In the first half of the year 2006 the company sales reached the level of 44 935 m CZK in comparison to 38 141 m CZK achieved in the same period last year. Revenues achievement 17% above the same period 2005 were realized by increased sales in majority of subsidiaries, especially in UNIPETROL RAFINERIE and CHEMOPETROL and also BENZINA. 
The company EBIT in first half of 2006 reached the amount of 2 802 m CZK, slightly lower to the last year number of 2 827 m CZK. 
UNIPETROL profit from operations in the second quarter of 2006 reached 1 824 m CZK level (57% increase vs 2Q2005) and resulted from improvement of operations in all subsidiaries. 
The company consolidated net profit in 1H 2006 in amount of 1 981 m CZK shows growth of 11% compared to same period 2005. 
Consolidated net profit in 2Q2006 reached the level of 1 167 m CZK.

Crude oil processed in UNIPETROL Group (100% PARAMO Refinery and 51% CESKA RAFINERSKA) reached the number of 1 978 ths tons and was slightly above the level of the first half of 2005, mainly due to an increase in 2Q2006. An improvement in yields of white products and fuels was noted in the whole first half of 2006 in comparison to the same period of 2005. 
CHEMOPETROL sales in 1H2006 were higher than year ago what was the results of higher prices for polyethylene, polypropylene and ethylene. Refining segment highlighted increased demand for the refinery production in second quarter of 2006, significantly improved versus 1Q2006.Retail noticed an increase in both revenues and margins during 2Q2006 after very poor period of 1Q2006 when the loss was noted. Retail business showed the positive operating profit for 2Q2006 and for the whole 1H2006 period.

As the company already announced, in 2005 UNIPETROL faced a serious problem related to its shareholdings in ALIACHEM and AGROBOHEMIE, the companies which are subject to the sale and purchase agreements between UNIPETROL and DEZA. There is the court proceeding being performed over the above issues as UNIPETROL claims the validity of the agreements. 
The above stated circumstances have not changed during 1H2006 and can have a significant negative impact on the value of UNIPETROL’s shares in ALIACHEM and AGROBOHEMIE. However, having in mind the two facts: i) uncertainty about future result of the court proceeding and ii) difficulties with determination of fair value of these shares, no impairment charge has been established in respect of these shares and no provision for penalties has been established. The Board of Directors of UNIPETROL believes, however, that given the above circumstances, the fair value of UNIPETROL shareholdings in both companies is likely to be lower than their current book value in consolidated financial statements of UNIPETROL which amounts to 3.7 bn CZK.

Mr Marek Mroczkowski, CFO of UNIPETROL, a.s. commented: 
“High demand for refinery production, especially in 2Q2006, allowed increasing crude oil throughput and improving the financial results of the Group. Positive influence on the results had an increase of refinery margins during the period and stable demand and margins for petrochemical products. 
I would like to point out that a lot of work has been done during 2Q2006 to improve services on filling stations. Operations standard “Ready for business” was developed and implementation phase started, training for all area managers and top stations dealers was organized and new merchandising concept was created. It builds a potential for operational and financial improvement of the retail activity in the coming periods.“

Commentary to financial and operational results of UNIPETROL Group after 1H 2006

UNIPETROL RAFINERIE 
INCREASE IN BOTH REVENUES AND NET PROFIT

The company sales in 1H2006 reached the level of 29 665 m CZK (24 071 m CZK in 1H2005) and generated net result in 1H2006 of -38 m CZK (59 m CZK in 1H2005). The company sales in 2Q2006 amounted at 15 882 m CZK (13 428 m CZK last year) and achieved net profit at the level of 287 m CZK (236 m CZK last year).

Crude oil processed in Unipetrol Rafinerie in 1H2006 was higher by 8% than the level achieved in 1H2005 and reached 1 743 kt. The increase in crude oil processing was achieved mainly due to 2Q2006 operations. Low oil processing in 1Q2006 was caused mainly by: maintenance shutdown in February in the area of the hydroskimming facility in the Kralupy refinery and unplanned shutdown of refinery installations in Litvínov in March 2006, used for catalyst exchange. Additionally in 1Q2006 the company had much less favorable product mix as a result of higher supply of POX feed together with lower Rebco processing and also the company results were negatively influenced by time shift formula of Steam Cracker feedstock price and IKL first filling revaluation.

