Q12018 RESULTS PRESENTATION May 10th 2018 @Grupa_Azoty #GrupaAzoty1Q18 @Grupa_Azoty #GrupaAzoty1Q18
2 GRUPA AZOTY GROUP Financial highlights PLN 2.497m Consolidated revenue PLN 403m Consolidated EBITDA Consolidated net profit PLN 188m 16.1% EBITDA margin Recommended dividend for 2017 PLN 1.25 Dividend per share
3 GRUPA AZOTY GROUP Diversification – shifts in revenue structure 2007-2023 2007 2017 2023 • Revenue: PLN • Revenue: PLN • Revenue: PLN 1.3bn 9.6bn 15bn (estimates • EBITDA: PLN • EBITDA: PLN excluding 163m 1,187m potential • Net profit: • Net profit: acquisitions) PLN 63.8m PLN 489m Agro Agro Fertilizers Plastics, Agro Fertilizers Chemicals, Fertilizers 30% 52% < 50% 29% 52% Plastics 6000,0 15% 3000,0 0,0 2007 2017 2023 Plastics, Chemicals, Agro Fertilizers Estimated revenues
Grupa Azoty Group
5 GRUPA AZOTY GROUP Grupa Azoty Group financial highlights 2,687 2,551 2,497 2,196 2,183 INCOME Q12017 Q22017 Q32017 Q42017 Q12018 16.9% 16.1% 12.0% EBITDA 11.6% 8.5% 462 453 403 EBITDA (Corrected) * 276 269 261 255 218 EBITDA margin Q12017 Q22017 Q32017 Q42017 Q12018 Net profit 262 255 188 135 123 Net profit* 75 77 (Corrected) 36 Q12017 Q22017 Q32017 Q42017 Q12018 * In 2017 adjusted for impairment losses on the fat processing unit, AIG, sulfur deposits and Elektrownia Puławy Power Plant.
6 GRUPA AZOTY GROUP Q1 2018 EBITDA – Business segments of the Grupa Azoty Group positive effect on EBITDA (PLNm) negative effect on EBITDA 3 20 6 84 23 453 403 Energy Low Q1 2017 base due to recognition of impairment loss on Elektrownia Puławy Power Plant capex Higher value of gas sales Chemicals Higher prices of sulfur and titanium white contributing to margin improvement Higher sales volume in the OXO business Stabilisation of the Melamine business 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 (as discussed above) Agro-Fertilizers Significantly lower sales volumes, both of nitrogen and NPK fertilizers Higher prices of gas and energy commodities, including CO 2 emission allowances
7 GRUPA AZOTY GROUP Q1 2018 revenue structure by segments CHANGE IN REVENUE Q1 2018 vs Q1 2017 (PLNm) Agro Fertilizers -18% -271 Agro Fertilizers 49% +12% +82 Chemicals Plastics +0% +0 Energy +34% +21 Chemicals Other -50% -22 Other 31% 1% Energy 3% Plastics 16%
8 GRUPA AZOTY GROUP Raw materials PRICES OF NATURAL GAS DAILY QUOTATIONS 80 EUR/MWh USD/MWh 25 20 70 60 20 15 50 15 40 10 10 30 20 5 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 10 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018-01-01 2018-01-08 2018-01-15 2018-01-22 2018-01-29 2018-02-05 2018-02-12 2018-02-19 2018-02-26 2018-03-05 2018-03-12 2018-03-19 2018-03-26 PPX* TTF DA* GPL DA * Russia Federal Tariff Service USD / MWh * bez przesyłu PRICES OF HARD COAL PRICES OF ELECTRICITY PLN/MWh USD/t 100 190 90 180 80 170 70 160 60 150 50 140 40 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 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 IRDN FX ARA BUSINESS
9 GRUPA AZOTY GROUP NITROGEN FERTILIZERS Market overview Market spreads CAN/ammonia spread expressed as CAN (27%N) equivalent 300 average annualised 160 250 140 120 200 EUR/t 100 Market spreads EUR/t 150 80 136 100 129 124 119 60 113 112 50 40 20 0 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 0 2014 2015 2016 2017 Q1 2017Q1 2018 Urea (27%N) Ammonia (27%N) Expressed as CAN (27%N) equivalent Pricing trends (cumulative) -2% -6% -4% 350 350 -8% -2% 300 300 -0% 250 250 EUR/t USD/t 200 200 150 290 284 150 290 277 241 226 209 100 100 192 164 162 136 135 50 50 0 0 CAN AN AS RSM Amonium Urea Q1 2017 Q1 2018 Q1 2017 Q1 2018 OUTLOOK: • The favourable grains balance, forecast to continue into future periods, will not be supportive of any significant price rises. • Demand for nitrogen fertilizers will continue to depend on weather. Agricultural sector delaying purchases in anticipation of lower prices will be an additional factor weakening demand. • In Q2 2018 (May/June), key market players are expected to announce post-season price reductions – rapid price changes possible to stimulate market demand. • In Q2 2018 (starting from May), urea is expected to be again in global oversupply (due to dwindling demand), and so its prices are likely to drop. • China’s passivity in urea exports will not have any significant impact on that market segment.
