INVESTOR PRESENTATION Y2019 April 2020 2 GRUPA AZOTY AT A GLANCE - - PowerPoint PPT Presentation

INVESTOR PRESENTATION Y2019 April 2020

2

GRUPA AZOTY AT A GLANCE

KEY DATA

FINACIAL RESULTS Y2019 PLNm REVENUE 11 308 EBITDA 1 424 NET PROFIT 408 MARKET CAPITALISATION SHARES STOCK INFORMATION

*data as of 1st January 2020

PLN 3.071 bn* GRUPA AZOTY GROUP 4 locations of main production plants 60 group companies approximately 15,000 employees EU’s No. 2 in mineral fertilizers EU’s No. 3 in PA6 99,195,484 shares WSE: WIG30, mWIG40, WIG- CHEMIA, WIG30, mWIG 40, WIG, WIG-Poland min/max price 6 PLN -113 PLN FOREIGN INDEXES: MSCI, FTSE, CEEplus ESG: WIG-ESG, MSCI ESG FTSE4GOOD

3

GRUPA AZOTY AT A GLANCE

STATE TREASURY

• Government of Poland
• Represented by the Chancellery
• f the Prime Minister

TFI PZU S.A.

• Financial investor

ING OFE (NN OFE)

• Financial investor

NORICA HOLDING S.À. R.L.

• Subsidiary of Acron and Mr. Viatcheslav

Kantor

• Shareholder since 2012
• Norica and its subsidiaries hold 19.82%
• f shares

OWNERSHIP STRUCTURE

Free float – 28.62 %

Based on official notifications received by the Company

State Treasury 33.00% ING OFE 9.96% TFI PZU S.A. 8.60% Other 25.75% Opansa Enterprises Limited 9.51% Rainbee Holdings Limited 9.90% Norica Holding S.à.r.l. 0.41%

Norica indirectly 19.82%

4 Productions plants

Fosfory NPK Grupa Azoty Puławy N Fertilisers, Melamine, Urea, CPL Grupa Azoty Siarkopol Sulphur Grupa Azoty S.A. Parent Company PA6, Compounding, NS Fertilisers Z.A. Chorzów NPK Grupa Azoty Kędzierzyn N Fertilisers, Urea OXO Products Grupa Azoty ATT Polymers PA6 Compo Expert Spain Speciality Fertilisers Compo Expert Speciality Fertilisers Grupa Azoty Police NPK, Urea, Ammonia, TiO2

GRUPA AZOTY AT A GLANCE

CORE BUSINESS

5 73 20 7 223

GRUPA AZOTY AT A GLANCE

GROUP’S BUSINESS BY GEOGRAPHY

Production plants Sales representative

• ffices

Stabilisation units Logistics 3,897 180 1,114 274 166 18

POLAND

50%

1,009959 1,260 46 743

EU 35% North America 3%

2 60 25 1 214

South America 3% Africa 1% Other Europe 4%

231 45 110 7 65

Asia 4%

187 1 3 201

WORLD EUR

Grupa Azoty Plastics Chemicals Energy Compo Expert Agro Fertilizers

2019 REVENUE

PLNm

46% 13% 13% 23% 3% 2%

REVENUE ANALYSIS 2019

Other 10 7 121 21

IMPACT OF COVID-19

7

IMPACT OF COVID-19

EFFECT OF PANDEMIC ON CHEMICAL INDUSTRY

Agricultural market

The COVID-19 pandemic had no significant impact on the crop segment of Poland’s agriculture.

Fertilizers - Poland

The COVID-19 pandemic had no significant impact on the Fertilizer segment in Poland.

Fertilizers - other countries

Except temporary logistics constraints of local nature, the COVID-19 pandemic had no significant impact on the fertilizer segment in the EU.

Polyamide

Record-high price declines in polyamide 6. Increased demand from the food packaging and healthcare sectors.

Melamine

Oversupply on Asian markets. Demand is still low due to the pandemic.

