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1
GENERAL INFORMATION Management Board Ludwik Klinkosz Stefan
Rojewski Jerzy Golis Supervisory Board Magdalena Bąkowska Elżbieta
Boniuszko Zygmunt Bosiakowski Andrzej Buczak Dariusz Krajowski –
Kukiel Edmund Kozak Ireneusz Król Edmund Pietrzak Registered
Offices: ul. Powązkowska 46/50 01-728 Warszawa Poland Auditor
Deloitte Audyt Sp. z o.o. ul. Piękna 18 00-549 Warszawa Poland
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Table of Contents
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TABLE OF CONTENTS:
TUREPORT FROM OPERATIONS OF THE CIECH GROUP IN THE FIRST HALF OF
2005UT.................................... 4 TU1UT TUCURRENT
STANDING OF THE CIECH GROUPUT
.........................................................................................
4
TU1.1UT TUCiech Group
OverviewUT.............................................................................................
4 TU1.2UT TUThe Ciech Group’s Major Achievements in the First Half
of 2005UT.................... 5 TU1.5UT TUFinancial Performance
Drivers Of the Ciech Group
UT.......................................... 11 TU1.6UT
TUAllocation By the Issuer of the Income from Share Issue UT
................................ 12 TU1.7UT TUMajor Research and
Development Achievements of the Ciech Group UT ......... 12 TU1.8UT
TUEnvironmental Protection UT
......................................................................................
13 TU1.9UT TUInvesting ActivityUT
.....................................................................................................
14 TU1.10 UT TUChanges In Organisational Linkage, Major Capital
InvestmentsUT .................... 16 TU1.12 UT TUCurrent and
Projected Financial Standing of the Ciech GroupUT
....................... 17
TU2UT TUGROWTH PROSPECTS FOR THE CIECH
GROUPUT...................................................................................
20 TU2.1UT TUMATERIAL RISK FACTORS AND THREATS AND DEGREE OF
EXPOSURE UT.................................... 21 TU2.2UT TUGROWTH
FORECASTUT
...........................................................................................................................
21 TU3UT
TUATTACHMENTSUT..........................................................................................................................................
22 TU3.1UT TUFIGURES CONCERNING MAIN PRODUCTS, GOODS AND
SERVICESUT............................................. 22 TU3.2UT
TUMARKET CHANGES UT
..............................................................................................................................
25 TU3.3UT TUCHANGES IN SUPPLY SOURCES OF MANUFACTURING MATERIALS,
GOODS, AND SERVICESUT 28 TUAUDITOR’S REPORT UT
...........................................................................................................................................
30 TUREPORT FROM OPERATIONS OF THE CIECH GROUP IN THE FIRST HALF OF
2005UT.................................. 33 TU4UT TUCURRENT
STANDING OF THE CIECH GROUPUT
.......................................................................................
33
TU1.2UT TUCiech Group
OverviewUT...........................................................................................
33 TU1.2UT TUThe Ciech Group’s Major Achievements in the First Half
of 2005UT.................. 34 TU1.5UT TUFinancial Performance
Drivers Of the Ciech Group
UT.......................................... 40 TU1.6UT
TUAllocation By the Issuer of the Income from Share Issue UT
................................ 41 TU1.7UT TUMajor Research and
Development Achievements of the Ciech Group UT ......... 41 TU1.8UT
TUEnvironmental Protection UT
......................................................................................
42 TU1.9UT TUInvesting ActivityUT
.....................................................................................................
43 TU1.10 UT TUChanges In Organisational Linkage, Major Capital
InvestmentsUT .................... 45 TU1.12 UT TUCurrent and
Projected Financial Standing of the Ciech GroupUT
....................... 46
TU5UT TUGROWTH PROSPECTS FOR THE CIECH
GROUPUT...................................................................................
49 TU2.1UT TUMATERIAL RISK FACTORS AND THREATS AND DEGREE OF
EXPOSURE UT.................................... 50 TU2.2UT TUGROWTH
FORECASTUT
...........................................................................................................................
50 TU6UT
TUATTACHMENTSUT..........................................................................................................................................
51 TU3.1UT TUFIGURES CONCERNING MAIN PRODUCTS, GOODS AND
SERVICESUT............................................. 51 TU3.2UT
TUMARKET CHANGES UT
..............................................................................................................................
54 TU3.3UT TUCHANGES IN SUPPLY SOURCES OF MANUFACTURING MATERIALS,
GOODS, AND SERVICESUT 57 TUAUDITOR’S REPORT UT
...........................................................................................................................................
59 TUCONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR THE
FIRST SIX MONTHS OF
2005UT..............................................................................................................................................................................
62
TU1UT TUGENERAL INFORMATIONUT
.........................................................................................................................
70 TU2UT TUMATERIAL ACCOUNTING
PRINCIPLESUT...................................................................................................
70
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Table of Contents
3
TU3 BUSINESS SEGMENTS UT
....................................................................................................................................
79 TU4UT TUINCOME AND EXPENSES
UT..........................................................................................................................
88 TU5UT TUINCOME TAXUT
..............................................................................................................................................
91 TU6UT TUDISCONTINUED OPERATIONS AND FIXED ASSETS AVAILABLE FOR
SALE UT ..................................... 95 TU7 EARNINGS PER
SHAREUT..............................................................................................................................
95 TU8 DIVIDENDS PAID AND DECLAREDUT
..............................................................................................................
96 TU9UT TUPROPERTY, PLANT AND EQUIPMENT UT
....................................................................................................
97 TU10UT TUINVESTMENT PROPERTY UT
.......................................................................................................................
104 TU11 PERPETUAL LEASEHOLD RIGHTS IN LANDUT
.............................................................................................
104 TU12UT TUINTANGIBLE
ASSETSUT..............................................................................................................................
106 TU13UT TUIMPAIRMENT UT
............................................................................................................................................
111 TU14UT TUGOODWILL IMPAIRMENT TESTUT
.............................................................................................................
114 TU15 INVESTMENTS IN ASSOCIATES UT
.................................................................................................................
114 TU16 BUSINESS COMBINATIONSUT
........................................................................................................................
115 TU17UT TUNON-CURRENT RECEIVABLESUT
..............................................................................................................
116 TU18 OTHER NON-CURRENT INVESTMENTS UT
.....................................................................................................
116 TU19UT
TUINVENTORIESUT...........................................................................................................................................
117 TU20UT TUTRADE AND OTHER RECEIVABLESUT
......................................................................................................
117 TU21UT TUSHORT-TERM
INVESTMENTSUT.................................................................................................................
119 TU22UT TUCASH AND CASH EQUIVALENTS UT
..........................................................................................................
119 TU23UT
TUEQUITYUT......................................................................................................................................................
120 TU24UT TUNON-CURRENT LIABILITIES UT
...................................................................................................................
122 TU25UT
TUPROVISIONSUT.............................................................................................................................................
129 TU26UT TUEMPLOYEE BENEFITSUT
............................................................................................................................
132 TU27UT TUSHORT-TERM DEBT UT
................................................................................................................................
134 TU28 OFF-BALANCE SHEET
ITEMSUT.....................................................................................................................
153 TU29UT TUFINANCIAL LEASESUT
................................................................................................................................
159 TU30 OPERATING LEASESUT
...................................................................................................................................
159 TU31 RELATED PARTIES UT
......................................................................................................................................
160 TU32UT TUFINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICYUT
............................................................ 168
TU33UT TUFINANCIAL INSTRUMENTSUT
.....................................................................................................................
168 TU34UT TUPOST-BALANCE SHEET EVENTSUT
..........................................................................................................
174 TU35 RECONCILIATION OF FIGURES PUBLISHED IN COMPLIANCE WITH THE
POLISH ACCOUNTING STANDARDS (PAS) RESTATED IN COMPLIANCE WITH THE
INTERNATIONAL FINANCIAL REPORTING STANDARDS. UT
.....................................................................................................................................................
174 TU36 RESTATEMENT OF THE FIGURES PRESENTED IN THE SECOND QUARTER
OF 2005. UT ...................... 179 TU37UT TUMISCELLANEOUS
INFORMATIONUT..........................................................................................................
182 TU38 STATEMENT BY THE MANAGEMENT BOARDUT
..........................................................................................
183
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Report From Operations of the Ciech Group In the First Half of
2005
4
REPORT FROM OPERATIONS OF THE CIECH GROUP IN THE FIRST HALF OF
2005
1 CURRENT STANDING OF THE CIECH GROUP
1.1 Ciech Group Overview
The Ciech Group is a group of domestic and foreign
manufacturing, distribution, and trade companies operating in the
chemical industry. At June 30th, 2005, it comprised 35 business
entities, including:
• Ciech SA – the parent (“Parent”)
• 29 subsidiaries, including:
- 22 domestic subsidiaries
- 7 foreign subsidiaries
• 4 domestic associated entities
• 1 foreign associated entity
Ciech SA has a total of 36 affiliated entities, including direct
subsidiaries and associates of Ciech SA acting as the parent
company, and indirect subsidiaries and associates where Ciech SA’s
subsidiaries and associates act as the parent entities When
preparing the consolidated financial statements for the first half
of 2005, the following companies were taken into account: • full
consolidation method:
1. Ciech SA – parent company
2. Przedsiębiorstwo Chemiczne Cheman SA
3. Vitrosilicon SA
4. Ciech Polfa Sp. z o.o.
5. Polsin Pte. Ltd.
6. Daltrade Plc
• equity method:
7. Przedsiębiorstwo Transportowo-Usługowe TRANSCLEAN Sp. z
o.o.