10 GRUPA AZOTY GROUP COMPOUND FERTILIZERS Market overview NPK 3x16/raw materials* Market spreads spread expressed as NPK 16-16-16 equivale 400 nt average annualised 100 350 300 80 250 USD/t 200 Market spreads 60 USD/t 150 100 86 40 76 50 69 0 49 46 20 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 33 0 2014 2015 2016 2017 Q1 2017Q1 2018 Potassium chloride Phosphate rock Urea * Potassium chloride, phosphate rock, urea, ammonium Ammonium sulfate NPK 16-16-16 sulfate Pricing trends (cumulative) +14% 500 +8% -2% 400 +14% 300 +17% +1% USD/t 200 388 339 290 284 254 248 235 218 100 96 112 95 96 0 DAP 18-46 NPK 16-16-16 Ammonia Potassium chloride Sulfur Phosphate rock Q1 2017 Q1 2018 OUTLOOK: DAP: upward trends expected, linked to export cuts by some producers in countries east of Poland and a DAP plant shutdown by a western • producer. NPK: after first indications of growth trends, NPK prices are expected to stabilise. Producers are likely to curb price rises, taking stock of the • difficult financial condition of Europe’s agricultural sector.
11 GRUPA AZOTY GROUP Agro Fertilizers Q1 Q1 (PLNm) Q/Q change 2017 2018 Segment 1,483 1,212 -18% revenue, including: Nitrogen fertilizers 904 796 -12% and ammonia Compound fertilizers 432 327 -24% EBITDA 252 168 -33% EBITDA margin 17.0% 13.9% -3.1 pp Volumes (‘000 tonnes) 600 -8% -26% -11% 300 -13% -29% 0 Saltpeter Phosphorus and NPK Urea Ammonium sulfate RSM Q1 2016 Q1 2017 Q1 2018
12 GRUPA AZOTY GROUP CHEMICALS Market overview Market spreads 2 000 DEHT/propylene spread 1 500 average annualised 800 EUR/t 1 000 600 EUR/t Market spreads 400 617 567 488 500 438 419 376 200 0 0 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2-EH Propylene DEHT (DOTP) Pricing trends (cumulative) +31% 3 000 +8% +1% +12% +7% 2 000 EUR/t 2,915 2,230 1 000 1,617 1,442 991 1,071 1,275 1,288 856 911 0 2-EH DEHT Melamine Titanium white Propylene 1Q2017 1Q2018 OUTLOOK: • Demand for OXO products is forecast to keep rising. Prices of OXO alcohols will remain correlated with propylene price, which largely reflects global oil price movements and demand factors. • Demand for plasticizers has been rising steadily (especially in the case of non-phthalates), a trend forecast to continue into coming years. • Continuing growth in titanium white prices, with demand outstripping supply. • As titanium white prices are beginning to hit their historical highs, they are soon expected to more or less stabilise. They may even slightly decline at the beginning of the fourth quarter (when demand is seasonally weaker) of 2018.
13 GRUPA AZOTY GROUP Chemicals Q1 Q1 (PLNm) Q/Q change 2017 2018 Segment 687 769 12% revenue, including: OXO alcohols 136 158 16% Plasticizers 61 66 8% Urea (technical grade) 152 147 -3% Melamine 119 132 11% Titanium white 85 106 25% EBITDA 107 127 19% EBITDA margin 15.6% 16.5% 0.9 pp Volumes (‘000 tonnes) +7% 200 150 +4% +5% 100 0% 50 0% 0 OXO alcohols Plasticizers Urea (technical grade) Melamine Titanium white Q1 2016 Q1 2017 Q1 2018
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