INA-Industrija Nafte HINA Q3 Results

  INA-Industrija Nafte (HINA) - Q3 Results

RNS Number : 8649P
INA-Industrija Nafte, d.d
30 October 2012






INA Group  (ZB:  INA-R-A; LSE:  HINA;  www.ina.hr) announced  its  Q1-Q3  2012 
results  today.  This   report  contains   unaudited  consolidated   financial 
statements for  the  period  ending  30 September  2012  as  prepared  by  the 
management in accordance with the International Financial Reporting Standards.



INA Group financial results (IFRS)





HRK mln.                 Q2 2012 Q3 2012   Q3 2011   % Q1-Q3 2011  Q1-Q3   %
                                         Restated*       Restated*   2012
Net sales revenues         7,275   8,089     7,967    2     22,727 22,620  (0)
EBITDA reported ^(1)         932   1,462     1,649 (11)      5,261  3,691 (30)
EBITDA excl. special
items ^(2)                   975   1,504     1,701 (12)      5,420  3,954 (27)
Operating profit
reported                    (97)   1,031       689   50      2,892  1,522 (47)
Operating profit excl.
special items ^(2)           343   1,096       772   42      3,286  2,273 (31)
Net financial expenses     (274)      34     (464) n.a.      (154)  (217)   41
Net profit/loss for the
period ^(3)                (304)     825       126  555      2,057    933 (55)
Net profit for the
period excl. special
items ^(2)                    34     877       192  356      2,371  1,541 (35)
Operating cash flow        1,461   1,500     1,422    6      2,270  3,434   51
Earnings per share
Basic and diluted
earnings per share
(kunas per share)         (30.4)    82.5      12.6  555      205.7   93.3 (55)
Net gearing                33.95   29.41     39.27 (25)      39.27  29.41 (25)
USD mln ^(4)             Q2 2012 Q3 2012   Q3 2011   % Q1-Q3 2011  Q1-Q3   %
                                          Restated        Restated   2012
Net sales revenues         1,242   1,353     1,511 (10)      4,310  3,856 (11)
EBITDA reported ^(1)         159     245       313 (22)        998    629 (37)
EBITDA excl. special
items ^(2)                   166     252       323 (22)      1,028    674 (34)
Operating profit
reported                    (17)     172       131   32        548    259 (53)
Operating profit excl.
special items ^(2)            59     183       146   25        623    387 (38)
Net financial expenses      (47)       6      (88) n.a.       (29)   (37)   27
Net profit/loss for the
period ^(3)                 (52)     138        24  477        390    159 (59)
Net profit for the
period excl. special
items ^(2)                     6     147        37  302        450    263 (42)
Operating cash flow          249     251       270  (7)        431    585   36
Earnings per share
Basic and diluted
earnings per share (USD
per share)                 (5.2)    13.8       2.4  477       39.0   15.9 (59)



^(1) EBITDA = EBIT + Depreciation + Impairment + Provisions

^(2) Excludes special items related to asset impairment, provision,  severance 
payments and  special  items  income.  The  Q1-Q3  2012  EBIT  was  negatively 
influenced by HRK 751 million special items

^3) INA Group net profit attributable to equity holder

^(4) In converting  HRK figures  into US  Dollars, the  following average  CNB 
(HNB) rates were used: for Q2 2012 - 5.8577 HRK/USD; Q3 2012 - 5.9788 HRK/USD;
Q3 201 - 5.2711; Q1-Q3 2011 - 5.2726 HRK/USD; Q1-Q3 2012 - 5.8664 HRK/USD

*Restatement of the previous periods understands the reclassification relating
to financial  statements presentations  (in line  with IAS  1) in  respect  of 
netting the  revenues  and  expenses and  technical  corrections  relating  to 
recording of the  asset impairment made  at 2011 year  end to the  appropriate 
corresponding interim period of that year.



INA Group  delivered EBITDA  of HRK  1.5  billion in  Q3 2012,  a  significant 
improvement over Q2 2012,  bringing the total EBITDA  excl. special items  for 
the first nine months of 2012 to  almost HRK 4.0 billion, despite the lack  of 
Syrian revenues. The Company also recorded positive results in both  operating 
profit and net profit excluding special items for the nine month period, which
amounted to HRK 2.3 billion and HRK 1.5 billion, respectively. As a result  of 
these positive  trends,  INA's  operating  cash  flow  for  nine  months  2012 
increased by 51 per  cent to close  to HRK 3.4 billion,  compared to the  same 
period last  year, thereby  strengthening  the Company's  financial  position. 
Constant management efforts  in consolidating the  Group's financial  position 
resulted in yet another improvement in gearing levels, which declined from 39%
at the  end of  Q3  2011 to  29%  in part  coming  from unsettled  Q3  trading 
facilities for crude purchases.



Net profit (excl. special items) in Q3 reached HRK 877 million, a  significant 
improvement compared to both HRK 34 million in Q2 2012 and HRK 192 million  in 
Q3 2011.



The Exploration and  Production division remained  the leading contributor  to 
Group level results. At the same time, the Refining and Marketing segment  saw 
a reversal in the negative contribution  trend of the previous quarters in  Q3 
2012 and turned positive ytd downstream EBITDA contribution mainly  reflecting 
healthier crack spread environment developments during the nine months.







► Exploration and Production: In Q1-Q3 2012, EBITDA excl. special items  was 
HRK 4.1 billion (USD 700 million) -  despite the lack of revenues from  Syria. 
Mainly due to the lack of Syrian production volumes and lower offshore volumes
the hydrocarbon production decreased by 33%  compared to the same period  last 
year. Results were  additionally burdened  with the  gas price  cap for  small 
industrial customers  and  regulated  prices for  supplying  tariff  household 
customers although  they were  changed upwards  during the  reporting  period. 
These negative drivers  were slightly moderated  by improved average  realized 
hydrocarbon prices and a 7% reduced unit opex.

► Refining and  Marketing: In  Q1-Q3 2012,  the segment  reported aHRK  464 
million improved  result  compared  to  the same  period  last  year  reaching 
positive EBITDA excluding special items in the amount of HRK 21 million driven
by healthier crack spread environment and several successful initiatives,  but 
partly offset by  decreasing regional demand  resulting in lower  sales by  7% 
compared to the same period last  year and the unfavorable yield structure  of 
the refineries. The positive contribution  of marketable motor fuels  improved 
yield  driven  by  better   feedstock  selection,  inventory  management   and 
optimization of refineries' operations  underline the successful  initiatives. 
Own consumption continued  to decrease,  reflecting the  results of  optimized 
operation and  internal efficiency  improvements. However,  the higher  energy 
costs and higher depreciation related to the capitalisation of key projects at
the end of 2011, were the negative drivers in first nine months of 2012.

► Retail segment:Despite adverse conditions in the business environment this
year, for the  nine months to  September 2012, the  Segment reached an  EBITDA 
(excluding special  items)  of  HRK  149  million  (USD  25  million),  a  13% 
improvement when  compared to  same period  in 2011.  However, a  slowdown  in 
economic activity, higher  prices and  reduced purchasing power  caused an  8% 
decrease in sales volumes  and 9% decrease in  operating profit excl.  special 
items in the first nine months  compared to 2011. These negative factors  were 
partially mitigated by lower operating costs, the introduction of diesel  fuel 
with a bio component and  optimization of the retail  network. As part of  the 
intensive INA Retail network modernisation program, which aims to enhance  the 
visual identity and functionality of filling stations and achieve a high level
of customer  service  and  consumer  satisfaction,  47  petrol  stations  were 
modernised in the first nine months of 2012, and more than 40 stations are  in 
the construction and tendering phases.

► Corporate and Other (1): The 3%  lower operating loss of the segment  (HRK 
398 million, excluding special items or USD 68 million) in Q1-Q3 2012 compared
to the same period last year demonstrates the results of process  optimization 
and cost control at the Company.

(1)Include  Corporate  Functions   and  subsidiaries   providing  safety   and 
protection  services,  technical  services,  accounting  services,   corporate 
support and other services.

► Capital expenditure:In the first nine months of 2012 INA has invested  HRK 
740 million. The majority of capital expenditure has been spent on a number of
Croatian  projects  including  intensified   onshore  exploration,  a   retail 
modernisation programme  and downstream  HSE and  efficiency improvement.  The 
Exploration and Production segment's CAPEX reached HRK 517 million  (including 
one-off OPEX for seismic acquisitions), covering, among other things: a  2D/3D 
seismic acquisition on South Adriatic, the intensification of the EOR  project 
and an onshore intensified drilling campaign. The temporary suspension of  all 
Syrian exploration  activities  decreased international  spending  and  placed 
stronger emphasis  on  domestic  exploration. The  completion  of  significant 
refinery development programmes  last year meant  year-to-date 2012 CAPEX  was 
lower compared to the same period in  2011. On the other hand, further  system 
developments starting this  year include: HSE  and energy efficiency  projects 
aimed at  improving  internal operational  efficiency  and a  deep  conversion 
project in  the  Rijeka refinery  is  also planned.  However,  major  refinery 
projects are subject to approvals which in some cases, have been delayed.  The 
modernization program of INA's retail  network, the so called "Blue  Concept", 
continues with  increased intensity  this  year. The  majority of  the  strong 
investment cycle  planned by  INA for  this year  is expected  to be  realized 
towards the year end due to the nature and dynamics of capital projects.



