OMV Petrom S.A. (XNE.F) Q2 FY2025 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the OMV Petrom's earnings call. Today's presentation will last around 30 minutes and will be recorded. By now, you should have received the presentation by e-mail. The slides and the speech are also available online at www.omvpetrom.com in the Investors section. These also include the cautionary statement regarding forward-looking statements. Now let me hand over to Simona Crutu, Manager of the Investors Relations and stakeholder engagement department who will moderate the event. Please go ahead.

Good afternoon, ladies and gentlemen, and thank you for joining us. We'll have a presentation followed by a Q&A session. Christina Verchere, Chief Executive Officer, will start with a brief overview of our progress in terms of strategy and continue in presenting our second quarter operational performance together with some key highlights on the macroeconomic and regulatory environment. Alina-Gabriela Popa, our Chief Financial Officer, who will give you more details on our financial performance and the brief outlook. Afterwards, the 2 [indiscernible] members, together with Cristian Hubati, [indiscernible] member responsible for E&P; [indiscernible] member is [indiscernible] R&M; and Franck Neel [indiscernible] will be available to answer your questions. [Operator Instructions]. I'm now handing over to Christina.

Good afternoon, ladies and gentlemen, and a warm welcome to our conference call that will take you through our performance in the second quarter of 2025. Please let me draw your attention to our legal disclaimer, which you can read in detail on Slide 2. Ladies and gentlemen, let me open our presentation with a summary of our progress in our Strategy 2030 implementation in the first half of this year. In our strategic pillar regional gas, our Neptun Deep project is progressing as planned. In March, we started development drilling in the Pelican South field, while progressing with the fabrication of equipment and construction, including the natural gas metering station in Tesla Romania. We also continued gas marketing activities. In offshore Bulgaria in the [indiscernible] adjacent to the [indiscernible] in March, we closed a transfer of 50% interest in the license to NewMed Energy while maintaining our role as operator. And last week, we announced the signing of a rig contract with [ Noble Corporation ] and international offshore drilling contractor for the drilling of the 2 offshore exploration wells. The drilling campaign in Bulgaria is expected to start in the fourth quarter this year and last approximately 4 months. Regarding our strategic pillar transition to low [indiscernible], we made significant progress on many projects, particularly in renewable power. In June, we signed the acquisition from Energy for a 50% interest in the Gabare photovoltaic project, one of our Bulgaria's largest PV projects. OMV Petrom and Energy will invest approximately EUR 200 million by 2027, including external financing for an installed capacity of approximately 400 megawatts. We are also advancing with the SAF/HVO project aiming to support the decarbonization of the transportation sector. In February, we started the construction works for the production unit in the Petrobrazi refinery. And in June, we exercised our option in a supply contract with Astra for the acquisition of pre-treated used cooking oil, thus reaching more than 80% of the feedstock for the first 8 years of biofuels production at the SAF/HVO plant. In the area of e-mobility, we inaugurated the largest electric charging hub in Romania for all types of vehicles, including binary transportation. By the end of June, we had around 1,000 charging points installed and our plan is to reach up to 1,500 by the end of the year. We are also delivering on our commitment to offer attractive shareholder returns. For the year 2024, we paid a base dividend per share of RON 0.044, up 7.5% year-on-year. In the third quarter, the Executive Board will decide if a special dividend is to be proposed. On HSSE, the total recordable injury rate for the period July 2024 to June 2025 was 0.54. Moreover, we continued our efforts to reduce greenhouse gas intensity with projects in all 3 business segments. On Slide 4, we present the key highlights for the second quarter. Operational performance was resilient in the second quarter. However, the context of lower and volatile oil prices as well as the regulatory environment in gas and power had a negative effect on our financial performance, partially offset by integration benefits. At RON 1.2 billion, our second quarter Clean CCS operating result was 14% lower year-on-year. Our operating cash flow in the second quarter of 2025 reached RON 2 billion. The Clean CCS return on average capital employed reached 12.8 percentage points. I will provide more detailed information on each business division later in this presentation. For now, I would like to highlight some developments in our traditional business. The second quarter is generally characterized by scheduled maintenance, and this was the case across all 3 business divisions in the second quarter of 2025. In E&P this translated in a higher than usual decline in hydrocarbon production, reflecting larger scopes of work performed at key wells as well as timing. In refining, the plant shutdown at the Petrobrazi refinery met the low