Grupa Azoty Integrated report 2014 by TOMAMI

Grupa Azoty Integrated Report | 2014

gRupa azoTy inTegRaTed RepoRT | 2014 prepared in accordance with GRI G4 (core) and verified by a third-party external verification agency.

G4-1

G4-2

Ladies and Gentlemen, Last year, Grupa Azoty faced a variety of crucial developments. Our consistent efforts to increase the Group’s value ushered in further significant triumphs. Investment projects, deployment of a new management model, development of a programme to operationalise our strategy, active involvement in international industry organisations, and adoption of a code of ethical conduct were our key achievements last year. We are especially proud of the programme for the operationalisation of the Group’s strategy. Today, declaring what one wants to achieve is simply not enough, one must also know how to achieve it. We already have this knowledge, having translated our strategic objectives into concrete actions and figures within three areas: organic growth, mergers and acquisitions, and the Azoty PRO Operational Excellence Programme. We have defined 68 investment projects, allocating close to PLN 7bn towards their costs. The investments will open up new business areas for Grupa Azoty, expand our product portfolio, increase production capacities, improve efficiency, and strengthen the distribution network. We will continue our activity in the area of mergers and acquisitions. We have selected acquisition targets whose capabilities and business profiles could be particularly valuable within the Group’s configuration of companies. The Azoty PRO Operational Excellence Programme is the operationalisation’s third pillar. It provides for exchange of experience between the companies and use of best practice to enhance our industrial and management processes, while encouraging self-improvement and continuous pursuit of increased efficiency and productivity.

pow er i ng cr e at i o n

It also gave us great satisfaction when in August 2014 the Ministry of State Treasury included Grupa Azoty S.A. in its list of strategic enterprises, which shows that the state appreciates our role in the national economy. It is good news for our shareholders. We are all the more happy, because we strive to make Grupa Azoty the first choice for investors in the chemical industry. We are active on the international arena as a member of such organisations as Fertilizers Europe. We have also strengthened our position in other international organisations, such as the International Fertilizer Industry Association (IFA), which have recognised Grupa Azoty not only because it manufactures and sells huge amounts of fertilizers, but also because of its role in shaping the future of the chemical industry and facilitating sustainability in global agriculture. The world’s largest powers, such as the US, Russia, Brazil and China, are striving to position themselves strongly on the food production market, which may become an area of globally strategic and geopolitical importance in the years to come. To meet this challenge as Grupa Azoty – and as Poland and the European Union – we are always on the lookout for new fertilizing technologies. To this end, we have forged links with research institutes, agricultural universities and Poland’s most prominent academics. We are certain that the scale of our operations will allow us to attract intellectual capital from around the world and that Grupa Azoty will remain an attractive employer for leading specialists in the fertilizer industry. Based on our own innovative projects, we plan to construct a new platform for Grupa Azoty’s growth in speciality chemicals. Given Poland’s successful economic transformation and experience gained in the process, our country is an example to follow, particularly in agricultural production, which often goes unappreciated. We do believe in its further growth and will make every effort to contribute. We realise that these objectives will be met only partially if our efforts are not consistent with the principles of social responsibility and sustainable development. Each of our projects, companies and products has a potential impact on the environment, health and life prospects of people living in the region where we operate, as well as on the safety of our employees and customers. This is why last year we decided to follow the Global Reporting Initiative’s G4 guidelines in discussing our business. This year we produced another GRI-aligned report, knowing that it would give our stakeholders a fuller picture of the Company. Have a good time reading Grupa Azoty’s second integrated annual report.

Paweł Jarczewski

President of the Management Board of Grupa Azoty

Numbers are important in business, but they do not tell the whole story. That is why we present in our current report, besides the numbers, the story about what we do. About our products, our partners, our clients. About why and how we do everything. Because we live among people â&#x20AC;&#x201C; we tell the story about our responsibility.

gRupa azoTy in key figuRes

Revenue

PLN 9,898 M EBIT

PLN 302 M EBITDA

PLN 822 M Capital expenditure

PLN 572 M Net profit

PLN 265 M Equity

PLN 6,488 M Total assets

PLN 9,948 M Headcount at end of year

13,879

w hat w e d o W h er e w e o per at e

Our strategy and mission Manag em en t s tan dar ds Financial highlights C api tal mar ke t

The Group

W ho w e ar e

Grupa Azoty – a strategic enterprise On August 5th 2014, the Ministry of State Treasury announced that Grupa Azoty had been placed on the list of strategic enterprises, on account of the scale of its operations, significant impact on the Polish economy, and enormous role in the labour market. The list includes 21 other enterprises.

Grupa Azoty is Poland’s largest chemical group, formed through consolidation of the major players of the Polish chemical sector. We enjoy a strong position on the chemical markets in Poland and abroad. A well thought-out structure of the Group gives it strength and security through the sheer scale of operations, as well as versatility and flexibility through integration of a wide range of mutually complementing capabilities.

Currently, the Grupa Azoty Group comprises four largest plants operating in the Polish heavy chemicals sector, based in Tarnów, Puławy, Police and Kędzierzyn-Koźle, as well as about fifty direct or indirect subsidiaries, associates and entities in which the Group holds minority interests. This complex structure has emerged in the process of strategic consolidation pursued in recent years. The strategy has allowed us to expand production capacities, run bold research and development projects and strengthen our independence in terms of logistics, feedstock and energy supplies.

Although the process of expansion of the Grupa Azoty Group through mergers and acquisitions is not yet over, we have recently concentrated on leveraging the achieved economies of scale and synergies in our dayto-day operations. However, we are still looking for businesses we would like to incorporate into the Group. The criteria we use to identify such acquisition targets have been specified in the ‘Grupa Azoty Group’s Strategy for 2014–2020 – Operationalisation’, adopted in 2014.

For a detailed description of entities comprising the Group, see the Directors’ Report on the Operations of the Grupa Azoty Group for the 12 months ended December 31st 2014 (pp. 4-8).

THE GROUP’S BUSINESS IS DIVIDED INTO THE FOLLOWING SEGMENTS: ■

Agro Fertilizers

■

Plastics

■

Chemicals

■

Energy

■

Other Activities

The gRoup

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1.1 w h o w e aR e

1.1 w ho w e aR e

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Grupa Azoty S.A.

In 2014, we worked on sorting out the assets acquired by the Group in the process of consolidation in previous years. As part of our investment in Africa, where we hold a licence for development of phosphate rock reserves, we finally accounted for the acquisition of African Investment Group S.A., incorporated AFRIG Trade S.à r.l. as a subsidiary of African Investment Group S.A., and established Grupa Azoty AFRICA S.A.

Grupa Azoty ATT Polymers GmbH 100%

Grupa Azoty „Compounding” sp. z o.o. 100%

Grupa Azoty „Folie” sp. z o.o. 100%

Grupa Azoty „KOLTAR” sp. z o.o. 100%

„Agrochem” sp. z o.o. 100%

Unibaltic Agro sp. z o.o. 100%

At home, we increased the share capitals of zarząd Morski Portu Police sp. z o.o., a subsidiary of Grupa Azoty POLICE, and Agrochem Puławy sp. z o.o. – a subsidiary of Grupa Azoty PUŁAWy. Grupa Azoty COMPOUNDING and Grupa Azoty FOLIE were established to extend the product chain in the Plastics Segment. Additionally, Unibaltic Agro sp. z o.o. was included in the Group. In sorting out its assets, the Grupa Azoty Group divested itself of Hotel Centralny and increased its shareholding in Elektrownia Puławy sp. z o.o.

„Agrochem Puławy” sp. z o.o. 100% Elektrownia Puławy sp. z o.o. 100% SCF Natural sp. z o.o. 99.99% GZNF „Fosfory” sp. z o.o. 98.43% Przedsiębiorstwo Żywienia Zbiorowego i Usług „STO-ZAP” sp. z o.o. 96.15% REMZAP sp. z o.o 94.61% Zakład Opieki Zdrowotnej „Medical” sp. z o.o. 91.41% 5 Zakłady Azotowe Chorzów S.A. 85% PROZAP sp. z o.o. 84.69%

„NAVITRANS” sp. z o.o. 26.45% 4

Bałtycka Baza Masowa sp. z o.o. 50% CTL KOLZAP sp. z o.o. 49% „NAVITRANS” sp. z o.o. 26.45%

Correct as at June 2nd 2015

TECHNOCHIMSERWIS S.A. closely held company 25%

1.1 w h o w e aR e The gRoup

Grupa Azoty Zakłady Azotowe „Puławy” S.A. 95.98%

Grupa Azoty Zakłady Azotowe Kędzierzyn S.A. 93.48%

Grupa Azoty Kopalnie i Zakłady Chemiczne Siarki „Siarkopol” S.A. 85%

Grupa Azoty Zakłady Chemiczne „Police” S.A. 66%

Hotel CENTRALNY sp. z o.o. in liquidation 100%

Grupa Azoty Police Serwis sp. z o.o. 100% 7

ZAKSA S.A. 91.67% 3

„Koncept” sp. z o.o. 100%

CTL CHEMKOL sp. z o.o. 49%

„Transtech” sp. z o.o. 100%

Grupa Azoty Polskie Konsorcjum Chemiczne sp. z o.o. 36.73% 1

„Supra” sp. z o.o. 100%

Grupa Azoty AFRICA S.A. 100% Zarząd Morskiego Portu Police sp. z o.o. 99.98% AFRIG Trade SARL 100%

1. Grupa Azoty PKCH sp. z o.o. – shares held by Grupa Azoty S.A. and Grupa Azoty KĘDzIERzyN 2. EKOTAR sp. z o.o. – shares held by Grupa Azoty Jednostka Ratownictwa Chemicznego Sp. z o.o. and Grupa Azoty PROREM Sp. z o.o. (12% each)

Grupa Azoty Polskie Konsorcjum Chemiczne sp. z o.o. 63.27% 1

„NAVITRANS” sp. z o.o. 26.45% 4

Grupa Azoty Automatyka sp. z o.o. 79.69% Grupa Azoty Jednostka Ratownictwa Chemicznego sp. z o.o. 100% Konsorcjum EKO TECHNOLOGIES 60% EKOTAR sp. z o.o. 12%*** Grupa Azoty PROREM sp. z o.o. 100% EKOTAR sp. z o.o. 12% 2

African Investment Group S.A. 54.9% 6 INFRAPARK Police S.A. in liquidation 54.43% „Budchem” sp. z o.o. in bankruptcy by liquidation 48.96% KEMIPOL sp. z o.o. 33.99%

3. zAKSA S.A. – shares held by Grupa Azoty KĘDzIERzyN (91.67 %) and CTL Chemkol sp. z o.o. (0.783 %). 4. NAVITRANS Sp. z o.o. – shares held by Grupa Azoty S.A., Grupa Azoty zakłady Azotowe Puławy S.A. and Bałtycka Baza Masowa sp. z o.o. 5. Grupa Azoty zakłady Azotowe Puławy S.A. holds also (indirectly) 0.83% of the total vote at the General Meeting, and 0.82% of the shares in MEDICAL sp. z o.o. 6. REMECH Grupa Inwestycyjno-Remontowa sp. z o.o. holds a 0.1% interest in the share capital of African Investment Group S.A. 7. On June 1st 2015, REMECH sp. z o.o. acquired AUTOMATIKA Sp z o.o., and changed its name to Grupa Azoty POLICE Serwis sp. z o.o.

