2016 at the companies − activities and sales performance
The LOTOS Group's marketing activities in 2016 were carried out by Grupa LOTOS and its subsidiaries: LOTOS Paliwa, LOTOS Oil, LOTOS Asfalt, LOTOS Kolej, and LOTOS-Air BP Polska.
Grupa LOTOS marketed its products in Poland (sales to foreign companies operating in the country) and on foreign markets (exports by sea and by land), while its subsidiaries targeted their sales at individual sectors, i.e. fuels, lubricants, and bitumens.
Areas of specialisation of the subsidiaries engaged in trading and sale of raw materials, products and services of the LOTOS Group:
- LOTOS Oil − manufacturing and sale of lubricating oils and lubricants, and sale of base oils,
- LOTOS Kolej − railway transport,
- LOTOS Asfalt − manufacturing and sale of bitumens,
- LOTOS Paliwa − wholesale and retail sale of fuels and light fuel oil, management of the LOTOS service station chain.
Selected activities and performance of the companies in 2016
LOTOS Kolej
- In Poznań, the company opened its sixth Transport Division, which is used to develop its services in Germany. In 2016, using the services of German train drivers, it transported 881,000 tonnes of products and intends to increase this volume to 1.1m tonnes in 2017 and 2m tonnes in 2019.
- LOTOS Kolej started to transport grains and fodder after it had been certified for compliance with the GMP+ B4 standard. The services are provided using LOTOS Kolej's own new rail cars.
- In 2016, the company increased its share in the Polish rail freight market from 9.91% to 10.20% and retained the second position (after PKP) among rail cargo carriers. For many years it has been the market leader in transport of dangerous goods − in 2016 the volume of dangerous goods it carried rose 24% (from 5.59m tonnes to 6.94m tonnes).
LOTOS-Air BP Polska
- The company began to sell aviation fuel to Emirates Airline and Air China, thus enlarging its pool of global customers.
- LOTOS-Air BP Polska increased its fleet of road tankers to 16 and now boasts the newest and the best fleet among businesses operating in Poland's aviation fuel market.
- The Olsztyn-Mazury Airport in Szymany is the fifth airport where the company sells aviation fuel 'at the wing tip'. Altogether, LOTOS-Air BP Polska supplies 350,000 litres of fuel on average at five Polish airports every day.
- In 2016, the company delivered record-high financial results, exceeding by several times the results it posted when it was established in 2014.
LOTOS Asfalt
- In 2016, LOTOS Asfalt continued its activities under the EFRA Project, as part of which it was responsible for covering the surface of roads with fullSMA bitumen.
- In 2016, 47 employees, i.e. more than 20% of the company staff, took part in a competition for innovative ideas.
LOTOS Serwis
- In 2016, LOTOS Serwis provided maintenance, repair and other services for the production facilities of the LOTOS Group and worked on the process modules of the Petrobaltic rig.
- In 2016, the company's Integrated Management System was certified by Polskie Centrum Badań i Certyfikacji, a Polish certification body.
- In H2 2016, the company was extensively involved in technical and organisational work as part of the preparation for the SPRING 2017 maintenance shutdown.
LOTOS Oil
- LOTOS Oil developed a new model of operation on the Polish market, based on communicating the quality and cutting-edge properties of its lubricants. On the international arena, the company started to work the Japanese brand ISUZU.
- Being present on 57 markets, LOTOS Oil was named ‘Ambassador of the Polish Economy’ and ‘Polish Business − International Champion’ in competitions held under the patronage of the Ministry of Foreign Affairs in 2016.
LOTOS Petrobaltic
- The company continued work on full development of the B8 field, e.g. it worked on the construction of a gas pipeline to Energobaltic and upgrade of the Petrobaltic rig.
- To renew its fleet, in December 2016 LOTOS Petrobaltic acquired a new platform supply vessel (PSV) Sylur, which is ultimately intended to operate as a multi-task vessel.
- Preparations for development of the B4 and B6 fields.
- Strengthening its position on the Norwegian Continental Shelf, where the LOTOS Group acquired interests in 5 licenses.
LOTOS Petrobaltic Group's production and sales of crude oil and gas in 2016
| Sales | Country | Volume ('000 boe) |
|---|---|---|
| Total crude oil and natural gas | Poland | 1 840,00 |
| Norway | 6 750,3 | |
| Lithuania | 365,6 |
| Production (1) | Country | Volume ('000 boe/d) |
|---|---|---|
| Total crude oil and natural gas | Poland | 5,5 |
| Norway | 20 | |
| Lithuania | 1,1 |
(1) Dzienna produkcja w boe/d stanowi sumę wolumenu wydobycia węglowodorów w 2016 r. podzieloną przez liczbę dni w roku.
Diesel oil, gasoline, aviation fuel − what are our best selling products?
The increase in our domestic sales was driven mainly by improved sales of diesel oil and gasolines (partly an effect of fuel market legislation enacted by the Polish government in August 2016) – the key petroleum products marketed through the wholesale and retail channels, which are more profitable than exports. The increase in sales of aviation fuel followed from higher sales in the wholesale and 'at the wing tip' channels, with the contract for supply of specialist F-34 fuel for the military being an additional source of growth.
LOTOS products with the highest share in sales in 2016
Like in the previous years, diesel oil had the largest share in the total sales volume. In 2016, the LOTOS Group sold 4,797 thousand tonnes of diesel oil, which accounted for 43.4% of total sales.
Gasolines represented 14.1% of total sales. The volume of gasolines sold in 2016 was 1,557 thousand tonnes, having grown by 0.6% on 2015.