The consolidated financial statements also account for four
lower-tier groups of companies:
1. The Petrochemia-Blachownia Group comprising:
- Petrochemia-Blachownia SA – the parent
- Bl-Trans Sp. z o.o.
2. The Fosfory Group comprising:
- Gdańskie Zakłady Nawozów Fosforowych Fosfory Sp. z o.o. – the
parent,
- Agrochem Sp. z o.o. Dobre Miasto
- Agrochem Sp. z o.o. Człuchów
3. The SODA MĄTWY Group comprising;
- Inowrocławskie Zakłady Chemiczne SODA MĄTWY SA – the
parent
- Elektrociepłownie Kujawskie Sp z o.o.
- Transoda Sp. z o.o.
- Polskie Towarzystwo Ubezpieczeniowe SA (accounted for by the
equity method)
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Report From Operations of the Ciech Group In the First Half of
2005
5
4. The Janikosoda SA Group comprising:
- Janikowskie Zakłady Sodowe Janikosoda SA – the parent
- Polskie Towarzystwo ubezpieczeniowe SA (accounted for by the
equity method)
5. The Alwernia Group comprising:
- Alwernia SA – the parent
- Alwernia Chrom Sp z o.o.
The Parent does not have branches (permanent establishments).
The Ciech Group’s operations consist in manufacture and sale of its
own products, and trading in goods. The trading activity is mainly
conducted through Ciech SA and its domestic and foreign trade
operations, and the manufacturing activity is conducted through
Ciech SA’s manufacturing subsidiaries. The Ciech Group sells
chemicals in the Polish market, and is a major contributor to
Poland’s foreign trade by dealing in the import and export of
chemical industry products. The core goods sold by the Group on the
Polish market were: soda ash, ethylbenzene, fertilisers, glass
blocks and glass packaging, salt, liquid fuel, sodium
tripolyphosphate, plastics, plant protection agents, and various
specialised chemicals. The Group’s key export goods included soda
ash, isocyanates (TDI), sulphur, epichlorohydrin, polyvinyl
chloride, mineral fertilisers, salt, calcium chloride, liquid
fuels. The Group’s largest markets are the European Union
countries. At 30.06.2005, the composition of Ciech SA’s Management
Board was as follows: Ludwik Klinkosz President of the Management
Board Jerzy Golis Member of the Management Board Stefan Rojewski
Member of the Management Board The commercial representative of the
Parent is Mr. Kazimierz Przełomski. At 30.06.2005, the composition
of Ciech SA’s Supervisory Board was as follows: Edmund Pietrzak
Chairman of the Supervisory Board Elżbieta Boniuszko Deputy
Chairman of the Supervisory Board Edmund Kozak Secretary to the
Supervisory Board Magdalena Bąkowska Member of the Supervisory
Board Zygmunt Bosiakowski Member of the Supervisory Board Andrzej
Buczak Member of the Supervisory Board Dariusz Krajowski-Kukiel
Member of the Supervisory Board Ireneusz Król Member of the
Supervisory Board
1.2 The Ciech Group’s Major Achievements in the First Half of
2005 On February 10th, 2005, a total of 28,000,000 of Ciech SA's
shares were introduced for trading on the Warsaw Stock Exchange,
including:
− 20,816 A-series bearer shares with a par value of 5 PLN each,
− 19,775,200 B-series bearer shares with a par value of 5 PLN each,
− 8,203,984 C-series bearer shares with a par value of PLN 5
each.
At 24.00 PLN at issue, the total revenue from the issue of
series- C ordinary shares was 192,875,000 including interest. At
the close of the first trading day, the price of one Ciech SA share
quoted on the Warsaw Stock Exchange reached 28.10 PLN.
• Alwernia SA introduced new products: fodder phosphates and
calcium nitrate.
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Report From Operations of the Ciech Group In the First Half of
2005
6
1.3 Financial Performance In the first half of 2005, the Ciech
Group recorded a profit of 57,021,000 PLN, a balance-sheet total of
1,683,382,000 PLN, and a net increase in cash by 28,796,000PLN. The
table below presents selected financial figures and the basic
financial ratios for the first six months of 2005 and 2004. Table
1. Selected financial information In '000 PLN
Jan - Jun 2005 Jan – Jun
2004 2005/2004 Dynamics
Net income from sales 1 079 186 1 078 738 0.0%Cost of sales 831
991 804 809 3.4%Gross sales profit 247 195 273 929 -9.8%Selling
costs 105 872 105 769 0.1%Overhead costs 76 838 78 614 -2.3%Other
operating income / expense -11 487 -7 153 60.6%Operating profit 52
998 82 393 -35.7%Financial income / expense 14 321 -12 684 -Share
in the profits of subsidiaries 5 244 -3 466 -Income Tax 15 542 15
905 -2.3%Net profit 57 021 50 338 13.3%Net profit of minority
shareholders 5 241 4 644 12.9%Net profit attributable to the equity
holders of the parent 51 780 45 694 13.3%EBITDA 107 294 131 730
-18.6%
30.06.2005 30.06.2004 2005/2004 Dynamics 31.12.2004 Dynamics:
30th June
2005/ 31.12.2004
Assets 1 683 382 1 567 358 7.4% 1 588 865 5.9%Non-current assets
896 935 891 469 0.6% 892 296 0.5%Current assets: 786 447 675 889
16.4% 696 569 12.9%- inventories 167 615 119 015 40.8% 130 270
28.7% - trade debtors and other receivables 523 292 499 949 4.7%
518 405 0.9% - cash and cash equivalents 65 566 44 020 48.9% 36 144
81.4% Parent's equity 957 347 689 865 38.8% 704 900 35.8%Minority
interests 110 058 106 942 2.9% 105 451 4.4%Equity 1 067 405 796 807
34.0% 810 351 31.7%Non-current liabilities 103 271 117 711 -12.3%
121 795 -15.2%Current liabilities 512 706 652 840 -21.5% 656 719
-21.9%
1st half of 2005 1st half of
2004 2005/2004 Dynamics
Net earnings per share 2.01 2.49 -19.3%Net profit margin 4.8%
4.2% 13.3%EBIT% 4.9% 7.6% -35.7%EBITDA % 9.9% 12.2% -18.6%Current
ratio 1.53 1.04 48.2%Quick ratio 1.21 0.85 41.5%Total debt ratio
36.6% 49.2% -25.6%Equity to assets ratio 63.4% 50.8% 24.7%
Source: Ciech SA
Calculation principles: net earnings/ share – net earnings per
ordinary shareholders of the parent company / weighted average
number of ordinary shares in a given period (according to the
definition in IAS 33 "Earnings per share”)
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Report From Operations of the Ciech Group In the First Half of
2005
7
net return – net earnings of the shareholders of the parent
company for a given period / net income from sales of products,
services, goods and materials for a given period, EBIT% –operating
profit for a given period / net income from sales of products,
services, goods and materials for a given period, EBITDA% –
(operating profit + amortisation for a given period / net income
from sales of products, services, goods and materials for a given
period, current ratio - current assets at the end of a given period
/ current liabilities at the end of a given period, quick ratio -
current assets less inventories at the end of the period / current
liabilities at the end of period, total debt ratio – short and
long-term liabilities at the end of period / total assets at the
end of period, equity to assets ratio – total equities at the end
of period / total assets at the end of period Sales Income The
Group's consolidated net income from sales for the first half of
2005 amounted to 1,079,186,000 PLN, similar to the income recorded
for the first half of 2004. It should be noted that the first half
of 2004 was a special period, in terms of the strong demand for
chemical products, and especially farming chemicals (a
pre-accession trading rally), and the good EUR/PLN exchange rates
(the average EUR/PLN exchange rate in the first six months of 2004
was 4.73, compared to 4.07 in the current year). The half-year
income was positively influenced by a growth in the prices of
certain chemical products, compared to the corresponding period of
2004, especially noticeable in the soda industry. The domestic
market continues to have the largest share in the Group's product
and goods sales, while the European Union is the main export
market. The geographical proximity and the lack of trade barriers
make EU countries natural markets for the Ciech Group. Sales Income
Structure The 2005 half-year income by business segment was as
follows:
Source: Ciech SA
USoda Segment During the first six months of 2005, the soda
segment generated almost 35% of the Group's total sales income. The
parent, Ciech SA, plays a key role in the trading operations,
managing the sales of the products manufactured by the subsidiaries
Soda Mątwy SA and Janikosoda SA. Soda ash is the basic product of
the segment, accounting for 74% of the segment sales. The companies
of the Group are the only soda manufacturers in Poland. The sales
slump recorded in the soda segment compared to the first half of
2004 was caused by reduced internal demand and lower exports
profitability (unfavourable exchange rates).