1. 2 w haT w e d o

■

G4-6

Grupa Azoty amongst producers

in poland ■

producer of compound fertilizers¹ ■

Plastics

15%

Fertilizers

56%

producer of mineral fertilizers² ■

producer of sulfur-containing fertilizers ■

producer of nitrogen fertilizers

in the european Union ■

producer of mineral fertilizers

Revenue

PLN 9,898 M

in the european Union ■

Chemicals

25% #1

in poland ■

Energy Other

■

■ ■

Percentage share of the product segments in sales:

1 Compound fertilizers in total (AP, NPK, PK); 2 Compound fertilizers + nitrogen fertilizers; 3 Among integrated producers;

producer of OXO alcohols and plasticisers

producer of titanium white

producer of melamine

in the european Union ■

■

producer of polyamide

in the european Union ■

producer of compound fertilizers

producer of plasticisers

producer of polyamide 6³

1. 2 w haT w e d o The gRoup

Gdynia

9 Gdańsk

7 police

Thanks to a complex structure of mutually complementing companies, Grupa Azoty is able to offer a wide range of products used indirectly or directly by millions of people in Poland, Europe and many other countries of the world.

Guben 6 puławy 2

3 Grzybów 1 Tarnów

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Kędzierzyn-Koźle 5 4 chorzów

Grupa Azoty S.A.

■ Caprolactam ■ Nitrogen fertilizers (AN, CAN)

Grupa Azoty police ■ Compound fertilizers (NPK, NP)

■ Nitrogen-sulfur fertilizers (ASN, AS) 2

Grupa Azoty ATT polYMeRS ■ Plastics (PA6)

■ Plastics (PA6, POM, modified products)

■ Nitrogen fertilizers (UREA) ■ Nitrogen-sulfur fertilizers (NS)

Grupa Azoty pUŁAWY

■ Titanium white

■ Nitrogen fertilizers (AN, RSM ®, UREA) ■ Nitrogen-sulfur fertilizers (RSMS, AS) ■ Melamine

Bałtycka Baza Masowa sp. z o.o.

■ Caprolactam

■ Logistics

Grupa Azoty SiARKopol

NAViTRANS sp. z o.o.

■ Sulfur-based products

■ Logistics

Grupa Azoty cHoRZÓW S.A.

GZNF Fosfory ■ Compound fertilizers

■ Compound fertilizers (NPK) ■ Stearin 10 5

Grupa Azoty KĘDZieRZYN ■ Nitrogen fertilizers (AN, CAN, UREA)

AFRiG Trade SARl – Senegal ■ Phosphorites

Traditionally, mineral fertilizers are the core of our offering. Our comprehensive range of fertilizers includes state-of-the-art original products – the outcomes of our research and development projects. Among them are nitrogen, nitrogensulfur, nitrogen-phosphorus and compound fertilizers, including liquid ones. Aware of the economic and environmental downsides of traditional approach to the application of fertilizers, we have recently focused on development of comprehensive, intelligent fertilizing systems that would optimally balance the needs of farmers, crops and the environment. Grupa Azoty is also a major supplier of plastics, chemicals and pigments. This product diversity secures our presence in the everyday lives of almost all social groups. Our products are applied in agriculture, the automotive, machine building, paper manufacture, food and textile industries, as well as in mining, construction, electrical engineering, pharmacy, cosmetics, printing, furniture, sports and many other areas. Apart from sheer satisfaction, it gives us the much valued diversification, which translates into security.

■ Nitrogen-sulfur fertilizers (CAN+S) ■ OXO alcohols ■ Plasticisers

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1. 3 wheRe we opeRaTe

Grupa Azoty originates from the best traditions of the Polish chemical industry. Its beginnings go back to 1927, when a decision was made in the newly independent Poland to build a chemical plant in Mościce. Today, however, we operate worldwide. With advanced quality products, we thrive in the global market. Our products are marketed mainly in Poland and exported to the EU countries, including Germany, the UK, the Czech Republic, Italy, France and Belgium. Fertilizers and chemicals (urea and OXO alcohols) are the key products sold in the domestic market. Exports to the EU countries include mainly fertilizers (such as Saletrosan® 26, Ammonium Sulfate AS21, zaksan®, Salmag®, Pulan™, RSM™, Polifoski®) and OXO alcohols, and exports to Asia – caprolactam and polyamides. In South America, we primarily market fertilizers.

Other Europe

For more details on the Product Stewardship certificate, see pp. 118−119.

22.4%

11.4%

53%

Other EU countries

Germany

Poland

Germany Poland

Global expansion of Grupa Azoty is not limited to winning new markets. We also seek to ensure secure and stable sources of our strategic feedstocks, looking for suppliers all over the world. Our feedstocks come from Africa, Western Europe, Central and Eastern Europe and Asia, where we look for prospective partners, undertake joint initiatives and establish new businesses. This is how we have acquired our own phosphate rock reserves in Senegal. However, thinking of business in global terms in the 21st century cannot boil down to geographical expansion. Going global means following the world-class standards of management, responsibility and reporting. In June 2014, Grupa Azoty was awarded the Product Stewardship certificate by Fertilizers Europe. Grupa Azoty PUŁAWy has held the certificate since 2011. Also in 2014, we published the first integrated report of Grupa Azoty, drawn up in compliance with the latest Global Reporting Initiative’s G4 guidelines.

SALES By GEOGRAPHIES IN 2014

2.1% Senegal

Africa

3.4%

South America

0.1%

Other

1. 3 wheRe we opeRaTe The gRoup

5.6%

Asia

World economic Forum in Davos Given the manufacturing profile of Grupa Azoty and the scale of its operations, food and energy security have long been among our top concerns. Therefore in 2015 we took part in the World Economic Forum in Davos as an industry partner. Grupa Azoty was represented by Paweł Jarczewski and Krzysztof Jałosiński, who actively participated in the discussions.

Meetings such as the one in Davos give us an opportunity to contribute to ongoing debates and have tangible influence on decisions which later affect our operations at home and globally. That is why we could not miss this opportunity and let key decisions be made without our voice. paweł Jarczewski President of the Grupa Azoty Management Board

The key component of Grupa Azoty’s strategy is its mission, in which strong emphasis is placed on the social and environmental aspects of its operations.

In August 2014, the Management Board of Grupa Azoty presented guidelines for the ‘Strategy of the Grupa Azoty Group for 2014–2020 – Operationalisation’, a document specifying how to build the Grupa Azoty value under the adopted strategy.

Mission statement We add life to the soil, and colour to life. With our experience and capabilities, we make chemicals safe to people. We consistently strive to increase the value of Grupa Azoty, taking advantage of all available synergies and innovations.

2020 ROCE ≥ 14%

■

2020 EBITDA margin > 14%

■

2020 EBIT margin > 8%

■

PLN 7bn to be spent on organic growth in 2014–2020

■

consolidating a top three position in fertilizer manufacturing

OPERATIONAL EXCELLENCE

For more details on the strategy operationalisation, see pp. 54−59. For the updated text of the Grupa Azoty Group’s strategy for 2013−2020, including its declared approach to corporate social responsibility, see http://grupaazoty.com/ pl/grupa/strategia.

pl n 7bn

on oRganic gRowTh

aims to achieve these objectives through projects in three core areas:

ORGANIC GROWTH

7 2014 – 2020

THE OPERATIONALISATION

Grupa Azoty operates in the commodity chemical sector. We are aware of our impact on the social and natural environment. This is why we are strongly committed to the principles of sustainable development and corporate social responsibility. Our approach to these issues is verbalised in the ‘Azoty Tarnów Sustainable Development Strategy for 2012–2016’, which will serve as the foundation for a Group-wide sustainable development strategy.

The strategy rests on three pillars:

Main corporate objectives: ■

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The key document defining our vision of business and value growth is the Strategy of the Grupa Azoty Group for 2013–2020, as updated in 2013.1 The main objectives of the Strategy are to deliver industry leading rates of return to shareholders and remain one of the three leading players in the European fertilizer market.

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EC DMA

1. 4 o u R s T R aT egy an d M i s si o n

MERGERS AND ACQUISITIONS

Sustainable production

i.e. mitigation of environmental impacts, cooperation with research institutions, work to increase environmental awareness, creation of sustainable products, continued commitment to the Responsible Care programme, improvement of plant security and engagement in social dialogue.

Workplace

i.e. improvement of working conditions and employee satisfaction, workplace safety and health protection, and provision of staff development opportunities.

Dialogue and relationship building

i.e. support of local communities, dialogue with key stakeholder groups, communication in the area of sustainable development, and development of a culture of ethics.

1.5 ManageMenT sTandaRds

MANAGEMENT MODEL:

KEy ACTIVITIES RELATED TO CORPORATE MANAGEMENT IN 2014: ■

implementation of a new management model for the Group,

■

amendment of the Ownership Policy,

■

implementation of New Organisational Rules,

■

implementation of the Grupa Azoty Group’s Code of Ethical Conduct,

■

adoption of the Code of Organisational Culture – the Grupa Azoty Group’s organisational and management system,

■

implementation of Guidelines on the Main Corporate Business Processes Management,

■

implementation of an ownership action programme with regard to logistics, production support and non-core companies,

■

implementation of corporate standards at Group subsidiaries, including Grupa Azoty Siarkopol.

1. Preserves the subsidiaries’ identity, location and legal autonomy; 2. Provides for centralising the functions which offer the most synergies, economies of scale, and specialisation; 3. Is a ‘joint operation model’ relying on the following principles: ■

we operate as a single entity, based on our four key companies,

■

members of the Grupa Azoty Management Board ensure joint action geared towards the Group’s strategic and financial objectives,

■

the management boards of Group subsidiaries have a say on decisions with a material effect on the subsidiaries’ financial performance,

■

all activities and decisions within the Grupa Azoty Group are transparent to all parties involved.

The gRoup

We act as a single business entity – and this is how we want to create the value of Grupa Azoty. Our management model is designed to serve this strategic objective. It is based on centralisation of the functions which generate the greatest synergies and management of key business processes at the Group’s level, while maintaining the individual character of Group companies.

1. 5 Manag em en t s tan dar ds

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1.5.1 Corporate governance

Corporate governance at the Grupa Azoty Group is guaranteed by the Management Board, the Supervisory Board and the General Meeting.

Witold Szczypiński

Artur Kopeć

Vice-President of the Management Board, Director General at the Parent, responsible for integration of production processes, plastics and organic syntheses

Member of the Management Board, responsible for social dialogue, plant safety and environmental protection

Management Board The Management Board of Grupa Azoty S.A. performs the function of the Management Board of the Grupa Azoty Group. Remit of the President includes general oversight of the Grupa Azoty Group, while the Management Board members are responsible for key areas of the Group’s operations: finance, strategy and development, investments, integration of production processes, plastics and organic synthesis, supply chain management, social dialogue, plant safety and environmental protection, as well as the management of individual Group companies. Corporate management is performed by corporate departments of Grupa Azoty S.A., whose functions at the Group level and Parent level are identical.

Grupa Azoty Council In order to exploit the potential synergies, the Grupa Azoty Council was appointed in 2013. Composed of presidents and management board members from across the Group as well as the Parent’s managing director, the Council has the task of advising, issuing opinions and initiating measures to improve management practices, as well as issuing opinions on separate and consolidated annual budgets of Grupa Azoty companies and their long term plans. It also serves as a platform for improving communications and cooperation within the Group, sharing information about joint operations and work aimed to develop a reporting system for the management boards of Grupa Azoty and its subsidiaries.

