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Letter from the President of the Management Board

Prezes_KrawiecDear Sir or Madam, Dear Shareholders,

The passage of 2008 was marked by macroeconomic turbulence of unusual gravity, which had a substantial impact on the operations of the ORLEN Group and its financial results.

It was a year predominantly shaped by the world economic crisis, a troubled banking sector and announcements of a further deepening of the recession. Never before in the Company’s entire history have we encountered a deterioration in external conditions, occurring at such lightening speed, and producing an unbridgeable impact.

Our financial results for last year thus bore the blows of this most unfavourable macroeconomic environment, the end effect being the necessity to now report negative operating and consolidated net results.

Nonetheless, despite the extremely unfavourable conditions, PKN ORLEN is able to consider the previous year a success. This is primarily owing to the fact that the Group has maintained its stable financial position, evidence of which can be found in its operating cash flow, which has increased by over 80 percent, as well as in the dynamic development of our retail segment, the return of the AB Mažeikiu Nafta refinery to full production and the Group’s crucial growth in terms of the most sought-after product in the market, namely diesel oil.

Last year, the ORLEN Group’s seven refineries processed 28 million tonnes of crude oil. At the same time, we conducted tests on alternatives to the REBCO processing method at our Płock and Mažeikiai refineries. This has provided us with comprehensive knowledge of the technological potential for raw material diversification. The results of our research have revealed a genuine possibility of diversifying the sources of our raw material supplies. This is of particular value in circumstances when flexible processing within stable economic parameters is demanded, such as arise, for example, during a prolonged overhaul.

The past year saw excellent results in our retail segment, with our Central European petrol station chain showing a quantitative increase in sales in excess of 12%. Meanwhile, we launched 107 new petrol stations, 76 of which are franchised, and 225 petrol stations were modernised, rebranded and rebuilt. We have maintained a consistent approach to the management of product categories and fuel services and have launched the STOP Café, a new, ORLEN petrol station catering outlet.

Our customers have not failed to recognise our endeavours in guaranteeing them the highest quality service or our ongoing development of services and other offers beyond the provision of fuel. Proof of this can be found, for example, in the fact that in the prestigious consumer research carried out by the monthly magazine, Reader’s Digest, the readers honoured ORLEN petrol stations with the title of Trusted Brand for the seventh consecutive year. The golden Trusted Brand statuette is awarded to the organisation which obtains the highest number of spontaneous votes. This year, ORLEN received 47 percent of the votes cast, improving on the previous year’s result of 45.7 percent, and once again, we have outstripped Western fuel companies and their brands. The ORLEN chain also took second place in the MasterCard competition, Excellence In Sales and Services. The competition recognises successful endeavours to improve levels of customer satisfaction.

Both awards give us more than simply a sense of satisfaction, acting primarily as a spur to create more offers, which will, in turn, go even further towards meeting our customers’ requirements.

Our wholesale results also deserve emphasis; in comparison to 2007, our fuel sales increased by 24 percent. The greatest demand dynamic was recorded in the aviation fuel division, where the volume of sales in 2008 exceeded those for the previous year by almost 54 percent.

Our focus in the chemical segment, established by ANWIL SA, was on maximising sales of fertiliser products, while increasing production line productivity in this area. Modernisation of the production lines in our PVC complex was also carried out, as was the construction of an oxygen generating unit.

In the second half of 2008, with the thought of the changes which were to be forthcoming on the world and national markets in mind, we focused on preparing a strategy for the Group which would adequately meet the situation and on putting forward proposals for what we believe to be the most appropriate operational solutions.

Our ruling objective is to reinforce the Group’s core business operations by introducing a long-term process of change, with a view to increasing the efficiency of our assets by means of restructuring, optimising costs, undertaking legitimate investment, and improving interaction among segments. We believe that our refinery, petrochemical and retail segments constitute the foundations for our further development.

A further objective of the strategy is to consolidate and integrate the company in readiness for the launch of our next stage of dynamic development as the outlook improves.

The preceding year saw the positive evaluation of the Company’s operations in numerous competitions and rankings, confirming us as a reliable and responsible business partner. These ratings include our second, consecutive victory in the MARQA Ranking for the Most Valued Polish Brands, first place in the List of 2000 published by the daily broadsheet, Rzeczpospolita, and our eighth Diamond, awarded to us by the Business Centre Club, to add to our Polish Business Leader Statuette.

Dear Shareholders,

As I hand this Annual Report to you, may I draw your attention to the fact that it was 10 years ago that the ORLEN Team, Poland’s only professional rally team, was created under the auspices of our Company.

The undeniable success of our team is the result of their many years of striving and their exceptional efforts and determination to overcome both their own shortcomings and the reversals of fortune. ORLEN team is a superb illustration of our determination as a Company which, despite unfavourable external conditions, never swerves on the road to achieving the most ambitious of goals. It is thanks to the sense of personal responsibility for the Company’s final results felt by all our employees that we are ready to operate in various circumstances, even the most unfavourable. Thus, I would like to thank each and every member of our ORLEN community for their involvement and team work during 2008 which, in turn, has readied us to achieve our intended goals together in 2009.

Let me also thank our Shareholders for their enduring trust in us, and the Members of the Supervisory Board for the enormous contribution they have made towards our achievement of our strategic objectives. I believe that our joint efforts will continue to be as auspicious as they have been so far, and that our ongoing constructive dialogue will further serve the OLREN Group and all the Stakeholders.

I am wholly convinced that the investments made in previous years and our consistency in implementing our operational plans will allow us to strengthen both PKN ORLEN’s position and its significance to our Shareholders and to the economies of the countries we are operating in.


Dariusz Jacek Krawiec


President of the Management Board, PKN ORLEN SA


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