Ethics at the Grupa Azoty Group
The Group’s principles of ethics and respect for human rights, as well as the desirable attitudes and standards of conduct, are defined in the Grupa Azoty Group’s Code of Ethical Conduct, describing measures taken to foster responsible employee behaviour and build relations with the Group’s external environment.
The Group’s principles of ethics and respect for human rights, as well as the desirable attitudes and standards of conduct, are defined in the Grupa Azoty Group’s Code of Ethical Conduct, describing measures taken to foster responsible employee behaviour and build relations with the Group’s external environment. The values prescribed in the Code are applicable to all Group companies.
Grupa Azoty Group’s values:
The Code applies to all employees of the Group’s largest companies and is also addressed to customers, trading partners, shareholders and other stakeholder groups.
The Codes of Ethical Conduct of Grupa Azoty Puławy and Grupa Azoty Police sets out the core values and principles of business ethics in relations with stakeholders, suppliers and the local community, as well as ensures equal employment, promotion and in-service training opportunities for our employees. The Code also defines the procedure for reporting unethical behaviour through a line manager or the Ethics Officer.
Additionally, the Code of Ethical Conduct implemented by Grupa Azoty Puławy and Grupa Azoty Police addresses issues related to the management of conflicts of interest and corruption risk, setting forth the basic rules of conduct in day-to-day work. According to their provisions, all employees are required to:
- avoid situations which may give rise to a conflict of interest or put them in a conflict of interest situation,
- carefully consider all situations in terms of potential impact on the impartiality of work-related actions or decisions,
- promptly notify their line managers and the Ethics Officer of any situations that give rise or may lead to a conflict of interest.
Due diligence procedures and performance indicators
An Ethics Officer has been appointed both at Grupa Azoty Police and Grupa Azoty Puławy.
In 2018, neither Grupa Azoty Kędzierzyn nor Grupa Azoty Police reported any breaches of the Code of Ethical Conduct or human rights, or any cases of discrimination at the workplace. In 2018, one breach of ethical standards was reported at Grupa Azoty Puławy. Seven breaches of ethical standards were reported at Grupa Azoty S.A., of which one involved mobbing and triggered an anti-mobbing procedure in accordance with Order No. 09/2014 of March 3rd 2014 on the Policy of Workplace Bullying Prevention at Grupa Azoty.
In 2018, there were no pending lawsuits regarding breaches of fair competition rules against Grupa Azoty, Grupa Azoty Puławy, Grupa Azoty Kędzierzyn, Grupa Azoty Police or their parent. No instances of non-compliance related to marketing communications were reported.
In 2018, there were no confirmed cases of corruption or fraud at Grupa Azoty Group companies. One incident involving an attempt to hand an item of value to an employee was identified.
The Senegalese investment
In the second half of 2017, tax proceedings were pending with respect to the operations of Grupa Azoty Police’s subsidiary African Investment Group S.A. in 2013–2015.
The rationale behind the investment in the open-pit phosphate rock mine in Senegal was to make the Grupa Azoty Group resilient to fluctuations in phosphate prices, while expanding its own reserves of phosphate rock, a basic input in the manufacture of compound fertilizers. However, the actual reserves of rock extractable from the mine turned out to be significantly lower than initially estimated. In 2016, the Management Board of Grupa Azoty Police announced that the value of AIG assets had been overestimated and, consequently, a relevant adjustment would be made to its financial results.
Grupa Azoty Police also filed claims for a refund of the undue portion of the purchase price it had paid for 55% of AIG shares, but later, on December 20th 2017, it concluded a conditional agreement with DGG ECO Sp. z o.o. settling the claims (confirmed by an in-court settlement). The conditional agreement was to result in the parties’ confirming termination of the 2013 agreement under which Grupa Azoty Police had acquired the majority interest in AIG. Reversal of the effects of the latter agreement was to entail, among other things, a refund of USD 28,850 thousand as the amount already paid for AIG shares. The conditional agreement was to have been consummated by February 28th 2018 provided that the requisite corporate approvals were granted by that date, and that Grupa Azoty Police received the first tranche of the price refund along with a bank guarantee securing receipt of the balance. However, the consummation did not take place by the agreed date.
Having regard to all circumstances of the phosphate rock project in Senegal and the non-consummation of the conditional settlement with DGG ECO sp. o.o., on March 7th 2018 the Management Board of Grupa Azoty Police passed a resolution to recognise, as at December 31st 2017, an impairment loss for the entire amount of the intangible exploration and evaluation assets.
On March 29th 2018, African Investment Group S.A. (AFRIG S.A.) filed for bankruptcy. The Management Board of AFRIG S.A. provided explanations to the Senegalese tax authorities (with the participation of the entity managing its accounting and tax matters). The Management Board denied most of the authorities’ allegations as groundless. However, the Senegalese tax authorities dismissed its explanations and, on March 13th 2018, AFRIG S.A. received a payment demand notice with an enforceability order issued by the Director for Large Enterprises, for an amount of XOF 10,435,788 thousand (equivalent to PLN 66,268 thousand as at December 31st 2017, translated at the exchange rate quoted for the reporting date).
Therefore, on May 24th 2018 Grupa Azoty Police signed an annex to the termination agreement, whereby:
- DGG Eco Sp. z o.o. agreed to refund the purchase price for AFRIG S.A. shares in the amount of USD 28,850 thousand, in instalments payable over five years, from December 31st 2018 to December 31st 2023;
- It was confirmed that AFRIG S.A. shares would be transferred back to DGG Eco sp. z o.o. after the latter submitted a representation on submission to enforcement;
- Grupa Azoty Police’s trade receivables from AFRIG S.A. were cancelled;
- DGG Eco sp. z o.o.’s obligation to provide a bank guarantee securing that company’s liabilities was waived, while the transfer of title to the documentation of appraisal of phosphate rock deposits and claims against AVES FZE onto Grupa Azoty Police remained in force.
On August 7th 2018, the Group’s Management Board announced that the effect of deconsolidation of African Investment Group S.A. on the consolidated financial result was estimated at PLN -55m. The expected adverse effect of the bankruptcy proceedings mainly relates to the fact that the Group is still obliged to repay a credit facility that had been used by AFRIG S.A. The Management Board announced that this risk was accordingly accounted for in the separate financial statements.