INA's operations are still  markedly affected by the  changes in the  external 
environment which  is characterised  by  ambiguous movements,  i.e.  depressed 
market demand, prolonged economic slowdown  in core markets and political  and 
regulatory constraints on one side and the improving crack spread  environment 
with relatively stable crude prices compared to 2011 on the other side. Eased
regulatory  pressures  in  respect  of  the  capped  natural  gas  prices  for 
households and  small  industrial  companies, continued  negative  growth  and 
contracting market  demandof  Croatian  economy,  negatively  affected  retail 
operations. Internationally,  INA's results  were negatively  affected by  the 
lack of  revenues  from its  Syrian  operations. In  addition  to  operational 
developments, the  depreciation of  the  HRK against  USD, which  resulted  in 
financial losses of HRK  217 million for  the first nine  months of 2012  also 
impacted the Company's performance during this period.

Management's continuous  efforts aimed  at increasing  operational  efficiency 
significantly contributed  to the  Q1-Q3  2012 results,  achieving  efficiency 
improvements of more than HRK 1.9 billion compared to 2010 base line.



Commenting on the results, Mr Zoltán Áldott, President of the Management Board
said:



In the first nine months 2012,  INA Group has delivered EBITDA (excl.  special 
items) of HRK 4.0  billion despite a continued  economic slowdown in the  core 
region and the  lack of  revenues from INA's  operations in  Syria, which  was 
mitigated by the management's committed efforts to improve efficiency.

INA has initiated a  new investment cycle to  strengthen its activities,  with 
more than 90% of nine months to September 2012 of capital expenditures made in
Croatia to  strengthen  INA's  domestic activities.  An  intensified  drilling 
campaign is being carried out in our  onshore fields with strong focus on  the 
ongoing Ivanić and Žutica  EOR projects, on the  preparation of the  Medimurje 
EOR project and accelerated exploration activities resulting in several  major 
discoveries recently  demonstrating  our  commitment to  further  develop  our 
Croatian E&P activities and to  strengthen energy security supply of  Croatia. 
Further development of our offshore fields  in Croatia was constrained by  the 
lack of drilling equipment in the past period.

Efforts by management to improve  efficiency and the completed investments  in 
the Refining segment  have led  to significant improvements  in the  segment's 
results, resulted  in  improved product  yield  and reduced  own  consumption; 
though this still remains high. The  utilization of new plants, together  with 
better feedstock selection, have  led to a greater  share of marketable  motor 
fuels, securing a basis  for future production  optimization. We are  awaiting 
the necessary permits and  licenses from the  relevant authorities to  execute 
new plans for the development of our refining system.

As a result of an intensified  modernization in the retail business, that  led 
to 63% higher investments compared to the same period last year, INA will have
the largest number  of modern  filling station  network in  Croatia among  all 
operators by the end of 2012.

Management discussion

Exploration and Production*



Q2 2012 Q3 2012 Q3 2011   %   Segment IFRS results (HRK  Q1-Q3 2011 Q1-Q3    %
                Restated      mln)                         Restated  2012
  2,773   2,428    2,883 (16) Net sales revenues              9,297 8,968  (4)
  1,364   1,260    1,904 (34) EBITDA reported                 6,055 3,905 (36)
                              EBITDA excl. special
  1,403   1,277    1,917 (33) items**                         6,095 4,106 (33)
    673   1,066    1,158  (8) Operating profit reported       4,466 2,545 (43)
                              Operating profit excl.
  1,057   1,094    1,172  (7) special items**                 4,486 3,183 (29)
    156     234      136   72 CAPEX***                          467   462  (1)



* Exploration and Production refers to the Upstream of INA, d.d. and following
subsidiaries: Crosco  Group, INA  Naftaplin IE&PL,  Guernsey, Adriagas  S.r.I. 
Milano, Prirodni plin d.o.o.

** The Q1-Q3  2012 performance was  negatively influenced by  HRK 638  million 
special items.

*** Not including one-off exploration Opex



Q2 2012 Q3 2012 Q3 2011    %                            Q1-Q3 2011  Q1-Q3    %
                             Hydrocarbon production*                 2012
                             Crude    oil    production 
 12,357  12,134  15,941 (24) (boe/d)*                       15,773 12,396 (21)
  8,889   8,914   9,127  (2) Croatia                         9,276  8,841  (5)
      -       -   3,302 n.a. Syria                           3,190    146 (95)
  1,963   1,878   1,846    2 Egypt                           1,718  1,922   12
  1,505   1,342   1,665 (19) Angola                          1,589  1,487  (6)
                             Natural   gas   production 
 32,226  27,831  48,523 (43) (boe/d)                        49,430 34,770 (30)
 16,523  14,879  21,166 (30) Croatia - offshore             22,137 16,718 (24)
 15,704  12,952  13,087  (1) Croatia - onshore              13,953 15,009    8
      -       -  14,270 n.a. Syria                          13,339  3,043 (77)
  2,719   2,156   9,707 (78) Condensate (boe/d)             10,325  3,477 (66)
  2,719   2,156   5,518 (61) Croatia                         6,439  2,546 (60)
      -       -   4,189 n.a. Syria                           3,886    931 (76)
                             Total          hydrocarbon 
 47,302  42,121  74,171 (43) production (boe/d)             75,528 50,643 (33)
Q2 2012 Q3 2012 Q3 2011    % Average           realised Q1-Q3 2011  Q1-Q3    %
                             hydrocarbon price**                     2012
                             Crude oil  and  condensate 
     96      90     113 (20) price (USD/bbl)                   102     96  (6)
                             Average realised gas price
     78      87      78   12 (USD/boe)                          70     77   10
                             Total  hydrocarbon   price 
     84      88      84    4 (USD/boe)*                         78     82    6
Q2 2012 Q3 2012 Q3 2011    % Natural gas trading -  mln Q1-Q3 2011  Q1-Q3    %
                             cm                                      2012
    244     248     210   18 Natural gas imports               564    859   52
                             Total natural gas sales  - 
    525     425     546 (22) domestic market                 2,058  1,914  (7)
                             Natural     gas      price             Q1-Q3
Q2 2012 Q3 2012 Q3 2011    % differential   to   import Q1-Q3 2011   2012    %
                             prices (HRK/000 cm)
  (638)    (90)   (545) (84) Total price                     (387)  (539)   39

*Excluding separated condensate

** Calculated based on total external sales revenue including natural gas
selling price as well



Third quarter 2012 vs. second quarter 2012 results



In Q3 2012, operating profit excluding special items was HRK 1,094 million, 3%
higher than Q2 due to the effects of the following positive drivers:

(1) A 4 per cent Increase in total average realised hydrocarbon price and  (2) 
a lower negative contribution from the natural gas trading business. This  was 
due to  the  eased  price  cap for  tariff  customers  and  liberalised  price 
formulation for  industrial customers,  coupled  with seasonally  lower  sales 
during summer months.



However,  these  positive  effects  have  been  mitigated  by  (1)   decreased 
hydrocarbon production as a result of the natural depletion of domestic fields
and the  regular  turnaround cycle  performed  on both  onshore  and  offshore 
concessions, and (2) lower sales of  domestic crude oil and condensate due  to 
the September overhaul of  the Sisak Refinery  resulting in approximately  HRK 
200 million lower revenues.

Reported operating profit  for the third  quarter 2012 amounted  to HRK  1,066 
million and was negatively affected by  HRK 28 million of special items  (most 
of which relate to provisions made for litigation).



Third quarter 2012 vs third quarter 2011 results

In Q3 2012, EBITDA, excluding special items decreased 33% compared to Q3  2011 
reflecting (1) the temporary suspension of activities in Syria and  subsequent 
lack of revenue from the country, (2) lower domestic production, partly due to
natural depletion in the Panon basin and in Adriatic off shore fields and  (3) 
loss making  gas trading  business  which was  mitigated  by the  eased  price 
pressure and  lower sales  volumes. However,  EBITDA of  the base  period  was 
negatively affected by Sisak refinery stoppage  in Q3 2011 resulting in  lower 
sales.



Q1-Q3 1 2012 vs Q1-Q3 2011 results

Upstream Q1-Q3  2012operating  profit,  excluding  special  items  has  fallen 
compared to the same  period last year,  driven by the effects  of: (1) a  33% 
decrease  in  hydrocarbon  production,  mainly  due  to  the  lack  of  Syrian 
production volumes and lower offshore volumes,  (2) a 52% increase in  volumes 
of imported natural gas at Prirodni  plin combined with (3) a higher  negative 
natural gas price differential coming from an increase in natural gas purchase
prices and capped sales  prices (Prirodni plin delivered  an EBIT loss of  HRK 
704 million in Q1-Q3 2012).  In Q1-Q3 2011, the  Company recorded of HRK  2.5 
billion revenues from Syria based  on an average daily hydrocarbon  production 
level of  20  Mboe/d; which  volumes  are  absent in  this  reporting  period. 
However, the positive contribution of  an increased average hydrocarbon  price 
and continuous efficiency improvement measures, especially considering  strict 
cost control resulting  in a 7%  lower unit opex,  has mitigated the  negative 
effects. The Upstream nine month result was also positively affected by Crosco
Group's improved contribution due it optimisation of its operations.



