS 11 are recognised in the statement of financial position at cost, adjusted for subsequent changes in the Group’s share of the net assets of such entities, less impairment losses, if any. The statement of comprehensive income reflects the share in the results of operations of such entities, and if a change is recognised directly in their equity, the Group recognises its share in each change and, if applicable, discloses it in the statement of changes in equity (see Accounting Policies, Note 7.11).
The change of the accounting method applied to UAB Minijos Nafta in the consolidated statement of financial position resulted in a decrease in total assets as at December 31st 2013 by PLN 14,863 thousand compared with the previously released data (January 1st 2013: PLN 22,557 thousand). Compared with the previously released data, the Group’s revenue for 2013 was down by PLN 38,177 thousand. In consequence, the Group’s operating profit for 2013 increased by PLN 20,106 thousand against the previously released data.
The change of the accounting method, however, had no effect on the Group’s equity or net profit for 2013. As at December 31st 2013, the Group’s share of the net assets of UAB Minijos Nafta and their changes in the amount of PLN 63,576 thousand was recognised in the statement of financial position under Equity-accounted joint ventures (January 1st 2013: PLN 85,214 thousand). The Group’s share in UAB Minijos Nafta’s net loss for 2013 in the amount of PLN 17,123 thousand was recognised in the statement of comprehensive income under Share in net profit/loss of equity-accounted joint ventures.
6.3 Other material changes
Due to the final settlement in 2014 of the corporate income tax (CIT) for 2013 at LOTOS Exploration and Production Norge AS (LOTOS Petrobaltic Group), the Group recognised income tax receivables as at December 31st 2013, which resulted in reclassification of relevant data as at December 31st 2013. Data was restated for Deferred tax assets, which decreased by PLN 46,424 thousand and Current tax assets, which increased by the same amount.
6.4 List of all restatements of previously published financial data as at and for the period ended December 31st 2013 and as at January 1st 2013
Consolidated statement of financial position as at December 31st 2013
| PLN ’000 | Dec 31 2013* (audited) |
Dec 31 2013 (restated) |
Effect of change, including: |
Effect of change of the consolidation method applied for UAB Minijos Nafta | Effect of final accounting for the acquisition of Heimdal assets | Effect of other changes |
|---|---|---|---|---|---|---|
| Non-current assets, including: | 12,038,771 | 11,979,871 | (58,900) | (153) | (12,323) | (46,424) |
| Property, plant and equipment | 10,048,374 | 10,009,073 | (39,301) | (36,298) | (3,003) | - |
| Other intangible assets | 686,222 | 658,797 | (27,425) | (27,431) | 6 | - |
| Equity-accounted joint ventures | 66,222 | 129,798 | 63,576 | 63,576 | - | - |
| Deferred tax assets | 980,284 | 924,534 | (55,750) | - | (9,326) | (46,424) |
| Current assets, including: | 8,260,052 | 8,304,089 | 44,037 | (14,710) | 12,323 | 46,424 |
| Inventories | 5,731,851 | 5,728,884 | (2,967) | (2,967) | - | - |
| Trade receivables | 1,594,746 | 1,591,649 | (3,097) | (3,097) | - | - |
| Current tax assets | 30,755 | 76,711 | 45,956 | (468) | - | 46,424 |
| Other current assets | 325,079 | 337,071 | 11,992 | (331) | 12,323 | - |
| Cash and cash equivalents | 503,686 | 495,839 | (7,847) | (7,847) | - | - |
| Assets held for sale | 794 | 794 | - | - | - | - |
| Total assets | 20,299,617 | 20,284,754 | (14,863) | (14,863) | - | - |
| Equity | 9,189,596 | 9,189,596 | - | - | - | - |
| Non-current liabilities, including: | 5,693,643 | 5,682,002 | (11,641) | (11,641) | - | - |
| Deferred tax liability | 281,307 | 275,823 | (5,484) | (5,484) | - | - |
| Other liabilities and provisions | 711,845 | 705,688 | (6,157) | (6,157) | - | - |
| Current liabilities, including: | 5,416,378 | 5,413,156 | (3,222) | (3,222) | - | - |
| Trade payables | 2,396,086 | 2,395,237 | (849) | (849) | - | - |
| Employee benefit obligations | 105,057 | 103,973 | (1,084) | (1,084) | - | - |
| Other liabilities and provisions | 1,169,939 | 1,168,650 | (1,289) | (1,289) | - | - |
| Total liabilities | 11,110,021 | 11,095,158 | (14,863) | (14,863) | - | - |
| Total equity and liabilities | 20,299,617 | 20,284,754 | (14,863) | (14,863) | - | - |
* (Audited) data as at December 31st 2013 is derived from the audited consolidated financial statements for the year ended December 31st 2013, released March 5th 2014.