OXO ALCOHOLS

Demand expected to pick up in Q3 2020. Very low crude oil prices expected to keep in check any meaningful increase in product prices.

Titanium white

There has been no reduction in the supply of titanium white in Europe, while the demand is strongly affected by the measures taken in response to the spread of coronavirus.

Natural gas

Record-high winter temperatures in Europe. Subdued demand due to the COVID-19 epidemic.

8

IMPACT OF COVID-19

IMPACT OF THE PANDEMIC ON THE GRUPA AZOTY GROUP’S BUSINESS

IDENTIFIED RISK AREAS:

Disruptions in feedstock supply chains and in sale of products due to disruptions in transport Risk

• f

temporary disruptions in timely delivery of capital and maintenance projects Disruptions in continuity

• f

production processes due to potentially reduced availability of workforce Risk of deteriorated liquidity faced by some trading partners due to payment backlogs Exchange rate volatility Possible risks of sales disruption in individual segments

GDP CHANGES AS FORECAST BY EC

• 4.3% -6.1%
• 6.2% -7%
• 7.2% -7.9%
• 8.2% -9.7%

Source: European Economic Forecast Spring 2020

• close monitoring of sales, trading partners’ position and

collection of receivables

• implementation of crisis management rules, particularly in

maintenance and investment activities

• cooperation

with public administration to develop appropriate regulations to mitigate adverse economic consequences of COVID-19 pandemic

MITIGATING MEASURES:

9

 Donation of PLN 3,200,000 to institutions and entities which combat COVID-19 (PLN 750,000 from Grupa Azoty S.A., Grupa Azoty ZAK S.A., Grupa Azoty Zakłady Chemiczne Police S.A. and PLN 950,000 from Grupa Azoty Zakłady Azotowe PUŁAWY S.A.);  Free-of-charge lend of 40 company cars to healthcare establishments for the purpose of combating the epidemic.  Manufacture of biocidal decontaminant by Grupa Azoty Zakłady Azotowe PUŁAWY S.A., based on hydrogen peroxide (4.9%), authorisation from the Office for Registration of Medical Devices and Biocidal Products;  Manufacture of “safe gloves” with antiviral properties, covered with a layer of silver;  Donation of Tarfuse filaments for the #DrukarzeDlaSzpitali initiative (3D printing of protective mask and goggle components) and the VentilAid project, a Polish ‘last chance’ ventilator (on the open source basis);  PLN 300,000 donations from Hyundai Engineering to purchase ventilators for hospitals in Police

MEASURES TAKEN IN RESPONSE TO THE CORONAVIRUS EPIDEMIC

IMPACT OF COVID-19

FINANCIAL PERFORMANCE

11

315 489 8 408

2016 2017 2018 2019

9 9,6 10 11,3

2016 2017 2018 2019

(PLNbn) 1034 1262 777 1529 11% 12% 8% 13%

2016 2017 2018 2019

• ADJ. EBITDA

EBITDA MARGIN

ADJUSTED EBITDA

FINANCIAL PERFORMANCE

RESULTS OF THE GRUPA AZOTY GROUP

REVENUE NET PROFIT

(PLNm)

EBITDA BY SEGMENTS

541 484 82 965 301 348 282 208

• 28

221 192 66

2016 2017 2018 2019

AGRO FERTILIZERS CHEMICALS PLASTICS (PLNm) (PLNm)

12

5 000 10 000 15 000

Azomures S.A. Groupe Roullier Nitrogenmuvek Rt. Achema JSC Fertiberia Eurochem Agrofert Borealis Grupa Azoty Yara

[tt]

FINANCIAL PERFORMANCE

AGRO FERTILIZERS

PRODUCTION CAPACITIES

• No. 2

in EU

• No. 1

in Poland

Source: Fertilizers Europe

RESULTS

(PLNm) 2018 2019 Y/Y CHANGE Segment revenue

4,904 6,716 37%

EBITDA

82 965 1,077%

EBITDA margin

2% 14%

PRODUCT CATEGORIES

Nitrogen fertilizers and ammonia 39% Nitrogen-sulfur fertilizers 11% Compound fertilizers 30% Specialty fertilizers 20%