Soda35%
Agrichemical15%Petrochemical
15%
Inorganic12%
Organic9%
Other 7%
Silicates and glassproducts5%
Pharmaceutical2%
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Report From Operations of the Ciech Group In the First Half of
2005
8
UAgrochemical Segment The agrochemical segment accounted for 15%
of the Group's total sales in the first half of 2005. It is the
home segment of the parent company, Ciech SA, which exports
fertilisers and imports base stock for fertiliser manufacture, and
of the subsidiary Fosfory Sp. z o.o. which manufactures fertilisers
and sells them on the domestic market. The key income-generating
products here are fertilisers, which account for over 84% of the
segment's income. The sales increase in the segment compared to the
first half of 2004 was thanks to Ciech SA increasing their
fertiliser exports following acquisition of additional stock from
Polish suppliers, and their imports of base stock for fertiliser
manufacture. Domestic fertiliser sales managed by the subsidiary
Fosfory Sp z o.o. decreased compared to the first half of 2004 due
to the shorter fertilisation periods resulting from extended
periods of snow cover in the fields. UPetrochemical Segment The
petrochemical segment accounted for 15% of the Group's total sales
in the first half of 2005. The key product here is ethylbenzene,
accounting for 44% of the segment income. The main entities
operating here are Ciech SA and Petrochemia Blachownia SA, and, to
a limited extent Cheman SA. The lower segment income resulted from
the reduced outputs of Petrochemia Blachownia, which limited its
ethylbenzene volumes to mitigate the effects of unfavourable
selling prices, and Ciech SA's gradual withdrawal from the liquid
fuels market. UInorganic Segment The inorganic segment accounted
for 12% of Group’s total income in the first half of 2005. The main
manufacturer in the segment is the subsidiary Alwernia SA, which
manufactures phosphorus and chromium, compounds. The company uses
the trading services of Ciech SA to import base stock and sell
certain products. The main product in the segment is sodium
tripolyphosphate, generating 39% of its total income. The segment
sales were similar to the half-year sales recorded in 2004. But the
product distribution in the segment is gradually changing, with
focus being shifted from chromium compounds to the other inorganic
products manufactured in that segment. UOrganic Segment The organic
segment accounted for 9% of Group's total sales in the first half
of 2005. The key player in that segment is Ciech SA, which renders
exports agency services, usually on a consignment basis. The main
products of the segment are plastics, which account for 50% of the
total segment income. Other major contributors to the segment
revenues are epichlorohydrin and isocyanates (TDI); throughout the
first half of 2005, Ciech SA exported those products on a
consignment basis. The year-on-year drop in the segment's half-year
sales was due to certain changes in payment arrangements (switch to
consignment sales in 2005), and due to Ciech SA withdrawing from
nonylphenol exports, and reducing the epichlorohydin export
volumes. USilicates and Glass The segment of silicates and glass
accounted for 5% of the Group's sales in the first half of 2005.
The main manufacturer in this segment is the subsidiary
Vitrosilicon SA, which manufactures silicates, glass blocks, and
glass lanterns. Vitrosilicon SA is the only manufacturer of glass
blocks in Poland. The largest contributors to the segment income
for the first half of 2005 were glass blocks and lanterns, which
accounted for approx. 51% of the segment's income. Silicates are
mainly sold for export, usually via Ciech SA. The increase in the
segment's sales compared to the first half of 2004 resulted from
bigger sales recorded for the entire product range, brought about
by favourable market developments and higher demand.
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Report From Operations of the Ciech Group In the First Half of
2005
9
The figure below shows the Group's sales income distribution by
leading products.
Figure 1. Sales income distribution by leading products
Source: Ciech SA UGross Sales Profit The consolidated gross
sales profit for the first half of 2005 was 247,195,000 PLN, which
was about 10% less than generated in the corresponding period of
2004. The gross sales profit recorded for the first six months of
2005 was mainly impacted by the disadvantageous trends on the
currency market (the average EUR/PLN exchange rate in the first
half of 2005 was 4.07 compared to 4.72 in the first half of 2004),
and the higher costs of the base stock used in manufacture. The
increase in base-stock prices was compensated by reducing the
base-stock usage and changing the soda-product prices at the
beginning of 2005. UOperating Profit (EBIT) In the first half of
2005, the operating profit amounted to 52,998,000 PLN. This means a
year-on-year decrease of approximately 36%. The decline was due to:
(a) lower gross sales profit (by 26,734,000 PLN) and (b) higher
loss on other operating activity (by 4,334,000 PLN – mainly after
creation of loss reserves and revaluation of receivables). The drop
in EBIT was also partly due to a 1,776,000 PLN reduction in the
general management costs, and the operational excellence programmes
aimed at reducing the use of base stock and streamlining the
expenditure. The financial impact of those programmes in the first
half of 2005 was estimated at 8 million PLN. UNet Profit The
consolidated net profit for the first half of 2005 was 57,021,000
PLN. The net profit for the shareholders of the Parent was
51,780,000 PLN. The net profit margin was 4.8% (4.2% the year
before). The share of minority interests in the net profit was
5,241,000 PLN. As in the previous year, the core business was the
main source of profit (gross sales profit less cost of sales and
general management costs). The net profit was also owed to the
positive balance of financial income and expenses in the amount of
14,321,000 PLN. The profit achieved on
Other 36%
Soda ash25%
Fertilisers12%
Benzene and ethylbenzene8%
Sodium bicarbonate2%
Sodium tripolyphosphate5%
Pharmaceuticals2%
Sulphur2%
Salt4%
Plastics4%
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Report From Operations of the Ciech Group In the First Half of
2005
10
financing activities resulted mainly from the sale of shares of
Ciech SA by the Group entities in a public offering (the profit on
the transaction was 17,815,000 PLN). The net profit was affected by
the loss of the subsidiary Cheman SA (7.5 million PLN). The table
below shows the key business operations shaping the profit, and the
comparative figures for the first half of 2004. Table 2. Financial
performance by type of business operations (‘000 PLN)
1st half of 2005 1st half of
2004 2005/2004 Dynamics
1. Profit on operating activities 52 998 82 393 -35.7%2. Balance
of income from and expense on financing activities 14 321 -12 684
-3. Share in the profits of subsidiaries accounted for by the
equity method
5 244 -3 466 -
4. Income tax 15 542 15 905 -2.3%5. Net profit (1+2+3-4) 57 021
50 338 13.3%6. Net profit attributable to minority interests 5 241
4 644 12.9%7. Profit for the shareholders of the parent (5-6) 51
780 45 694 13.3%
Source: Ciech SA
Balance Sheet UEquity The consolidated equity of the Ciech
Group's Parent at the end of the first half of 2005 was 957,347,000
PLN, which was 267,482,000 PLN more than in the preceding year. The
key equity driver were the proceeds from the issue of shares in the
amount of 192,347,000 PLN, and the net profit of 51,780,000 PLN
generated for the Parent’s shareholders in the first half of 2005.
UNon-Current Assets At June 30th, 2005, the Group's non-current
assets accounted for 53% of the balance-sheet total, at 896,935,000
PLN. Their share in the total assets decreased compared to the
preceding year, even though fixed assets increased by 5,466,000
PLN. The reason was the high rate of increase in the current
assets. Non-current assets comprised mainly property, plant, and
equipment, which accounted for about 89% of the total non-current
assets. UCurrent Assets At June 30th, 2005, the Group's current
assets accounted for 47% of the total assets. Current assets
comprised mainly: (a) trade and other receivables – 66.5% of
current assets, (b) inventories – 21% of current assets (c) cash
and cash equivalents – 8%. Compared to the balance at 30.06.2004,
current assets increased by 16%, owing to increases in: (a) the
inventories (by 48,600,000 PLN), (b) trade and other receivables
(by 23,343,000 PLN), (c) short-term investments (by 19,473,000 PLN)
and (d) cash and cash equivalents (by 21,546,000 PLN). The increase
in inventories resulted mainly from the import of a larger batch of
phosphorus stock to take advantage of the temporary price cuts and
the good dollar exchange rates (Fosfory, Alwernia). The increase in
short-term investments and cash was owed to the proceeds from the
issue of shares in February 2005. UConsolidated Debt The total
short- and long-term liabilities of the Ciech Group as at June
30th, 2005, reached 615,977,000 PLN, which was 20% less than at
June 30th, 2004. Long-term liabilities accounted for 17% of the
total liabilities. They were 14,440,000 PLN less than at June 30th,
2004. Short-term liabilities decreased by PLN 140,134,000 PLN
compared to June 30th, 2004, owing to bank loan repayments. Bank
liabilities accounted for 28%, and trade and other liabilities
accounted for 67% of the total short-term liabilities. Net debt as
at June 30th, 2005 (comprising bank loans, other loans, and other
financial liabilities less cash) amounted to 113,091,000 PLN
(260,667,000 PLN in the preceding year). Such a big net debt
reduction resulted from repayment of part of the current loans, and
a simultaneous increase in cash (mainly with the gains from the
public issue of shares). This also led to a drop in the Group's
debt ratio (calculated as the ratio of net debt to the
balance-sheet total) from 16.6% at June 30th, 2004 to 6.7%.
Financial leverage (the ratio of net debt to net debt plus equity)
as at June 30th, 2005 was 9.6% compared to 24.6% in the preceding
year.
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Report From Operations of the Ciech Group In the First Half of
2005
11
The current ratio, calculated as the ratio of total current
assets to total short-term liabilities, amounted to 1.53, showing a
significant improvement in liquidity compared to the same period of
the previous year, when that ratio stood at 1.04. UCash Flows Net
cash flows in the first half of 2005 amounted to 28,796,000 PLN.
