NIS Q2 2025 Presentation: Net Loss Amid OFAC Sanctions and Lower Oil Prices

Introduction & Market Context

NIS AD (BELEX:NIIS) reported a net loss of 5.1 billion RSD in Q2 2025 and 3.6 billion RSD for the first half of the year, according to the company’s performance presentation delivered on August 7, 2025. The Serbian oil and gas company faced significant headwinds from U.S. sanctions and declining oil prices, with Brent crude averaging $67.8 per barrel in Q2 2025, down from $84.9 in the same period last year.

The company’s operations have been complicated by its inclusion on the U.S. Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list since January 10, 2025. NIS has been operating under a series of special licenses that have repeatedly delayed the full implementation of sanctions, with the current extension running until August 27, 2025.

As shown in the following chart, macroeconomic conditions have created a challenging environment for NIS, with lower oil prices and reduced spreads affecting profitability:

Quarterly Performance Highlights

NIS reported a steep decline in financial performance for Q2 2025 compared to the same period in 2024. Sales revenues fell by 34.4% to 73.5 billion RSD, while EBITDA plummeted 86.7% to 1.7 billion RSD. The company swung from a 3.6 billion RSD profit in Q2 2024 to a 5.1 billion RSD loss in Q2 2025.

For the first half of 2025, the company’s financial metrics showed similar deterioration, with sales revenues down 26.5% year-over-year to 145.8 billion RSD and EBITDA falling 55.3% to 10.2 billion RSD.

The comprehensive financial and operational performance is illustrated in the following key indicators table:

Despite the financial challenges, NIS maintained operational stability in its refining segment, with crude oil and semi-finished products output increasing to 824.1 thousand tonnes in Q2 2025, up 8.1% from Q2 2024. However, total petroleum products sales volume declined by 10.7% to 805.3 thousand tonnes.

Detailed Financial Analysis

The significant decline in EBITDA was primarily attributed to lower crude oil prices and expensive inventory, as shown in the following breakdown:

Operating cash flow for Q2 2025 showed a slight improvement, increasing to 7.9 billion RSD from 7.2 billion RSD in Q2 2024. However, for the first half of 2025, OCF decreased dramatically by 82.7% to 1.7 billion RSD. The company reduced its capital expenditures by nearly half, with CAPEX for H1 2025 at 12.4 billion RSD compared to 24.4 billion RSD in H1 2024.

NIS also reduced its debt to banks to 516 million EUR as of June 30, 2025, down from 580 million EUR a year earlier. Despite financial challenges, the company declared a dividend of 28.18 RSD per share (gross) at its shareholders’ assembly held on June 20, 2025.

The net profit decline is illustrated in the following chart:

Market Position and Strategic Initiatives

NIS experienced erosion in its market position in Serbia, with its share of the total motor fuels market declining from 79% in H1 2024 to 66% in H1 2025. Its retail market share also slipped slightly from 49% to 48%.

The Serbian motor fuels market contracted by 0.9% in the first half of 2025 compared to the same period in 2024, while other countries in the region showed modest growth in consumption.

The following chart illustrates the company’s changing market share in Serbia:

Despite these challenges, NIS continued to implement strategic initiatives, particularly in renewable energy. The company completed a photovoltaic power plant at its petroleum product warehouse in Novi Sad and is progressing with rooftop solar installations at the Pančevo Oil Refinery. Additionally, NIS is implementing solar power projects at 33 petrol stations across Serbia, with many already operational.

The performance of NIS’s petrochemical subsidiary, HIP-Petrohemija, also faced challenges, as shown in the following operational and financial indicators:

Forward-Looking Statements

NIS management emphasized their focus on preserving operational stability and maintaining employee social stability despite the extremely complex business circumstances. The company noted that its Polypropylene Project FEED study has been temporarily postponed due to the U.S. sanctions issue.

The Pančevo Oil Refinery continues to operate continuously to meet market needs for petroleum products, and the company has adjusted its operations to ensure continuous supply of oil derivatives despite the challenging environment.

In its conclusion, NIS acknowledged the complex macroeconomic conditions but highlighted its success in preserving stability in the domestic market for oil derivatives. The company’s immediate focus remains on navigating the sanctions situation while maintaining operational continuity.

As NIS continues to operate under the temporary license from OFAC (currently extended until August 27, 2025), the resolution of the sanctions issue remains a critical factor for the company’s future performance and strategic direction.

Full presentation:

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