Vienna - Austrian oil and gas group OMV AG on Wednesday reported that its annual net income fell 17 per cent to 1.53 billion euros (1.95 billion dollars), with the company turning into the red in the fourth quarter.

The drop in net earnings came despite a 7 per cent rise in operating income to 2.34 billion euros.

Annual sales rose to 25.54 billion euros, an increase of 27 per cent, said OMV, the Central and South-eastern European market leader in refining and marketing.

At the same time, the company's financial results went into the red by compared with a financial profit of 228 million euros in 2007.

Financial results were burdened by lower earnings from OMV's petrochemical company Borealis AG, which reported dropping demand in the fourth quarter, as well as by the depreciation of the Turkish lira against the dollar since last fall.

In the 2008 fourth quarter, OMV made a net loss of 365 million euros, down from a profit of 354 million euros in the same quarter the previous year, as the price of Brent oil fell by 37 per cent.

The company incurred quarterly operating losses of 129 million euros, while sales stagnated at 5.77 billion euros.

"We are prepared to face a significantly more challenging environment," chief executive Wolfgang Ruttenstorfer said. The company said it had completed the restructuring of some of its refining operations and would continue modernization of its Romanian holding Petrom. (dpa)