H1 2018 RESULTS PRESENTATION August 29th 2018 @Grupa_Azoty - - PowerPoint PPT Presentation

H1 2018 RESULTS PRESENTATION

August 29th 2018

@Grupa_Azoty #GrupaAzoty H1 2018

2

DEVELOPMENTS

KEY DEVELOPMENTS IN H1 2018

10 years on the Warsaw Stock Exchange FTSE4Good Sales consolidation Diversification Corporate financing Dividend

GRUPA AZOTY GROUP

3

Net profit/(loss) Consolidated EBITDA

DEVELOPMENTS

FINANCIAL HIGHLIGHTS H1 2018

Consolidated revenue PLN 4,877m PLN 529m Consolidated EBITDA excluding one-off items PLN 536m PLN 124m PLN 132m

estimate (Current Report 39/2018)

Net profit/(loss) excluding one-off items PLN 175m

4

DEVELOPMENTS

DIVIDENDS PAID BY THE PARENT

(PLNm)

355 225 209 44 251 62 124,0 78.4 83.3 19.9 148.8 39.9 Dividend for 2017 Dividend for 2016 Dividend for 2015 Dividend for 2013 Dividend for 2012 Dividend for 2009 Dividend amount Net profit

Dividends paid since IPO

• ver PLN 493m

5

GRUPA AZOTY INTEGRATED REPORT 2016/2017

DEVELOPMENTS

• nline: www.raport.grupaazoty.com

In 2016 and 2017 we:

• Reduced energy consumption
• Reduced N2O emissions from production of nitric acid
• Spent over PLN 60m on projects designed to reduce
• ur environmental impacts
• Had 0 fatal accidents
• Contributed over PLN 15min donations and

sponsorships to promote the development of our local communities

IN THE REPORT:

• Challenges lying ahead and scenarios for the future
• Grupa Azoty Group New Sustainable Development Strategy for 2018–2022

consistent with the UN Sustainable Development Goals

• Innovative products and programmes for the non-fertilizer business

6

DEVELOPMENTS

10 YEARS ON

• Puławy (up to 95.98%)
• Siarkopol (99.33%)

1.3 1.4 1.2 1.9 5.3 7.1 9.8 9.9 10.0 9.0 9.6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

• Puławy (10.4%)

Equity since IPO

x 6.4

• Police (66%)
• Kędzierzyn (94%)

Price low/high since IPO:

6.00/113.00

Capitalisation

PLN 3.5bn

• ATT Polymers GmbH (100%)
• Kędzierzyn (53%)

Free float

26% EV/EBITDA 3.1x

Dividends paid:

PLN 493m Consolidated revenue (PLNbn)

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CONSOLIDATED FINANCIAL INFORMATION GRUPA AZOTY

8

GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

• Adverse impact of rising prices of energy commodities (coal and natural gas up over

30%) and carbon emission allowances

• Unfavourable weather conditions in the first quarter, leading to reduced fertilizer

application and increased supply in the second quarter

• High inventory levels and increased supply as the key drivers behind

fertilizer prices

PLNm

Net profit EBITDA Revenue

397 175

EBITDA margin 12% 5% EBITDA margin 15% 11%

• 152%

9%

• 67%

0%

738 536 276 133 378 124

H1 2017 H1 2018

4,870 4,877

H1 2017 H1 2018

714 529

H1 2017 H1 2018

2,183 2,380

Q2 2017 Q2 2018

261 126

Q2 2017 Q2 2018

134

• 13

122

• 64

Q2 2017 Q2 2018

In 2017 adjusted for impairment losses on the fat processing unit and Elektrownia Puławy Power Plant. In 2018 adjusted for impairment losses on the fat processing unit and the effect of loss of control over AFRIG S.A.

9

GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION

REVENUE ANALYSIS

SEGMENT CONTRIBUTION IN H1 2018 REVENUE (PLNm)

2,317

AGRO FERTILIZERS

48%

31%

CHEMICALS

1,514

NON-FERTILIZER BUSINESS

17%

PLASTICS

831

3%

141 52%

ENERGY

1%

74

OTHER ACTIVITIES EV/EBITDA*

5.8 9.1 11.3 7.5 5.8 3.1

PHOSAGRO YARA CF INDUSTRIES MOSAIC CHEMICAL BASF GRUPA AZOTY

LTM EBITDA as at March 31st 2018

9

10

GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION

H1 2018 EBITDA – Business segments of the Grupa Azoty Group

positive effect on EBITDA negative effect on EBITDA

• ne-offs

(PLNm)

* adjusted for one-offs

Chemicals

• Higher prices of sulfur and titanium white contributing to margin improvement
• Higher sales volume in the OXO business
• Stabilisation of the Melamine business

Energy

• Low Q1 2017 base due to recognition of impairment loss on Elektrownia Puławy Power Plant capex
• Higher value of gas sales

