INA-Industrija Nafte - INA 2007 Flash Report

RNS Number:1287R
INA-Industrija Nafte, d.d
31 March 2008

INA Group (ZSE: INA - R-A; LSE: HINA; homepage: www.ina.hr), announced its
results for FY 2007 today. This report contains consolidated financial
statements for the period ending 31 December 2007 as prepared by the management
in accordance with International Financial Reporting Standards (IFRS).

Financial highlights

INA Group Q4 2006 Q4 2007 Ch. % FY2006 FY2007 Ch. %
financial results
(IFRS) HRK USD mill HRK USD mill HRK USD HRK USD mill HRK USD mill HRK USD
mill 1) mill 1) mill 1) mill 1)

Net sales 6,210 1,085 7,892 1,534 27.1 41.4 23,434 4,016 25,848 4,819 10.3 20.0
revenues
EBITDA 494 87 781 153 58.1 75.4 2,474 424 2,803 523 13.3 23.3
Operating profit 269 47 141 29 (47.6) (37.5) 974 167 1,020 190 4.7 13.9
Net financial 56 10 42 8 (25.0) (16.6) 131 22 113 21 (13.7) (6.1)
gain (expenses)
Net income2 278 48 142 29 (48.9) (40.0) 883 151 869 162 (1.6) 7.1
Operating cash 570 99 1,169 222 105.1 125.2 1,429 245 2,416 450 69.1 84.0
flow

1) In converting HRK financial data into US Dollars, the following average CNB
(NBH) rates were used: for FY 2006: 5.8358 HRK/USD, for FY 2007: 5.3635 HRK/USD,
both calculated as arithmetic mean.

2)INA Group net income attributable to equity holder.

Dr Tomislav Dragicevic, Chairman of INA, d.d. commented:

INA ended 2007 with EBITDA to HRK 2.8 billion and intensified activities in core
business segments. The upward trend in hydrocarbon production continued with
higher gas production in the Northern Adriatic and increased crude oil
production outside Croatia. Commercial discoveries claimed in Syria, the new gas
field at the border with Hungary and the joint exploration agreement signed with
INA's strategic partner MOL confirm the successes in exploration. Major
agreements for procurement of plants in Rijeka refinery and finalisation of the
1st modernisation phase in Sisak refinery marked the Refinery modernisation
programme. INA remained the market leader on the Croatian market and increased
its market share in Bosnia & Herzegovina - the most significant export market.
Net profit of INA Group for 2007 was 1.6% down on 2006 as a result of higher
amount of corporate taxes.

Improved performance on operating profit level

In FY 2007, operating profit of INA Group increased by 5% to HRK 1,020 mill (USD
190 mill) in comparison with FY 2006. Increased natural gas production and
increased sales volumes of refined products together with increased gas sales
price had a positive effect on the FY 2007 result, partially offset by the
increased depreciation charge. The net financial gain in FY 2007, mainly coming
from foreign exchange gains, decreased by 13.7% to HRK 113 mill compared to the
same period last year due to higher interest payable and other financial
payables.

• Exploration & Production

The increase in the average daily hydrocarbon production continued in 2007
reaching 12.2%, in comparison with 2006. Segment's operating profit increased
by HRK 422 mill to HRK 2,045 mill (USD 381 mill). Quarter-on-quarter operating
profit increased by HRK 254 mill reaching HRK 656 mill. The increase was mainly
due to the increase in gas production and lower gas imports. The negative impact
of the imposed cap on domestic gas prices was partly offset by higher prices for
two major customers. The increased volume of works provided by Crosco Group to
third parties reflected favourably in the results. The positive effects were
partially offset by higher depreciation charge.

• Refining & Marketing

The Refining & Marketing segment contributed to the result of INA Group in 2007
with an operating profit of HRK 59 mill (USD 11 mill) which is a decrease of HRK
111 mill in comparison with 2006. 4Q 2007 result is HRK 306 mill down on the
same period 2006 (HRK 278 mill) due to the unfavourable impact of the price cap
(1) and lower intersegmental income resulting from damage compensation due to
lower quality of domestic feedstock measured through increased maintenance
costs, depreciation and asset value adjustment.(2)

• Retail

The average throughput per site of 2,816 tones is in level with 2006 figure. The
number of petrol stations increased by 5 stations in Croatia, in line with INA's
new retail strategy. In 2007 the segment recorded HRK 90 mill loss (USD 17
mill), which is HRK 123 mill down on the 2006 result. Such downfall is the
result of HRK 132 mill lower result in 4Q 2007 compared to 4Q 2006 mainly due to
1.2% lower sales volume and 49% lower retail margin (total impact of HRK 114
mill, of which HRK 77 mill related to the negative effect of the price cap(3),
divided between Retail and R&M segments equally) and increased Opex and asset
value adjustment (IAS 36(4)).

• Corporate and Other (5)

Segment's operating results in FY 2007 amounted to HRK (994) mill, or USD (185)
mill, HRK 142 mill up on the 2006 figure. Income from provided maintenance
services and other corporate support services decreased and the operating costs
increased (the increase was partially offset by lower controllable costs due to
OptINA efficiency improvement programme, while the other costs increased mainly
as a result of increased depreciation and provisions for enviromental protection
and incentives). Cost in 4Q 2007 decreased by HRK 56 mill.

• Capital expenditures

Strictly controlled capital expenditures in 2007 amounted to HRK 2,896 mill
(USD 540 mill), which is HRK 176 mill down on the same period 2006. Investments
decreased by 30% mainly due to putting in operation SAP project and costs
connected to finalization of the exploration phase on major Upstream projects.
Investment into property, plant and equipment decreased by 2%, mainly due to
lower costs on Upstream development projects, in line with the plans, offset by
the amount for acquisition of Rotary, Hungary while ongoing R&M projects spent
HRK 147 mill more.

