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40. Financial instruments and risk managementLiabilitiesAssetsINA d.d. 2007 2006 2007 2006Mln HRK Mln HRK Mln HRK Mln HRKAmount denominated in USD 5,524 4,072 992 591Amount denominated in EUR 198 228 198 375,722 4,300 1,190 628Analysis of sensitivity to currency riskThe Company is mostly exposed to the currency risk ofchanges to the HRK-to-USD exchange rate, due to the factthat the trade in oil and gas at the international market ismostly done in USD.The table below shows the analysis of the Group’s andthe Company’s sensitivity to the increase of the HRKexchange rate by 10% in 2007 (10% in 2006) with respectto the relevant foreign currencies. Previous vulnerabilityrates are the rates which represent the management’sestimate of the realistic changes of exchange rates. Thesensitivity analysis includes only open monetary items inforeign currency and their conversion at the end of theperiod on the basis of percentage change of exchangerates. The sensitivity analysis includes monetary assetsand monetary liabilities in the currency. The negativefigure shows the reduction of profit if HRK changes withrespect to the relevant currency by the above percentages.In the case of inversely proportional value change of HRKwith respect to the relevant currency, the effect on profitwould be equal and opposite.Currency US$ ImpactCurrency EUR ImpactINA Group 2007 2006 2007 2006Mln HRK Mln HRK Mln HRK Mln HRKProfit / (loss) (489) (352) 8 (34)(489) (352) 8 (34)Currency US$ ImpactCurrency EUR ImpactINA d.d. 2007 2006 2007 2006Mln HRK Mln HRK Mln HRK Mln HRKProfit / (loss) (465) (366) 9 (43)(465) (366) 9 (43)The exposure to changes to the exchange rate of thecurrency shown by 10% is largely related to the status ofsuppliers and the received loans stated in USD.Interest rate risk managementDue to the fact that the INA Group companies use loanswith fixed and variable interest rates, the Group is exposedto the risk of interest rate change. A large majority of theGroup’s loans was contracted with variable interest rates.Interest risk sensitivity analysisThe following sensitivity analysis is based on the exposureto the risk of change to interest rates on the balancesheet date. For liabilities tied to a variable interest rate,the analysis was made under the assumption that theamount of liabilities stated on the balance sheet date160 Financial report
was valid throughout the year. An increase or decreaseof interest rates by 50 base points is used in internalreporting on the interest rate risk and represents themanagement’s estimate on the reasonable possibleinterest rate change.In the event of increase/decrease of interest rate by50 base points, under the assumption of stability ofother variables, the following changes would occur inexpenditure for INA d.d. interest. Due to the increase inlong-term debt with a variable interest rate, the effect ofany changes to interest rate on profit is also increased.INA GroupINA d.d.2007 2006 2007 2006Effect of short-term loans interest rate change 1 1 1 1Effect of long-term loans interest rate change 16 10 15 9Total change: 17 11 16 10In the event of change to the interest rate by 50 basepoints, the Group’s profit as at 31 December 2007 wouldincrease/decrease by 17 million HRK (in 2006, the increase/decrease was by 11 million HRK), and INA d.d. profit wouldincrease/decrease by 16 million HRK in 2007 (by 10 millionHRK in 2006).Other price risksThe Group is exposed to risks of changes to the principalprice which result from equities. Equities are kept forstrategic reasons and not for trading.Principal price sensitivity analysissSensitivity analyses given below were made on the basis ofexposure to price risk of the principal on the reporting date.• this would not affect the current year’s profit,31 December 2007 included, since equities were listedin the category of available for sale• other INA d.d. reserves in the principal would begreater by 54 million HRK (42 million HRK in 2006),resulting from the changes to the fair value of stocksavailable for sale.In the event of reduction by 10%, the effect on the principalwould be equal and opposite.The Group’s sensitivity to the prices of principal did notchange significantly compared with the previous year.Credit risk management at INA d.d.Credit risk is risk from non-payment or failure to fulfill thecontractual obligations by the Group’s customers, whichcan cause possible financial loss of the Group. INA d.d.has adopted the “Procedure for Credit Risk Management”which is implemented in operations with customers, andcollects the payment insurance instruments whereverpossible, for the purpose of protection from potentialfinancial risks and losses due to failure to pay or to fulfillcontractual obligations.Customers are classified into risk groups according to thefinancial business indicators and their business historywith INA d.d., and appropriate credit risk protectionmeasures are applied for each group.Data from the customer’s official financial reports aremostly used for customer categorization, ratings fromindependent providers of creditworthiness informationare obtained, and INA d.d. information on customerhistory is used.INA d.d. exposure analysis and customer credit ratingprocesses are continuous, and credit exposure ismonitored and controlled through credit limits which aremodified and verified at least once a year.INA Group has business transactions with a large numberof customers of different business structures and sizes.Annual report 2007161
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Table of contentsIntroduction 5INA,
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Annual report 2007