Reported operating profit  for the  period Q1-Q3  2012 amounted  to HRK  2,545 
million and was negatively affected by HRK 638 million of special items.



Total natural gas production  was 30% lower [than  the same period last  year] 
reflecting (1)a lack  of Syrian production  in majority of  the period due  to 
announcement of "force majeure", (2) a decrease in offshore production due  to 
severe weather conditions,  natural decline,  and water  cuts and  maintenance 
work on the Barbara T platform in the North Adriatic.



Croatian crude production declined in Q1-Q3  2012 due to natural depletion  of 
the fields(See note 2 below). International crude production was 12% higher in
Egypt due to the positive effects of drilling and workover activities on North
Bahariya and drilling activities on  West Abu Gharadig; the beneficial  effect 
of this was diminished however by 6% lower crude production in Angola.  Syrian 
crude volumes were significantly lower (with no production recorded in Q2  and 
Q3) compared to the same period last year as the company temporarily suspended
activities in line with international and domestic regulation and local Syrian
developments. Production volumes in Syria were accounted for only until "force
majeure" announcement, without receiving revenues from October 2011.



As a result of the above trends, Upstream sales revenues were lower than  last 
year's underlining  (1) a  33% decrease  in hydrocarbon  production and  lower 
natural gas  sales volumes  on one  side, (2)  a 6%  increase in  the  average 
realised hydrocarbon price and (3) thepositive effect of the exchange rate due
to the deterioration of the HRK against the USD.



Q1-Q3 2012Upstream expenditures increased by 33% to HRK 6.4 billion, driven by
increased uncontrollable costs relating to natural gas imports, aforementioned
special items and increased  royalty payments. A  strong increase in  imported 
natural gas  quantities  (over 50%)  and  an  increased import  price  due  to 
international market  movements, were  the  main drivers  of the  increase  in 
uncontrollable costs. Higher imported  natural gas volumes  of 859 mcm  (+52%) 
were necessary to maintain continuity of supply and stability of the  domestic 
energy system following a technical disruption of deliveries caused by  severe 
weather conditions, a decrease in  domestic production and additional  imports 
required for covering  peak consumption  during periods  of exceptionally  low 
temperatures.



(Note 2) Due to the different  methodology the condensate production in  Q1-Q3 
2012 compared to total production with  NGL (C2+) in Q1-Q3 2011 show  decrease 
of 50%.  Decrease of  50% is  caused by  13% lower  condensate production  and 
remaining 37% is  caused by  modified production process  due to  discontinued 
ethane production and  in fact  results in an  increase of  Panon natural  gas 
production.



Exploration and Production capital expenditures

The Exploration  and  Production segment's  CAPEX  in the  period  Q1-Q3  2012 
amounted to HRK 517  million. Capital investments in  Croatia amounted to  HRK 
383 million,  capital investments  abroad  were HRK  59 million  and  CROSCO's 
investments were HRK 75 million. Compared with the same period in 2011 capital
investments are  higher by  HRK 46  million or  10%. This  increased level  of 
investments is mainly due to intensive  activities on the EOR projects  Ivanić 
and Žutica. These activities have resulted in two new discoveries on  Privlaka 
and Žutica fields based  on the search for  new so-called satellite fields  in 
the Sava Depression.



                                           E&P CAPEX 1Q-3Q 2012 (HRK million)                                                    Croatia              Syria        Egypt       Angola
Exploration                                                                                                                       115.1                3.4          1.5          0
o/w expl. one off opex                                                                                                             55.3
Development                                                                                                                       178.9                5.8         33.4         11.6
                                                                                                                         Exploration:             All   planned On    North Q1-Q3
                                                                                                                                                  activities    Bahariya    investments
                                                                                                                         Of  Central  and   South cancelled due concession  on     block 
                                                                                                                         Adriatic  2D/3D  seismic to  political drilling of 3/05a   were 
                                                                                                                         acquisition was finished situation.    Abrar-4,    related   to 
                                                                                                                         in   March   2012    and Investments   Abrar-5,    FEED  (front 
                                                                                                                         acquired 1215 km^2 of 3D represent     Abrar-7 and engineering
                                                                                                                         area and  843 km  of  2D allocated G&A Ganna-3     and  design) 
                                                                                                                         line.                    costs     and development activities
                                                                                                                                                  construction  wells   was on Punja and
                                                                                                                         Of   onshore    finished activities    completed.  Caco  Gazela 
                                                                                                                         drilling of  exploration for       the Drilled     Fields.   On 
                                                                                                                         wells Hrastilnica-3  (in period        wells   are block   3/05 
                                                                                                                         March) and  Đeletovci-1Z Jan-Feb  26th oil         investments
                                                                                                                         (in April).  Both  wells before  Force producers   were related
                                                                                                                         were tested and resulted Majeure       and    were to       FSO 
                                                                                                                         in     new      deposits announcement. put      in Palanca  dry 
Exploration (including Iran): 123.7 (23.9%)                                                                        discoveries.Development:               production. dock
                                                                                                                                                                Also,       maintenance
 Of Adriatic  investments               finished is and
Development: 229.7 (44.5%)                                                                                               were related to IVANA  K               drilling of GLCC-LLCC
                                                                                                                         platform overhaul.                     two         separator
                                                                                                                                                               exploration construction
                                                                                                                         Of onshore  in scope  of               wells       activities.
Other: 163.5 (31.6%)                                                                                                     EOR   project    ongoing               Rawda-SE1   On      both 
                                                                                                                         construction  activities               (founded    blocks
                                                                                                                         of new  CO2 Ethan  Plant               dry)    and planned
                                                                                                                         and     Molve      Plant               Sidra-2.    activities
                                                                                                                         compressor stations  and                           were      in 
                                                                                                                         construction of new  CO2               On      Ras delay.
                                                                                                                         Ivanić    and     Žutica               Qattara and
                                                                                                                         pipelines.  Drilling  of               West Abu El
                                                                                                                         development         well               Gharadig
                                                                                                                         Kalinovac-4 R started in               concessions
                                                                                                                         May  and   finished   in               workower
                                                                                                                         September. The  main  of               operations
                                                                                                                         the   rest   development               were
                                                                                                                         activities were  related               performed
                                                                                                                         to     well      general               in order of
                                                                                                                         workowers   which    are               optimizing
                                                                                                                         ongoing.                               production
                                                                                                                                                                level.



Croatian natural gas trading business environment

The Croatian Parliament passed the Energy  Law in effect abolishing the  price 
cap for  small  industrial  customers  effective  from  Q4  this  year,  while 
retaining the  price cap  for households  at the  level of  2.20 HRK  per  cm. 
Although these changes have had a modest positive effect on INA's  operational 
results Prirodni Plin d.o.o.  suffered an EBIT  loss of HRK  80 million in  Q3 
2012.

Refining and Marketing*



Q2 2012 Q3 2012  Q3 2011    % Segment IFRS results (HRK Q1-Q3 2011  Q1-Q3    %
                Restated      mln)                        Restated   2012
  5,091   5,909    4,798   23 Revenues                      13,798 15,095    9
  (343)     228    (225) n.a. EBITDA reported                (486)     16 n.a.
                              EBITDA excl. special
  (356)     235    (205) n.a. items**                        (443)     21 n.a.
                              Operating profit/(loss)
  (558)      33    (390) n.a. reported                     (1,124)  (577) (49)
                              Operating profit/(loss)
  (568)      40    (352) n.a. excl. special items**          (844)  (563) (33)
                               Replacement
                              modification gain (+) /
  (166)     152       26  485 loss (-)                         261    141 (46)
                               Impairment on
                              inventories gain (+) /
   (27)      30       60 (49) loss (-)                        (95)     27 n.a.
                               Foreign exchange rate
                              differences gain (+) /
   (15)       2        2    0 loss (-)                          96    (2) n.a.
                               CCS-based R&M
  (360)   (145)    (440) (67) operating loss***            (1,106)  (730) (34)
                              CAPEX and investments
     27      31      126 (75) (w/o acquisition)                328     96 (71)



*Refers to Refining & Marketing  INA. d.d. and following subsidiaries:  Maziva 
Zagreb, Proplin (until October, 2011), Osijek Petrol, InterIna Ljubljana,  INA 
BH Sarajevo, Holdina Sarajevo, INA Hungary,  INA -Crna Gora, INA Beograd,  INA 
Kosovo

**The Q1-Q3 2012 performance includes HRK 14 million negative special items

***Starting from  Q2  2011  effect of  inventories  impairment  excluded  from 
Estimated CCS-based Operating profit/(loss)