Andrzej Skolmowski 18

Vice-President of the Management Board, responsible for finance, IT and IR

1. 5 Manag em en t s tan dar ds President of the Management Board, responsible for management and HR policy, the owner’s supervision, oversight of the Agro Business Centre, information policy, risk management, and coordination of the internal audit function

1.5.1 Corporate governance

Krzysztof Jałosiński Vice-President of the Management Board, responsible for strategy and development

Supervisory Board The Supervisory Board’s role is to exercise supervision over Grupa Azoty. Since 2013, an Audit Committee has operated within the Supervisory Board, as an advisory body. The Audit Committee monitors: ■■ the financial reporting process, ■■ effectiveness of the internal control systems, ■■ financial audit, ■■ independence of the auditor and the entity qualified to audit financial statements, ■■ audit of separate and consolidated financial statements, ■■ work of the internal audit team, ■■ work and reports of the independent qualified auditor.

General Meeting The General Meeting is convened and prepared in accordance with the Commercial Companies Code and internal regulations of Grupa Azoty S.A. Its powers include review and approval of directors’ reports and financial statements, as well as passing resolutions on distribution of profit or coverage of loss and increasing or reducing the share capital.

Marek Kapłucha Marian Rybak Vice-President of the Management Board, responsible for investments

Vice-President of the Management Board, responsible for supply chain management and strategic feedstock procurement management

The Group

Paweł Jarczewski

1. 5 Manag em en t s tan dar ds

SO DMA

Grupa Azoty follows the best practice and global standards of corporate management and sustainable development. The Group companies comply with the applicable laws and meet all the accreditation, certification and other requirements. The activities of Grupa Azoty are assessed for conformity with the implemented management systems and legal requirements. Compliance with the requirements regarding quality, environmental impact, occupational health and safety and food safety is assessed through audits of the internal management systems. The results are presented at management review meetings attended by senior executive staff, and serve as a basis for proposals to improve the systems in place. The audits performed by certification bodies in 2014 confirmed that the management systems in place at Grupa Azoty were compliant with relevant standards and the fact has been attested by appropriate certificates.

In 2014, the companies covered by this report implemented the Product Stewardship standard and, having successfully passed an external audit, obtained relevant certificates and implemented an enterprise risk management system.

1.5.3

Management systems used by the Group companies conform to the highest international standards. The systems are regularly assessed and recertified. In 2014, some of the Group companies went through the process of recertification or obtained new certificates. Systems implemented by the Grupa Azoty Group companies include: ■■

Quality Management System compliant with the ISO 9001:2008 standard

■■

Environmental Management System compliant with the ISO 14001:2004 standard

■■

Occupational Health and Safety Management System compliant with the PN-N-18001:2004 and BS OHSAS 18001:2007 standards

■■

Management System compliant with the PN-EN ISO/IEC 17025:2005 standard (general requirements for the competence of testing and calibration laboratories)

■■

Food Safety Management System compliant with the ISO 22000:2005 standard

■■

Automotive Industry Quality Management System implemented in accordance with the ISO/ TS16949:2009 standard

■■

Responsible Care Framework Management System compliant with the guidelines of the European Chemical Industry Council

■■

Product Stewardship Management Standard Grupa Azoty S.A

ISO 9001:2008

For more details on the Product Stewardship certificate, see pp. 118−119.

G4-34

PR DMA

1.5.2 Management systems

Internal audit

The internal audit system in place at Grupa Azoty conforms to the International Standards for the Professional Practice of Internal Auditing, developed by the Institute of Internal Auditors (IIA). It streamlines the Group’s operations and ensures that its corporate governance system is appropriate and effective. Moreover, it supports the Group companies in regular assessment of their activities and improvement of their management processes. Under the ‘Internal Audit Standards at the Grupa Azoty Group’ adopted in 2013, all entities comprising the Group are now subject to audits.

Grupa Azoty KĘDZIERZYN

Grupa Azoty POLICE

Grupa Azoty PUŁAWY ü

ISO 14001:2004

PN-N-18001:2004

BS OHSAS 18001:2007

ISO 22000:2005

ISO 50001:2011 ISO/IEC 17025:2005

ISO/TS 16949:2009

Responsible Care Framework Management System compliant with the guidelines of the European Chemical Industry Council

Enterprise Risk Management System

Product Stewardship Management Standard compliant with the standards adopted by Fertilizers Europe

1. 5 Manag eM en T s Tan daR ds

The Grupa Azoty Group is exposed to various risks which may have an impact on its operations, financial standing, performance or stock value. Therefore, we keep analysing our business environment, identify significant risks and threats, and monitor external and internal factors affecting the Group’s growth. Factors conducive to the Group’s growth include good prospects for Poland’s economy, a stable, albeit slowly growing fertilizer market in the European Union, and a well-balanced agricultural policy of the European Union, supporting the agricultural sector through a scheme of direct and indirect subsidies (Poland being one of its major beneficiaries). The main market threats, on the other hand, include the prolonged economic downturn in the European Union and imports of fertilizers to the EU from countries with access to less expensive feedstocks. We are taking steps to minimise the potential impact of those and other threats. For a complete list of factors conducive to the Group’s growth as well as opportunities and threats, see the Directors’ Report on the Operations of the Grupa Azoty Group for the 12 months ended December 31st 2014.

We actively manage compliance risk with respect to all laws applicable to the Grupa Azoty Group’s activities.

It defines uniform rules for risk identification, assessment, management, monitoring and reporting, compliant with the recognised ISO 31000 standard ‘Risk management principles and guidelines’ and the ‘Enterprise Risk Management – Integrated Framework’ standard issued by COSO.

We regard the compliance risk management as a key function in the protection of our brand value and reputation, including management of our relations with customers and other stakeholders.

A new position of Risk Manager was established at Grupa Azoty, as well as a Risk Management Steering Committee. The identified risks are assessed for possible consequences and likelihood of occurrence. As a result, a list of key risks is drawn up. Measures to minimise risks related to individual processes are assessed as part of audits of the internal management systems.

We conduct our business in compliance with the law and with integrity, realising that even an apparently minor violation of the law may seriously undermine our reputation and bring about considerable damage, including a financial loss. This is why we have zero tolerance even for the slightest violations.

The risk management policy is in place at all the four main companies of Grupa Azoty, based in Tarnów, KędzierzynKoźle, Police and Puławy.

Compliance is a key issue in terms of competition and consumer protection. Therefore, we promote the policy of fair competition.

risk identification and assessment

KEy ELEMENTS OF THE RISK MANAGEMENT POLICy:

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G4-2

monitoring and evaluation of risk levels

In 2014, we adopted the ‘Grupa Azoty Enterprise Risk Management Policy’. Aware of the fact that risk factors may undermine our sustainable development in the long term, Grupa Azoty has implemented an integrated enterprise risk management model. The model provides for regular activities to identify, assess and mitigate possible adverse effect of risks on the operations of the Group companies. As part of the adopted policy, we have put in place a procedure for integrated enterprise risk management at Grupa Azoty. The document defines the principles of risk management across the entire organisation and allocates the related powers and responsibilities.

definition and deployment of risk response measures and incident management plans

reporting and communication

use of information on risks in decisionmaking processes

monitoring and evaluation of the risk management system

nasza The gRoup gRupa

1.5.4 Risk ManageMenT

EC DMA

1.6 financial highlighTs

su M MaRy co nso l i daT ed fi nan ci al s TaT eM en T s

Revenue

PLN 9,898 M

EBITDA

PLN 822 M Net profit

PLN 265 M EPS

PLN 2.33

For more details on Summary Consolidated Financial Statements see pp. 125-133

performance drivers ■

downward correction in fertilizer prices (notably urea and sulfate) on global markets,

■

record-high NPK imports to Poland,

■

lower prices of plastics driven by developments on the crude oil and petroleum product market,

■

weaker Polish złoty improving the competitiveness of exports,

■

Fy 2014 consolidated results of Grupa Azoty are the first to fully reflect the performance of Siarkopol and AIG,

■

impairment loss on the phthalic anhydride unit (Oxoplast business unit) contributing to downward profitability pressures in the Chemicals segment.

2014 CONSOLIDATED REVENUE BREAKDOWN (PLN THOUSAND) Agro Fertilizers

plastics

chemicals

energy

other and unallocated

Total

5,580,374

1,460,155

2,505,638

194,621

157,688

9,898,476

594,392

(33,546)

45,615

79,994

135,950

822,405

External revenue

G4-EC4

EBITDA

SIGNIFICANT FINANCIAL ASSISTANCE RECEIVED FROM GOVERNMENT (PLN) Grupa Azoty S.A.

Grupa Azoty KĘDzIERzyN

13,559

658,302

20,010,804

20,000,000

Tax incentives related to operation within a special economic zone

–

21,194,000

Other

–

Information on significant total monetary value of the following components:

Grupa Azoty PUŁAWy

Grupa Azoty POLICE

Value for 2014

Government grants

STRUCTURE OF THE GROUP’S CONSOLIDATED REVENUE IN 2014 (PLN M)

Grupa Azoty S.A. Grupa Azoty KĘDZIERZYN*

Grupa Azoty POLICE*

Grupa Azoty PUŁAWY*

100 Other

* together with subsidiaries

EC DMA

The IPO of Grupa Azoty (then Zakłady Azotowe w Tarnowie-Mościcach S.A.) on the Warsaw Stock Exchange took place in mid 2008. It was a period of forming and consolidating the Group. The capital market was a tool we used to expand and strengthen,

but also a platform of dialogue with investors, who have had considerable contribution to the Group’s current make-up. Therefore, loyalty towards our shareholders and open communication with the capital market are among our priorities.

The performance of our share price since the IPO proves that our policy of building Grupa Azoty’s value is effective. Long-term investors who trusted us back in 2008 have not been disappointed.

Grupa Azoty share price from the IPO (June 30th 2008) to May 20th 2015 Price (PLN) 90 80 70 60 50 40 30 20 10 0

Volume 600,000 500,000 400,000 300,000 200,000 100,000 0 July

2009

July

2010

July

2011

July

2012

July

2013

July

2014

July

2015

share price performance graphs for Grupa Azoty Puławy (ZAP) for the past five years Price (PLN) 200

Apart from Grupa Azoty S.A. (ticker ATT), two other Group companies: Grupa Azoty PUŁAWY S.A. (ticker ZAP) and Grupa Azoty POLICE (ticker PCE), are publicly traded on the Warsaw Stock Exchange.

150 100 50 0

2010

July

2011

July

2012

July

2013

July

2014

July

2015

July

2014

July

2015

GrupA Azoty Puławy

share price performance graphs for Grupa Azoty Police (PCE) for the past five years Price (PLN) 40

They have also been appreciated by investors, as evidenced by their share price performance. Now, it is a history of our joint success.

30 20 10 0

2010

July

2011

July

2012

July

2013

Grupa Azoty Police 23

Nasza The Group Grupa

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1.7 Capital market

G4-7

1.7 capiTal MaRkeT

The major shareholder of 22.53% Other Grupa Azoty, guaranteeing its strategic security, is the Polish State Treasury, with a 33% equity interest. Other shareholders, including 5.75% EBRD investment funds and other financial institutions, control a total of almost 45% of Grupa Azoty’s share capital. 8.76% TFI PzU S.A. As a result, the number of free float shares corresponds to 22% of the Company’s share 9.96% ING Pension Fund capital. On the one hand, this secures share price stability, and on the other, promises strong growth dynamics in favourable circumstances.

33% State Treasury of Poland

Shareholding structure

* A direct subsidiary of Norica Holding S.à r.l.