13

FINANCIAL PERFORMANCE

CHEMICALS

PLASTICIZERS

100 200 300 400 500

Valtris Perstorp OXO AB Deza Grupa Azoty Polynt Evonik BASF ExxonMobil

200 400 600

Oltchim SA Perstorp OXO Grupa Azoty Ineos Oxea Group BASF

OXO ALCOHOLS MELAMINE

50 100 150 200

Azomures S.A. BASF SE Grupa Azoty Borealis Group OCI Melamine

PRODUCTION CAPACITIES

• No. 3

in EU

• No. 5

in EU

• No. 4

in EU Titanium white 13% Melamine 17% Urea (technical grade) 22% Plasticizers 8% OXO alcohols 18% Other 22%

PRODUCT CATEGORIES RESULTS

(PLNm) 2018 2019 Y/Y CHANGE Segment revenue

3,114 2,639

• 15%

EBITDA

282 208

• 26%

EBITDA margin

9% 8%

14

FINANCIAL PERFORMANCE

PLASTICS

PRODUCTION CAPACITIES

POLYAMIDE 6

50 100 150 200 250 300 Nurel Beaulieu Rhodia Ube Domo Radici DSM Aquafil Grupa Azoty Lanxess BASF

Source: PCI Nylon, YellowBook 2018 Integrated

RESULTS

• No. 3

in EU

• No. 1

in Poland

(PLNm) 2018 2019 Y/Y CHANGE Segment revenue

1,562 1,456

• 7%

EBITDA

192 66

• 66%

EBITDA margin

12% 5%

PRODUCT CATEGORIES

Caprolactam 8% Natural polyamide 86% Modified polyamide 6%

15 30 50 70 90 2 7 12 17 22 27

EEX

20 40 60 80 100 120

GPL* Gas - PPX*

130 180 230 280

PRICES OF HARD COAL ELECTRICITY PRICES CO2 PRICES [Q/Q]

PLN/MWh USD/t EUR/t

The long-term growth trend initiated in Q3 2017 is in the correction phase. The number of emission allowances held by the Grupa Azoty Group companies is sufficient to cover their CO2 emissions for 2019. The EC continues to work on the European Green Deal which will enforce emission reductions and reduce the allocation of free emission allowances. We expect the downward trend to continue. The Grupa Azoty Group companies have secured the required volumes under their contracts. We are awaiting decisions about reliefs under the Capacity Market Act. Regulations on the amount of charges come into force as of October 1st 2020, already accounted for in the 2020 budget. We expect prices to continue at recent levels. In Poland, the supply exceeds the demand in both the producer and the customer segments of the market. The Group companies are parties to long-term contracts securing the required volumes. Deliveries are made as planned. In mid-year, the EC plans to start its revision of the Community framework for the taxation of energy products.

NATURAL GAS PRICES

40% year-on-year decline in the average quarterly gas prices according to Gaspool data High stock levels maintained in case transit through Ukraine is suspended Significant increase in LNG supply on the global market Low gas prices in Asia – Europe more favourable to LNG suppliers from the Atlantic region. FINANCIAL PERFORMANCE

ENERGY COMMODITIES

PLN/MWH * Excluding transmission.