utilization of the assets Similarly, in the power segment, the scheduled out is at the Brazi power plant resulted in a lower-than-normal contribution to the national production mix of 5%. Worth mentioning that these maintenance activities are essential for the regular and safe operations of our business. In today's high inflation environment, maintaining a sharp focus on cost efficiency and streamlining our operations is crucial. To achieve this, we will continue optimization programs by assessing selective field development opportunities, simplifying and automating our processes and further improving contractor management throughout the company. We have launched cost optimization initiatives that are expected to achieve cost reductions of EUR 150 million by 2027 compared to 2024. We anticipate that the most significant impact from these programs will be realized in the next 2 years. At the beginning of July, we announced the natural gas discovery in Spineni, near Craiova. Testing has compounded the discovery is commercially viable with a production potential of 1,300 barrels of oil equivalent per day and we are moving forward with the approval of the development plan. For this onshore project, we have already invested around EUR 15 million during the exploration phase. Our core business remains a strong source of cash flow and continues to support our investments in regional gas growth, lower 0 carbon projects as well as dividend payments. Let us now look at the evolution of commodity prices in the second quarter of 2025. Oil prices were highly volatile in the second quarter. Prices trended downward in late April and May, influenced by escalating trade tensions, OPEC+ decision to accelerate the unwinding of voluntary production cuts and ongoing discussions regarding a potential U.S-Iran nuclear agreement. By early May oil prices fallen to their lowest level in several years, briefly to be below $60 per barrel. A reversal began early June as supply concerns mounted due to rising geopolitical tensions Ukraine strikes on Russian air bases and ultimately, the breakout of an open military conflict between Iran and Israel, leading to Brent briefly. Brent crude briefly trading above $80 per barrel. On average, Brent crude was priced at $68 per barrel in the second quarter, representing a decrease of 20% year-on-year and 10% quarter-on-quarter. OMV Petrom indicator refining margin reached $10.27 per barrel in the second quarter, 6% higher year-on-year in the context of lower crude oil prices. European spot gas prices began the quarter on a downward trend, reflecting significant concerns of our economic growth and increasing protectionist environment. However, prices started to rise in June, driven by fears that physical energy flows from the Middle East could be disrupted. The CEGH price averaged EUR 39 per megawatt hour during this quarter, representing a 20% increase year-on-year with a 20% decrease quarter-on-quarter. On the Romanian centralized market, gas prices also declined quarter-on-quarter but from a higher base, reaching an average level comparable to the CEGH. Day-ahead prices averaged around EUR 39 per megawatt hour, marking a 25% decrease quarter-on-quarter and a 46% decrease year-on-year. Baseload electricity prices in Romania decreased by 36% quarter-on-quarter, but increased by 8% year-on-year to an average of EUR 86 per megawatt hour. The average CO2 price fell by 6% quarter-on-quarter to EUR 69 per ton. This decline was largely driven by market uncertainty following the tariffs discussion, which raised concerns about a major restructuring of the global trade potential long-term countermeasures and the outlook of manufacturing activity. CO2 prices, which are closely linked to gas prices mirrored the downward trend seen in the gas market during this period. Looking now at the Romanian macroeconomic environment. The latest available data shows that in the first quarter of 2025, GDP increased by only 0.3% year-on-year. In May, the European Commission reduced its projected GDP growth for 2025 Romania from 2.5% to 1.4%. And for 2026, Romanian GDP is now forecasted to grow by 2.2%, reduced from the previous 2.9%. The consumer price index for the month of June 2025 versus June 2024 was 5.7%. One rating agency issuance a report of the announcement of the new fiscal consolidation package by the government. In July, S&P reconfirmed Romania's investment-grade status yet with a negative outlook. S&P's estimates for Romanian GDP growth were revised down from 1.8% to 0.3% for 2025 and from 2.6% to 1.3% for 2026. Nonetheless, most rating agencies welcome the announced fiscal consolidation package, highlighting its importance for restoring fiscal credibility and stabilizing Romania's debt. However, the anticipated fiscal timing is expected to put pressure on future economic growth and most likely will result in higher inflation. Looking at the Romanian energy sector in the second quarter of 2025 based on our internal estimates, the demand evolution for our products was mixed. Demand for retail fuels was stable year-on-year. Commercial demand was down by 4% year-on-year due to weak industrial sector evolution. Gas demand increased by around 9% year-on-year, generated by higher consumption from households and small and medium enterprises due to colder weather, especially in April and May. Power demand was 1% lower year-on-year, while domestic production