• Operating cash flow

Operating Cash Flow before changes in working capital increased by 10% to HRK
2,636 mill compared to 2006 mainly due to the increased depreciation. The
changes in the working capital were mainly caused by the increase in
inventories, changes in trade receivables and trade payables, which decreased
the net cash flow from operating activity by HRK 52 mill. The capital
expenditures of HRK 2,896 mill were financed from the increased indebtedness -
HRK 895 mill up on the figure as at 31 December 2006.

Overview of the environment

In 2007, the world economy was experiencing a strong but lower-than-expected
growth at the rate of 4.9 percent because of a considerable slowdown in Q4
caused by worsened conditions on the global financial market, mainly due to the
widening fallout from the US sub-prime mortgage crisis. The spillover effects,
followed by an equity markets sell-off, launched interest rate cutting
interventions led by central banks to help ease liquidity problems. The West
European countries and Japan saw a notable slowdown in growth with deteriorating
confidence indicators. Strong expansion, led by China and India, continued on
the emerging and developing markets boosted by growing domestic demand and
improving macroeconomic policies.

Crude oil prices (Brent FOB Med) had been continuously growing throughout the
year, from low 50 USD/barrel in January to almost 100 USD/barrel at the end of
the year reaching a record high of 96.2 USD in December. 2007 crude average
price stood at 72.67 USD per barrel, what was 11.56 per cent higher than the
2006 average of 65.14 USD/barrel. The increased demand caused by growing energy
needs of the developing markets (China and India) with high growth rates
combined with political uncertainty in the oil-producing countries was pushing
up the prices.

Crack spreads as quoted by Platt's (FOB Med - Italy) for 2007 went up compared
to 2006. The margin for the premium unleaded petrol (50ppm) rose by 15.1 per
cent (from 117.8 USD/t in 2006 to 135.6 USD/t in 2007) while the negative margin
for fuel oil of 3.5% decreased by 1 per cent (from -212.2 USD/t in 2006 to
-210.1 USD/t in 2007). The margin for gas oil EN590 50 PPM increased by 2.9 per
cent (from 107.5 USD/t in 2006 to 110.7 USD/t in 2007).

During 2007, the Croatian economy continued its strong growth reaching almost 6
per cent at the year-end. According to the data available for the first three
quarters, economic growth slowed in the second half of 2007 mainly due to a
slowdown in personal consumption and capital investments compared to the
beginning of the year.

Towards the year-end inflation sharply increased (as measured by the consumer
price index). During November and December, inflation rates reached 4.6 and 5.8
per cent respectively as opposed to the moderate year average of 2.9 per cent.
Higher year-end inflation was mainly driven by increased food, housing and
energy prices.

Since the beginning of the year the kuna appreciated 0.3% against the euro, i.e.
the euro rate declined from 7.35 HRK/EUR (31 Dec 06) to 7.33 HRK/EUR (31 Dec
07). In the same period, the rate of kuna against the US dollar rose by 10.6 %,
from 5.58 HRK/USD at the end of 2006 to 4.99 HRK/USD at the end of 2007. On
average kuna depreciated against the euro by 0.2% (from 7.32 HRK/EUR to 7.33
HRK/EUR) while its rate against the US dollar appreciated strongly - by 8.1%
(from 5.84 HRK/USD to 5.36 HRK/USD).

Exploration and production*

Segment IFRS results Q4 2006 Q4 2007 Ch.% FY2006 FY2007 Ch.%
in millions HRK USD HRK USD HRK USD HRK USD HRK USD HRK USD

Revenues 1,426 251 2,719 526 90.7 109.6 6,794 1,164 8,133 1,516 19.7 30.2
Operating profit 402 70 656 127 63.2 80.7 1,623 278 2,045 381 26.0 37.1
CAPEX 579 101 795 145 37.3 44.5 1,747 299 1,559 285 (10.8) (4.7)

HYDROCARBON PRODUCTION Q4 2006 Q4 2007 Ch % FY2006 FY2007 Ch %

Crude oil production (MMbbl) 2.0 2.1 4.3 6.2 6.3 2.7
Croatia 1.1 1.1 (3.6) 4.6 4.4 (3.6)
Abroad 0.9 1.0 14.0 1.6 1.9 20.2
Condensate (MMbbl) 0.8 0.8 (3.3) 3.1 3.0 (4.4)
Natural gas production (Bcf) 18.8 20.4 8.5 71.8 86.1 19.9
Croatia 18.8 19.7 5.0 71.8 83.2 15.9
- onshore 11.8 10.7 (9.7) 47.7 42.5 (10.9)
- offshore 7.0 9.1 29.8 24.1 40.6 68.9
Syria 0.0 0.7 - 0.0 2.9 -

Average hydrocarbon prod./ day 60.1 63.7 6.1 58.2 65.3 12.2
(Mboe/d)

Natural gas imports (Bcf) 10.2 9.9 (2.7) 39.8 37.3 (6.3)
Natural gas sales on domestic 28.2 35.9 27.2 94.7 109.1 15.2
market (Bcf)

Realised hydrocarbon price Q4 2006 Q4 2007 Ch % FY2006 FY2007 Ch %
Average realised crude oil price 54.0 79.0 46.3 60.0 66.1 10.1
(USD/bbl)
Average realised total 39.8 50.0 25.7 38.9 44.4 14.2
hydrocarbon price (USD/boe)

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

The operating profit of the E&P segment in FY2007 amounted to HRK 2,045 mill,
which was an increase of HRK 422 mill in comparison with FY 2006.
Quarter-on-quarter, the operating profit increased by HRK 254 mill. The positive
impact of increased revenues due to higher average crude oil price (Brent FOB up
on the 2006 figure by 12%) and increased scope of Crosco Group activities for
external users was partially offset by higher depreciation and costs related to
increased scope of operator's services.

Hydrocarbon
production

Mboe/day Q4 2006 Q4 2007 FY 2006 FY 2007

Crude Oil 17.1 16.9 16.9 17.1
Natural Gas 8.9 9.1 8.5 8.1
condensate
Natural Gas 34.1 37.7 32.8 40.1
o/w North 12.7 17.4 11.6 19.6
Adriatic
Total 60.1 63.7 58.2 65.3

Hydrocarbon production cost

USD/Boe Q4 2006 Q4 2007 FY 2006 FY 2007

Croatia - 10.4 12.1 9.2 10.4
onshore
Croatia - 5.8 7.6 7.1 7.7
offshore
Angola 14.9 19.8
Egypt 6.8 8.1 6.5 7.5
Sirya 15.8 4.0 16.3 5.5
Average 9.3 11.6 8.9 9.7

Average daily hydrocarbon production in FY 2007 increased by 12.2%, reaching
65.3 Mboe/day. The increase was mainly due to a 69% higher production on the
North Adriatic gas fields.

Average cost of production in FY 2007 increased by 9% to 9.7 USD/boe, primarily
due to strengthening of the Croatian kuna against US dollar (costs of domestic
production) and putting in operation new field in Egypt (increased costs with
lower initial production).

Average lifting cost amounted to 2.21 USD/boe in the FY 2007 compared to 1.67
USD /boe in 2006.

The impact of regulated natural gas prices on INA's domestic market continued to
have a negative effect on E&P segment profit. The average import price of
Russian natural gas for FY 2007 was 1.6768 HRK/Mcm/33.34 MJ, 5.2 % down compared
to prices in the FY period last year (mainly due to a weaker US dollar against
the HRK).

The Management successfully renegotiated the contractual terms of gas supply for
the year 2007 with two major eligible customers - HEP and Petrokemija Kutina,
partially decreasing the negative effect of high import prices.

Price Differential to Import Prices
in HRK/Mcm/33.34 Q4 2006 Q4 2007 FY 2006 FY 2007
MJ

Eligible (1,034.3) (632.0) (999.0) (716.8)
customers' price
Tariff customers' (773.0) (565.4) (700.0) (609.2)
price
Total price (875.3) (597.0) (827.0) (668.9)

Upstream Capex decreased by HRK 188 mill and reached HRK 1,559 mill in FY 2007,
mostly due to finalization of exploration phases in North Adriatic and Syria and
lower investment in development phases in North Adriatic according the PSA. HRK
639 mill was spent on projects in Croatia, of which the North Adriatic gas
project (HRK 256 mill) was the most significant. In FY 2007 a total of HRK 476
mill was invested into foreign concessions (major investments were in Syria -
HRK 278 mill, and Egypt - HRK 126 mill). Investment of HRK 444 mill refers to
procurement of plants and equipment and acquisition of Rotary Ztr. Hungary.

Proved reserves for 2007 amounted to 270.4 MMboe (an increase of 9.3 MMboe in
comparison with 2006) while proved and probable reserves decreased by 6.1 MMboe
to 375.1 MMboe.

Reserves replacement ratio was 141,0 % for proved reserves and 72,6% for proved
and probable reserves.

Refining & Marketing*

Segment IFRS results Q4 2006 Q4 2007 Ch.% FY 2006 FY 2007 Ch.%
in millions HRK USD HRK USD HRK USD HRK USD HRK USD HRK USD

Revenues 5,285 921 5,766 1,120 9.1 21.6 18,136 3,108 18,764 3,498 3.5 12.6

Operating profit 278 48 (28) (5) (110.1) (110.4) 170 29 59 11 (65.3) (62.2)
CAPEX 306 53 476 91 55.6 70.5 850 146 985 184 15.9 26.1

REFINERY PROCESSING Kt Q4 2006 Q4 2007 Ch % FY 2006 FY 2007 Ch %

Domestic crude oil 128 107 (16.0) 622 599 (3.7)
Imported crude oil 1,026 1,146 11.7 3,799 4,198 10.5
Condensates 45 37 (17.3) 185 163 (11.9)
Other feedstock 80 111 39.5 296 387 30.7
TOTAL REFINERY THROUGHPUT 1,279 1,402 9.6 4,902 5,347 9.1

REFINERY PRODUCTION Kt Q4 2006 Q4 2007 Ch % FY 2006 FY 2007 Ch %

TOTAL REFINERY PRODUCTION 1,279 1,402 9.6 4,902 5,347 9.1

REFINED PRODUCT SALES Kt Q4 2006 Q4 2007 Ch % FY 2006 FY 2007 Ch %

Croatia 773 781 1.0 2,918 2,923 0.2
B&H 157 187 18.8 635 730 15.0
Other markets 318 297 (6.8) 1,219 1,238 1.6
TOTAL CRUDE OIL PRODUCT SALES 1,248 1,265 1.3 4,772 4,891 2.5

REFINED PRODUCT SALES Kt Q4 2006 Q4 2007 Ch % FY 2006 FY 2007 Ch %

Motor gasoline 300 304 1.4 1,234 1,254 1.6
Gas and heating oils 722 726 0.6 2,624 2,681 2.2
Other products 227 235 3.4 914 957 4.7
TOTAL CRUDE OIL PRODUCT SALES 1,248 1,265 1.3 4,772 4,891 2.5

*Refers to Refining&Marketing INA. d.d. and following subsidiaries: Maziva
Zagreb, Proplin, Crobenz, Osijek Petrol, InterIna Ljubljana, Interina Sarajevo,
NA BH Sarajevo, Holdina Sarajevo, Interina Skopje, INA Hungary, Commercina Zug,
FPC London, INA -Crna Gora, INA Beograd, Interina Holding London, Holdina
Guernsey.

