The economy in 1Q 2004 was mainly affected by an average 1.7 per cent increase in crude oil prices compared with 1Q 2003. Despite a 21.6 per cent (y-o-y) fall, refinery margins remained at quite a high level. The Ural / Brent differential also rose by almost 42 per cent (y-o-y). These macroeconomic market conditions were favourable for PKN ORLEN and contributed to a satisfactory result in 1Q 2004.

Despite the continuing high unemployment rate, Poland's GDP index continues to grow. From a sector perspective, it is important that sales of new cars in Poland in 1Q 2004 increased by approximately 22.5 per cent (compared with 1Q 2003), and domestic fuel consumption (petrol, diesel, heating oil) is estimated to have risen by approximately 6 per cent.

PKN ORLEN's financial performance recorded a 27.5 per cent revenue increase and 350 cost cutting initiatives brought PLN 143m of savings. The net profit figure also benefited positively due to a dividend from Polkomtel of PLN 68m (compared to a PLN 47m in 1Q 2003).

Refinery and wholesale operations recorded a PLN 424m operating profit in 1Q 2004. Calculated with the LIFO method, this results in an increase of 5 per cent over the same period in 2003. As a result of fuel supply contracts with international operators, PKN ORLEN increased sales of white products by 6.8 per cent. Due to its strategy of maximizing total margin and good fuel prices, PKN ORLEN's inland premium reached PLN 103m and exports surged by 40 per cent. Cost savings in the wholesale area within the cost cutting programme amounted to PLN 35m.

Retail operations were noticeably driven by the market's seasonality - typically, the first quarter of each year witnesses the poorest demand for fuel. The segment's operating result was affected mainly by performance of ORLEN Deutschland. All in all, however, the retail segment's result improved by PLN 5m over 1Q 2003. Consolidated retail sales rose by 18.1 per cent, which is mainly attributable to the consolidation of German retail operations. The fall in petrol sales was off-set by increased sales of diesel and a surge in LPG sales, which allowed aggregate sales at the company-owned stations to rise by 1.8 per cent over 1Q 2003. The segment's positive result in 1Q 2004 in Poland was significantly supported by margin optimization, also for non-fuel goods and services.

The ORLEN Group's petrochemical segment achieved an operating profit of PLN 202m. Taking into an account a PLN 112m contribution to Basell Orlen Polyolefins in 1Q 2003, the result of the segment in 1Q 2004 grew by 106 per cent in comparison to the first quarter of the previous year. The main driver behind this was the improved market conditions for fertilisers, which, together with better margins, off-set lower sales of the segment. Anwil - an ORLEN Group company - increased its operating profit by PLN 51m, an over 650 per cent increase in the net profit of this company. The PLN 12m from Basell Orlen Polyolefins also contributed to the segment's consolidated result in 1Q 2004.

Zbigniew Wróbel, President and CEO, said:

"The Company's results clearly indicate our consequence and determination to execute our corporate strategy. We operated in favourable market conditions, Germany excepted, and our flexible and constructive management of the business secured another good set of results for our shareholders."