Electricity (IRDN) Hard coal ARA prices

16

FEEDSTOCK CONSUMPTION BY GRUPA AZOTY GROUP

FEEDSTOCK COST ANALYSIS

Gas 24% Other 31% Energy 11% Propylene 6% Potassium chloride 8% Phenol 6% Phosphate rock 5% Fine coal 6% Benzene 3%

FINANCIAL PERFORMANCE

17 FINANCIAL PERFORMANCE

FROM RAW MATERIAL TO PRODUCT GRUPA AZOTY GROUP

Natural gas Oxygen Nitrogen Methanol Phenol Benzene Sulfur Ammonia Nitric acid

Ammonium nitrate

(AN)

Calcium am monium nit rate (CAN) Ammonium sulfate nitra te (ASN) Ammonium sulfate (AS)

Mixed acid Caprolactam PA 6 POM Trioxane Modified plastics C-non Oleum Dolomite

Syngas and hydrogen production

Formalin Sulfuric acid Ilmenite Titanium slag Titanium white Phosphate rock Potassium chloride Phosphoric acid Fertilizers NP Fertilizers NPK / PK Adipic acid Terephthalic acid Plasticizers OXO alcohols Urea (UREA) Propylene Aldehydes Melamine UAN (UAN)

Raw materials – procurement Plastics OXO ALCOHOLS Agro Fertilizers Own production Pigments

Pulaska

Liquid fertilizer

18

Corporate credit facilities Overdraft and multi-purpose facilities Other financing sources

500 1 000 1 500 2 000 2 500

FINANCIAL PERFORMANCE

GRUPA AZOTY GROUP FINANCES AS AT DECEMBER 31ST 2019

AVAILABLE FUNDING

NET DEBT BRIDGE

SECURED CORPORATE FINANCING

• Revolving and umbrella credit facility
• PLN 3,869m

PKO and bank syndicate

• Term Loan Agreement
• PLN 627m

EBRD

• Term Loan Agreement
• PLN 1,043m

EIB

• PLN 5,539m

Total corporate financing NET DEBT 2018 2019

Net debt calculated as per bank agreements (PLNm) 2,029 1,850 Net debt/EBITDA for 12 months (ratio) 2.42 1.36 Total debt ratio 48.6% 50.3%

2,029 1,850

1,049 1,424 291 95

Net debt 2019 Capital expenditure EBITDA Contribution to GA Police share issue Other Net debt 2019

Change in net debt as at December 31st 2019 calculated as per bank agreements

INVESTMENTS

20

20

MODIFIED PLASTICS PLANT – COMPOUNDING

PORTFOLIO

Caprolactam intermediate in polyamide 6 (PA6) production Natural engineering plastics: PA6, POM Modified plastics: PA 6, PA66, POM, PPC, PPH , PBT

MAIN PROJECTS

PROJECT SCOPE: Construction of plastics modification unit

• Project implemented within a Special

Economic Zone

• Location: Tarnów
• Target production capacity: 46tt
• Project budget: PLN 115m

PROJECT’S KEY BENEFITS: The project will allow the Group to shift its product mix towards higher-margin segments and further enhance the value of its PA6 product and others

 FINISHED Q4 2019

21

POLIMERY POLICE

PROJECT SCOPE:

• PDH-PP plant
• polypropylene logistics base
• propane and ethylene handling & storage terminal
• Production capacity

– propylene 429,000 tonnes/year

• polypropylene 437,000 tonnes/year
• Project finance
• Location: within the Pomeranian Special Economic Zone

(state aid of up to PLN 428m)

• Budgeted cost of the project: EUR 1.52bn

CAPEX EUR 1.18bn

• Hyunday Engineering Co. Ltd as the General Contractor

PROJECT’S KEY BENEFITS: Diversification of revenue streams, additional profits for the Grupa Azoty Group, expansion of the product portfolio, flattening of business cycles

21

MAIN PROJECTS IN PROGRESS

• Full Notice to

Proceed (FNTP) Dec 23, 2019

• Start of

construction by the General Contractor Jan 7, 2020

• Test run of the

PDH-PP plant Q2 2022

• Start of

commercial

• peration

Q4 2022 PROJECT SCHEDULE

ISB News – distinction under the category 'Most Reliable in the Fuel and Chemical Sector'

22

Company's current capital Grupa Azoty 345 LOTOS 127 HEC & KIND 130 118 Grupa Azoty S.A 30,52% Grupa Azoty POLICE 34,41% Grupa Azoty 64,93% LOTOS 17,30% HEC & KIND 17,77%

