Naftna Industrija Srbije : Q3 2023 IFRS

Naftna industrija Srbije A.D.

Interim Condensed Financial Statements (Unaudited)

30 September 2023

This version of the financial statements is a translation from the original, which is prepared in Serbian language. All possible care has

been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original Serbian language version of the document takes precedence over this translation

Contents

INTERIM CONDENSED FINANCIAL STATEMENTS

Interim Condensed Statement of Financial Position	3
Interim Condensed Statement of Profit and Loss and Other Comprehensive Income	4
Interim Condensed Statement of Changes in Shareholders' Equity	5
Interim Condensed Statement of Cash Flows	6
Notes to the Interim Condensed Financial Statements
1.	General Information	7
2.	Summary of Material Accounting Policies	7
3.	Segment Information	8
4.	Cash and Cash Equivalents	10
5.	Short-term Financial Assets	10
6.	Trade and Other Receivables	10
7.	Inventories	10
8.	Other Current Assets	11
9.	Property, Plant and Equipment	12
10.	Right-of-use Assets	13
11.	Investments in subsidiary	13
12.	Long-term Financial Assets	14
13.	Other Non-Current Assets	14
14.	Short-term Debt and Current Portion of Long-term Debt	14
15.	Trade and Other Payables	14
16.	Other Current Liabilities	15
17.	Other Taxes Payable	15
18.	Long-term Debt	15
19.	Lease Liabilities	16
20.	Other non-current financial liabilities	17
21.	Production, Manufacturing and Cost of other sales	17
22.	Selling, General and Administrative Expenses	17
23.	Other income (expenses), net	18
24.	Net Foreign Exchange Gain (Loss)	18
25.	Finance Income	18
26.	Finance Expenses	18
27.	Fair Value Measurement	19
28.	Contingencies and Commitments	19
29.	Related Party Transactions	20
30.	Events After The Reporting Date	21
Contact Information	22

2

NIS a.d.

Interim Condensed Statement of Profit and Loss and Other Comprehensive Income

(All amounts are in 000 RSD, unless otherwise stated)

		Three month period ended Nine month period ended
		30 September	30 September
	Note	2023	2022	2023	2022
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
Sales of petroleum products, oil and gas		104,241,644	127,324,216	266,062,577	346,620,892
Other revenues		8,002,183	4,186,481	23,024,993	14,135,102
Total revenue from sales	3	112,243,827	131,510,697	289,087,570	360,755,994
Purchases of oil, gas and petroleum products		(62,843,257)	(75,253,387) (164,482,647)	(207,303,660)
Production, manufacturing and cost of other
sales	21	(11,860,000)	(8,143,779)	(35,185,413)	(26,207,080)
Selling, general and administrative expenses	22	(7,237,248)	(5,916,813)	(20,989,484)	(17,577,152)
Transportation expenses		(426,864)	(450,935)	(1,147,761)	(1,237,655)
Depreciation, depletion and amortization		(5,579,558)	(5,891,139)	(16,919,777)	(17,426,245)
Taxes other than income tax		(1,373,701)	(1,312,160)	(4,093,609)	(3,874,188)
Exploration expenses		(322)	-	(322)	(173)
Total operating expenses		(89,320,950)	(96,968,213) (242,819,013)	(273,626,153)
Other income (expenses), net	23	(16,964)	223,904	(7,160,347)	301,615
Operating profit		22,905,913	34,766,388	39,108,210	87,431,456
Net foreign exchange gain / (loss)	24	5,274	(731,445)	(104,478)	(2,024,590)
Finance income	25	1,017,657	699,595	4,576,942	1,325,847
Finance expenses	26	(848,514)	(479,594)	(2,451,676)	(1,256,088)
Total other (expense) / income		174,417	(511,444)	2,020,788	(1,954,831)
Profit before income tax		23,080,330	34,254,944	41,128,998	85,476,625
Current income tax expense		(3,717,059)	(5,403,162)	(6,767,837)	(13,674,850)
Deferred tax income		159,983	104,306	540,950	275,820
Total income tax		(3,557,076)	(5,298,856)	(6,226,887)	(13,399,030)
Profit for the period		19,523,254	28,956,088	34,902,111	72,077,595
Other comprehensive income / (loss):
Items that will not be reclassified to profit /
(loss)
Losses on remeasurements of defined benefit
plans		-	-	-	(33,528)
Gain / (loss) from investments in equity
instruments		8,431	-	8,276	(104)
Other comprehensive income / (loss) for the
period		8,431	-	8,276	(33,632)
Total comprehensive income for the period		19,531,685	28,956,088	34,910,387	72,043,963
Earnings per share attributable to shareholders
of Naftna Industrija Srbije
Basic earnings (RSD per share)		119.73	177.58	214.04	442.03
Weighted average number of ordinary shares in
issue (in millions)		163	163	163	163

