Comments to 2008 results

In 2008 Saras Group registered a strong set of results, thanks to its operational performance, and a robust market for middle distillates, towards which our production is heavily geared.

Group Revenues were EUR8,673 million, up 29% compared to last year, in the light of significantly higher oil product prices during the first semester of 2008.

Group comparable EBITDA amounted to EUR673.3 million, an increase of 15% vs. 2007. In particular, the Sarroch refinery achieved record runs in excess of 15.5 million tons (113.3 million barrels), and the refining margin reached $8.7 billion, up 20% versus $7.3 billion in 2007, while EMC benchmark at 3.2 $/billion was slightly lower than the $3.3 billion registered in 2007. Saras premium on the EMC benchmark was $5.5 billion, up from $4.0 billion in 2007, an increase due to our exposure to middle distillates, and the superior flexibility and operational efficiency of our assets.

Group reported EBITDA in 2008 was EUR256.6 million. The major difference from the EUR760.1 million reported for 2007 can be explained with a pre–tax inventory gain of around EUR165 million recorded in 2007, and a subsequent pre-tax loss of around EUR305 million in 2008, due to the dramatic fall of oil prices.

Group Adjusted Net income was EUR327.1 million, up 31% vs. 2007, mainly due to the increase in comparable EBITDA, and also to the difference in financial charges, which in 2007 were negative for EUR42.0 million, while in 2008 were positive for EUR1.4 million.

Group Reported Net income for 2008 was EUR61.8 million. The main difference versus the EUR322.7 million booked in 2007 can be explained with the same factors discussed at the EBITDA level, net of taxes, plus the difference in financial charges (negative for EUR42.0 million in 2007, and positive for EUR1.4 million in 2008). Finally, it is worth reminding that “comparable” and “adjusted” figures differ from IFRS “reported” figures because they do not include non recurring items, changes in derivatives fair value, and for the methodology used for the evaluation of oil inventories.

In particular, under International Financial Reporting Standards (IFRS), inventories are accounted with the “first-in, first-out” (FIFO) methodology and valued at the lower of cost or net realizable value. On the contrary, “comparable” and “adjusted” figures exclude inventory revaluations and write downs, and provide a clean methodology, more appropriate for an accurate evaluation of the company’s results in conditions of extreme price volatility, like the ones which characterize the oil industry.

The board of directors of Saras met under Chairman Gian Marco Moratti and reviewed the preliminary unaudited 2008 results. The chairman declared: “2008 has been a very volatile year, with the first six months characterized by strong demand and rising prices, followed by a global financial and economic crisis, which led to a severe shrinkage for the cumulative oil product demand. Even in such turbulent times, middle distillates proved quite resilient, and Saras could benefit from its strong exposure to diesel, and its superior operational performance, thus achieving high refining margins and runs. Our solid balance sheet position in the current financial turmoil allows us to face the global economy slowdown and to remain positive for the medium term outlook”.