Sales, Operating Expenses and Operating Profit
Increase in Net sales revenue
In 2011, Group net sales revenues increased by 24% to HUF 5,343.2 bn, primarily reflecting higher commodity price quotations, resulting in higher average sales prices. Other operating income in 2011 remained at the prior year level (HUF 25.0 bn).
Increase in Cost of raw materials
The cost of raw materials and consumables used increased by 31%, in accordance with the rising sales. In Raw material costs increased by 33%, mainly as result of the higher value of purchased crude oil due to the higher prices (HUF 677.2 bn including the effect of FX rate change) and higher volumes (HUF 30.3 bn) compared to 2010. The cost of goods sold increased by 34% to HUF 655.1 bn, mainly due to the increased cost of oil industry goods sold (HUF 145.5 bn), due to higher prices. The value of material-type services used decreased by 6% to HUF 185.3 bn.
Increase in Other operating expenses
Other operating expenses increased by 3% to HUF 381.3 bn in 2011, mainly as a combined effect of increase in impairment recognised on trade receivables (HUF 13.3 bn in 2011) and increase in fees paid to Slovakian Stockpiling Association (HUF 9.3 bn) which was partly offset by the decrease in net foreign exchange loss recognized on trade receivables and payables (HUF 7.8 bn) and release of provision, which was made for litigation in 2010 at INA (HUF 4.0 bn).
Lower Personal expenses due to lower average headcount
Personnel expenses decreased by 6% to HUF 256.0 bn in FY 2011, mainly due to the lower average headcount (-5%), and the lower amount of provision made for redundancy at INA in 2011 compared to the prior year amount.
Non-recurring items in Total operating expenses
The temporary crisis tax imposed on the energy sector increased other operating expenses by HUF 29.0 and HUF 25.8 bn in the year 2011 and 2010, respectively. As a result of the 2011 annual impairment test on the goodwill allocated to the Group’s Italian refining and wholesale activities (IES Group), a HUF 34.8 bn impairment charge was recognized on goodwill due to the combined effect of decreased crack spreads, higher feedstock and energy costs. Additional impairment in 2011 was recognized on certain upstream assets in INA Group in the amount of HUF 5.2 bn. Further increase in the 2011 amount was caused by the non-recurring provision charge of HUF 5.6 bn with respect to a fine imposed by the Romanian Competition Council.
Decrease in net financial expense
A net financial expense of HUF 54.9 bn was recorded in 2011 (compared to a net financial expense of HUF 85.5 bn in 2010). Interest payable was HUF 41.2 bn in 2011 (HUF 34.5 bn in 2010) reflecting mainly coupons paid on bonds, while interest received amounted to HUF 9.4 bn in 2011 (HUF 7.4 bn in 2010). In 2011 a net foreign exchange gain of HUF 55.6 bn was recognized, compared to the loss of HUF 46.7 bn in 2010. The fair valuation gain on the conversion option embedded in the capital security issued by Magnolia Finance Ltd. was HUF 10.5 bn (compared to the unrealized loss of HUF 5.4 bn in FY 2010). In addition, a loss of HUF 60.8 bn has been incurred on the fair valuation of the call option on MOL shares owned by CEZ. Both changes reflect significant share price decrease in the second half of 2011.
Income from associates
Profit contributor associates
Income from associates recorded HUF 20.1 bn in FY 2011 (main contributors were MET Zrt. and MOL’s 10% share from the operations of Pearl Petroleum Company).
Profit before Taxation
As a result of the above-mentioned items, the Group’s profit before taxation in 2011 was HUF 218.4 bn, compared to HUF 172.0 bn in 2010.
Lower income tax expense
Income tax expense decreased by HUF 29.9 bn from the comparative period to HUF 33.4 bn in FY 2011. The subsequent impact of MOL share transactions and certain options attached to shares held by third parties is treated differently for IFRS and tax purposes and resulted in a HUF 17.6 bn decrease in our tax expense. The current income tax expense was the result of the contribution from MOL parent company of HUF 20.1 bn (19% corporate income tax, 8% ‘Robin Hood tax’ and 2% local trade tax), INA of HUF 35.4 bn (20% corporate income tax), FGSZ Zrt. of HUF 2.3 bn and MMBF Zrt. of HUF 1.2 bn.