Net cash from operating activities was 1,311,000 PLN. The key cash
driver, in addition to the net profit plus amortisation, was
movements in current assets: (a) decrease in liabilities
(-64,480,000 PLN) and (b) increase in inventories (-35,844,000
PLN). The balance of inflows and outflows from investing activities
was a negative figure, and amounted to 45,658,000 PLN. The most
important half-year expenditure included expenses on fixed assets
by the manufacturing companies, and expenses connected with the
investing activity of Ciech SA after obtaining the funds from the
issue of shares. The largest investment income was earned on the
sale of Ciech SA's shares by the Ciech Group companies. The main
sources of growth in cash were the cash flows from financing
activities, the balance of which was 73,143,000 PLN. The inflows
came mainly from the issue of shares, and a large part of those
inflows was used to repay current loans. Cash as disclosed in the
cash-flow statement at the end of June 2005 totalled PLN 65,566,000
PLN. 1.4 Seasonal or Cyclical Patterns in the Operations of the
Ciech Group Ciech SA's trading activity involves many chemicals
that are used as raw materials. The raw-material markets are
characterised by high cyclicality, prompted by the volatility of
the world economies. The market prices of such oil-derivative
products as benzene, toluene, ethylbenzene are most heavily
affected by market cyclicality. The differences in the prices of
those products range from 50% to over 100% over several years
(3-5-year periods). In case of inorganic chemicals (soda ash,
soda-based products, mixed and phosphate fertilisers), the
differences in market prices are lower, even immaterial. Income
from the sales of goods and materials and income from the sales of
products and services is not characterised by cyclicality or
seasonality. This is because there is a large number of product
ranges (several thousand types of goods and products) which
complement each other in terms of the sales they generate in the
different periods, and level each other out when factored in the
total income. Seasonality has a relatively small impact on the
Group's overall sales, as it overlaps with other factors, which
include: impact of global prices and market cycles exchange rate
fluctuations delays and rescheduling of large deliveries the
subcontractors' manufacturing schedules downtime maintenance and
operating breaks at manufacturing plants, capacity increases by the
manufacturing affiliates.
The Ciech Group's level of income and financial performance
depends, largely, on the general standing of the economy. Cyclical
fluctuations in income and profit are especially noticeable in the
organic segment, which is marked by high-demand cycles. Because
almost half of the Group's revenues are from sales of inorganic
chemical products to stable markets, the fluctuations in revenues
and profit are relatively small. The sales levels recorded in the
consecutive quarters are usually similar. Additional factors
include: stable sales structure large share of product supply by
the Group's manufacturing entities small share of finished products
sales to end customers and the resulting low sensitivity to changes
in demand. large share of loyal customers in the total sales (high
rate of customer loyalty) diversity of the operations, and of the
export markets and domestic markets.
So, the sales are characterised by high cyclicality and an even
spread of sales throughout the year.
1.5 Financial Performance Drivers Of the Ciech Group In the
first half of 2005, one of the key macroeconomic drivers that
continued to boost the Ciech Group's operations was Poland's new
membership in the European Union, which rallied the domestic market
and chemicals exports and facilitated the trade exchange between
Poland and the EU (e.g. no customs clearance), Positive factors
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Report From Operations of the Ciech Group In the First Half of
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12
• Good prospects for improvement in Poland’s farming industry,
and the resulting increase in demand for agrochemicals in this
economic sector
• Continued uptrend in the European glass industry (main buyer
of soda ash) • Improvement of the situation in the construction
industry, which is an indirect recipient of many chemical
products (long-expected increase in construction and assembly
sales) • Continuous upswing in the artificial fertiliser industry
(especially with respect to mixed and phosphate
fertilisers: growing outputs, exports volumes, and export
prices) • Sale of Ciech SA's shares by the subsidiaries
Negative factors
• High volatility of the chemicals market – rapid changes in
price levels and relations • High base-stock prices:
(i) Enduring high prices of coke (considerably higher than in
the first half of the previous year) resulting in high costs of
soda ash production. (ii) Higher phosphorus prices (iii) Supply
shortage and high prices of potassium salt (iv) Supply shortage and
higher prices of benzol
• Continuously high PLN exchange rates (especially the PLN/EUR
rate) which affect exports profitability • Stagnation with respect
to production and sales in the whole chemical industry (dynamics
close to 0% in
comparison with the high base – very good results in the
previous year) • Substantial decrease in prices of the main
plastics on the domestic market during the 1st half of 2005 •
Enhancement of production capacity by Alwernia's competitors,
leading to an increased supply and
lower mark-ups • Difficulties facing the Polish fertiliser
market due to shorter fertiliser spreading periods • A sharp drop
in cereal prices and the lack of market for cereal sales, leading
to the shortage of funds in
the Polish agricultural sector
1.6 Allocation By the Issuer of the Income from Share Issue
Agro-chemical segment. The construction of the feed phosphate
system in Alwernia has been completed. At
Fosfory, the construction of the system is in progress. The
stage of basic project work has been completed. The system is
expected to be ready in October 2005. Total expenditure on the
systems at both companies was PLN 11,368,000 PLN. On July 8th,
2005, the parent purchased 128,000 shares in ZCh Police SA at the
issue price of 10.30
Segment of silicates and glass products. The glass block
production section is being modernised. The
subsidiary Vitrosilicon SA started to implement an
environment-friendly technology for production of glass blocks. The
modernisation will be finished in May 2006, and will allow doubling
the output from 3.5 million to 7 million blocks. The value of the
investment is 17,988,000 PLN
Petrochemical segment. The construction of the BT fraction
extractive distillation system is in progress. The
project is at the stage of technical design and preparation of
the construction site. That investment will enable a substantial
improvement in the purity of benzene and toluene, providing an
opportunity to look for new chemical synthesis markets in Poland
and abroad. The expenditure of the project will amount to about 35
million PLN. Completion is scheduled for the 2nd quarter 2006
Organic segment. The company submitted a bid for the purchase of
majority stakes in ZCh Zachem and
ZCh Organika Sarzyna Soda segment. One of the soda manufacturing
plants started to build a monohydrate system to launch
production of heavy "monohydrate" soda, which has better
physical properties compared to the soda currently manufactured by
the Ciech Group, and which will better meet the customer
expectations. The monohydrate system project will enable the Ciech
Group to strengthen the market position. The investment is planned
to be completed by the end of the first quarter 2007. The estimated
cost of construction of the monohydrate system is about 47.2
million PLN. In addition, the company is awaiting a decision of the
State Treasury concerning repurchase of small stakes in the soda
companies
1.7 Major Research and Development Achievements of the Ciech
Group
Development and production launch of fodder phosphates
containing 10 – 15 % of sludge II from concentration of EKF
solutions at Alwernia SA
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The laboratories developed formulas for winning fodder
phosphates containing 10 to 15 % of sludge, the by-product of
pentasodium triphosphate production, from extractive phosphoric
acid. It was proven that the resulting mono- and dicalcium fodder
phosphates comply with all applicable requirements, both in terms
of their composition, and of the impurities content. The method
involving the over-15 % phosphorus derived from the sludge was
implemented on a commercial scale for dicalcium fodder
phosphate
Development of a method for repulping post-neutralisation sludge
from pentasodium triphosphate production on the basis of extractive
phosphoric acid at Alwernia SA. The laboratories developed a
formula for obtaining sodium phosphates from post-neutralisation
sludge and from concentration, to reduce P2O5 and sodium losses
during pentasodium triphosphate production on the basis of
extractive phosphoric acid. The tests were also carried out in a
semi-technical scale, showing the potential for washing ca. 25-30%
of P2O5 and 30-35 % of sodium iodine. Implementation of so-called
repulping was proved highly profitable, and will be launched on a
commercial scale. The ultimate result will be P2O5 loss reduction
from the current 18-20% to 10-12%
Development and implementation of a liquid calcium nitrate
production system at Alwernia SA The laboratories developed a
method for producing liquid calcium nitrate on the basis of nitric
acid, a by-product of the "NITRON” SA technology, and hydrated
lime. Tests were also conducted on a commercial scale to obtain
liquid nitrogenous fertiliser which meets all EC requirements for
fertilisers. Sample batches of several tonnes were given to
customers for evaluation
Research work at the sediment ponds and the surrounding areas of
Janikosoda SA. The research involved measurement of the degree of
pollution of underground waters, the stability of the embankments,
and the environmental impact of reclamation of the closed-down soda
ash sediment dumps. Reclamation work was continued on the sediment
ponds by applying a new technology using ash and sewage sediment.
Research is underway with regard to the condition of the
soil-forming layer being created, and the emerging flora
Research work at the sediment ponds and the surrounding areas of
Soda Mątwy SA. The main research in the first half of 2005, covered
such topics as reclamation of sediment pond embankments, increasing
the cooling capacity for clear sewage drained to the Vistula,
reduction of ammonia use and emissions, potential uses of process
heat and waste heat, disposal of eluate from the Raw Soda system
centrifuges, possibilities to replace the direct-dryer heating
system at the Calcium Chloride unit, reduction of post-drying gas
impurities at the Calcium Chloride unit, improvement of the flow
rate of soda – anti-caking agent, launch of sodium percarbonate
production, soda waste disposal – production of sorbents, fillers,
and fertilisers, production of high-purity products.
Launch of production of a new-generation environment-friendly
non-organic binding agent for iron- and non-ferrous metal alloy
casting at Vitrosilicon SA A project is underway to launch
production of sodium water glass modified with organic additives,
based on the products already in place. The new binder will be used
in cast-iron and cast-steel foundries, and partly also (a new
advancement) in non-ferrous metal alloy foundries producing
moulding sand casts. It will be recommended for use in mould
production and, largely, also in all types of casting cores. The
successful application of sample batches in commercial foundries
shows that the modified water glass can be widely used in the
non-ferrous metal casting industry.
Lithium Silicate Production Growth Vitrosilicon SA continues its
efforts to develop a lithium silicate production technology. The
research is very advanced, and the results breed patent hopes. The
lithium-modified potassium and sodium water glass obtain during the
research was applied in the coated electrode industry where a high
degree of arc ionisation is required during welding. The commercial
application was successful.