Grupa Azoty has a flexible dividend policy, designed to accommodate the interests of shareholders, while maintaining appropriate levels of financial ratios and capital necessary for further growth. There is no contradiction here – the ultimate beneficiaries of funds invested to develop Grupa Azoty will be its longterm investors, whom we particularly care about. The dividends paid in 2014 for the previous year amounted to PLN 0.20 per share. This year, the Management Board recommends that the net profit for 2014 be fully retained and applied towards financing of projects presented in the strategy for 2014–2020 and its operationalisation. A final decision is to be made by the General Meeting.

Our shares should be particularly attractive to long-term investors guided by the criteria of corporate social responsibility, as we combine the strategic objective of achieving a high return on capital with responsible management of our social and environmental impacts. The fact that Grupa Azoty S.A. has repeatedly featured in the prestigious RESPECT index speaks for itself. Moreover, Grupa Azoty S.A. is included in the WIG, WIG30, mWIG40 and WIG-Poland indices, as well as the WIG-Chemia industry index. Since February 2013, it has also been listed in the MSCI Emerging Markets index of Morgan Stanley, the American investment bank. In March 2015, Grupa Azoty was included in the prestigious FTSE Emerging Markets index, a part of the FTSE Global Equity Index Series (GEIS).

as at April 25th 2015

0.57% Norica Holding S. à r.l.

9.9% Rainbee Holdings Limited* 9.53% Opansa Enterprises Limited*

For a list of changes in the shareholding structure since 2008, visit: http://tarnow. grupaazoty.com/en/relacje/spolka/struktura

Grupa Azoty in the ReSpecT index Ever since 2009, Grupa Azoty S.A. has been included in the RESPECT Index – the first CSRfocused stock market index in Central and Eastern Europe, which proves that it maintains the highest standards of corporate governance, disclosure discipline and investor relations, and cares for the environmental, social and labour-related aspects of its business.

1.7 Capital market

Grupa Azoty provides investors with exhaustive and reliable information on its operations, going beyond the obligatory disclosure requirements. Conferences are held jointly by all issuers from the Group to present a coherent picture of the Group’s performance. The release of full-year and interim results is accompanied not only by conferences, but also by online chats with shareholders. Investor presentations and chat logs are available on the Company’s website in the Investor Relations section. Key announcements of Grupa Azoty are also published in social media and distributed in a newsletter.

Nasza The Group Grupa

‘Golden share’ for Grupa Azoty police

Appreciated by the capital market

The company received a distinction in the 3rd Edition of the TSR Ranking – Biznes.pl.’s Golden Share. The Company’s value in 2011–2013 rose by 230%, ranking it first among the best companies in which the State Treasury holds interests. Rafał Kuźmiczonek, Vice-President of the Management Board, collected the award at a gala event held on the premises of the Warsaw Stock Exchange.

■■

We won prestigious Golden Website Award. It was the 8th edition of the Award, organised by the Polish Association of Listed Companies,

■■

We were recognized and praised with the logo ‘Responds to Investors’ by “Puls Biznesu”,

■■

The Equity Market Champion title is another award given to Grupa Azoty S.A. by the Polish Individual Investors Association.

Key data on the Grupa Azoty shares 2010

2011

2012

2013

2014

Price at year-end

32.68

27.25

53.90

62.50

63.30

High

33.40

41.50

88.50

80.49

Low

13.80

23.65

25.25

45.40

Trading value (PLNm)

356.04

437.59

592.43

1224.58

806.35

Average volume per session

34,965

55,340

58,982

80,189

49,489

1,278

1,747

3,456

6,200

6,279

1.50

0.20

–

P/E Ratio

28.90

8.20

37.2

P/B Ratio

1.11

0.56

0.99

1.09

Capitalisation at year-end (PLNm) Dividend (per share)

For more detailed information on the Grupa Azoty Group’s presence on the capital market, see the Investor Relations (Relacje Inwestorskie) section on http:// grupaazoty.com/en/relacje

Prod u c t s an d mar ke t s

Str at egy i n ac t i o n

Investments I n n ovat i o n an d d e v elo pm en t

our business

Part n er s

2.1 Prod u c t s an d mar ke t s

Irrespective of how complex and varied processes take place within a business entity, especially such a large one as the Grupa Azoty Group, from the outside it is viewed and assessed mainly on the strength of its products. Therefore, we will begin the story about our business with our products and the markets to which they go and in which they have to prove their worth. Fertilizers account for the largest share of the Grupa Azoty Groupâ&#x20AC;&#x2122;s revenue. Significant contributors are also plastics, OXO alcohols and plasticisers.

2.1 pRod u c T s an d MaR ke T s

13.1% Other

2.9% Pigments 3.8% Melamine

7.1% Chemicals

8.6% OXO alcohols and plasticisers

14.4% Plastics and intermediates 14.9% Compound fertilizers

SALES By PRODUCT GROUP (PLN THOUSAND)

Nitrogen fertilizers Compound fertilizers Plastics and intermediates OXO alcohols and plasticisers Chemicals Melamine Pigments

2014 2013

Other

Revenue by product group 0

500

1000

1500

2000

2500

3000

3500

4000

ouR business

35.2% Nitrogen fertilizers

Revenue by product group

2.1 pRod u c T s an d MaR ke T s 2.1.1 feRTilizeRs

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COMPOUND FERTILIzERS

NITROGEN FERTILIzERS

Agriculture is our largest target market. For years, we have striven to provide our customers with a comprehensive offering of fertilizers, including all fertilizer types and forms. Today, having brought all major Polish fertilizer manufacturers under a single brand, this objective can be achieved. Our offering includes everything a farmer might need, from compound fertilizers, to nitrogen fertilizers, nitrogen-phosphorus fertilizers, nitrogen fertilizers with sulfur, to specialised fertilizers. We have also launched a line of ‘hobby’ fertilizers. Our fertilizer products are manufactured in Tarnów, KędzierzynKoźle, Police and Puławy, as well as in Gdańsk and Chorzów, at plants operated by subsidiaries of the Grupa Azoty PUŁAWy Group. In the vicinity of Poznań, micro starter fertilizers (state-of-the-art specialist products for precision fertilizing) are manufactured in cooperation with Adob, while in Dobre Miasto – custom made fertilizer blends mixed in accordance with individual formulae. In this business segment we also manufacture nitrogen-based chemicals: ammonia, NOXy® (urea solution used to reduce nitric oxide emissions in diesel engines) and mixed acid.

NITROGEN-PHOSPHORUS FERTILIzERS

For more information on our fertilizers, visit: http://nawozy.grupaazoty.com/ For more information on our fertilizers and their distribution, see pp. 46−47.

CORN

2.1 pRod u c T s an d MaR ke T s 2.1.1 feRTilizeRs NITROGEN FERTILIzERS WITH SULFUR

Owing to the cooperation with ADOB, in February 2015 innovative starter fertilizers MICRO-1 were added to the Grupa Azoty Group’s product range. They are manufactured as microgranules supplying high-quality minerals to plants through early stages of growth. They are designed for corn, rapeseed and beet crops. Thanks to high-quality feedstock, the new micro granulates minimise the quantities of noxious heavy metals introduced into the soil.

At the beginning of 2015, on Grupa Azoty’s website, Strefa Klienta (Customer zone) was launched at nawozy.grupaazoty.com, featuring advisory materials, agricultural news and comprehensive information on Grupa Azoty’s fertilizer products, including details on their applications, use and dosage. The Customer zone offers access to folders, brochures and photographs of products, as well as contact with a market manager. Another important function of the service is filtering, enabling users to select a product more precisely against additional criteria, such as nitrogen forms, manufacturer and farming applications. We also provide our customers with another Internetbased source of information on the products, namely a professional agricultural website www.nawozy.eu, devoted to fertilizers and fertilizing. Accessible free of charge, the portal contains articles, calculators and fertilizing timetables, supports queries to agricultural experts and consultants in the region, displays specialist weather forecasts, and offers access to an archive of agricultural product prices.

We have observed that, globally, starter fertilizing is growing at a significantly higher rate of approximately 8% pa, while in the case of consumption of standard NPK fertilizers the annual growth rates are in the range of 2%–3%. Our new product is a step towards an improved balance of food supply and demand from the rapidly growing population, given the limited access to new arable land and water systems. paweł Jarczewski President of the Management Board of Grupa Azoty

HOBBy FERTILIzERS

uniwersalny

do iglaków

do trawników 1

SPECIALISED FERTILIzERS

G4-26

INTERNET-BASED COMMUNICATION PLATFORMS

MARKET AND PERFORMANCE Owing to good weather, grain yields were high for another year in a row, with grain stocks growing globally, bringing about drops in agricultural product prices, and, on their back, decreasing prices of numerous fertilizers. However, the Grupa Azoty Group was coping quite well, thanks, in particular, to the integration of fertilizer sales and marketing. In 2014, revenue in the Agro Fertilizers segment was PLN 5,580,374 thousand, accounting for 56.4% of the Group’s total revenue. The segment generated positive EBIT. Domestic sales represented approximately 67% of total sales of fertilizers.

do trawników 2

ouR business

Breakthrough in fertilizing technology

2.1 pRod u c T s an d MaR ke T s

G4-4

2.1.2

pl asTics

The Plastics Segment is the second most important area of the Grupa Azoty Group’s business. Plastics are manufactured in two plants: in Tarnów and Guben, Germany. Tarnamid® and alphalon® (trade names of polyamide 6), and Tarnoform® (a trade name of polyacetal) are the segment’s key products, manufactured in both natural and modifiable forms. The offering is supplemented with modified plastics based on polyamide 6.6 (Tarnamid A®), polypropylene (Tarnoprop®) and PBT (Tarnodur®). Plastics manufactured by Grupa Azoty are used by numerous industries, including automotive, construction, electrotechnical, home appliances, food processing and textiles. The segment’s products also include intermediates for plastics, such as melamine, caprolactam, cyclohexanone and cyclohexanol. We plan further investment projects to increase our production capacities and tighten cooperation between the Tarnów and Puławy plants, as part of wider integration of the Plastics Segment.

For more information on our plastics and the segment’s customers, see pp. 48−49.

In 2014, work continued in Tarnów and Puławy on the operational integration of the Plastics business.

New polyamide production unit In 2014, the required corporate approvals were obtained and construction work commenced on a new Polyamide 6 unit at Grupa Azoty S.A., which will add 80,000 tonnes to the Grupa Azoty Group’s annual polyamide capacities. The decision to go ahead with the project will result in consolidation of caprolactam production capacities at Grupa Azoty. The new Polyamide 6 unit is our response to the step change seen recently on the global caprolactam market. Higher PA6 capacities will make Grupa Azoty better placed for any changes on the market and will ease our dependence on caprolactam customers. Polyamide is considered a plastic with large potential for applications in the automotive, textile, packaging and other industries.

2.1 pRod u c T s an d MaR ke T s 2.1.2 pl asTics a new uniT will add

80,000

To n n e s peR y e a R

MARKET AND PERFORMANCE In 2014, different price trends prevailed on plastics markets. Revenue in the Plastics segment was PLN 1,460,155 thousand, accounting for 14.7% of the Group’s total revenue. Exports represented over 90% of total revenue from sales of plastics. A significant improvement of the segment’s EBIT was seen in 2014 relative to 2013: (negative result of PLN (156.1)m was reduced to PLN (81.4)m. The reduction was possible on cost optimisation and revenue restructuring towards products with higher added value.

Award for Tarnoform® During the PLASTPOL International Plastics and Rubber Processing Trade Fair, Grupa Azoty S.A. received a medal in the ‘Modern Solutions of the Polish Industry’ category for its second generation Tarnoform plastic, characterised by low emissions of formaldehyde and intended for use in the automotive industry. Moreover, in the ‘Modern Solutions of the Polish Industry’ category, the fair jury awarded the Company for its caprolactam-modified Tarnamid.