Plastics

• 16% yoy depreciation of the US dollar constricting sales margins, mainly in the Asian region
• Segment’s performance impacted by rising energy costs
• Production structure modified towards increased volumes of caprolactam processed into PA6 in an attempt to mitigate the impact of adverse market factors

Agro-Fertilizers

• High inventory levels and strong supply with an impact on the policy of redirecting Azoty volumes to the chemicals business
• Higher prices of gas and energy commodities, including carbon emission allowances

714 529 24 48 29 5 1 266 7

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RAW MATERIALS

NATURAL GAS

2/03/2018; 214.23 2/03/2018; 257.44 50 150

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18

PGNiG taryfa TGE DA import/PGNiG

PLN/MWh

NATURAL GAS CONSUMPTION (MILLION MWH)

H1 2018 TOTAL 11.8 Grupa Azoty S.A. 1.0 Grupa Azoty POLICE 2.9 Grupa Azoty PUŁAWY 5.7 Grupa Azoty KĘDZIERZYN 2.2

12% of natural gas consumption in Poland

12

RAW MATERIALS

ENERGY RESOURCES

ELECTRICITY PRICES CO2 PRICES

EUR/t PLN/MWh

2 7 12 17

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q42017 Q1 2018 Q2 2018

EEX

140 190 240

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

IRDN

HARD COAL PRICES CO2 EMISSIONS (‘000 TONNES)

H1 2018 Grupa Azoty S.A. 544 Grupa Azoty POLICE 877 Grupa Azoty PUŁAWY 1,765 Grupa Azoty KĘDZIERZYN 662

USD/t

40 80

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018

ARA

13

FALLING FERTILIZER PRICES AND SIGNIFICANTLY GROWING PRICES OF GAS

500 1000 1500

12 17 22 27 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018

PLN/t EUR/MWh

PPX, TTF DA, GPL DA

THE POLISH POWER EXCHANGE TTF DA Ammonium nitrate AN 33.5% France, delivered (bulk) (PLN/t) UREA prilled FOB Baltic (PLN/t) Ammonium nitrate (average retail price on the Polish market) Urea average retail price on the Polish market

RAW MATERIALS

14

AGRO FERTILIZERS

AGRO FERTILIZERS GLOBALLY

< = -500

• 50 to -499
• 1 to -49

1 to 50 51 to 500 > 500

Long droughts

Areas affected by drought, winter grains Year 2018 period 03 (Apr 11–Jun 10)

EU 28 GRAIN PRODUCTION FORECAST 2017/2018*

France

• 3.2%

Germany

• 8.6%

Poland

• 14.8%

Italy 2.0% United Kingdom

• 3.6%

Spain 21.8% Hungary 9.4% Romania

• 18.3%

Heavy rain

Source: USDA PSD * Largest producers (80% of EU production)/DG AGRI-G4

• 7.5 million tonnes

Significant decrease in wheat production in EU caused by weather anomalies.

Total production in EU: 137.5 million tonnes

Areas most affected by droughts

15

AGRO FERTILIZERS

AGRO FERTILIZERS GLOBALLY

10 20 30 40 50 50 100 150 200 250

2015 2016 2017 2018 2019 2020 2021 2022 CONSUMPTION OF FERTILIZERS (N, P2O5, K2O), IN MILLION TONNES

World N+P+K (left axis) World N+P+K forecast (left axis) Europe N+P+K (right axis) Europe N+P+K forecast (right axis) Poland N+P+K (right axis) Poland N+P+K forecast (right axis)

100 200 300 400 500 600 700 50 100 150 200 250 300 350

cze 12 cze 13 cze 14 cze 15 cze 16 cze 17 cze 18

million tonnes USD/t

CBOT GRAN PRICES/GLOBAL GRAIN STOCKS

Grain stock - million t Average wheat price CBOT (USD/t) Average corn price CBOT (USD/t)

Source: Polish Central Statistical Office, IFA, USDA, GA data.

15

16

AGRO FERTILIZERS GLOBALLY

AGRO FERTILIZERS

10000 20000 30000 40000 50000 2010 2015 2020

Urea production capacity 2010–2020

Bliski Wschód Europa Zach. i Centr. Rosja Ukraina Białoruś

(tys. ton) 10 000 20 000 30 000 2010 2015 2020

AN production capacity 2010–2020

Central and Western Europe Russia Ukraine Lithuania Georgia Belarus

(tys. ton)

source: Integer 2018 source: IHS 09/2016 AN

Ammonium nitrate

• No significant increase in ammonium nitrate production

capacity is expected by 2020;

• The production capacity growth that was seen in Central

and Western Europe between 2015 and 2020 was mainly attributable to Nitrogenmuvek (2017) and YARA (ammonium nitrate, technical grade) (2017). In Belarus, the ammonium nitrate production capacity rose after an

• bsolete production unit was replaced by a new one.