Q2 2012 Q3 2012 Q3 2011    % Refinery processing    Q1-Q3 2011 Q1-Q3 2012    %
                             (kt)
    117     104       - n.a. Domestic crude oil            210        358   71
    552     748     698    7 Imported crude oil          2,394      1,872 (22)
     40      19       - n.a. Condensate                     67         79   18
    359     223     220    2 Other feedstock               597        802   34
                             Total refinery
  1,069   1,094     918   19 throughput                  3,268      3,112  (5)
Q2 2012 Q3 2012 Q3 2011    % Refinery production    Q1-Q3 2011 Q1-Q3 2012    %
                             (kt)
     66      67      48   39 LPG                           175        184    5
    373     330     223   48 Motor gasoline                696        897   29
    420     383     216   77 Diesel                        754      1,029   36
     22      49      43   14 Heating oil                   137        127  (7)
     31      35      47 (26) Kerosene                       98         82 (17)
     15      10      18 (45) Naphtha                        71         48 (32)
    100     122     115    6 Fuel oil                      450        319 (29)
     11      14       - n.a. Bitumen                        49         26 (48)
  (110)    (50)      73 n.a. Other products*               349        (6) n.a.
    928     960     783   23 Total                       2,779      2,705  (3)
      8       7       6   22 Refinery loss                  23         21  (9)
    133     128     129  (1) Own consumption               465        385 (17)
                             Total refinery
  1,069   1,094     918   19 production                  3,268      3,112  (5)
Q2 2012 Q3 2012 Q3 2011    % Refined product sales  Q1-Q3 2011 Q1-Q3 2012    %
                             by country (kt)
    423     544     529    3 Croatia                     1,427      1,381  (3)
    122     130     142  (8) B&H                           409        356 (13)
    334     343     256   34 Other markets                 953        852 (11)
    879   1,017     927   10 Total                       2,789      2,588  (7)
Q2 2012 Q3 2012 Q3 2011    % Refined product  sales Q1-Q3 2011 Q1-Q3 2012    %
                             by product (kt)
     68      76      60   26 LPG                           201        202    1
    301     282     235   20 Motor gasoline                713        759    6
    315     406     362   12 Diesel                        942        990    5
     28      31      39 (22) Heating oil                   139        109 (22)
     35      52      51    0 Kerosene                       98         99    1
     15       9      18 (47) Naphtha                        73         49 (33)
     82     119     122  (2) Fuel oil                      447        285 (36)
     15      20      18    6 Bitumen                        69         41 (41)
     20      23      22    8 Other products*               108         56 (49)
    879   1,017     927   10 Total                       2,789      2,588  (7)
                             o/w   Retail   segment 
    258     318     429 (26) sales                         864        790  (9)

*Other products = FCC gasoline, petrol components, other gasoline,
benzene-rich cut, other diesel fuels and components, liquid sulphur, coke,
motor oils. Ind, lubricants, base oils, spindle oil, waxes, blend. gas oil
"M", atmosp, residue, intermediaries and other



Third quarter 2012 vs. second quarter 2012



Refining and Marketing positively contributed  to the Group's Q3 results  with 
the segment's  operating profit  (excluding special  items) showing  a  strong 
improvement from the Q2 operating loss  and amounting to HRK 40 million.  This 
improvement was  driven by  16%  increase in  sales volumes,  improved  crack 
spread  environment   and  the   positive  effect   of  inventory   management 
materialised in decreased volume levels, especially in the second half of the
quarter also  demonstrating  management's  efforts  and  focus  on  efficiency 
improvement and operations  optimisation. The Refining  & Marketing  segment's 
'clean' CCS-based operating loss  (3) decreased but  remained negative at  HRK 
145 million.



(3) excluding  effects of  special items,  inventory revaluation  and  foreign 
exchange differences on debtors and creditors



Results for Q3  2012 were positively  affected by: (1)  a 72kt improvement  in 
sales of  marketable motor  fuels driven  by the  optimization of  refineries' 
operations to utilize a favourable crack spread environment (2) extended crude
basket and better feedstock selection, (3) lower own consumption and  refinery 
loss, therefore  reducing  energy  costs and  (4)  an  efficiency  improvement 
program (strict costs control and logistics network rationalization).



These positive effects were mitigated by  (1) the increased cost of  purchased 
energy (natural  gas,  electricity),  (2)  the  Brent-Ural  spread  which  was 
slightly below Q2 2012 levels and (3) the price cap stipulated by the domestic
pricing Rulebook.



In Q3 2012 overall  sales were 15.7% above  the previous quarter, with  August 
sales breaking the 400kt level. Total  Q3 sales exceeded one million tons  for 
the first time since Q4 2010.



Reported Q3 2012 operating profit of HRK 33 million was negatively affected by
HRK 7 million of special items.



Third quarter 2012 vs. third quarter 2011



In Q3  2012, the  R&M  segment's operating  profit (excluding  special  items) 
exceeded that  of  the  same period  last  year  by HRK  392  million,  mainly 
resulting from  the favourable  external  crack spread  environment.  However, 
internal efforts made by the management on (1) production yield  restructuring 
(2) lower  own  consumption  derived  from  better  feedstock  selection,  (3) 
utilization of new plants,  (4) on demand  refineries operation, (5)  improved 
motor fuel sales of 91kt amidst contracting markets, (6) inventory  management 
initiatives launched  by  management  in June  2012  strongly  supported  this 
result.



The R&M segment achieved profitability and 'clean' CCS-based operating  result 
improved by  HRK  295 million  compared  to Q3  2011  as a  result  of  above 
mentioned drivers.



Total refinery throughput was 19% higher than Q3 2011. The main reason  behind 
this increase was the shut-down of the Sisak refinery last year due to a  fire 
incident, resulting in domestic crude processing  of 104 kt in Q3 2012  versus 
no processing in Q3 2011. Total R&M sales rose by 90 kt or 9.7% as a result of
strong  wholesale  efforts  levelling  off  a  declining  INA  Retail  segment 
performance.



Q1-Q3 2012 vs. Q1-Q3 2011 results



The segment improved its EBITDA (excluding special items) and turned  positive 
in the first  nine months  of 2012,  reaching a value  of HRK  21 million;  an 
improvement of HRK 464 million compared to last year. This was due to:

The positive effects of: (1) a higher  average crack spread, and (2) the  fact 
that the motor fuels  product sales share exceeded  the same period last  year 
(67.6% in 2012 vs.  59.3% in 2011), (3)  better feedstock selection and  lower 
own consumption (13.0%  in 2012 vs.  14.9% in 2011),  (4) on-demand  operation 
mode of  refineries  resulting  (5)  in high  white  product  yields  in  both 
refineries with the average  74.8% in 2012  vs. 66.6% in  2011 and (6)  strong 
cost control. These positives were mitigated  by the negative effects of:  (1) 
an increase  in the  price  of crude  oil (2)  a  decrease in  the  Brent-Ural 
spread,(3) a decline in motor fuel consumption in core markets and (4) higher
energy costs, mainly due to higher natural gas prices.

The R&M segment's  operating results  (excluding special  items) exceeded  the 
same period last year  by HRK 281  million, at HRK  563 million. The  positive 
external environment, especially in  terms of the  record high gasoline  crack 
spread, was  utilized by  matching production  yield with  market yield,  i.e. 
keeping the  share  of  marketable  fuel products  high  while  the  share  of 
non-profitable black products was kept low. Increased depreciation related  to 
putting new assets on stream and the price cap in the domestic market  limited 
positive effects.



Reported operating loss  for Q1-Q3 2012  amounted to HRK  577 million and  was 
negatively affected by HRK 14 million of special items.



Although both the gasoline  and diesel markets are  contracting for the  third 
consecutive year, 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. Negative  GDP  movements and  reduced  spending  are 
apparent through the industry, mostly in construction and transport.



Refining and Marketing capital expenditures



A large scale refinery development program was completed in 2011. As a  result 
of this, in Q1-Q3 2012 CAPEX spending was lower compared to the same period of
the previous year (HRK  96 million vs. 328  million). The successful  start-up 
and putting on-stream  of the  Isomerization unit  in the  Sisak Refinery  has 
significantly improved the octane pool in  gasoline blending and was the  most 
important project in  H1 2012.  Numerous growth  and HSE/sustainable  projects 
have been launched and further projects are in preparation and approval  phase 
with initiation expected  by the  end of 2012,  in line  with preparation  for 
upcoming significant development programs.



