Strengthening the market position

Financial performance

The Group's financing structure is adjusted to its needs and enables it to implement key investment projects.

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[IR - Results presentation]

The Group's financing structure is adjusted to its needs and enables it to implement key investment projects. The main objective is to ensure long-term financial security and full internal compatibility of all financing sources used by the Group.

[102-7]
  • Consolidated revenue was PLN 9,998.967m (up 4% year on year)
  • EBITDA totalled PLN 764,442m (down 35.6% year on year)
  • Consolidated net profit came in at PLN 7,650m (down 98.4% year on year)
  • The Group also reported a good debt ratio level, with net debt/EBITDA at 0.3

* 2013: adjusted for a gain on the acquisition of Grupa Azoty Puławy, Grupa Azoty Siarkopol and AIG, and for an impairment loss on the POM unit.
2014: adjusted for an impairment loss on the phthalic anhydride unit.
2015: adjusted for an impairment loss on the benzene-derived C-none, fats processing and carbon disulfide units.
2016: adjusted for impairment losses on AIG receivables and deposits and on the fats processing unit.
2017: the fats processing unit. In 2017, EBITDA and net profit were adjusted for impairment losses on the fats processing unit, AIG, Elektrownia Puławy power plant and sulfur deposits.
In 2018, the results were adjusted for impairment losses on the fat processing unit, and net profit was additionally adjusted for the effect of loss of control over AFRIG S.A.

Grupa Azoty Group's strategic financial targets and actual performance:


Strategic target
2018 actual
2017 actual
EBIT margin
   8%
0.8%
6.2%
EBITDA margin
  14%
7.6%
12.3%
ROCE
   10%
0.7%
6.1%
ROE
   10%
0.1%
6.6%
See expert comment on the Grupa Azoty Group's financial position in 2018

With revenue up 4.0% year on year and cost of sales up 12.7%, the Group reported a gross profit. Year on year, gross profit dropped by PLN 567,218 thousand in 2018. Gross profit net of selling expenses and administrative expenses was PLN 121,573 thousand, that is PLN 606,866 thousand less than in 2017. In 2018, the balance of other income and other expenses was negative, at PLN (40,582) thousand, which had an adverse effect on EBIT. The latter amounted to PLN 80,991 thousand.

Revenue

EBIT by segmentAgro FertilizersPlasticsChemicalsEnergyOther
External revenue4 904 0511 561 6483 113 955252 977166 336
Profit/(loss) on sales(121 750)133 825182 644(21 874)(51 272)
EBIT(133 790)133 892168 462(18 912)(68 661)


Source: Company data.

The Group’s profit on sales of products in 2018 was driven primarily by the market situation in Agro Fertilizers, Plastics and Chemicals. Revenue in the Agro Fertilizers segment was down 2.5% year on year. An increase in revenue was reported in Plastics – up 10.0%, Chemicals – up 11.7%, Energy – up 9.9%, and Other Activities – up 9.7%.

Revenue reported by each segment

Source: Company data.

Revenue structure by segment


Source: Company data.

The shares of individual segments in total revenue changed slightly compared with 2017, with increased contributions from Plastics (up 0.9pp), Chemicals (up 2.1pp), Energy (up 0.1pp) and Other Activities (up 0.1pp), and a lower contribution from Agro Fertilizers (down 3.2pp).

EBIT

The Group’s EBIT in 2018 came in at PLN 80,991 thousand. The balance of other income and other expenses was negative, at PLN 40,582m, which had an adverse effect on EBIT. EBIT margin in 2018 was 0.8%, compared with 6.2% in the previous reporting period.

EBITDA

The Group earned EBITDA of PLN 159,971 thousand and a net profit of PLN 171,064 thousand in 2018. Year on year, EBITDA fell by PLN 85,038 thousand and net profit dropped by PLN 183,729 thousand. In line with the Grupa Azoty Group's strategy for 2013–2020 revised in May 2017, the Group's strategic target is to achieve EBITDA margin of 14%.

Consolidated data

Item
2018
2017*
Change
Change %
Revenue
9 998 967
9 617 495
381 472
4,0
Cost of sales
(8 406 424)
(7 457 734)
(948 690)
12,7
Gross profit1 592 5432 159 761(567 218)(26,3)
Selling and distribution expenses
(658 602)
(673 555)
14 953
(2,2)
Administrative expenses
(812 368)
(757 767)
(54 601)
7,2
Profit on sales
121 573
728 439
(606 866)
(83,3)
Net other income/(expenses)
(40 582)
(131 225)
90 643
(69,1)
Operating profit
80 991
597 214
(516 223)
(86,4)
Net finance income/(costs)
(53 683)
(36 824)
(16 859)
45,8
Share of profit of equity-accounted investees
13 092
16 015
(2 923)
(18,3)
Profit before tax40 400576 405(536 005)(93,0)
Income tax(32 750)(87 579)54 829(62,6)
Net profit7 650488 826(481 176)(98,4)
EBIT80 991597 214(516 223)(86,4)
Depreciation and amortisation683 451589 62793 77915,9
EBITDA764 4421 186 886(422 444)(35,6)


*Source: Company data.