Urea

• In the Middle East, between 2015 and 2020 production

capacity grew in Iran;

• The growing trend will continue until 2020;
• No other significant production capacity hikes are

expected in the above countries/regions.

17

AGRO FERTILIZERS

IMPORTS OF NITRATE FERTILIZERS 2017-2018

VOLUMES OF AMMONIUM NITRATE IMPORTS

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018

1H2018/1H2017: 49%

CUMULATIVELY

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

∆

VOLUMES OF UREA IMPORTS CUMULATIVELY

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2018

1H2018/1H2017: 1%

∆

Source: Analytical Centre, the Tax Administration Chamber in Warsaw.

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AGRO FERTILIZERS

FERTILIZERS

Nitrogen fertilizers and ammonia 62% NPK 31% Other 7%

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue PLN 1.105m Revenue PLN 2.317m EBITDA: PLN -68m EBITDA: PLN 100m EBITDA MARGIN: 4.3% EBITDA MARGIN:

• 6.2%

VOLUMES (‘000 TONNES)

100 200 300 400

Nitrate Phosphate and NPK fertilizers Urea Ammonium sulfate UAN Q2 2017 Q2 2018

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AGRO FERTILIZERS

NITROGEN FERTILIZERS – MARKET OVERVIEW

CAN/ammonia delta Market deltas

expressed as CAN (27%N) equivalent

50 100 150 200 250 300

Q1 14 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218

EUR/t Urea (27%N) Ammonia (27%N) CAN (27%N)

129 136 113 112 107 115

20 40 60 80 100 120 140 160 2014 2015 2016 2017 H1 2017H1 2018

EUR/t

average annualised

Market spreads

Pricing trends (cumulative)

125 149 286 215 128 158 257 225

50 100 150 200 250 300 350

AS UAN Ammonia Urea

USD/t H1 2017 H1 2018

2% 6%

• 10%

5% 190 270 182 266

50 100 150 200 250 300

CAN AN EUR/t

H1 2017 H1 2018

• 1%
• 4%

OUTLOOK: OUTLOOK:

• In H2 2018, prices of agricultural products are expected to increase due to the deterioration of their balance in Poland and the EU (droughts in H1

2018).

• Demand for nitrogen fertilisers in Q3 2018 (harvest period) is estimated to be low. A slight revival is expected in September (autumn application

season).

• In H2 2018, prices of nitrogen fertilisers are forecast to be steadily rising, the growth being an effect of the largest players’ pricing policies, the

prospects of urea price growth on global markets, and the rising price of natural gas (used in production of nitrogen fertilizers).

• A negative supply-demand balance in urea on global markets in H2 2018 will support urea prices. The demand for urea in Brazil and India and the

limited availability of the fertilizer in China and Iran will also play a role.

20

OUTLOOK: OUTLOOK:

• DAP: The shutdown of the Mosaic unit will be a balancing factor to the launch of additional capacities in the Middle East and North Africa and will

stabilise the global supply/demand balance.

• NPK: the level of demand expected to be seen in Europe in Q4 and the cost pressure from energy prices will push up NPK prices in the region.

AGRO FERTILIZERS

COMPOUND FERTILIZERS – MARKET OVERVIEW

NPK 3x16/raw materials* delta Market deltas

50 100 150 200 250 300 350 400

Q1 14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

USD/t Potassium chloride Phosphate rock Urea Ammonium sulfate NPK 16-16-16

expressed as NPK 16-16-16 equivale nt average annualised

86 76 69 49 42 52

20 40 60 80 100 2014 2015 2016 2017 H1 2017H1 2018

USD/t

Market spreads

* Potassium chloride, phosphate rock, urea, ammonium sulfate

Pricing trends (cumulative)

336 237 286 224 95 94 393 257 257 246 113 97

100 200 300 400 500 DAP 18-46 NPK 16-16-16 Ammonia Potassium chloride Sulfur Phosphate rock USD/t H1 2017 H1 2018

+17% +8%

• 10%

+10% +19% +3%

21

CHEMICALS

CHEMICALS

OXO alcohols 20% Plasticizers 8% Urea (technical grade) 19% Melamine 17% Titanium white 14% Other 22%

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue PLN 745m Revenue PLN 1,514m EBITDA: PLN 91m EBITDA: PLN 218m EBITDA MARGIN: 12.2% EBITDA MARGIN: 14.4%

VOLUMES (‘000 TONNES)