Retail Services*



Q2 2012 Q3 2012  Q3 2011    % Segment IFRS results (HRK   Q1-Q3 2011 Q1-Q3   %
                Restated      mln)                          Restated  2012
  1,966   2,423    2,356    3 Revenues                         5,854 6,006   3
     30      87       90  (3) EBITDA reported                    106   130  23
                              EBITDA excl. special
     31      95      101  (6) items**                            132   149  13
                              Operating profit/(loss)
   (20)      67       61   10 reported                            19    38 100
                              Operating profit/(loss)
   (12)      70       80 (13) excl. special items**               56    51 (9)
                              CAPEX and investments (w/o
     34      57       16  258 acquisition)                        57    93  63

* Refers to  Retail INA. d.d.  and Petrol Rijeka  and retail of  subsidiaries: 
Proplin (until October  3, 2011), Osijek  Petrol, Interina Ljubljana,  Holdina 
Sarajevo, INA - Crna Gora

**The Q1-Q3  2012 performance  was  negatively influenced  by HRK  13  million 
special items



Q2 2012 Q3 2012 Q3 2011    % Refined product retail Q1-Q3 2011 Q1-Q3 2012    %
                             sales (kt)
     89     109     118  (8) Motor gasoline                300        272  (9)
    164     206     212  (3) Gas and heating oils          538        505  (6)
      7       8      10 (16) LPG                            27         22 (16)
      1       1       1 (11) Other products                  2          2 (14)
    261     324     342  (5) Total                         868        801  (8)
Q2 2012 Q3 2012 Q3 2011    % Refined product retail Q1-Q3 2011 Q1-Q3 2012    %
                             sales (kt)
    249     309     326  (5) Croatia                       828        764  (8)
      9      11      12  (7) B&H                            29         27  (7)
      3       4       4  (8) Other markets                  10         10  (5)
    261     324     342  (5) Total                         868        801  (8)





Third quarter 2012 vs. second quarter 2012 results



In Q3 2012, the Retail Segment achieved an operating profit excluding  special 
items of HRK 70 million, representing  an improvement of HRK 82 million.  Main 
drivers were (1) an improved fuel  margin due to seasonal effects (24%  higher 
sales) and (2) lower receivables from customers.



Third quarter 2012 vs third quarter 2011 results



Compared to Q3 2011, operating profit excluding special items was lower by HRK
10 million in Q3 2012, primarily due to (1) a lower sales volumes by 5% caused
by decline in consumption  and purchasing power,  and (2) higher  expenditures 
from value adjustments.

Operating profit  in Q3  2012  totalled HRK  67  million, which  includes  the 
negative impact of special items in the amount of HRK 3 million.



Q1-Q3 2012 vs Q1-Q3 2011 results



The Retail Segment recorded operating profit excluding special items of HRK  5 
million lower compared to the same period the previous year. This decrease  in 
operating result was driven by  (1) a lower fuel  margin, and (2) lower  sales 
volumes, in part mitigated by decreased personnel costs and lower provisions.

Reported operating profit in Q1-Q3 2012 amounted to HRK 38 million,  including 
the negative impact of HRK 13 million special items.



In the first nine months of 2012,  total retail sales volumes decreased by  8% 
compared to the  same period  the previous year,  mainly as  a consequence  of 
weaker demand driven by economic slowdown and an increase in retail prices, as
well as the  negative influence of  the strong  winter and a  lower number  of 
operating filling stations  in 2012.  As a result  of aforementioned  factors, 
sales volumes of gasoline fell by 9%, while 6% less gas oil was sold.



Throughput per site in the first three quarters of 2012 was 3% lower  compared 
to the  same period  previous  year, indicating  both contracting  market  and 
intensified network modernisation programme having a constant number of closed
petrol stations for construction works.



At 30 September 2012 INA Group operated a network of 432 filling stations (380
in Croatia and 52 abroad, of which 45 in Bosnia and Herzegovina, 6 in Slovenia
and 1 in Montenegro). Since 30 September 2011, INA Group's retail network  has 
been reduced  by 22  filling stations,  this  is the  result of  an  intensive 
modernization program in 2012.



Retail capital expenditures



Capital expenditures in  Q1-Q3 2012 amounted  to HRK 93  million and were  63% 
higher than the same period last year, when amounting HRK 57 million.

As part of the intensive INA Retail network modernisation program, which  aims 
to enhance  the visual  identity  and functionality  of filling  stations  and 
achieve a high level of customer service and consumer satisfaction, 47  petrol 
stations were modernised in the  first nine months of  2012, and more than  40 
stations are in the construction  and tendering phases. With the  acceleration 
of the programme INA expects to operate the leading Croatian network through a
number of premium modernised stations.





             Condensed Consolidated Income Statement - INA-GROUP

               For the period ended 30 September 2011 and 2012

                              (in HRK millions)





                 Q3 2011                                   Q1-Q3    Q1-Q3
Q2 2012 Q3 2012 Restated    %                      Note     2011     2012    %
                                                        Restated
                              Sales revenue
  4,252   4,908    4,508    9 a) domestic                 12,799   14,274   12
  3,023   3,181    3,459  (8) b) exports                   9,928    8,346 (16)
  7,275   8,089    7,967    2 Total sales revenue   1     22,727   22,620  (0)
                              Income from own
                              consumption of
                              products and
     59      82       89  (8) services                       178      165  (7)
                              Other operating
     68      52      (3) n.a. income                         359      238 (34)
                              Total operating
  7,402   8,223    8,053    2 income                      23,264   23,023  (1)
                              Changes in
                              inventories of
                              finished products
  (387)       5       76 (93) and work in progress           904      347 (62)
                              Cost of raw
                              materials and
(3,764) (4,464)  (3,722)   20 consumables           2   (11,606) (11,630)    0
                              Depreciation and
  (429)   (387)    (768) (50) amortization          4    (1,934)  (1,444) (25)
  (430)   (440)    (461)  (5) Other material costs  4    (1,290)  (1,281)  (1)
  (307)   (267)    (280)  (5) Service costs         4      (866)  (1,015)   17
  (656)   (589)    (664) (11) Staff costs           5    (2,030)  (1,864)  (8)
                              Cost of other goods
  (926) (1,006)  (1,353) (26) sold                  3    (3,115)  (3,889)   25
                              Impairment and
  (312)    (70)    (229) (69) charges (net)                (666)    (370) (44)
                              Provisions for
                              charges and risks
  (288)      26       37 (30) (net)                          231    (355) n.a.
(7,499) (7,192)  (7,364)  (2) Operating expenses        (20,372) (21,501)    6
                              Profit from
   (97)   1,031      689   50 operations                   2,892    1,522 (47)
                              Share in the profit
                              of associated
                              companies
   (88)      77       78  (1) Finance income                 207      157 (24)
  (186)    (43)    (542) (92) Finance costs                (361)    (374)    4
                              Net loss from
  (274)      34    (464) n.a. financial activities  7      (154)    (217)   41
  (371)   1,065      225  373 Profit before tax            2,738    1,305 (52)
     67   (240)     (99)  142 Income tax expense    6      (682)    (365) (46)
  (304)     825      126  555 Profit for the year          2,056      940 (54)
                              Attributable to                             n.a.
                              Owners of the
  (304)     825      126  555 Company                      2,057      933 (55)
                              Non-controlling
      -       -        - n.a. interests                      (1)        7 n.a.
  (304)     825      126  555                              2,056      940 (54)
                              Earnings per share
                              Basic and diluted
                              earnings per share
 (30.4)    82.5     12.6  555 (kunas per share)            205.7     93.3 (55)





     Condensed Consolidated Statement of Comprehensive Income - INA-GROUP

               For the period ended 30 September 2011 and 2012

                               (in HRK million)





Q2 2012 Q3 2012  Q3 2011    %                            Q1-Q3 2011 Q1-Q3    %
                Restated                                   Restated  2012
  (304)     825      126  555 Profit for the year             2,056   940 (54)
                              Other comprehensive
                              income:
                              Exchange differences
                              arising from foreign
    462   (278)      564 n.a. operations                      (125)  (71) (43)
                              Gains on
                              available-for-sale
   (37)     (2)     (62) (97) investments, net                 (57)     6 n.a.
                              Other comprehensive
    425   (280)      502 n.a. income, net                     (182)  (65) (64)
                              Total comprehensive income
    121     545      628 (13) for the year                    1,874   875 (53)
                              Attributable to:
    121     545      628 (13) Owners of the Company           1,875   868 (54)
      -       -        - n.a. Non- controlling interests        (1)     7 n.a.





Condensed Consolidated Statement of Financial Position - INA-GROUP

                        At 30 September 2011 and 2012

                              (in HRK millions)





                                         Note 1 January 2012 30 Sept 2012    %
Assets
Non-current assets
Intangible assets                         9              880          673 (24)
Property, plant and equipment             10          20,294       19,489  (4)
Goodwill                                                 183          183    0
Investments in associates and joint
ventures                                                  34           34  (0)
Other investments                                        355          174 (51)
Long-term receivables                                    162          189   17
Derivative financial instruments                           5            5    0
Deferred tax                                             662          746   13
Available for sale assets                               325          332    2
Total non-current assets                              22,900       21,825  (5)
Current assets
Inventories                               12           3,693        4,212   14
Trade receivables net                     13           3,282        2,641 (20)
Other receivables                                        456          970  113
Derivative financial instruments                           2            2    0
Other current assets                                      76           27 (64)
Prepaid expenses and accrued income                       79          179  127
Cash and cash equivalents                                337          609   81
Current assets                                         7,925        8,640    9
Assets classified as held for sale                         -            - n.a.
Total current assets                                   7,925        8,640    9
Total assets                              8           30,825       30,465  (1)
Equity and liabilities
Capital and reserves
Share capital                             11           9,000        9,000    0
Revaluation reserve                                        -            6 n.a.
Other reserves                                         2,616        2,545  (3)
Retained earnings / (Deficit)                          2,759        3,689   34
Equity attributable to equity holder of
the parent                                            14,375       15,240    6
Non-controlling interests                               (10)            0 n.a.
Total equity                                          14,365       15,240    6
Non-current liabilities
Long-term loans                                        5,630        1,148 (80)
Other non-current liabilities                            126          131    4
Employee benefits obligation                             104          100  (4)
Provisions                                             2,715        2,789    3
Total non-current liabilities                          8,575        4,168 (51)
Current liabilities                                                       n.a.
Bank loans and overdrafts                              1,918        1,122 (42)
Current portion of long-term debt                      1,904        4,690  146
Trade payables                            15           2,032        3,034   49
Taxes and contributions                                1,524        1,343 (12)
Other current liabilities                                246          293   19
Accruals and deferred income                              48           42 (13)
Employee benefits obligation                              13           10 (23)
Provisions                                               200          523  162
Current liabilities                                    7,885       11,057   40
Liabilities directly associated with
assets classified held for sale                            -            - n.a.
Total current liabilities                              7,885       11,057   40
Total liabilities                         14          16,460       15,225  (8)
Total equity and liabilities                          30,825       30,465  (1)





