Press Release

Zakłady Azotowe Puławy Determined to Continue To Invest Despite Poorer Results

In the first quarter of the financial year 2009/2010, Zakłady Azotowe Puławy S.A. is continuing the implementation of its investment projects, despite the fact that the Company’s financial results have deteriorated relative to the corresponding period of the previous year.

Just like other companies from the chemical sector, ZA Puławy saw a decline in its financial results compared with the performance generated in 2007 and 2008. Sales revenue, which peaked at PLN 674.8m in the first quarter of 2008/2009, decreased to PLN 383.4m. However, it needs be noted that given the exceptionally good economic conditions, in the first quarter of the previous financial year products achieved record high prices.

The decrease in sales revenue followed chiefly from high production costs, caused by high prices of natural gas in Poland. Contractual prices of natural gas for Zakłady Azotowe Puławy are higher than the prices in Western Europe (USD 8.8/MMBtu vs. USD 7.17/MMBTu). To note, Western companies usually buy natural gas on the basis of spot contracts, under which natural gas prices ranged from USD 4,67/MMBTu – USD 5,51/MMBTu in Q3 2009. Furthermore, stronger złoty made it difficult for the Company’s products to remain competitive in export markets and contributed to an increase of the amount of imported fertilizers in the Polish market. The Company saw its net earnings and EBIT fall respectively to PLN -31.2m and PLN -46,8m.

Sales revenue in the non-fertilizer sector increased slightly. The Company recorded higher revenue from the sales of caprolactam (+11,9%), AdBlue (+155,3%), hydrogen peroxide (+16,6%) and carbon dioxide (+14,9%). In the fertilizer products segment, sales revenue was more than two times lower.

“Despite poorer results, we are going to continue our investment projects. This year, we have decided to allocate PLN 403m for this purpose,” says Paweł Jarczewski, the Company’s President. “Companies from the Polish chemical sector must face one major challenge – high prices of natural gas. However, we are taking steps with a view to obtaining such natural gas prices which will allow us to successfully compete in the global market.”

Despite weaker performance, the Company is continuing the implementation of its development projects and its efforts aimed at obtaining EU funding. The main items of investment expenditure in the discussed quarter related to: modernisation of the Oxygen Generation Plant – Ammonia – Urea production line, reconstruction of Steam Boiler 2 in the CHP plant, reconstruction of the demineralised water unit, execution of the target AdBlue unit, alteration of the Unit for CO2 Removal from Gas in the Ammonia Synthesis Process and Upgrade of Transformer Station.