NIS Publishes Revised Consolidated Financial Statement Data for 2014

March 6, 2015

The financial result of the company was adversely affected by the extremely unfavourable macroeconomic conditions arising in the global hydrocarbon market in the second half of 2014. Nonetheless, owing to the implementation of the business process efficiency increase programme in the principal business segments, NIS has successfully minimized the drop of the EBITDA indicator to 8% -- down to 63.4 billion dinars -- despite a global plunge of petroleum and petroleum product prices. The positive impact of the efficiency increase programme and the reduction of basic costs and expenses on the financial result amounted to 8.3 billion dinars. The significant drop in the prices of hydrocarbon feedstocks and the strengthening of the exchange rate of major global currencies against the Serbian dinar resulted in a 42% fall in profits of the NIS Group year over year. Based on the reporting period results, NIS net profit stood at 27.8 billion dinars. The company estimates that the impact of negative exchange rate differences factored in at 13.2 billion dinars. The volume of NIS direct and indirect tax liabilities amounted to 136.2 billion dinars in 2014, which is a 13% increase compared to last year. The tax burden increase was primarily brought about by external factors – excise duties increased for petroleum products and new taxes on the creation of reserves were levied. Despite a further fall in the major petroleum product markets of the Balkans, intensified in 2014 because of the adverse effects of the floods in Serbia, Bulgaria, and Bosnia and Herzegovina, the company has maintained the petroleum product sales volume at 3 million tons, equaling last year’s. Further, the share of motor fuels in the sales portfolio rose to 58%. Daily sales of fuel at a premium PS in the Gazprom network in Serbia reached 7.1 tonnes, which put the network in first place in the domestic market in terms of this indicator. According to the 2014 results, the volume of refining at the company refinery stood at 3.1 million tons, which is a slight increase year over year. The basic efficiency indicators of the oil refining complex – energy efficiency, employee, and operational readiness indices – rose significantly. It is in terms of these indices that the company has come close to the major refineries in central and southern Europe. Owing to the implementation of geological exploration projects and the development of the geological model of the Pannonian Basin, the company increased its hydrocarbon reserves by 9% year over year. Oil and gas production volume in Serbia stood at 1.59 million toe – a 3-per cent decrease compared to last year. The drop in the production volume was primarily caused by the reduction of the investment programme. NIS capital investments in 2014 stood at 39.4 billion dinars, which is 29 per cent less than last year’s indicators. The company was forced to reduce the investment programme volume due to non-payment of debts by the biggest state debtors and an unfavourable situation on petroleum exchanges around the world. Commenting on NIS 2014 business results, the Chief Executive Officer, Kirill Kravchenko, said in a statement: “Basically, today we are facing a crisis that we already weathered in 2008. But, the current situation is more complex, primarily because of record low oil prices, the competition, and growing technological needs. NIS has remain stable during this turbulent period. We are focusing on a steady increase of business efficiency, we are increasing hydrocarbon reserves, and have the resources necessary for the implementation of major investment projects. None of this seemed possible in 2008. It is important that the Government of the Republic of Serbia has been understanding of this course of action. In 2014, the Memorandum was signed regulating the mechanism of paying back the debts of the biggest debtors of the company. I hope that in 2015 we will be implementing it.”