2012 | GRUPA AZOTY CONSOLIDATED ANNUAL REPORT 2 0 12 ...

reportreportreportPowering Creation

The birth of independent

Poland’s chemical industry took

place in Tarnów in 1927. Since

then, history has come full circle.

Today marks the rebirth

of Polish chemistry in Tarnów.

This time with a full awareness

of its power. Grupa Azoty is

the fusion of everything that we,

the Poles, have been able to do

best in this industry. Now we

feel secure. Now we are ready

to transcend borders.

grupaazoty.com 2012 | GRUPA AZOTY CONSOLIDATED ANNUAL REPORT

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Grupa azoty Consolidated annual report

2012

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powerinG Creation

Monika Kacprzyk-Wojdyga

Chairperson of the Supervisory BoardGrupa Azoty S.A.

The difficulties facing the global economy over the past several years have given rise to a wide array of risks which require particular courage and resolve from those determined to pull through. Against this backdrop, the Supervisory Board of Zakłady Azotowe w Tarnowie-Mościcach S.A. has shown full support for the plan to consolidate Poland’s chemical industry.

Today, with the crowning achievement of the process – Grupa Azoty’s acquisition and integration of Zakłady Azotowe Puławy S.A., we can safely say that the first positive effects of consolidation will be visible much sooner than anticipated, and in almost all key areas of the Group’s operations. This reinforces our firm belief that Grupa Azoty is on the right track.

On behalf of the Supervisory Board I would like to thank all those who have helped in creating a modern chemical group. Grupa Azoty will elevate the status of the Polish chemical industry and increase its competitiveness in global markets.

With kind regards,

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powerinG Creation

Jerzy Marciniak

Chairman of the Management Board General DirectorGrupa Azoty S.A.

It is with pleasure that I present the Annual Report of Grupa Azoty for 2012, a ground-breaking year for many of our subsidiaries and the Group as a whole.

Through our unfaltering eff orts to consolidate Poland’s leading chemical companies around Zakłady Azotowe w Tarnowie-Mościcach S.A.,we have changed Poland’s and Europe’s chemicals landscape.

Creating Grupa Azoty was along-term process and its crowning achievement was Zakłady Azotowew Tarnowie-Mościcach S.A.’s acquisition of Zakłady Azotowe Puławy S.A. This landmark transaction will long be remembered in Poland’s economic history, but it would not have been possible without the trust of the shareholders who agreed to exchange Puławy shares for those of Zakłady Azotowe w Tarnowie--Mościcach S.A.

Grupa Azoty brings together strategically fi t companies with various specialisations and traditions, now working together under a strong, distinctive brand that is well recognised in global markets. Modern capital markets demand strategic thinking, and in building Grupa Azoty we have proved that we understand the challenge. This is why we believe that, having achieved the leading position in Poland, we are now capable and ready to advance our standing in global markets.

The fi rst synergies are clearly visible. We increased our assets and are ready to reduce raw material, logistics, transport and marketing costs.We are already enjoying the eff ectsof streamlined decision-making, which – as can be seen in further parts of the report – is best refl ected in our fi nancial results.

Looking to the future, we have further ambitious goals in mind, one of which is for Grupa Azoty to enter the main Warsaw Stock Exchange index, which will increase our long-term growth potential and investment capacity, allowing us to create shareholder value.

Our plans for the future, however, are fi rmly anchored in past achievements – we are well aware that what we have accomplished is owed to the hard work and experience of numerous generations. We will continue to draw inspiration from this rich tradition.

The present is equally important to us, because each company in our Group is a vital part of its community and region, from which it continually draws strength. For this reason we place emphasis on sustainable development. The more we benefi t from the world and its people, the more we owe to them.

We treat each successas a subsequent obligation – as a constant responsibility towards our shareholders, clients and employees. Responsibility for the environment, for quality of life, for global harmony. We take this obligation on without hesitation, because we know we have the power. The power to create.

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Key eVent s in 2012Key eVent s in 2012

For the Group Parent, Zakłady

Azotowe w Tarnowie-Mościcach

S.A., 2012 marked 85 years

since its foundation – the ideal

moment to confirm its status

as the market leader and make

good use of the experience

and tradition built up over

time. Already in its third year,

consolidation of the chemical

industry was advanced with the

signing of a historic agreement

with Zakłady Azotowe Puławy S.A.

and the introduction of

a single brand – Grupa Azoty.

24 January

The Warsaw Stock Exchange announces the composition of the RESPECT index – Zakłady Azotowe w Tarnowie-Mościcach S.A. is included for the fourth time.

3 February

The Group commences implementation of its “Information Security Policy for the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group” in accordance with personal data protection legislation.

29 February

A merger of two Z.Ch. Police S.A. subsidiaries is completed – Centrum Elektrotechnika Instalacje Serwis sp. z o.o. is taken over by AUTOMATIKA Usługi Kontrolno-Pomiarowe sp. z o.o.

9 March

Polskie Konsorcjum Chemiczne sp. z o.o. sells 100% of shares in ZWRI sp. z o.o. to P.P.H.U. WIET-POL.

26 June

A modern installation for collection of ash at the on-site CHP plant is commissioned, significantly reducing the amount of waste generated and decreasing negative environmental impact.

14 July

The takeover of Zakłady Azotowe Puławy S.A. is commenced. Through a decisive majority, extraordinary general meeting of Zakłady Azotowe w Tarnowie-Mościcach S.A. adopts a resolution approving an increase of authorised share capital by 32 495 500 shares, to be exchanged for a 68% stake in Zakłady Azotowe Puławy S.A. The move was part of a defence strategy against the hostile takeover attempt by Norica Holding (Acron Group) and it put the company at the forefront of the domestic chemical industry, signalling commencement of the final stage in consolidating Poland’s leading chemical companies.

31 July

For the fifth time, Zakłady Azotowe w Tarnowie-Mościcach S.A. is included in the RESPECT index.

31 July

Consolidation of Polskie Konsorcjum Chemiczne sp. z o.o. (acquirer) and Biprozat sp. z o.o. (target) is completed, with the acquirer assuming the target’s liabilities and becoming the legal successor to the merged companies. The outcome is a stable company focusing on investment and design processes.

3 August

An agreement is entered into between ZAK S.A. and fund manager Towarzystwo Funduszy Inwestycyjnych PZU S.A. on the provision of additional pension benefits under the employee pension scheme.

23 March

The management board of ZAK S.A. agrees to commence disposal of subsidiaries PTS Autozak sp. z o.o., Hotel Centralny sp. z o.o. and Hotel ORW “Azoty” sp. z o.o.

16 May

Through its holding company Norica Holding, Russian mineral fertiliser and chemical product group Acron announces a tender offer for shares in Zakłady Azotowe w Tarnowie-Mościcach S.A.

1 June

The management board of Zakłady Azotowe w Tarnowie-Mościcach S.A. responds to the tender offer announced by Norica Holding (Acron Group) on 16 May. The board strongly objects to the offer, saying that it does not reflect the company’s fair value and does not take into account its long-term strategy.

13 June

Zakłady Azotowe w Tarnowie-Mościcach S.A. publishes the “Zakłady Azotowe w Tarnowie-Mościcach S.A. Group Strategy 2012-2020”, setting out the Group’s mission and vision and presenting directions for sustainable development.

20 June

Two significant agreements relating to the formation of an employee pension scheme at Zakłady Azotowe w Tarnowie-Mościcach S.A. are signed: a company-wide pension agreement entered into between the employer and trade unions and an agreement between Zakłady Azotowe w Tarnowie-Mościcach S.A. and fund manager Towarzystwo Funduszy Inwestycyjnych PZU S.A., the company’s partner in the pension scheme.

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Key eVent s in 2012

21 August

Through a tender offer to purchase 32% of shares in Zakłady Azotowe Puławy S.A., announced on 13 July, Zakłady Azotowe w Tarnowie-Mościcach S.A. acquires a 10.3% stake in Puławy.

31 August

A merger of PROReM sp. z o.o., Zakład Remontowy REKOM sp. z o.o. and ZAK SERWIS sp. z o.o., companies providing services in the mechanics and machine industry, is completed. The combined entity trades as PROReM.

31 August

A merger between Jednostka Ratownictwa Chemicznego sp. z o.o. and CHEMZAK sp. z o.o. is finalised. The merged entity, a provider of laboratory and small-scale chemical production services, trades as Jednostka Ratownictwa Chemicznego sp. z o.o.

September

Zakłady Azotowe w Tarnowie-Mościcach S.A., ZAK S.A. and Zakłady Chemiczne Police S.A. sign a “framework agreement on cooperation with Polskie Konsorcjum Chemiczne sp. z o.o. (PKCh) ”. The agreement governs the principles on which Zakłady Azotowe w Tarnowie-Mościcach S.A. Group subsidiaries commission investment management, coordination, implementation and supervision services to PKCh.

9 October

Attended by Polish President Bronisław Komorowski, celebrations take place to mark 85 years since the founding of Zakłady Azotowe w Tarnowie-Mościcach S.A. The President met with Zakłady Azotowe w Tarnowie-Mościcach S.A.

employees and public officials from the city of Tarnów. Accompanied by Eugeniusz Kwiatkowski’s granddaughter, Julita Maciejewicz-Ryś, the President unveiled a statue of Kwiatkowski in front of the company’s headquarters.

31 October

A merger between automatics and control companies Automatyka sp. z o.o. and ASTERZAK sp. z o.o. is completed. The combined entity now trades as Automatyka sp. z o.o.

13 November

Officials from Grupa Azoty, the mayor of Tarnów and the deputy marshal of the Małopolska province sign a letter of intent concerning cooperation on a new chemical technology research and development centre.

14 November

The management boards of Zakłady Azotowe w Tarnowie-Mościcach S.A. and Zakłady Azotowe Puławy S.A. enter into a consolidation agreement outlining the rules for cooperation between the two companies. This agreement governs the issues mentioned in the memorandum of 20 September 2012, which it supersedes.

23 November

An agreement is entered into between Zakłady Azotowe w Tarnowie-Mościcach S.A. and Grupa LOTOS S.A., significantly expanding the Group’s R&D capabilities in the future. The agreement concerns feasibility studies, including technical and economic analyses, for a project to jointly develop new chemical and petrochemical installations.

5 December

The management board of Zakłady Azotowe w Tarnowie-Mościcach S.A. unveils the Grupa Azoty brand, which from this point will be adopted by all group companies.

19 December

An agreement is signed selling shares in PTS Autozak sp. z o.o. to Solaris sp. z o.o.

21 December

The Polish Financial Supervision Authority approves Zakłady Azotowe w Tarnowie-Mościcach S.A.’s Prospectus for new series D shares to be issued to Zakłady Azotowe Puławy S.A. shareholders.

31 December

The Joint Implementation Project performed by Zakłady Azotowe w Tarnowie-Mościcach S.A. and Mitsubishi Corporation since 2008 is completed. During the four-year project, CO2 emissions were reduced by 2 670 356 tonnes and the company generated over PLN 100 million in profit.

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we are chemists– and therefore understand the mechanisms

of change.we collaborate with nature.

we create a safe world.

yet when talking about our mission, we don’t want

to talk about ourselves. about our technique.

so instead of a chemical formula, we would rather

show how stalks of wheat heavy with grain sway

in the wind. we would rather show the smile

of a child reaching for a toy. a cityscape which

grows beautiful through our materials. a stream

flowing with clean water. instead of talking about

ourselves, we would rather talk about how

we envisage a better life. Because, in fact, this

is what we mean.

6 7


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a GloBal BrandPeople experience

joy the same anywhere in

the world, although they express it

in different languages. Only when you

understand this, can you enter global

markets.

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Grupa Azoty is a project focused on the future. This is the way it has always been. When President Ignacy Mościcki decided to build the National Nitrogen Compounds Factory in 1927, this was a vision of the future. A vision of great Polish chemistry.This vision – as well as the history of all the companies which form part of the Group – is our commitment for decades to come. We’ve come a long way. We’ve changed. We’ve crossed many borders. Today we are competing with Europe’s largest chemical companies. But the power needed to achieve this – the power to create – is something which we draw upon from our tradition.

When choosing the name Grupa Azoty, we were guided by two considerations: respect for our own tradition and the principle of simplicity. We believe that even in our highly complex and rapidly changing contemporary age, simplicity remains a source of effectiveness and strength. The strength of the group itself and the power and clarity of the message through which the group communicates its mission.

The Group – because we are all together, even if we have different experiences and operate in different areas. Because we complement one another. Azoty – because that’s the way it has always been. It was under this slogan that Poland’s modern chemicals industry was born. And it is our desire to enter global markets guided by this same slogan.

a GloBal Brand

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desCription of Grupa a zot y

There are many strategy games and different puzzles. We choose business. This is where the gameplay is for true power. For real security. For a better life. For everyone.

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desCription of Grupa a zot y

Consolidation tiMeline

Beginning in 2010, the process

of consolidating Poland’s

chemical industry has further

progressed with the creation

of a new brand – Grupa Azoty.

This was a ground-breaking

moment for the entire industry.

For Grupa Azoty, its undisputed

leader, it is a significant challenge

and a new responsibility.

28 January 2010

Zakłady Azotowe w Tarnowie-Mościcach S.A. acquires 100% of shares in Unylon Polymers GmbH, a German-based polyamide (PA6) manufacturer, and changes its name to ATT Polymers GmbH.

20 October 2010

Zakłady Azotowe w Tarnowie-Mościcach S.A. acquires a 52.62% stake in ZAK S.A.

19 August 2011

Zakłady Azotowe w Tarnowie-Mościcach S.A. acquires a 66% stake in Zakłady Chemiczne Police S.A.

13 October 2011

Zakłady Azotowe w Tarnowie-Mościcach S.A. increases its controlling interest in ZAK S.A. to 93.48%.

February – October 2012

Subsidiaries Biprozat sp. z o.o., PROReM sp. z o.o., Zakład Remontowy REKOM sp. z o.o., ZAK SERWIS sp. z o.o. and CHEMZAK sp. z o.o. are consolidated within Polskie Konsorcjum Chemiczne sp. z o.o.

14 July 2012

Zakłady Azotowe w Tarnowie-Mościcach S.A. begins the process of acquiring control over Zakłady Azotowe Puławy S.A.

21 August 2012

As a result of a tender offer, Zakłady Azotowe w Tarnowie-Mościcach S.A. acquires a 10.3% stake in Zakłady Azotowe Puławy S.A.

5 December 2012

The Grupa Azoty brand is launched.

24 January 2013

As a result of shareholders exchanging shares in Zakłady Azotowe Puławy S.A. for shares in Zakłady Azotowe w Tarnowie-Mościcach S.A., the latter raises its stake in the former’s share capital to 83.7%, thereby assuming control over it.

Through Grupa Azoty PKCh sp. z o.o. and its subsidiaries, the Group is taking steps to integrate and reorganise non-manufacturing companies active in design, investment delivery, repair and mechanics, automation, laboratory services and small-scale chemical production, together with other support services (with the exception of rail transport). This is aimed mainly at increasing the effectiveness and transparency of operations and separating core operations from other functions. The primary goal here is to reduce the Group’s overheads.