FINANCING OF POLICE POLYMER PROJECT

INVESTOR AMOUNT Hyundai (HEC) USD 73m KIND USD 57m Grupa LOTOS PLN 500m

The Grupa Azoty Group has secured its

• wn

funding for the Project for a total amount of USD 464m, including:

• USD 118m – equity contributed to date
• USD 160m – capital to be contributed
• USD 186m – subordinated loans to be contributed

within the permitted limits of the total “equity” contribution specified in the Group's corporate financing agreements, including 47% of equity from Grupa Azoty S.A., 53% of Grupa Azoty Police Each Sponsor will provide the following “equity”: 60% pure equity and 40% loan The “equity” financing was raised at the full amount agreed with the banks, i.e. USD 720m. The Group also has a safety buffer to cushion adverse exchange rate movements until hedges are put in place.

* All amounts translated at the USD/PLN exchange rate of 3.95. Grupa LOTOS's contribution was converted from PLN to USD. POLIMERY POLICE

TARGET SHAREHOLDING STRUCTURE * “EQUITY” FINANCING STRUCTURE*

USD 720M

INVESTMENT AGREEMENT GRUPA AZOTY’S INVESTMENT

23

POLIMERY POLICE

THE FACILITIES AGREEMENT FOR THE FINANCING

CONSORTIUM: Alior Bank S.A., Bank Gospodarstwa Krajowego, Bank Ochrony Środowiska S.A., Bank Polska Kasa Opieki S.A. (the bank coordinating), BNP Paribas Bank Polska S.A., the European Bank for Reconstruction and Development, Industrial and Commercial Bank of China (Europe) S.A. Poland, mBank S.A.,

FACILITY MAX AMOUNT MATURITY term loan EUR 487,800,000 29 November 2030 term loan USD 537,700,000 29 November 2030 working capital VAT facility PLN 150,000,000 30 November 2024 working capital loan USD 180,000,000 29 November 2025

Powszechna Kasa Oszczędności Bank Polski S.A., Powszechny Zakład Ubezpieczeń S.A., Powszechny Zakład Ubezpieczeń na Życie S.A., PZU Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych BIS2, Santander Bank Polska S.A. ICBC Standard Bank PLC

24

POLIMERY POLICE

POLIMERY POLICE

PRODUCTION CAPACITIES

Production forecast for polypropylene after 2022 (tt./year) - internal estimates of Grupa Azoty Polyolefins S.A. based on data provided by Eurostat

500 1000 1500 2000 2500

Belgium Germany France Spain Italy Netherland Hungaria Czech Republic Poland Slovakia UK Finland Bulgaria Romania +437 tt. from Grupa Azoty Polyolefins S.A. Construction industry 9% Food storage packaging 32% Household products 27% Textiles 7% Automotive 15% Industry 10%

Source: Own study of Grupa Azoty PolyolefinsS.A. based on data from the Annual Report 2017 of the PlasticsEurope Polska Foundation

SALE OF POLYPROPYLENE BY END CUSTOMER PLANTS LOCALISATION POLIMERY POLICE

25

NITRATE GRANULATION PLANT

PRODUCTS PROJECT SCOPE: Plant for production of ammonium nitrate-based granulated fertilizers

• The plant’s daily production capacity:

1,400 tonnes of CAN

• r

1,200 tonnes of mechanically granulated nitrate

• Project completion timeframe: 2015 – 2021
• Location: Puławy
• Capital expenditure: PLN 430m (amended)

PROJECT’S KEY BENEFITS: Improved quality of fertilizers by applying modern mechanical granulation

25

MAIN PROJECTS IN PROGRESS

Calcium ammonium nitrate (CAN) Granulated ammonium nitrate

26

NITRIC ACID AND NEUTRALISATION UNITS

MAIN PROJECTS IN PROGRESS

PROJECT SCOPE: new nitric acid unit 1,000 t/d, neutralisation unit 1,300 t/d, fertilizer production line 600 t/d, upgrade of existing nitric acid lines