50 100 150

OXO alcohols Plasticizers Urea (technical grade) Melamine Titanium white

Q2 2017 Q2 2018

22

CHEMICALS

CHEMICALS – MARKET OVERVIEW

DEHT/propylene delta Market deltas

200 400 600 800 1 000 1 200 1 400 1 600 1 800

Q1 14 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218

EUR/t

2-EH Propylene DEHT (DOTP)

average annualised

438 567 617 488 499 339

100 200 300 400 500 600 700 2014 2015 2016 2017 H1 2017 H1 2018

EUR/t

Market spreads

Pricing trends (cumulative)

1,092 1,361 1,467 2,302 862 1,102 1,297 1,635 2,940 958

1 000 2 000 3 000

2-EH DEHT Melamine Titanium white Propylene

EUR/t H1 2017 H1 2018

+1%

• 5%

+11% +28% +11%

OUTLOOK:

• Demand for OXO products is forecast to keep rising.
• The projected upward trends in the prices of raw materials relative to to the first half of the year and on a year-on-year basis will increase the prices of

OXO products.

• Demand for plasticizers has been rising steadily (especially in the case of non-phthalates), a trend forecast to continue into coming years.
• Titanium white supply and demand balanced out as a result of increased imports from China to Europe
• Increased product availability depressed prices in the second quarter As at the end of the first half-year, prices reached a record high
• Signs of a market slowdown seen after the end of the first half-year

23

PLASTICS

PLASTICS

Polyamide 84% Caprolactam 10% Other 6%

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue PLN 420m Revenue PLN 831m EBITDA: PLN 60m EBITDA: PLN 120m EBITDA MARGIN: 14.3% EBITDA MARGIN: 14.4%

VOLUMES (‘000 TONNES)

10 20 30 40 50

Polyamide Caprolactam Q2 2017 Q2 2018

24

PLASTICS – MARKET OVERVIEW

PLASTICS

Sales of PA6 Grupa Azoty

Market deltas

20 000 40 000 60 000 80 000 100 000 120 000 2011 2012 2013 2014 2015 2016 2017 H1 2017 H1 2018 500 1 000 1 500 2 000 2 500

Q1 14 Q214 Q314 Q414 Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218

EUR/t

Caprolactam Benzene Polyamide 6 +51% 1,923 2,098

500 1 000 1 500 2 000 2 500

Solid caprolactam

USD/t H1 2017 H1 2018

+9%

821 1,426 2,115 2,169 739 1,351 2,140 2,205

500 1 000 1 500 2 000 2 500

Benzene Phenol Liquid caprolactam Polyamide 6

EUR/t H1 2017 H1 2018

• 10%
• 5%

+1% +2%

Pricing trends (cumulative)

OUTLOOK: OUTLOOK:

• Demand and supply trends, combined with crude oil prices, are the main factors shaping the market of PA6 and CPL.
• The European polyamide 6 market is expected to remain stable, with strong demand and balanced supply.
• The continued demand for PA6 in Europe will be mainly driven by the automotive and construction industries.
• Expected shift in the structure of demand for PA6: with the engineering plastics, film and flexible packaging sector gaining prominence.

25

GRUPA AZOTY

Grupa Azoty Group financials as at June 30th 2018*

• Revolving and umbrella credit facility
• PLN 3,550m

PKO and bank syndicate

• Term Loan Agreement
• PLN 150m
• since July 25th 2018: PLN 500m*

EBRD

• Term Loan Agreement
• PLN 1,180m

EIB

• PLN 4,880m

Total corporate financing 499 2 908 500*

• ther financing sources
• verdrafts and multi-purpose credit

facilities corporate credit facilities

AVAILABLE FUNDS/UNDRAWN FACILITIES*

(mln PLN)

• 41

233 327 576

NET DEBT

(PLNm)

Net debt/EBITDA - max. 3.0x (2020–2023: max 3.5x)

NET DEBT

Q2 2017 Q2 2018 Total debt ratio (%) 34.2 37.8 Net debt (PLNm) 630 576 Net debt/EBITDA 12M EBITDA 0.61 0.58 Net debt/EBITDA

• 0.03x

0.58x 0.23x 0.28x H1 2018 2017 2015 2016 * Since July 25th, the amount of credit facilities granted under agreements and available credit lines has been PLN 500m higher as a result of a new agreement signed with the EBRD.