2.1 pRod u c T s an d MaR ke T s

G4-4

2.1.3 cheMicals

Chemicals is another key business segment of the Grupa Azoty Group. It includes products with various applications, addressed to various customers: ■

OXO alcohols (2-Etylohexanol, Izobutanol and n-Butanol),

■

plasticisers (DEHT, DEHP and DPHP) sold under the trademarks Oxoviflex™, Oxoplast® O, Oxoplast Medica® and Oxoplast® PH,

■

melamine,

■

technical-grade urea,

■

universal titanium white and specialist titanium white (under the trade name of Tytanpol®),

■

sulfur,

■

hydrogen peroxide.

50,000

To n n e s peR y e a R

of Oxoviflex™

The main asset of the Grupa Azoty Group’s OXO segment is the most advanced non-phthalic plasticiser unit in our region of Europe. Manufactured at the plant in Kędzierzyn-Koźle, Oxoviflex™ is the first Polish new-generation plasticiser.

innovative plasticisers On April 29th 2015, Grupa Azoty KĘDzIERzyN officially placed in service a new non-phthalic plasticiser unit, with a target budget of over PLN 40m. It is a response to growing demand for innovative solutions for the PVC processing market. Thanks to the most advanced plasticiser unit in this part of Europe, Grupa Azoty KĘDzIERzyN will be able to produce 50,000 tonnes of Oxoviflex™ per year.

Oxovifletx™ is a product of cooperation between our process engineers and scientists from the Blachownia Institute of Heavy Organic Synthesis. This innovative product with strong market potential is modern, safe and competitive. OXO alcohols are used in the production of plasticisers, solvents, fuel additives and acrylic bases for paints and varnishes. Plasticisers are used as softeners and emulsifiers, to obtain substances with necessary mechanical properties, including PVC plastics. Plasticisers make PVC products flexible and pliable.

Grupa Azoty KĘDzIERzyN, the only producer of OXO alcohols in Poland, operates one of Europe’s most advanced OXO units. OXO alcohols are used in the production of plasticisers, as well as additives to diesel oils and paint and varnish solvents. In the Grupa Azoty Group, they are used to make plasticisers Oxoplast®O and Oxoplast Medica®, used by the medical industry.

Adam leszkiewicz President of the Management Board of Grupa Azoty KĘDzIERzyN

2.1 Prod u c t s an d mar ke t s 2.1.3 Chemicals

Titanium white is supplied primarily to paint and varnish manufacturers. Thanks to high quality of our pigments, most of them are qualified for use in products that come into contact with foodstuffs. Grupa Azoty POLICE remains the only Polish and a significant European producer of titanium white.

The global prices of products in this segment were going down rather than up; downward trends were observed in the case of OXO alcohols, plasticisers and melamine. Despite these adverse developments, the segment’s sales reached PLN 2,505,638 thousand, which represented 25.3% of the Grupa Azoty Group’s total revenue. The segment’s 2014 EBIT was negative.

For more information on our chemicals, see the Strefa Klienta (Customer Zone) at: http://siarczany.grupaazoty.com/ http://pigmenty.grupaazoty.com/ http://oxoplast.com/

Award-winning products The cooperation between Grupa Azoty KĘDZIERZYN and the Blachownia Institute of Heavy Organic Synthesis has brought fruit in the form of development of a new non-phthalic plasticiser, which in December 2014 was named the ‘Polish Product of the Future’ by the Polish Agency for Enterprise Development. The Oxoplast Medica® plasticiser, another product of Grupa Azoty KĘDZIERZYN, marketed since January 2014, was named Product of the Year in the ‘Diamonds of the Polish Chemical Industry’ contest.

our business

Market and performance

2.1 pRod u c T s an d MaR ke T s

G4-4

2.1.4 eneRgy

The Grupa Azoty Group’s main production plants operate their own electricity and heat generating units, with surpluses sold to local customers.

For more details on our energy management and eﬃciency, see pp. 95−97.

MARKET AND PERFORMANCE In 2014, the segment’s revenue was PLN 194,621 thousand, which represented 2.0% of the Group’s total revenue. Despite lower revenue compared with the previous year, in 2014 the Energy Segment generated positive EBIT.

2.1 Prod u c t s an d mar ke t s 2.1.5 Other goods and services

The Grupa Azoty Group manufactures catalysts used in chemical synthesis processes, including the production of ammonia, hydrogen and synthesis gas: iron/chromium catalysts,

■■

copper/zinc catalysts,

■■

iron catalysts.

our business

■■

Companies of the Grupa Azoty Group provide analytic and research services, using their own research and specialist human resources. Their services include environmental and power engineering analyses, analyses of food and foodstuffs, fertilizers, aldehydes and oxo alcohols, butyl esters and 2-ethylhexyl dicarboxylic acids, as well as analyses and research of plastics, titanium white pigments, identification and quality analyses. The companies also provide other services (for instance, they supply water, including drinking and industrial water, and electricity), as well as port services.

Market and performance In 2014, the segment’s revenue was PLN 194.6m, and its EBIT was positive.

2. 2 paR T n eR s

Feel the chemistry On November 13th 2014, a meeting of Grupa Azoty’s foreign and domestic business partners, the first in its history, was held in Serock. Guests from around the world were invited, making it a prominent event in the industry. We presented Grupa Azoty’s achievements, further plans and development ideas. The event will be held every two years. We want to communicate with our partners and keep them up to date on developments in the Grupa Azoty Group to establish closer relationships and thus create the value of our global community.

No company, even the largest one, is alone on the market, where it encounters both competitors and partners. In the case of Grupa Azoty, the latter group comprises tens, and indirectly – hundreds, of large and small enterprises specialising in various fields. Their variety aside, they have one thing in common – our success depends on their success, and vice versa: if we accomplish something, they share the benefits. We know how to establish such relationships, which we consider to be one of our most valuable assets.

This is an unprecedented event, both in terms of scale and format. It brings a new quality to our communications with business partners from around the world, and presents a great opportunity to speak about our achievements and plans, and to get to know each other better.

EN DMA

G4-12

2.2.1 Raw MaTeRials, eneRgy and The supply chain

Our customers identify Grupa Azoty primarily with its products. Of course, this is to be expected and does make us happy. To us, however, each product is the result of a long process which always starts with raw materials. Although pretty obvious, it is far from simple, especially the way we do things. Ensuring stable supply of raw materials and energy is a major challenge that requires strategic thinking.

We have many trusted suppliers, both in Poland and abroad. However, as our operations are growing in scale, we are forced to change our approach, which is why we are increasingly seeking out opportunities for vertical integration through acquisition of companies holding rights to produce the raw materials we are interested in. We have recently closed transactions to secure access to sulfur deposits in Poland and phosphate rock and ilmenite deposits in Senegal.

paweł Jarczewski President of the Management Board of Grupa Azoty

2. 2 paR T n eR s 2.2.1 Raw MaTeRials, eneRgy and The supply chain

Senegal project

G4-12

We are taking steps to rationalise the supply chain. A common procurement policy and optimisation of supply and logistics should translate into savings by reducing the cost of raw materials and ensuring efficient management of coal stocks at our companies. One of the largest consumers of raw materials in Central and Eastern Europe, Grupa Azoty spends over PLN 8bn per year on various feedstocks, principally natural gas (over 30%), strategic raw materials (some 30%) and other energy resources (over 15%). Our strategic raw materials include petrochemical products (propylene, benzene, phenol and methanol) and minerals (phosphate rock, potassium chloride and molten sulfur). Supplies for Grupa Azoty are primarily sourced from producers based in the EU and post-Soviet states. Minerals used to manufacture fertilizers are sourced from North Africa.

g R u pa a zoT y s pen ds ov eR

pl n b n peR ye aR o n vaR i o us feeds To ck s

Within the Grupa Azoty Group, we have obtained various feedstock interconnections. Proper allocation of resources helps optimise production programmes and significantly reduce costs by utilising our own production capacities. The most important of these areas include a consistent policy on ammonia, nitric acid, caprolactam, molten sulfur, and ammonium sulfate, as well as a coordinated approach to PE packaging manufactured by the Group.

ouR business

In 2013, Grupa Azoty purchased a majority interest in a company holding licences for exploration of phosphate rock and ilmenite deposits in Senegal. Only a year later, we began to construct a phosphoric acid production unit in Senegal. In mid-2014, we launched a feasibility study into developing a phosphate rock mine. A decision was obtained from the Senegalese authorities to expand the exploration licence area. We also carried out exploration work in the ilmenite licence areas. This year, we are planning to apply for a licence to launch production from the ilmenite deposits. The key objective of the project is to cut the cost of fertilizer production at the Police plant.

2. 2 paR T n eR s

G4-12

2.2.1 Raw MaTeRials, eneRgy and The supply chain

The Grupa Azoty Group is Poland’s largest consumer of natural gas. With annual demand reaching some 2.2 bcm, we treat natural gas procurement as a matter of strategic importance. To secure continuity and security of supplies, we plan to cover half of our demand under a long-term contract with a strategic supplier, satisfying the remainder through short-term contracts, the power exchange and OTC market. Being such a large consumer of natural gas, the Grupa Azoty Group is able to secure cost reductions. We achieve economies of scale through joint procurement procedures and negotiations carried out by a team representing all Group companies. We also leverage differences in contract prices under flexible off take arrangements. Grupa Azoty S.A. uses locally-sourced nitrogen-rich natural gas to satisfy some 40% of the demand of its ammonia unit in Tarnów, which translates into lower costs of the feedstock thanks to favourable pricing terms, and gives the Company a degree of self-sufficiency in case of grid supply limitations.

Our raw materials procurement policy is designed to ensure that Grupa Azoty’s needs are satisfied on competitive terms. We enter into long-term contracts for the supply of key raw materials, often priced below market levels, and use shortterm contracts and one-off purchases to further optimise the costs. Grupa Azoty has long-standing relationships with the region’s largest producers of raw materials. We seek to secure at least two sources of supply for each of our companies’ key operating segments. We take care to ensure only first-rate services for Grupa Azoty. In agreements we execute with our suppliers, we include mandatory provisions concerning environmental protection, occupational health and safety, and fire safety. We often require our suppliers to follow the procedures and management system guidelines in place at our own facilities. We also reserve the right to audit the other party to verify their compliance with environmental, quality and OHS requirements.

partnership with KGHM In January 2014, Grupa Azoty signed a letter of intent to collaborate with KGHM Polska Miedź S.A. on joint business projects. They may include phosphogypsum processing, acquisition of potassium salt deposits abroad, accessing natural gas reserves, construction of a polygeneration power plant, and phosphate rock exploration and production. The relationship may involve commercial partnership (based on agreements or contracts), joint undertakings (joint ventures), and equity investments.

2. 2 paR T n eR s 2.2.1 Raw MaTeRials, eneRgy and The supply chain G4-EN1

RAW MATERIALS USED

GRUPA AzOTy S.A.

GRUPA AzOTy PUŁAWy

Expenses by nature remained unchanged. Raw materials and energy used were up on increased output, off set by lower procurement cost of key feedstocks.

In 2014, total expenses fell approximately 1% year on year, mainly on a ca. 5% drop in raw material and energy used.

PLN M 2000

PLN M

RAW MATERIALS AND ENERGY USED

- 1%

3500

14%

1800

liquid ammonia

1600

electricity

coal

fine coal

1400

3000

10%

19%

benzene

2500

10%

13%

other

benzene

natural gas

1200

2000

1000 1500

800 600

1000

400 500

200 0

21%

28%

other

2013

phenol

59%

2014

2013

natural gas

2014

raw materials and energy used services labour costs depreciation and amortisation other

GRUPA AzOTy POLICE

GRUPA AzOTy KĘDzIERzyN

Key reasons behind lower expenses included reduced prices of key feedstocks and access to phosphate rock deposits through acquisition of shares in African Investment Group S.A.

