Financial performance
The Group's financing structure is adjusted to its needs and enables it to implement key investment projects.
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.
- 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% |
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 segment | Agro Fertilizers | Plastics | Chemicals | Energy | Other |
|---|---|---|---|---|---|
| External revenue | 4 904 051 | 1 561 648 | 3 113 955 | 252 977 | 166 336 |
| Profit/(loss) on sales | (121 750) | 133 825 | 182 644 | (21 874) | (51 272) |
| EBIT | (133 790) | 133 892 | 168 462 | (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 profit | 1 592 543 | 2 159 761 | (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 tax | 40 400 | 576 405 | (536 005) | (93,0) |
| Income tax | (32 750) | (87 579) | 54 829 | (62,6) |
| Net profit | 7 650 | 488 826 | (481 176) | (98,4) |
| EBIT | 80 991 | 597 214 | (516 223) | (86,4) |
| Depreciation and amortisation | 683 451 | 589 627 | 93 779 | 15,9 |
| EBITDA | 764 442 | 1 186 886 | (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: | 9 886 441 | 8 069 981 | 1 816 460 | 22,5 |
| 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: | 4 274 028 | 3 668 063 | 605 965 | 16,5 |
| Trade and other receivables | 1 553 909 | 1 088 424 | 465 485 | 42,8 |
| Inventories | 1 503 897 | 1 003 214 | 500 683 | 49,9 |
| Cash and cash equivalents | 846 532 | 1 085 885 | (239 353) | (22,0) |
| Property rights | 261 767 | 188 887 | 72 880 | 38,6 |
| Current tax assets | 67 217 | 24 248 | 42 969 | 177,2 |
| Total assets | 14 160 469 | 11 738 044 | 2 422 425 | 20,6 |
*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 % |
|---|---|---|---|---|
| Equity | 7 328 226 | 7 443 407 | (115 181) | (1,5) |
| Non-current liabilities, including: | 3 556 776 | 2 336 621 | 1 220 155 | 52,2 |
Borrowings | 2 488 353 | 1 564 879 | 923 474 | 59,0 |
Employee benefit obligations | 394 677 | 336 781 | 57 896 | 17,2 |
Deferred tax liabilities | 342 790 | 177 588 | 165 202 | 93,0 |
Provisions | 143 772 | 122 740 | 21 032 | 17,1 |
Government grants received | 136 002 | 90 585 | 45 417 | 50,1 |
| Current liabilities, including: | 3 275 467 | 1 958 016 | 1 317 451 | 67,3 |
| Trade and other payables | 2 598 289 | 1 769 199 | 829 090 | 46,9 |
| Borrowings | 362 620 | 70 209 | 292 411 | 416,5 |
| Other financial liabilities | 198 138 | 31 484 | 166 654 | 529,3 |
| Employee benefit obligations | 45 630 | 42 316 | 3 314 | 7,8 |
| Provisions | 44 425 | 29 805 | 14 620 | 49,1 |
| Current tax liabilities | 18 178 | 8 916 | 9 262 | 103,9 |
| Government grants received | 7 999 | 6 087 | 1 912 | 31,4 |
| Total equity and liabilities | 14 160 469 | 11 738 044 | 2 422 425 | 20,6 |
*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.
| Note | Jan 1–Dec 31 2018 | Jan 1–Dec 31 2017 | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit/(loss) before tax | 40 400 | 576 405 | |
| Adjustments for: | 764 441 | 703 765 | |
| Depreciation and amortisation | 683 451 | 589 672 | |
| (Reversal of)/impairment losses on assets | 4, 10 | (30) | 77 981 |
| Loss on investing activities | 73 412 | 10 860 | |
| 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 | 29 977 | 41 802 | |
| Dividends | (291) | (677) | |
| Fair value loss on financial assets at fair value | 500 | 142 | |
| 804 841 | 1 280 170 | ||
| Increase in trade and other receivables | 32 | (163 292) | (80 423) |
| Increase in inventories | 32 | (237 232) | (121 063) |
| Increase in trade and other payables | 32 | 405 637 | 172 253 |
| Increase in provisions, accruals and government grants | 32 | 150 247 | 41 808 |
| 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 | 1 082 530 | 1 114 225 | |
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment, intangible assets and investment property | 6 430 | 6 624 | |
| Acquisition of property, plant and equipment, intangible assets and investment property | (1 097 209) | (1 069 140) | |
| Dividend received | 13 108 | 13 270 | |
| Acquisition of subsidiary, net of cash acquired | (951 064) | (689 496) | |
| Proceeds from sale of other financial assets | 249 789 | 1 002 100 | |
| Interest received | 19 643 | 22 218 | |
| Government grants received | 4 901 | 1 120 | |
| Loans advanced | (3 252) | (1 225) | |
| Repayments of loans advanced | 112 | 1 446 | |
| Other proceeds | 709 | 9 000 | |
| 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 | 973 489 | 332 634 | |
| 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 | 433 450 | 54 490 | |
| Total net cash flows | (245 480) | 459 493 | |
| Cash and cash equivalents at beginning of period | 1 085 885 | 641 895 | |
| Effect of exchange rate fluctuations on cash held | 8 127 | (15 503) | |
| Cash and cash equivalents at end of period | 846 532 | 1 085 885 | |
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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
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.