1.8 Environmental Protection In the first half of 2005, the
manufacturing plants of the Ciech Group continued to operate in
accordance with the applicable laws and administrative decisions
obtained. The Group pursues an environmental policy aimed at
minimising the negative impact of the manufacturing operations on
the natural environment. All manufacturing companies hold the
quality management certificates ISO 9001:2000, and most of them
(except for Boruta–Kolor and GZNF Fosfory) hold the environmental
management certificates ISO 14001:1996. Two members of the Ciech
Group hold the work safety management certificates OHSAS
18001:1999; they are Petrochemia Blachownia and Vitrosilicon. The
certificates mean that the certifying bodies conduct periodical
audits in order to confirm compliance with the quality and
environmental norms, as well as adherence to the management rules
as required by the relevant norms. All the manufacturing companies
of Ciech Group want to minimise environmental impact by constantly
modernising their technologies and equipment and ensuring
compliance with EU requirements. One of the most important recent
efforts to that end was implementation of the requirement to obtain
integrated licenses. Most of the companies have already submitted
their applications for integrated licenses to the relevant
administrative bodies and are awaiting decisions, and Zakłady
Chemiczne Alwernia S.A., Petrochemia Blachownia SA and Vitrosilicon
SA (Żary plant) have already received their integrated licenses. In
addition, the manufacturing companies began to look into the
effects of implementation of the draft REACH regulation.
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Report From Operations of the Ciech Group In the First Half of
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Alwernia SA is working to adapt its storage area to the
applicable regulations on waste segregation and storage. A project
for the redevelopment and singling out of new quarters in the
production waste storage area is being developed. The company also
obtained an integrated licence for production of fodder phosphates.
Fosfory Sp. z o.o. modernised their DOYLE's scrubbers by adding
another absorption fluid circulation. Soda Mątwy SA built
embankments around the emergency cooling ponds, a redundant gas
cleaning system, modernised the intermediate pumping station and
the water and sewage system, modernised the calcium product system
devices, modernised the Calcium Chloride apparatus and equipment,
and reclaimed the settling pond slopes.
1.9 Investing Activity
1.9.1 Investments In The First Half Of 2005 Total capital
expenditure at the Ciech Group in the first half of 2005 amounted
to 53,600,000 PLN. Total capital expenditure at Alwernia SA in the
first half of 2005 amounted to 4,509,000 PLN. The projects
included:
• Expansion of the EKF-based orthophosphate system • Launch of
production of liquid and crystalline calcium nitrate • Fodder
phosphate production system • Modernisation of the phosphorus
storage facilities • Launch of by-product-based fertiliser
production
Total capital expenditure at the Blachownia Group in the first
half of 2005 amounted to 5,900,000 PLN. Most of that amount was
expended on the construction of an extractive distillation system
and an R2 tank to increase the storage capacity. Total capital
expenditure at Fosfory Sp z o.o. in the first half of 2005 amounted
to 7,642,000 PLN. The projects included:
• Construction of a fodder phosphate system • Modernisation of
the Nabrzeże Chemików wharf • Construction of a phosphoric acid
terminal • Modernisation of the sulphuric acid system •
Modernisation of the fertiliser system – switch to waste-free
fertiliser production • Replacement of pneumatic transport of
ground phosphate rock with motor transport.
Total capital expenditure at Alwernia SA in the first half of
2005 amounted to 14,700,000 PLN. The following were completed and
put into operation in the first half of 2005:
• Two process gas compressors • A new dense soda ash screening
system • Modernised dense soda ash loading system • Constant
monitoring of chimney emissions
Total capital expenditure at Soda Mątwy SA in the first half of
2005 amounted to 14,588,000 PLN. The projects included:
• Production of monohydrate soda, • Alternative water supply in
the plant, • Boosted production of sodium bicarbonate, •
Replacement of a preliminary dust concentration decanter, •
Bicarbonate centrifuging, • Modernisation of the plant’s cabling
and power network, • Modernisation of control and measurement
systems, • Automation and modernisation of the boiler room, •
Modernisation of the RH-DS apparatus, • Modernisation of TBS turbo
compressors, • Modernisation of the Calcium Chloride apparatus and
equipment, • Modernisation of the carbonating towers, •
Modernisation of the FCH lime kilns,
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Report From Operations of the Ciech Group In the First Half of
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• Limestone crushing, • Purchase and implementation of a new
version of the ERP system.
Total capital expenditure at Vitrosilicon SA in the first half
of 2005 amounted to 1,198,000 PLN. The projects included:
• Boiler room modernisation at the Iłowa plant • Purchase of
vehicles • Modernisation of the computer network • 5,000,000 were
paid as an advance toward refractory materials which were used to
build a furnace, and
toward delivery of technology equipment for the glass brick
production unit.
1.9.2 Investment Plans For the Next 12 Months The Ciech Group
plans to allocate 207,500,000 PLN on capital expenditure in 2005.
That amount includes mainly Ciech SA's capital expenditure, and
expenditure on construction of production systems at the
subsidiaries. Alwernia SA is planning to complete the following
projects by the end of the year:
• EKF system • Modernisation of the dust extraction point •
Fodder phosphate system • Calcium nitrate production system
Environmental projects will also be launched in the first half
of 2006, including a fertiliser production system (super phosphate,
nitrate and potassium sulphate) based on production waste, and
redevelopment of the waste storage area Blachownia SA is planning
to continue to build an extractive distillation system and to buy a
parcel of land from Ciech SA which houses stocking tanks for the
benzol processing system. Fosfory Sp. z o.o. is planning the
following projects:
• Construction of a fodder phosphate system. • Modernisation of
the Nabrzeże Chemików wharf to be able to service ships carrying
liquid cargo. • Construction of a Phosphoric Acid Terminal:
construction of a new, and adaptation of the existing
phosphoric acid tanks, construction of a phosphoric acid loading
station • Construction of a phosphoric acid storage tank for the
purposes of fertiliser production, later to be used
in the discontinuation of waste phosphogypsum production stored
in Wiślinki. • Modernisation of the sulphuric acid system. As
Poland is now part of the European Union, the Sulphuric
Acid Production Plant has to comply with the standards and
requirements of the BAT (Best Available Techniques) for sulphuric
acid production. The warehouse facilities for sulphuric acid will
also be enlarged.
• Modernisation of the fertiliser system to make it capable to
produce new types of compound fertilisers at zero or minimum waste.
The fertilisers will be enriched with calcium, sodium, and
sulphur.
• Replacement of pneumatic transport of ground phosphate rock
with motor transport. Generation of compressed air, the bulk of
which is used to transport ground phosphate rock in the production
shops, requires a lot of power. Ground phosphate rock transport
using compressed air causes emissions to the atmosphere, even
despite the filtering devices.
Major investments aimed at increasing the effectiveness of the
production processes of Janikosoda SA planned for the next 12
months include:
• Modernisation of the limekiln charge preparation system
(anthracite) • Limestone crushing system
Soda Mątwy's investments will mainly focus on the monohydrate
soda production system. Vitrosilicon's major investments in the
next 12 months will include:
• Modernisation of the glass block production unit. •
Construction of new finished-product warehouses • Expansion of the
sodium water glass production unit and of the water glass warehouse
• Construction of a glass lantern-paining unit • Construction of an
experimental amorphous silicate unit • Purchase of a numerically
controlled machine tool • Relocation and modernisation of the plant
laboratory
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Report From Operations of the Ciech Group In the First Half of
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1.10 Changes In Organisational Linkage, Major Capital
Investments
1.10.1 Capital investments and divestments in the first half of
2005, financing In the first half of 2005, Ciech SA continued its
investment and divestment activities started in the preceding year
in accordance with the overall Ciech Group growth strategy, by
consolidating its shareholding stakes and streamlining the Group's
organisation, and preparing for equity investments using the income
from the issue of shares. On 6th June 2005, Ciech SA, IZCh Soda
Mątwy SA, and JZS Janikosoda SA acquired 100% shares and
votes in Vitrosilicon SA because of a forced buyout of minority
interests. The total value of the transaction was 64,800,000 PLN.
Ciech holds a 60.4% stake in Vitrosilicon SA, Janikosoda SA holds a
19.80% stake, and Soda Mątwy SA holds a 19.80% stake.
By way of an agreement signed on June 16th, 2005, Ciech SA its
whole stake in Polcommerce Kft of
Budapest to Ciech-Polfa Sp. z o.o. for the amount of 203,000
PLN. Polcommerce Kft. operates mainly in the pharmaceutical sector.
The transaction was a consequence Ciech SA spinning off its
pharmaceutical business as a separate unit, Ciech Polfa Sp. z o.o.,
and transferring the part of the sales network dealing with the
pharmaceutical industry to Ciech Polfa Sp. z o.o.
On March 11th, 2005, the General Assembly of Zach-Ciech Sp. z
o.o. resolved to initiate liquidation of the
company. Alwernia SA sold their shares in the subsidiary
Oczyszczalnia Alwernia and 95,100 shares of Ciech SA at 24
PLN per share. Petrochemia-Blachownia SA sold 236,878 shares of
Ciech SA at 24 PLN per share.
Fosfory Sp z o.o. sold 190,208 shares of Ciech SA at 24 PLN per
share.
Janikosoda SA sold 440,260 shares of Ciech SA through a public
offering at 24 PLN per share.
Soda Mątwy sold 335,924 shares of Ciech SA through a public
offering at 24 PLN per share.
1.10.2 Equity Investment and Divestment Plans For the Next 12
Months The investments and divestments planned for the next 12
months will be carried out in line with the adopted growth strategy
designed to increase the Group's value. Efforts are underway to
acquire new equity investment projects, both in Poland and abroad.
The purpose of those efforts is to take over domestic and foreign
manufacturers of selected chemical products, thereby reinforcing
the Ciech Group’s standing in its current markets and providing
opportunities for development of the Group’s operations in other
segments. The Ciech Group will complete the following as part of
the projects scheduled for the next 12 months:
• continue to buy shares in soda companies, with the ultimate
aim of acquiring a 100% stake in the share capitals of IZCh Soda
Mątwy SA and IZCh Janikosoda SA. The privatisation agreements of
both companies provide that Ciech SA has the right to purchase both
blocks of shares for approximately 40 million PLN.