26

GRUPA AZOTY

INVESTMENTS

Tarnów 20% Grupa Azoty Puławy Group 44% Grupa Azoty Police Group 17% Grupa Azoty Kędzierzyn Group 10% Other 9%

BY COMPANY EXECUTED IN H1 2018

(PLNm)

INVESTMENT PROJECTS including: H1 2018 EXPENDITURE GROWTH CAPEX 291 MAINTENANCE CAPEX 69 MANDATORY CAPEX 23 PURCHASE OF FINISHED GOODS 15 OTHER (COMPONENTS, MAJOR OVERHAULS) 47 TOTAL 445 CAPEX in 2018: approximately PLN 1.6bn

26

GRUPA AZOTY PUŁAWY GROUP

28

GRUPA AZOTY PUŁAWY GROUP

FINANCIAL HIGHLIGHTS

• Natural gas prices at record highs
• Unfavourable weather conditions
• Price decline

Revenue EBITDA Net profit

• 106.3%

7.7%

• 44.7%
• 1.8%

EBITDA margin 10.8% EBITDA margin 3.6%

305 196 1 7 91 1 7 59

H1 2017 H1 2018

26

• 2

Q2 2017 Q2 2018

788 849

Q2 2017 Q2 2018

78 31

Q2 2017 Q2 2018

93 38 41 5 187 96 282 190

H1 2017 H1 2018

164 91

H1 2017 H1 2018

• Currency exchange rates

29

GRUPA AZOTY PUŁAWY GROUP

H1 2018 EBITDA – BUSINESS SEGMENTS OF THE GRUPA AZOTY PUŁAWY GROUP

(PLNm) 281.9 189.6

• 92.1
• 4.6

14.4

• 1.5
• 8.6

positive effect on EBITDA negative effect on EBITDA

• Lower fertilizer prices and sales volumes
• Higher sales volumes and prices of melamine
• Higher sales volumes and lower sales prices of caprolactam
• Natural gas prices up 19%

30

GRUPA AZOTY PUŁAWY GROUP

Q2 2018 EBITDA – BUSINESS SEGMENTS OF THE GRUPA AZOTY PUŁAWY GROUP

(PLNm) 78.3 30.7

• 55.2

18.5

• 5.2
• 2.1

3.6 positive effect on EBITDA negative effect on EBITDA

• Higher sales volumes and lower sales prices of fertilizers
• Higher sales volumes and lower sales prices of caprolactam
• Higher sales volumes and prices of melamine
• Natural gas prices up 30%

31

GRUPA AZOTY PUŁAWY GROUP

FERTILIZERS

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP

Nitrogen fertilizers 80% Phosphate and compound fertilizers 9% Other 11%

Revenue PLN 470m Revenue PLN 976m EBITDA: PLN 17m EBITDA: PLN 126m EBITDA MARGIN: 3.6% EBITDA MARGIN: 12.9%

VOLUMES (‘000 TONNES)

100 200 300

Nitrate Phosphate and NPK fertilizers Urea Ammonium sulfate UAN

Q2 2017 Q2 2018

+36%

• 2%

+9% +52%

• 20%

32

GRUPA AZOTY PUŁAWY GROUP

CHEMICALS

Caprolactam 34% Urea 18% Melamine 37% Other 11%

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue PLN 346m Revenue PLN 699m EBITDA: PLN 59m EBITDA: PLN 127m EBITDA MARGIN: 17.1% EBITDA MARGIN: 18.2%

VOLUMES (‘000 TONNES)

50 100

Melamine Caprolactam Urea

Q2 2017 Q2 2018

+6% +47%

• 6%

33

GRUPA AZOTY PUŁAWY GROUP

ONGOING CAPEX PROJECTS

(PLNm)

H1 2018 CAPITAL EXPENDITURE BY PROJECT STRUCTURE Mandatory 1% Maintenance capex 6% Growth capex 85% Purchase of finished goods 2% Contingency 6%

TYPE 2018 PLANNED H1 2018 CAPEX Mandatory 48.9 1.2 Maintenance capex 38.0 9.7 Growth capex 294.5 135.4 Purchase of finished goods 6.6 3.1 Contingency 10.0 9.3 Total 398,0 158,8

*Excluding the cost of improvements, major overhauls and catalysts.

MAJOR PROJECTS IN 2018

CAPEX PROJECT TOTAL BUDGET 2018 PLANNED EXPECTED COMPLETION DATE TOTAL ACTUAL COST TO DATE 2018 CAPEX PROJECT TYPE Upgrade of existing nitric acid production units and construction of new nitric acid production and neutralisation units, and construction

• f units for production of new

fertilizers based on nitric acid 695.0 55.4 2024 84.7 17.1 Growth Facility for production of granulated fertilizers based on ammonium nitrate 385.0 131.3 2020 226.3 79.6 Growth Replacement of the TG-2 turbine generator set 99.0 5.0 2018 69.5 9.4 Growth Upgrade of steam generator OP-215 to reduce NOx emissions 93.0 44.0 2020 0.6 0.1 Mandatory

GRUPA AZOTY POLICE GROUP

Key issues related to AFRIG S.A.

36

GRUPA AZOTY POLICE GROUP

AGREEMENT WITH DGG ECO SP. Z O.O. AND DECONSOLIDATION OF AFRIG S.A.