decreased by 2% year-on-year, making Romania a net importer of in the second quarter of 2025. The contribution of hydro and coal to the overall generation mix significantly decreased year-on-year, while electricity from solar wind and gas sources increased year-on-year. Let me now summarize the key highlights of the Romanian regulatory framework. Looking at the fiscal regulatory framework in Romania, the power market was liberalized starting from the 1st of July. And additionally, the government is implementing a series of measures to protect vulnerable consumers. As for gas, the Ordinance 6 2025 maintains the regulations until the end of March '26, after which the gas market is also set to be liberalized. We reiterate our belief that free market principles are fundamental for investments and that intervention should be temporary in nature, and we welcome the state actions to put in place a mechanism for formable consumers. The 0.5% tax on the net value of certain constructions introduced at the beginning of 2025 had an impact of low double-digit million euros for 2025. The 0.5% tax on turnover introduced in 2024 for 2 years remains applicable also in 2025. We maintain our estimate on the impact from this tax to be below RON 250 million in 2025. The newly appointed Romanian government has proposed a set of fiscal measures with effect after the first of August 2025. These include, among others, increases of VAT rates and excise duties which could potentially affect the demand for our products in the medium term. Let me now move to the performance of our divisions, starting with exploration and production. Clean operating results in Exploration Production decreased by 20% year-on-year to RON 657 million in the second quarter of 2025, driven by lower oil price and hydrocarbon sales volumes, unfavorable ForEx effects, higher gas taxation and higher production costs. These were partly compensated by lower depreciation, higher gas price, lower exploration expenses and net positive impact from litigation. Hydrocarbon production in the second quarter decreased by 7% year-on-year, mainly due to planned maintenance activities and natural decline in the field. However, on a like-for-like basis, excluding the impact of maintenance, which occurred in the second quarter this year versus the third quarter last year. Production was 3.7% declining year-on-year. Production cost per barrel of oil equivalent increased year-on-year by 18% to $18.1, reflecting lower production, unfavorable ForEx and increased costs, including the newly introduced construction tax with an impact of $0.32 per barrel of oil equivalent. For the full year 2025, we largely maintain the guidance provided in April. We keep our estimate for Brent oil price at $70 per barrel. We expect to produce around 104,000 barrels of oil equivalent per day, considering no divestments. We now see the production cost above $17 per barrel of oil equivalent given the ForEx effect, the new construction tax and the expectation of the [ existing ] inflationary pressures on our cost. CapEx is estimated to be around RON 5.8 billion. Alina will provide more details later. In Refining and Marketplace, the Clean CCS operating result decreased by 25% year-on-year to RON 560 million in the second quarter of 2025, mainly in the context of the 20-day client shutdown of the Petrobrazi refinery in May. Retail sales were flat year-on-year. However, total refined product sales volumes decreased by 9% year-on-year reflecting lower product availability in the context of a binary plant shutdown impacting exports and commercial sales. Recent market evolutions have improved the outlook related to refining margins. For the full year 2025, we now estimate the indicator refining margin to be around $8 per barrel. The guidance for refinery utilization rate is kept at between 90% and 95%. In terms of retail fuel products demand, we change our estimate Romania from slightly above compared to 2024 to stable. For our total [ of fire ] product sales, we now see a lower year-on-year performance with broadly flat retail fuel sales in line with demand evolution. In Gas and Power, we achieved improved performance in both business lines. However, the overall result remained a loss of RON 7 million as it continued to be affected by regulatory framework and market price development. In the gas business, we had a good operational performance with sales volumes 23% higher year-on-year and higher realized margins for both equity and third-party gas. The power business continued to be affected by the changes in legislation introduced starting April 2024, although to a lower extent compared to the second quarter of last year, mainly from reduced over taxation. We achieved good results from higher production, improved margin generation by volumes from third parties and by the balancing and [indiscernible] services. In addition to our already operational renewable assets in our portfolio, those small have also started to contribute to our overall power margin. The Brazi power plant generated 0.61 terawatt hour in the second quarter, covering 5% of Romania generation mix in the context of the client shutdown. For the full year 2025, our total gas sales volumes and the net electrical output are estimated to remain stable year-on-year. Please let me now hand over to Alina for more details on the financial results of the second quarter of 2025.