• continue the process of pre-investment analyses of soda
manufacturing companies in Central and Eastern Europe.
• take part in the privatisation of chemical companies in
Poland.
1.11 Securities issues at Ciech
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The share capital was increased by 41,020,000 PLN on February
15th, 2005, following issue of C shares with a nominal value of 5
PLN each. No share redemptions occurred in the period concerned. On
March 22nd, 2005, CIECH SA redeemed its previously issued
commercial papers with a par value of 15,000,000 PLN at the
maturity date Within the first half of 2005 ended on June 30th,
2005, the Company did not issue any debt securities, including
bonds, promissory notes, or short-term debt securities.
1.12 Current and Projected Financial Standing of the Ciech Group
The assessment of how well the Group's financial resources are
managed was based on a financial-ratio analysis, including
profitability ratios, liquidity ratios, asset turnover ratios, and
debt ratios. It is the Group's key objective to maintain full
liquidity. The Ciech Group is fully capable of meeting all of its
financial obligations. The decision-making procedures applied to
purchases of both base stock, and auxiliary materials and services,
provide that the best possible financial terms should always be
negotiated, with particular emphasis on the payment deadlines. The
same rule applies to sales, where additional care is exercised to
determine the partner's reliability, the degree of certainty as to
recoverability of the payments receivable, and, where necessary, to
apply execution measures.
Ciech Group's profitability analysis In the first half of 2005,
even though demand for chemical products was lower and the currency
exchange rates were unfavourable (the zloty was strong against
other currencies, causing lower exports profitability), the sales
income remained similar to the income recorded in the same period
of 2004. This was possible because prices of certain chemical
products increased compared to the first six months of 2004, which
was especially evident in the soda sector. The half-year on
half-year profitability slump was mainly caused by: (a) currency
exchange trends disadvantageous for exporters and (b) higher prices
of the base stock used by the Group to manufacture its products.
The tables below show the main figures concerning financial
performance and profitability:
Table 3. Consolidated profitability ratios for the Ciech
Group
Specification 1st half of 2005 1st half of 2004
Net sales income 1 079 186 1 078 738Sales profit 64 485 89
546Operating profit 52 998 82 393Net profit 57 021 50 338Return on
sales (%) 5.98% 8.30%Return on operating activity (%) 4.91%
7.64%Return on Sales (%) 5.28% 4.67%Return on Assets (%) 3.39%
3.21%Return on Equity (%) 4.85% 5.73%
Source: Ciech SA
Calculation principles: profitability ratios – the ratio of the
relevant sales profit, operating profit, and net profit figures for
the period concerned to the net income from sales of products,
services, and materials, return on assets (ROA) – net profit /
assets as at the period-end, return on equity (ROE) – net profit of
the equity holders of the parent/ equity as at the period-end.
Liquidity of the Ciech Group Ciech SA’s financial liquidity
position in the first half of 2005 improved considerably, and the
liquidity ratios met the recommended safety standards. The most
important driver of the improvement in liquidity was the issue of
shares. Thanks to the cash earned from the issue, the amount of
short-term financial assets increased, while the level of
short-term debt decreased. The key liquidity ratios are shown in
the table below:
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Table 4. Liquidity ratios for the Ciech Group
Specification 1st half of 2005 1st half of 2005
Current ratio 1.53 1.04Quick ratio 1.21 0.85
Source: Ciech SA
Calculation principles: current ratio – the ratio of current
assets to total current debt at the period-end; the current ratio
reflects the company’s ability to repay its current debt using its
current assets. quick ratio – the ratio of current assets less
inventories to total current debt at the period-end; the quick
ratio reflects the company’s ability to accumulate cash in a short
time to finance its payable debt.
Working capital and turnover ratios for the Ciech Group The
demand for current assets at the end of June 2005 amounted to
325,500,000 PLN, and had increased by 43% within 12 months. This
was mainly due to: (a) larger inventories and (b) higher trade
receivables. Table 5. Working Capital of the Ciech Group ('000
PLN). Specification 30.06.2005 30.06.2004 1. Current assets 786 447
675 8892. Cash and other short-term investments 91 604 50 5853.
Adjusted current assets (1-2) 694 843 625 3044. Short-term
liabilities 512 706 652 8405. Short-term loans and other financial
liabilities 143 363 255 3746. Adjusted short-term debt (4-5) 369
343 397 4667. Working capital (1-4) 273 741 23 0498. Working assets
demand (3-6) 325 500 227 8389. Net cash balance (7-8) -51 759 -204
789
Source: Ciech SA
The high amounts of the Ciech Group's trade receivables and
payables against the disclosed income are driven by the type of
sales (consignment) conducted as part of the trading operations of
the Parent. The cash conversion period was extended by 20 days in
the first half of 2005 compared to the first half of 2004, mainly
as a result of a reduction in the trade payables (leading to the
liabilities turnover period being 9 days shorter) accompanied by an
increase in the inventories (the inventory turnover period is 8
days longer).
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Table 6. Turnover cycles for Group's main working capital items
(days)
Specification 1st half of 2005 1st half of 2004
Inventory turnover 30 22Trade receivables turnover 71 68Trade
payables turnover 39 48Operating cycle 101 90Cash conversion cycle
62 42
Source: Ciech SA
Calculation principles: inventory turnover – the ratio of
inventories at the period-end to the operating cost for the period,
multiplied by the number of days in the period, receivables
turnover – the ratio of trade receivables at the period-end to the
net sales income for the period, multiplied by the number of days
in the period, payables turnover – the ratio of trade payables at
the period-end to the operating costs for the period, multiplied by
the number of days in the period, operating cycle - total inventory
turnover and trade receivables turnover days cash conversion cycle
– the difference between the operating cycle and the trade payables
turnover cycle
Ciech Group's Debt At the end of the first half of 2005, the
Ciech Group's debt was at a safe level, lower than the year before.
Total liabilities were equal to ca. 37% of the assets. The high
ratio of equity to assets indicates that external financing can be
increased in the future. Such financing will support the Group in
carrying out its strategic tasks, and in particular in acquiring
new operations. The table below shows the key debt ratios. Table 7.
Debt Ratios for the Ciech Group
Specification 1st half of 2005 1st half of 2004
Total debt ratio 36.6% 49.2%Long-term debt ratio 6.1% 7.5%Debt
to equity ratio 57.7% 96.7%Equity to assets ratio 63.4% 50.8%
Source: Ciech SA
Calculation principles: total debt ratio – the ratio of long-
and short-term debt to total assets; the ratio reflects the share
of external financing sources. long-term debt ratio – the ratio of
long-term debt to total assets; it reflects the share of long-term
liabilities in the overall financing of operations. debt to equity
ratio – the ratio of total liabilities to equity. equity to assets
ratio – the ratio of equity to total assets; it reflects the share
of equity in the financing of operations.
1.13 Assessment Of Investment Project Feasibility Against the
Status Of the Resources In Place, Taking Into Consideration
Possible Changes In the Financing Structure.
Most of the capital expenditure planned will be covered from the
Group's own funds allocated from amortisation gains and profit.
Soda Mątwy started to build a monohydrate soda production system in
the first half of 2005. The construction will be largely financed
with a long-term loan taken out with Bank Handlowy. The loan
agreement is currently negotiated, and the desired terms will be
40,000,000 PLN granted for 5.5 years, payable in instalments until
January 2011. Vitrosilicon will finance 20% of its projects alone,
and 80% with bank loans. The financing structure may change,
depending on whether the Company is granted funds by the Ministry
of Economy as part of the "Assistance for
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Report From Operations of the Ciech Group In the First Half of
2005
20
Businesses Making New Investments" Programme. The grant from the
Programme would be allocated to repay the loan earlier. With regard
to acquisitions, the Group can finance most of the expenses with a
long-term bank loan. The Group is not planning to finance its
capital expenditure with securities issues.
1.14 Material Events That Impacted Or Are Likely To Impact the
Company’s Operations and Financial Results
• Launch of privatisation of the 6 largest state-owned chemical
companies, which will lead to substantial
changes on the domestic chemical market. Ciech SA intends to
become involved in the privatisation of selected companies.
• The changes with regard to the ownership structure of the
petrochemical industry in Central Europe (Orlen-Unipetrol), as well
as the planned launch of new systems for manufacture of
polyethylene and polypropylene in the third quarter this year in
Płock (Basell Orlen Polyolefins), will change the situation on the
market, and Ciech SA will have to adapt to the new conditions.
• Extension of the validity period of duty-free import quotas on
potassium chloride from Eastern European countries until April 2006
will make it possible to maintain the competitive edge of that
material, which Ciech SA imports to the Polish market.
• Launch of new products by Alwernia (fodder phosphates,
fertilisers). • Sale of Alwernia SA's idle fixed assets and
transfer of the perpetual lease rights to unused land to the
local
(Gmina) authorities. • Alwernia will start to work together with
the Fertiliser Institute (Instytut Nawozów Sztucznych) in Puławy
to
develop farming fertiliser production technologies. • Fosfory
and Alwernia SA will sign a long-term contract for forwarding and
quay port services with regard to
phosphoric acid handled at the transhipment terminal. •
Application of anthracite in soda production by Janikosoda SA and
completion of a project related to dense
soda loading.
