Segment Management system in the ORLEN Group

As announced earlier, on 1 January 2006 the ORLEN Group is adopting a new management structure based on segment management system principles. The changes are aimed at further improving operational efficiency across the growing and developing ORLEN Group. The whole Group, irrespective of the legal status of individual entities, will constitute one organism driven by the same conduct principles, and where the optimization of operations will be applied to the whole Group, not just particular companies.

The main principle of the segment management system is to achieve coherent co-operation within the company – each team abides by a shared strategy, aims for common objectives and bears shared responsibility for performance. Segment management translates into much bigger involvement of PKN ORLEN into the functioning of the entire Group. The Programme’s aim is to improve operational coordination amongst the individual business segments.

It offers an environment for improvements in operational and investment efficiency, as well as utilization of economy of scale effects and synergies amongst Group companies. Margin optimization management and procurement policies are good examples. Also, a coherent HR policy will add significant value.

Segment management also means a considerable simplification of procedures. A portion of operating decisions shall be seconded to a director and people at managerial level – this will help to refocus responsibility and define adherence to key assignments. The new management rules should create measurable benefits for the company, as has been case at other companies which have put them into practice. The benefits will include:

• Possibility of optimization of CAPEX and operational planning in conditions of multiple-plant production;
• Cost reduction across the company through a decrease of unit procurement costs, the cutting of some support functions within the Group, and coordination of PR and marketing activities;
• Coherence of strategic decisions and decentralization of operating functions;
• Optimization of human resources across the ORLEN Group.

As of 1 January 2006 six business segments will be selected: Refining, Oils, Wholesale, Retail, Petrochemicals, and Chemicals. They will be managed by executive directors, who will take a share of the management board’s tasks and, at the same time and under existing procedures and rules, will take responsibility for operational coordination of each segment across the ORLEN Group.

A majority of the executive directors originate from within PKN ORLEN. The companies of the Unipetrol Group will be covered by the Segment Management system as of 1 January 2007.