Pdf Consolidated Annual Report of Ciech Group for 2014

Pdf Consolidated Annual Report of Ciech Group for 2014

We are providing a courtesy English translation of our audited financial statements which were originally written in Polish. We take no responsibility for the accuracy of our translation. For an accurate reading of our audited financial statements, please refer to the Polish language version of our financial statements attached hereto. GENERAL INFORMATION Management Board Dariusz Krawczyk Artur Osuchowski Maciej Tybura Supervisory Board PhD Jan Kulczyk Piotr Augustyniak Tomasz Mikołajczak Mariusz Nowak Artur Olech Wojciech Stramski Registered Office of the Company ul. Puławska 182 02-670 Warszawa Polska Certified Auditor KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp. k. ul. Chłodna 51 00-867 Warszawa Polska Dear Sirs and Madams, I am pleased to publicly present the results of the CIECH Group for the year 2014. This was an important period in the recent history of our Company. Great importance had the formulated in spring of 2012 and consistently implemented by the Board deep restructuring program, through which the company regained its long-term profitability and built a stable foundation for further development. In the past year, there have been significant changes in the shareholders structure of the Company - in June the majority shareholder became KI Chemistry - a subsidiary of Kulczyk Investments Group. This change has created new opportunities for the Company and gives broad perspectives for further development. In November last year, the CIECH Group's strategy for the years 2014 – 2019 was adopted. According to the assumptions, the Company will focus on organic growth in the sodium and organic segments (so called AGRO in this business), as well as a further improvement of the Group's efficiency in every aspect of its operations. It is worth emphasizing that in 2014 all Group companies continued to implement restructuring programs. The results achieved by the Group companies are impressive and reflect in the consolidated results. The major development project in the sodium segment – project SODA +200 (expansion of production capacity in Soda Poland CIECH of an additional 200 thousand tonnes of product per year – up to the level of 800 thousand tonnes in 2016) has been continued and in the nearest future we will introduce significant changes in the organic segment in New Sarzyna. In the past year the production capacity of the Group increased significantly. The new calciner installed in Romania increased local production capacity by 460 thousand tonnes per year. On the other hand, the deployed in October extended installation for producing saturated polyester resins in New Sarzyna has allowed to increase the production of this range by 100 percent - to 12 thousand tonnes of product per year. We stand before another ambitious challenges and development projects. Goodwill has been increasing and the Company successfully develops on a global scale. I am optimistic about the future and I am convinced that CIECH has already become completely different, more dynamic company and reliable business partner. Our goal always remains the same: we will systematically continue to increase the value of our Company for the shareholders. Yours faithfully, Dariusz Krawczyk President of the CIECH S.A. Management Board Table of Contents TABLE OF CONTENTS I. REPORT ON THE CIECH GROUP’S ACTIVITIES IN 2014 .......................................................... 6 1 CHARACTERISTICS OF THE CIECH GROUP ................................................................................................ 6 2 THE MOST IMPORTANT EVENTS IN THE CIECH GROUP IN 2014 ................................................................. 12 3 DESCRIPTION OF FACTORS AND EVENTS OF SIGNIFICANT INFLUENCE ON THE GROUP’S OPERATIONS ............. 17 4 RISK FACTORS ..................................................................................................................................... 18 5 OVERVIEW OF THE BASIC ECONOMIC-FINANCIAL VALUES OF THE CIECH GROUP......................................... 28 6 THE CIECH GROUP'S TRADE AND PRODUCTION ACTIVITY ......................................................................... 42 6.1 EXPLANATIONS CONCERNING THE SEASONAL AND CYCLICAL NATURE OF CIECH GROUP'S ACTIVITY ............ 42 6.2 INFORMATION ON MAIN PRODUCTS, GOODS AND SERVICES ........................................................................ 42 6.3 INFORMATION ON MARKETS, SOURCES OF SUPPLY FOR PRODUCTION MATERIALS, PRODUCTS AND SERVICES .. 57 7 INVESTMENT ACTIVITIES ......................................................................................................................... 59 7.1 CAPITAL INVESTMENTS .......................................................................................................................... 