Where increasing the scale of operations is concerned, the Group’s strategy envisages further participation in the consolidation of Poland’s and Central Europe’s chemical industry. The consolidation aims to benefit from synergies, both in horizontal and vertical integration, and as a consequence to increase profit margins. The Group believes that potential acquisitions of other chemical companies, strategic alliances and joint ventures will expand its product portfolio, increase production capacity, develop sales markets and provide access to new distribution channels, but first and foremost will result in higher shareholder value.

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desCription of Grupa a zot ydesCription of Grupa a zot y

sHareHoldinG struCture 31 deCeMBer 2011 – 15 MarCH 2013 Group struCture

31 Dec 2011 27 Apr 2012 15 Jun 2012 23 Jul 2012

ShareholderNo. of

votes

% of

votes

No. of

votes

% of

votes

No. of vo-

tes

% of

votes

No. of

votes

% of

votes

Total 64 115 444 100.00% 64 115 444 100.00% 64 115 444 100.00% 64 115 444 100.00%

State Treasury of Poland 20 549 000 32.05% 20 549 000 32.05% 20 549 000 32.05% 20 549 000 32.05%

Other shareholders 23 277 763 36.31% 22 662 448 35.35% 19 391 863 30.25% 9 433 677 14.71%

ING Otwarty Fundusz

Emerytalny8 284 242 12.92% 8 284 242 12.92% 8 284 242 12.92% 9 250 000 14.43%

Norica Holding S.à.r.l.,

together with Cliffstone

Holdings Limited

- - - - - - 8 481 287 13.23%

Aviva Otwarty Fundusz

Emerytalny Aviva BZ WBK5 384 685 8.40% 6 000 000 9.36% 6 000 000 9.36% 6 397 643 9.98%

Generali OFE 3 245 554 5.06% 3 245 554 5.06% 3 245 554 5.06% 3 340 610 5.21%

PZU OFE Złota Jesień - - - - 3 270 585 5.10% 3 270 585 5.10%

PZU S.A.

(including PZU Życie S.A.)3 374 200 5.26% 3 374 200 5.26% 3 374 200 5.26% 3 392 642 5.29%

27 Jul 2012 29 Oct 2012 31 Dec 2012 6 Mar 2013

ShareholderNo. of

votes

% of

votes

No. of

votes

% of

votes

No. of

votes

% of

votes

No. of

votes

% of

votes

Total 64 115 444 100.00% 64 115 444 100.00% 64 115 444 100.00% 99 195 484 100.00%

State Treasury of Poland 20 549 000 32.05% 20 549 000 32.05% 20 549 000 32.05% 44 764 617 45.13%

Other shareholders 12 826 319 20.00% 16 166 929 25.21% 16 166 929 25.21% 28 550 085 28.78%

ING Otwarty Fundusz

Emerytalny9 250 000 14.43% 9 250 000 14.43% 9 250 000 14.43% 9 883 323 9.96%

Norica Holding S.à.r.l.,

together with Cliffstone

Holdings Limited

8 481 287 13.23% 8 481 287 13.23% 8 481 287 13.23% 9 599 816 9.68%

Aviva Otwarty Fundusz

Emerytalny Aviva BZ WBK6 397 643 9.98% 6 397 643 9.98% 6 397 643 9.98% 6 397 643 6.45%

Generali OFE 3 340 610 5.21% - - - - - -

PZU OFE Złota Jesień 3 270 585 5.10% 3 270 585 5.10% 3 270 583 5.10% - -

12 13



Group struCture

Grupa Azoty brings together

a number of strategically

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on delivering a common

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14

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Grupa azoty ManaGeMent Board Best praCtiCes for a CrediBle Capital MarKet partiCipant

ManaGeMent Board

Jerzy Marciniak Chairman of the Management Board,

General Director

Andrzej Skolmowski Vice-Chairman of the Management Board

responsible for Group finance and trade

Witold Szczypiński Vice-Chairman of the Management Board

responsible for Group production and safety

Krzysztof Jałosiński

Vice-Chairman of the Management Board

responsible for Group strategy and development

Artur Kopeć

Member of the Management Board

elected by employees of the Parent

In accordance with the

2012-2020 strategy,

the management board

of Grupa Azoty S.A. acts

as management board of the

entire group, with each board

member responsible for

a specific operating area.

Group management

is compliant with the highest

standards and current

legislation.

The chairman of the management board/managing director oversees Grupa Azoty as a whole, while board members’ competences are split into three main areas – finance and trade, strategy and development, and production and safety.

Responsibility for corporate management rests with the corporate departments at Grupa Azoty S.A. which oversee their respective areas throughout the entire Group.

14 15



Best praCtiCes for a CrediBle Capital MarKet partiCipant

Acting in accordance with

corporate governance best

practices, as outlined in the

Best Practices for Warsaw Stock

Exchange-Listed Companies,

the Parent (Grupa Azoty S.A.)

provides all capital market

participants, in particular

its current and potential

shareholders, with exhaustive

and reliable information on

events taking place at the

Parent and within the Group.

These are presented in current and periodic reports, and online at www.grupaazoty.com. Information available online also includes the Parent’s recent share performance.

Going beyond what is required by law, the Group’s open information policy is aimed at meeting the expectations of capital market stakeholders, and in doing so creating and promoting the highest standards in communication between listed companies and investors.

As part of the open information policy, conferences are held after the publication of periodic reports presenting financial results. In 2012, representatives of the Parent also met with capital market stakeholders in a series of one-to-one meetings as well as during events. Starting with its IPO, the company has held annual meetings with retail investors during the Wall Street conference organised in Zakopane by the Association of Individual Investors. In June 2012, the management board and representatives of the Parent were again on hand to meet with shareholders during the conference and the associated Targi Akcjonariat event.

The Group’s corporate website is a key tool for communicating with capital market stakeholders, where current and periodic reports, significant information about AGMs and EGMs, analyst recommendations and financial results can be found. The new website, updated and revamped on 5 December 2012, was edited to efficiently provide precise capital market information. In addition, a dedicated module allows investors easy access to share price and other capital market-related information.

The content and presentation of significant investor information was recognised at the annual Złota Strona Emitenta awards for corporate web sites, organised by the Polish Association of Listed Companies. The jury decided to advance Grupa Azoty to the next stage of the competition.

Grupa Azoty’s investor relations efforts were also singled out by investors themselves in the popular Polish economic daily Puls Biznesu for the Parent’s active participation in the Akcja Inwestora campaign, due to which the Parent has had the privilege to be able to use the “Responds to Investors” mark since August 2010. The campaign aims to encourage capital market participants to communicate effectively with listed companies using a dedicated website.

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Words are relative. There are endless ears of grain in the field. But there are even more stars in the sky. This is why we use numbers. We measure hard facts.

Grupa a zot y in nuMBers

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16 17


Grupa a zot y in nuMBers

Revenue

PLN 7 099 million

EBIT

PLN 372 million

EBITDA

PLN 611 million

Net profit

PLN 315 million

Earnings per share

PLN 4.59

Total employment in Grupa Azoty

as at the end of 2012

8 607 people

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s trateGy 2012-2020

We operate within a Group. We think together. We talk. We are open. So we are not afraid of being tested by the market and our clients.

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18 19


s trateGy 2012-2020

Adopted in 2012, Grupa

Azoty’s Strategy is the primary

document outlining the vision

to increase the Group’s value

through strengthening its

competitive position and

ensuring its sustainable

development in the global

chemical market. The Group’s

mission is to supply safe and

useful chemical products

and to make effective use

of synergies and innovation

to enhance Group value.

The strategy will be expanded in 2013 to include the growth potential resulting from the acquisition of Zakłady Azotowe Puławy S.A.

Grupa Azoty is delivering an ambitious corporate strategy, which clearly outlines its key objectives and prospective growth areas. The strategy provides a blueprint for identification and maximisation of potential value drivers, giving the Group the edge it needs to compete in global chemical markets. The strategy also focuses on Grupa Azoty entering the main Warsaw Stock Exchange index within a decade and places significant emphasis on generating industry-leading rates of return for shareholders. In fertiliser manufacturing, the Group aims to maintain its top-3 position in the European market.

The strategy addresses key aspects of Group operations, in particular:

increasing the operational scale of the Group’s core activities (organic growth, alliances, M&As);

maximising operating synergies within the Group;

reducing sensitivity to energy costs (technical and energy solutions, a new CHP plant in Kędzierzyn-Koźle) and changes in economic cycles (product chain extensions);

lowering production costs (modernising key production lines);

building stable and effective customer relations (including introduction of advisory and technical marketing, opening a single centralised trade and marketing centre, entering markets with asymmetrical demand cycles);

improving the effectiveness of key processes (modernisation, process optimisation);

related diversification through synergies with existing product portfolio (expansion to include liquid and specialty fertilisers, mechanically granulated nitrate fertilisers, next generation plasticisers);

constantly adapting product quality to client requirements, product perfection (innovative technologies and cooperation with research and development centres both in Poland and abroad, and opening the Group’s own R&D facility).

Grupa Azoty has significant potential for further growth in the fertiliser and chemical product markets, the capital needed to expand dynamically, patents and licences within the Polish chemical industry and independent research facilities. This guarantees dynamic product development, including those based on the latest technical solutions and those adapted to changing customer expectations. Highly qualified personnel, innovative management systems, an open and transparent information policy, dialogue with local communities and care for the natural environment – these are the key factors which set Grupa Azoty apart from the competition.

The Group’s intention is to grow in line with sustainable development principles, limiting environmental impact in as far as economically practicable, while taking into consideration the needs of local communities.

The primary objective for the Group is to create economic value and redistribute earnings to shareholders. To the extent covered by the strategy, the Group plans to increase the level of key operating and financial ratios:

ROE > 12%;

ROCE > 14%;

EBIT/EBITDA > 8%/14%. Where its dividend policy is concerned, Grupa Azoty S.A. plans to make pay-outs appropriate to the company’s earnings and financial standing. The dividend will be in the region of 40% to 60% of the company’s separate net profit in any given financial year.

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20 21


Grupa azoty CoMpanies

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Grupa a zot y CoMpaniesGrupa a zot y CoMpanies

Grupa azoty s.a.

(formerly zakłady azotowe w tarnowie-Mościcach s.a.)

Grupa azoty s.a.


On the back of an 85-year history, Grupa Azoty is reshaping Poland’s chemical industry. This trusted and well-known organisation was founded upon long-lasting commercial relationships based on partnership and mutual understanding.

The company is active in manufacturing, service and commercial operations relating to mineral fertilisers, engineering plastics and the raw materials needed for their production. Grupa Azoty S.A. is also an experienced manufacturer and supplier of highly specialised catalysts used in the chemical industry.

In addition to working with leading domestic scientific and academic centres, the company conducts wide-ranging research and development at its own laboratories, carrying out over a million analyses each year. Due to its robust R&D programme, Grupa Azoty S.A. is the source of new technologies and innovative products which enjoy recognition and trust in Poland and abroad.

Grupa Azoty S.A. is an active participant in the Responsible Care programme.

speCialisation

Grupa Azoty S.A.’s core operations centre on the manufacture of nitrogen fertilisers and compounds, engineering plastics, organic and inorganic chemicals and other chemical products. The company also generates revenue from selling electricity and laboratory, logistics and other services.

Of key significance within the nitrogen fertilisers manufactured by the company are nitrogen fertilisers with sulphur, a product group including Saletrosan®26 macro and ammonium sulphate AS21. Nitrate fertilisers are generally manufactured using macro mechanical granulation, and they are characterised by good spreading properties.

Due to the use of two granulation methods (smaller, varied granules produced by milling for standard fertilisers and uniform mechanical granulation for macro fertilisers), Grupa Azoty S.A. guarantees the highest quality products and an improvement in crop yields.

Engineering plastics are another significant manufacturing segment.

The engineering plastics manufactured by the company are both natural and modified (including Tarnamid®, the trade name of polyamide 6 – PA6). This segment also includes the manufacture of caprolactam, cyclohexanone and cyclohexanol. The company is Poland’s only manufacturer of polyoxymethylene (POM), marketed as Tarnoform® (a natural and modified acetal polymer). The plastics produced in Tarnów are mainly used in the automotive industry, in white goods and packaging. The company also manufactures other organic and inorganic chemicals and catalysts used in certain chemical syntheses for the production of ammonia, hydrogen and synthetic gas.

22 23


Grupa a zot y CoMpaniesGrupa a zot y CoMpanies

Grupa azoty s.a.


Grupa azoty s.a.


Capital MarKet partiCipant

Grupa Azoty S.A. has been listed on the Warsaw Stock Exchange since 30 June 2008. Throughout this time the company has strived to ensure that communication with capital market stakeholders meets the highest standards of corporate governance. The company releases exhaustive and reliable information on corporate events. Long-term, partnership-based relations are built with investors on the basis of an open information policy which goes significantly beyond what is required by law. One of the key principles of Grupa Azoty S.A.’s operations is to ensure sustainable development. Since 19 November 2009 the company has been listed in the RESPECT Index, Central and Eastern Europe’s first stock market index of companies observing guidelines for responsible business.

ManaGeMent Board

Jerzy Marciniak Chairman of the Management Board,

General Director

Andrzej Skolmowski Vice-Chairman of the Management Board

responsible for Group finance and trade

Witold Szczypiński Vice-Chairman of the Management Board

responsible for Group production and safety

Krzysztof Jałosiński

Vice-Chairman of the Management Board

responsible for Group strategy and development

Artur Kopeć

Member of the Management Board

elected by employees of the Parent

superVisory Board

Monika Kacprzyk-Wojdyga

Chairperson of the Supervisory Board

Ewa Lis Deputy Chairperson

of the Supervisory Board

Jan Wais

Secretary of the Supervisory Board

Tomasz Klikowicz Member of the Supervisory Board

Artur Kucharski Member of the Supervisory Board

Marek Mroczkowski Member of the Supervisory Board

Jacek Obłękowski Member of the Supervisory Board

Zbigniew Paprocki Member of the Supervisory Board

Ryszard Trepczyński Member of the Supervisory Board

Correct as at 6 March 2013.

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Grupa a zot y CoMpanies

zaKłady CHeMiCzne poliCe s.a.

The future is a notion. Life is a project.We give people the freedom to design their own future.

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24 25



zaKłady CHeMiCzne poliCe s.a.

Zakłady Chemiczne Police S.A. has been manufacturing compound fertilisers for over 40 years. The company has its own specialist port infrastructure which is located in close proximity to its production facilities. The port in Police is the fourth largest in Poland by cargo handled. Thanks to Zakłady Chemiczne Police S.A., Grupa Azoty enjoys a strong and solid position in global markets as an exporter of fertilisers, pigments and chemical products. Zakłady Chemiczne Police S.A has Poland’s only titanium white facility and is the largest-scale manufacturer of compound fertilisers, ammonia, and phosphoric and sulphuric acid.

speCialisation

The company manufactures compound mineral fertilisers (its standard fertilisers are marketed under the POLIFOSKA® brand) and urea – fulfilling stringent quality standards, this nitrogen fertiliser is the safest for plants and due to its high quality has a wide range of applications outside agriculture. The fertilisers manufactured at Police are:

POLIWAP®

POLIDAP®

POLIFOSKA®

POLIMAG®

Mocznik.pl®

Zakłady Chemiczne Police S.A. has also successfully launched a range of garden fertilisers. Particularly from an environmental protection viewpoint, a significant aspect of the company’s operations is the manufacture of AdBlue®, a urea solution used in the automotive industry to reduce nitrogen monoxide in diesel engines.The company’s key operating areas also include the manufacture and marketing of titanium white and associate intermediates: iron (II) sulphate and post-hydrolytic acid. The company holds the leading position in the domestic titanium white market.

