Profit leak

Lotos has reported a 47.6-percent drop in its third-quarter net profit, from zł.381.3 million in 2005, to zł.199.6 million this year. Despite the loss, the result still exceeded market forecasts. Sales rose to zł.3.7 billion in the third quarter from zł.3.1 billion, while operating profit dropped to zł.255 million from zł.469 million.

Analysts had forecast a net profit of zł.192 million, due to lower refining margins and a narrower price differential between the Ural crude oil it refines and Brent North Sea Oil, which is used as a benchmark for product prices.

Lotos' refinery on the Baltic Sea coast now buys most of its annual throughput of 5.4 million tonnes of crude from Russia, but the company is on the lookout for other foreign gas and oil options. Its medium-term strategy assumes diversification of supplies and limiting deliveries from any single source to 60 percent.

In comparison, PKN Orlen showed a surprise rise in third-quarter profits to a record zł.1.03 billion, saying it had managed to offset the narrowing Ural/Brent price differential with cost controls and higher retail margins.

Lotos maintained its forecast that its consolidated net profit after minorities would slip to zł.657 million this year from zł.930 million last year, which included zł.288 million in one-off gains from a revaluation of assets. It predicted sales would rise to zł.13.4 billion this year from zł.9.6 billion in 2005. (Reuters)