Thank you, Christina, and good afternoon also from my side. I will continue the presentation with Slide 12, starting with some highlights on the income statement and also presenting key developments in our cash flow statement. Group clean CCS operating results decreased by 14% year-on-year to RON 1.2 billion with lower results in E&P and R&M and improved results in Gas and Power. The clean consolidation line was RON 15 million in the second quarter of 2025, mainly as a result of lower fuel product stocks and lower oil prices overcompensating the effects from gas volumes injected into storage. For the second quarter of 2025, we recorded inventory holding losses of RON 113 million compared to losses of minus RON 4 million in the second quarter of 2024. We also recorded net special charges of RON 121 million, mainly in relation to reassessment of provisions and temporary valuation effects from followed contracts. For comparison, in the second quarter of 2024, we recorded net special gains of RON 46 million, mainly due to the next temporary gains from forward contracts. The net financial result was a positive RON 225 million, mainly due to interest income following positive outcome from litigation. As a result, in the second quarter of 2025, the net income attributable to stockholders decreased by 17% year-on-year to RON 1.1 billion. The 0.5% [indiscernible] on revenue introduced in 2024 amounted to around RON 44 million, mostly booked in the refining and marketing segment. As for the newly introduced 0.5% tax on construction, we booked in the second quarter around RON 6 million, mostly in the Exploration and Production division. With regards to our cash flow statement in the second quarter of 2025, the cash generating from operating activities before net working capital movement was RON 1.4 billion. For comparison, the amount recorded in the second quarter of last year was RON 683 million, being impacted by the payment of RON 1.2 billion solidarity contribution on refined crude for 2023. Working capital changes led to a cash inflow of RON 571 million in the second quarter of 2025 compared to RON 372 million in the second quarter of 2024. Following a strict working capital discipline, the higher cash inflows reflects mainly lower receivables and inventories. Overall, the operating cash flow in the second quarter of 2025 amounted to RON 2 billion compared to RON 1.1 billion in the previous year. Our net payment for investing activities amounted to RON 1.9 billion, an increase of 180% year-on-year. This mainly reflects a cash outflow for organic CapEx amounted to RON 2 billion, partly compensated by a net cash inflow from investment in government bonds. Our base dividend for the financial year 2024, amounting to RON 2.7 billion were paid starting June 1, 2025. The net cash position, excluding leases, decreased to RON 7.3 billion at the end of the second quarter of 2025 versus RON 12.8 billion by the end of June 2024. Moving now to Slide 13. Total CapEx for the first half of 2025 was RON 3.3 billion, 37% higher year-on-year. 73% of this amount was spent in exploration and production, the biggest project being NeptunDeep. In addition, we finalized the drilling of 5 new wells and [indiscernible] and perform more than 260 workover drops. In Refining & Marketing, investments increased by 24% to RON 74 million, mainly for the Petrobrazi shutdown and ongoing projects related to the transition to low and zero-carbon activities such as SAF/HVO unit and mobility. In Gas & Power, we invested BRL 120 million, reflecting the progress made on the renewable power portfolio and the planned outage of Brazi power plant. For the full year 2025, assuming a predictable and competitive regulatory and fiscal environment, we maintain the guidance provided in February. We plan organic CapEx of around RON 8 billion, more than 25% higher year-on-year. Additionally, potential inorganic CapEx is estimated at up to RON 0.6 billion, mainly in connection to the M&A transactions in the Gas and Power segments. Let me move to outlook on Slide 14. We have presented already our expectations for the relevant indicators for 2025. As a result, this year, in the context of higher plant investments, we expect the free cash flow before dividends to be negative, decreasing further our net cash position as planned. We are closely monitoring events on the global and local agenda and permanently assess their impact on our business. The assumptions and targets for the period 2026, 2027 are currently under review as part of our annual midterm planning process. We are confident that our strong financial position and integrated business model will help us navigate in this volatile environment. With this, we conclude our presentation, and thank you for your attention. We are now available for your questions.

