CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

Business-to-Business DivisionWe previously sold refined products to a large number of commercial customers of varying size and to privateconsumers. As part of the restructuring of our marketing segment, we no longer sell refined products directly to smallsizedcommercial consumers or private consumers. Instead, we have in recent years supplied our products to a networkof independent dealers, who in turn sell directly to these customers. The independent dealers are contractually requiredto use us as their primary supplier and are responsible for sales and delivery to the end-user. Creating this network ofindependent dealers to handle sales to smaller commercial customers and retail consumers and focusing our sales andmarketing efforts on larger commercial consumers has enabled us to reduce the size of our sales force and simplify oursupport functions, thereby reducing our costs. This shift in focus has enabled us to retain a very large portion of our salesvolume while focusing our efforts on a smaller part of our previous customer base.Within our business-to-business division, we have also outsourced route planning and transportation of productsto the independent dealers, which has helped reduce our costs. In 2008, we created a sales staff and support team to helpincrease our sales of diesel by increasing our market share in the commercial road traffic segment and the fleet segment,which include company cars and light transportation.Today, our business-to-business division concentrates on sales to large- and medium-sized commercialconsumers. Our main focus is on the supply of diesel and fuel oil to the industrial sector of Sweden, as well as to thetransport and agricultural sectors and to the majority of the Swedish municipalities.Within the business-to-business division, total volumes for the year ended December 31, 2010 increased byapproximately 11% compared to year ended December 31, 2009 as a result of the increasing demand for diesel andheating oil.Station and Consumer DivisionOur station and consumer division consists of a network of service stations throughout Sweden. We have anetwork of approximately 390 service stations in Sweden operating under the Preem brand name that arecompany-owned and dealer-operated. This network of Preem-branded stations consists of both full-service stations,offering a variety of products through integrated convenience stores aimed at consumers who prefer “one-stop shopping,”and low-cost unmanned self-service stations that sell gasoline and diesel at reduced prices for the price-sensitivecustomer. We also have a network of approximately 180 unmanned diesel truck stops that are company-owned andoperate under the brand name “Såifa.” For a majority of our company-owned stations and truck stops, we own nearly allof the fixed assets and the fuel; however, we lease the land upon which the stations are located.The following table shows a breakdown of Preem’s manned and unmanned stations as of December 31, 2010.Type of Station Preem (1) SåifaManned ............................................................................................................................................. 129 —Unmanned......................................................................................................................................... 262 184Total ............................................................................................................................................. 391 184(1) Four of our 391 Preem-branded stations are boat stations, all of which are manned.We have implemented a retail strategy that has reduced our cost base, increased sales of fuels and conveniencegoods and improved our strength of brand. Part of this strategy involved developing a new retail concept and attractivecustomer offers. Our new convenience shop concept has been well received among our customers.A key component of this strategy was to outsource the operation and management of our company-operatedstations and convenience shops to independent dealer operators, which was completed in 2008.Transferring the operation of company-operated stores to independent dealer operators was an important factorin the cost reductions achieved in connection with the restructuring of the marketing segment. We have substantiallyfinished rolling out a new design for our stations and continue to selectively upgrade certain of our stations that have notyet undergone the change. In addition, we are standardizing relations with these independent operators by using a newpartner contract, which helps us present a unified profile across our service stations.Sustainable Business InitiativesThe demand for biofuels is increasing and our costumers are systematically looking for solutions to reduce theirenvironmental impact. As Sweden’s largest producer and supplier of fuels, we have responded to this demand byexpanding our offering of biofuels and partnering with various institutions in the testing and development of alternativefuels that use renewable raw materials and do not compete with global food production, reduce water assets or threatenbiodiversity.Currently through out retail network, we offer our customers Bio100 diesel and fuel oil with 100% renewable43