Financial results
and operational achievements

In 2019, adjusted LIFO-based EBITDA was PLN 2.9bn, down 7.7% year on year. Last year, the Company paid record-high dividend of PLN 3 per share. In 2019, the macroeconomic environment for refining operations was more demanding than in 2018 and relative to the strategic projections assumed by the Company. The significant decline in natural gas and crude oil prices had an adverse effect on the exploration and production segment’s performance.

In 2019, the LOTOS Group posted revenue of PLN 29.5bn. with 97.5% of the figure coming from refining operations. The Group sells its products mainly to domestic customers. Domestic sales accounted for 81.8% of total revenue.

In 2019, the LOTOS Group’s revenue was PLN 29,493.3m. Sales of diesel oil accounted for the major share of revenue, having totalled PLN 16,246.8m (55.1% of the Group’s total revenue). In 2019, they were up 8.2% year on year. Sales of gasolines were also an important contributor to revenue, amounting to PLN 4,346.6m (14.7% of total revenue), which represented a 2.3% decrease year on year. In 2019, heavy products accounted for 9.0% of the LOTOS Group’s revenue. Their value was PLN 2,639.7m (down by 15.8% compared with 2018).

In 2019, the share of domestic sales in the LOTOS Group’s revenue went up by 3.7% compared with the previous year, to PLN 24,121.8m (81.8% of total revenue).

In 2019, the LOTOS Group’s debt equalled PLN 4,416.4m, and was PLN 532.4m higher than at the end of December 2018, mainly as a result of the implementation of IFRS 16 'Leases'. The ratio of debt adjusted for free cash to equity was 22.8% (including lease liabilities representing 10.0% of equity), which is 6.6pp higher compared with December 31st 2018. Net debt totalled PLN 2,899.8m. The ratio of net debt to adjusted LIFO-based EBITDA as at December 31st 2019 was 1.0x, of which 0.4x was attributable to IFRS 16 'Leases''.

As at December 31st 2019, the LOTOS Group’s cash balance (including current account overdrafts) amounted to PLN 1,516.6m. In 2019, net cash flows decreased the amount of cash and cash equivalents by PLN 421.7m, where:

• The LOTOS Group generated positive cash flows from operating activities of PLN 2,130.2m, attributable mainly to net profit increased by depreciation and amortisation, income tax, and higher provisions, and reduced by higher trade receivables resulting from the lack of factoring arrangements in 2019.
• Cash flows from investing activities equalled PLN -407.9m driven mainly by expenditure on key development projects, including EFRA, related to crude oil and gas production from the Norwegian and Baltic Sea fields. They also included funds released from the Sleipner decommissioning escrow account.
• Negative cash flows from financing activities, of PLN -2,141.2m, were mainly attributable to the negative balance of proceeds from borrowings and repayment of borrowings (facilities taken out by Grupa LOTOS S.A. to finance inventories and the 10+ Programme; LOTOS Asfalt’s investment loan), as well as interest paid, dividend distributed and payments due under lease contracts.

In 2019, the LOTOS Group’s capital expenditure exceeded PLN 1,024.7m, most of which was spent on the construction of a delayed coking unit (EFRA Project) and on oil and gas production, mainly from the B8 field in the Baltic Sea and from the Sleipner and YME area fields on the Norwegian Continental Shelf.