H1 2018 RESULTS PRESENTATION August 29th 2018 @Grupa_Azoty #GrupaAzoty H1 2018
2 DEVELOPMENTS KEY DEVELOPMENTS IN H1 2018 10 years on the Sales Warsaw Stock FTSE4Good consolidation Exchange Corporate Dividend Diversification financing GRUPA AZOTY GROUP
3 DEVELOPMENTS FINANCIAL HIGHLIGHTS H1 2018 PLN 4,877m Consolidated revenue PLN 529m Consolidated EBITDA Consolidated EBITDA PLN 536m excluding one-off items PLN 132m PLN 124m Net profit/(loss) estimate (Current Report 39/2018) Net profit/(loss) PLN 175m excluding one-off items
4 DEVELOPMENTS DIVIDENDS PAID BY THE PARENT (PLNm) 39.9 Dividend for 2009 62 148.8 Dividend for 2012 251 19.9 Dividend for 2013 44 83.3 Dividend for 2015 209 78.4 Dividend for 2016 225 124,0 Dividend for 2017 355 Dividend amount Net profit Dividends paid since IPO over PLN 493m
5 DEVELOPMENTS GRUPA AZOTY INTEGRATED REPORT 2016/2017 online: www.raport.grupaazoty.com In 2016 and 2017 we: Reduced energy consumption Reduced N 2 O emissions from production of nitric acid Spent over PLN 60m on projects designed to reduce our environmental impacts Had 0 fatal accidents Contributed over PLN 15m in donations and sponsorships to promote the development of our local communities IN THE REPORT: Challenges lying ahead and scenarios for the future Grupa Azoty Group New Sustainable Development Strategy for 2018 – 2022 consistent with the UN Sustainable Development Goals Innovative products and programmes for the non-fertilizer business
6 DEVELOPMENTS 10 YEARS ON • Puławy (up to 95.98%) • Siarkopol (99.33%) • Puławy (10.4%) Equity 10.0 9.9 9.8 9.6 since IPO x 6.4 9.0 • Police (66%) Price low/high • Kędzierzyn (94%) since IPO: 7.1 6.00/113.00 Capitalisation • ATT Polymers GmbH (100%) 5.3 PLN 3.5bn • Kędzierzyn (53%) Free float 26% 1.9 EV/EBITDA 1.4 1.3 1.2 3.1x 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dividends paid: PLN 493m Consolidated revenue (PLNbn) 6
CONSOLIDATED FINANCIAL INFORMATION GRUPA AZOTY
8 GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION FINANCIAL HIGHLIGHTS Adverse impact of rising prices of energy commodities (coal and natural gas up over 30%) and carbon emission allowances Unfavourable weather conditions in the first quarter, leading to reduced fertilizer application and increased supply in the second quarter High inventory levels and increased supply as the key drivers behind PLNm fertilizer prices Net profit EBITDA Revenue EBITDA margin EBITDA margin 9% 0% 12% 5% 15% 11% -152% -67% 276 738 397 2,380 261 2,183 4,870 4,877 714 536 378 134 133 529 122 126 175 124 -13 -64 H1 2017 H1 2018 H1 2017 H1 2018 Q2 2017 Q2 2018 H1 2017 H1 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 In 2017 adjusted for impairment losses on the fat processing unit and Elektrownia Puławy Power Plant. In 2018 adjusted for impairment losses on the fat processing unit and the effect of loss of control over AFRIG S.A.
9 GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION REVENUE ANALYSIS SEGMENT CONTRIBUTION IN H1 2018 REVENUE (PLNm) AGRO 2,317 48% FERTILIZERS CHEMICALS 31% 1,514 NON-FERTILIZER PLASTICS 17% 831 BUSINESS 141 52% 3% ENERGY 74 1% OTHER ACTIVITIES EV/EBITDA* 11.3 9.1 7.5 5.8 5.8 3.1 PHOSAGRO YARA CF INDUSTRIES MOSAIC CHEMICAL BASF GRUPA AZOTY LTM EBITDA as at March 31st 2018 9
10 GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION H1 2018 EBITDA – Business segments of the Grupa Azoty Group positive effect on EBITDA negative effect on EBITDA (PLNm) one-offs 48 5 29 1 266 24 7 714 529 * adjusted for one-offs Chemicals Higher prices of sulfur and titanium white contributing to margin improvement Higher sales volume in the OXO business Stabilisation of the Melamine business Energy Low Q1 2017 base due to recognition of impairment loss on Elektrownia Puławy Power Plant capex Higher value of gas sales Plastics 16% yoy depreciation of the US dollar constricting sales margins, mainly in the Asian region Segment’s performance impacted by rising energy costs Production structure modified towards increased volumes of caprolactam processed into PA6 in an attempt to mitigate the impact of adverse market factors Agro-Fertilizers High inventory levels and strong supply with an impact on the policy of redirecting Azoty volumes to the chemicals business Higher prices of gas and energy commodities, including carbon emission allowances