[Operator Instructions].

Our first question comes from the line of Oleg Galbur of ODDO BHF.

I have 4. So firstly, on the litigation gain, could you please tell us what was the exact impact on the operating results and on financial results? And could you also explain why was this game not report on the special items because, frankly, it was a bit confusing for us to interpret correctly the E&P segment performance? Secondly, on the special dividend decision. So from the way you phrased it in the report, it seems that you have delayed the decision, although you must have already a pretty good visibility on this year's performance. So my question is, I guess, are there any particular reasons for that? Would it be related to possible the exclusion of Petrom from [ FTI ] indexes, for example? My next question relates to your investments in green energy projects. After the most recent acquisition in Bulgaria, it looks like that [ from ] should be able to achieve its 2030 targets in terms of installed capacity. Do you see more room to grow in this space. In other words, do you plan to invest more money in renewables, at least opportunistically? And lastly, could you please provide us the volume of gas to be sold at regulated prices in Q3 and Q4?

Well, thank you very much for your questions. Alina, maybe you take a litigation and special dividends, but also to the [indiscernible] indices in question that's there as well. Franck when we will take the volumes sold on the gas market, and I will take that energy transition investment.

So starting with first question. The net positive impact on litigation in EBIT in the operational result was approximately RON 200 million and the positive impact on the financial result was approximately RON 170 million, both in Q2 2025. Now this is related to [indiscernible] topics related to fiscal treatment for some transactions that happened many years ago, more than 10 years ago. Legal process took very long, and it was concluded by the [indiscernible] in Q2 in 2025. Therefore, the impacts were booked in Q2. The reason why were -- they were not reflected as special when we booked the expenses related to this litigation actually the provisions related to [indiscernible] on at that time. And then we followed the original treatment of the expense also when we reverse where we have the revenue this time. This is a simple [indiscernible]. And moving now to special dividend. So I think you know very well our dividend policy and dividend guidance. We had -- when it comes to base dividend -- progressive base dividend, we announced 7.5% increase versus previous year. It was approved payment started in June. When it comes to special dividends, we pay them in a favorable market environment and provided to our CapEx spend and funding for the decision, we debated a lot what need of the year means in our company. So we have some likely debate on that. We announced now that we will take the decision by end of September, so in Q3. So this is what we announced together with the report today. And this decision is based on 3 main elements. Number one is the progress on our significant project we are in the most intensive investment period of our history with a lot of projects ongoing. We will assess the progress on all that. Second one, which is probably the most unknown at this point in time is related to the significant changes in the regulatory and fiscal regulations going on in Romania right now. There are several [indiscernible] packages that have been announced. But it's still -- we are still assessing and there are still potentially more to come. So we want to have full clarity on what the extent to which this such fiscal regulatory measures will have an impact on our company. And the third [ dimension ] is related to the overall market environment. Oil gas prices, refining margins and our financial results. And there, yes, we do have quite some clarity based on the first 2, 2 quarters already. But later September, we will have a decision when it comes to that. Now this has anything to do with the [indiscernible] and let me explain a bit of [indiscernible] situation because I think it's important to go through that as well. So our share price had very strong evolution in the last few years. So if we look year-to-date, we had approximately 10% if we look last 3 years, about 45%. [ Futhi ] has 3 criteria for this size of market capitalization. We have no issues a thought on that. Second is [indiscernible], the free float, no issues at all on that. And the liquidity tested the third one where we are struggling. The reason for that, what we see is the number of investors middle- and long-term investors in Petrom is increasing. And generally, this is a good thing. It's not a bad thing, especially as we are company in an industry which I invest in mid- and long term. So that shows the trust of the investors. But it comes to the intended consequences of this low liquidity. And this is where -- yes, we have the challenges around this criteria related [ FSI]. We will see we will monitor the progress. It should be somewhere August, September, where we will see the final decision [indiscernible].