On December 20th 2017, Grupa Azoty Police and DGG ECO Sp. z o.o. entered into a conditional agreement (sanctioned by a court settlement) providing for reimbursement (in view of AFRIG S.A.’s failure to produce phosphate rock from its deposits in quantities provided for in the contract) of all undue amounts paid for the shares in AFRIG S.A. against re-transfer of the shares, confirming the validity

• f the Company’s claims.

Signing of settlement with DGG December 20th 2017 No settlement finalised on the initially planned date Signing of annex to the agreement with DGG May 22nd– 23rd 2018 Re-transfer of AFRIG S.A. shares to DGG and loss of control of the company May 30th 2018 Exclusion

• f AFRIG S.A. from

consolidated financial statements USD 3m reimbursed by DGG as partial repayment of the amount due for AFRIG S.A. shares August 14th 2018

AFRIG S.A. was excluded from the consolidated financial statements as of May 30th 2018 Negative effect on the consolidated H1 2018 net profit or loss: PLN -44m The deconsolidation had a negative impact on consolidated profit or loss because the Company (as a joint borrower) is liable for repayment of a bank loan used by AFRIG S.A. to finance its operations Positive effect on the separate H1 2018 net profit or loss: PLN +14m At the parent level, the risk was accounted for in the separate financial statements in the form of provisions recognised for the loan guarantee from the moment the risk was identified.

36

GRUPA AZOTY POLICE GROUP RESULTS

38

FINANCIAL HIGHLIGHTS

GRUPA AZOTY POLICE GROUP CONSOLIDATED FINANCIAL RESULTS

• Significant increase in natural gas prices
• Unfavourable downward trend in ammonia prices
• Unfavourable weather conditions
• Significant increase in prices of carbon emission

allowances

• Loss of control over AFRIG S.A. – impact on net profit
• r loss: PLN -43,994 thousand

(PLNm)

Revenue EBITDA Net profit

96 29 172 94 50

• 4
• 3%
• 8%

88 25

EBITDA margin 4.0% EBITDA margin 7.6%

• 189%
• 115%

54

• 48

Q2 2017 Q2 2018

177 94

H1 2017 H1 2018

100

• 15

H1 2017 H1 2018

650 630

Q2 2017 Q2 2018

1350 1245

H1 2017 H1 2018

93 25

Q2 2017 Q2 2018 Net of one-off items related to subsidiary AFRIG S.A.

• Constructive market environment in Pigments
• Optimisation of administrative expenses
• Several major capex projects finalised

39

GRUPA AZOTY POLICE GROUP

SEPARATE AND CONSOLIDATED NET PROFIT

(PLNm)

59 60 115 75 113 53

4% 5% 8% 6% 8% 4%

20 40 60 80 100 120 140 160

H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Separate net profit Separate net profit margin Consolidated net profit

56 48 107 77 100

• 15

Effect of AFRIG S.A. deconsolidation on consolidated net profit for H1 2018: PLN -44m

40

GRUPA AZOTY POLICE GROUP

H1 2018 EBITDA – BUSINESS SEGMENTS OF THE GRUPA AZOTY POLICE GROUP

177 94

23 7 111 2

(PLNm) positive effect on EBITDA negative effect on EBITDA

• Pigments: sales prices of titanium white rising (up 28%) on stable demand
• Fertilizers: unfavourable market conditions in nitrogen fertilizers, with key feedstock

(natural gas) prices rising almost 20%, with average market prices of ammonia down year on year

• Prices of fine coal and potassium chloride up 32% and 7%, respectively, with prices of carbon

emission allowances surging ca. 140% year on year

• Decline in sales volumes of compound fertilizers and ammonia

41

GRUPA AZOTY POLICE GROUP

H1 2018 EBITDA – GRUPA AZOTY POLICE GROUP

177 94

36 3 1 96 24 3

including:

• natural gas prices up PLN 46m
• prices of carbon emission allowances up PLN 11m
• coal prices up PLN 12m
• potassium chloride prices up PLN 10m

(PLNm) positive effect on EBITDA negative effect on EBITDA

• Average prices of titanium white up 28% year on year
• Significant increase in natural gas prices, up 20% relative to H1 2017
• Marked increase in prices of CO2 emission allowances (by ca. 140%)
• Decline in sales volumes of compound fertilizers, ammonia and titanium white
• Higher prices of fine coal, potassium chloride, and raw materials for the production of titanium

white

42

GRUPA AZOTY POLICE GROUP

FERTILIZERS

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP

Compound fertilizers, 65% Urea 18% Ammonia 10%

• ther

7%

Revenue PLN 510m Revenue PLN 1,003m EBITDA: PLN -9M EBITDA: PLN 28m EBITDA MARGIN:

• 2%

EBITDA MARGIN: 3%

VOLUMES (‘000 TONNES)