The accompanying notes are an integral part of these Interim Condensed Financial Statements.

4

NIS a.d.

Interim Condensed Statement of Changes in Shareholders' Equity

Nine-monthperiod ended 30 September 2023 and 2022 (All amounts are in 000 RSD, unless otherwise stated)

			Retained
(unaudited)	Share capital	Reserves	earnings	Total
Balance as at 1 January 2022	81,530,200	93,991	190,623,686	272,247,877
Profit for the period	-	-	72,077,595	72,077,595
Other comprehensive loss
Loss from investments in equity instruments	-	(104)	-	(104)
Losses on remeasurements of defined benefit plans	-	-	(33,528)	(33,528)
Total comprehensive income / (loss) for the period	-	(104)	72,044,067	72,043,963
Dividend distribution	-	-	(5,782,122)	(5,782,122)
Balance as at 30 September 2022	81,530,200	93,887	256,885,631	338,509,718
			Retained
(unaudited)	Share capital	Reserves	earnings	Total
Balance as at 1 January 2023	81,530,200	93,904	278,192,015	359,816,119
Profit for the period	-	-	34,902,111	34,902,111
Other comprehensive gain
Gain from investments in equity instruments	-	8,276	-	8,276
Total comprehensive income for the period	-	8,276	34,902,111	34,910,387
Dividend distribution	-	-	(23,364,925)	(23,364,925)
Disposal of investment in equity instrument	-	33,877	(33,877)	-
Internal transfer	-	(94,715)	94,715	-
Balance as at 30 September 2023	81,530,200	41,342	289,790,039	371,361,581

The accompanying notes are an integral part of these Interim Condensed Financial Statements.

5

NIS a.d.

Interim Condensed Statement of Cash Flows1

(All amounts are in 000 RSD, unless otherwise stated)
		Nine month period ended
		30 September
	Note	2023	2022
		(unaudited)	(unaudited)
Cash flows from operating activities
Profit before income tax		41,128,998	85,476,625
Adjustments for:
Finance expenses	26	2,451,676	1,256,088
Finance income	25	(4,576,942)	(1,325,847)
Unrealised foreign exchange/(gain) losses, net		(384,013)	2,293,394
Depreciation, depletion and amortization		16,919,777	17,426,245
Other non-cash items		322,816	344,598
Operating cash flow before changes in working
capital		55,862,312	105,471,103
Changes in working capital:
Trade and other receivables		(4,418,976)	(14,708,887)
Inventories		6,739,874	(28,600,574)
Other current assets		(1,577,234)	(2,979,670)
Trade payables and other current liabilities		(16,366,879)	11,667,423
Other taxes payable		3,563,726	2,531,667
Total effect on working capital changes		(12,059,489)	(32,090,041)
Income taxes paid		(25,373,621)	(6,843,340)
Interest paid		(2,031,143)	(981,938)
Interest received		3,022,600	668,274
Net cash generated by operating activities		19,420,659	66,224,058
Cash flows from investing activities
Net cash outflow on acquisition of subsidiaries	11,20	(5,863,685)	-
Loans issued		(9,346,067)	(3,410,579)
Loan proceeds received		7,760,912	3,340,219
Capital expenditures2		(19,623,043)	(12,731,474)
Proceeds from sale of property, plant and equipment		110,568	331,090
Bank deposits repayment, net		(19,000,000)	-
Other inflows		8,430	-
Net cash used in investing activities		(45,952,885)	(12,470,744)
Cash flows from financing activities
Proceeds from borrowings	14,18	7,611,892	16,429,595
Repayment of borrowings	14,18	(13,874,926)	(21,699,724)
Repayment of lease liabilities	19	(477,098)	(289,322)
Dividends paid		(23,364,925)	(5,782,122)
Net cash used in financing activities		(30,105,057)	(11,341,573)
Net increase/(decrease) in cash and cash equivalents		(56,637,283)	42,411,741
Effect of foreign exchange on cash and cash equivalents		(170,062)	(410,833)
Cash and cash equivalents as of the beginning of the
period		83,083,255	20,336,901
Cash and cash equivalents as of the end of the period	4	26,275,910	62,337,809

