Puławy, 14 August 2006

ZA Puławy Meets the Forecasts

ZA Puławy’s financial performance was fully in line with its forecasts for the 2005/2006 financial year. The company recorded the highest ever sales revenue (PLN 2.03bn), while its net profit for the period reached PLN 126.1m.

In the fourth quarter of the financial year, which for ZA Puławy lasted from April 1st to June 30th, the company’s revenue grew relative to the corresponding period of the previous year (PLN 540.0m and PLN 523.3m, respectively). The growth was driven by a number of factors, including higher revenue on sales of granular fertilisers – in particular urea and ammonium nitrate.  We were well prepared for the delayed commencement of the fertiliser application season, which enabled us to maintain fertiliser sales at a stable level until the end of June, explains Małgorzata Iwanejko, President of the company’s Management Board.

ZA Puławy also recorded an over twofold increase (from PLN 30.5m in Q4 2004/2005 to PLN 65.2m in Q4 2005/2006) in revenue on other sales – especially exchange sales of electricity, trading transactions and sales of materials and services (such as processing of ammonia).

As the Polish złoty strengthened compared with the analogous period of the previous year – mainly against the euro (up by 4.5%), which is the currency of the major part of ZA Puławy’s foreign-currency transactions – the company reported a decline in export sales (especially of its export “best-seller” – the liquid fertiliser UAN). In order to hedge against foreign-exchange risk, the company monitors its currency position on an on-going basis and seeks to offset its foreign-currency outflows with its foreign-currency inflows. Since the foreign-currency inflows exceed the outflows, the level of natural hedging corresponds to the amount of such outflows. Additionally, the company has a currency-risk management procedure in place, which relies on forward FX contracts and zero-cost option strategies. The share of exports in ZA Puławy’s total sales fell from 53% in Q4 2004/2005 to 47% in Q4 2005/2006.

In the fourth quarter of the financial year, ZA Puławy posted operating profit of PLN 13.6m, with the net profit standing at PLN 13.1m. In the same period of the previous year, the net profit amounted to PLN 50.3m. 
 
The profits went down mainly as a result of the enormous increase in the cost of our chief raw material – natural gas, which represent one-third of our total costs. In the fourth quarter alone, the cost of gas incurred by the company rose by more than PLN 37m on the corresponding period of the previous year, explains Małgorzata Iwanejko, President of ZA Puławy’s Management Board.

There were no significant changes in other costs (except other costs by type) relative to the previous year.  

ZA Puławy closed the 2005/2006 financial year in line with the assumptions set out in its financial plan. The sales revenue exceeded PLN 2bn (compared with PLN 1.96bn in the previous year). The EBITDA reached PLN 274.4m, while the net profit amounted to PLN 126.2m.

Last year the situation on the gas market was unlike anything that we have ever witnessed and we tend to regard it as an extraordinary situation. Let me remind you that during the past financial year we had four price rises: in July 2005 (up by 8.5%), in October 2005 (up by 7.4%), in January 2006 (up by 10.5%) and in April 2006 (up by 7.6%). Under these circumstances, our ability to perform with a surplus over the forecast figure testifies to the company’s flexibility, says President Iwanejko.

The forecast had envisaged revenues of PLN 1.98bn, EBITDA of PLN 268.8m and net profit of PLN 123m.

Contact:

Marek Sieprawski
tel. (81) 887 62 01
msieprawski@azoty.pulawy.pl

Krzysztof Mering
tel. (22) 654 17 63
krzysztof.mering@jkminstitute.pl