200 400

Compound fertilizers Urea Ammonia

2Q2017 Q2 2018

0% +23%

• 60%

43

GRUPA AZOTY POLICE GROUP

PIGMENTS

Titanium white 96% Other Activities 4%

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue PLN 109m Revenue PLN 219m EBITDA: PLN 32m EBITDA: PLN 66m EBITDA MARGIN: 30% EBITDA MARGIN: 30%

VOLUMES (‘000 TONNES)

• 10%

2 4 6 8 10 12

Titanium white

Q22017 Q2 2018

44

GRUPA AZOTY POLICE GROUP

ONGOING CAPEX PROJECTS

PARENT’S H1 2018 CAPITAL EXPENDITURE BY PROJECT STRUCTURE

(PLNm)

Growth capex 39% Mandatory 37% Maintenance capex 20% Purchase of finished goods 4%

TYPE H1 2018 CAPEX* Growth capex 17.0 Mandatory 16.6 Maintenance capex 8.8 Purchase of finished goods 1.9 Total 44,3

*Excluding the cost of improvements, major overhauls and catalysts.

GRUPA AZOTY POLICE GROUP’S LARGEST PROJECTS IN 2018

CAPEX PROJECT TOTAL BUDGET EXPECTED COMPLETION DATE TOTAL ACTUAL COST TO DATE EXPENDITURE INCURRED 1H 2018 PROJECT TYPE Police Polymers (implemented jointly with Grupa Azoty S.A.) 5,276.8 2022 139,5 28,6 Growth Change of phosphoric acid production method (DA-HF technology) 73.7 2018 53.8 13.4 Growth Fabrication and replacement of heat exchangers in ammonia unit 15.5 2019 5.0 2.3 Mandatory Replacement of absorption tower on sulfuric acid line 7 14.0 2019 0.01 0.01 Maintenance Computerisation of phosphoric acid PF-4 line 10.8 2018 4.5 3.5 Maintenance Major capex projects completed in H1 2018: 1. Exhaust gas treatment unit and upgrade of the EC II CHP plant; project budget: PLN 290.9m 2. Upgrade of TUP-12 turbine generator set and auxiliary equipment; project budget: PLN 16.0m 3. Replacement of the fertilizer drying plant; project budget: PLN 12.0m

GRUPA AZOTY KĘDZIERZYN GROUP

46

GRUPA AZOTY KĘDZIERZYN GROUP

FINANCIAL HIGHLIGHTS

• Natural gas prices at record highs
• Unfavourable weather conditions
• Price declines in Fertilizers

Revenue EBITDA Net profit

9.8%

• 28.9%

5.6%

• 51.9%

EBITDA margin 9.9% EBITDA margin 3.8%

• Foreign exchange rates
• Price increases in Oxoplasts

395 434

Q2 2017 Q2 2018

880 929

1H 2017 1H 2018

20 16

Q2 2017 Q2 2018

101 92

H1 2017 H1 2018

• 3
• 5

Q2 2017 Q2 2018

44 32

H1 2017 H1 2018

47

GRUPA AZOTY KĘDZIERZYN GROUP

Q2 EBITDA – BUSINESS SEGMENTS OF GRUPA AZOTY KĘDZIERZYN

20.0 16.3

9.8 13.0 0.4

(PLNm) positive effect on EBITDA negative effect on EBITDA

• Revenue delivered by the Oxoplast business up PLN 38m (increased sales volumes of products, mainly Oxo

Alcohols, with prices also rising)

• Cost of raw materials in Oxoplasts up PLN 29.7m (propylene up PLN 25.8m)
• Revenue delivered by the Fertilizers business up PLN 12.7m (increased sales volumes of nitrogen fertilizers

and Rednox products)

• Cost of raw materials in Fertilizers up PLN 34.8m (natural gas up PLN 34.2m)
• Cost of services in Fertilizers down PLN 8.6m (overhauls down PLN 7.5m)

48

GRUPA AZOTY KĘDZIERZYN

FERTILIZERS

Q2 2018 H1 2018 REVENUE IN H1 2018, BY PRODUCT GROUP Revenue: PLN 186.2m Revenue: PLN 409.7m

71% 29%

Nawozy azotowe Pozostałe produkty

EBITDA: PLN -2.6m EBITDA: PLN 37.7m EBITDA MARGIN:

• 1.4%

EBITDA MARGIN: 9.2%

VOLUMES (‘000 TONNES)

140 99 172 115

• 10

40 90 140 190 240 Nitrogen fertilizers Other products

Q2 2017 Q2 2018

+23.1% +16.6%

49

GRUPA AZOTY KĘDZIERZYN

OXO

VOLUMES (‘000 TONNES)