Titanium dioxide pigments are sold under the trade name TYTANPOL® and their principal customers are manufacturers of paints and varnishes. Other industrial consumers for this raw material include the plastics and paper sectors, ceramics industry and textiles. A source of essential support for the company’s operations is the Energy Centre, which generates technical steam, electricity and compressed air. The company also maintains an acid waste treatment centre and landfill site. Zakłady Chemiczne Police S.A. has strategic significance for the West Pomeranian region as a whole, and it identifies closely with its regional community. Carrying on its tradition, it provides stable employment for over 2000 people.


On 14 July 2005 shares in Zakłady Chemiczne Police S.A. were floated on the Warsaw Stock Exchange (WSE symbol: PCE). The company is a constituent of the WIG-CHEMIA, sWIG80, InvestorMS, WIG and WIG-Poland indices. On 19 August 2011 when Zakłady Azotowe w Tarnowie-Mościcach S.A. acquired 49.5 million ordinary bearer shares in Zakłady Chemiczne Police S.A., assuming a 66% stake in its share capital, the company was absorbed into Grupa Azoty. In accordance with corporate governance guidelines, the company informs stakeholders of its current and planned activities based on the principles of transparency, accuracy and reliability.

ManaGeMent Board

Krzysztof Jałosiński Chairman of the Management Board,

Managing Director

Wojciech Naruć Vice-Chairman of the Management Board

Rafał Kuźmiczonek Vice-Chairman of the Management Board

superVisory Board

Jerzy Marciniak Chairperson of the Supervisory Board

Marcin Likierski Deputy Chairperson


Wiesław Markwas Secretary of the Supervisory Board

Jerzy Góra Member of the Supervisory Board

Anna Tarocińska Member of the Supervisory Board

Andrzej Skolmowski Member of the Supervisory Board


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zaKłady azotowe puławy s.a.

We imagine the world as a garden. As a living project, which requires vision and care. As a place to live.

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26 27



zaKłady azotowe puławy s.a.

For over half a century Zakłady Azotowe Puławy S.A. has skilfully combined business acumen with cutting-edge technology. Every day it manufactures products for millions of customers, both in Poland and in dozens of countries in Europe and as far afield as South America and Asia. As manufacturer of mainly nitrogen fertilisers and melamine, the company plays an important role in Grupa Azoty. As well as ensuring technological development, the company plays an active role in environmental protection, reflected through its participation in the international chemical industry programme Responsible Care. Its wide-ranging product portfolio and five decades of operations, experience and competences mean that Zakłady Azotowe Puławy S.A. is well-recognised by investors and trusted by customers.

Zakłady Azotowe Puławy S.A. became a part of Grupa Azoty as a result of the tender offer in July last year. The consolidation agreement entered into on 14 November 2012 clearly outlines the principles for cooperation between the companies and specifies the merger conditions. As of the beginning of January this year, Zakłady Azotowe Puławy S.A. shareholders were able to exchange their shares for those of Grupa Azoty S.A. Each share in Zakłady Azotowe Puławy S.A. entitled the holder to 2.5 D series shares in Grupa Azoty S.A. After the successful issue of D series shares, Grupa Azoty S.A. acquired an 83.7% stake in Zakłady Azotowe Puławy S.A. This transaction signalled a crowning achievement in the on-going consolidation of Poland’s chemical industry.

speCialisation

Zakłady Azotowe Puławy S.A.’s key products are mineral fertilisers, including: nitrogen fertilisers: PULAN®,

PULREA®, RSM® and PULSAR®, manufactured in Puławy;

phosphorous and mixed fertilisers – superfosfat, Amofoski®, Agrafoski®, Amofosmagi®, mixed fertilisers and ground phosphate rock, manufactured at GZNF Fosfory, Gdańsk;

potassium nitrate and calcium nitrate, manufactured at Azoty-Adipol in Chorzów.

The second key operating area is the manufacture and sale of chemical products, including: melamine, caprolactam, hydrogen

peroxide, PULREA®, PULNOX® and AdBlue®, manufactured in Puławy;

sulphuric acid and sodium bisulphite, manufactured at GZNF Fosfory;

and potassium nitrate manufactured at Azoty-Adipol for technical and food-related purposes.

Zakłady Azotowe Puławy S.A. also trades commercially in electricity, thermal energy and heat-transfer utilities.


Zakłady Azotowe Puławy S.A. has been listed on the Warsaw Stock Exchange since 22 November 2005. The company is included in the mWIG40, WIG-Chemia and WIG-div indices. Operating in compliance with the highest standards, the company is trusted by its shareholders and influencers within the investor community.

ManaGeMent Board

Paweł Jarczewski Chairman of the Management Board

Marian Rybak Vice-Chairman of the Management Board

Wojciech Kozak Member of the Management Board

Marek Kapłucha Member of the Management Board

Zenon Pokojski Member of the Management Board

superVisory Board

Cezary Możeński Chairperson of the Supervisory Board

Irena Ożóg Deputy Chairperson


Jacek Józef Wójtowicz Member of the Supervisory Board

Jerzy Marciniak Member of the Supervisory Board

Marta Kulik-Zawadzka Member of the Supervisory Board

Andrzej Bartuzi Member of the Supervisory Board


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Grupa azoty zaKłady azotowe Kędzierzyn s.a.

(formerly zakłady azotowe Kędzierzyn s.a.)

With a 65-year history, Grupa Azoty Zakłady Azotowe Kędzierzyn S.A. is a company with well-recognised product brands and a continued drive towards growth – with the utmost respect for the natural environment and focus on the highest production safety standards. This has enabled the company to develop and maintain a stable position in the domestic and European chemical markets.

At present Grupa Azoty ZAK S.A. is Poland’s third largest manufacturer by production capacity of nitrogen fertilisers, products with exceptional seeding parameters. It is also the only domestic manufacturer of oxo alcohols and plasticisers. The company’s products are used in numerous sectors of the economy: agriculture, construction, chemical processing, manufacturing and the automotive industry. The company also provides specialist laboratory and environmental analysis services.

With regard to corporate social responsibility, Grupa Azoty ZAK S.A. plays an active role in its local community and has become known as a responsible business partner, the largest employer in the region, a sponsor of sporting, cultural and artistic events, and a donor. The company invests in human capital, building relationships based on co-promotion of corporate culture, loyalty to the company and full involvement in implementing the company’s strategy. For this reason the company is active in areas significant for the company’s employees and its local community, for example conservation of the natural environment and promotion of safe working conditions and corporate culture, support for employee development and care for their health and a comfortable retirement.

A key element of Grupa Azoty ZAK S.A.’s corporate social responsibility is environmental protection, and since 1994 the company has participated in the Responsible Care programme.

speCialisation

Grupa Azoty ZAK S.A.’s core operations focus on manufacturing nitrogen fertilisers and compounds, organic and inorganic chemicals and other chemical products.

The company manufactures plasticisers for plastics (chiefly PVC) and raw materials for their production, oxo alcohols and phthalic anhydride.

Plasticisers include: Oxoplast® IB (DIBP), Oxoplast® O (DOP), Oxoplast® PH (DPHP), Oxoplast® OT (DEHT).

Oxo alcohols include: 2-etyloheksanol, Izobutanol, N-butanol, Oktanol F.

Grupa Azoty ZAK S.A. also manufactures phthalic anhydride, butanals, ammonia, nitric acid and other raw materials for the chemical industry.

The nitrogen fertilisers manufactured at Grupa Azoty ZAK S.A. include: Kędzierzyńska Saletra Amonowa®

(a mixture of ammonium nitrate with calcium sulphate),

46% granulated urea, Saletrzak (CAN), Salmag®, Salmag® with boron, Salmag® with sulphur.

The basic raw materials for fertilisers – ammonia and nitric acid – are manufactured on-site from natural gas, air and water.

ManaGeMent Board

Adam Leszkiewicz Chairman of the Management Board,

Managing Director

Mirosław Ptasiński Vice-Chairman of the Management Board

Sabina Nowosielska Vice-Chairman of the Management Board

Ireneusz Marciniak Vice-Chairman of the Management Board

superVisory Board

Andrzej Skolmowski Chairperson of the Supervisory Board

Jerzy Koziara Deputy Chairperson


Wojciech Lubiewa-Wieleżyński Member of the Supervisory Board

Witold Szczypiński Member of the Supervisory Board

Mirosław Sotel Member of the Supervisory Board


28 29



Grupa azoty zaKłady azotowe Kędzierzyn s.a.

(formerly zakłady azotowe Kędzierzyn s.a.)

There are different seasons. There are different lifestyles. There are different people. We create products which take this diversity into account.

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att polyMers GMBH

Adapt to the body? Adapt to a wave?

Adapt to life? This is what we’re about.

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30 31



att polyMers GMBH

One of the leading polyamide manufacturers in western Europe, ATT Polymers GmbH has been a part of Grupa Azoty since 2010. The company processes caprolactam into granulated natural and modified polyamide 6. The company’s products are sold to consumers in a wide range of industry sectors including floor coverings, packaging, automotive, household appliances, electronics, construction and machinery. The inclusion of ATT Polymers GmbH within Grupa Azoty constituted fulfilment of the strategic objectives outlined in the 2008 prospectus, and the transaction enabled the further consolidation and integration of subsidiaries.

The company was restructured in 2012, becoming an entity processing caprolactam and distributing polyamide on behalf of Grupa Azoty. It also successfully entered several demanding and technologically advanced Asian markets. ATT Polymers GmbH has highly flexible technical resources, meaning that the company and Grupa Azoty can easily fulfil market requirements for new, more technically sophisticated and higher quality products.

speCialisation

ATT Polymers GmbH manufactures and markets plastics (polymers), their intermediates and the by-products of the manufacturing process.

The company’s operations cover processing of supplied caprolactam into granulated natural and modified polyamide 6 with viscosity of 2.4-4.0 through two-phase hydrolytic polymerisation of caprolactam, and packaging, warehousing, marketing and dispatching the manufactured product. Marketed as alphalon®, the polyamide 6 produced at ATT Polymers GmbH is used in the following plastics industry segments: manufacture of industrial

and carpet fibres,

for packaging, particularly in the food industry,

manufacture of engineering plastics.

ManaGeMent Board

Krzysztof Pieńkowski Geschäftsführer

Jacek Dychtoń Geschäftsführer

superVisory Board

Andrzej Skolmowski Chairperson of the Supervisory Board

Stanisław Rygiel Deputy Chairperson


Małgorzata Malec Member of the Supervisory Board


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Grupa azoty polsKie KonsorCjuM CHeMiCzne sp. z o.o.

(formerly polskie Konsorcjum Chemiczne sp. z o.o.)

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report 2012

The process of creation begins with vision. True art, however, means translating the vision to project language.

32 33



Grupa azoty polsKie KonsorCjuM CHeMiCzne sp. z o.o.

(formerly polskie Konsorcjum Chemiczne sp. z o.o.)

A subsidiary of Grupa Azoty, Grupa Azoty Polskie Konsorcjum Chemiczne Sp. z o.o.’s operations cover design services, investment coordination, management of subsidiaries and oversight for restructuring and consolidation activities.

Grupa Azoty Polskie Konsorcjum Chemiczne Sp. z o.o. comprises: Grupa Azoty Jednostka Ratownictwa Chemicznego Sp. z o.o., PROReM Sp. z o.o. and Automatyka Sp. z o.o. – their collected experience and human capital enable comprehensive provision of services covering design, investment preparation and delivery, maintenance and support, together with maintaining the operability of Grupa Azoty production lines. In 2012, Polskie Konsorcjum Chemiczne sp. z o.o. mainly dealt with implementing a previously developed corporate and financial plan for its subsidiaries’ operations, covering restructuring and consolidation of its group companies. Significant restructuring activities carried out in 2012 led to the streamlining of internal structures.

speCialisation

The company’s core operations cover chemical industry investment coordination – from studies, through process development, construction and implementation, services during construction and the commissioning of installations, to supply procurement and service contracting. Grupa Azoty PKCh sp. z o.o. also provides specialist rescue and industrial automation services. In 2012 the company provided engineering, procurement and construction management services (EP and EPCM) and lump-sum turnkey investment projects (EPC).

Within Grupa Azoty, the company is responsible for building a technological development platform and increasing Grupa Azoty value. This allows effective management of investments within the Group.

Consolidation aCtiVities

Reorganisation and consolidation activities were continued at Polskie Konsorcjum Chemiczne sp. z o.o. in 2012. One of the main tasks for last year was to take over Biprozat sp. z o.o. and to merge it into Polskie Konsorcjum Chemiczne sp. z o.o. This was completed on 31 July 2012 with the acquisition of Biprozat sp. z o.o. by Polskie Konsorcjum Chemiczne sp. z o.o., which became the legal successor merging the companies. As a result of this takeover, a strong entity was created bringing together expertise in investment and design, and Polskie Konsorcjum Chemiczne sp. z o.o.’s operations were expanded. A Project Delivery Department was created within the company’s organisational structure, encompassing the project management offices in Tarnów, Kędzierzyn-Koźle and Police.

ManaGeMent Board

Jerzy Woliński Chairman of the Management Board

Beata Kurbiel Member of the Management Board

Henryk Chromik Member of the Management Board

superVisory Board

Witold Szczypiński Chairperson of the Supervisory Board

Mirosław Ptasiński Deputy Chairperson

of the Supervisory Board Andrzej Skolmowski Member of the Supervisory Board

Adam Leszkiewicz Member of the Supervisory Board Rafał Smoła Secretary of the Supervisory Board


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Grupa azoty Koltar sp. z o.o.

(formerly przedsiębiorstwo transportu Kolejowego Koltar sp. z o.o.)

PTK “Koltar” sp. z o.o. was formed on 1 January 2000 through changing the legal form of Zakład Transportu Kolejowego, a part of Zakłady Azotowe w Tarnowie Mościcach S.A. Within Grupa Azoty, it plays a significant role in freight forwarding and rail transport. Thanks to its highly-qualified personnel and the licences and concessions acquired during its operations, Grupa Azoty Koltar sp. z o.o. has rapidly become a valued service provider in the rail industry throughout the nation. The company is one of few in Poland to hold the required authorisations to perform comprehensive repair of rolling stock bogies and cistern tanks adapted for the transport of hazardous materials. In 2012 the company reported significant growth in revenue from licensed transport operations, which increased by a factor of 3.4 in comparison with the figure recorded for the same period in 2011. A total of 1 123 rail trips took place in 2012, carrying a total of 287 000 tonnes of cargo. The successful implementation of new rolling stock maintenance solutions led to a notable increase in operational efficiency and reduction in costs. Due to investment projects implemented last year at Grupa Azoty Koltar sp. z o.o., the company became practically self-sufficient in the maintenance of goods wagons.

speCialisation

The company’s core operations include provision of services to Grupa Azoty, in particular freight forwarding, loading and unloading services, commercial operations and railway track maintenance for Grupa Azoty’s on-site railway station.