Structure of assets

In 2018, the Group’s assets rose to PLN 14,160,469m, that is by PLN 2,422,425m relative to the end of 2017. Year on year, the most significant changes in assets included:

  • PLN 885,891 thousand increase in property, plant and equipment,
  • PLN 367,309 thousand increase in intangible assets,
  • PLN 500,683 thousand increase in inventories,
  • PLN 465,485 thousand increase in trade and other receivables.
Item
2018
2017
Change
Change %
Non-current assets, including:9 886 4418 069 9811 816 46022,5
Property, plant and equipment
7 665 639
6 799 748
885 891
13,1
Intangible assets
763 064
395 755
367 309
92,8
Goodwill
581 436
32 468
548 968
1 690,8
Perpetual usufruct of land
470 178
476 616
(6 438)
(1,4)
Other receivables
185 397
137 850
47 547
34,5
Equity-accounted investees
89 496
111 059
(21 563)
(19,4)
Deferred tax assets
75 579
69 583
5996
8,6
Current assets, including:4 274 0283 668 063605 96516,5
Trade and other receivables1 553 9091 088 424465 48542,8
Inventories1 503 8971 003 214500 68349,9
Cash and cash equivalents846 5321 085 885(239 353)(22,0)
Property rights261 767188 88772 88038,6
Current tax assets67 21724 24842 969177,2
Total assets14 160 46911 738 0442 422 42520,6


*Source: Company data.

Structure of equity and liabilities

Year on year, the most significant changes in equity and liabilities in the reporting period included:

  • PLN 120,821 thousand decrease in equity,
  • PLN 1,215,885 thousand increase in non-current and current liabilities under borrowings,
  • and PLN 829,090 thousand increase in trade and other payables.
Item
2018
2017
Change
Change %
Equity7 328 2267 443 407(115 181)(1,5)
Non-current liabilities, including:3 556 7762 336 6211 220 15552,2
Borrowings
2 488 3531 564 879923 47459,0
Employee benefit obligations
394 677336 78157 89617,2
Deferred tax liabilities
342 790177 588165 20293,0
Provisions
143 772122 74021 03217,1
Government grants received
136 00290 58545 41750,1
Current liabilities, including:3 275 4671 958 0161 317 45167,3
Trade and other payables2 598 2891 769 199829 09046,9
Borrowings362 62070 209292 411416,5
Other financial liabilities 198 13831 484166 654529,3
Employee benefit obligations45 63042 3163 3147,8
Provisions44 42529 80514 62049,1
Current tax liabilities18 1788 9169 262103,9
Government grants received7 9996 0871 91231,4
Total equity and liabilities14 160 46911 738 0442 422 42520,6


*Source: Company data.

Consolidated statement of changes in equity

Operating cash flow

In 2018, the Group generated positive net cash from operating activities of PLN 1,082,530 thousand. The amount mainly included net profit before depreciation and amortisation, impairment losses, an increase in trade and other payables, as well as a decrease in inventories and trade and other receivables.


NoteJan 1–Dec 31 2018Jan 1–Dec 31 2017
Cash flows from operating activities

Profit/(loss) before tax

40 400576 405
Adjustments for:

764 441703 765
Depreciation and amortisation

683 451589 672
(Reversal of)/impairment losses on assets4, 10(30)77 981
Loss on investing activities

73 41210 860
Gain on disposal of financial assets

(9 486)-
Share of profit of equity-accounted investees

(13 092)(16 015)
Interest, foreign exchange gains or losses

29 97741 802
Dividends

(291)(677)
Fair value loss on financial assets at fair value

500142

804 8411 280 170
Increase in trade and other receivables32(163 292)(80 423)
Increase in inventories32(237 232)(121 063)
Increase in trade and other payables32405 637172 253
Increase in provisions, accruals and government grants32150 24741 808
Other adjustments

158 977(7 119)


1 119 178
1 285 626
Cash generated from operating activities



Income tax paid

(36 648)(171 401)
Net cash from operating activities

1 082 5301 114 225
Cash flows from investing activities
Proceeds from sale of property, plant and equipment, intangible assets and investment property
6 4306 624
Acquisition of property, plant and equipment, intangible assets and investment property
(1 097 209)(1 069 140)
Dividend received
13 10813 270
Acquisition of subsidiary, net of cash acquired
(951 064)(689 496)
Proceeds from sale of other financial assets
249 7891 002 100
Interest received
19 64322 218
Government grants received
4 9011 120
Loans advanced
(3 252)(1 225)
Repayments of loans advanced
1121 446
Other proceeds
7099 000
Other disbursements
(4 627)(5 589)
Net cash from investing activities
(1 761 460)(709 222)
Cash flows from financing activities
Dividends paid
(144 345)(100 313)
Proceeds from borrowings
973 489332 634
Payment of borrowings
(341 894)(90 133)
Interest paid
(76 094)(52 369)
Payment of finance lease liabilities
(10 087)(13 238)
Other cash used in financing activities
59 260-
Other cash provided by financing activities
(26 879)(22 091)
Net cash from financing activities
433 45054 490
Total net cash flows
(245 480)459 493
Cash and cash equivalents at beginning of period
1 085 885641 895
Effect of exchange rate fluctuations on cash held
8 127(15 503)
Cash and cash equivalents at end of period
846 5321 085 885



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See how we delivered on our dividend policy objectives
[201-1]

In accordance with the Grupa Azoty’s dividend policy resulting from the updated strategy for 2013−2020, the company decided not to set the lower limit for the dividend payout ratio and to maintain the upper limit at 60%.