            Condensed Consolidated Cash Flow Statement - INA GROUP

               For the period ended 30 September 2011 and 2012

                              (in HRK millions)



                 Q3 2011                                   Q1-Q3    Q1-Q3
Q2 2012 Q3 2012 Restated     %                     Note     2011     2012    %
                                                        Restated
                               Profit/(loss) for
  (304)     825      126   555 the year                    2,056      940 (54)
                               Adjustments for:
                               Depreciation and
    429     387      768  (50) amortisation                1,934    1,444 (25)
                               Income tax
                               (benefit)/expenses
                               recognized in
   (67)     240       99   142 (loss)/profit                 682      365 (46)
                               (Gain) / loss over
                               / under lifting
      -       -        -  n.a. receivable                      -        - n.a.
                               Impairment charges
    317      79      204  (61) (net)                         746      533 (29)
                               Reversal of
    (5)     (9)       25  n.a. impairment                   (80)    (163)  104
                               Gain on sale of
                               property, plant and
      -     (5)        1  n.a. equipment                     (9)      (7) (22)
                               Gain on sale
                               investments and
      -       -       17  n.a. shares                         28        - n.a.
                               Foreign exchange
    186   (132)      387  n.a. loss/(gain)                  (56)     (82)   46
                               Interest expense
     36      29       42  (31) (net)                          94       95    1
                               Other financial
                               expense recognised
    (1)      84     (35)  n.a. in profit                    (23)      119 n.a.
                               Increase in
    293    (35)     (32)     9 provisions                  (218)      355 n.a.
                               Decommissioning
     24      39       32    23 interests                      86       87    1
                               Other non-cash
      6    (36)     (22)    64 items                        (20)      (6) (70)
                               Operating cash flow
                               before working
    914   1,466    1,612   (9) capital changes      16     5,220    3,680 (30)
                               Movements in
                               working capital      17
                               (Increase)/decrease
   (60)   (368)    (598)  (38) in inventories            (1,922)    (618) (68)
                               (Increase)/decrease
                               in receivables and
   (30)      82      240  (66) prepayments                   386       71 (82)
                               (Decrease)/increase
                               in trade and other
  1,425     540      236   129 payables                  (1,018)    1,363 n.a.
                               Cash generated from
  2,249   1,720    1,490    15 operations                  2,666    4,496   69
  (788)   (220)     (68)   224 Taxes paid                  (396)  (1,062)  168
                               Net cash inflow
                               from operating
  1,461   1,500    1,422     6 activities                  2,270    3,434   51
                               Cash flows used in
                               investing
                               activities
                               Payments for
                               property, plant and
  (140)   (338)    (101)   235 equipment                   (781)    (660) (15)
                               Payment for
   (16)    (33)      (7)   371 intangible assets            (55)     (63)   15
                               Proceeds from sale
                               of non-current
      -       5        1   400 assets                         12        7 (42)
                               Investments of
      -       -        -  n.a. subsidiaries                    -        - n.a.
                               Proceeds from sale
      -       -        -  n.a. of subsidiaries                22        - n.a.
                               Dividends received
                               from companies
                               classified as
                               available for sale
                               and from other
      -       -        7  n.a. companies                       8        1 (88)
                               Interest received
                               and other financial
      8       5        7  (29) income                         20       20    0
                               Investments and
                               loans to third
    (8)       -      (8)  n.a. parties, net                  (9)      145 n.a.
                               Net cash used for
                               investing
  (156)   (361)    (101)   257 activities           18     (783)    (550) (30)
                               Cash flows from
                               financing
                               activities
                               Additional
                               long-term
    163      46        1 4,500 borrowings                     27      276  922
                               Repayment of
                               long-term
(1,423)   (208)    (285)  (27) borrowings                (1,352)  (1,907)   41
                               Additional
                               short-term
  3,771   3,344    5,034  (34) borrowings                 16,022   11,404 (29)
                               Repayment of short
(4,063) (4,195)  (5,745)  (27) term borrowings          (15,161) (12,193) (20)
      -       -        -  n.a. Dividends paid              (480)        - n.a.
                               Interest paid on
   (25)    (22)        5  n.a. long-term loans                 -     (73) n.a.
                               Other long-term
      1       -      (3)  n.a. liabilities, net              (7)      (1) (86)
                               Interest paid on
                               short term loans
                               and other financing
     18    (72)    (113)  (36) charges                     (246)    (117) (52)
                               Net cash from
                               financing
(1,558) (1,107)  (1,106)     0 activities                (1,197)  (2,611)  118
                               Net
                               (decrease)/increase
                               in cash and cash
  (253)      32      215  (85) equivalents                   290      273  (6)
    843     559      304    84 At 1 January                  317      337    6
                               Effect of foreign
                               exchange rate
   (31)      18       39  (54) changes                      (49)      (1) (98)
                               At the end of
    559     609      558     9 period                        558      609    9





      Condensed Consolidated Statement of Changes in Equity - INA-GROUP

               For the period ended 30 September 2011 and 2012

                              (in HRK millions)

                                      

                 Attributable to equity holders of the parent







                                               Retained              Non
                 Share   Other   Revaluation  profits /   Total controlling Total
                capital reserves  reserves   (Accumulated         interest   equity
                                               deficit)
Balance as at 1
January 2011      9,000    2,340          27        1,424 12,791           2 12,793
Profit for the
year                  -        -           -        2,057  2,057         (1)  2,056
Other
comprehensive
income, net           -    (125)        (57)            -  (182)           -  (182)
Other
comprehensive
income, net           -    (125)        (57)        2,057  1,875         (1)  1,874
Dividends
payable               -        -           -        (480)  (480)           -  (480)
Balance as at
30 Sept 2011      9,000    2,215        (30)        3,001 14,186           1 14,187
                                               Retained              Non
                 Share   Other   Revaluation  profits /   Total controlling Total
                capital reserves  reserves   (Accumulated         interest   equity
                                               deficit)
Balance as at 1
January 2012      9,000    2,616           -        2,759 14,375        (10) 14,365
Profit for the
year                  -        -           -          933    933           7    940
Other
comprehensive
income, net           -     (71)           6            -   (65)           -   (65)
Purchase of
non-controlling
interest              -        -           -          (3)    (3)           3      -
Total
comprehensive
income for the
year                  -     (71)           6          930    865          10    875
Dividends paid        -        -           -            -      -           -      -
Balance as at
30 Sept 2012      9,000    2,545           6        3,689 15,240           - 15,240







