PRESENTATION OF Q1 2020 RESULTS May 21st 2020
GRUPA AZOTY GROUP – CONSOLIDATED FINANCIAL INFORMATION 2 Q1 2020 FINANCIAL RESULTS (PLNm) CONSOLIDATED REVENUE 3,104 - PLN 261m (7.8%) less than in Q1 2019 - PLN 1,927m revenue in the Fertilizers segment, with Compo Expert's share at 25% CONSOLIDATED EBITDA 476 - PLN 132m (21.7%) less than in Q1 2019 - EBITDA margin at 15.3% (2.8 pp down on Q1 2019) 196 CONSOLIDATED NET PROFIT/(LOSS) - PLN 127m (39.3%) less than in Q1 2019
KEY DEVELOPMENTS 3 BUSINESS SEGMENTS DURING THE PANDEMIC FERTILIZERS - pandemic concerns spurred farmers’ purchasing decisions - 5% increase in sales volume - gas prices down 40% relative to Q1 2019 PLASTICS - lower prices of all products - benzene and phenol prices increased by 20% (then fell after collapse of oil prices) - no signs of demand recovery from the automotive industry CHEMICALS - lower prices of melamine (20%), OXO alcohols (15%) and technical urea (12%) - higher prices of sulfur (6%) and other urea solutions (4%) - higher volumes of sales of OXO (12%) and technical urea (8%), lower volume of sales of sulfur (40%)
KEY DEVELOPMENTS 4 MEASURES TAKEN IN RESPONSE TO THE CORONAVIRUS EPIDEMIC Donation of PLN 3,200,000 to institutions and entities which combat COVID-19 (PLN 750,000 from Grupa Azoty S.A., Grupa Azoty ZAK S.A., Grupa Azoty Zakłady Chemiczne Police S.A. and PLN 950,000 from Grupa Azoty Zakłady Azotowe PUŁAWY S.A.); Free-of-charge lend of 40 company cars to healthcare establishments for the purpose of combating the epidemic. Manufacture of biocidal decontaminant by Grupa Azoty Zakłady Azotowe PUŁAWY S.A., based on hydrogen peroxide (4.9%), authorisation from the Office for Registration of Medical Devices and Biocidal Products; Manufacture of “safe gloves” with antiviral properties, covered with a layer of silver; Donation of Tarfuse filaments for the #DrukarzeDlaSzpitali initiative (3D printing of protective mask and goggle components) and the VentilAid project, a Polish ‘last chance’ ventilator (on the open source basis); PLN 300,000 donations from Hyundai Engineering to purchase ventilators for hospitals in Police
KEY DEVELOPMENTS 5 POLICE POLYMER PROJECT Project schedule not affected by COVID-19 pandemic December 23rd 2019 – issue of FNTP to the general contractor; January 7th 2020 – handover of the construction site to the general contractor; March 30th 2020 – commitment letters with 11 banks and institutions on USD 1.075bn debt financing Debt financing agreement nearly finalised ISB News – distinction under the category 'Most Reliable in the Fuel and Chemical Sector'
KEY DEVELOPMENTS 6 NEW PRODUCTS AND TECHNOLOGIES SPECIALISED FERTILIZER OFFERING BY GA CHORZÓW - successful restructuring of the company - development of compound fertilizers based on potassium nitrate and calcium nitrate - AZOPLON fertilizers for foliar feeding of crops, fruit and vegetables - FERTIPLON fertilizers intended mainly for cultivation under cover LAUNCH OF SALE OF 3D PRINTING MATERIALS - R&D programme began in 2017 - FDM technology filaments based on PA6 polyamide manufactured by GA - Online retail store to launch soon - Research into SLS printing powders and SLA and DLP polymers PROJECTS ON THE LIST OF NCBiR-RECOMMENDED INITIATIVES - Total amount of co-financing PLN 20m - Grupa Azoty PUŁAWY , GA POLICE and Łukasiewicz - INS’s projects third on the list - Modern fertilizer formulae: functional additives, polymer coating - Technologies for optimum use of intermediate products and waste products
R&D&I
8 RESEARCH AND DEVELOPMENT GRUPA AZOTY GROUP’S PROJECTS RECOMMENDED BY NCBIR FOR POIR CO-FINANCING (2020) 1. Grupa Azoty PUŁAWY + Grupa Azoty POLICE + Łukasiewicz -INS Environmentally friendly slow-release fertilizers Project value: PLN 5.80m Co-financing: PLN 3.82m 2. Grupa Azoty S.A. Specialist ammonium nitrate fertilizer products with functional additives Project value: PLN 4.88m Co-financing: PLN 1.95m 3. Grupa Azoty ZAK Development of technology for production of high-purity neopentyl glycol and hydroxipival aldehyde oxime with the use of low-value intermediate product and waste hydrogen stream. Project value: PLN 27.40m Co-financing: PLN 11.67m 4. Grupa Azoty ZAK Development of innovative process to obtain a range of ester for ionic liquid catalyst Project value: PLN 5.87m Co-financing: PLN 2.52m