Operating profit of the R&M segment decreased by HRK 111 mill in comparison with
2006, resulting in HRK 59 mill operating profit for 2007. The positive effect of
the 2.5% increase in sales volume and 24.6%(6) higher average crack spread in
2007 offset mostly by higher maintenance costs and higher depreciation. In 4Q
the segment generated loss of HRK 28 mill (against the profit of HRK 278 mill in
4Q 2006). It was the result of increased maintenance operating costs (while
total maintenance were at lower level), depreciation, asset value adjustment
(7), increased unfavourable impact of the price cap(8) and lower intersegmental
income resulting from damage compensation due to lower quality of domestic
condensate.

Total sales volumes increased by 2.5% (4,891 Kt) in FY 2007 in comparison with
FY 2006. Motor gasoline and diesel (EURO IV quality) sales increased by 19% (220
Kt), all from own production.

INA's strong market position continued in 2007 although its market share on the
Croatian wholesale market slightly declined from 79% in 2006 to 78%, but its
market share on the BiH market rose to 52%.

Capex increased by 16% to HRK 985 mill in FY 2007 in comparison with the FY 2006
figure, mostly due to Refinery modernisation programme which 1st phase is almost
fully contracted. Capital expenditure in the Refinery Modernisation Programme in
Sisak Refinery increased by HRK 75 mill. In Sisak refinery the Sulphur Recovery
Unit is in operation and construction of HDS FCC unit is in progress. The
contracts for Sulphur Recovery Unit, Hydrocracking Complex and Hydrogen
Generation Unit in Rijeka refinery were signed and procedures are in progress in
order to obtain the necessary construction permits.

Retail*

Segment IFRS results Q4 2006 Q4 2007 Ch.% FY 2006 FY 2007 Ch.%
in millions HRK USD HRK USD HRK USD HRK USD HRK USD HRK USD

Revenues 1,340 235 1,484 292 10.7 24.3 5,669 971 5,850 1,091 3.2 12.3
Operating profit 6 1 (126) (23) - - 33 6 (90) (17) (372.7) (396.7)
CAPEX 71 12 46 9 (35.2) (25.1) 117 20 212 40 81.2 97.2

Key Segment operating data

REFINED PRODUCT RETAIL SALES Kt Q4 2006 Q4 2007 Ch. % FY 2006 FY 2007 Ch. %

Motor gasoline 109 105 (3.7) 469 457 (2.6)
Gas and heating oils 164 164 0.2 657 677 3.2
LPG 6 7 9.5 24 26 5.9
Other products 1 1 (23.7) 5 4 (20.1)
TOTAL OIL PRODUCT RETAIL SALES Kt 280 277 (1.2) 1,154 1,163 0.8

* Refers to Retail INA. d.d. and Petrol Rijeka

In FY 2007 the segment generated operating loss of HRK 90 mill (against HRK 33
mill operating profit in FY 2006) as a result of HRK 126 mill loss in 4Q 2007
mainly due to 1.2% lower sales volume,49% lower retail margin (negative effect
of the price cap was divided between Retail and R&M segments equally)(9) and
increased Opex and asset value adjustment (negative effect of IAS 36 on profit
due to the results of impairment calculation on petrol station assets).

As at 31 December 2007, 413 petrol stations were operated by INA's Retail
segment and 20 by the Company's fully owned subsidiaries in Croatia; in addition
43 petrol stations were operated in Bosnia and Herzegovina (B&H) and 6 in
Slovenia. In comparison with the same period last year that is an increase of 5
petrol stations on the domestic market, in line with the implementation of INA's
new retail strategy.

Total retail sales volumes increased by 0.8% and the average throughput per site
(2,816 tones) is in level with 2006 figure.

Diesel and motor gasoline sales volumes increased by 1.4% in total (of which
diesel increased by 4.4% while motor gasoline decreased by 2.6%). Heating oil
sales volume decreased by 20.4% due to mild winter. The increase in sales of
lubricants and other products by 1.8% is a result of the increase in LPG sales
by 5.9%, and the decrease in sale of motor oils by 6.6% and industrial
lubricants by 3.3% due to strengthening of the competition.

Shop sales revenues increased by 5.9% in FY 2007. The gross margin per litre of
fuel sold on petrol stations increased by 6.1% in comparison with previous year.

Total purchase with INA Card - 23.0% of total sales is in level with 2006
figure.

CAPEX increased by HRK 95 mill to HRK 212 mill in FY 2007. The total of HRK 69
mill was invested in the construction of new stations and HRK 143 mill was
invested in the reconstruction of petrol stations, in line with the Company's
Retail strategy.

Financial overview

Changes in accounting policies and estimates

In the current year the Company and the Group have adopted all of the new and
revised Standards and Interpretations, issued by the International Accounting
Standards Board (IASB) and the International Financial Reporting Interpretations
Committee (IFRIC), relevant to their operations and effective for accounting
periods beginning on 1 January 2007: (MSFI 7 Financial instruments), as well as
the interpretations of IFRIC 7-10 effective as of year 2006.

The adoption of the new and revised Standards and Interpretations has not
affected Company's and Group's accounting policies.

Operations

In 2007 INA Group net sales revenues increased by 10% amounting to HRK 25.8
billion mainly due to the increase in sales volumes (2.5% refined products, 16%
natural gas and 20% crude oil(10)) and higher realized sales prices.

In 2007 INA continued to suffer the negative impact of the regulated natural gas
prices on the domestic market for not being able to pass the price of Russian
imported gas onto its customers.

The restriction on charging the maximum prices under the pricing formula for
retail products (due to the price cap) had a negative impact of HRK 260 mill on
the 2007 result.