Thank you, Alina. Maybe I'll just say a couple of points on investment in [ NH ] transition in general [indiscernible] probably the details should come from Franck. I think, Ali, what I would just want to highlight maybe at the higher level of energy transition, investment. What I think you can see is that there are some areas where we go faster and that some areas where we go a bit slower. So for example, when we put our strategy update out last year, we increased our target to 2.5 gigawatts for renewable power portfolio, including with partnerships, and that was an increase from 1 gigawatt in our original one. It is a clear example of where we were going larger. And then actually biofuels bit slower. So -- and the main, I think, message is that we will need to watch how things are unfolding to make sure that we are investing appropriately and then as we put the assets and bring the new assets in that they are fully being utilized. It's going to be real ability to sort of predict how the market is going to unfold or is to make sure that we are maximizing the use of our assets and not putting any assets on it onto the market that will be fully utilized. So that gives you just a little bit of example to make sure that we're being flexible and careful and also always making sure that we get double-digit rates of returns our low and 0 carbon investments. But maybe, Franck, you want to add a little bit with regards to renewable and [indiscernible].

Thank you for the question. We are quite busy now to build our new portfolio. So as we mentioned in our slides, we are pulling about megawatts under construction. [indiscernible], and we will start also the 2 wind project construction in the second half of the year. So a very busy schedule. And we will have a new project in Bulgaria. So yes, we are in line with our target will achieve our target. What we are looking at on top is not, let's say, new reliable capacity is power storage. So this where we have a TV plan to install also power storage as we see quite a good opportunity, a good return there. So that's what we are focusing at the moment in terms of business development. And in terms of your question on gas, so we have a situation till March 2026 which impact 2 things. One is the price to sold to the B2C customers and the districting and that's cap at 120 limit-down. But with no supplementary tax on gas for this sale, which is quite significant in Romania. And also for the storage of [indiscernible] where we also supply at 120 per megawatt hour as well. And this will cover around 65% of our sales for 2025.

But just as a follow-up, do you have a specific number for the third quarter and fourth quarter?

It's mainly the same. I think it's 65% per quarter. So there is a mix between injection now for storage mainly Q2, Q3. But then we have the winter sales for the parcel. So it's quite stable, around 65%.

Okay. But in terms of megawatt, you don't have a number?

Oleg, are you referring to the sales to households and this in heating [indiscernible]?

Exactly. Exactly.

Okay. Yes, we can provide these numbers. I can do that. So if we refer to Q2 2025, 2.6 terawatt hours, first half 2025, 6 terawatt hour Q3 2025, 2.1 terawatt hours, full year forecast 2025, 10 terawatt hour, and we have also Q1 2026 2.6 terawatt hour.

That may change, that's forecast.

Our next question comes from the line of Tamas Pletser of Erste Group Research.

I got 2 questions. First of all, I think you mentioned during the presentation that in the second quarter, you booked around 60 million payment to the construction tax E&P segment. I just wanted to ask this confirmation. And also -- what was the impact of the oil and gas revenue tax in the same period? I suppose this is also affecting the -- so if you can tell a little bit more on this, that would be really helpful. And the second question I have is your Gas & Power business I mean you mentioned that the regulation for the gas part of the business will change only in 2026. Can we expect this segment to return to profitability in the third or the fourth quarter or in the first quarter next year even before the regulation changes for the gas part of that business?