• Company's policy is to present cash flow inclusive of related VAT.

• CF from investing activities includes VAT in the amount of 2.5 bln RSD (2022: 1.7 bln RSD)

The accompanying notes are an integral part of these Interim Condensed Financial Statements.

6

NIS a.d.

Notes to the Interim Condensed Financial Statements for the nine month period ended 30 September 2023

(All amounts are in 000 RSD, unless otherwise stated)

1. GENERAL INFORMATION

Open Joint Stock Company Naftna Industrija Srbije, Novi Sad (the "Company") is a vertically integrated oil company operating predominantly in the Republic of Serbia. The Company's principal activities include:

• Exploration, production and development of crude oil and gas,
• Production of refined petroleum products,
• Petroleum products and gas trading and
• Electricity generation and trading.

Other activities primarily include sales of other goods, works and services.

The Company is a public joint stock company listed on the Belgrade Stock Exchange.

These Interim Condensed Financial Statements have been approved and authorized for issue by Chief Executive Officer and will be presented to Board of Directors for approval.

2. SUMMARY OF MATERIAL ACCOUNTING POLICIES

2.1. Basis of preparation

The Company maintains its books and records in accordance with accounting and taxation principles and practices mandated by Serbian legislation. The accompanying Interim Condensed Financial Statements were primarily derived from the Company's statutory books and records with adjustments and reclassifications made to present them in accordance with International Financial Reporting Standards (IFRS).

The Interim Condensed Financial Statements have been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting. IAS 34 for interim financial reporting does not require all disclosures that would be necessarily required by IFRS.

The new standard for insurance contracts and the amendments to the existing standards, which became effective on 1 January 2023, did not have any material impact on the Interim Condensed Financial Statements.

The Company intends to implement the amendments to the existing standards and new standards issued but not yet effective as of the date these Condensed Interim Financial Statements were authorised for issue, and the Company does not expect them to have any material impact on the Condensed Interim Financial Statements when adopted.

The Company does not disclose information, which would substantially duplicate the disclosures contained in its audited Financial Statements for 2022, such as significant accounting policies, significant estimates and judgements, financial risk disclosures or disclosures of financial line items, which have not changed significantly in amount or composition. Management of the Company believes that the disclosures in these Interim Condensed Financial Statements are adequate to make the information presented not misleading if these Interim Condensed Financial Statements are read in conjunction with the Company's Financial Statements for 2022.

In the first nine months 2023 the volatility at commodity and financial markets is seen rising while the RSD remained stable relative to EUR and weakening against the USD (the information on economic environment in the Republic Serbia is detailed in Note 28) due to geopolitical situation. Under current conditions it turned out to be impossible to evaluate how long the volatility will remain and at what level the key financial indicators will ultimately stabilise. Due to that during the third quarter of 2023 the Company didn't review the critical accounting estimates which are used by the Company in the Interim Condensed Financial Statements preparation and which are assessed based on oil prices forecasts, inflation and market borrowing rate. In particular as of 30 September 2023 the Company didn't review estimation of the recoverable amount of the non-current assets that is determined for the purpose of the impairment testing.