In 2014, total expenses fell approximately 2.4% year on year, mainly on a ca. 5% drop in raw material and energy used.

PLN M

RAW MATERIALS AND ENERGY USED

3000 - 7.6%

2500

PLN M

RAW MATERIALS AND ENERGY USED

2500

KEY RAW MATERIALS

ilmenite

molten sulfur

2000

16%

27% other

33%

natural gas

1500

phosphate rock

1500

2000

titanium slag

1000 1000 500

500

16% 0

potassium chloride

2013

2014

39%

natural gas

21% other

2013

2014

40%

propylene

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RAW MATERIALS AND ENERGY USED

2. 2 Part n er s

G4-EN30

EN DMA

2.2.2 Logistics and transport

At Grupa Azoty, procurement of raw materials and distribution of products in Poland and abroad is the responsibility of the Corporate Logistics Department, which also oversees processes related to warehouse management, packaging and coordination of internal transport streams. The Department also sets strategic objectives for logistics and manages related risks.

We establish lasting relationships with key logistics operators and carriers to ensure transparency and safety of the supply process, and to optimise costs. In 2014, we brought our relations with trading partners to a new level, having implemented the Yard Management System to ensure more efficient movement of trucks in Tarnów and Kędzierzyn-Koźle, and IT systems for managing vehicles and loading facilities to improve handling times for drivers and efficiency of the process. This has allowed us to ensure uniform handling standards for drivers at all key companies of the Grupa Azoty Group. Having eliminated documents from the vehicle handling process and replaced them with RFID cards, and having implemented a single system for managing warehouses, external car parks and vehicle scales, we are now able to promptly detect and respond to any irregularities.

To ensure more efficient planning and execution of distribution processes, in 2014 we made organisational changes in some companies, reallocating packaging shops and warehouses from production to logistics. The Corporate Logistics Department is carrying out a programme to transform the current logistics model into a supply chain management system. Last year, we evaluated the integration of logistics processes at Grupa Azoty companies and determined the standards which need to be implemented to establish a supply chain.

2. 2 Part n er s 2.2.2

Transport structure

Grupa Azoty S.A

Grupa Azoty PUŁAWY

Grupa Azoty KĘDZIERZYN

Grupa Azoty POLICE

Road transport

27.41%

35.10%

51.44%

26.63%

Sea transport

2.18%*

12.14%

11.91%

44.62%

Rail transport

70.41%

52.75%**

37.66%

28.75%

* including intermodal transport ** including combined road and rail transport

For more details on safety during transport see p. 116

Significant contract between PKP CARGO and Grupa Azoty In October 2014, PKP CARGO and companies of the Grupa Azoty Group entered into a two-year contract for transport of chemical products, containers and other goods. It complements the existing contracts by securing the services of Poland’s largest freight operator also for Grupa Azoty SIARKOPOL. PKP CARGO will transport products from the Grupa Azoty Group manufacturers to sea ports and end users in Poland, and will handle imports and exports of goods. Some shipments will involve exchange of products between companies of the Grupa Azoty Group. In addition to the transport of chemical products and containers, services provided by PKP CARGO and its companies to the Grupa Azoty Group include coal shipments, road freight forwarding in Poland, rail freight forwarding abroad, and customs brokerage services for goods imported from east of Poland.

our business

Managing a chain of supply of raw materials and products to and from companies located throughout Poland is a tremendous logistical challenge. Every year, we transport millions of tonnes of fertilizers, chemical products and raw materials. With advanced logistics solutions in place, we are able to optimise shipments, which translates into financial and environmental savings. In both these aspects, rail freight is the form of transport offering the most benefits. However, for the Police plant, given its location, sea transport is the best option.

Logistics and transport

2. 2 paR T n eR s

Our key principles in this respect are set out in ‘The Grupa Azoty Group’s Code of Ethical Conduct’, adopted in 2014.

extract from our code In business relations, we always keep our word. We offer to our customers top quality products at a price level that brings benefits to both sides. Our goal is to actively identify the needs of our customers and meet them halfway, tailoring our offer accordingly, and we do our best to help customers solve any problems they may encounter in their operations. We focus on the development of transparent and professional relations between our employees, especially sales representatives, and customers. We provide reliable and accurate information on our products. We educate our customers, actively developing their knowledge and awareness of the economically viable and safe use of our products.

G4-PR5 G4-26

Customer relations have always been subject to certain universal standards of business and ethical conduct applicable across all industries and markets. However, in today’s increasingly globalised economy, new international standards have emerged in quality, responsibility and safety, and the Grupa Azoty Group has consistently been Poland’s forerunner in their adoption.

G4-27

G4-26

PR DMA

2.2.3 dialogue wiTh cusToMeRs

At Grupa Azoty, customer satisfaction levels are monitored on an ongoing basis. Given the considerable diversity of its products and customer groups, different methods are used, even within the same companies. Typically, we survey our customers for feedback on product quality, prices and payment terms, timeliness of deliveries, service quality and staff competence, complaint handling, as well as quality of promotional materials and packaging. In the course of this exercise, we find the best solutions in place at individual companies and implement them throughout the Grupa Azoty Group. The last year’s surveys indicated that customers were happy with the quality of our products, especially fertilizers, while our front office staff received high marks for competence and politeness. However, there were some complaints about untimely deliveries from certain companies. After all, the purpose of these surveys is to indicate areas where certain procedures need to be improved. Our dialogue with customers in not limited to monitoring whether they are satisfied with our products. By working with our customers, and by monitoring market trends and activities of competition, we are able to develop new products, better tailored to customer expectations. We also help our customers in various ways to use our products optimally.

2. 2 Part n er s 2.2.3 Dialogue with customers

Agro Festa

our business

In October 2014, Grupa Azoty organised the first Agro Festa conference, inviting representatives of Poland’s largest agricultural holdings. It has opened a new chapter in our relationship with customers. The event focused on the Polish agricultural sector’s achievements in the 10 years of the country’s presence in the European Union and factors which may affect the quality and quantity of agricultural production in the coming years. We intend to continue the event, seeing it as an excellent forum for exchanging experience, verifying expectations and discussing stateof-the-art agricultural solutions.

2. 2 paR T n eR s 2.2.4 MaRkeTing and disTRibuTion

Thanks to a diversified product portfolio, the Grupa Azoty Group reaches customers from a wide variety of markets, whose specifics and expectations of individual customer groups must be considered at the earliest stages of planning our customer relations strategies. For each product segment, we develop relevant models of communication, distribution and marketing, which are also seen as a form of dialogue with customers.

aT pR e s en T, o u R n e T wo R k o f d o M e s T i c d i s T R i b u To R s co M pR i s e s ov eR

90 co M pa n i e s

FERtiliZERs Fertilizers represent the Grupa Azoty Group’s main market. Our policy for this area relies on strategic partnership with distributors, subject to five-year contracts defining annual supply volumes. At present, our network of domestic distributors comprises over 90 companies. Our marketing strategy aims to establish strong product brands, with the ultimate goal of enhancing brand recognition among our target customers – farmers. In 2014, we took steps to integrate fertilizer sales. To this end, we launched ‘Marketing Packages’, a Group-wide promotional scheme whereby every distributor signing a contract with any company of the Grupa Azoty Group is obliged to promote its full range of products. Marketing Packages represent a key element of our relations with the distribution sector. Designed to support the Group’s marketing policy, it also helps Grupa Azoty to build its image of a modern player, seeking excellence as well as increasing the levels and standardising communication with customers. Over one year ago, an e-commerce system was launched for the Grupa Azoty Group, designed to automate

the sales process, from online order placement, to selection of transport and order status tracking, to delivery and warranty service. It provides users with access to reports, status updates and electronic invoices, as well as expert information. The system streamlines sales by improving response times, facilitating order handling and allowing sales teams to focus on providing customised

solutions. When implementing the e-commerce system, we drew on the practices developed by Grupa Azoty PUŁAWy, with our task made easier because of earlier integration of all IT systems of the companies from Tarnów, Kędzierzyn-Koźle and Police.

2. 2 paR T n eR s 2.2.4 MaRkeTing and disTRibuTion

M O D EL F ER T I L I z ER D EP OT F O R R S M ® i n d o b R e M i a s To

Working meeting

As part of our efforts to integrate the Agrochem network, in September 2014 a Model Fertilizer Depot was launched in Dobre Miasto for RSM® (UAN), a highly concentrated nitrogen fertilizer. The new depot is one of the few such facilities in Poland. Its tanks can hold approximately 10,000 tonnes of the solution, fully meeting the needs of farmers from the Olsztyn Province. The facility in Dobre Miasto is unique in that the fertilizers can be enriched to include various microelements, such as zinc, or macroelements, such as phosphorus, depending on

the needs. This project will not only improve supplies to our customers, but also stimulate the local job market. The Grupa Azoty Group would like to do more than just sell fertilizers – it wants to educate farmers on rational fertilizer application to achieve higher yields and better soil quality without adverse environmental impacts. We want to make sure that our fertilizers help farmers produce safe food.

2014 marked the beginning of conceptual work on the PKO BP – Grupa Azoty Group cooperation, whereby the bank would provide financing to our agricultural trading partners. In exchange, the Group is to enable sale of banking products through its fertilizer distribution network, and run joint marketing campaigns targeted at the same customer group. In this way, the Grupa Azoty Group will benefit from increased liquidity of its customers and higher sales, while PKO BP will be able to attract new clients from the sector. The project is consistent with the government’s strategy of cooperation between state-owned companies, and at the same time reflects our own philosophy of establishing complex, partnering relations with customers on multiple levels.

We are keeping a watchful eye on changes in the Polish agriculture. Over the past ten years, we have seen a substantial increase in exports of agricultural crops and a shift towards precision agriculture and innovative solutions. The Polish food sector is set for further strong growth and we intend to help fuel that growth. The Grupa Azoty Group and PKO BP are committed to bringing benefits to our customers to support further growth of this strategic sector of Polish economy. Andrzej Skolmowski Vice-President of the Management Board of Grupa Azoty

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In February 2015, we organised a meeting ‘Operating Marketing Packages and e-commerce’, focusing on the needs and expectations of both producers and distributors of fertilizers. The meeting, attended by over 170 representatives of the Grupa Azoty Group authorised distribution network, was a great opportunity for open dialogue about the Grupa Azoty Group’s main objectives in its relations with distributors and the related benefits and duties of the parties.

cooperation with Bank pKo pB

2. 2 Part n er s 2.2.4 Marketing and distribution

Plastics The Plastics Segment has always relied on consistently high product quality and continuous search for innovations. The Segment caters to a specific customer group, chiefly companies which use our products as feedstock in their own manufacturing processes. Consequently, our marketing policy is based on B2B activities, including targeted advertising in trade magazines and websites, conferences, training sessions, sponsorship and support of major industry events, as well as establishing lasting relations with customers, offering pre- and after-sales service, designing bespoke products, and, last but not least, innovation, based on our cooperation with research centres. The Group also runs educational initiatives on plastics in its direct and indirect market environment. We seek to promote plastics as advanced materials and dispel any negative stereotypes about them.