Grupa Azoty Koltar sp. z o.o.’s services include:

licensed rail freight forwarding;

rail freight forwarding support for Grupa Azoty and external companies;

shunting services at Grupa Azoty sites and comprehensive rail marshalling support;

lease of cargo locomotives and rolling stock;

loading and unloading services.

Grupa Azoty Koltar sp. z o.o.’s maintenance and repair services include:

systematic and emergency repair and periodic inspection of cargo rolling stock and locomotives;

inspection and repair of tank wagons for the transport of RID class 3, 6.1 and 8 hazardous materials, confirmed through acceptance by the Transport Technical Supervision Inspector;

blast cleaning of metal surfaces and painting of rolling stock;

cleaning of rail tank wagons and road tankers after the transport of inorganic chemical products;

maintenance and repair of railway tracks;

major and ad hoc repairs on excavators and bulldozers;

metalwork, welding and machining.

Grupa Azoty Koltar sp. z o.o.’s commercial operations include:

sale of diesel;

sale of decommissioned goods wagons.

ManaGeMent Board

Piotr Golemo Chairman of the Management Board,

Managing Director

Jarosław Wrona Vice-Chairman of the Management Board

superVisory Board

Andrzej Skóra Chairperson of the Supervisory Board

Józef Grajdura Deputy Chairperson


Tomasz Wałęga Secretary of the Supervisory Board



Grupa azoty proreM sp. z o.o.

(formerly proreM sp. z o.o.)

34 35



Grupa azoty Koltar sp. z o.o.

(formerly przedsiębiorstwo transportu Kolejowego Koltar sp. z o.o.)


Grupa azoty proreM sp. z o.o.

(formerly proreM sp. z o.o.)

Subsidiary of Grupa Azoty PKCh sp. z o.o.

PROReM sp. z o.o. was formed in 1998. Its core operations cover the provision of high quality maintenance and repair services for the chemical, energy and petrochemical industries. PROReM sp. z o.o. also supervises, builds, starts up and commissions newly-constructed and operational buildings and structures.

The company’s biggest asset is its highly qualified personnel. The prestigious Quality of the Year award confirms that the implementation of long-term strategies and improvements goes hand-in-hand with the trust shown by business partners.

As part of the consolidation of Polskie Konsorcjum Chemiczne sp. z o.o., PROReM sp. z o.o. was singled out as a significant entity focusing on production maintenance and machine repairs.

In August 2012 PROReM sp. z o.o. took over Zakład Remontowy REKOM sp. z o.o. and ZAK SERWIS sp. z o.o.

ManaGeMent Board

Artur Sebesta Chairman of the Management Board

Andrzej Paryło Vice-Chairman of the Management Board Katarzyna Piekarska Member of the Management Board, Finance


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Grupa azoty jednostKa ratowniCtwa CHeMiCzneGo sp. z o.o.

(formerly jednostka ratownictwa Chemicznego sp. z o.o.)


Grupa Azoty Jednostka Ratownictwa Chemicznego sp. z o.o. is a service and manufacturing company focusing on a wide range of operations, including specialist rescue services, particularly hazardous operations, recycling and salvage of municipal waste (including hazardous waste) and asbestos (the company owns and operates approx. 200 hectares of landfill), mechanical, biological and chemical purification of industrial waste and recycling of plastics, sale of chemicals and fertiliser packaging.

Grupa Azoty JRCh sp. z o.o. has its own PCA-accredited laboratory providing water, wastewater and waste analysis, testing of harmful factors in the working environment, the release of substances into the atmosphere, food testing, microbiological and other analysis. A separate area of its operations is the manufacture of polytetrafluoroethylene products and PA, PE and POM re-granulates. Grupa Azoty JRCh sp. z o.o. also provides professional, specialist and follow-up training courses.

As part of the on-going consolidation process within Grupa Azoty, in 2012 Jednostka Ratownictwa Chemicznego sp. z o.o. acquired CHEMZAK sp. z o.o. in Kędzierzyn-Koźle, which strengthened its position in laboratory analysis, small-scale chemical production and chemical rescue services.

Out of concern for sustainable development, the company’s strategy is subordinate to the strict requirements of standards and implemented management systems relating to quality, the environment and occupational health and safety. Environmental protection is a priority for Grupa Azoty JRCh sp. z o.o., reflected in the company’s slogan – “protecting people and the environment”.

ManaGeMent Board

Leszek Gniadek Chairman of the Management Board

Agata Gorzkowska-Rams Member of the Management Board


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Grupa azoty jednostKa ratowniCtwa CHeMiCzneGo sp. z o.o.

(formerly jednostka ratownictwa Chemicznego sp. z o.o.)

It’s impossible to enter a forest without leaving

tracks. We are humans.

We emerged from the forest ages ago.

We are humans.Learning to walk

all over again.Learning not

to leave tracks.

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autoMatyKa sp. z o.o.

What is a greater miracle – an ear of grain or human technology? We are not miracle workers. But we look for the best solutions wherever possible. We listen to people. We listen to nature.

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autoMatyKa sp. z o.o.


Automatyka sp. z o.o.’s operations cover industrial automation, control and measurement systems, electrical engineering, safety systems, telecommunications and IT. This wide range of services is possible due to the company’s highly qualified staff and extensive technical facilities.

Since 1 November 2012, i.e. from the date on which Automatyka sp. z o.o. acquired AsterZAK sp. z o.o., a company based in Kędzierzyn-Koźle, it has employed approx. 380 staff in Tarnów and Kędzierzyn. Coupled with practical knowledge of technical processes in chemistry, energy and ecology, their extensive knowledge, qualifications and experience enable the efficient development of new dedicated solutions and subsequent integration with customers’ existing systems.

Automatyka sp. z o.o. has modern diagnostic, repair and calibration facilities for measurement apparatus and elements of control systems, mechanical workshops, a 0.4 and 6 kV testing station and a calibration laboratory.

The company’s key attributes – its partnership-based approach to cooperation with clients, its flexible approach to problem-solving and its high delivery capacity are its greatest advantages. This has been reflected in numerous awards, certificates, and more importantly client references.

ManaGeMent Board

Artur Maciejczyk Chairman of the Management Board

Robert Buczek Vice-Chairman of the Management Board

Janusz Semeniuk Vice-Chairman of the Management Board

superVisory Board

Jerzy Woliński Chairperson of the Supervisory Board

Wiesław Kozioł Member of the Supervisory Board

Maciej Włoch Member of the Supervisory Board, Secretary


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ranKinGs, dis tinC tions and awards

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Labour and its fruits. No other reward is necessary – unless backed by people’s appreciation.

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ranKinGs, dis tinC tions and awards

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2012 was a year in which

Grupa Azoty advanced

in the rankings published

by opinion-forming newspapers

and industry magazines, and

a year of prestigious awards

and distinctions for particular

companies and for Grupa Azoty

as a whole.

ranKinGs

(seleCted listinGs)

April – Zakłady Azotowe w Tarnowie-Mościcach S.A. ranked 37th on Newsweek’s 100 Most Valuable Companies list.

April – The Zakłady Azotowe w Tarnowie-Mościcach S.A. Group advanced 125 places to 43rd in Rzeczpospolita’s “500 Biggest Companies in Poland”. At the same time the Group ranked 29th in the “50 Companies which Invest the Most” (an advance of 14 places).

April – Zakłady Azotowe w Tarnowie-Mościcach S.A. was placed a high 43rd (100 place advance) in Polityka’s ranking of the “50 Most Profitable Polish Companies” from the “500 Biggest Companies in Poland” list. The company recorded significant progress in the “50 Largest Polish Exporters”, where it advanced 102 places to 41st.

4 September – Zakłady Azotowe w Tarnowie-Mościcach S.A. is ranked 144th in the “500 Biggest Companies in CEE” published by Deloitte in cooperation with Rzeczpospolita (a 272 place improvement).

24 October – The Zakłady Azotowe w Tarnowie-Mościcach S.A. Group placed 44th on the “2000 Most Innovative Polish Companies 2011” list, published by Rzeczpospolita. Group companies also made the cut: Z.Ch. Police S.A. was ranked 124th, with ZAK S.A. at 163rd.

21 December – In Home & Market’s “50 Most Valuable Personalities of the Business” (by company market capitalisation), chairman of the management board of Zakłady Azotowe w Tarnowie-Mościcach S.A. Jerzy Marciniak ranked 22nd. This publication also included a ranking of the “Most Dynamic Companies in Poland” (by revenue at the end of Q3 2012), where Zakłady Azotowe w Tarnowie-Mościcach S.A. took 1st place.

2012 – Automatyka sp. z o.o. was ranked 10th on Dziennik Gazeta Prawna’s “Business Wings 2012” list in the mid-sized company category.

seleCted awards reCeiVed By Grupa azoty

and Group CoMpanies

25 January – Weekly magazine Gazeta Finansowa named chairman of the management board of Zakłady Azotowe w Tarnowie-Mościcach S.A. Jerzy Marciniak “Finance Professional of the Year 2011” for his success in developing the group and consolidating the chemical industry.

10 February – Grupa PTWP S.A. awards Zakłady Azotowe w Tarnowie-Mościcach S.A. with the “Cause for Change in Polish Industry” distinction for success in consolidating Poland’s chemical industry and creating stable foundations for a strong chemical group. The company was also named “Most Interesting of the Best” for its implementation of innovative IT solutions, which contributed significantly to improving business processes and increasing efficiency and competitiveness.

March – Z.Ch. Police S.A. was named “Pearl of Business 2011” for its 2011 financial results.

March – ZAK S.A. was named Opole Brand 2011 in the Opole region.

19 April – Zakłady Azotowe w Tarnowie-Mościcach S.A. and Z.Ch. Police S.A. were winners in the “Pillars of the Polish Economy” awards organised by magazine Puls Biznesu and the TNS Pentor research institute.

May – Zakłady Azotowe w Tarnowie-Mościcach S.A. received a medal at the PLASTPOL International Plastics and Gum Expo in Kielce for Tarnoform® (POM) with reduced formaldehyde emissions (in the “Achievements of Polish Technology” category).

June – The Polish Ecological Foundation presented Z.Ch. Police S.A. with the “Eco-Trends 2011” award.

June – Z.Ch. Police S.A.’s titanium white is awarded the “Teraz Polska” logo.

July – Zakłady Azotowe w Tarnowie-Mościcach S.A. is included in the RESPECT index for the fifth time.

22 October – ZAK S.A. received a Q quality certificate for Salmag®, Saletrzak (CAN) and Salmag z borem®.

8 November – The Lesser Poland Chamber of Commerce awarded the Lesser Poland Economic Award 2012 to Zakłady Azotowe w Tarnowie-Mościcach S.A.

16 November – In the 10th “Best Functioning Companies” rankings published by economics magazine Polish Market in association with the Institute of Economic Sciences at the Polish Academy of Sciences, the Zakłady Azotowe w Tarnowie-Mościcach S.A. Group, ZAK S.A. and Z.Ch. Police S.A. were named Pearls of the Polish Economy for “consistently implementing corporate policy and strategy and achieving a leading position among the most dynamic and effective companies in Poland”.

2012 – Automatyka sp. z o.o. received an “Astor Golden Partner 2011” certificate for control systems, SCADA visualisation systems using classic technology and industrial network systems.

2012 – PTK KOLTAR sp. z o.o. was named “Business Gazelle 2011” by Puls Biznesu, and also received the “Credible Company 2012” award from the Masovian Association of Commerce, Industry and Services.

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Grupa azoty produCts and serViCes

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Grupa a zot y produC t s and serViCes

Plants are like people. We respect people and consider their needs. We know what plants require – wherever they grow.

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44 45



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Grupa Azoty’s core mission,

as outlined in the 2012-2020

strategy, is to deliver chemicals

which are safe for people.

As the leader in Poland’s

chemical sector and a major

player in Europe, Grupa Azoty

operates in the following

segments:

fertilisers, plastics, oxo alcohols, pigments others.

fertilisers

Fertilisers are a key manufacturing segment at Grupa Azoty. Well-known and trusted fertiliser producers (from Tarnów, Kędzierzyn-Koźle, Police, Puławy, Gdańsk and Chorzów) have joined forces in a newly-formed group with top capacity in Poland to manufacture compound and nitrogen fertilisers, including nitrogen fertilisers with sulphur and liquid fertilisers. Consolidation has also solidified the Group’s position in the European market, where it is the second-largest manufacturer of compound fertilisers and third-largest in mineral and liquid fertilisers.

The modern mineral fertilisers manufactured and sold by Grupa Azoty are enriched with scarce essential secondary nutrients: sulphur and magnesium, and some are additionally enriched with the commonly scarce boron.

The most universal law in agricultural science – Liebig’s Law of the Minimum – states that growth is controlled not by the total amount of resources available in the soil, but by the scarcest resource. The wide range of fertilisers marketed by Grupa Azoty enables farmers to respect this principle. Use of the fertilisers manufactured by the Group contributes to development of root systems and the use of mineral resources and water by crops, bringing greater natural and economic effectiveness to fertiliser application.

The mineral fertilisers manufactured by Grupa Azoty can be divided into the following sub-categories:

compound fertilisers such as Polifoska®, PoliDAP®, PoliMAG®, PoliWAP®, Amofoska® and Superfosfat; Police’s NPK fertilisers stand out against the competition through their high assimilability and the significant concentration of pure ingredients;

nitrogen fertilisers such as Salmag®, Kędzierzyńska Saletra Amonowa®, PULAN®, urea (including Mocznik.pl®, PULREA®) and saletrzak (CAN).

A significant role in the Group’s product portfolio is played by fertilisers with added sulphur: Saletrosan®, Salmag® with sulphur, Polifoska®21 and ammonium sulphate manufactured in Puławy under the trade name PULSAR®. Liquid RSM® (urea and ammonium nitrate solution) is also a key product within the nitrogen fertiliser product range.

The high quality of Grupa Azoty’s fertiliser products is owed to manufacturing processes not based on physical methods (crushing and mixing) but rather production based on emergent chemical processes. Nitrogen-based chemicals are also manufactured in this segment, including ammonia, AdBlue® (a mixture of urea used for the selective reduction of nitrogen oxide in diesel engines) and mixed acids.

Nitrogen fertilisers 50%

Fertiliser sales structure in 2012

Sales structure by segment in 2012

Oxo alcohols 15%

Plastics 16%

Fertilisers 59%

Others 4%

Pigments 6%Other fertilisers 9%

Compound fertilisers 41%

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oXo

The oxo range comprises organic products and is a significant part of Grupa Azoty’s operations. The main products in this group are oxo alcohols, plasticisers and anhydrides. A member of the group, Grupa Azoty ZAK S.A., is the only domestic manufacturer of oxo alcohols. It has one of the most technologically advanced oxo alcohol facilities in Europe. Oxo alcohols are used as an additive to oils and as thinners in the manufacture of paints and varnishes, as well as in other industry sectors. Within the group, oxo alcohols are used to manufacture plasticisers: Oxoplast®O (DEHP), Oxoplast®IB (DIBP), Oxoplast®PH (DPHP), Oxoplast®OT (DEHT), which are also available for sale. These are components of plastics, varnishes, dyes and polyester resins. They are widely used in the plastics and automotive industries.

