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Business environmentThe following factors affected the financial results of INA,d.d.: During 2007, the Croatian economy continued itsstrong growth which reached the rate of almost 6% bythe end of the year. Inflation (measured by the index ofconsumer prices) was reduced from 3.2% in 2006 to 2.9%in 2007. The inflation rate in December rose to 5.8% mostlydue to higher prices of food, housing and energy sources.Prices of crude oil (Brent FOB Med) continuously grewover the year, from USD 50 USD per barrel in January toUSD 96 USD/bbl in December, and the overall increaseover 2006 amounted to 11.56% (from average 65.14 USD/bbl to 72.67 USD/bbl in 2007). The generator of the priceincrease was a stronger demand caused by growingenergy needs of developing markets with high growthrates (China and India), added to political instability incountries that produce oil.Refinery margins reached in 2007 rose from 39.5 USD/mtin 2006 to 48.66 USD/mt. According to Platts quotations(FOB Med - Italy), the margin for unleaded super 50 ppmrose by 15.1% (from 117.8 USD/t in 2006 to 135.6 USD/t in2007), while the negative margin for fuel oil of 3.5% wasreduced by 1%(from -212,2 USD/t in 2006 to -210,1 USD/t in 2007). The margin for diesel EN590 50 PPM rose by2.9% (from 107.5 USD/t in 2006 to 110.7 USD/t in 2007).The USD depreciated by an average of 8.1% against theHRK, to 5.36 HRK/USD, that is, to 10.6% on December 31st2007 (4.99 HRK/USD) when compared to December 31st2006. At the same time, there was slight appreciationof the Euro by an average of 0.2%. The year-end EURexchange rate remained almost unchanged (from HRK7.33 in 2006 to HRK 7.35 in 2007).Cash flowINA-Group cash flow (in HRK million) 2006 2007Business activities 1,429 2,416Investment activities (3,025) (2,884)Financial activities 1,819 576Net growth/fall of cash 223 108* gross principleOperating cash flow in 2007 increased over 2006 by69% and amounted to HRK 2,416 million. Operating cashflow before changes in working capital increased by 10%,primarily as the result of higher depreciation. The increaseof working capital decreased the funds by HRK 52 million,primarily resulting from the change in receivables andobligations towards suppliers in the amount of HRK 479million, that is HRK 860 million, as well as an increasein inventories of HRK 448 million. The tax payment inthe amount of HRK 168 million is lower due to lowercorporate taxes (in 2006, liabilities were paid pursuant toaccounting for the previous year and on a high monthlyadvance payment determined on that basis).Net cash outflow for investing activities was reduced by5% and amounted to HRK 2,884 million in comparisonwith HRK 3,025 million in 2006. Total corporate netindebtedness rose by HRK 895 million.Annual report 200763