Puławy, April 30th 2009

Press Release

Strong Performance Despite Hard Times

Despite the global economic slowdown, affecting also the markets of significant importance for the Puławy-based Company, the performance in the three quarters of the current financial year was very strong.  In the last quarter, i.e. Q3, the Company’s net profit outperformed the market expectations. According to the released consensus forecast, the Company’s Q3 net profit was estimated at PLN 23m, whereas the actual net profit was PLN 30.1m. The Company generated profit despite the fact that among the Polish companies, it was the most affected by shortages in natural gas, which is the key feedstock used by the Company in its production process.

ZA Puławy improved its financial performance relative to the corresponding period of the previous financial year despite unfavourable economic situation prevailing in the past two quarters and shortages in natural gas supply. The Company’s operating profit advanced by over 22% to nearly PLN 350m. EBIDTA also rose by 22%, to PLN 400.5m. Revenue from sales amounted to over PLN 1.847bn, showing a slight improvement on the figure from the corresponding period of the previous financial year. In the three quarters of 2008/2009, the Company earned PLN 177m, which is less than in the corresponding period of the previous financial year.

“Zakłady Azotowe Puławy again proved that is it capable of overcoming adversities, also in unfavourable conditions. Thanks to our performance, we joined a group of companies achieving the highest profitability. We are securing new contracts and investing in expanding our production capacities, despite worse conditions on our key markets,” said Paweł Jarczewski, President of the Management Board of ZA Puławy S.A.
In March 2009, the Company signed two large contracts for the sale of caprolactam in Asia. The total value of the contracts is approx. USD 20m. Following intensive efforts on the marketing front, at the end of the discussed quarter the Company intensified use of its existing caprolactam production capacities, and is expecting to soon achieve their full utilisation.

The Company continues to execute investment projects aimed at securing stable supplies of its key feedstocks. In the past quarter, the Company received a feasibility study concerning a coal gasification project, prepared by Bechtel, which confirmed that the project is viable and should be continued. Work on the project is in progress, for example the Company is currently preparing itself for the process of selecting a financial adviser.
Another significant investment project is the construction of a power plant in Puławy in cooperation with Vattenfall. The Supervisory Board of ZA Puławy approved the contribution of the perpetual usufruct rights to the land intended for the project to the special purpose vehicle. The Supervisory Board also approved amendments to the Company’s Articles of Association, whereunder the Company is allowed to execute energy-related projects.
Situation in the Fertilisers Market
The end of the reported quarter saw an increase in demand for fertilisers, especially nitrogen fertilisers. The relation between prices of nitrogen fertilisers and prices of grains improved, resulting in higher purchasing power of farmers.
In connection with the depreciation of the złoty, profitability and volume of imports of nitrogen fertilisers from the East decreased in Poland. On the other hand, exports to the East have become more profitable. 
Start of the spring season and improving demand for fertilisers encouraged European fertiliser producers to put in operation the production facilities which were shut down in Q4 2008.
Growing demand for urea is currently seen on the international markets, resulting from the decision of the Indonesian authorities to build up stocks of this product.
Global market prices of nitrogen and phosphorous fertilisers have remained stable since early 2009, which is attributable to the seasonal increase in the demand for these fertilisers.
Situation on the Chemicals Market
In Q1 2009, the demand for melamine decreased in Europe. Weak demand and the deepening global economic crisis were the main factors behind the decrease in melamine prices by 22-24% relative to the previous quarter. The prevailing difficult market conditions forced all melamine producers to temporarily reduce their production.
The first few months of 2009 were not favourable for the caprolactam market, either. A long holiday in Asia adversely affected the demand and price level. Towards the end of the quarter, the situation improved, and the Asian market saw an increase in the demand for caprolactam.
A long Christmas and New Year holiday period and the slowdown observed in the paper industry affected the hydrogen peroxide market in Europe. In the discussed period, efforts were made to ensure a relatively smooth supplies of the product. The growth in consumption of AdBlue flattened due to worse situation on the transport services market.
Despite the temporary difficulties, the structural fundamentals of the chemicals market remain solid.