Grupa Azoty is Poland’s only and Europe’s seventh-largest manufacturer of oxo alcohols and Poland’s largest and Europe’s fourth-largest manufacturer of plasticisers.

plastiCs

Plastics is the second most important product segment at Grupa Azoty. Manufacturing takes place within the group at two companies: Grupa Azoty in Tarnów, Poland and ATT Polymers in Guben, Germany. Plastics (Tarnamid®, alphalon® – trade name of polyamide 6) are manufactured both in natural and modified form and their high quality and composition, which are adapted to specific projects, result from the use of in-house R&D facilities and Grupa Azoty’s cooperation with leading Polish research institutes.

The plastics product range also includes natural and modified Tarnoform® (trade name of polyoxymethylene – POM), alongside other modified plastics based on polyamide 6.6 (Tarnamid A®), polypropylene (Tarnoprop®) and PBT (Tarnodur®). The plastics manufactured by Grupa Azoty are used in a wide range of industries due to the myriad of beneficial physical properties, including in the automotive industry, construction, electrical engineering, household goods, and the food and textile industries.

Granulates are also used to manufacture plastic goods: polyamide casings – used

as packaging for sliced meats; polyamide 6, 11 and 12 and LDPE

polythene pipes used as pneumatic and hydraulic tubing.

Intermediates for the manufacture of plastics are also sold in this segment, including melamine, caprolactam, cyclohexanone and cyclohexanol.To ensure the highest customer service standards, Grupa Azoty provides all plastics customers with additional service and consultancy and develops product compositions for specific uses.

Grupa Azoty is Europe’s second largest manufacturer of melamine and the fifth-largest integrated manufacturer of polyamide 6. In Poland it is the only manufacturer of melamine and POM and the leader in production of polyamide 6.


POM 5%

Others 7%

Caprolactam 13%

Polyamide 75%

Plasticisers 25%

Others 4%

Oxo alcohols 71%

Oxo segment in 2012

Plastics segment in 2012

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piGMents

The pigments manufactured at Police are Grupa Azoty’s latest product segment. As Poland’s only producer, the Group supplies domestic and international markets with titanium white, marketed as Tytanpol®.

The pigments product range covers nine rutile grades: universal titanium white

(Tytanpol®R-001, Tytanpol®R-003, Tytanpol®R-210);

specialist titanium white (Tytanpol®R-002, Tytanpol®R-211, Tytanpol®RD5, Tytanpol®R-310).

otHer

The “other” segment focuses on the sale of catalysts, energy and services. The Group manufactures catalysts for selected chemical syntheses and for the production of ammonia, hydrogen and synthetic gas. The product range includes: iron-chromium catalyst; copper-zinc catalyst; iron catalyst.


Fertilisers Plastics Oxo Pigments Other

Revenue 4 157 393 1 128 561 1 093 888 400 590 318 303

% share 58.6 15.9 15.4 5.6 4.5

Net profit from sales 338 481 45 628 43 661 36 377 (45 741)

% share 80.9 10.9 10.4 8.7 (10.9)

EBIT 332 770 50 647 43 278 35 620 (90 583)

% share 89.5 13.6 11.6 9.6 (24.4)

Grupa azoty eBit By seGMent /pln tHousand/

as at 31 deCeMBer 2012

Grupa Azoty’s product sales are primarily determined by market conditions in the fertilisers, plastics and oxo segments. The largest percentage increase in revenue from sales was recorded in the pigments segment (170.5% growth), which was reflected in the net profit from sales and operating profit generated in this segment. The highest increase in revenue from sales was noted in the fertilisers segment, which has the highest share in total sales (60% growth on the figure for 2011). This segment also generates the highest profit from sales and highest operating profit.

Titanium white is an important component in manufacturing across a wide range of industries. The key market for TiO2 pigments is the paints and varnishes sector. The high quality of the Group’s pigments means that the majority are certified for use in products in contact with food.

serViCes

Grupa Azoty provides a wide range of logistics, warehousing and port services. The Group owns three sea ports for its own and clients’ use (in Gdynia, Gdańsk and Police). Railway rolling stock and locomotive services are provided within the Group by companies in Tarnów, Kędzierzyn, Puławy and Gdynia. The Group is also active in environmental protection and administration and is a supplier of diagnostic, inspection and research services. It also sells electricity and thermal energy and provides its customers with maintenance and repair services.

Others 2%

Pigments 98%

Pigments segment in 2012

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sales MarKe t s in 2012

We learn from our clients. Our work is different but, like they, we sell what we produce. The relationship is clear – if they succeed, so do we.

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sales MarKe t s in 2012

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Between 2009 and 2012,

Grupa Azoty sold its products

to customers in over seventy

countries worldwide. The largest

group was the European Union,

where mainly polyamide 6,

oxo products and compound

fertilisers were sold. Another

significant region was Asia,

where primarily oxo alcohols,

polyamide 6, caprolactam

and urea were marketed.

A subsequent region is South

America, where the highest

demand is for mineral fertilisers

and oxo products.

A diversified geographical structure is Grupa Azoty’s key competitive advantage, enabling it to apply a flexible sales policy. Sales market diversification is also aided by the seaport facilities in Police, Gdynia and Gdańsk and by diversified distribution channels. The Group sells its products both directly to consumers and through an extensive distribution network. Customer diversification makes it possible to eliminate the effects of seasonality through marketing products in diverse climate zones.

fertilisers

The strategic market for mineral fertilisers is Poland, accounting for 70% of total sales. The remaining 30% is mainly exported to Germany, Scandinavia and the UK. The sales structure differs significantly by fertiliser groups. For NPK fertilisers, exports account for 41% of sales, while only 15% of nitrogen fertilisers are exported. NPK fertilisers are exported to the European Union (19% of NPK fertiliser sales – the principal countries being Germany, Denmark and Belgium) and South America (12% of total NPK fertiliser sales, mainly to Venezuela and Brazil).

Nitrogen fertilisers are primarily exported to the European Union (14% of nitrogen fertiliser sales), mainly to Germany, Scandinavia and Poland’s southern neighbours – the Czech Republic and Slovakia. A key nitrogen fertiliser product is ammonium sulphate, where the sales structure is diverse and varies from other fertilisers. Poland constitutes 34% of sulphate sales, with the European Union at 33% and South America at approx. 28%.

plastiCs

The primary market for engineering plastics is the European Union. Sales to this region constitute 82% of the total. Products are mainly marketed in Germany, Belgium and Italy. A smaller share of products is sold in Asian markets (10% of total sales).

oXo produCts

Oxo products are mainly sold in European Union markets (80% of sales), including Poland (27%), the Czech Republic, Italy and Germany. Some oxo products are also sold in Asia, constituting 16% of sales.

piGMents (titaniuM wHite)

Titanium white is sold in the European Union, accounting for 95% of total sales, with Poland at 52%. Other notable markets include Italy, France, Germany and Scandinavia.

sales MarKets

Poland 50.64%

EU countries 37.68%

South America 3.57%

Asia 2.86%

non-EU countries 2.76%

Africa 2.09%

North America 0.39%

Others 0.01%

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Grupa azoty Key operatinG areas

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researCH and deVelopMentWe talk with people. We talk with matter. We talk with ourselves. But these are not negotiations. It’s getting to know oneself. It’s friendship.

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researCH and deVelopMent

One of the key factors impacting

the development of any

company is the way in which it

faces up to future challenges.

In the chemical industry it

is essential to continually

seek new solutions. Thanks

to its research facilities and

experienced engineering staff,

Grupa Azoty is in a prime

position to do just this.

Working in partnership with leading research and development centres, Grupa Azoty is constantly seeking the latest and most effective technological solutions and is an active participant in innovative research programmes. Through long-term cooperation with technical higher education institutions and academic and scientific centres, Grupa Azoty companies are recognised as trusted and solid partners. The experience and knowledge of experts working at Grupa Azoty also contribute to numerous international technology projects.

A key R&D project at Grupa Azoty is the establishment of the Chemical Technology Research and Development Centre. In accordance with the Group’s strategy, work has begun on building the Grupa Azoty Research and Development Centre. The main objective of the new venture will be to search for and implement the latest and most effective solutions at all Group companies. The primary objectives of the initiative were outlined in the letter of intent signed on 13 November 2012 concerning cooperation. This document was signed by representatives of Grupa Azoty, the Mayor of Tarnów and the deputy marshal of the Province of Lesser Poland. The overriding goal of the new centre is not just to increase innovation,

but also to actively build on the Group’s competitive advantages. The Chemical Technology Research and Development Centre will also serve to strengthen the links between the scientific and business communities. In this context, cooperation is planned with the International Centre for Chemical Safety and Security in Tarnów based on the cutting-edge solutions applied in the global chemical industry and promotion of associated cooperation. The parties intend to support the development of innovations connected with the chemical industry through seed funds, loans and guarantees and entrepreneurship development.

In addition, an agreement entered into with Grupa LOTOS S.A. on 23 November 2012 will have a significant impact on the Group’s R&D capabilities. The agreement concerns feasibility studies, including technical and economic analyses, for a project to jointly develop new chemical and petrochemical installations. The results of these studies will enable both groups to take a decision by the end of 2013 on whether to form an SPV to jointly implement the project. The main aim will be to process the raw materials generated at Grupa LOTOS into valued-added petrochemical intermediates and their further processing at facilities belonging to Grupa Azoty into chemical products and plastics. The joint venture has a good chance of becoming part of the Inwestycje Polskie programme.

With its own research and development facilities, including the Technology Development Laboratory, Plastics Laboratory and Titanium White Applications Laboratory, Grupa Azoty focuses on continuous improvement of product quality and research on finding new, cutting-edge products and technologies. Thanks to these activities, new product launches and adaptation of the product range to changing customer requirements is a smooth and effective process.

Key R&D operations in 2012 include:

perfection of the fertiliser manufacturing process, work on further enrichment of the nitrate fertiliser product range and research on the effectiveness and benefits of using fertilisers in agriculture;

research on modernising the Tarnoform® polymerisation lines to increase effectiveness and lower the dependence on weaker links in the production chain;

research on on-going optimisation of the cyclohexanol oxidation process, ammonium sulphate crystallisation process and intensification of the caprolactam manufacturing process;

research on changing the technology used to manufacture phosphoric acid;

work on the capability to process liquid waste at the titanium white facility;

work on further product diversification and maximisation of synergies within Grupa Azoty.

R&D operations enable Grupa Azoty to increase the innovativeness and diversification of its product offering. The aim of work on increasing technological efficiency is to further decrease the level of energy used by technical facilities while taking simultaneous advantage of the synergies resulting from by-products generated within the Group.

As per its 2012-2020 strategy, Grupa Azoty’s key R&D objective is to build knowledge-based competitive advantage, which as a consequence will enable it to increase the level of innovation in its product range, processes and technologies. Grupa Azoty is committed to investing up to 1% of revenue in research and development.

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it ConsolidationinVes tMent s

The Grupa Azoty 2012-2020

strategy emphasises investment

in products for agriculture,

technologically advanced

materials, and organic and

inorganic chemicals. The

main objective of investment

initiatives is to ensure that the

Group continuously enhances its

competitive position and ensures

conditions for stable growth.

The investments implemented in 2012 are in line with the objectives and activities specified in the strategy. The key investments delivered in 2012 include:

Construction of a hydrogen facility adapted to the use of natural gas with higher nitrogen content from sources local to Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of the sulphuric acid and oleum plant at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of ammonia synthesis reactors at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Economic use of ash from the CHP facility at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of the cooling system at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of main electrical substations at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of the internal logistics system, covering construction of a heavy goods vehicle parking area at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Construction of a dioctyl terephthalate research and production installation at Zakłady Azotowe w Tarnowie-Mościcach S.A.

Modernisation of synthetic gas compression at Zakłady Chemiczne Police S.A.

Construction of an iron II sulphate neutralisation system at Zakłady Chemiczne Police S.A.

Modernisation of the fertiliser logistics system at Zakłady Chemiczne Police S.A.

Modernisation of the stripper at Zakłady Chemiczne Police S.A.’s urea facility.

Adaptation of loading stations to new Transport Technical Supervision requirements at Zakłady Azotowe w Tarnowie-Mościcach S.A., Zakłady Chemiczne Police S.A. and Grupa Azoty ZAK S.A.

IT projects strengthening integration and increasing management efficiency at Group companies.

As regards equity investments in 2012, Grupa Azoty acquired a 10.3% stake in the share capital of Zakłady Azotowe Puławy S.A. for PLN 216.5 million.

As per the strategy, in 2012 the key investment objectives were to lower manufacturing costs through modernising the main production lines and to decrease the Group’s sensitivity to the costs of energy and commodities. The Group also prepared new projects relating to the manufacture of plastics, fertilisers and further product diversification. In the coming years, the Group intends to implement a range of energy projects at its three sites – in Tarnów, Kędzierzyn and Police – connected with the adaptation of this segment to new requirements resulting from implementation of the IED directive.

54 55


it Consolidation

IT objectives for 2012 focused

on supporting the consolidation

of Grupa Azoty.

The beginning of the year saw the completion of a range of projects streamlining IT environments at ZAK S.A. and Zakłady Azotowe w Tarnowie-Mościcach S.A., while the end of the year saw the culmination of pre-start-up tests at Zakłady Chemiczne Police S.A. on a joint integrated system. In the meantime the core ERP system was used to launch key integrated-system elements for four service subsidiaries – Polskie Konsorcjum Chemiczne, Automatyka, Prorem and Koltar. This was in line with Grupa Azoty’s strategic IT objectives.

At Grupa Azoty, IT is the framework around which a cohesive Group is built. Databases for on-going operational synergies are created in specific areas, and IT environments are transformed and consolidated to increase standardisation and optimise business processes. On the back of the activities completed over the last 18 months, all significant business processes are recorded in a single IT environment and are inventoried using pre-defined,

uniform primary data. Standardisation has been effected across the Group using SAP/OpenText and Microsoft software. As a result of steps taken in 2012, almost 3 000 Group personnel are using common systems, e.g. e-mail, invoicing, business expense and annual leave reporting.

Consolidation is aimed at ensuring support for management processes within Grupa Azoty, including streamlining decision-making, optimising and standardising business processes, ensuring quick access to reliable and comparable data, report automation, and rapid presentation of results for Warsaw Stock Exchange reporting purposes.

Parallel projects were implemented to unify and standardise information sharing between teams which are frequently working at different locations. A SharePoint video conferencing platform was also implemented.

Web domains and the IT environment were adapted under the rebranding process, and e-mail addresses were unified across the group. From this moment the new group’s corporate website is at grupaazoty.com.

In partnership with HP, Grupa Azoty significantly expanded its IT environment last year to include solutions supporting operational security. A high-spec and reliable server environment was implemented for the requirements of consolidated central systems, and data processing, access networks, internet gateways and security systems were reorganised. The process of building systems to protect data processing against failures and natural disasters is on-going.