Thanks very much for your questions. Alina, the [indiscernible]. Very glad to see regulation changing .

Not that. Construction tax in Q2 2025 was approximately RON [ 17 ] million and as it was incentive for paying it earlier, we paid fully in Q2 when it comes to oil and gas taxation, you mentioned. So we had like normal, we have royalties approximately RON 175 million royalties paid in Q2 was crude oil and gas. And then we have the natural gas additional revenue taxes [indiscernible] tax reform as approximately RON 95 million in Q2 2025.

Okay. I think you mentioned in the presentation was not remember precisely, I think it was Page let me just check it -- yes, that was Page 7, you mentioned this oil and gas revenues. What was that on this 0.5%, which is applicable until the end of 2025. What sort of the value of that? If you can mention that would be helpful.

Okay. If -- it refers to tax on turnover. So if there is a tax on turnover of 0.5% applicable for '24 and '25, it should end is for full year 2025, approximately RON 250 million -- up to RON 250 million for entire year. So yes, RON 60 million per quarter.

[indiscernible] on the gas and power, yes, we definitely will come back to some I would say, more positive results. Definitely, I think the last year have been very difficult with this regime on the regulation on power. So there were 2 taxes mainly. One was about above 400 per megawatt hour and including your CO2 costs, you have 100% tax and then 80% tax in Q2 this year. So this will disappear since first of July and also the tax power and gas trading disappear as well. So that's really very beneficial, of course, of the business. Now we depend on the spark spread, of course, but we see already an improvement. We will see positive results already and Q4, our target is to recover the losses from Q1, Q2 by the end of the year.

[Operator Instructions] Our next question comes from the line of Laura Simion of BRD-GSG.

In fact, I have only one is question [indiscernible] manning because some of the more assets earlier. So is anything include your expectation of the demand of your products, especially retail. You mentioned in the presentation an estimate of the national banks for the inflation this year, which is quite a [indiscernible] May. They said in the last policy decision that inflation will be much higher than the may estimate. So considering this inflation spike in the second half of the year. Do you still see the demand of stable?

Thank you, for the question. [indiscernible] answering on this one. Generally, when we have adjustments of the -- like in this particular case for us from tomorrow of the [ excise ] and the we do not see immediate impact into the demand. So generally, for the base products, the demand stays for a while on a similar level. So we do stay with the actual forecast of having a stable amount -- most probably the impact is going to be visible and sales in the sense of decreasing from next year or beginning of next year, as we are calling it on a midterm -- and in general, when we talk about the impact on sales related to the market come indicators, the economical growth is one that gives us the best indication of that, which indeed is relatively slow or reduced for this year, but still on our positive trends.

Our next question comes from the line of Oleg Galbur of ODDO BHF.

I would like to ask you, can you spend a few minutes and elaborate on the impact of the U.S. dollar depreciation on your second quarter results because you're mentioning the impact on different segments? So I would like to ask you maybe to give us more color on what was the impact on this segment level and also on the consolidated level, maybe in other words, if you know and can share with us on a like-for-like basis, what would have been the net profit results in a stable FX environment.

Thank you, Oleg, for the question. I mean we don't have such a calculation. I mean, I think the probably the place where you see this impact on most if we look into the production cost in production cost for Q2 versus Q1, we have $1.1 per barrel impact, negative impact, increasing production costs because do weakened first quarter. So overall, clearly, we have -- when dollar is weakening, we have a negative impact in our results, but we don't have such a calculation in such a bit calculation. What we do represent is the sensitivity in the sensitivity page -- the end of our presentation, you can see there a sensitivity for U.S. dollar depreciation by $0.10. We have approximately EUR 90 million EBIT impact. You can use that one to do some estimations, but we do not provide more of that -- more than that.

If there are no more questions, I want to thank you again for taking part in our conference call. We further information, please do not hesitate to contact the Investor Relations team. Until our next call, we wish you all the best. Thank you.

That concludes today's conference call. Thank you for participating. You may now disconnect.