The cost of raw materials and consumables increased by 7% in 2007 in comparison
with the last year, of which the cost of crude oil increased by 15% due to 11%
higher refined quantities and 4% higher prices. The cost of other goods sold
increased by 20% and amounted to HRK 4.9 billion. Service costs decreased by 1%
to HRK 3.8 billion. Depreciation increased by 35% to HRK 1.3 billion mainly due
to capitalized successful exploration works and decreased reserves on fields in
production. Adjustments and provisions decreased by 10% to HRK 481 mill. Total
staff costs increased by 8% including the average salary increase of 8,9%. The
closing headcount as at 31 December 2007 was 15,855 which is slightly less than
the closing headcount as at 30 December 2006 (15,873).

Net financial gains for 2007 decreased by 13.7% to HRK 113 mill in comparison
with the last year. The effect of increased foreign exchange gains of HRK 165
mill was offset by HRK 127 mill higher interest payable ( of which HRK 72 mill
for long term loans) and HRK 56 mill higher other financial expenses. Interest
payable for loans in 2007 amounted to HRK 280 mill compared to HRK 163 mill in
2006.

The corporate tax for 2007 increased by HRK 41 mill to HRK 262 mill mainly due
to higher Company's corporate profit.

Balance sheet

Total assets amounted to HRK 24.9 billion at the end of December 2007
representing an increase by 12% compared to the figure as at 31 December 2006.
Non-current tangible and intangible assets increased by 12% mainly due to
investments in development of gas and oil fields (North Adriatic, Syria and
Egypt), investments into refineries and modernization of retail network in
Croatia. Goodwill and investments increased by 32% (4% lower non-tangible assets
resulting from lower investments into exploration phase due to transition of
most significant oil and gas exploration projects into development phase, offset
by HRK 163 mill goodwill for the acquisition of Energopetrol (Bosnia and
Herzegovina) recorded in INA's books as of 29 March 2007). Investments in
associates and joint ventures and investments in other companies increased by
HRK 81 million of which the most significant was the acquisition of 33.5%
interest in Energopetrol. The increase in assets available for sale in the
amount of HRK 220 mill was mainly the result of an increase in market value of
Janaf d.d. shares. Deferred tax decreased by HRK 92 mill of which HRK 40 mill
refers to assets available for sale.

Inventories increased by 10% to HRK 3.1 billion primarily as a result of a
higher value of crude inventories (higher volumes and price) partially offset by
lower value of finished products and unfinished production.

Net trade receivables increased by 21% due to higher prices of oil products and
amounted to HRK 3.1 bilion.

As at 31 December 2007 INA Group's total liabilities increased by 20% compared
to 2006 amounting to HRK 11.3 billion. The increase in liabilities was the
effect of the increased long-term and short-term loans in total of HRK 4.9
billion in comparison with HRK 3.9 billion in 2006. Long-term provisions
increased by HRK 220 million to HRK 1.4 billion as at 31 December 2007 mainly
due to the increased provisions for decommissioning costs (HRK 127 mill) and
increased provisions for litigation costs (HRK 114 mill).

Total net debt of INA Group amounted to HRK 4.2 billion in comparison with HRK
3.3 billion at the end of 2006, while the net gearing ratio(11) increased from
20.5% at the end of 2006 to 23.5 % at the end of 2007.

Cash flow

Operating cash flow in 2007 was HRK 2,416 million, which is 69% up on the 2006
figure. Operating cash flow before movements in working capital increased by 10%
mainly as a result of higher depreciation.

The increase in working capital, resulting primarily from the changes in
receivables and trade payables of HRK 479 mill and HRK 860 mill, respectively
and increase in inventories of HRK 448 mill, decreased the funds by HRK 52 mill.
The lower amount of tax paid of HRK 168 mill was due to lower tax paid by INA,
d.d. (in 2006 commitments were paid for the previous period based on which high
monthly instalments were defined).

Net cash outflow for investing activities of HRK 2,884 mill decreased by 5% in
comparison with HRK 3,025 mill net cash in 2006. Total INA's net indebtedness
increased by HRK 895 mill.

INA Group Summary Segmental Results of Operations

Q4 FY
2006 2007 2006 2007
in HRK in HRK Ch. % in HRK in HRK Ch. %
mill mill mill mill

Sales
Exploration & Production 1,426 2,719 91 6,794 8,133 20
Refining & Marketing 5,285 5,766 9 18,136 18,764 3
Retail 1,340 1,484 11 5,669 5,850 3
Corporate and Other (40) (12) (70) 690 684 (1)
Inter-segment revenue (1,800) (2,065) 15 (7,855) (7,583) (3)
Total sales 6,211 7,892 27 23,434 25,848 10

Operating expenses, net other income
from operating activities
Exploration & Production (1,024) (2,063) 101 (5,171) (6,088) 18
Refining & Marketing (5,007) (5,794) 16 (17,966) (18,705) 4
Retail (1,334) (1,610) 21 (5,636) (5,940) 5
Corporate and Other (377) (349) (7) (1,542) (1,678) 9
Inter-segment eliminations 1,800 2,065 15 7,855 7,583 (3)

Profit from operations
Exploration & Production 402 656 63 1,623 2,045 26
Refining & Marketing 278 (28) - 170 59 (65)
Retail 6 (126) - 33 (90) -
Corporate and Other (417) (361) (13) (852) (994) 17
Total profit from operations 269 141 (48) 974 1,020 5

Share in the profit of associate 0 0 0 0 0 0
companies
Net profit/(loss) from financial 56 42 (25) 131 113 (14)
activities

Profit before taxation 325 183 (44) 1,105 1,133 3

Current taxation (47) (42) (11) (221) (262) 19
Profit for the period 278 141 (49) 884 871 (1)

Segmental sales include sale between business segments and the costs associated
with such sales are therefore included into operating expenses of business
segment making the purchase. Inter-segmental transactions are eliminated to
arrive at INA Group sales figures and INA Group operating expenses.