Q2 2018 H1 2018 Revenue: PLN 222.7m Revenue: PLN 463.3m 43 50

Oxoplast Segment's products

Q2 2017 Q2 2018

+16.3% EBITDA: PLN 9.2m EBITDA: PLN 29.8m EBITDA MARGIN: 4.1% EBITDA MARGIN: 6.4%

50

GRUPA AZOTY KĘDZIERZYN

ONGOING CAPEX PROJECTS

MAJOR PROJECTS IN 2018

TYPE H1 2018 CAPEX Mandatory 0.1 Growth capex 22.3 Maintenance capex 21.2 Purchase of finished goods 2.1 Contingency 0.6 Total 46.3

CAPEX PROJECT TOTAL BUDGET EXPECTED COMPLETION DATE TOTAL ACTUAL COST TO DATE H1 2018 CAPEX PROJECT TYPE

• Special Esters I

54.6 March 2019 33.3 17.2 Growth

• Upgrade of synthesis gas

compression unit supplying ammonia plant 180.0 March 2020 15.4 15.1 Maintenance

• Gas compressor (GHH)

31.6 June 2019 14.9 3.4 Maintenance

Mandatory 0% Maintenance capex 48% Growth capex 46% Purchase of finished goods 5% Contingency 1% H1 2018 CAPITAL EXPENDITURE BY PROJECT STRUCTURE

(PLNM)

Thank you for your attention

For more information, please visit www.grupaazoty.com

52

APPENDIX 1

53

GRUPA AZOTY S.A. – SEPARATE FINANCIAL DATA

FINANCIAL HIGHLIGHTS

• Energy commodity prices at record highs
• Reduced fertilizer application in Q1
• Accelerated cycle of maintenance and modernization

shutdowns

• High stock levels reflected in fertilizer prices

(PLNm)

Revenue EBITDA Net profit

• 62%
• 72%

14% 6%

EBITDA margin 17% 12% EBITDA margin 16% 5%

96 36 328 125

H1 2017 H1 2018

856 907

H1 2017 H1 2018

282 80

Q2 2017 Q2 2018

145 108

H1 2017 H1 2018

377 430

Q2 2017 Q2 2018

59 22

Q2 2017 Q2 2018

50

• 10
• Increase in sales volumes after the launch of

Polyamide Plant II

* Net profit adjusted for dividends received

54

DANE FINANSOWE

(PLNm)

• 100

100 200 300 400 500

• 500

500 1 000 1 500 2 000 2 500

Income Net profit

• 200
• 100

100 200 300 400 500 600 700

EBITDA NET DEBT

EBITDA AND NET DEBT

GRUPA AZOTY – CONSOLIDATED FINANCIAL INFORMATION

CONSOLIDATED RESULTS OF THE GRUPA AZOTY GROUP, BY QUARTER

REVENUE AND NET PROFIT

55

GRUPA AZOTY PUŁAWY GROUP

CONSOLIDATED RESULTS OF THE GRUPA AZOTY PUŁAWY GROUP, BY QUARTER

REVENUE AND NET PROFIT

• 50,0

0,0 50,0 100,0 150,0 200,0 250,0

• 250,0

0,0 250,0 500,0 750,0 1 000,0 1 250,0

Revenue Net profit (PLNm)

EBITDA AND NET DEBT

• 1 000,0
• 750,0
• 500,0
• 250,0

0,0 250,0 500,0

EBITDA NET DEBT

FINANCIAL DATA

56

GRUPA AZOTY POLICE GROUP

CONSOLIDATED RESULTS OF THE GRUPA AZOTY POLICE GROUP, BY QUARTER

Effect of AFRIG S.A. deconsolidation on net profit for Q2 2018: PLN -44m

REVENUE AND NET PROFIT

• 350
• 250
• 150
• 50

50 150 250 100 200 300 400 500 600 700 800 900 1 000

Revenue Net profit (PLNm)

EBITDA AND EBITDA MARGIN

• 100,0%
• 50,0%

0,0% 50,0%

• 300
• 100

100 300

EBITDA EBITDA MARGIN

The 2013–2015 net profit and EBITDA figures are shown based on a 2016 adjustment related to AFRIG S.A., with an estimated effect on each performance metric (with the effect on the bottom line totalling approximately PLN 223m). Figures for the years from 2016 to H1 2018 are based on the reported data. FINANCIAL DATA

57

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• r advisers or any other person, as to the accuracy, completeness or reliability of information or opinions contained in this Presentation.

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achievements of the Group in the past. Forward-looking statements are made based on various assumptions of future events, including numerous assumptions regarding present and future business strategies of the Group and its future business environment. Although the Group believes that its estimates and assumptions are reasonable, they may prove to be incorrect. The information, opinions and forward-looking statements contained herein are valid only on the date of this Presentation and are subject to change without notice. The Group and its advisers are not obliged to publish any updates or modify any information, data or statements contained in this Presentation in the event of a change of strategy or the intentions of the Group, or of facts or circumstances that will have an impact on the strategy or intentions of the Group, unless such an

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Contact Investor Relations Office

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