In 2018, Grupa Azoty distributed profit earned in 2017. The amount of profit allocated for distribution was PLN 123,994.355 thousand (PLN 1.25 per share). The dividend record date and the dividend payment date were set for July 25th 2018 and August 8th 2018, respectively.

Dividend paid out in 2008−2018

Year for which dividend was paid
Dividend record date
Dividend payment date
Profit earned
Total dividend
Dividend per share
2008
Jun 26 2009
Part 1: Aug 31 2009
PLN 61,935,000
PLN 39,898,749.42
PLN 1.02
Part 2: Nov 6 2009
2012
Apr 22 2013
May 24 2013
PLN 250,692,000
PLN 148,793,226.00
PLN 1.50
2013
Jun 18 2014
Jul 9 2014
PLN 44,117,000
PLN 198,839,096.80
PLN 0.20
2015
Jun 20 2016
Jul 11 2016
PLN 209,055,000
PLN 83,324,206.56
PLN 0.84
2016
Aug 4 2017
Aug 23 2017
PLN 224,775,000
PLN 78,364,432.36
PLN 0.79
2017
Jul 25 2018
Aug 8 2018
PLN 354,793,000
PLN 123,994,355.00
PLN 1.25


Source: Company data

See how our shares performed on the stock exchange

At the close of the last trading session in 2017, Grupa Azoty shares traded at PLN 69.60. Until mid-January 2018, the price went up sharply to PLN 76 and subsequently went down to around PLN 65 in the first ten days of February, marking a clear downward trend. The declines not only persisted but also dramatically accelerated in the following months of 2018, with only few tentative trend reversals. At the beginning of the second half of 2018, the stock price stabilised in the range PLN 42 − PLN 44, to go down to PLN 36 − PLN 38 in August and September 2018. The beginning of the fourth quarter of 2018 saw the price plummet to PLN 22 per share, the level last seen in 2011. The decrease was largely attributable to higher prices of energy carriers (gas and electricity), and CO2 emission allowances, as well as to fertilizers oversupply. Another important factor was the sell-out of the shares by emerging market funds as part of their portfolio restructuring following FTSE's reclassification of Poland to developed markets. The relatively low free float added to the adverse price fluctuations. After the local minimum, the rebound pushed the price back to around PLN 30, and temporarily to almost PLN 35. This short-lived peak was accompanied by record trading volumes following the reclassification of Grupa Azoty to the MSCI GLOBAL SMALL CAP INDEXES – MSCI POLAND INDEX as of November 30th 2018. At the end of 2018, the stock price was PLN 31.18 and rose to PLN 35 at the beginning of 2019.

Grupa Azoty share price in 2018

2014: adjusted for an impairment loss on the phthalic anhydride unit.

Grupa Azoty Police started 2017 on the stock exchange with a trading price of PLN 20.90, which was the year’s high. The stock price remained stable within the PLN 19.25 − PLN 20.60 range throughout the first quarter of 2018, with the trend continuing into the first half of the second quarter. In the second half the price fell to PLN 17.25 and then to PLN 16.50 at the end of the first month of the third quarter of 2018. It edged up to PLN 19.00 in the second month of the third quarter, but receded again in the third month, to PLN 16.75. From the end of September to the beginning of November, the price dropped sharply, hitting the year’s low of PLN 12.00 on November 2nd. It rebounded in the final month of the fourth quarter and reached PLN 13.50 at the end of year.

Grupa Azoty Police share price in 2018

As at December 28th 2018 (Friday), Grupa Azoty Puławy’s stock traded at PLN 67.60, down 59.88% on the closing price from January 2nd 2018, which was PLN 168.50. Over the same period, the WIG index declined 13.93%. The lowest price of Grupa Azoty Puławy’s stock (PLN 67.00 per share) was recorded on December 27th 2018, while the highest price, of PLN 168.50 per share was seen on January 2nd 2018. As at the end of December 2018, the company's market capitalisation was PLN 1,292m.

Grupa Azoty Puławy share price in 2018

The Grupa Azoty Group’s consolidated financial results are available to the public. As required by the applicable regulations, we make our accounts available to all stakeholders. Our financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union, which are consistent with the interpretations approved by the International Accounting Standards Board. The Group's full consolidated financial statements are available on our website.

See the results of our companies

See notes to the financial statements

Strengthening the market position
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Ensuring production safety to people and the environment