With regard to hardware, as a cost-saving measure Grupa Azoty centralised and unified its solutions – networks, virtual servers and matrices, backup and computer hardware as per the latest IT developments.

All of the above activities will be continued in the future – actively supporting business processes, optimising costs and minimising information security risk.

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ManaGeMent sys teMsrisK ManaGeMent

Grupa Azoty companies are

exposed to numerous and

wide-ranging risks capable

of negatively impacting their

operations, financial results

and share performance.

In 2012, the management

board adopted a list of key

risks identified and assessed

within the Group which

should in particular be closely

monitored and controlled.

Key risks to Grupa Azoty operations:

Risk of a hostile takeover;

Macroeconomic risk;

Currency risk;

Competition risk;

Risk connected with technical downtime, production continuity and incident management;

Risk connected with hazardous materials handling;

Risk connected with access to and the continuity of supplies and supplier dependence;

Risk connected with effective communication and decision-making processes within the Group during consolidation processes;

Risk connected with strategy execution and strategic project delivery and effectiveness.

With regard to the specific nature of its operations and the industry in which Grupa Azoty operates, systematic tracking of risks appearing in its changing environment, including those created by changing legal regulations, is of the highest significance.

In line with its 2012-2020 strategy, Grupa Azoty will implement a corporate Risk Management System over this period, covering key risk identification, potential threat assessment and the introduction of tools to minimise their impact.

In 2012 a decision was taken to implement a Risk Management System within Grupa Azoty, which will be based on ISO 31 000 and COSO ERM Framework.

The process will be long-term, but the anticipated relatively short-term benefits will be the design of system foundations and thus organisational and procedural solutions to coordinate, monitor and report risk-related information.

The scale of operations at Grupa Azoty means that the occurrence of new risks could constitute a hazard. Effective risk management must therefore combine three aspects: accurate forecasting of risk factors, design of possible emergency scenarios and effective reduction of their effects. Common, unified operating guidelines are particularly vital to the Group during the dynamic processes and changes it is undergoing.

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ManaGeMent sys teMs

Grupa Azoty companies

work towards their strategic

objectives based on

management systems compliant

with the highest international

standards. These systems outline

frameworks to establish and

review strategic goals relating

to quality, the environment,

occupational health and safety

and food safety.

Systems in place at Grupa Azoty companies include:

ISO 9001:2008-compliant Quality Management System;

ISO 14001:2004-compliant Environmental Management System;

PN-N-18001:2004 and BS OHSAS 18001:2007-compliant Workplace Health and Safety Management System;

PN-EN ISO/IEC 17025:2005 Management System (research and calibration laboratory competences);

ISO 22000:2005-compliant Food Safety Management System;

Quality Management System for the automotive industry, implemented as per ISO/TS 16949:2009;

Responsible Care Framework Management System compliant with European Chemical Industry guidelines.

In 2012 a decision was taken to implement a subsequent system – the Grupa Azoty Risk Management System – based on the guidelines of ISO 31 000 and COSO ERM Framework.

These systems enable Grupa Azoty companies to cite the highest management standards. Their operational rollout and compliance with international standards are inspected by certification bodies.

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MarKe t enVironMents trateGiC raw Material s and enerGy

For its manufacturing operations, Grupa Azoty needs two things – raw materials and energy. The Group’s strategy envisages raw material procurement on the basis of a common procurement policy. Security of supply is ensured through long-term agreements taking into consideration commercial price formulas and quantitative guarantees. The most important task in procuring raw materials is to reduce the Group’s sensitivity to changing economic cycles and to natural gas and petrochemical commodity prices.

aMMonia In 2012 Zakłady Azotowe w Tarnowie-Mościcach S.A. sourced ammonia exclusively through intragroup deliveries, chiefly from the facilities at Zakłady Chemiczne Police S.A. Grupa Azoty has the largest ammonia surplus in Poland and completely satisfies its own requirements.

Benzene Zakłady Azotowe w Tarnowie-Mościcach S.A.’s benzene procurement strategy is based on supplies from Poland and other CEE countries. Supply of this commodity in 2012 was completely secured. The main problem for caprolactam manufacturers in 2012 were the prevailing high contract prices of benzene, exceeding EUR 1 000/tonne. In the unanimous opinion of market participants, benzene price levels in 2012 were inadequate for the market situation. To a large extent the market was dominated by speculative transactions.

eleCtriCity Electricity for all Grupa Azoty facilities was sourced primarily from a large domestic supplier. The electricity procurement strategy enabled the Group to enjoy competitive prices and contract conditions. The Group’s facilities also periodically purchased on the spot market. The CHP facilities at Grupa Azoty S.A., Grupa Azoty ZAK S.A. and Z.Ch. Police S.A. also contributed to electricity supply security.

pHenol In this field, Grupa Azoty’s procurement strategy is based on two primary sources – western Europe and supplies from domestic sources. Regular deliveries from Scandinavian manufacturers commenced from 2013, constituting supplementary supplies. Phenol consumption was reduced at the end of 2012 with regard to unfavourable market conditions and a drop in cyclohexanol shipments to external customers.

pHospHate roCK Phosphorite was mostly purchased on the basis of periodic agreements or spot contracts, mainly from African manufacturers. Grupa Azoty is diversifying its procurement strategy. The situation in the phosphorite market is to a large extent connected with the situation in the fertilisers sector.

natural Gas The sole domestic supplier of natural gas supplied this commodity from the transmission network and from local sources pursuant to long-term agreements. Grupa Azoty purchased 84.5% of its methane-rich natural gas from the PGNiG S.A. transmission network and the remaining 15.5% from other sources.

MetHanol In 2012 Grupa Azoty secured its own manufacturing requirements through annual contracts, mainly from Russian sources. No major price changes were noted in the spot market, and short-term price fluctuations were mainly caused by technical failures or maintenance stoppages at the largest producers. A high level of supply from Russian sources was maintained in the Polish market, which was competitive from a pricing viewpoint.

propene The Group mainly purchases propene based on annual contracts, with spot purchases constituting a supplementary source of supply. Propene prices are heavily dependent on oil prices. In 2012 Germany remained the main propene supplier, accounting for over 47% of this commodity.

sulpHur Grupa Azoty’s long-term strategy assumes supplies of sulphur on the basis of long-term contracts, which enable it to ensure continuous access to this commodity. This is possible due chiefly to Grupa Azoty’s common procurement policy, together with diverse sulphur supplies from petrochemical sources and optimised commercial terms for sulphuric acid purchases.

potassiuM salt Due to competitive commercial terms, the primary suppliers of potassium salt are producers from Russia and Belarus. Supplies are ensured on the basis of quarterly contracts. Supplementary deliveries are periodically sourced from Germany and the UK.

steaM Coal Supplies of steam coal for Grupa Azoty’s CHP facilities were mainly sourced from two large domestic firms, with supplies split 74.9% to 19.1%. Some purchases were also made through spot contracts. The high price of steam coal noted at the beginning of 2012 fell significantly over the course of the year. For the Group, this meant low double-digit percentage rebates. Coal products are used at Grupa Azoty pursuant to the amended provisions of the excise duty act. From 2 January 2012 these were exempt from excise duty.

58 59


MarKe t enVironMents trateGiC raw Material s and enerGy

The European Union constitutes Grupa Azoty’s key strategic market. In connection with seasonality and the quest to find new alternatives, overseas markets are also becoming increasingly important. Hence, we track macroeconomic and industry trends concerning our key operating areas with particular attention.

AGRICULTURAL MARKET

According to Strategie Grains estimates, EU crop production in the 2013/2014 season is forecast at 290.2 million tonnes, approx. 7% up on harvests in 2012/2013. Forecasts for soft wheat harvests in European Union countries stand at as much as 134.2 million tonnes (+9%). The highest increase is expected for corn, production of which is forecast at 63 million tonnes. Barley harvests are expected to reach close to 54.1 million tonnes, while a 13% (7.5 million tonne) drop in harvests is forecast for rye. The forecast changes should not result in a drop in prices for agricultural produce.

FERTILISERS MARKET

It is forecast that China, India and Brazil will remain the primary importers of potassium and phosphorus, although African countries will also gain in significance.

The current level of fertiliser consumption in the EU is as follows: 10.5 million tonnes of nitrogen fertilisers, 2.4 million tonnes of phosphorous fertilisers and 2.7 million tonnes of potassium fertilisers. It is estimated that by 2022, EU countries will increase levels of fertiliser use to 10.8 million tonnes, 2.6 million tonnes and 3.2 million tonnes respectively. The countries with the highest forecast decreases in nitrogen fertiliser consumption are the Netherlands, Denmark and Greece, while slightly smaller reductions are expected in France and the UK. In the case of phosphorous and potassium fertilisers, growth in their use is anticipated in Austria, Portugal, Spain and Sweden.

Current fertiliser use in the domestic market stands at 1.14 million tonnes for nitrogen fertilisers, 400 000 tonnes for phosphorous fertilisers and 500 000 tonnes for potassium fertilisers. A growth trend will also be maintained in Poland.

PLASTICS MARKET

Prospects for 2013 are uncertain for manufacturers throughout the entire caprolactam production chain, who fear low demand for polyamide 6, mainly in the automotive sector. Market analysts at Jato Dynamic believe that car sales in Europe will remain weak next year. A particular hazard is the prospect of economic weakening in the German market. North Africa may however emerge as a prospective market for automotive development. Industry website Automotive News Europe states that new car sales in this region are due to increase by almost 40% over the next 4 years. The growth in polyamide 6 production in Asian countries will likely limit the possibilities for sales in this region.

Demand for European polyacetal is weak, which is mainly due to on-going weak macroeconomic conditions. With regard to the fact that the automotive sector is one of the dominant consumers for polyacetal, as is the case in the polyamide 6, market demand trends do not look promising. Another sector using polyacetal is the household and electronic goods sector. Research firm PMR forecasts that, despite an anticipated drop in economic growth in 2013, the market will see several positive factors leading to growth for household and electronic goods.

Despite weakening demand for plastics (chiefly in the automotive segment), an improvement in the situation for the plastics industry is anticipated before the end of 2013.

OXO MARKET

Asia (including Japan), Europe and North America are the largest markets for oxo chemicals. In 2012 these regions generated 95% of global demand, and consumption between 2008 and 2012 increased at an annual rate of over 4%. Consumption in these markets is forecast to continue to rise until 2018. Particularly good consumption is estimated up to 2018 for Germany. German demand is estimated to increase at an annual average of 13%, which to a large extent results from increased demand for acrylates, where n-butanol and 2-ethylohexanol are used.

PLASTICISER MARKET

The market for plasticisers is seeing a systematic decrease in the share of phthalate plasticisers based on C4 and C8 alcohols in western European processing, and their gradual replacement by phthalate plasticisers based on C9 and C10 alcohols and non-phthalate plasticisers, including bio-plasticisers. The global non-phthalate plasticiser market is growing at a rate of approx. 7% per year, and its current value is estimated at EUR 1.3 billion. The industry’s rapid expansion comes on the back of legislative amendments in numerous North American and western European countries. There is however demand for phthalate plasticisers from Asian markets.

TITANIUM WHITE MARKET

The titanium white market is closely linked to GDP. The financial crisis, weak global economic situation and drop in consumption translate directly into a drop in titanium white prices. Current forecasts for the economic situation and GDP for 2013 are not optimistic. Under deteriorating market conditions, a further fall in titanium white consumption and price should therefore be expected. A slight seasonal demand uptick may be anticipated in June and July 2013.

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Mathematicians say that beauty and simplicity are the criteria for truth.Business is similar.But knowing the business world better than mathematicians do, we would like to add one more – harmony.

60 61


sustainaBle deVelopMent

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sus tainaBle deVelopMent

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The profile of a wing, the delicacy of a leaf, the freshness of air. Everything needs to be where it belongs. Power demands delicacy.

62 63



One of the most important

elements in the Group’s

strategy is responsibility for its

surroundings. Believing that

technological development can

always go hand-in-hand with

care for the natural environment

and positive economic results,

the Group is working on a range

of initiatives aimed at achieving

harmony and balance with the

world around it.

Grupa Azoty treats issues of sustainable development as a matter of strategy. Further to the “Zakłady Azotowe w Tarnowie-Mościcach S.A. Group Strategy 2012-2020”, the Group is developing and will execute a sustainable development and corporate social responsibility strategy based on the “Zakłady Azotowe w Tarnowie-Mościcach S.A. Sustainable Development Strategy 2012-2016”. The adopted strategy completely reflects an integrated approach to all tasks implemented with regard to economic effectiveness, responsibility towards the workforce and relations with the Group’s surroundings.

This strategic approach shows the way in which Grupa Azoty will create stakeholder value while simultaneously achieving economic goals. Management of sustainable development is effected at strategic level, which translates into improvements in processes within key Grupa Azoty operational areas.

Grupa Azoty operates on a large scale and its reach covers numerous countries, which is why the actions taken are reported in a systematic, transparent and reliable manner in annual and environmental reports.

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Implementation of corporate social responsibility guidelines is based on three pillars.

Grupa Azoty’s goals under sustainable manufacturing are:

reducing the environmental impact of Grupa Azoty companies;

developing cooperation with scientific and academic institutions;

building ecological awareness;

creating sustainable products;

continuing involvement in the Responsible Care programme, a voluntary undertaking by chemical industry companies to take an active role in ensuring observance of eco-etiquette, improve working conditions, increase the safety of facility operations and maintain constant contact with the environment.

Grupa Azoty’s goals under dialogue and relation building are:

supporting the development of the local community;

adopting forms of dialogue with key stakeholder groups;

building an ethical culture for Grupa Azoty.

Grupa Azoty’s goals under sustainable employment are:

improving employee satisfaction;

improving employee health and safety;

initiating employee development initiatives.

respeCt indeX

Proof of its responsibility and sustainable development is the fact that since 19 November 2009 Grupa Azoty S.A. (formerly Zakłady Azotowe w Tarnowie-Mościcach S.A.) has continually been listed in the RESPECT index. The companies are selected to join this index in accordance with a three-phase procedure. Financial issues, strategy and corporate management, environmental factors, employment policy and employee relations, together with market impact and customer relations, are analysed. This means that Grupa Azoty S.A. is part of an elite group of stable and credible organisations and constitutes additional confirmation that Grupa Azoty S.A. is well-balanced, secure and managed in accordance with the highest sustainable development-based standards.

responsiBle Care proGraMMe

One of the most important programmes in which the Grupa participates is Responsible Care. The initiative was launched in 1984 in Canada and for almost three decades has assisted in creating operational systems for chemical companies aimed at reducing environmental impact, increasing the safety of manufacturing process safety and ensuring preventative health system management.

Grupa Azoty S.A., Z.Ch. Police S.A., Grupa Azoty ZAK S.A. and Z.A. Puławy S.A. are actively involved in programme activities. This proves the companies’ deep-rooted involvement in voluntary activities driving sustainable development. The companies submit annual declarations concerning activities planned under the Responsible Care programme, supervised by the Polish Chamber of Chemical Industry.

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There can be no tree without the sun. And no shade without a tree. We need both – the sun and shade. We need balance.

