Integrated Annual Report 2020
LOTOS Group

Our capitals

Management in the Grupa LOTOS is a strategic action plan based on key performance indicators.

In the process of creating common value, we attach great importance to the effective management of capitals held and the proper use of their potential and capabilities in the various segments of the group’s activities. We know how important it is for all six capitals to be managed coherently because only such integrated measures can produce the best results for both the company and the environment.

Sound management and multiplication of financial capital allows us to invest in non-financial resources of the LOTOS Group, which generate further profits over time. For years, we have been consistently investing in improving extraction and production processes, employee development and building a culture of innovation within the organisation, creating innovative products and implementing new ideas with our partners. We are also constantly thinking about solutions to limit our environmental footprint. We are also trying to have a positive social impact through charitable and sponsoring activities.

Environmental capital

Capital management

As an organisation with operating plants from the fuel and energy industries, we manage our environmental impact in a comprehensive manner — we implement national and international guidelines as well as the assumptions of internal policies. As part of the Integrated Management System, which includes, among others, the Environmental Management System, the Grupa LOTOS has in place an Environmental Monitoring Plan. We continuously monitor the performance of individual indicators and assesses their impact on the environment. More information is available here.

One of the key aspects of our activity is contributing to the common fight against climate change. Climate-related risks and opportunities are one of the elements of a comprehensive Enterprise Risk Management system. We are working intensively and multilaterally to reduce energy consumption, improve the use of products and reduce emissions into the atmosphere. We also encourage our customers to act in a climate-friendly way, among others by adapting our stations. Electric car charging points have been installed at subsequent stations.

The Grupa LOTOS is also active in the area of raising awareness within the scope of hydrogen application. Among other things, our initiative led to the establishment of the Cluster of Hydrogen Technologies and Clean Coal Technologies, whose mission is to initiate measures to increase the importance of hydrogen technologies. LOTOS also participates in the Clean Transport Package and in the works of the Ministry of Climate on the national hydrogen strategy.

CONTRIBUTION (as at the end of 2019)

10,672,434
l
Total oil consumption
11,183,428
t
Total final product consumption
33,456,174
GJ
Total energy consumption
2,027,970
t CO2e
Total direct emissions of greenhouse gases

RESULT (as at the end of 2020)

10,197,000
l
Total oil consumption
11,138,626
t
Total final product consumption
34,740,518.65
GJ
Total energy consumption
2,090,948
t CO2e
Total direct emissions of greenhouse

Production capital

Capital management

The Grupa LOTOS owns one of the newest and most modern refineries in Europe. We are an oil company engaged in the extraction and processing of crude oil, wholesale and retail sale of high-quality petroleum products. We are also a manufacturer and supplier of, among others, unleaded petrol, heating diesel fuel (light fuel oil), aviation fuel and heavy fuel oil. The concern also specialises in the production and sale of lubricating oils and asphalts. We are constantly investing in increasingly efficient crude oil processing (EFRA Project) and we are expand and adapt our product portfolio on an ongoing basis to the current market situation.

In line with our strategy, we develop and standardise a network of petrol stations. Our activities in the area of improving the quality of service in the sales network include: implemented employee training programmes, sales and incentive competitions for station employees, development of loyalty schemes and making the business offer more attractive, including cooperation with large shipping companies.

Thanks to our actions, in the last year, we increased the number of petrol stations and the number of traveller service points.

