2 February 2007

ZAP generated sales revenues of nearly PLN 1bn

In the first half of the 2006/207 financial year, Zakłady Azotowe Puławy S.A. generated sales revenues of nearly PLN 1bn (PLN 998.6m), i.e. over PLN 17m more than in the corresponding period in the previous year. The main contributors to the figure were stronger revenues on all chemical products offered by Puławy and its ammonium nitrate.

In the second quarter of the financial year, ended on December 31st 2006, the Company’s sales revenues totalled PLN 538.3m. During the period, Puławy’s sales of its core products, including nitrogen fertilisers and chemicals, were similar to the previous year’s figures.

In the second quarter of the financial year, Puławy exported nearly half of its  output (49%), though the domestic sales of fertilisers rose substantially, in line with the volume of sales actually contracted for the year. Considerable demand for nitrogen fertilisers from domestic customers was clearly visible, growing on distributors’ short supplies at the end of the previous season.

As the fertilising season approaches, strong demand should continue into the next quarter. Demand for fertilisers also rose on the American market, which drove the prices up. In Europe, December saw strong rises in the prices of urea and urea-ammonium nitrate solution (UAN). As far as the latter is concerned, in addition to the economic upturn seen on the American market, the positive trends affecting the Company’s situation include extension by the European Commission of the effective term of duties on imports of UAN originating in Algeria, Byelorussia, Russia and Ukraine by another five years. As for the chemicals, melamine prices are expected to increase, and the strong demand for caprolactam in Asia should continue.

 Based on our analysis of the market situation, I believe we will be able to meet our financial targets for the year, says Krzysztof Lewicki, President of the Management Board of Zakłady Azotowe Puławy S.A. In our analyses, we also focused on the trends with a bearing on the markets for our strategic raw materials and adjusted the assumptions concerning foreign exchange rates.

Company’s actual performance vs. forecasts:

(PLN m)	2006/2007 forecast	H1 2006/2007 actual	% of forecast
Net sales revenue	2,038	999	49.0%
EBITDA	188	94	50.2%
Operating profit	89	44	49.8%
Net profit	83	37	44.4%

In the last quarter, the Company proceeded with 46 investment tasks, of which 16 were completed, including an AdBlue unit. AdBlue is a new product whose main component is urea produced by the Company. AdBlue is highly appreciated by customers for its quality. It is a reductive agent for vehicles with Diesel engines using the SCR (Selective Catalytic Reduction) technology. Dosed to the SCR catalytic converter during combustion of Diesel oil, AdBlue instantly reduces pollutant emissions – including NOx – which cause smog and acid rain into nitrogen and water. The SCR system is applied in the automotive industry in connection with the new EU standards regulating emissions of exhaust gases [Euro IV (2005) and Euro V (2008)].