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64 65



enVironMent

Environmental performance within Grupa Azoty is run in accordance with the highest standards. Operational issues are addressed on an on-going basis: manufacturing, investment, reclamation of contaminated land, and the appropriate conditions for the manufacturing, storage, transport and distribution of substances are ensured in order to observe environmental protection requirements. With regard to their operating areas, Group companies are classified as entities with a high risk of industrial incidents. Due to the skilful implementation of the latest technological solutions, Grupa Azoty companies drive environmental performance, financially benefitting in this field on more than one occasion. Group companies have developed and implemented appropriate programmes to prevent industrial incidents and regularly report safety-related issues. There are appropriate evacuation and rescue plans and safety management systems in force at Grupa Azoty sites.

Due to the nature of its operations, Grupa Azoty is subject to legal regulations under the Environmental Protection Law, Water Law, Waste Management Act and other environmental protection legislation. These regulations impose obligations on Group companies with regard to manufacturing, investment, reclamation of contaminated land and the guarantee of appropriate conditions for the manufacturing, storage, transport and distribution of substances in order to observe environmental protection requirements.

The end of 2012 saw completion of the Joint Implementation Project, executed in cooperation with Japan’s Mitsubishi Corporation from the second half of 2008. The project was an effect of the Kyoto Protocol and concerned limitation of greenhouse gases, including nitrogen oxide, which is released from the Nitric Acid Plant. Throughout the entire project from 2008 to 2012, the actual level of ERUs generated was 2 670 356, which translated into profit exceeding PLN 100 million.

It is worth emphasising that this success was achieved despite an incident which took place at the KDC installation at the beginning of 2011 and resulted in a stoppage of several months, during which it was impossible to generated ERUs. With regard to the significance of the project, its entire duration required constant monitoring and supervision, both from management and from personnel working at the plant. The ERUs generated were verified on multiple occasions by an external firm and only the final report, confirming application of the right standards and methods, enabled the ERUs to be sold.

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reaCH systeM

Grupa Azoty companies act in full compliance with regulations aimed at thoroughly analysing the harmful properties of all marketed chemical substances, introducing guidelines for their use and, in justified instances, limitations and prohibitions.

Beginning 1 June 2007, the REACH regulation imposes a registration obligation on all European manufacturers and importers of chemical substances. In the case of some substances belonging to the “substance of very high concern” category, it is necessary to obtain authorisation for their use. In order to register substances, it is necessary to submit the appropriate documentation to the European Chemicals Agency containing test results and assessment of the chemical’s safety.

In 2012 the on-going process of consolidation and close cooperation between the REACH departments at three Grupa Azoty companies (Grupa Azoty S.A., Grupa Azoty ZAK S.A. and Z.Ch. Police S.A.) was continued. In accordance with the European Chemicals Agency’s decision, required updates and registration of chemicals and chemical substances were undertaken in 2012.

The extent of registration to date corresponds to the current extent of Group companies’ operations. At future dates specified in the REACH regulation (2013 and 2018), it is anticipated that subsequent substances will need to be registered. These are substances manufactured at a lower scale of operations (below 1 000 tonnes per year) and have less significance for Group revenues.

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66 67



loCal CoMMunity

Keeping in mind our responsibility towards local communities, Grupa Azoty conducts voluntary activities such as investment for local communities, solutions to social problems and charity work.

Adopted in 2011, the “Zakłady Azotowe w Tarnowie-Mościcach S.A. Strategy for Local Communities 2011-2013” is aimed at organisations and institutions working within their regions for the benefit of local communities. Grupa Azoty companies are key players in developing the regions in which they are based. Involvement in the development of local communities is manifested in support for scientific and academic projects, economic initiatives, sports and culture.

Seeing the need to support people unable to independently develop and function in society, Grupa Azoty acts for the benefit of its stakeholders. The Group’s “Donation Award Guidelines” clearly and precisely specify the principles for providing this type of assistance.

Support for the development of local communities is proof of the Group’s involvement in the problems faced by local communities. This involvement is the effect of best practices applied within the Group and of its strategic approach.

Grupa Azoty’s activity in various areas, from artistic and cultural initiatives to sports and economic projects underscores its involvement and willingness to build on relationships with residents of the regions where its plants, companies and facilities are located.

eMployMent The greatest capital that any company possesses is people. Their experience, skills and knowledge are the greatest value for the business they build together. As the largest industrial complexes in their regions, Group companies count among the leading employers in the provinces of West Pomerania, Lesser Poland, Opole and Lublin.

The Group is timely and reliable in fulfilling its obligations towards its employees, feeling responsibility not just for them but also for their families and their daily environment. Being fully aware of the difficulties which employees may be faced with during the consolidation period, the Group is making every effort to make sure that they are well prepared to meet new challenges and are kept fully up-to-date of developments. HR policy is based on strategic documents including the HR Policy itself. The Group constantly ensures investment in employee development, including through a training system, programs co-funded by the EU and support for individual studies at higher education institutions.

In operations where safety is so highly dependent on the human factor, support for employee development must be constantly perfected. Employees are subject to obligatory training and regularly sit exams verifying their awareness of occupational health and safety issues. In addition, specific companies also apply solutions aimed at ensuring the highest level of safety, in particular management systems and internal policies.

Group companies also offer a wide range of additional programmes such as life insurance, pension schemes, additional health insurance, and support for sporting activities, cultural interests and leisure pursuits.

sports sponsorsHip

Sponsorship makes it possible to achieve several goals simultaneously. Skilfully implemented, it enables brand identity and a company’s products to be enhanced, and reflects positive factors associated with sport such as passion, emotion and fair play on the company’s identity. It enables the company’s name to be associated with a specific sporting discipline, streamlines client acquisition and leads to a visible increase in the sale of products and services. For this reason, Grupa Azoty companies successfully marketed their operations in 2012 through various sports, acknowledging this form of promotion as positively received and effective.

In 2012 the management board of Grupa Azoty specified the principal fields for sponsoring and marketing of the Group’s brand when supporting professional sport. This was aimed at ensuring a coherent corporate identity policy and coherent principles for managing funds designated for Grupa Azoty brand marketing.

It was decided that Group marketing and advertising would be implemented through supporting winter sports, speedway, and men’s and women’s volleyball. Aside from the above sporting disciplines, Grupa Azoty also implements brand marketing activities through supporting sports such as football, basketball and climbing. The value of steps taken in this field is confirmed by the fact that year on year corporate and product advertising implemented through sports is not just increasingly popular, but it is also increasingly effective.

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suMMary Consolidated finanCial stateMents for 2012

68 69


suMMary Consolidated finanCial stateMents for 2012

Business is an adventure.Vision. Responsibility. Yes, we know that. But in the end it all has to be counted. This is what our shareholders expect. This is what our customers expect. So this is something we don’t forget.

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report 2012

suMMary Consolidated stateMent of CoMpreHensiVe inCoMeGrupa azoty

for tHe period ended 31 deCeMBer 2012 (pln tHousand)

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

Revenue 7 098 735 5 338 029

Cost of sales (6 107 680) (4 151 389)

Gross profit 991 055 1 186 640

Selling and distribution expenses (181 916) (151 617)

Administrative expenses (390 733) (312 087)

Other income 49 024 34 000

Other expenses (95 698) (175 609)

Results from operating activities 371 732 581 327

Finance income 42 741 19 129

Finance costs (38 672) (39 750)

Net finance income (costs) 4 069 (20 621)

Share of profit of equity-accounted investees 8 549 2 850

Profit before tax 384 350 563 556

Tax expense (69 049) (64 615)

Net profit 315 301 498 941

Other comprehensive income

Effective portion of changes in fair value of cash flow hedges 423 (1 124)

Net change in fair value of cash flow hedges reclassified to profit or loss 1 594 874

Net change in fair value of available-for-sale financial assets 45 952 -

Deferred tax on other comprehensive income (9 114) 47

Foreign currency translation differences – foreign operations (6 750) 7 037

Other comprehensive income 32 105 6 834

Total comprehensive income 347 406 505 775

Net profit attributable to:

Equity holders of the Parent Company 294 376 461 527

Non-controlling interests 20 925 37 414

Total comprehensive income attributable to:

Equity holders of the Parent Company 326 481 468 361


Earnings per share:

Basic earnings per share (PLN) 4.59 9.45

Diluted earnings per share (PLN) 4.59 9.45

suMMary Consolidated stateMent of finanCial positionGrupa azoty

as at 31 deCeMBer 2012 (pln tHousand)

70 71




Assets 31 Dec 2012 31 Dec 2011

Non-current assets

Property, plant and equipment 2 845 691 2 747 478

Investment property 28 903 49 275

Intangible assets 281 343 283 000

Goodwill 9 124 9 124

Investments in subordinated entities 80 132 80 106

Available-for-sale financial assets 283 202 12 604

Other financial assets 565 565

Non-current receivables 4 890 1 201

Deferred tax assets 113 366 124 266

Other assets 3 932 610

Total non-current assets 3 651 148 3 308 229

Current assets

Inventories 723 682 653 171

Other financial assets 19 079 253

Current tax assets 4 141 -

Trade and other receivables 677 927 722 958

Cash and cash equivalents 243 440 244 791

Other current assets 19 894 16 702

Assets held for sale 347 125

Total current assets 1 688 510 1 638 000

Total assets 5 339 658 4 946 229

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report 2012

suMMary Consolidated stateMent of CHanGes in eQuityGrupa azoty


Equity and liabilities 31 Dec 2012 31 Dec 2011

Equity

Share capital 320 577 320 577

Share premium 680 688 680 688

Fair value reserve 37 221 -

Hedging reserve - (1 634)

Translation reserve (1 279) 5 471

Retained earnings, including: 2 039 413 1 745 368

Net profit for the year 294 376 461 527

Equity attributable to owners of the Parent 3 076 620 2 750 470


Total equity 3 490 698 3 152 667

 

Liabilities

Loans 289 979 226 072

Employee benefits 139 756 124 932

Other non-current payables 928 790

Provisions 118 622 118 951

Government grants 19 996 17 917

Deferred income 12 -

Deferred tax liabilities 131 800 126 378

Other financial liabilities 17 632 23 977

Total non-current liabilities 718 725 639 017

 

Loans 200 017 168 754

Employee benefits 14 155 28 247

Current tax liabilities 19 227 2 179

Trade and other payables 697 317 754 181

Provisions 133 275 133 142

Government grants 768 600

Deferred income 687 644

Other financial liabilities 64 789 66 798

Total current liabilities 1 130 235 1 154 545

Total liabilities 1 848 960 1 793 562

Total equity and liabilities 5 339 658 4 946 229



72 73


suMMary Consolidated stateMent of CHanGes in eQuityGrupa azoty


Share capital

Share premium

Revaluation reserve

Hedging reserve

Translation reserve

Retained earnings

Total equity attributable to owners of the parent

Non-control-ling interests

Total equity

As at 1 January 2011 195 582 209 990 - (1 431) (1 566) 1 099 601 1 502 176 447 926 1 950 102

Total comprehensive income for the year

Net profit for the year - - - - - 461 527 461 527 37 414 498 941

Total other comprehensive income

- - - (203) 7 037 - 6 834 – 6 834

Total comprehensive income

- - - (203) 7 037 461 527 468 361 37 414 505 775

Transactions with owners of the company, recognised directly in equity

Contributions by and distributions to owners of the company

Issue of ordinary shares 124 995 470 698 - - - - 595 693 - 595 693

Dividends - - - - - - - (265) (265)

Total contributions by and distributions to owners of the company

124 995 470 698 - - - - 595 693 (265) 595 428

Change in ownership interests in subsidiaries

Acquisition of non-con-trolling interests without a change in control

- - - - - 184 474 184 474 (384 564) (200 090)

Acquisition of subsidiary with non-controlling in-terests

- - - - - - - 301 849 301 849

Total transactions with owners of the company

124 995 470 698 - - - 184 474 780 167 (384 829) 395 338

Other

Other - - - - - (234) (234) (163) (397)

As at 31 December 2011 320 577 680 688 - (1 634) 5 471 1 745 368 2 750 470 402 197 3 152 667

As at 1 January 2012 320 577 680 688 - (1 634) 5 471 1 745 368 2 750 470 402 197 3 152 667

Total comprehensive income for the year

Net profit for the year - - - - - 294 376 294 376 20 925 315 301

Total other comprehensive income

- - 37 221 1 634 (6 750) - 32 105 - 32 105

Total comprehensive income

- - 37 221 1 634 (6 750) 294 376 326 481 20 925 347 406

Transactions with owners of the company, recognised directly in equity

Dividends - - - - - - - (8 884) (8 884)

Total transactions with owners of the Company

- - - - - - - (8 884) (8 884)

Other

Other - - - - - (331) (331) (160) (491)

As at 31 December 2012 320 577 680 688 37 221 - (1 279) 2 039 413 3 076 620 414 078 3 490 698



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report 2012

suMMary Consolidated stateMent of CasH flowsGrupa azoty


za okresod 01.01.2012do 31.12.2012

za okresod 01.01.2011do 31.12.2011

Cash flows from investing activities

Proceeds from sale of property, plant and equipment, intangible assets and investment property

13 329 8 687

Acquisition of property, plant and equipment, intangible assets and investment property

(397 294) (344 034)

Dividends received 8 000 142

Acquisition of financial assets (224 688) (701 115)

Proceeds from sale of financial assets 12 269 4 006

Interest received 1 999 3 014

Grants received 2 907 599

Other proceeds/disbursements (10 680) (7 965)

Loans (1 190) (450)

Net cash from investing activities (596 148) (1 037 116)

Cash flows from financing activities

Proceeds from issue of share capital - 594 278

Dividends paid (8 884) (265)

Proceeds from loans and borrowings 565 777 877 807

Payment of loans and borrowings (460 099) (1 025 851)

Interest paid (28 717) (35 971)

Payment of finance lease liabilities (12 563) (9 226)

Other proceeds/disbursements (9 544) 61 417

Net cash from financing activities 45 970 462 189

Net decrease in cash and cash equivalents (6 398) (43 456)

Cash and cash equivalents at the beginning of the period 244 791 279 450

Effect of exchange rate fluctuations on cash held 5 047 8 797

Cash and cash equivalents at the end of the period 243 440 244 791

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

Cash flows from operating activities

Profit for the year 384 350 563 556

Adjustments for: 284 073 323 824

Depreciation 239 592 188 864

(Reversal of) impairment losses of assets 35 562 52 683

Gain (loss) from investing activities 26 058 40 479

Gain (loss) on disposal of financial assets (5 501) (2 281)

Share of profit of equity-accounted investees (8 549) (2 850)

Interest, foreign exchange gains or losses 11 423 31 189

Dividends (18 352) (142)

Change in fair value of financial assets at fair value through profit or loss 3 840 35 578

Cash generated from operating activities before changes in working capital 668 423 907 076

Changes in trade and other receivables 87 136 (75 414)

Changes in inventories (73 056) (80 016)

Changes in trade and other payables (129 684) (148 843)

Changes in provisions, prepayments and grants 40 504 55 299

Other adjustments (437) (19 998)

Cash generated from operating activities 592 886 638 104

Income taxes paid (49 106) (106 633)

Net cash from operating activities 543 780 531 471

74 75


suMMary Consolidated stateMent of CasH flowsGrupa azoty


za okresod 01.01.2012do 31.12.2012

za okresod 01.01.2011do 31.12.2011

Cash flows from investing activities

Proceeds from sale of property, plant and equipment, intangible assets and investment property

13 329 8 687

Acquisition of property, plant and equipment, intangible assets and investment property

(397 294) (344 034)

Dividends received 8 000 142

Acquisition of financial assets (224 688) (701 115)

Proceeds from sale of financial assets 12 269 4 006

Interest received 1 999 3 014

Grants received 2 907 599

Other proceeds/disbursements (10 680) (7 965)

Loans (1 190) (450)

Net cash from investing activities (596 148) (1 037 116)

Cash flows from financing activities

Proceeds from issue of share capital - 594 278

Dividends paid (8 884) (265)

Proceeds from loans and borrowings 565 777 877 807

Payment of loans and borrowings (460 099) (1 025 851)

Interest paid (28 717) (35 971)

Payment of finance lease liabilities (12 563) (9 226)

Other proceeds/disbursements (9 544) 61 417

Net cash from financing activities 45 970 462 189

Net decrease in cash and cash equivalents (6 398) (43 456)

Cash and cash equivalents at the beginning of the period 244 791 279 450

Effect of exchange rate fluctuations on cash held 5 047 8 797

Cash and cash equivalents at the end of the period 243 440 244 791

These summary consolidated financial statements are only a summary of information included in the consolidated financial statements of Grupa Azoty S.A. Group, approved by the Management Board of Grupa Azoty S.A. on 6 March 2013. These are not the complete financial statements and do not include the information sufficient to gain a full understanding of the Group’s financial position and performance. The summary consolidated financial statements should be read in conjunction with the audited consolidated financial statements prepared in accordance with International Financial Reporting Standards adopted by the European Union (IFRS EU) and other applicable regulations.