CONTRIBUTION (as at the end of 2019)

506
Number of petrol stations
20
Number of traveller service points
32.6
%
Share in the domestic fuels market
20.7
thous. boe/day
Extraction volume

RESULT (as at the end of 2020)

513
Number of petrol stations
23
Number of traveller service points
33.6
%
Share in the domestic fuels market
20.3
thous. boe/day
Extraction volume

Financial capital

Capital management

In 2020, the LOTOS Group, like most companies, had to face additional difficulties related to the COVID-19 pandemic. Ensuring safety of employees and customers at petrol stations and maintaining business continuity was one of the priorities in the last year. The company optimally managed its own financial resources as well as those of all other entities from the LOTOS Group. Despite the exceptionally unfavourable conditions caused by the COVID-19 pandemic, all relevant financial and liquidity ratios remained at safe levels in 2020, thanks to which all liabilities were handled on an ongoing basis. In this extraordinary year, the operating loss amounted to PLN 1,396.8 million vs. PLN 1,969.9 in 2019. On the other hand, sales revenues amounted to PLN 20,908.6 million, i.e. PLN 8,584.7 million less (-29.1%) than in 2019, mainly due to lower prices of oil and petroleum products on global markets and a lower sales volume.

CONTRIBUTION (as at the end of 2019)

29,493
PLN billion
Total sales revenue
3,844
PLN billion
Consolidated profit from sales
1.97
PLN billion
Operational results
12.71
PLN billion
Level of equity
396
PLN billion
Capital expenditures in the production and trade segment

RESULT (as at the end of 2020)

20,909
PLN billion
Total sales revenue
1,467
PLN billion
Consolidated profit from sales
-1.40
PLN billion
operational results
11.57
PLN billion
Level of equity
475
PLN billion
Capital expenditures in the production and trade segment

Human capital

Capital management

In the Strategy of the Grupa LOTOS for 2017–2022, one of the key strategic objectives is a Strong team, coherent CSR and safety as well as the initiative related to the safety area — a high safety culture. This is an expression of the Management Board’s concern for the employees, their safe working conditions, but also an emphasis of the fact that safety at work is a priority and a value in itself. In the Grupa LOTOS, we implement the principles of diversity management and a policy of equal treatment regardless of gender, age or other factors.

The past year of 2020 was particularly difficult for the company as an employer. Faced with a pandemic that changed the reality throughout the country for a long time, we had to keep our employees safe during their daily work, in contacts with customers or in offices. In addition to constant access to private medical care, the employees of our companies were able to take tests allowing for quick detection of infections with SARS-CoV-2. Despite the difficult situation, we increased the number of people employed. Due to impeded access to trainings and the possibility to organise them online, the number of training hours decreased significantly. On the other hand, in 2020, we increased our expenditure on employee benefits in order to provide our employees with even better support.

CONTRIBUTION (as at the end of 2019)

5,431
Total number of employees
14
%
Percentage of newly hired employees on the group’s scale
21
Average number of training hours per employee
207.5
PLN billion
Employee benefits
32
Number of accidents among employees

RESULT (as at the end of 2020)

5,473
Total number of employees
11
%
Percentage of newly hired employees on the group’s scale
9.61
Average number of training hours per employee
221.5
PLN billion
Employee benefits
37
Number of accidents among employees

Social capital

Capital management

The LOTOS Group supports social initiatives and projects, including in a particularly difficult year for culture, sport or social activities. Sponsorship activities of LOTOSU focus on these three areas, which are primarily implemented in counties and provinces where the plants of the LOTOS Group are located, as well as in locations where it conducts commercial activities, including petrol stations. The employees themselves also eagerly engage in the concern’s charity activities carried out by the LOTOS Foundation, including through various initiatives organised by the employer. In connection with the coronavirus pandemic, LOTOS provided both financial and in-kind support. The number of donations made by the LOTOS Foundation increased to 148 in 2020. The amount of support provided by the Foundation was also higher.

CONTRIBUTION (as at the end of 2019)

13
Number of social activity projects
125
Number of donations made by the LOTOS Foundation
8
PLN million
The amount of support provided by the LOTOS Foundation
183,941
PLN
Local taxes

RESULT (as at the end of 2020)

14
Number of social activity projects
148
Number of donations made by the LOTOS Foundation
14
PLN million
The amount of support provided by the LOTOS Foundation
213,216
PLN
Local taxes

Intellectual capital

Capital management

The LOTOS Group ensures the development of its employees. For years, the organisation has had in place a training and development system to improve competences for all employees, regardless of their position.