• Project completion timeframe: 2017 – 2024
• Project carried out jointly with Thyssenkrupp Industrial

Solutions AG

• Location: Puławy
• Capital expenditure: PLN 695m

PROJECT’S KEY BENEFITS: Higher production capacity, addition of new solid and liquid fertilizers (Ca, K, Mg) to product range, avoiding downtime (production losses), elimination of bottlenecks in absorption and cooling, improved production efficiency, consumption rates: ammonia, steam yield, electricity

27

POWER GENERATION UNIT

MAIN PROJECTS IN PROGRESS

PROJECT’S KEY BENEFITS: The new unit and the upgraded on-site CHP plant will provide Grupy Azoty Puławy with an energy system appropriate for its needs in terms of electricity and process heat supplies PROJECT SCOPE: Construction of a new coal-fired unit

• Launch of the unit: 2021
• A 100 MWe coal-fired unit
• Integrated with the on-site CHP plant
• Location: Puławy
• Project budget: PLN 1.2bn

RESEARCH AND DEVELOPMENT

29

RESEARCH AND DEVELOPMENT

NEW PRODUCTS AND TECHNOLOGIES

LAUNCH OF SALE OF 3D PRINTING MATERIALS SPECIALISED FERTILIZER OFFERING BY GA CHORZÓW PROJECTS ON THE LIST OF NCBiR-RECOMMENDED INITIATIVES

• R&D programme began in 2017
• FDM technology filaments based on PA6 polyamide manufactured by GA
• Online retail store to launch soon
• Research into SLS printing powders and SLA and DLP polymers
• Total amount of co-financing PLN 20m
• Grupa Azoty PUŁAWY

, GA POLICE and Łukasiewicz-INS’s projects third on the list

• Modern fertilizer formulae: functional additives, polymer coating
• Technologies for optimum use of intermediate products and waste products
• successful restructuring of the company
• development of compound fertilizers based on potassium nitrate and calcium nitrate
• AZOPLON fertilizers for foliar feeding of crops, fruit and vegetables
• FERTIPLON fertilizers intended mainly for cultivation under cover

30

RESEARCH AND DEVELOPMENT

1. 3D printing – product innovation 2. Vacuum coating – product innovation

OWN PROJECTS: EXAMPLES

PA6 filaments for FDM Project launched in 2017

• March 2020 – product commercialised
• May 2020 – launch of online store

SLS powders Advanced research to obtain SLS powders from PA 6 and other structural polymers Launch of vacuum metal and non-metal coating unit Physical vapour deposition technology

• ffers a number of advantages over competing solutions.

Work on new types of coatings, e.g. biocidal coatings.

31

RESEARCH AND DEVELOPMENT

SCALE UP  Grupa Azoty S.A. 's participation as Technology Recipient in two projects implemented by: Krakowski Park Technologiczny, Funding Box  More than 15 accelerated start-ups in both programmes  Implementation: Jan 1 2019 – Dec 31 2021

COOPERATION WITH START-UPS

IDEA4AZOTY  Grupa Azoty S.A.'s business accelerator programme  35 applications, 19 projects in second stage of recruitment  2 applications at evaluation stage, with terms of another 5 under discussion

32

RESEARCH AND DEVELOPMENT

• 1. SatAgro

Agriculture 4.0 - satellite field monitoring Optimisation of fertilizer application depending on soil conditions Pilot 2017 Season 2019: 253 farms, 63 thousand hectares monitored

START-UPS’ PROJECTS: EXAMPLES

• 2. Sinteco

Diversification of business - organic chemicals and highly specialised products Production of high-purity polyglycerols and glycerine-based polyglycerol esters Implementation of innovative low-temperature synthesis

Contact Investor Relations Office

ir.tarnow@grupaazoty.com