Zagreb, 6 October 2014- Further to media reports, which refer to so-called “secret INA’s study” according to which Sisak Refinery could be profitable, we would like to point out following facts.

So-called “internal INA’s study,” is in fact a business analysis prepared in late 2012 with the purpose of discussion of the business plans for the upcoming year. In that sense, the analysis was based on short-term assumptions for 2013 and did not in any way refer to the period of five years, as stated in the reports.

Predictions about the so-called “profitability” of the Sisak Refinery in the amount of almost USD 40 million annually were taken out of context since that figure is only a gross margin figure that is calculated before net profit and does not include all costs. Also, it was not emphasized in the media reports, but what is visible from the material, that the mentioned short-term predictions were connected to the domestic oil prices that are below market value. Such model is unsustainable and undervalues upstream performance.

600.000 tons is not enough for the continuous operation of the refinery while increasing refining capacities would cause additional losses. Due to the non-profitable processing capacities, Sisak Refinery has been operating only occasionally for years. For example, it operated for only two months this year, and only five in 2013. Such standby regime that the refinery operates in for most of the time continuously increases energy and maintenance costs, and which were also not considered.

Furthermore, one has to look at the profitability of the refining system as a whole and it has been making sizeable losses; EBIT HRK 8.5 billion in the last three years and in the first half of 2014 altogether. In recent years INA has invested maximum efforts to decrease losses of its refining business considering the market circumstances and the overcapacity that burdens the regional and wider European market. Markets of Croatia, Slovenia, Bosnia and Herzegovina and Albany had 35% bigger refining capacities than the refined product demand. In addition, INA has to take into account competitive import as several million tons of import capacities are available from the MED.

In spite of numerous measures aimed at improving efficiency and optimizing production, the negative trends proved impossible to turn around, which is why the restructuring of refining business crucial for INA, as well as concentrating the oil processing at the location that has the potential of securing the long-term sustainability of the refining business.  Here, it can be pointed out that the similar analyses and discussions were held 16 years before as well, although the market conditions in refining business were more favorable.  Even at that time the analyses stressed the importance of the economically sustainable business of the entire company, for which the precondition was to optimize refining capacities of INA’s refineries, especially Sisak Refinery.