Page 9 and 10:
Tomislav DragiËeviÊ, President of
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Josip PetroviÊ, Member of the Boar
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Scheme of macro-organizational stru
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Higher output in INA’srefineriesI
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Poslovno izvjeπÊeAnnual report 20
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Vision, Mission and CoreValuesINA i
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Reduction of sulphur dioxide and hy
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Healthcare, as one of the prioritie
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Intellectual propertymanagementToda
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Business Segments
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Mazrur-1STConstruction of the Mazru
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Exploration in CroatiaPannonian bas
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Investments in exploration and deve
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Oil and gas reserves as of 31 Decem
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As part of safety and environmental
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Natural gas supplyThe production of
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Over the previous year, the strong
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At the Rijeka Oil Refinery, a contr
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Annual report 200747
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Strateπko pertnerstvoIn 2006 two n
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All business processes of the Secto
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Strategic partnershipwith MOLStrate
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Financial results
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Important financialindicators for 2
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Refineries and MarketingSegments IF
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Business environmentThe following f
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(“price cap” limitation) also h
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Annual report 200767
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ContentsResponsibility for the Fina
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Responsibility for thefinancial sta
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OpinionIn our opinion, the financia
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Notes 2007 2006Investment revenue 6
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INA Group ConsolidatedBalance Sheet
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INA d.d. UnconsolidatedBalance Shee
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INA Group ConsolidatedStatement of
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INA d.d. UnconsolidatedStatement of
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INA Group ConsolidatedCash Flow Sta
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Notes 2007 2006Cash flows from fina
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In its session of 22 July 2005, the
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Management Board from 5th May 2006d
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IFRIC 11 IFRS 2: Group and Treasury
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GoodwillGoodwill arising on the acq
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Where an impairment loss subsequent
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Deferred taxDeferred tax is recogni
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The effective interest method is a
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Furthermore, the time determined fo
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3. Sales revenueRevenue represents
Page 109 and 110: 7. Finance costsINA GroupINA d.d.20
Page 111 and 112: 9. Earnings per shareINA Group2007
Page 113 and 114: ) By asset typeINA GroupOil and gas
Page 115 and 116: ) By asset typeINA d.d.Oil and gasp
Page 117 and 118: I) Oil and gas reservesThe ability
Page 119 and 120: 13. Investments in subsidiariesBasi
Page 121 and 122: 14. Investments in associates and j
Page 123 and 124: 17. Available-for-sale assetsCompan
Page 125 and 126: 19. Receivables from buyers, netINA
Page 127 and 128: 22. Paid expenses of the future per
Page 129 and 130: 25. Liabilities to suppliers, taxes
Page 131 and 132: Averageweightedinterest rateAverage
Page 133 and 134: was contracted with a 5-year expiry
Page 135 and 136: INA GroupINA d.d.2007 2006 2007 200
Page 137 and 138: o podjeli proizvodnje - UPP) on the
Page 139 and 140: The change of the present value of
Page 141 and 142: 34. Retained earningsINA GroupRetai
Page 143 and 144: By business segmentsINA d.d.Researc
Page 145 and 146: By business segmentsINA GroupResear
Page 147 and 148: By business segmentsINA d.d.Researc
Page 149 and 150: By geographical areasINA d.d.Republ
Page 151 and 152: Income from sale of goodsand servic
Page 153 and 154: Income from the sale of products to
Page 155 and 156: ond, exploratory and confirmatory w
Page 157 and 158: 39. Unforeseen obligationsInvestmen
Page 159: Goals of financial risk managementT
Page 163 and 164: INA d.d. interest-free liabilities
Page 165 and 166: 42. Approval of the financial state
Page 167 and 168: CROBENZ d.d. ZagrebRadniËka cesta
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