OREANDA-NEWS. INA - Industrija nafte, d.d. has published financial results of INA Group for 2012 and the final quarter of the last year.

On this occasion, INA Management Board President Zoltán Áldott emphasized that despite the considerable challenges posed by the lack of Syrian production and declines in gasoline and diesel demand continuing for the fourth consecutive year, INA managed to significantly increase investments in Croatia in 2012, by tripling capital expenditures in domestic exploration and production and more than doubling investments in retail activities compared to 2011.

In upstream investments INA kept a strong emphasis on exploration in onshore Croatia, a continuation of Ivanic and Zutica EOR projects and further development of its offshore fields. As regards retail, thanks to an intensified modernization program, INA now has the largest modern filling station network in Croatia.

In 2012, INA achieved a solid EBITDA (excl. special items ) of close to HRK 5 billion due to our strong focus on improving operational efficiency across the Group. The company also recorded significant operating profit (excluding special items) of HRK 2.9 billion, as well as a net profit (excluding special items) of HRK 1.9 billion.
The company is particularly pleased with the improvement in its financial position reflected in the reduction of its net indebtedness by 27%, driven by strong cash generation.
As regards the performance of business segments, Exploration & Production remained the main contributor to Group results, especially with new exploration & production projects, while our Refining segment achieved significant efficiency improvements as utilization of new plants, coupled with optimized feedstock selection, led to a greater share of marketable motor fuels.

Operative results overview
 Revenues of approximately HRK 30 billion primarily as a result of improved realized hydrocarbon price
 EBITDA (excluding special items) of approximately HRK 5 billion
 Operating profit (excluding special items) of HRK 2.9 billion
 Net profit (excluding special items) of HRK 1.9 billion
 Investment activity despite the continued economic crisis experienced in its core regional markets, spending HRK 1.3 billion in 2012
 Increased total investments in Croatia, i.e. increased  CAPEX spending portion in Croatia from 72% in 2011 to even 94% in 2012
Exploration and Production - operating profit in 2012 (excluding special items) amounted to HRK 4.5 billion
This result reflects the effects of the following positive factors:
o efficiency improvement efforts
o CROSCO Group’s improved contribution driven by on-going recovery in Libyan activities
However, these positive effects were partially decreased by:
o 35% decrease in hydrocarbon production, mainly due to the lack of Syrian production volumes and lower offshore volumes
o 29% increased natural gas imports
o Compared to the previous year, even higher (5%) difference between purchase (import) and sales gas price

Croatian crude production declined in 2012 due to natural depletion of the fields. International crude production was 8% higher in Egypt due to the positive effects of drilling and work over activities on concession North Bahariya and drilling activities on concession West Abu Gharadig; the beneficial effect of this was diminished, however, by 6% lower crude production in Angola. Production volumes in Syria were accounted for only up to the Force Majeure announcement.
Total natural gas production was 33% lower, reflecting:
o lack of Syrian production during the majority of the period due to the announcement of Force Majeure
o natural decline on both onshore and offshore fields in Croatia
o decrease in offshore production due to severe weather conditions in first quarter, maintenance work on the Barbara T platform in the North Adriatic and a lower INA share due to decommissioning
2012 Exploration and Production segment’s CAPEX spending amounted to HRK 746 million. Majority of the CAPEX were related to investments in Croatia, which reached HRK 558 million, while foreign investments were around HRK 86 million and CROSCO’s investment HRK 102 million.
Refining and Marketing - The segment improved its EBITDA (excluding special items) in 2012, an improvement of HRK 654 million compared to last year , although the segment delivered an operating loss (excluding special items) of HRK 1.1 billion.

This improvement reflects:
o significantly higher average crack spread
o increased share of  motor fuels share in sales (66.8% in 2012 vs. 60.4% in 2011)
o diversified feedstock selection and increased operational efficiency have resulted in lower own consumption (13.1% in 2012 vs. 14.9% in 2011)
o on-demand operation mode of refineries
o higher white product yields in both refineries with the average 74.3% in 2012 vs. 67.9% in 2011
Positives trends were offset by:
o increased processed crude oil price
o decrease in the Brent-Ural spread (1.1 USD/bbl in 2012 vs. 2.2 USD/bbl in 2011)
o decline in motor fuel consumption in core markets
o higher energy costs
Although both the gasoline and diesel demand on domestic market have been in a continuous decline for several years, the R&M segment managed to achieve higher motor fuel sales in the period which resulted in higher market share due to the continuous efforts of the Company.

Numerous HSE/sustainable projects have been launched in 2012, in line with preparation for upcoming significant development programs. In 2012 CAPEX spending reached HRK 242 million.


Retail - In 2012, the Retail segment recorded net profit (excluding special items) of HRK 19 million, while it generated an EBITDA (excluding special items) of HRK 148 million, representing a slight improvement in profitability compared to 2011. A drop in demand and the tightening of the Croatian market, which decreased sales volumes and margins, was offset by management efforts to lower operating costs.
Sales slump was recorded as a result of weaker consumer demand:
o caused by the slowdown in economic activity
o higher retail prices
o negative influence of the strong winter
o lower number of operating filling stations resulting from intensified network modernization program in 2012, which is expected to be compensated in the following period
Capital expenditures in the amount of HRK 229 million in 2012 were 116% higher than in 2011, when they amounted to HRK 106 million. The main reason for such high realization in 2012, compared to the previous year, was the intensive modernization program.
As part of the intensive INA Retail network modernization program, which aims to increase the brand identity and functionality of filling stations and to achieve a high level of customer service and consumer satisfaction, 92 filling stations were modernized in 2012, while 17 filling stations are currently in the construction phase and 6 in tendering phase.