2 Growth Prospects for the Ciech Group The growth will be
determined by both the rate at which the Group will pursue its
growth strategy, and by external factors, which include: large
potential for growth in the demand for chemicals in Poland. Use of
chemicals in Western Europe is
almost four times higher than in Poland. interest of foreign
investors in the Polish chemical industry, competitive edge of
Polish chemical products sold on international markets, evidenced
with a high export
dynamics. Ciech SA believes that the positive macroeconomic
trends and the assumed parameters of the Group's key investment
projects will be the driving force for achieving the key strategic
targets, including higher operating profitability in the next two
to three years. The Ciech Group’s short-term goal is to strengthen
its current market position with respect to the core business
segments and key product sales. The Ciech Group's range of products
comprises many “mature” products (soda ash, vacuum pan salt, sodium
bicarbonate) with an established market standing and a stable
growth dynamics. The Group plans the following with respect to
those products: streamline base-stock purchases and product sales
and logistics, modify the manufacturing processes to enhance the
operational excellence and reduce the manufacturing
costs, use market niches to place the Group's core portfolio
products, acquire cheap base-stock in Eastern European and Asian
countries, to reduce the unit costs of production,
With respect to products with higher growth dynamics, (such as
glass blocks, lanterns, epoxy resins, benzene, sodium water glass),
the Group is planning to increase the sales and market shares of
those products. The Ciech Group's long-term efforts will focus on:
strengthening the leading position in the core product markets,
horizontal concentration of the manufacturing processes (from
securing access to cheap base-stock sources
to reaching the end consumer, using own distribution network
where economically sound), manufacturing maximally processed
products with high-potential application markets, defined as the
so-
called “core portfolio.”
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Report From Operations of the Ciech Group In the First Half of
2005
21
2.1 Material risk Factors And Threats And Degree Of Exposure
Situation in the customer industries Ciech SA's largest domestic
customers include the chemical industry, the glass manufacturing
industry, and the plastics industry. How those industries expand,
depends on the general economic situation in Poland. In the first
six months of 2005, the industrial output at fixed prices increased
by a mere 1.5% (12.3% throughout 2004). It can be expected that the
economic downturn forecasted for 2005 (from 5.4% of the GDP in 2004
to ca. 3.5%) will be reflected in lower sales dynamics in the
chemical sector. Note, however, that the situation is a result of
the so-called high base – an exceptionally good economic
performance recorded in the previous year, largely owed to Poland's
accession to the EU. On the other hand, recent economic analyses
indicate that Poland's economic growth rate will be higher in the
second half of 2005. Economic situation in Europe and worldwide The
Ciech Group's activities rely largely on chemical product exports,
the volume and profitability of which depend on the global economic
situation in Europe and worldwide. A global economic slump could
affect the demand for raw materials on the global markets, and,
consequently Ciech SA's exports performance. Situation in the raw
materials market A major portion of the Ciech Group’s turnover is
generated from imports of chemical raw materials. The raw-materials
markets are characterised by high cyclicality, prompted by
fluctuations in the world economies. On the one hand, growing
prices of raw materials force the trading agents to lower their
mark-ups and lead to lower customer demand. On the other hand,
dropping prices are usually a sign of declining demand and the
onset of an economic slump. Raw materials are impacted by the same
trends in the Polish market. If the stable growth rate and steady
prices of chemical raw materials continue, this will benefit the
Ciech Group’s imports of chemical raw materials. Large fluctuations
in demand and prices caused either by a high economic growth rate,
or by an economic slump, will affect Ciech SA’s trade in chemical
raw materials. Growing competition in the soda segment The Ciech
Group's core products include soda products manufactured by the
subsidiaries JZS Janikosoda S.A. and IZCh Soda Mątwy S.A., and sold
by Ciech SA. The continuing concentration of production in Europe
escalates competition from large, supra-regional chemical
corporations that manufacture soda ash. Ciech SA also intends to
join the concentration bandwagon by acquiring soda manufacturers.
Foreign exchange risk Exports constitute a major share of the Ciech
Group's operations. Payments are mostly made in euros. High EUR/PLN
exchange rates increase the profitability of product sales in
foreign markets. Moreover, high EUR/PLN exchange rates are good for
the Group's export sales, which translates into an increase in the
overall sales income Exports denominated in USD are much less
significant for the Group's performance. The USD exchange rates
have no impact on the profit, because they are naturally hedged
with similar volumes of USD-denominated imports. Ciech SA, which is
the agent managing the international transactions of the other
Group members, has the highest exposure to exchange risk. The
exchange risk is constantly monitored, and most of the deals are
hedged with forward contracts and options strategies.
2.2 Growth Forecast The Ciech Group's growth strategy is aimed
at reaching the highest possible company value by creating a strong
regional chemical corporation focused on selected market segments
covering products with high added value, high growth potential, and
complementary in nature.
After the strategic vision is fulfilled, the Group will be
transformed to a chemical corporation composed of four separate
divisions managing the four key areas of the chemical sector: a
soda division, phosphorus division, inorganic division, and organic
division. Each division will manage a dedicated product portfolio
with parameters guaranteeing an income level for the Group of
approximately 700 million Euros per year, and an EBITDA of more
than 12%.
Delivery of the growth strategy will involve: – increasing the
added value in the soda sector by means of internal consolidation
of the soda segment within
the soda division, and through technology investments, – working
toward a leading position in the Polish markets of phosphorous
fertilisers and products, as well as
compound fertilisers, by expanding the phosphorus division
through fixed-asset investments in the
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Report From Operations of the Ciech Group In the First Half of
2005
22
subsidiaries GZNF Fosfory Sp. z o.o and SCh Alwernia SA, and by
equity investments in the phosphorus fertiliser industry.
– expanding the inorganic division on the basis of the
subsidiary Vitrosilicon SA, mostly through investments in
increasing the production capacity, and also through equity
investments,
– increasing the Ciech Group’s role in creating the value chain
for organic products by taking over the manufacturing stage of
selected products (creation of the organic division) through equity
investments aimed at acquiring Polish manufacturers of organic
chemicals.
Ultimately, the CIECH Group’s operations will comprise almost
exclusively the manufacture of and trade in the products of the
so-called “core portfolio,” meeting the predefined added-value
requirements. Portfolio streamlining will be carried out on two
levels: one the one hand, the share of non-core products and goods
in the Ciech Group’s portfolio will be gradually decreasing, and,
on the other hand, the portfolio will be enriched with attractive
new products that, to date were not part of the trade offering. The
streamlining process will find its reflection in strategic
decisions concerning the Group’s composition. The Ciech Group will
be aiming to take over enterprises (or parts thereof) manufacturing
the products identified as "core.” At the same time, the Ciech
Group’s member companies will be making their own investments to
increase the volumes of core-product manufacturing (organic
growth). While gradually abandoning the non-core portfolio, Ciech
SA will be making divestments from selected manufacturing and
commercial companies which are currently part of the Group. The
divestments are necessary, first, to be able to focus on the core
business and, second, to gain funds to finance the planned
acquisitions and investments. Ciech SA’s trade in non-core
low-yield products will also be gradually reduced. The strategy of
the Ciech Group will be implemented through specific tasks
delegated to the Group members.
