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's activity report 2022

Overview of economic activity

During the reporting year, Baltic Marine Bunker AS continued its main activity - bunkering of ships, wholesale of ship fuels, as well as providing shipping and other services.

The net turnover of the reporting year was 71,009 thousand euros (2021: 57,007 thousand euros), 73.2 thousand tons of fuel were sold (2021: 116.1 thousand tons), earning a pre-tax net profit of 2,125 thousand euros (2021: 1,262 thousand euros).

In 2022, political tensions in the region increased due to the further development of the situation in Ukraine, which has negatively affected raw material and financial markets, and volatility in pricing has increased. Additional sanctions and restrictions have been imposed on businesses operating in the region during the year.

AS Baltic Marine Bunker (hereinafter: BMB) 100% of the shares are owned by the sanctioned business entity Gazpromneft Marine Bunker LLC, whose representatives also belong to the BMB council as representatives of the owner. Nevertheless, the purpose of Article 5aa(1)(b) of EU Regulation 833/2014 is to exempt subsidiaries of sanctioned companies located in the EU from the sanction (prohibition of transactions), enabling them to continue their economic activity on condition (see. Article 5aa(1)(c) of the Regulation) that the subsidiary conducts independent economic activity, does not operate under the parent company's guidelines or represent it. In this case, there is no basis for claiming that BMB operates on behalf of or under the guidelines of the parent company.

BMB has complied with all sanctions imposed by both the EU and Estonia and has used legal exceptions to continue operations.

Fuel supplies from group companies ended in April 2022. In addition to related companies, we have a long-term cooperation with independent fuel product suppliers. Subsequently, fuel products were purchased from independent non-sanctioned parties in accordance with the exception set out in Article 3m(3)(b) of Council Regulation No 833/2014, according to which the ban on the import of crude oil and petroleum products does not apply until 5.02.2023 to transactions concluded before that date. The Republic of Estonia narrowed the EU restrictions, imposing an import ban until 05.12.2022. According to the imposed sanctions, it has been possible to trade in Russian-origin fuel products if they have been stored in an excise warehouse located in the EU before 05.02.2023.

The high world market prices for fuel products since the beginning of the year have allowed profitable operation. Since November 2022, the price trend for petroleum products has been slightly declining, but still relatively high compared to the previous year. Product pricing, both in purchase and sale transactions, is based on the international exchange market prices of the day (Platt's CIF NEW/Basis ARA, FOB Rotterdam), so the price risk of fuel products has been hedged.

Bunkering volumes in the domestic market slightly decreased, which was due to the deficit of some fuel products and imposed sanctions. The volumes of the fuel product ULSF in wholesale decreased the most, as there were procurement difficulties due to technical problems at the manufacturers. Transit through Estonia decreased, mainly due to imposed sanctions.

In the domestic market and Latvia, customer relationships were consolidated with existing partners. This was facilitated by the high quality of the fuel we supply.

The overall impact on the world economy has raised fees for energy carriers, which has led to a general price increase for various products and services, affecting all companies equally.

Environmental protection issues were also topical. The bunker ship East is equipped with all necessary environmental protection equipment and the crew on board has received special training. In addition, ballast water cleaning equipment was installed on the bunker ship. The operation is also covered by third-party protection insurance.

During the reporting year, a class inspection was carried out on the bunker ship East, valid for 5 years.

The company hedges financial risks through supply contracts, using so-called virtual hedge when buying fuel. Currency risks are mitigated by the identity of the purchase and sale currency. The company is well capitalized. Our clients are international companies with stable payment behavior. Credit limits have been set according to the client's international rating, daily credit control takes place before concluding new transactions.

Based on legislative sanctions, the company's management has analyzed the impact on business operations at the time of preparing the report and found that Baltic

Marine Bunker AS is still an operating company for at least 12 months from the preparation of the annual financial statements.

Objectives for the next financial year - maintain the customer base; - conclude supply contracts for the purchase of non-Russian origin fuel products; - continue the company's operations within the limits allowed by sanctions; - develop new supply schemes for the purchase of non-Russian origin fuel products.

The main financial ratios characterizing the company are as follows: