April 26th 2007

PUŁAWY REVISES UPWARDS ITS FINANCIAL FORECASTS, FOLLOWING A QUARTER OF EXCELLENT PERFORMANCE

In the third quarter of the financial year 2006/2007, ZA Puławy reported record-breaking revenue of PLN 600m, with operating profit amounting to PLN 79m (up by over 27% on the corresponding period of the previous year) and net profit of PLN 68m (up by 33%).

Following the exceptionally successful quarter, the Company decided to revise upwards its financial forecasts. In the financial year 2006/2007, the Company should earn net profit in the amount of PLN 115.7m (surpassing the earlier projections by 40%), while net sales revenue is expected to touch PLN 2.17bn (upward revision by 6.5).

The revenue of PLN 600m posted by the Company in Q3 2006/2007 was at a historical high. There was an increase in sales volumes of all strategic products, accompanied by a rise in prices.
The conditions prevailing on the fertilisers market were particularly favourable, allowing the Company to leverage the global market upswing. The sales of fertilisers went up to PLN 342.5m (up by over 30% in relation to Q3 2005/2006). Overall, the Company reported a year-on-year growth in sales of products in the region of PLN 100m. 

The profitability of our products is improving, comments Krzysztof Lewicki, ZA Puławy’s President, Even though the costs of raw materials grew by nearly PLN 75m year on year, we managed to generate a 16%  margin, an improvement by 4% compared to the previous financial year. Moreover, as we do not anticipate any gas price increases in the next two quarters, the outlook for the entire 2007 year seems bright. Thanks to the strategy for the years 2007-2017, approved by the Company’s Supervisory Board on April 23rd, we will be able to intensify our efforts aimed at business expansion and at finding more cost-effective sources of raw materials.

The Company generated a strong financial performance – its sales revenue for three quarters (cumulative) amounted to PLN 1,601m, while operating profit and net profit reached PLN 123m and PLN 106m, respectively.

Upward trends exist not only on the fertilisers market, which is currently experiencing a global rise in consumption driven by the growing biofuels market and food production imbalance. The market of the Company’s key chemicals - melamine and caprolactam – is also thriving. The Asian market retains its attraction – largely as a result of strengthening demand for construction plastics. ZA Puławy has recently entrenched its position in the region by initiating cooperation with one of Taiwan’s largest end-customers for caprolactam. The prices of benzene – a strategic raw material – are also rising, which allows to forecast further increases in caprolactam prices, especially on the balanced European market. ZA Puławy is also exploiting its competitive advantages on the melamine market. The market is expected to be characterised by a cost-driven increase in prices coupled with a growth in demand linked to the construction market growth.

• fertilisers for the agricultural industry (urea, ammoniun nitrate, urea-ammonium nitrate solution and ammonium sulphate) – leading domestic and global producer.
• melamine (a raw material in the production of synthetic resins, which in turn are used in the production of furniture, paints and varnishes, as well as in the textile and paper industries) – the third largest producer in the world, the only producer in Poland.
• caprolactam (a raw material in the production of textile fibres, industrial fibres, carpets and engineering resins, which are in turn used in the automotive, electronic and food industries) – one of Poland’s two producers 

ZA Puławy is the largest operator on the Polish market of fertilisers and chemicals, simultaneously enjoying a strong global position. Export sales account for nearly 50% of its total revenue.