59 7.1.1 INVESTMENTS IMPLEMENTED IN 2014 ...................................................................................................... 59 7.1.2 CAPITAL EXPENDITURES PLANNED FOR THE NEXT 12 MONTHS ................................................................... 59 7.2 DESCRIPTION OF MAJOR CAPITAL INVESTMENTS AND THE METHODS OF THEIR FINANCING ............................. 59 7.2.1 CAPITAL INVESTMENTS AND DIVESTMENTS IMPLEMENTED IN THE CURRENT REPORTING PERIOD AND THE METHOD OF THEIR FINANCING ................................................................................................................. 59 7.2.2 CAPITAL INVESTMENTS AND DIVESTMENTS PLANNED FOR THE NEXT 12 MONTHS .......................................... 60 7.3 EVALUATION OF THE ABILITY TO COMPLETE THE INVESTMENT PLANS IN RELATION TO OWNED ASSETS, INCLUDING THE POSSIBLE CHANGES IN THE FINANCING STRUCTURE OF THESE ACTIVITIES. ............................ 60 8 MANAGING THE FINANCIAL RESOURCES IN THE CIECH GROUP ................................................................. 60 8.1 INFORMATION REGARDING IMPORTANT FINANCIAL LIABILITIES. ................................................................... 60 8.2 BONDS, CREDIT, LOAN, SURETIES AND GUARANTEES ................................................................................ 68 8.3 INFORMATION ABOUT ISSUANCE OF SECURITIES IN CIECH S.A. ................................................................ 70 8.4 FINANCIAL INSTRUMENTS ....................................................................................................................... 70 9 EXPLANATION OF DIFFERENCES BETWEEN FINANCIAL RESULTS AND THE PREVIOUSLY PUBLISHED FORECASTS OF RESULTS.......................................................................................................................................... 71 10 EMPLOYMENT IN THE CIECH GROUP ...................................................................................................... 71 11 CHANGES IN ORGANISATION, MANAGEMENT AND FINANCIAL ASSETS OF THE CIECH GROUP ........................ 71 11.1 CHANGES IN BASIC PRINCIPLES OF MANAGING IN THE CIECH GROUP ........................................................ 71 11.2 CHANGES IN ORGANIZATIONAL LINKAGES IN CIECH GROUP ..................................................................... 71 12 INFORMATION ABOUT PURCHASE OF OWN SHARES OF THE PARENT COMPANY .............................................. 73 13 DESCRIPTION OF USING RECEIPTS FROM ISSUANCE BY THE ISSUER ............................................................ 73 14 INFORMATION ABOUT THE EXCHANGE RATE OF SHARES OF CIECH S.A. .................................................... 73 15 PERSPECTIVES FOR DEVELOPMENT OF OPERATIONS OF THE CIECH GROUP ............................................... 75 16 CHARACTERISTICS OF EXTERNAL AND INTERNAL FACTORS ESSENTIAL FOR THE DEVELOPMENT OF THE CIECH GROUP ............................................................................................................................................. 76 17 EXPECTED FINANCIAL SITUATION OF CIECH GROUP ................................................................................ 77 18 STRATEGIC PRIORITIES OF CIECH GROUP .............................................................................................. 77 19 INFORMATION ABOUT CONCLUDED CONTRACTS, SIGNIFICANT FOR CIECH GROUP’S ACTIVITY (INCLUDING CONTRACTS CONCLUDED BETWEEN SHAREHOLDERS AND INSURANCE AND COOPERATION CONTRACTS) ......... 78 20 INFORMATION ON CONTRACTS CONCLUDED WITH THE ENTITY AUTHORIZED TO AUDIT/REVIEW THE CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP ............................................................... 78 21 DESCRIPTION OF TRANSACTIONS WITH RELATED ENTITIES ......................................................................... 78 22 INFORMATION ON THE ENVIRONMENTAL PROTECTION ISSUES ..................................................................... 78 22.1 LEGAL STATUS OF THE USE OF THE ENVIRONMENT .................................................................................... 79 22.2 ENVIRONMENTAL PROTECTION COSTS ..................................................................................................... 81 22.3 EMISSION TRADING ............................................................................................................................... 82 22.4 REACH ............................................................................................................................................. 82 22.5 ENVIRONMENTAL LIABILITIES .................................................................................................................. 82 23 KEY ACHIEVEMENTS IN RESEARCH AND DEVELOPMENT AT THE CIECH GROUP ..........................................

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