3 ATTACHMENTS
3.1 Figures Concerning Main Products, Goods and Services Ciech
SA
01.01.2005 - 30.06.2005
Product, product group, or service Quantity in ‘000 tonnes Net
sales in
‘000 PLN Percentage
share
Dense soda ash 400.5 209 932.0 25.9% Benzene and ethylbenzene
28.7 81 434.7 10.0% Light soda ash 138.5 76 062.1 9.4% Fertilisers
72.0 51 789.8 6.4% Salt 279.8 47 484.5 5.9% Yellow phosphorus 4.7
38 896,. 4.8% Other - 305 911.1 37.7% TOTAL 811 510.8 100.0%
UAlwernia
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales Percentage
share Pentasodium triphosphate 19.7 49 384 58.4 Phosphoric acid
6.7 11 857 14.0 Other products - 23 337 27.6 TOTAL 84 578 100.0
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Report From Operations of the Ciech Group In the First Half of
2005
23
UBlachownia 01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales Percentage
share Ethylbenzene 22.2 61 641 52% Benzene 11.3 30 113 25%
Toluene 5.4 10 282 9% Anhydrous ethanol ['000 litres] 4.1 7 722 6%
Other - 9 135 8% TOTAL 118 893 100%
UFosfory
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales in ‘000 PLN
Percentage share
Superphosphates 30.8 21 948.7 19.7% NPKMg Compound Fertilisers
(Amofosmag) 26.8 20 755.2 18.6% PKMg Compound Fertilisers
(Agrafoska) 17 19 037.0 17.1% NPK Compound Fertilisers (Amofoska)
22.2 18 261.7 16.4% Other - 31 121.6 28.2% TOTAL 111 124.2
100.0%
UJanikosodaU
01.01.05 -30.06.05
Product/Product Group Quantity in tonnes Sales in '000
PLN Share in
total sales Light soda ash 84 352 38 720 22.6% Dense soda ash
194 387 92 203 54.0% Wet vacuum pan salt 167 410 15 406 9.0% Dry
vacuum pan salt 109 009 15 867 9.3% Other 3 253 8 427 5.1%
TOTAL 170 623 100.0% USoda MatwyU
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales Percentage
share Dense soda ash 211 96 925 43.5% Light soda ash 55 25 236
11.3% Sodium bicarbonate 30 18 165 8.1% Calcium chloride 22 11 356
5.1% Other - 71 237 32.0% TOTAL 222 919 100.0%
UVitrosilicon
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales in ‘000 PLN
Percentage share
Glass lanterns 10.6 17 252 34.9% Sodium water glass 28.2 14 184
28.7% Glass blocks 3.2 7 932 16.1% Sodium water glass 14.2 6 026
12.2% Other - 3 999 8.1%
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Report From Operations of the Ciech Group In the First Half of
2005
24
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales in ‘000 PLN
Percentage share
TOTAL 49 393 100% UCheman
01.01.2005 - 30.06.2005
Product, Product Group, or Service Quantity in ‘000 tonnes Net
sales Percentage
share Fuel 3.33 18 077 25.18% Soda products 16.58 11 986 16.70%
Household chemicals and cosmetics 1.93 6 679 9.30% Products for
glassworks 1.79 3 950 5.50% Solvents 1.36 4 611 6.42% Feed
additives and standards 4.80 4 024 5.61% Base stock for the
petrochemical industry and the chipboard industry 1.64 3 995 5.57%
Additives for the food industry 1.40 5 063 7.05% Products for
construction chemicals and peroxide 1.96 3 491 4.86% Water
treatment products 0.37 1 423 1.98% Auxiliary products 0.11 1 355
1.89% Plastics 1.14 4 907 6.84% Other 0.10 2 221 3.10% TOTAL 71 782
100.00%
UCiech Polfa
01.01.2005 - 30.06.2005
Product, product group, or service Quantity in ‘000 tonnes Net
sales Percentage
share Medicines 13.484 55 Pharmaceutical substances 8.043 33
Packaging 2.479 10 Other 504 2 TOTAL 24.510 100.00%
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Report From Operations of the Ciech Group In the First Half of
2005
25
3.2 Market Changes
Ciech S.A.'s major customers in the 1st half of 2005 ('000 PLN)
01.01.2005 - 30.06.2005
Domestic Customers Net sales in ‘000
PLN Share Affiliation with Ciech S.A Zakłady Chemiczne Alwernia
67 755 8.35% Subsidiary Dwory S.A. 63 242 7.79% None Fosfory Sp. z
o.o. Gdańsk 39 997 4.93% Subsidiary Interore SA 28 373 3.50% None
Owens-Ilinois Polska SA 24 490 3.02% None Siarkopol SA Grzybów 23
383 2.88% None Cheman SA 21 795 2.69% Subsidiary Petrochemia
Blachownia 19 455 2.40% Subsidiary Borsodchem 18 251 2.25% None
Landhandel 16 375 2.02% None Other 488 395 60.18% TOTAL 811 511
100.00%
Alwernia Group's customers accounting for more than 10% of the
sales ('000 PLN)
01.01.2005 - 30.06.2005 Customer
Net sales Share Affiliation with Ciech S.A
Reckitt Benckiser 9 383 11.1% None Procter&Gamble 8 501
10.1% None Ciech SA 8 386 9.9% Other 58 308 68.9% TOTAL 84 578
100.00% Petrochemia Blachownia Group's customers accounting for
more than 10% of the sales ('000 PLN)
01.01.2005 - 30.06.2005 Customer
Net sales Share Affiliation with Ciech S.A
Ciech SA 79 877 67.2 Other 39 016 32.8 TOTAL 118 893 100%
Fosfory Group's customers accounting for more than 10% of the sales
('000 PLN)
01.01.2005 - 30.06.2005 Customer Net sales in ‘000
PLN. Share Affiliation with Ciech S.A
Agrolok Sp. z o.o. 12 830.6 12 % None Kazgod Sp. z o.o. 11 351.6
10 % None Ciech SA 6 662.5 6%
Other 80 279.5 72% TOTAL 111 124.2 100%
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Report From Operations of the Ciech Group In the First Half of
2005
26
Janiksoda SA's customers accounting for more than 10% of the
sales ('000 PLN)
01.01.0 -30.06.05 Specification Net sales Share
Affiliation with Ciech S.A
Ciech SA 164.991 96.7% l Other 5 632 3.3% subsidiary
TOTAL 170 623 100.0% Soda Mątwy Group's customers accounting for
more than 10% of the sales ('000 PLN)
01.01.2005 - 30.06.2005 Customer
Net sales Share Affiliation with Ciech S.A
Ciech SA 158 992 71.3 Janikosoda SA 58 897 26.4 Subsidiary Other
5 030 2.3 TOTAL 222 919 100% Vitrosilicon SA's customers accounting
for more than 10% of the sales ('000 PLN)
01.01.2005 - 30.06.2005 Customer
Net sales (PLN ‘000) Percentage share Affiliation with Ciech
S.A
Ciech SA 18176 36.8 Other 31217 63.2 Total 49393 100% Cheman
SA's customers accounting for more than 10% of the sales ('000
PLN)
01.01.2005 - 30.06.2005 Customer
Net sales Share Affiliation with CIECH S.A
KWB Adamów 3 657 5.1% none Trend Glass 1 230 1.7% none Agros
Nova 1 110 1.5% none Other 65 785 91.7% Total 71 782 100% –
Ciech-Polfa Sp. z o.o.'s customers accounting for more than 10% of
the sales ('000. PLN)
01.01.2005 - 30.06.2005 Customer Net sales Share Affiliation
with Ciech S.A
Polfa Pabianice 5,559 22.70% Erekton (Russia) 2,437 10 % Other
16,514 67.30% Total 24,510 100%
Ciech SA's markets in the 1st half of 2005 ('000 PLN) 01.01.2005
- 30.06.2005
Net sales in ‘000 PLN. Goods Services Poland 476 809 5 532
Exports: 296 333 32 837 -European Union 279 119 5 221 -Other
European countries 15 329 896 -Africa 368 24 021 -Asia 836 2 290
-Other 681 404
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Report From Operations of the Ciech Group In the First Half of
2005
27
Alwernia Group
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and Services
Poland 3 337 42 399
Exports: 367 38 475 -European Union 367 20 898 -Other European
countries - 16 043 -Africa - 347 -Other - 1 187
Petrochemia Blachownia Group
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and Services Poland 1 806 105 968
Exports: - 11 119 -European Union - 9 714 -Other European
countries - 1 405
Fosfory Group
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and Services
Poland 14 587 96 537 Janikosoda SA
01.01.05 -30.06.05 Net sales in ‘000 PLN. Goods and Materials
Products and Services Poland 231 170 392
Soda Mątwy Group
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and Services Poland 463 222 226 Exports: - 230
-European Union 230 Vitrosilicon SA
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and Services Poland 846 44 960 Exports: 39 3 548
-European Union 39 3 163 -Other European countries - 370 -Asia -
15
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Report From Operations of the Ciech Group In the First Half of
2005
28
Cheman SA
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and
Materials Products and
Services Poland 71 045 369 Exports: -European Union 197 -Other
European countries 171 -Africa -Asia -Other Ciech Polfa Sp. z o.o.
01.01.2005 - 30.06.2005 Net sales in ‘000 PLN. Goods and Materials
Products and
Services Poland 7.035 499
Exports: -European Union 5.089 -Other European countries 9.651 3
-Africa 6 -Asia 2.077 2 -Other 148
3.3 Changes in supply sources of manufacturing materials, goods,
and services Ciech SA’s suppliers accounting for more than 10% of
the total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier Net purchase
value Share Affiliation with Ciech
S.A
Soda Mątwy SA 154 953.9 22.3% subsidiary Janikosoda 162 629.8
23.4% subsidiary Petrochemia Blachownia 79 682.3 11.5% subsidiary
Other 297 554.5 42.8% Total 694 820.5 100%
Alwernia Group’s suppliers accounting for more than 10% of the
total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier Net purchase
value Share Affiliation with Ciech
S.A
Ciech SA 35 579 43.6 Other 46 024 56.4 Total 81 603 100%
Petrochemia-Blachownia Group’s suppliers accounting for more than
10% of the total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier Net purchase
value Share
Affiliation with Petrochemia-
Blachownia ZAKŁADY KOKSOWNICZE ZDZIESZOWICE SP. Z O.O. 23 116
19.5 None
Ciech SA 19 513 16.5 Other 75 897 64.0
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Report From Operations of the Ciech Group In the First Half of
2005
29
01.01.2005 - 30.06.2005 Supplier Net purchase
value Share
Affiliation with Petrochemia-
Blachownia
Total 118 526 100% Fosfory Group’s suppliers accounting for more
than 10% of the total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier Net purchase
value Share Affiliation with Ciech
S.A
Ciech SA 26 333.4 27% Lotos Mazowsze 3 170.5 3% None Zakłady
Azotowe PUŁAWY 1 748.6 2% None Janiksoda SA’s suppliers accounting
for more than 10% of the total supplies (‘000 PLN)
01.01.05 -30.06.05 Specification Net purchase
value Share Affiliation with
Ciech SA
Elektrociepłownie Kujawskie Sp. z o.o. 57,746 47.86% Indirect
subsidiary Ciech SA 9,695 8.04%Jantrans Sp. z o.o. 2.581 2.14%Total
70.022 58.04%
Vitrosilicon SA’s suppliers accounting for more than 10% of the
total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier Net purchase value
('000 PLN). Share Affiliation with Ciech S.A
Ciech SA 8 970 25.5 PGNiG 5 933 16.9 None Other 20 224 57.6
Total 35 127 100% Cheman SA’s suppliers accounting for more than
10% of the total supplies (‘000 PLN)
01.01.2005 - 30.06.2005 Supplier
Net purchase value Share Affiliation with Ciech S.A
Ciech SA 9 444 16.32% Other 48 428 83.68% Total 57 872 100%
Ciech-Polfa Sp. z o.o.'s suppliers accounting for more than 10% of
the total supplies ('000 PLN)
01.01.2005 - 30.06.2005 Customer Net purchase value share
Affiliation with Ciech S.A