Press releases

Press release - Warsaw, February 29th, 2008

The consolidated net profit of the Ciech Chemical Group for the fourth quarter of 2007 equalled PLN 235.2 million, which means a 26% increase compared to the corrected* net profit of PLN 184.8 million for 2006. Consolidated sales revenues equalled PLN 3 418.7 million compared to PLN 2 174.3 million in the previous year (an increase of 57%).
The above figures show that the net profit was achieved on a level of 94% of the recent Group’s financial forecast published in August 2007. The forecast of the sales revenues was fulfilled in 98%.

Income and profit increase

The implemented acquisition of the Organika-Sarzyna and Zachem companies in 2006 and their successful operational integration in 2007 led to a clear improvement in the financial results.
Moreover, an advantage efficiently taken during the economic boom, which has been kept during 2007 for most of the products of the Group’s companies, contributed to the improvement in the financial results of the companies. Particularly, a high price level was kept for phosphate fertilizers and TDI used in the production of polyurethane foams. Whereas, the strong exchange rate of the Polish zloty in 2007, with export sales taking over 50% of the total sales, had a negative effect on the Group’s income.
An increase in basic raw material prices is regarded another negative factor which influenced the financial results. The Group’s profit was also lower due to the high losses of the Romanian company US Govora. In 2007 there was an intensive restructuring in US Govora and investments of EUR 10 million were implemented. As a result of these activities an increase in the production capacity will be noticed leading further to the profitability of the company in 2009.

Bookkeeping and depreciation costs

The settlement of the shares of Organika-Sarzyna, Zachem and US Govora purchased in December 2006 had a significant impact on the financial results of the Ciech Chemical Group in 2007.
In relation to those booking operations, the balance and the income statement for 2006 were rectified. The total amount of corrections in the closing balance of 2006 equalled PLN 385 million that was 22% of the total balance value. Whereas the net profit correction equalled PLN 34.4 million, making up almost 19% of the net financial result.
Evaluation of the net assets of the acquired companies to the adequate value contributed to an increase in the depreciation costs in 2007. Altogether in 2007, in the scope of the entire Group, that activity contributed to an increase of those costs by PLN 25 million and reached a level of PLN 177 million, which reduced the net profit level by about PLN 20 million. The net profit dynamic in 2007 rose by 26% while the EBITDA tendency (operational profit increased by the depreciation costs) increased by 76%.

Key events in 2007

Several significant events in all activity areas took place in 2007 in the Ciech Chemical Group. A new strategy was adopted for the period until 2011, anticipating an income increase on the level of PLN 5.6 billion or PLN 8 billion (if a large acquisition in the fertilizer sector is performed). A research and development department was established whose task is to coordinate the innovation activities in the Group and be in charge of cooperation between the companies and research institutes. The first tangible result of the Ciech Chemical Group’s new approach to innovations was three patent applications from the companies and the institutes in cooperation.
The previous FosChem division was transformed in two new divisions: Silicates and Glass, and Agro. A Vitrosilicon company, which is operating within the framework of the former, started acquisition of Glassworks in Wymiarki.
Concerning the Organica division, an operational integration of Organika-Sarzyna and Zachem was implemented and the first investments were performed after the companies were taken over by Ciech. The epoxy resins’ installations were modernised and extended in Organika-Sarzyna, and the TDI complex extension started in Zachem.
The soda division was extended by the new German company Sodawerk Stassfurt. This contributed to an increase in production capacity of sodium bicarbonate in the Ciech Chemical Group by 600 thousand tons, this way strengthening the company’s position as the second largest producer of that raw material in Europe. A considerable part of the transaction for the total amount of EUR 75 million concluded in December 2007 was finalised by issuance of bonds for a value of PLN 300 million. Operational integration and extension of production capacity was also conducted in US Govora. Two Polish soda companies in the Kuyavia region were merged into one entity – Soda Poland Ciech.
Quotations for Ciech SA shares increased by 86% in 2007 and proved to be one of the most successful investments on the Warsaw Stock Exchange.

Dividends and financial forecast

Taking into consideration the good financial condition of the Company, the Management Board of Ciech SA is going to offer shareholders to allocate 25% of the net profit for 2007 for a dividend (PLN 58.8 million). That means that the dividend value for one share will equal PLN 2.1 and will remain the same as paid from the profit for 2006.
The financial forecast for 2008 assumes consolidated sales revenues in the amount PLN 4,270 million and net profit on the level of PLN 225 million.
Consolidated revenues in the soda sector forecast an increase of 63% mainly due to the Soda Deutschland Group acquired in December 2007 and included in the Ciech Chemical Group. An increase in the consolidated revenues of the organic sector is estimated at 58% and it is a result particularly of the extension of production capacity.
Further appreciation of the Polish zloty and the growth of prices in basic raw materials will contribute to a lower estimated net profit than achieved in 2007. There is an increase of prices forecasted: prices of coal – growth of 12-15%, limestone and anthracite – about 20% and energy carriers’ prices - 11-15% growth.
Investments planned for 2008 include tangible investments alone for a value of PLN 489 million. These projects will significantly contribute to an increase in production capacities of the Ciech Chemical Group’s companies in subsequent years.

*Consolidated net profit of the Ciech Group published in the annual report 2006 equalled PLN 151 million. The introduced adjustments referred to the settlement of the costs of takeover of the companies Zachem, Organika-Sarzyna and US Govora in December 2006.