Income Statement

Q4 FY
2006 2007 2006 2007
in HRK in HRK Ch. % in HRK in HRK Ch. %
mill mill mill mill
Income Statement Data
Sales revenue
a) Domestic 3,933 4,366 11 14,797 16,467 11
b) Exports 2,277 3,526 55 8,637 9,381 9
Total sales revenue 6,210 7,892 27 23,434 25,848 10
Income from own consumption of products 253 255 1 767 695 (9)
and services
Other operating income 158 245 55 606 619 2
Total operating income 6,621 8,392 27 24,807 27,162 9
Changes in inventories of finished (118) 81 - 116 (28) -
products and work in progress
Cost of raw materials and consumables (2,929) (3,849) 31 (12,146) (13,029) 7
Depreciation and amortization (172) (410) 138 (964) (1,302) 35
Cost services (1,234) (1,098) (11) (3,845) (3,817) (1)
Staff costs (659) (729) 11 (2,385) (2,581) 8
Cost of other goods sold (1,187) (2,016) 70 (4,073) (4,904) 20
Impairment charges (net) (28) (152) 443 (500) (381) (24)
Provisions for charges and risks (25) (78) 212 (36) (100) 178
Operating expenses (8,963) (10,970) 22 (23,833) (26,142) 10
Profit from operations 269 141 (48) 974 1,020 5
Share in the profit of associated
companies
Finance revenue 236 11 (95) 620 746 20
Finance costs (180) 31 - (489) (633) 29
Net (loss) / profit from financial 56 42 (24) 131 113 (13)
activities
Profit for the year before taxation 325 183 (44) 1,105 1,133 3
Current taxes (47) (42) (11) (221) (262) 19
Deferred taxes

Profit / (Loss) for the year 278 141 (49) 884 871 (1)

Attributable to
Equity holder 278 142 (49) 883 869 (2)
Minority interest 0 (1) - 1 2 100
278 141 (49) 884 871 (1)
Earning per share (in HRK) 27.8 14.2 (49) 88.3 86.9 (2)

Consolidated Balance Sheet

Period ended 31 December
2006 2007 Ch.
HRK mill HRK mill %

Assets
Non-current assets
Intangible assets 685 661 (4)
Property. plant and equipment 13,312 14,891 12
Goodwill 163 0
Investments in associates and joint ventures 57 124 118
Investments in other companies 48 62 29
Long-term receivables 181 177 (2)
Derivative financial instruments 251 226 (10)
Deferred tax 129 37 (71)
Available for sale assets 436 656 50
Total non-current assets 15,099 16,997 13
Current assets
Inventories 2,838 3,123 10
Trade receivables net 2,532 3,072 21
Other receivables 720 674 (6)
Derivative financial instruments 77 97 26
Other current assets 53 50 (6)
Prepayments and advances 239 183 (23)
Cash with bank and in hand 630 720 14
Total current assets 7,089 7,919 12
Total assets 22,188 24,916 12
Equity and liabilities
Capital and reserves
Share capital 9,000 9,000 0
Revaluation reserve 66 229 247
Other reserves 2,347 2,301 (2)
Retained earnings / (Deficit) 1,366 2,104 54
Equity attributable to equity 12,779 13,634 7
holder of the parent
Minority interests 7 9 29
Total equity 12,786 13,643 7
Non-current liabilities
Long-term loans 1,425 3,130 120
Other non-current liabilities 153 144 (6)
Employee benefits obligation 72 91 26
Long-term provisions 1,186 1,406 19
Total non-current liabilities 2,836 4,771 68
Current liabilities
Bank loans and overdrafts 1,935 1,664 (14)
Current portion of long-term debt 578 129 (78)
Accounts payable 2,900 3,532 22
Taxes and contributions 549 648 18
Other short-term liabilities 264 269 2
Accruals and deferred income 157 198 26
Employee benefits obligation 8 15 88
Short-term provisions 175 47 (73)
Total current liabilities 6,566 6,502 (1)
Total liabilities 9,402 11,273 20
Total equity and liabilities 22,188 24,916 12

Capital Expenditure

Q4 FY
2006 2007 2006 2007
in HRK in HRK Ch. % in HRK in HRK Ch. %
mill mill mill mill

Exploration & Production:
Property, Plant and 616 677 1,544 1,364
Equipment
Intangible Assets (37) 118 203 195
Total Exploration & 579 795 37.3 1,747 1,559 (10.8)
Production
Refining & Marketing
Property, Plant and 287 475 830 978
Equipment
Intangible Assets 19 1 20 7
Total Refining & Marketing 306 476 55.6 850 985 15.9
Retail:
Property, Plant and 71 46 117 211
Equipment
Intangible Assets 0 0 0 1
Total Retail 71 46 (35.2) 117 212 81.2
Corporate & other:
Property, Plant and 92 30 212 69
Equipment
Intangible Assets 67 10 170 71
Total Corporate & other 159 40 (74.8) 382 140 (63.4)
Inter-segment elimination:
Property, Plant and (24) (24)
Equipment
Intangible Assets 0 0
Total Inter-segment (24) (24)
elimination
Total Capital Expenditure 1,091 1,357 24.4 3,072 2,896 (5.7)
of which:
Property, Plant and 1,042 1,228 2,679 2,622
Equipment
Intangible Assets 49 129 393 274

INA-INDUSTRIJA NAFTE d.d. ZAGREB

INA GROUP CONSOLIDATED STATEMENT OF CASH FLOW

Period ended 31 December 2006 and 2007

(All amounts in HRK millions)