The main objective of the Segmentâ&#x20AC;&#x2122;s marketing strategy is to enhance brand recognition among target groups and maintain stable relations with its customers and market environment. What the Grupa Azoty Group offers its customers is not only a wide range of base and modified plastics, but also professional technical support through pre- and after-sales customer service. Our long experience and continuous contact with the segment allows the Group to quickly respond to any processing problems and solve them using technical support services provided at the head office or directly on the customerâ&#x20AC;&#x2122;s premises. We opt for the widest possible transfer of knowledge and experience to our current and prospective customers.

2. 2 Part n er s 2.2.4 Marketing and distribution

Plastics – materials of the future

We have long-standing experience in working with customers. We develop projects jointly with them, which is one of the features that make us stand out against competition. We always emphasise that we develop for and together with our customers. We build our experience by developing products to meet specific needs. Małgorzata Malec Head of the Plastics Segment

Partnerships with universities and training sessions The Plastics Segment has working relationships with leading Polish technical universities. This collaboration has produced a number of outcomes, including a series of training sessions and workshops for technical staff of our current and prospective customers, which educate them about plastics and promote best processing practices. Thanks to a mixed format which includes both lectures and workshops, the newly acquired knowledge can be tested in practice, with key elements of processing identified and discussed.

e-plastics.eu e-plastics.eu is a website devoted to plastics and their uses, allowing users to look up detailed parameters of plastics, search plastics by name, physical, chemical or processing characteristics, and make in-depth comparisons. In addition, registered customers can use the website to contact technical consultants and account managers, place orders, monitor invoices and payments, access product certificates and product documentation, and track orders to check the current location of dispatched products. 49

our business

Engineering plastics are an important part of our product mix, which is why in 2014 Grupa Azoty S.A. organised a twoday promotional event devoted to educating students and residents from Tarnów and neighbouring areas about plastics manufactured by the Company. During the event, held in front of Grupa Azoty S.A.’s main administrative building, our guests could learn what plastics are, how they are manufactured and what makes them useful. Next, plastics manufactured at Grupa Azoty were presented, and selected groups of students were taken on themed tours of the plant.

2. 2 paR T n eR s 2.2.4 MaRkeTing and disTRibuTion

cHEMicals Creative approach to dialogue with customers is a valid model for each of our segments. In September 2014, Grupa Azoty devised a new strategy for sales of OXO alcohols and plasticisers, the Chemical Segment’s key products. Instead of relying on a product-based system, where customers came into contact with managers responsible for specific product categories, we assigned individual account managers to each customer, so that all products from the Grupa Azoty KĘDzIERzyN portfolio can be purchased through a single person. The company also invited its customers to join expert teams composed of marketing professionals and process engineers. In this way, we can tailor products to a customer’s specific needs as early as at the production stage, and not only during sales.

We are committed to working closer to customers and learning about their needs, not only in terms of business, but also technology. Thus, we can provide our customers with optimally suited solutions. We are confident that our new strategy will enable us to create new products, improve existing applications and solve everyday problems, in cooperation with our business partners. We want to learn and develop through innovative products, an approach requisite in the diﬃcult market in which we operate. Our major competitors, whom we perceive as a reference point, include companies which incessantly perfect their product portfolios, so we cannot stay behind. Agnieszka Kurpińska Head of Sales at the Oxoplast Business Unit

T h e co n T R ac T s ToTa l l i n g

900 pl n M

One of our key achievements in 2014 was the conclusion by Grupa Azoty PUŁAWy and Grupa Azoty POLICE of major trade contracts to supply melamine and urea to Kronospan, the world’s largest manufacturer of woodbased boards. Totalling an impressive PLN 900m, the contracts will remain in force until the end of 2018. The Puławy and Police plants will supply their products directly to Kronospan’s Polish companies in Mielec and Szczecinek, Strážske in Slovakia and Ostrava in the Czech Republic.

2. 2 paR T n eR s

G4-PR9

G4-PR7

2.2.4 MaRkeTing and disTRibuTion

2014 chemical industry Symposium In January 2014, the 2014 Chemical Industry Symposium was organised in Płock. It was the twentieth meeting of representatives of the Polish chemical industry, including Grupa Azoty. For the chemical industry, the year 2013 was anything but easy. In this context, recognising the challenges and prospects for the chemical and petrochemical industry is the key to successful management. For two days, representatives of public institutions, the industry and science, as well as independent experts, were discussing development directions for the chemical industry and projects undertaken by Polish companies in terms of their efficiency and synergies.

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In 2014, the Grupa Azoty Group did not report any incidents of non-compliance with applicable regulations or voluntary codes of conduct relating to marketing communications, including advertising, promotion, and sponsorship, which would result in a fine, penalty or warning. No fines or penalties were imposed for noncompliance with laws and regulations concerning the provision and use of products and services.

Grupa Azoty was represented by zenon Pokojski, Vice-President of the Management Board of Grupa Azoty PUŁAWy, Adam Leszkiewicz, President of the Management Board of Grupa Azoty KĘDzIERzyN (‘Chemical and Petrochemical Segment’ panel), Wojciech Kozak, Vice-President of the Management Board of Grupa Azoty PUŁAWy, Krzysztof Kamiński, Vice-President of the Management Board of Grupa Azoty KĘDzIERzyN, and Waldemar Duży, Head of Power Generation at Grupa Azoty POLICE (‘Power Generation in the Chemical Industry’ panel).

2. 2 Part n er s 2.2.5 Partnership and membership of organisations

G4-15

Membership in organisations and associations in 2015 – Grupa Azoty and other Group companies*

G4-16

A modern enterprise with a scale of operations like that of the Grupa Azoty Group cannot focus solely on production and sales. We share responsibility both for the future of our industry and for the life of our local communities. We create new products, set new trends, and drive the market and its environment. In each of these areas we have a lot to say, which is why we engage in the activities of numerous organisations at global, national and local levels.

British Polish Chamber of Commerce Szczecin Business Club CEEP (Central European Energy Partners) CEFIC (European Chemical Industry Council) CEMS (The Global Alliance in Management Education) Advanced Technology Centre at the Industrial Chemistry Institute EPCA The European Petrochemical Association (Europejskie Stowarzyszenie Petrochemiczne) EPF (European Panel Federation)

Law and Economy ADR Research Centre Plastics Europe Polish Chemical Safety Group Polish Commercial Chamber of Pro-Environmental Development Polish Chamber of Chemical Industry – PIPC Polish Chamber of Patent Attorneys Polish Technological Platform for Safety at Industrial Work Places Polish Hydrogen And Fuel Cell Technology Platform Polish Technological Platform for Sustainable Chemistry Polish Committee for Standardization Polish Association of Plastics Processing Companies Polish ISO 9000 Forum Polish-Brazilian Chamber of Commerce North Poland Chamber of Commerce

Fertilizers Europe

Employers of Poland

Large Gas Consumer Forum

Puławy Chamber of Commerce

Polish ISO 14000 Forum

Puławy Entrepreneurship Centre

Forum of Safe Work Leaders

Regional Chamber of Commerce

Puławy Hospital Assistance Foundation

Responsible Care Programme

Davos World Economic Forum Foundation

Association of Advisers for Safe Railway Transport of Hazardous Goods

IFA (International Fertilizer Industry Association) ISSA International Security Systems Association

Association of Polish Exporters Association of Polish Electrical Engineers, Management Board of the Tarnów Division Polish Association of Listed Companies

Polish Chamber of Industrial Power and Energy Consumers

Polish Association of Chemical Engineers

Land Transport Commercial Chamber

Accountants Association in Poland, Lublin, Kielce, and Kraków Branches

Kraków Chamber of Commerce and Industry Tarnów Chamber of Commerce and Industry Tarnów Chamber of Craft and SMEs Chem-Ster Specialty Chemicals Cluster POLLAB Club of Polish Research Laboratories Azoty-Puławy Sports Club Chemistry Committee of the Polish Academy of Sciences Info-Tech-Med Consortium National IT Network of the European Agency for Safety and Health at Work

Opole Chamber of Commerce

Executive Club

NPG-6 Promotional Group

* In accordance with the Management Board’s resolution of December 16th 2014.

National Foundation for Environmental Protection

Polish Federation of Engineering Associations NOT

Association of Consumers and Importers of Potassium Chloride Association „Lubelskie Drewno” Association of Polish Corporate Treasurers West Pomerania Chemical Cluster SPOT System of Assistance in Hazardous Material Transport Tarnów Club of Technology and Technological Improvements TDMA (Titanium Dioxide Manufactures Association) European Sulphuric Acid Association Polish Power Exchange S.A.

2. 2 Part n er s 2.2.5 Partnership and membership of organisations

Executive Club

International Fertilizer Industry Association

Fertilizers Europe

All four companies of the Grupa Azoty Group have subscribed to Responsible Care, a voluntary initiative of the global chemical industry to promote environmental ethics, better working conditions, safe operation of production units and ongoing dialogue with the community. The programme was set up in 1984 in Canada on the initiative of the Chemistry Industry Association of Canada. By joining the initiative, a firm pledges to conduct its business in accordance with the key principles of sustainable development:

In early 2015, the Executive Club organised a congress called ‘New Order in Europe and in the World – Implications for Business’. The Grupa Azoty Group was a partner of the event, which attracted a large number of prominent figures from the world of politics, science and economy.

In May 2014, during the 82nd annual conference of the International Fertilizer Industry Association in Sydney, Paweł Jarczewski, Grupa Azoty CEO, was appointed the Association’s board member with responsibility for Western and Central Europe. This appointment proves that Grupa Azoty Group managers are recognised and esteemed internationally. The successful consolidation of the Polish chemical industry has been acknowledged across the fertilizer industry.

In October 2014, the Grupa Azoty Group took part, as a sponsor, in the Argus FMB Fertilizers Europe 2014 conference in Monte Carlo, attended by more than 600 delegates representing more than 300 registered entities. The conference was an opportunity to meet with all key partners from the fertilizer segment. We held more than 30 meetings and many valuable discussions, with a few new contracts agreed in the process. At the conference, the Grupa Azoty Group presented its portfolio of fertilizer products.

■■

economic efficiency,

■■

care for the environment (protection of natural resources, gradual mitigation of environmental impact, efficient use of resources),

■■

social equilibrium (improving the quality of life of local communities, engagement in environmental education).

The Executive Club is an organisation bringing together top management staff from major Polish and international companies. Since 2005, the Club has been the meeting venue for business leaders whose activity sets the directions for Poland’s economic growth. The final panel of the congress, entitled ‘Primacy in Leadership – Politics or Economy’, was attended by Aleksander Kwaśniewski, Poland’s former president; Włodzimierz Karpiński, Minister of State Treasury; Professor Dariusz Rosati and Paweł Jarczewski, Grupa Azoty CEO.

Our business is not driven by itself. We need to work hard to foster communication with the market and we are not alone – we had a chance to rub shoulders with our competitors from Russia, North Africa, the Middle East, and the old Europe, of course. Hubert Kamola Head of the Corporate Fertilizer Sales Department

As part of the scheme, all four companies prepare declarations for another year and report performance for the previous year 1.

1 The documents are available online at http://tarnow.grupaazoty.com/index.php?p=rozwoj&s=rozwoj&val=troska&lang=pl http://zchpolice.grupaazoty.com/index.php? p=rozwoj&s=troska&lang=pl, http://zak.grupaazoty.com/index.php?p=rozwoj&s=odpowiedzialnosc&lang=pl, http://www.pulawy.com/353-csr---os---szczegoly/lang/pl-PL/infoid/140/list/446/default.aspx.

our business

Responsible Care

EN DMA

EC DMA

2. 3 Str at egy i n ac t i o n

Business activity is not just about buying raw materials and processing them into finished goods to be marketed. The complex structure of the Grupa Azoty Group and its extensive offering make the management process, given its complexity, almost as important as the operations themselves. This is why in 2014 we formulated

the operationalisation concept for the Grupa Azoty Group’s 2014–2020 strategy, translating the strategy into measurable financial objectives and steps needed to achieve them. The operationalisation covers three areas: organic growth, operational excellence and mergers and acquisitions.