The summary consolidated financial statements were prepared using the accounting policies presented in point 2 of the notes to the Group’s consolidated financial statements.

The Group’s consolidated financial statements for 2012 are available online at grupaazoty.com. Copies of the financial statements may be obtained in the registered office of Grupa Azoty S.A., ul. Kwiatkowskiego 8, Tarnów, Poland.

Basis of preparation of tHe suMMary Consolidated finanCial stateMents

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reVenue, eXpenses and finanCial result By operatinG seGMents

for tHe 12 MontHs ended 31 deCeMBer 2012

Fertilisers Plastics Oxo Pigments Other Total

External revenues 4 157 393 1 128 561 1 093 888 400 590 318 303 7 098 735

Inter-segment revenue 624 654 282 879 6 894 759 1 438 017 2 353 203

Total revenue 4 782 047 1 411 440 1 100 782 401 349 1 756 320 9 451 938

Operating expenses, including: (-) (4 443 566) (1 365 812) (1 057 121) (364 972) (1 802 061) (9 033 532)

Selling and distribution expenses (-) (112 189) (37 017) (40 884) (4 293) 12 467 (181 916)

Administrative expenses (-) (195 415) (84 667) (44 587) (16 720) (49 344) (390 733)

Other income 8 922 9 604 174 1 269 29 055 49 024

Other expenses (-) (14 633) (4 585) (557) (2 026) (73 897) (95 698)

Segment result from operating activities EBIT* 332 770 50 647 43 278 35 620 (90 583) 371 732

Finance income - - - - - 42 741

Finance costs - - - - - (38 672)

Share of profit of equity-accounted investees - - - - - 8 549

Profit before tax - - - - - 384 350

Income tax - - - - - (69 049)

Net profit - - - - - 315 301

EBIT 332 770 50 647 43 278 35 620 (90 583) 371 732

Depreciation and amortisation 85 171 29 387 24 716 6 956 84 508 230 738

Unallocated depreciation and amortisation - - - - - 8 854

EBITDA** 417 941 80 034 67 994 42 576 (6 075) 611 324

* EBIT is calculated as results from operating activities presented in the statement of comprehensive income.

** EBITDA is calculated as results from operating activities increased by depreciation and amortisation.



76 77


Fertilisers Plastics Oxo PigmentsOther

operationsTotal

External revenues 2 586 223 1 240 844 1 063 644 148 082 299 236 5 338 029

Inter-segment revenue 280 705 233 198 9 392 1 733 718 305 1 243 333

Total revenue 2 866 928 1 474 042 1 073 036 149 815 1 017 541 6 581 362

Operating expenses, including: (-) (2 509 279) (1 257 187) (948 936) (119 676) (1 023 348) (5 858 426)

Selling and distribution expenses (-) (88 198) (36 855) (36 729) (2 084) 12 249 (151 617)

Administrative expenses (-) (143 247) (72 419) (57 604) (4 557) (34 260) (312 087)

Other income 3 851 878 6 308 (483) 23 446 34 000

Other expenses (-) (51 302) (3 914) (9 904) (7 288) (103 201) (175 609)

Segment result from operating activities EBIT* 310 198 213 819 120 504 22 368 (85 562) 581 327

Finance income - - - - - 19 129

Finance costs - - - - - (39 750)

Share of profit of equity-accounted investees - - - - - 2 850

Profit before tax - - - - - 563 556

Income tax - - - - - (64 615)

Net profit - - - - - 498 941

EBIT 310 198 213 819 120 504 22 368 (85 562) 581 327

Depreciation and amortisation 73 400 23 530 24 647 3 940 53 535 179 052

Unallocated depreciation and amortisation - - - - - 9 812

EBITDA** 383 598 237 349 145 151 26 308 (32 027) 770 191



* EBIT is calculated as results from operating activities presented in the statement of comprehensive income.

** EBITDA is calculated as results from operating activities increased by depreciation and amortisation.

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Whatever we do, we play by the rules.

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78 79


independent auditors’ report on tHe suMMary Consolidated finanCial s tateMent s

to tHe General MeetinG of Grupa azoty s.a.

The accompanying summary consolidated financial statements, which comprise the summary consolidated statement of financial position as at 31 December 2012, the summary consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and related notes, are derived from the consolidated financial statements of the Group, whose parent entity is Grupa Azoty S.A. (previously Zakłady Azotowe w Tarnowie-Mościcach S.A.) with its registered office in Tarnów, ul. Kwiatkowskiego 8 (“the Group”) for the year ended 31 December 2012. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated 6 March 2013. Those consolidated financial statements, and the summary consolidated financial statements, do not reflect the effects of events that occurred subsequent to that date.

The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards as adopted by the European Union and other applicable regulations. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of the Group.

ManaGeMent’s responsiBility for tHe suMMary Consolidated finanCial stateMents

Management is responsible for the preparation of the summary consolidated financial statements on the basis described in Note “Basis of preparation of the summary consolidated financial statements”.

auditors’

responsiBility Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with National Standards on Auditing issued by the National Council of Certified Auditors in Poland and International Standard on Auditing (ISA) 810, Engagements to Report on Summary Financial Statements.

opinion In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of the Group for the year ended 31 December 2012 are consistent, in all material respects, with those consolidated financial statements, on the basis described in Note “Basis of preparation of the summary consolidated financial statements”.

On behalf of KPMG Audyt Sp. z o.o. Registration No. 458ul. Chłodna 51, 00-867 Warsaw

Marcin DomagałaKey Certified Auditor Registration No. 90046Director

15 March 2013

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80

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Perspective makes lines converge as if they were to meet at one point – somewhere at infinity. But if you manage things right, it can happen here and now. In real life.

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seleCted finanCial inforMation for 2012

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PLN thousand EUR thousand

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

Revenue 7 098 735 5 338 029 1 700 866 1 289 348

Results from operating activities 371 732 581 327 89 067 140 414

Profit before tax 384 350 563 556 92 091 136 121

Net profit 315 301 498 941 75 547 120 514

Total comprehensive income 347 406 505 775 83 239 122 165

Number of shares 64 115 444 64 115 444 64 115 444 64 115 444

Earnings per share 4.59 9.45 1.10 2.28

Net cash flows from operating activities

543 780 531 471 130 290 128 372

Net cash flows from investing activities (596 148) (1 037 116) (142 838) (250 505)

Net cash flows from financing activities 45 970 462 189 11 015 111 637

Total net cash flows (6 398) (43 456) (1 533) (10 496)

Cash and cash equivalents at the beginning of the period

244 791 279 450 58 652 67 498

Cash and cash equivalents at the end of the period

243 440 244 791 58 329 59 127

31 Dec 2012 31 Dec 2011 31 Dec 2012 31 Dec 2011

Non-current assets 3 651 148 3 308 229 893 094 749 010

Current assets 1 688 510 1 638 000 413 020 370 857

Non-current liabilities 718 725 639 017 175 805 144 679

Current liabilities 1 130 235 1 154 545 276 463 261 399

Equity 3 490 698 3 152 667 853 847 713 790

Share capital 320 577 320 577 78 415 72 581

Non-controlling interests 414 078 402 197 101 286 91 061

The selected balances in the statement of financial position, statement of comprehensive income and statement of cash flows are translated into EUR in accordance with the following method:

– assets and liabilities in the statement of financial position are translated at the exchange rate prevailing at the end of the reporting period:

rate as at 31 December 2011 EUR 1 = PLN 4.4168 (Table 252/A/NBP/2011)

rate as at 31 December 2012 EUR 1 = PLN 4.0882 (Table 252/A/NBP/2012),

– items in the statement of comprehensive income and the statement of cash flows are translated at the exchange rates being the arithmetical average of exchange rates published by the National Bank of Poland for EUR, for the last day of each month in the reporting period:

average exchange rate in the period 1 January – 31 December 2011 EUR 1 = PLN 4.1401

average exchange rate in the period 1 January – 31 December 2012 EUR 1 = PLN 4.1736.

The recalculation was performed based on the above mentioned exchange rates by dividing the amounts in PLN thousand by the exchange rate.

Consolidated seleCted finanCial inforMationGrupa azoty

82 83


separate seleCted finanCial inforMationGrupy azoty s.a.

(forMerly zaKłady azotowe w tarnowie-MośCiCaCH s.a.)


1 Jan 2012 to 31 Dec

2012

1 Jan 2011 to 31 Dec 2011

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

Revenue 1 996 173 1 916 717 478 286 462 964



Net profit 250 692 207 875 60 066 50 210


Number of shares 64 115 444 48 842 068 64 115 444 48 842 068


Net cash flows from operating activities 183 327 249 063 43 925 60 159

Net cash flows from investing activities (272 919) (943 721) (65 392) (227 946)

Net cash flows from financing activities 70 295 608 756 16 843 147 039

Total net cash flows (19 297) (85 902) (4 624) (20 749)


86 289 172 191 20 675 41 591


66 992 86 289 16 051 20 842

31 Dec 2012 31 Dec 2011 31 Dec 2012 31 Dec 2011


Current assets 543 440 502 872 132 929 113 854


Current liabilities 372 635 400 920 91 149 90 772

Equity 2 215 135 1 925 589 541 836 435 969

Share capital 320 577 320 577 78 415 72 581









Consolidated seleCted finanCial inforMationGrupa azoty

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separate seleCted finanCial inforMationzaKłady CHeMiCzne „poliCe” s.a.


1 Jan 2012to 31 Dec 2012

1 Jan 2011to 31 Dec 2011

1 Jan 2012to 31 Dec 2012

1 Jan 2011to 31 Dec 2011

Revenue 2 956 836 2 753 660 708 462 665 119



Net profit 115 970 321 255 27 787 77 596


Number of shares 75 000 000 75 000 000 75 000 000 75 000 000



Net cash flows from investing activities (113 580) (56 671) (27 214) (13 688)

Net cash flows from financing activities (26 204) (60 486) (6 279) (14 610)

Total net cash flows (10 498) 8 827 (2 515) 2 132


31 967 19 858 7 659 4 797


28 904 31 967 6 925 7 721

31 Dec 2012 31 Dec 2011 31 Dec 2012 31 Dec 2011

Non-current assets 917 779 847 868 224 495 191 964

Current assets 600 438 646 922 146 871 146 468



Equity 991 123 875 153 242 435 198 142

Share capital 750 000 750 000 183 455 169 806









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separate seleCted finanCial inforMationzaKłady CHeMiCzne „poliCe” s.a.

separate seleCted finanCial inforMationGrupa azoty zaKłady azotowe Kędzierzyn s.a.


1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

1 Jan 2012 to 31 Dec 2012

1 Jan 2011 to 31 Dec 2011

Revenue 2 165 037 2 193 317 518 746 529 774



Net profit 115 804 191 539 27 747 46 264


Number of shares 57 012 860 57 012 860 57 012 860 57 012 860



Net cash flows from investing activities 25 200 (169 708) 6 038 (40 991)

Net cash flows from financing activities (174 021) (60 099) (41 696) (14 516)

Total net cash flows 14 459 (14 631) 3 464 (3 534)


44 682 59 392 10 706 14 346


58 686 44 682 14 061 10 792

31 Dec 2012 31 Dec 2011 31 Dec 2012 31 Dec 2011


Current assets 444 450 451 910 108 715 102 316



Equity 1 004 463 1 008 386 245 698 228 307

Share capital 285 064 285 064 69 728 64 541









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Grupa azoty s.a.

ul. eugeniusza Kwiatkowskiego 8

33-101 tarnów

poland

nip: 873-000-68-29

wse symbol: att

Krs: 0000075450

isin: plzatrM00012

tel. +4814 637 35 31

[email protected]

zakłady Chemiczne „police” s.a.

ul. Kuźnicka 1, 72-010 police

poland

nip: 851-02-05-573

wse symbol: pCe

Krs: 0000015501

isin: plzCplC00036

tel. +4891 317 24 36

[email protected]

zakłady azotowe puławy s.a.

al. tysiąclecia państwa polskiego 13

24-110 puławy

poland

nip: 716-000-18-22

wse symbol: zap

Krs: 0000011737

isin: plzapul00057

tel. +48 81 565 37 15

Grupa azoty zaK s.a.

ul. Mostowa 30 a, skr. poczt. 163

47-220 Kędzierzyn-Koźle

poland

nip: 749-00-05-094

Krs: 0000008993

tel. +48 77 481 26 35

[email protected]

grupaazoty.com

86 87


You have to do something good to be able to smile at the end of the day.

To smile at the end of the year, you have to do something more.

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2012 annual report

Grupa Azoty S.A.ul. Eugeniusza Kwiatkowskiego 8, 33-101 Tarnów, Poland

grupaazoty.com

Published by | Designed by © grupa tomami | www.tomami.pl

Report written and compiled by the Corporate Public Relations OfficePlease send comments and queries to:

[email protected]

raportraportraportSiła Tworzenia

Przemysł chemiczny

niepodległej Polski narodził się

w Tarnowie w roku 1927. Od tej

pory historia zatoczyła pełny

krąg. Dziś polska chemia rodzi

się w Tarnowie po raz drugi.

Tym razem świadoma własnej

siły. Grupa Azoty to połączenie

wszystkiego, co w tej branży

nam, Polakom, udało się zrobić

najlepiej. Teraz czujemy się

bezpieczni. Teraz jesteśmy

gotowi do przekraczania granic.

SKONSOLIDOWANY RAPORT ROCZNY GRUPY AZOTY | 2012grupaazoty.com

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