At the end of the first half of 2006 products sale prices increased in comparison with previous months (with the exception of fuel oils). Demand for refinery product was increased which allowed increasing crude oil throughput and positively influenced on 2Q2006 financial results of the company. Jet and diesel suffered from significant imports, fuel oils from low demand and extremely high stocks. 
Positive influence on the company’s results in 1H2006 had also a stable increase of refinery margins during the period.

Chamber 11 started up at 27th June which allows improving production slate and has a limited impact on crude oil processing volume.

PARAMO 
NET PROFIT GROWTH TO 138 m CZK in 1H2006

The company sales in 1H2006 reached the level of 5 215 m CZK (4 822 m CZK in 1H2005) and generated net profit in 1H2006 of 138 m CZK (-94 m CZK in 1H2005). PARAMO sales in 2Q2006 amounted at 3 145 m CZK (3 163 m CZK in 2Q2005) and achieved net profit in 2Q2006 of 110 m CZK (-2 m CZK in 2Q2005).

Lower amount of crude oil processed in first months of 2006 was the result of maintenance shutdown in refinery. The shutdown was made 3-weeks in advance in relation to the original plan due to unfavorable market situation – very high oil prices. The decrease of oil processed was directly mirrored by the decrease in sales. Lack of possible transmission of increase in oil prices into the prices of final products, due to the specifics of oils and asphalts market, is connected to high influence of substitute products.

The situation changed in 2Q2006 as a result of commencement of seasonal production (bitumens and bituminous products). 
The company was able to increase prices for asphalts and lubricants during the period. Positive influence on the company’s results had also a stable increase of refinery margins mainly during 2Q2006.

Crude oil processed in PARAMO in 1H2006 at the level of 234 kt was lower by 15% in comparison with 1H2005 number (270 kt) due to unfavorable margins and high crude oil prices especially in 1Q2006.

At the beginning of the period PARAMO sold to BENZINA its shareholding in its 100% subsidiary - PARAMO TRYSK for the amount of 252 m CZK.

CHEMOPETROL 
INCREASE IN BOTH REVENUES AND NET PROFIT

CHEMOPETROL sales in 1H2006 achieved the value of 16 994 m CZK vs. 15 471 m CZK last year. Net profit of the company for 1H2006 shows the number of 1 464 m CZK vs. 1 489 m CZK in 1H2005. The company sales in 2Q2006 reached the level of 8 585 m CZK (8 168 m CZK in 2Q2005) and generated net profit in 2Q2006 of 568 m CZK (390 m CZK in 2Q2005).

The company revenues from sales were higher than a last year figure as a result of higher prices for polyethylene, polypropylene and ethylene. Petrochemical and agrochemical gross margins were also improved due to combination of price trend of crude oil (refinery products) and output of chemical production. 
Stronger CZK vs. EUR had a negative impact on the company financial results in 1H2006.

The realized production of ethylene unit was affected by structure of raw materials from CRC - full capacity was not achieved due to technical problem with main distillation column but the production fully covered increased demand. Polypropylene production in 2Q2006 was lower due repeated failure in granulating unit and high outdoor temperature (high temperature of cool water for reactors).

KAUCUK 
INCREASE IN BOTH REVENUES AND NET PROFIT

In 1H2006 KAUCUK achieved the revenues from sales in the amount of 5 616 m CZK vs. 5 551 m CZK in 1H2005. In the first half of 2006 the company generated net result of 419 m CZK and doubled the 1H2005 number (222 m CZK). The company sales in 2Q2006 reached the level of 2 945 m CZK (2 632 m CZK in 2Q2005) and generated net profit in 2Q2006 of 208 m CZK (-65 m CZK in 2Q2005).

The company lower sales in first months of 2006 were caused by low demand and especially by seasonal character of the demand for polystyrenes. Weak demand for synthetic rubber and polystrerenes was only partially compensated by an increase in sales of the base semi-product – styrene. This tendency remained unchanged throughout the whole first quarter.