Q4 FY
2006 2007 Ch. % 2006 2007 Ch. %

Profit for the year 278 141 (49) 884 871 (1)
Adjustments for:
Depreciation and amortisation of non-current 172 410 138 964 1,302 35
assets
Income tax expenses recognized in profit 46 164 257 221 262 19
Impairment charges (net) 28 152 437 500 381 (24)
Gain on sale of property plant and equipment (9) (9) 0 (9) (9) 0
Gain on sale of shares or stakes 0 (17) - 0 (17) -
Foreign exchange loss/(gain) (107) (8) (93) (186) (402) 116
Interest expense (net) 60 88 47 202 333 65
Other financial expenses/(income) (1) 110 - (42) 45 -
Change in provision for charges and risks and (64) (87) 36 (136) (130) (4)
other non-cash items
Operating cash flow before working capital changes 404 944 134 2,398 2,636 10
Working capital
(Increase)/decrease in inventories 302 155 (49) 484 (448) (193)
Increase in receivables and prepayments (147) (427) 190 (487) (479) (2)
Decrease in trade and other payables 263 537 104 (314) 860 -
Decrease in provisions (147) 10 -) (147) 15 -
Cash generated from operations 675 1,219 81 1,934 2,584 34
Taxes paid (105) (50) (52) (505) (168) (67)
Net cash inflow from operating activities 570 1,169 105 1,429 2,416 69
Cash flows used in investing activities
Purchase of property, plant and equipment (1,042) (960) (8) (2,679) (2,354) (12)
Purchase of intangible assets (49) (129) 163 (393) (274) (30)
Proceeds from sale of non-current assets 5 13 160 20 13 (35)
Purchase of investments in associates and joint (2) (146) - (2) (279) -
ventures and other companies
Dividends received from companies classified under 0 0 - 3 2 (33)
available for sale and other companies
Proceeds from sale of property, plant and 0 0 - 0 0 -
equipment
Proceeds from sale of investments 0 (13) - 0 0 -
Proceeds from financial assets 0 9 - 0 0 -
Interest received (1) 0 - 0 0 -
Investments and loans to third parties, net 17 8 (53) 26 8 (69)
Net cash (outflow) from investing activities (1,072) (1,218) 14 (3,025) (2,884) (5)
Cash flows from/(used in) financing activities
Additional long-term borrowings 720 5 (99) 1,375 3,700 169
Repayment of long-term borrowings (49) (108) 120 (428) (2,360) 451
Net drawdown /(repayment) of short term borrowings 107 437 308 986 (300) -
Interest paid on long-term loans (35) (43) 23 (87) (152) 75
Dividends paid (3) (3) 0 (9) (9) 0
Other long-term liabilities, net 0 0 0 0 (131) -
Interest paid on short term loans and other 59 (126) -) (18) (172) 856
financing charges
Net cash inflow/(outflow) from financing 799 162 (80) 1,819 576 (68)
activities
Net (decrease)/increase in cash and cash 297 113 (62) 223 108 (52)
equivalents
At beginning of period 314 629 100 376 630 68
Effect of foreign exchange rate changes 19 (22) - 31 (18) -
At the end of period 630 720 14 630 720 14

INA GROUP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the period ended 31 December 2007

(All amounts in HRK millions)

Attributable to equity holders of the parent

Share Other Revaluation Retained Total Minority Total
capital reserves reserves profits / interests equity
(Accumulated
deficit)

Balance as at 1 January 2006 9,000 2,390 (96) 483 11,777 6 11,783
(restated)
Gains/(losses) on
available-for-sale
investments 0 0 162 0 162 0 162
Exchange differences on
translation of the
financial statements of foreign 0 (43) 0 0 (43) 0 (43)
operations
Net profit recognised directly in 0 (43) 162 0 119 0 119
equity
Profit for the year 0 0 0 883 883 1 884
Total recognized income and
expense for the period 0 (43) 162 883 1,002 1 1,003

Balance as at 31 December 2006 9,000 2,347 66 1,366 12,779 7 12,786

Balance as at 01 January 2007. 9,000 2,347 66 1,366 12,779 7 12,786
Gains/(losses) on
available-for-sale
investments 0 0 163 0 163 0 163
Dividends Payable 0 0 0 (131) (131) 0 (131)
Exchange differences on
translation of the
financial statements of foreign 0 (46) 0 0 (46) 0 (46)
operations
Net profit recognised directly in 0 (46) 163 (131) (14) 0 (14)
equity
Profit for the year 0 0 0 869 869 2 871
Total recognized income and
expense for the period 0 (46) 163 738 855 2 857