RESEARCH AND DEVELOPMENT 9 External funds for R&D&I projects in 2019 1 . Grupa Azoty PUŁAWY PLN 20.57m Strengthening R&D&I potential (POIR/NCBiR) 2. Grupa Azoty ZAK PLN 9.6m GA ZAK Innovation Centre (POIR/NCBiR) 3. Grupa Azoty ZAK PLN 2.49m Specialist ammonium nitrate compound fertilizers containing additional ingredients (POIR/NCBiR ) 4. Grupa Azoty Police PLN 6.58m Development of new type of liquid fertilizers based on phosphorous raw materials of sedimentary origin (POIR/NCBiR) 5 . Grupa Azoty S.A. PLN 0.63m Development of new generation catalyst for low-temperature hydrogen and syngas production process (POIR/NCBiR) 6 . Grupa Azoty S.A. PLN 0.75m Co-funding for three start-ups in IMPACT_POLAND 2.0 (PARP) 7. Grupa Azoty S.A. PLN 0.5m Co-funding for two start-ups in the KPT ScaleUp programme (PARP)
10 RESEARCH AND DEVELOPMENT CURRENT R&D PROJECTS TOTAL: 81 81 PROJECTS (as (as at May 20 2020 20)
11 RESEARCH AND DEVELOPMENT PROJECT PORTFOLIOS
12 RESEARCH AND DEVELOPMENT BUDGETS Total budget ca. PLN 170m External funding ca. PLN 40m
13 RESEARCH AND DEVELOPMENT OWN PROJECTS: EXAMPLES 1. 3D printing – product innovation PA6 filaments for FDM Project launched in 2017 - March 2020 – product commercialised - May 2020 – launch of online store SLS powders Advanced research to obtain SLS powders from PA 6 and other structural polymers 2. Vacuum coating – product innovation Launch of vacuum metal and non-metal coating unit Physical vapour deposition technology offers a number of advantages over competing solutions. Work on new types of coatings, e.g. biocidal coatings.
14 RESEARCH AND DEVELOPMENT COOPERATION WITH START-UPS IDEA4AZOTY Grupa Azoty S.A.'s business accelerator programme 35 applications, 19 projects in second stage of recruitment 2 applications at evaluation stage, with terms of another 5 under discussion SCALE UP Grupa Azoty S.A. 's participation as Technology Recipient in two projects implemented by: Krakowski Park Technologiczny, Funding Box More than 15 accelerated start-ups in both programmes Implementation: Jan 1 2019 – Dec 31 2021
15 RESEARCH AND DEVELOPMENT START- UPS’ PROJECTS: EXAMPLES 1. SatAgro Agriculture 4.0 - satellite field monitoring Optimisation of fertilizer application depending on soil conditions Pilot 2017 Season 2019: 253 farms, 63 thousand hectares monitored 2. Sinteco Diversification of business - organic chemicals and highly specialised products Production of high-purity polyglycerols and glycerine-based polyglycerol esters Implementation of innovative low-temperature synthesis
CONSOLIDATED FINANCIAL INFORMATION OF GRUPA AZOTY GROUP
GRUPA AZOTY GROUP – CONSOLIDATED FINANCIAL INFORMATION 17 EFFECT OF PANDEMIC ON CHEMICAL INDUSTRY Agricultural market The COVID-19 pandemic had no significant impact on the crop segment of Poland’s agriculture. Fertilizers - Poland The COVID-19 pandemic had no significant impact on the Fertilizer segment in Poland. Fertilizers - other countries Except temporary logistics constraints of local nature, the COVID-19 pandemic had no significant impact on the fertilizer segment in the EU. Polyamide Record-high price declines in polyamide 6. Increased demand from the food packaging and healthcare sectors. Melamine Oversupply on Asian markets. Demand is still low due to the pandemic. OXO ALCOHOLS Demand expected to pick up in Q3 2020. Very low crude oil prices expected to keep in check any meaningful increase in product prices. Titanium white There has been no reduction in the supply of titanium white in Europe, while the demand is strongly affected by the measures taken in response to the spread of coronavirus. Natural gas Record-high winter temperatures in Europe. Subdued demand due to the COVID-19 epidemic.
GRUPA AZOTY GROUP – CONSOLIDATED FINANCIAL INFORMATION 18 IMPACT OF THE PANDEMIC ON THE GRUPA AZOTY GROUP’S BUSINESS IDENTIFIED RISK AREAS: MITIGATING MEASURES: Disruptions in feedstock supply chains and in close monitoring of sales, trading partners’ position and sale of products due to disruptions in transport collection of receivables implementation of crisis management rules, particularly in Risk of temporary disruptions in timely maintenance and investment activities delivery of capital and maintenance projects cooperation with public administration to develop Disruptions in continuity of production appropriate regulations to mitigate adverse economic processes due to potentially reduced consequences of COVID-19 pandemic availability of workforce Risk of deteriorated liquidity faced by some trading partners due to payment backlogs GDP CHANGES AS FORECAST BY EC Exchange rate volatility -4.3% -6.1% Possible risks of sales disruption in individual -6.2% -7% segments -7.2% -7.9% -8.2% -9.7% Source: European Economic Forecast Spring 2020
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