Financial overview and notes



Income statement

Notes
      Q1-Q3 2012 results
  1   Total sales revenues in  Q1-Q3 2012 amounted to  HRK 22,620 million  and 
      were slightly  lower  by  HRK 107  mln  than  in Q1-Q3  2011,  as  lower 
      hydrocarbon sales volumes were offset by higher realized oil derivatives
      and natural gas prices compared to the same period last year.
  2   Costs of raw materials and consumables  were also slightly lower by  HRK 
      24 mln compared to Q1-Q3 2011 and  amounted to HRK 11,630 million, as  a 
      result of 22% lower volumes of imported crude, while the average  import 
      price of crude rose by 12%.
  3   The costs of goods sold increased by 25% to HRK 3,889 million mostly due
      to a combined effect of higher sold volumes of imported natural gas  and 
      higher prices compared to Q1-Q3 2011.
  4   Within the other operating costs realised in Q1-Q3 2012:
      § Other material  costs slightly decreased  by 1% to  the amount of  HRK 
      1,281 million.
      § Service costs in the amount of HRK 1,015 million recorded an  increase 
      of 17% mainly due to higher royalty costs compared to Q1-Q3 2011.
      § Depreciation was lower by 25% and amounted to HRK 1,444 million mainly
      due to  "force majeure"  announced in  February 2012  reducing  Upstream 
      depreciation and
      § Adjustments and provisions of HRK 725 million were by HRK 290  million 
      higher and related to international operations.
  5   Staff costs amounted  to HRK 1,864  million, which is  a decrease of  8% 
      resulting from  workforce optimization  compared  to Q1-Q3  2011.  Staff 
      costs include net salaries  in the amount of  HRK 936 million,  employee 
      income tax in  the amount  of HRK  409 million,  tax on  payroll in  the 
      amount of HRK 246 million and other payroll related costs in the  amount 
      of HRK 273 million for the period ended 30 September 2012.
      INA terminated the contracts of 264  employees and severance payments in
      the total amount of HRK 77,2  million were made. (The number of  workers 
      includes 127 employees who  were gone on 31  December 2011, because  the 
      costs of their severance payments were included in Q1-Q3 2012.)
  6   In the first nine  months 2012 income tax  expense decreased by HRK  317 
      million to the amount of HRK 365 million.
      Tax costs and deferred taxes during the interim period are calculated on
      the basis of actual results and the profit tax rate, 20% for the  period 
      ending 30 September  2012 and  20% for  the period  ending 30  September 
      2011.
  7   Net financial expenses in the amount of HRK 217 million were recorded in
      Q1-Q3 2012, compared to the net financial expenses of HRK 154 million in
      the same period of 2011.
      § Net foreign exchange  gains were HRK 80  million in Q1-Q3 2012  mainly 
      related to the appreciation of HRK  against USD, compared to Q1-Q3  2011 
      net foreign exchange gains of HRK 330 million
      § Interest payable  was HRK 130  million in Q1-Q3  2012, while  interest 
      received amounted to HRK 17 million.
      The Company  has  recognized  revenues  in  the  income  statement  from 
      hydrocarbon sales  in  Syria  which  had been  realized,  in  line  with 
      international accounting standards, meaning that the cash principle  has 
      been applied since the beginning of 2011. INA until now did not  receive 
      the outstanding  revenues for  its share  of hydrocarbon  production  in 
      Syria neither it expects to realize its production share from its Syrian
      project for  the  foreseeable  future,i.e. at  least  until  the  "force 
      majeure" conditions  cease  to  exist.  Following  the  changes  of  the 
      parameters for  the  functional  depreciation  (INA's  production  share 
      during the "force majeure") on the  major part of the Syrian assets  and 
      in line with  the IFRS, depreciation  would not be  booked for the  cash 
      generating assets from February 2012 till force majeure conditions  will 
      cease to exist.
      Under current practice  and in  line with  the international  accounting 
      standards the  Company adjusts  its  receivables that  are 180  days  or 
      older. Accordingly the Company has adjusted a significant amount of  its 
      receivables in Egypt that meet these criteria.

      Restatement of  the previous  periods understands  the  reclassification 
      relating to financial statements presentations  (in line with IAS 1)  in 
      respect of netting the revenues  and expenses and technical  corrections 
      relating to recording of the asset  impairment made at 2011 year end  to 
      the appropriate corresponding interim period of that year.
      Until end of September  2012, HRK 1,446  million recurring cost  savings 
      (1,145  excluding   inter-segmental)  and   HRK  511   million   revenue 
      improvements have been  achieved compared  to the 2008  baseline at  INA 
      Group level. Altogether, HRK 1,957 million of recurring EBIT improvement
      (1,656 excluding inter-segmental) has been delivered since the program's
      inception in 2010.

      





Balance sheet



 8   As at 30 September  2012, INA Group total  assets amounted to HRK  30,465 
     million and were almost at the same level as at 31 December 2011.
 9   In the period ending 30 September 2012, the Group invested HRK 63 million
     in intangible assets. The effect  of depreciation equals HRK 41  million. 
     Foreign exchange revaluation of oil and gas fields decreased the net book
     value in amount of HRK  11 million. Value adjusted investments  decreased 
     net book  value  by  HRK  104 million.  Transfer  to  Property,  Plant  & 
     Equipment decreased  net  book value  of  intangible assets  by  HRK  114 
     million.
 10  In the nine month  period, ending 30 September  2012, INA Group  invested 
     HRK 622 million in property, plant and equipment. Reversal of capitalised
     decommissioning costs decreased the  value of assets  by HRK 55  million. 
     Retranslation caused by U.S. dollar exchange rate differences on oil  and 
     gas fields decreased net book value of INA Group in the amount of HRK  61 
     million. Reversal of impairment according to  IAS 36 in INA Group  equals 
     HRK 16 million.  The effect  of depreciation  reduced net  book value  of 
     property, plant and equipment in the  amount of HRK 1,403 million.  Value 
     adjusted investments decreased net book value by HRK 51 million. Transfer
     from intangible assets increased the value of Property, plant & equipment
     by HRK 114 million. Disposal of assets was HRK 3 million. Increase of INA
     Group net book value is also a result of foreign exchange differences  in 
     the amount  of HRK  15  million. Correction  of prior  year  depreciation 
     increased net  book value  of  property, plant  and  equipment by  HRK  1 
     million.

     
 11  Issued capital at 30 September 2012 amounted to HRK 9,000 million.  There 
     were no movements  in the  issued capital of  the Company  in either  the 
     current or the prior financial reporting.

     
 12 Inventories amounted to HRK  4,212 million, which is  an increase of  14% 
     compared to  31 December  2011,  as a  result  of higher  inventories  of 
     natural gas  (higher volumes  and  higher prices)  and higher  crude  oil 
     products prices.

     
 13  Trade receivables decreased by 20% as  a result of management efforts  to 
     collect overdue receivables and decreased sales volumes.

     
 14  As at 30 September 2012 total  liabilities decreased by 8% to the  amount 
     of HRK 15,225 million mostly as an effect of lower indebtedness  compared 
     to the 31 December 2011 level.

     INA Group net  indebtedness decreased by  30% and amounted  to HRK  6,351 
     million, as  INA primarily  managed to  reduce its  long-term debt  as  a 
     result of  higher  own  cash generating  capabilities.  Gearing  ratio(4) 
     decreased from 38.8% as at 31 December 2011, to 29.4% as at 30  September 
     2012.

     
 15  Trade payables increased  by 49%  to HRK 3,034  million, as  a result  of 
     higher amount  of crude  oil and  natural gas  purchased compared  to  31 
     December 2011.

(4) Net debt / net debt plus equity incl. minority interests



Cash flow



16 The operating cash-flow before changes  in working capital amounted to  HRK 
   3,680 million in Q1-Q3 2012, representing a decrease of HRK 1,540  million, 
   or 30%, compared to Q1-Q3 2011, mainly as a result of lower EBITDA.
17 Changes in working capital affected  the operating cash flow positively  by 
   HRK 816 million, primarily due to:
   § Higher liabilities by HRK 1,363 million related higher crude purchases.

   § Increased value of inventories by HRK 618 million (reflecting both higher
   prices and higher volumes)
   Tax  payment  affected   operating  cash   flow  by   HRK  1,062   million. 
   Afore-mentioned factors caused  a HRK  3,434 million net  cash inflow  from 
   operating activities in Q1-Q3 2012.
18 Net outflows  in  investing activities  amounted  to HRK  550  million,  in 
   comparison with HRK 783 million of outflows in Q1-Q3 2011. Positive  inflow 
   in the amount of HRK 145  million was recorded resulting from repaid  loans 
   by subsidiaries of  joint ventures. The  lower level of  cash inflow was  a 
   consequence of the nature  of key projects, some  of which were  completed, 
   and from current less favourable operating market environment.



Related party transactions



The company has dominant positions in  Croatia in oil and gas exploration  and 
production, oil refining  and the  sale of gas  and petroleum  products. As  a 
result of  the Company's  strategic position  within the  Croatian economy,  a 
substantial portion of its  business and the business  of its subsidiaries  is 
transacted with the Croatian Government, its departments and agencies, and the
companies with  the  Republic of  Croatia  being their  majority  shareholder. 
Transactions between  the  Company and  its  subsidiaries, which  are  related 
parties of the  Company, have  been eliminated on  Group level  consolidation. 
Details of transactions between  INA, d.d. and the  Group companies and  other 
related parties are disclosed below.