Heavy fuel oil accounted for 13.6% of sales in 2016. The LOTOS Group sold 1,477 thousand tonnes of the product in 2016, 2.7% up on 2015.
In 2016, the Downstream segment sold 7,026 thousand tonnes of products in Poland (2015: 6,446 thousand tonnes; 2014: 6,282 thousand tonnes) and exported 3,993 thousand tonnes (2015: 4,471 thousand tonnes; 2014: 3,824 thousand tonnes).
The LOTOS Group’s sales by product category ('000 tonnes)
| 2016 | 2015 | 2016/2015 change | |||
|---|---|---|---|---|---|
| '000 tonnes | % share | '000 tonnes | % share | % | |
| Gasolines | 1,557 | 14.10% | 1.547 | 14.20% | 0.60% |
| Naphtha | 521 | 4.70% | 508 | 4.60% | 2.60% |
| Reformate | 45 | 0.40% | 13 | 0.10% | 246.40% |
| Diesel oils | 4,797 | 43.50% | 4 853 | 44.40% | -1.20% |
| Bunker fuel | 65 | 0.60% | 66 | 0.60% | -0.,30% |
| Light fuel oil | 268 | 2.40% | 251 | 2.30% | 6.70% |
| Heavy products (1) | 2,118 | 19.20% | 2,099 | 19.20% | 0.90% |
| JET A-1 fuel | 656 | 6.00% | 556 | 5.10% | 18.00% |
| Lubricants | 60 | 0.50% | 60 | 0.60% | 0.10% |
| Base oils | 214 | 1.90% | 202 | 1.80% | 6.30% |
| LPG | 247 | 2.20% | 238 | 2.20% | 4.00% |
| Crude oil (commodity) | 195 | 1.80% | 243 | 2.20% | -19.80% |
| Other | 276 | 2.50% | 290 | 2.70% | 9.70% |
| Total petroleum products, merchandise and materials of the Downstream segment | 11,018 | 100.0% | 10,917 | 100.0% | 1.30% |
| Natural gas (toe) | 675 | 6.20% | 223 | 2.00% | 202.90% |
| Crude oil (upstream) | 151 | 1.40% | 82 | 0.80% | 84.30% |
| NGC (2) | 43 | 0.40% | 8 | 0.10% | - |
(1) heavy fuel oil and bitumen
(2) natural gas condensate
How we sell our fuels
The LOTOS Group offers fuels on the domestic retail market exclusively through LOTOS Paliwa. On the wholesale market, the LOTOS Group operates both through Grupa LOTOS (sales of fuels to international corporations and key customers, e.g. under contracts with the Material Reserves Agency and the Military Property Agency) and LOTOS Paliwa (transactions with wholesale customers and independent operators). In 2016, our share in the domestic fuel market was 29.5%.
11 new service stations − record-high retail fuel sales
In 2016, we posted record-high retail fuel sales. At the end of 2016, the LOTOS service station chain comprised 487 stations, including 11 new ones. Optimisation efforts and the government's Fuels Package helped improve the chain's financial performance. Adjusted EBITDA in 2016 amounted to PLN 156m, compared with PLN 112m in 2015 and PLN 95m in 2014.
Facilities for customers
- The LOTOS service station chain's performance was supported by our successful efforts to extend the value chain and expand the sales model. Non-fuel products and services generate increasingly more revenue for the chain. Their development was the Marketing segment's key expenditure item in 2016, and was pursued with the objective of ensuring comfort for motorists by:
- Developing food services, the second largest (after sales of fuel) contributor to the 2016 profit. We have entered into long-term cooperation with the Subway restaurant chain,
- Introducing other services, such as cashback, automobile services, trailer rental, manual car wash facilities, mobile payments,
- Opening facilities which offer alternative fuels (electric car charging points in the Gdańsk-Sopot-Gdynia agglomeration).
- The sales efforts were supported by marketing activities – standardisation of the service stations' visual identification and offering customer-friendly solutions: dedicated call bells for disabled persons to call attention of the service station staff, baby changing tables, helmet racks in the toilet rooms for motorcycle riders, and dog watering stations for dog owners. Motorists can also charge their smartphones free of charge.
Management of the service station chain
Grupa LOTOS' chain of service stations is organised into Economy (LOTOS Optima) and Premium (LOTOS) segments. In 2016, we opened 11 new LOTOS sites, including 10 CODO and 1 DOFO station. The chain expansion was based on a plan focusing on key locations which offer the highest potential of winning and retaining fleet customers. The need to eliminate gaps identified in the geographic coverage of the LOTOS service station network was also a priority.
Expansion of the service stations' offering
Car rental service − partnership with 99rent
In order to enhance the range of services available to customers of its retail chain, LOTOS Paliwa commenced cooperation with 99rent, a car rental company. The objective is to establish a network of points offering customers a quick and convenient car rental service. In 2016, it was available at LOTOS stations in eight cities: Bydgoszcz, Częstochowa, Elbląg, Gdańsk, Kraków, Radom, Warsaw, and Wrocław.
Customers can rent cars and small vans. The rental procedure is simple and anyone aged 21 or over who has had a driving licence for at least 2 years can rent a car. The pickup and return processes take only a dozen or so minutes. For information about our service stations with car rental facilities, go to: www.lotos.pl/wypozyczauto .
Addition of new sites to the retail sales network
In 2016, the Premium service station chain was further standardised, and new locations were added (both CODO stations and DOFO stations, the latter under new franchise agreements), including 10 CODO stations and 1 DOFO station.
Marketing segment strategy for 2017−2022