Consolidated statement of financial position as at January 1st 2013
| PLN '000 | Jan 1 2013* (audited) |
Jan 1 2013 (restated) |
Effect of the change of the consolidation method applied for UAB Minijos Nafta |
|---|---|---|---|
| Non-current assets, including: | 11,509,743 | 11,501,434 | (8,309) |
| Property, plant and equipment | 9,685,850 | 9,644,600 | (41,250) |
| Other intangible assets | 548,659 | 496,386 | (52,273) |
| Equity-accounted joint ventures | - | 85,214 | 85,214 |
| Current assets, including: | 8,515,394 | 8,501,146 | (14,248) |
| Inventories | 5,966,203 | 5,963,027 | (3,176) |
| Trade receivables | 1,632,837 | 1,625,715 | (7,122) |
| Current tax assets | 90,566 | 90,566 | - |
| Other current assets | 436,121 | 434,400 | (1,721) |
| Cash and cash equivalents | 268,333 | 266,104 | (2,229) |
| Assets held for sale | 2,428 | 2,428 | - |
| Total assets | 20,027,565 | 20,005,008 | (22,557) |
| Equity | 9,066,424 | 9,066,424 | - |
| Non-current liabilities, including: | 5,415,418 | 5,399,688 | (15,730) |
| Deferred tax liability | 322,873 | 313,716 | (9,157) |
| Other liabilities and provisions | 412,260 | 405,687 | (6,573) |
| Current liabilities, including: | 5,545,723 | 5,538,896 | (6,827) |
| Trade payables | 2,174,451 | 2,169,408 | (5,043) |
| Employee benefit obligations | 110,930 | 109,971 | (959) |
| Other liabilities and provisions | 1,068,988 | 1,068,163 | (825) |
| Total liabilities | 10,961,141 | 10,938,584 | (22,557) |
| Total equity and liabilities | 20,027,565 | 20,005,008 | (22,557) |
* (Audited) data as at January 1st 2013 is derived from the audited consolidated financial statements for the year ended December 31st 2013, released March 5th 2014.
Consolidated statement of comprehensive income for the year ended December 31st 2013
| PLN ’000 | year ended Dec 31 2013* (audited) |
year ended Dec 31 2013 (restated) |
Effect of change, including: |
Effect of the change of the consolidation method applied for UAB Minijos Nafta | Effect of other changes |
|---|---|---|---|---|---|
| Revenue | 28,597,342 | 28,559,165 | (38,177) | (38,177) | - |
| Cost of sales | (26,913,268) | (26,878,863) | 34,405 | 34,405 | - |
| Gross profit | 1,684,074 | 1,680,302 | (3,772) | (3,772) | - |
| Distribution costs | (1,106,746) | (1,106,186) | 560 | 560 | - |
| Administrative expenses | (433,984) | (429,177) | 4,807 | 4,807 | - |
| Other income | 30,337 | 30,869 | 532 | (19) | 551 |
| Other expenses | (40,659) | (22,680) | 17,979 | 18,530 | (551) |
| Loss of control of subsidiary | 13,472 | 13,472 | - | - | - |
| Operating profit | 146,494 | 166,600 | 20,106 | 20,106 | - |
| Finance income | 135,162 | 135,159 | (3) | (3) | - |
| Finance costs | (342,627) | (342,304) | 323 | 323 | - |
| Share in net profit/loss of equity-accounted joint ventures | (1,008) | (18,131) | (17,123) | (17,123) | - |
| Pre-tax loss | (61,979) | (58,676) | 3,303 | 3,303 | - |
| Corporate income tax | 101,407 | 98,104 | (3,303) | (3,303) | - |
| Net profit | 39,428 | 39,428 | - | - | - |
| Other comprehensive income (net) | 84,022 | 84,022 | - | - | - |
| Total comprehensive income | 123,450 | 123,450 | - | - | - |
* (Audited) data for the year ended December 31st 2013 is derived from the audited consolidated financial statements for the year ended December 31st 2013, released March 5th 2014.
Consolidated statement of cash flows for the year ended December 31st 2013
| PLN ’000 | year ended Dec 31 2013* (audited) |
year ended Dec 31 2013 (restated) |
Effect of change, including: |
Effect of the change of the consolidation method applied for UAB Minijos Nafta | Effect of other changes |
|---|---|---|---|---|---|
| Net cash from operating activities | 1,436,496 | 1,416,277 | (20,219) | (12,981) | (7,238) |
| Net cash from investing activities | (938,414) | (931,051) | 7,363 | 7,363 | - |
| Net cash from financing activities | (251,102) | (243,864) | 7,238 | - | 7,238 |
| Total net cash flow | 246,980 | 241,362 | (5,618) | (5,618) | - |
* (Audited) data for the year ended December 31st 2013 is derived from the audited consolidated financial statements for the year ended December 31st 2013, released March 5th 2014.
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)