The LOTOS Group appreciates the experience of its employees that comes with age. 50+ employees support new staff in adaptation processes (during accompanying traineeships and mentoring meetings); this relationship is a valuable learning experience that benefits both parties. Particular attention should be paid to the LideRo mentoring programme, implemented in the Production Department.

In the LOTOS Group, we focus on innovative solutions, expanding knowledge and sharing mentoring knowledge of older employees with younger ones. We also make use of numerous partnerships to create new technological solutions for low-emission transport. We look for new solutions in the area of use of non-conventional fuels, such as hydrogen and hydrogen biohydrogen.

The LOTOS Group continuously improves its offer addressed to students. The internship programme Start with LOTOS, created in 2017, was certified and awarded the title of “Best-Quality Internship”. In addition to its own proprietary programme, the concern has been a partner in many internship initiatives for years, including: Develop the Future, organised by the Municipal Office in Gdańsk, Energy Academy of the Lesław A. Paga Foundation, Go4Poland of the Warsaw Stock Exchange Foundation and the Holiday Internship.

As part of its strategy, LOTOS strives to become a leader in next-generation fuels. We conduct joint research and development activity with the Gdańsk University of Technology. This cooperation involves the preparation of prototypes of selected devices in the area of low-emission transport and energy storage. The Grupa LOTOS is also active in the area of raising awareness within the scope of hydrogen application. Its initiative led to the establishment of the Cluster of Hydrogen Technologies and Clean Coal Technologies, whose mission is to initiate measures to increase the importance of hydrogen technologies.

The Grupa LOTOS has taken action in the areas of future fuels, i.e. to promote hydrogen-based technologies, and has actively participated in the Clean Transport Package, which aims to strengthen the national security in the energy sector and reduce pollution in transport. More information is available here . The Group is also active in the Cluster of Hydrogen Technologies and Clean Coal Technologies. In 2020, the Grupa LOTOS joined Hydrogen Europe, an association which is active in the support of development of the hydrogen market in the European Union. The company also signed a consortium agreement with the Institute of Power Engineering — Research Institute and the AGH University of Science and Technology. The purpose of the contract is to develop and implement a high-efficiency solid oxide electrolysis system for the production of high-purity hydrogen for transport purposes using RES. The agreement will become effective provided that funding is obtained for the project.

One of the most important projects supporting innovation in the Grupa LOTOS is the Efficiency Improvement Programme (PPE). It pursues one of the main strategic objectives of the LOTOS Group as set out in the Strategy for 2017-2022. Through low costs and continuous improvement of processes, it strives to ensure that the LOTOS Group is resilient to unfavourable external conditions.

In 2019*, 209 projects were reported as part of the Efficiency Improvement Programme. The total impact of the initiatives was PLN 504.9 million, with reference to the 2015 comparative basis:

  • cost-restructuring projects (178 projects): PLN 117.5 million,
  • margin-increasing projects (31 projects): PLN 387.4 million.

Since 2020, the PPE has operated in a modified formula. The programme departed from the 2015 reference basis and a 24-month project reporting period was introduced.

In 2020, 131 projects were reported as part of the Efficiency Improvement Programme. Their total impact amounted to PLN 122.7 million.

*Due to the change in the formula of the Efficiency Improvement Programme, the values presented in 2019 and 2020 are not comparable in view of their different nature and the introduction of a maximum project reporting period, which was not applicable in 2019.

504,9
PLN million
Total impact of the initiatives as a part of the Efficiency Improvement Programme in 2019

CONTRIBUTION (as at the end of 2019)

209
Number of measures identified under the Efficiency Improvement Programme
117.5
PLN million
Cost-restructuring projects (178 projects)
387.4
PLN million
Margin-increasing projects (31 projects)

RESULT (as at the end of 2020)

131
Number of measures identified under the Efficiency Improvement Programme
52.9
PLN million
Cost-optimising projects (114 projects)
69.9
PLN million
Margin-increasing projects (17 projects)

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