7

NIS a.d.

Notes to the Interim Condensed Financial Statements for the nine month period ended 30 September 2023

(All amounts are in 000 RSD, unless otherwise stated)

The Company continues monitoring the development of macroeconomic situation and emergence of possibility to make evaluation of the indicators mentioned above with reasonable certainty.

The results in these Interim Condensed Financial Statements for the three and nine month period ended 30 September 2023 are not necessarily indicative of the Company's results expected for the full year.

The Company as a whole is not subject to significant seasonal fluctuations.

2.2. Changes in significant accounting policies

Significant accounting policies, judgements and estimates applied while preparing these Interim Condensed Financial Statements are consistent with those applied during the preparation of Financial Statements as of and for the year ended 31 December 2022.

3. SEGMENT INFORMATION

Presented below is information about the Company's operating segments for the nine month period ended 30 September 2023 and 2022. Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available.

The Company manages its operations in 2 operating segments: Upstream and Downstream.

Upstream segment (exploration and production) includes the following Company operations: exploration, development and production of crude oil and natural gas and oil field services. Downstream segment (refining and marketing) processes crude oil into refined products and purchases, sells and transports crude and refined petroleum products (refining and marketing). Corporate centre and Energy business activities are presented within the Downstream segment.

Eliminations and other adjustments section encompasses elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products, and other adjustments. Intersegment revenues are based upon estimated market prices.

EBITDA represents the Company's EBITDA. Management believes that EBITDA represents useful means of assessing the performance of the Company's ongoing operating activities, as it reflects the Company's earnings trends without showing the impact of certain charges. EBITDA is defined as earnings before interest, income tax expense, depreciation, depletion and amortization, finance income (expenses) net and other non-operating income (expenses). EBITDA is a supplemental non-IFRS financial measure used by management to evaluate operations.

Reportable segment results for the nine-month period ended 30 September 2023 are shown in the table below:

	Upstream	Downstream	Eliminations	Total
Segment revenue	35,329,357	289,844,475	(36,086,262)	289,087,570
Intersegment	35,289,019	797,243	(36,086,262)	-
External	40,338	289,047,232	-	289,087,570
Adjusted EBITDA (Segment results)	23,615,318	32,726,418	-	56,341,736
Depreciation, depletion and amortization	(9,261,463)	(7,658,314)	-	(16,919,777)
Net foreign exchange loss	(69,882)	(34,596)	-	(104,478)
Finance income (expenses), net	(123,521)	2,248,787	-	2,125,266
Income tax	-	(6,226,887)	-	(6,226,887)
Segment profit	14,159,436	20,742,675	-	34,902,111

8

NIS a.d.

Notes to the Interim Condensed Financial Statements for the nine month period ended 30 September 2023

(All amounts are in 000 RSD, unless otherwise stated)

Reportable segment results for the nine-month period ended 30 September 2022 are shown in the table below:

	Upstream	Downstream	Eliminations	Total
Segment revenue	47,742,374	359,112,250	(46,098,630)	360,755,994
Intersegment	45,660,444	438,186	(46,098,630)	-
External	2,081,930	358,674,064	-	360,755,994
Adjusted EBITDA (Segment results)	35,965,318	68,857,740	-	104,823,058
Depreciation, depletion and amortization	(9,263,752)	(8,162,493)	-	(17,426,245)
Net foreign exchange loss	(189,278)	(1,835,312)	-	(2,024,590)
Finance income (expenses), net	(41,048)	110,807	-	69,759
Income tax	(155,950)	(13,243,080)	-	(13,399,030)
Segment profit	26,413,754	45,663,841	-	72,077,595