Balance as at 31 December 2007 9,000 2,301 229 2,104 13,634 9 13,643

Announcements in 2007

28 February 08 Production start-up in Syria
20/21 February 08 Extraordinary shareholders' assembly
19 February 08 Meeting with financial analysts
15 February 08 Unaudited consolidated profit for the year ending 31 December 2007
8 February 08 Meeting with financial analysts
24 January 08 Acquisition of shares
18 December 07 Meeting with an investor
17 December 07 Press conference announcement
12 December 07 Acquisition of shares
10 December 07 Acquisition of shares by the Management Board
29 November 07 Acquisition of shares by the Management Board
29 November 07 Acquisition of shares
16 November 07 Notice of meetings with investors
3 October 07 Start of production at Sidi Rahman - 1
28 September 07 Press conference announcement
28 September 07 New Claus unit at Sisak Refinery put on trial run
25 September 07 Notice of meetings
21 September 07 Supervisory Board meeting held - UPDATED NEWS
21 September 07 Notice of meetings
21 September 07 Notice of acquisition of securities
20 September 07 INA signed a contract for construction at Rijeka Refinery
19 September 07 Press conference announcement
07 September 07 INA - CROSCO - approval of the Hungarian Competition Agency
03 September 07 Notice of acquisition of securities
03 September 07 INA and MOL signed an Exploration Agreement for Novi Gradac-Potony Border Area
27 August 07 INA d.d. - Notice of acquisition of securities
24 August 07 Notice of acquisition of securities
17 August 07 Purchase of shares by the current and former employees
16 August 07 Financial report H1 2007
09 August 07 Notice of Results 2007.
24 July 07 Notice
19 July 07 Cooperation between MOL and INA resulted in a discovery of a new natural gas field
18 July 07 Signature of term contract for crude oil supply
10 July 07 Development of the Jazal field and a new commercial discovery in Syria
28 June 07 CROSCO purchased Rotary drilling Ltd.
04 June 07 Dividend notice
30 May 07 Notice of a meeting with investors
23 May 07 Notice of meetings with investors
15 May 07 Notice of meetings with shareholders
15 May 07 Results for Q1 2007
09 May 07 Notification of Results
19 April 07 Addition to previously released news
12 April 07 Contract for USD 1.000.000.000 Syndicated Revolving Credit Facility signed
02 April 07 Business News Notice
30 March 07 Notice of the General Meeting
23 March 07 Annual Financial Report for FY 2006 Acceptance
22 March 07 Results for fiscal year 2006
21 March 07 Notification of Results
16 March 07 Management Board and Supervisory Board meetings announcement
27 February 07 Syndicated Revolving Credit Facility
23 February 07 Notice of analyst meetings
12 February 07 Sisak Refinery update
12 February 07 Unaudited Consolidated Profit
02 February 07 Changes in Supervisory Board
30 January 07 Notice of meetings
26 January 07 Audited Annual Report for 2006 publication date
19 January 07 Notice of analyst meetings
19 January 07 Environmental Efforts - Sisak
11 January 07 Annual General Meeting revocation
09 January 07 Oil discovery at El Alamein
02 January 07 Acquisition of shares by president of INA management board

SHAREHOLDER STRUCTURE

31.12.06. 31.03.07. 30.06.07. 30.09.07. 31.12.07.

The Government of Republic of 5,180,367 5,180,367 5,180,367 5,180,367 4,484,918
Croatia
MOL 2,500,001 2,500,001 2,500,001 2,500,001 2,500,001
The Fund of Croatian War Veterans 700,000 700,000 700,000 700,000 700,000
of Homeland War and their Family
Members
Zagrebacka banka d.d./Citibank N,A, 368,725 253,414 233,345 215,354 204,307
(custodian/depositary for GDR)
Private and institutional investors 1,250,907 1,366,218 1,386,287 1,404,278 2,110,774
Total 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

During the last quarter of 2007 the Government's stake was reduced to 4,484,918
shares pursuant to the INA -Industrija nafte d.d. Privatisation Act (NN32/02)
and Government Resolutions. On 3 December 2007, 66,754 additional INA-R-A shares
were reposted from the account of the Croatian Government to eligible investors'
accounts (pursuant to the Government Resolution of 14 September 2006 and its
amendments of 13 October 2006 and 10 November 2006, published in the Official
Gazette, NN 104/06, 113/06, 122/06 and 129/06).

On 14 November 2007, the offer of INA, d.d. shares to current and former INA
Group employees was concluded. A total of 628.695 shares was sold pursuant to
the Government Resolution on the model, price, privileged conditions, timing and
terms of the sale of INA-Industrija nafte d.d. shares to its current and former
employees (NN 77/07, 94/07 and 103/07).

Changes in organisation and senior management:

Changes in the Supervisory Board

As of 1 February 2007, Mr Gyorgy Imre Mosonyi ceased to be a member of INA's
Supervisory Board and Mr Laszlo Geszti was appointed Supervisory Board member.

Changes in the Management Board

Mr Laszlo Geszti, Board Vice-President and CFO, was released of his duties as of
31 December 2006. As of 1 January 2007, the duty of the Board Vice-President and
CFO was taken over by Mr Zalan Bacs, until then a Board member and the director
of Corporate Services.

Mr Sandor Lendvai was appointed Board member and director of Corporate Services
as of 1 January 2007.

Changes in corporate organisation

As of 1 January 2007, the departments of Planning & Controlling and Resource
Allocation & Investment Planning were merged into Planning, Controlling &
Resource Reallocation. At the same time, a new department to cover Investor
Relations was formed.

Business processes of the Well Technology department were reengineered and
reallocated between other departments of the Oil & Gas Exploration & Production
division. The organisational structure was changed in order to facilitate the
business operations.

--------------------------

(1) Quarterly negative effect of the price cap in 2007 amounted to HRK 77 mill,
while in the same period 2006 there was no effect. Annual negative effect
amounted to HRK 130 mill against HRK 200 mill in 2006.

(2) Write-offs of raw materials and spare parts, and adjusted value of finished
and semi-finished products residue.

(3) Quarterly negative effect of the price cap in 2007 amounted to HRK 77 mill,
while in the same period 2006 there was no effect. Annual negative effect
amounted to HRK 130 mill against HRK 108 mill in 2006.

(4) Negative effect on profit due to the results of imparment calculation on
petrol station assets amounted to HRK 7 mill

(5) Corporate and Other stands for Safety and security services business,
maintenance services, corporate and other support services.

(6) The crack spread was calculated based on INA's product slate marketed on
Platt's (FOB Med) prices.

(7) Write-offs of raw materials and spare parts, and adjusted value of finished
and semi-finished products residue.

(8) Quarterly negative effect of the price cap in 2007 amounted to HRK 77 mill,
while in the same period 2006 there was no effect. Annual negative effect
amounted to HRK 130 mill against HRK 200 mill in 2006.

(9) Quarterly negative effect of the price cap in 2007 amounted to HRK 77 mill,
while in the same period 2006 there was no effect. Annual negative effect
amounted to HRK 130 mill against HRK 108 mill in 2006.

(10) External sales, outside of INA Group

(11) Net debt to net debt plus shareholders' equity including minority interests

This information is provided by RNS
The company news service from the London Stock Exchange
END

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