Product sales between  related parties were  made at the  usual prices of  the 
Group,  reduced  by  discounts  and  rebates  depending  on  each   particular 
relationship. Purchases  of  products between  related  parties were  made  at 
market prices, including  appropriate discounts depending  on each  particular 
relationship. INA d.d. generally seeks collateral for oil product sold to  its 
related parties, except from customers  who are state budget beneficiaries  or 
fully owned by the state. The liabilities of the related parties to INA,  d.d. 
are presented net of impairment of for bad and doubtful receivables





                                    Amounts owed from       Amounts owed to
            INA-Group                related parties        related parties
             HRK mln                   30 Sept 2012          30 Sept 2012
Companies available for sale
JANAF d.d. Zagreb                                      1                     6
Strategic partner
MOL Plc                                               60                    85
Companies controlled by strategic
partner
Tifon d.o.o.                                          53                     1
Kalegran Ltd.                                         22                     -
MOL SLOVENIJA d.o.o.                                   3                     9
IES-Italiana Energia e Servizi
s.p.a.                                                 3                     2
Intermol d.o.o.                                        6                     -
Energopetrol d.d.                                      6                     -
Moltrade Mineralimpex Zrt.                             -                     -
Companies controlled by the State
Hrvatska elektroprivreda                             200                     2
Other                                                443                    39
            INA-Group                 Sales of goods       Purchase of goods
             HRK mln                   30 Sept 2012          30 Sept 2012
Companies available for sale
JANAF d.d. Zagreb                                      2                    53
Strategic partner
MOL Plc                                              313                   400
Companies controlled by strategic
partner
Tifon d.o.o.                                         666                     5
Moltrade Mineralimpex Zrt.                             -                   102
Slovnaft, a.s.                                         -                    76
Mol Lub Kft.                                           -                     1
MOL SLOVENIJA d.o.o.                                  25                    69
IES-Italiana Energia e Servizi
s.p.a.                                                15                     6
TVK Nyrt.                                              -                     2
Intermol d.o.o.                                       54                     -
Energopetrol d.d.                                    270                     -
Companies controlled by the State
Hrvatska elektroprivreda                           1,936                   125
Other                                              1,739                   419



Financial instruments and risk management



Risk Management and Hedging  Policy for INA Group  is providing the  framework 
under  which  INA  and  its  consolidated  subsidiaries  manage  and  maintain 
commodity, foreign exchange  and interest  rate risk at  an acceptable  level. 
Beside financial (market) risks, the  most important risks include the  credit 
risk and the liquidity risk.



a) Market risk

Commodity price risk management

INA purchases crude  oil on  a spot  market price,  mostly through  short-term 
credit facility arrangements in US dollars. The required quantities of gas are
purchased at a price denominated in US dollars in accordance to 3-year  supply 
contract with Italian ENI. Domestic prices of refined products are  determined 
under the  pricing formula  set  out in  the  Highest Retail  Refined  Product 
Pricing Regulation which, to  a limited extent, is  protecting the Group  from 
the changes in  crude and oil  product prices and  the foreign currency  risk, 
enabling refinery  products  to  be  reprised  bi-weekly.  INA  may  also  use 
derivative instruments in managing its commodity exposure.

Foreign currency risk management

Many Group transactions  are priced  and denominated in  foreign currency  and 
thus the Group is  exposed to currency  risk. The Group has  net long USD  and 
EUR, and net short HRK operative cash  flow position. The Group may use  cross 
currency swaps  to  adjust the  currency  mix of  the  debt portfolio.  As  of 
September 30, 2012, there were no open cross currency transactions.

Interest rate risk management

INA Group companies  use borrowed funds  at both fixed  and variable  interest 
rates (mostly variable) and the Group is consequently exposed to the  interest 
rate risk. The  Group does  not speculate  on interest  rate developments  and 
primarily chooses floating rates. As of September 30, 2012, there were no open
interest rate swap transactions.

Other price risk

INA is exposed to equity price risks arising from equity investments held  for 
strategic reasons and not for trading.



b) Credit risk

Credit risk  refers to  the risk  that the  counterparty will  default on  its 
contractual obligations resulting in a financial loss to the Group.  According 
to existing Credit Risk Management Procedure Group estimates  creditworthiness 
and risk in dealing  with customers based on  internal model of evaluation  as 
well  as  using  the  services  of  creditworthiness  agencies.  There  is  no 
significant credit  risk  exposure of  INA  Group  that is  not  covered  with 
collateral, other than those  to the institutions  and entities controlled  by 
the state  and  the local  government,  and exposure  toward  customers  under 
certain concession  agreements  abroad.  In  order  to  extend  the  available 
measures for collection of receivables, INA is also using services of agencies
for "out of court" collection of receivables.



c) Liquidity risk

The Group's  liquidity risk  is managed  by maintaining  adequate reserves  of 
liquidity and  credit lines  and  by continuous  monitoring of  projected  and 
actual cash flow and due dates for account receivables and payables.

As of September  30, 2012,  the Group  had contracted  short-term bank  credit 
lines amounting to  HRK 1.7  bn (CNB  middle rate),  excluding overdrafts  and 
trade financing  credit lines  established  with the  purpose to  finance  the 
purchase of crude  oil and  oil products, and  contracted long-term  revolving 
credit lines amounting to HRK 6.5 bn (CNB middle rate).



d) Fair value of financial instruments

The Group has concluded some long-term sale or purchase contracts that contain
embedded derivatives as defined by IAS 39.









IRAN Moghan-2 Block



Currently  INA,  d.d.  holds  a  Service  Contract  for  the  Exploration  and 
Development of the  Moghan-2 Block in  Iran signed  on 8 April  2008 with  the 
National Iranian Oil Company (NIOC). The  contract came into effect on 1  June 
2008 and  regulates INA  as the  operator in  the exploration,  appraisal  and 
development phase  while  NIOC  will conduct  production  operations.  Minimum 
exploration work commitments include seismic surveys (2D and 3D) and  drilling 
of one exploration  well with  minimum financial obligation  amounting to  USD 
40.3 million. Obligatory Exploration phase expired on 31 May 2012. Due to  the 
very complex developments regarding the international regulation for operating
in Iran, including restrictive  measures, actual project costs  as of 30  June 
2012 amounted to USD 4.5 mln.

The Company is currently not engaged in any activities that would be in breach
of the  EU and  wider  international trade  sanctions  against Iran  and  will 
continue with its efforts to ensure  all future activities are carried out  in 
compliance with the aforementioned regulation.





Contingent liabilities



EDISON INTERNATIONAL S.p.a arbitration procedure

EDISON INTERNATIONAL S.p.a. in its claim  states that INA essentially did  not 
adhere to the Production Sharing Agreement  for the contractual area of  north 
Adriatic, Izabela and Iris/Iva blocks,  i.e. that it breached the  obligations 
arising from the Agreement, and Edison is consequently claiming the amount  of 
EUR 102.3 million.On 19 July 2011, INA provided its response to the Notice of
Arbitration and also  set out  its Counterclaim.  The seat  of arbitration  is 
Vienna, Republic  of  Austria,  and  the  arbitration  proceedings  are  being 
conducted pursuant to the UNCITRAL Arbitration Rules 2010. Further submissions
are currently being exchanged before hearing scheduled for December 2012.





Findings Report received from the Ministry of Finance

On 20  February 2012,  INA d.d.  received  from the  Financial Police  at  the 
Ministry  of  Finance  a  Report  on  the  findings  in  connection  with  the 
supervision of  legality,  correctness  and  timeliness  of  the  calculation, 
declaration and payment  of budgetary revenue  for the period  1 January  2008 
until 31 December 2009. The inspection covered value-added tax and  corporate 
income tax for the period 1 January 2008 - 31 December 2009. According to  the 
Findings Report, the Company  has been imposed  additional tax liabilities  as 
well as late-payment interest for the period from 2008 to 2009. The  potential 
tax liability and late penalty interest  determined by the tax resolution  was 
decreased compared to  the initial  liabilities determined in  the Report  and 
amounts to approximately HRK 124 millionINA, d.d. filed the appeal to the  tax 
resolution within the prescribed deadline and is confident of proving its case
in the pending administrative proceedings.



Angolan Ministry of Finance audit

INA entered the Block  3 Production Sharing Agreement  in Angola as member  of 
related contractor groups in 1980 and  started crude oil lifting in 1985.  The 
audit of the activities was completed for the period 2003-2009 by the  Angolan 
Ministry of  Finance  on all  blocks  on  which INA  performs  activities  and 
additional tax and profit oil liabilities  were imposed to INA.INA, d.d.  made 
provisions in the amount of HRK 122 million for the potential tax and  profit 
oil liability relating  to the ongoing  audit for 2010.  Although the  Angolan 
Ministry of Finance did not start the  audit of 2011, INA, d.d. estimates  the 
potential contingent liability in this  regard in the amount of  approximately 
HRK 33 million.







Subsequent events



Starting from  01 August  2012, the  Corporate Service  Business Function  has 
changed its name  to Corporate Centre  Business Function. As  of 01  September 
2012, INA's  Executive director  of Corporate  Centre Business  Function,  Mr. 
Berislav Gašo has continued his career  within MOL Group, and the position  of 
the Executive  Director for  Corporate Centre  was taken  over by  Mr.  Tvrtko 
Perković.



              INA Group Summary Segmental Results of Operations



Q2 2012 Q3 2012  Q3 2011    %                   Q1-Q3 2011      Q1-Q3 2012   %
                Restated          (HRK mln)       Restated
                              Sales
                              Exploration &
  2,773   2,428    2,883 (16) Production             9,297           8,968 (4)
                              Refining &
  5,091   5,909    4,798   23 Marketing             13,798          15,095   9
  1,966   2,423    2,356    3 Retail                 5,854           6,006   3
                              Corporate and
    123     159      158    1 Other                    382             365 (4)
                              Inter-segment
(2,678) (2,830)  (2,228)   27 revenue              (6,604)         (7,814)  18
  7,275   8,089    7,967    2 Sales                 22,727          22,620 (0)
                                                           The story has
                              Operating                    been truncated,
                              expenses, net               
[TRUNCATED]
 
Press spacebar to pause and continue. Press esc to stop.