Adjusted EBITDA for the three and nine month period ended 30 September 2023 and 2022 is reconciled below:

	Three month period ended Nine month period ended
	30 September	30 September
	2023	2022	2023	2022
Profit for the period	19,523,254	28,956,088	34,902,111	72,077,595
Income tax	3,557,076	5,298,856	6,226,887	13,399,030
Finance expenses	848,514	479,594	2,451,676	1,256,088
Finance income	(1,017,657)	(699,595)	(4,576,942)	(1,325,847)
Depreciation, depletion and amortization	5,579,558	5,891,139	16,919,777	17,426,245
Net foreign exchange (gain) / loss	(5,274)	731,445	104,478	2,024,590
Other expenses/(income), net	16,964	(223,904)	7,160,347	(301,615)
Other non-operating expense/(income), net*	80,206	120,520	(6,846,598)	266,972
Adjusted EBITDA	28,582,641	40,554,143	56,341,736	104,823,058

*Other non-operating expense / (income), net mainly relates to donations for support projects in the field of education, social and health care, excess and deficiencies of assets revealed, fines, penalties and other. (note 23)

Oil, gas and petroleum products sales, sales of electricity, lease revenue and other sales comprise the following:

	Nine month period ended
	30 September
	2023	2022
Sale of crude oil	-	4,602,951
Sale of gas	139,165	100,104
Wholesale activities	139,165	100,104
Sale of petroleum products	265,923,412	341,917,837
Through a retail network	80,410,567	95,721,017
Wholesale activities	185,512,845	246,196,820
Sale of electricity	11,091,913	3,870,327
Lease revenue	274,936	268,239
Other sales	11,658,144	9,996,536
Total sales	289,087,570	360,755,994

Other sales mainly relate to sales of non-fuel products at petrol stations for 8,156,028 RSD (2022: 7,198,682 RSD).

All performance obligations related to customers are satisfied at point in time at which a customer obtains control of a promised asset and the entity satisfies a performance obligation.

9

NIS a.d.

Notes to the Interim Condensed Financial Statements for the nine month period ended 30 September 2023

(All amounts are in 000 RSD, unless otherwise stated)
4.	CASH AND CASH EQUIVALENTS
		30 September	31 December
		2023	2022
Cash in bank and in hand	8,970,637	16,861,298
Deposits with original maturity of less than three months	17,299,999	66,219,999
Cash equivalents	5,274	1,958
		26,275,910	83,083,255

The fair value of cash and cash equivalents approximates their carrying value.

5.	SHORT-TERM FINANCIAL ASSETS
		30 September	31 December
		2023	2022
Short-term loans	2,027,129	204,604
Deposits with original maturity more than 3 months less than 1 year	25,873,752	6,003,699
Current portion of long-term investments (note 12)	5,458,695	4,225,725
Less impairment loss provision	(1,978,366)	(1,980,437)
		31,381,210	8,453,591

The fair value of short-term financial assets approximates their carrying value.

6.	TRADE AND OTHER RECEIVABLES
		30 September	31 December
		2023	2022
Trade receivables	54,736,857	50,420,797
Other receivables	90,188	88,717
Less credit loss allowance for trade receivables	(7,422,663)	(7,437,841)
Less credit loss allowance for other receivables	(31,959)	(34,426)
		47,372,423	43,037,247

The Management of the Company regularly assesses the credit quality of trade and other receivables taking into account analysis of ageing profile of receivables and duration of relationships with the Company.

Management believes that not impaired trade, specific and other receivables are fully recoverable.

The carrying amounts of the Company's trade and other receivables are mostly denominated in the RSD.

7.	INVENTORIES
		30 September	31 December
		2023	2022
Crude oil		26,286,784	29,409,389
Petroleum products	19,407,775	23,314,075
Materials and supplies	4,843,455	4,771,464
Other		1,242,646	1,124,692
Less impairment provision	(4,423,515)	(4,456,029)
		47,357,145	54,163,591

10