KAUCUK total sales of products in 2Q2006 were higher in comparison to the same period of last year and also previous periods. 
Fraction C4 product’s butadien reached highest margin and sales volume. High sales of E-SBR continued in 2Q2006 and there was full reflection of increased price raw materials to sale prices. The same applies for EPS. Polystyrene achieved sales and margin increase compared to same period 2005 even of price volatility of benzen.

In 1Q2006 UNIPETROL, the owner of 100% shares of KAUCUK, announced its intention to sell its shareholdings in the company KAUCUK and started the process of divestment. At the end of 1H2006 the divestment process was in progress.

SPOLANA 
SLIGHT DECREASE IN REVENUES AND NET PROFIT IN 1H2006 VS 1H2005 

SPOLANA revenues from sales achieved in 1H2006 the amount of 2 983 m CZK and remained almost unchanged in comparison with last year figure of 2 995 m CZK. Net profit of the company for 1H2006 shows the number of 138 m CZK and is slightly lower than the 1H2005 result of 162 m CZK. The company sales in 2Q2006 reached the level of 1 360 m CZK (1 395 m CZK in 2Q2005) and generated net profit in 2Q2006 of 42 m CZK (-8 m CZK in 2Q2005).

In March there was a flood in Czech Republic which influenced the company activity. The management of SPOLANA decided to shut down the chemical production. Special action was taken to minimize the leakage of any chemical products. As a result of the flood crisis and the necessity of emptying the company’s warehouses SPOLANA increased the sales volume due to selling off products from stock.

In first months of 2006 the company benefited from the price boom for PVC and melted caprolactam. SPOLANA limited the production of granulated caprolactam to maximize production and sales of melted caprolactam which noted a higher demand.

In 2Q2006 the producer‘s efforts were focused on passing the higher costs for ethylene and energy to PVC prices, which was achieved to a very limited extent due to evenly matched supply and demand. In the middle of the period of 1H2006 a demand for Sodium Hydroxide commenced to decrease. At the end of May this trend slowed down in particular in the export market due to several producers' drop-outs. The domestic market noted a price decline. The trend of increased demand for CPL Molten continued. Thanks to higher inventories from the previous months, the company could increase supplies to its customers. As far as Ammonium Sulphate is concerned a decline in domestic sales for fertilizing was compensated by export to overseas markets, however for unfavorable prices (stagnating demand). Therefore the company sold only the amount needed to keep the CPL production plant running.

In 1Q2006 UNIPETROL made information public about its intention to divest its shareholdings in SPOLANA. An open tender was then announced and several offers from potential buyers were received by the seller. At the end of 1H2006 the divestment process was in progress.

BENZINA 
INCREASE IN REVENUES AND NET PROFIT

BENZINA achieved the revenues from sales in 1H2006 at the amount of 3 474 m CZK. The number is over 25% higher than the one generated for first six months of last year. BENZINA net result in 1H2006 shows the loss of -255 m CZK vs. -263 m CZK in 1H2005. The company sales in 2Q2006 reached the level of 2 031 m CZK (1 507 m CZK in 2Q2005) and generated net profit in 2Q2006 of -47 m CZK (-376 m CZK in 2Q2005). BENZINA achieved positive value at the level of EBIT both for 1H2006 (+43 m CZK) and for 2Q2006 (+46 m CZK). 
In 1H2006 BENZINA continued the process of liquidation of BENZINA TRADE, its 100% subsidiary responsible for non-fuel business on filling stations. BENZINA TRADE was converted into BENZINA’s new department focused on non-fuel activity.

At the beginning of 1H2006 BENZINA acquired 100% shares of PARAMO TRYSK from PARAMO. The company started the process of operational integration of the acquired 19 filling stations with the existing network. In 2Q2006 BENZINA started the process of merger with PARAMO TRYSK.

In May DVD promotion on BENZINA sites started and had significant positive influence on the company results. 
Operations standard "Ready for business" was developed and announced in the second quarter of 2006 and implementation started. 
Internal training for all Area Managers and dealers of Top A and B sites started during the said period. 
New store merchandising concept was in the process of development and test. 
All mentioned above undertakings are aimed at improvement of services and operational effectiveness of filling stations.​