11 RAW MATERIALS NATURAL GAS 2/03/2018; 257.44 PGNiG taryfa PLN/MWh TGE DA 2/03/2018; 214.23 import/PGNiG 150 50 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 NATURAL GAS CONSUMPTION (MILLION MWH) H1 2018 TOTAL 11.8 Grupa Azoty S.A. 1.0 12% of natural gas consumption in Grupa Azoty POLICE 2.9 Poland Grupa Azoty PUŁAWY 5.7 Grupa Azoty KĘDZIERZYN 2.2
12 RAW MATERIALS ENERGY RESOURCES ELECTRICITY PRICES CO2 PRICES EUR/t PLN/MWh 240 17 12 190 7 2 140 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q42017 Q1 2018 Q2 2018 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 IRDN EEX HARD COAL PRICES CO2 EMISSIONS (‘000 TONNES) H1 2018 USD/t Grupa Azoty S.A. 544 Grupa Azoty POLICE 877 80 Grupa Azoty PUŁAWY 1,765 40 Grupa Azoty KĘDZIERZYN 662 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 ARA
13 RAW MATERIALS FALLING FERTILIZER PRICES AND SIGNIFICANTLY GROWING PRICES OF GAS PLN/t EUR/MWh PPX, TTF DA, GPL DA 1500 27 1000 22 500 17 12 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 THE POLISH POWER EXCHANGE TTF DA Ammonium nitrate AN 33.5% France, delivered (bulk) (PLN/t) UREA prilled FOB Baltic (PLN/t) Ammonium nitrate (average retail price on the Polish market) Urea average retail price on the Polish market
14 AGRO FERTILIZERS AGRO FERTILIZERS GLOBALLY -7.5 million tonnes Significant decrease in wheat production in EU Areas most affected by droughts caused by weather anomalies. Total production in EU: 137.5 million tonnes < = -500 -50 to -499 -1 to -49 1 to 50 51 to 500 > 500 Long droughts Areas affected by drought, winter grains Year 2018 period 03 (Apr 11 – Jun 10) EU 28 GRAIN PRODUCTION FORECAST 2017/2018* France -3.2% Germany -8.6% Poland -14.8% Italy 2.0% United Kingdom -3.6% Spain 21.8% Hungary 9.4% Heavy rain Romania -18.3% Source: USDA PSD * Largest producers (80% of EU production)/DG AGRI-G4
15 AGRO FERTILIZERS AGRO FERTILIZERS GLOBALLY CONSUMPTION OF FERTILIZERS (N, P 2 O 5 , K 2 O), IN MILLION TONNES 250 50 World N+P+K (left axis) 200 40 World N+P+K forecast (left axis) 150 30 Europe N+P+K (right axis) 100 20 Europe N+P+K forecast (right axis) 50 10 Poland N+P+K (right axis) 0 0 2015 2016 2017 2018 2019 2020 2021 2022 Poland N+P+K forecast (right axis) CBOT GRAN PRICES/GLOBAL GRAIN STOCKS million tonnes 350 700 USD/t 300 600 250 500 200 400 150 300 100 200 50 100 0 0 cze 12 cze 13 cze 14 cze 15 cze 16 cze 17 cze 18 Grain stock - million t Average wheat price CBOT (USD/t) Average corn price CBOT (USD/t) Source: Polish Central Statistical Office, IFA, USDA, GA data. 15
AGRO FERTILIZERS 16 AGRO FERTILIZERS GLOBALLY Urea production capacity 2010 – 2020 AN production capacity 2010 – 2020 (tys. ton) (tys. ton) 50000 30 000 40000 20 000 30000 20000 10 000 10000 0 0 2010 2015 2020 2010 2015 2020 Bliski Wschód Europa Zach. i Centr. Rosja Ukraina Białoruś Central and Western Europe Russia Ukraine Lithuania Georgia Belarus source: Integer 2018 source: IHS 09/2016 AN Ammonium nitrate Urea No significant increase in ammonium nitrate production • In the Middle East, between 2015 and 2020 production • capacity is expected by 2020; capacity grew in Iran; The production capacity growth that was seen in Central • The growing trend will continue until 2020; • and Western Europe between 2015 and 2020 was mainly • No other significant production capacity hikes are attributable to Nitrogenmuvek (2017) and YARA expected in the above countries/regions. (ammonium nitrate, technical grade) (2017). In Belarus, the ammonium nitrate production capacity rose after an obsolete production unit was replaced by a new one.
17 AGRO FERTILIZERS IMPORTS OF NITRATE FERTILIZERS 2017-2018 VOLUMES OF AMMONIUM NITRATE IMPORTS CUMULATIVELY 2017 2018 ∆ 1H2018/1H2017: 49% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec VOLUMES OF UREA IMPORTS CUMULATIVELY 2017 2018 ∆ 1H2018/1H2017: 1% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Analytical Centre, the Tax Administration Chamber in Warsaw.
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