2% pigments

2% melamine

three core areas of The operationalisation Organic growth

Operational excellence

Mergers and acquisitions

4% OXOplast

11%

2.3.1 Organic grow th

Organic growth is a gradual expansion of the Group’s business based on resources generated in its previous operations. In its pursuit of organic growth, the Group has selected 68 investment projects at various planning or completion stages to receive up to PLN 7bn in capital support. This amount will be distributed among the valuedriving business segments (Fertilizers, Plastics, Oxoplast, Pigments, Melamine), internal power generation as an auxiliary segment, and corporate-wide projects, that is projects driving the value of more than one operating segment, all identified as part of the operationalisation.

c ape x proj ec t s

PL N 7b n 2014 – 2020

plastics

19 % energy

At corporate level, the strategy operationalisation falls within the remit of the Strategy and Development Corporate Department, whose head coordinates the work of development staff at the Grupa Azoty Group companies and initiates actions under the three value creation pillars.

3 0% fertilizers

32% corporate projects

2.3 Strategy in action 2.3.1 Organic grow th

Key projects included in the organic growth plans are as follows: A project of caprolactam balancing at the Grupa Azoty Group and processing of caprolactam into PA6 polyamides, initiated in 2014. This project will enable the Grupa Azoty Group to sell approximately 140,000 tonnes of polyamides and 30,000 tonnes of composites, making it the third largest polyamide producer in Europe. The new polyamide plant in Tarnów will be worth PLN 320m. The Tarnów company is also carrying out a Mechanical Granulation project with a value of PLN 141m.

■■

A Mechanical Granulation project is also being pursued by Grupa Azoty PUŁAWY, where two mechanical granulation lines worth PLN 385m are under construction.

■■

Construction of a unit for propylene production using propane dehydrogenation (PDH) at Grupa Azoty POLICE, which will consume PLN 1.7bn. Grupa Azoty POLICE is also modernising the ammonia synthesis unit (project value: PLN 155.6m).

■■

Grupa Azoty KĘDZIERZYN is building a CHP plant (planned expenditure of PLN 375m) and UAN unit (PLN 29.5m).

■■

Principal corporate-wide projects are related to diversification and stability of coking gas supplies, construction of the Puławy power plant, and further work on the Senegal and New Plastics projects.

For more details on our investments, see pp. 58−59.

our business

■■

2. 3 s T R aT egy i n ac T i o n 2.3.2 opeRaTional excellence STRUCTURE OF AzOTy PRO

The Azoty PRO Operational Excellence Programme, one of the largest of its kind in Poland, provides for a comprehensive approach to optimisation, encompassing the entire Grupa Azoty Group and all efficiency drivers. Its goal is to continuously improve business efficiency, in terms of both costs and revenue, to achieve more than PLN 300m in annual savings as of 2017.

STEERING COMMITTEE Paweł Jarczewski President of the Management Board, Grupa Azoty S.A.

Witold Szczypiński Vice-President of the Management Board, Grupa Azoty S.A. Director General

Andrzej Skolmowski Vice-President of the Management Board, Grupa Azoty S.A.

Krzysztof Jałosiński Vice-President of the Management Board, Grupa Azoty S.A. President of the Management Board, Grupy Azoty POLICE

Marian Rybak Vice-President of the Management Board, Grupa Azoty S.A. President of the Management Board, Grupa Azoty PUŁAWY

Marek Kapłucha Vice-President of the Management Board, Grupa Azoty S.A.

The programme, launched on July 1st 2014, encompasses not only business and operational aspects, but also corporate culture, group integration, commitment and innovation. It aims to build a platform for sharing knowledge and experience across the Group, create leaders, and support change management. Its goals correspond with those of the Grupa Azoty Group’s CSR strategy, transforming them into practical action plans and specific budgets.

Adam Leszkiewicz President of the Management Board, Grupa Azoty KĘDZIERZYN

PROGRAMME SPONSOR Krzysztof Jałosiński

PROGRAMME MANAGEMENT Robert Pikulski

Operational excellence is pursued in five areas: ■

Production

■

Logistics and procurement

■

Repairs and overhauls

■

Energy efficiency

■

Support functions

A team of several dozen key staff members has been set up to implement the Operational Excellence Programme. They are initiative leaders responsible for the implementation of specific projects in individual areas. Overall management of the project is the responsibility of the Steering Committee.

INITIATIVE LEADERS Production Repairs and overhauls Logistics and procurement Energy efficiency Support functions

COMMUNICATION Alicja Stronciwilk

CONTROL Paweł Oleksy

AzOTy PRO AND SUSTAINABLE DEVELOPMENT In addition to financial benefits, numerous objectives of the Azoty PRO Programme are designed to bring about environmentally relevant savings. This relates primarily to the consumption of raw and other materials: the more efficiently we operate in this area, the lighter our environmental footprint. The same is true of energy efficiency. Azoty PRO includes a sub-programme providing for the implementation of follow-up recommendations of energy audits (White Energy) with a view to reducing the energy intensity of our production and support processes. Every success in this area will translate into reducing our carbon footprint, and the Group-wide reduction can prove quite substantial.

IMPLEMENTATION OF THE AzOTy PRO PROGRAMME IN 2014 – A SUMMARy During the Steering Committee’s fifth meeting held in February 2015, the implementation of the programme in 2014 and the progress of its 27 initiatives were summarised. The most important findings of the meeting are presented below. 27 working teams were established, with a total of over 400 members representing all companies of the Grupa Azoty Group. The teams’ work was planned for the three years covering the first phase of the Azoty PRO Programme, that is until June 2017. The Steering Committee held four meetings, approving 16 out of the 27 initiatives and discussing the scopes of the teams’ work. The teams confirmed that the initiatives can potentially deliver significantly greater benefits. This is good news, which allows us to expect that the PLN 300m target of annual benefits will be exceeded. For 2014, we expected the Programme to bring PLN 15m in EBIDTA. Actually, we achieved a materially higher EBITDA of PLN 26m. Therefore, the leaders have set equally ambitious objectives for 2015.

2. 3 s T R aT egy i n ac T i o n 2.3.2 opeRaTional excellence OPERATIONAL EXCELLENCE PROGRAMME

Analytical approach to maximum eﬃciency

2017

2015

SUppoRT FUNcTioNS

• • • • • • •

• • • •

optimisation of ammonia units within the Group process output optimisation of H2SO4 use optimisation of caprolactam production costs within the Group enhanced quality testing efficiency within the Group enhanced work organisation efficiency within the Group production management optimisation within the Group

• • •

pRocUReMeNT AND loGiSTicS 2016 2015

2017

• multi-dimensional use of procurement optimisation tools • efficient management of coal stocks within the Group • lower gas consumption costs within the Group • efficient procurement processes within the Group • efficient logistics within the Group eNeRGY eFFicieNcY

2016

• improvement of energy efficiency

• • • •

effective administration sale of non-core assets reduction in tax cost of idle process units incentives to maximise purchases within the Group effective planning within the Group uniform production cost estimation methodology within the Group uniform incentive rules based on productivity and evaluation enhanced employee commitment within the Group flexible working hours within the Group innovations within the Group KPI* monitoring and benchmarking within the Group

2017 2016 2015

2016 2017 2016 2015

RepAiRS AND oVeRHAUlS

• best maintenance practices within the Group • TPM** and Preventive Maintenance • efficient management of repair and overhaul subsidiaries

2016

E FFEc t a n n ua l b e n e f i T s o f M o R e T h a n

* Key Performance Indicators ** Total Productive Maintenance

300 pl n M

Planned completion of ongoing projects

2.3.3 MeRgeRs and acquisiTions

2 abouT

T h o u s a n d p oT e n T i a l Ta R g e T s i d e n T i f i e d i n T h e f i R s T s Tag e

While the strategy operationalisation focuses largely on optimising the use of assets acquired in the past years through consolidation, Grupa Azoty continues to think of further growth also through mergers and acquisitions.

In implementing the third area of the programme, companies were selected which might prove valuable acquisition targets for continued value building. Various companies were taken into account: suppliers of raw materials, intermediate products and energy, service providers, as well as competitor companies and customers. The starting point was Grupa Azoty’s activity tree. In the first stage, approximately 2,000 potential targets were identified, and after a multistage procedure, 10 entities were finally shortlisted for inclusion into the Grupa Azoty Group.

enTiTies shoRTlis Ted foR inclusion i n To T h e g R u pa a zoT y g R o u p

ouR business

2016 2017 2016

pRoDUcTioN

2. 4 i n v e s T M en T s

In the concept for Grupa Azoty’s strategy operationalisation adopted in 2014, we identified development as our continued priority until 2020. In business, development means investments, and our investments in the coming years will be truly large and ambitious.

CAPITAL EXPENDITURE AT THE GRUPA AzOTy GROUP IN 2014 (PLN ’000): Grupa Azoty S.A. (the Company)

70,298

Grupa Azoty POLICE (with subsidiaries)

177,648

Grupa Azoty PUŁAWy (with subsidiaries)

169,498

Grupa Azoty KĘDzIERzyN (with subsidiaries)

128,870

Other companies of the Grupa Azoty Group

25,883

Grupa Azoty (total)

Companies of the Grupa Azoty Group implement both investment projects related to business development and continuity, and mandatory investments required by law. In 2014, total capital expenditure at the Grupa Azoty Group was PLN 572,197 thousand (net of expenditure on overhauls and components, advance payments and other expenditure directly related to investments).

11.62% | PLN 66,486 thousand Purchase of finished goods

15.62% | PLN 89,365 thousand Mandatory investments

572,197

breakdown of capital expenditure

41.48% | PLN 237,337 thousand Business development

GRUPA AzOTy S.A.

31.28% | PLN 179,009 thousand

■

Construction of a new Polyamide II unit (with an annual production capacity of 80 thousand tonnes)

■

Granulation plant II project

■

Upgrade of the interiors of ammonia synthesis reactors

■

Purchase and assembly of a new circulating hydrogen compressor for phenol hydrogenation on Pd catalyst

■

Consolidation of IT systems of the Grupa Azoty Group companies

■

Bulk fertilizer storage facility

■

Intensification of cyclohexanone manufacturing from phenol

■

New iron-chromium catalyst plant

■

Increase of ammonia production capacities

■

Flue gas desulfurisation unit

■

Flue gas denitration unit

■

20 MW pass-out and condensing turbine generator set at the CHP Plant

Business continuity

2. 4 i nve s T M en T s

inves TMenT woRTh

GRUPA AzOTy POLICE ■

Upgrade of ammonia synthesis reactors

■

Expansion of the post-calcination gas desulfurisation system through the addition of two new reactors

■

Purchase and assembly of the second 63-7 roller mill facility

■

Flue gas treatment unit and upgrade of the EC II CHP plant

■

Production of POLIFOSKA® 21 and ammonium sulfate at the DAP facility

■

Upgrade of the ammonia unit

■

Construction of an industrial wastewater neutralisation unit at the titanium white plant

■

Construction of a decomposition sludge neutralisation unit

■

Change of the DAHF phosphoric acid production method

GRUPA AzOTy PUŁAWy ■

Production of liquid fertilizers based on urea and ammonium sulfate,

■

Production of solid fertilizers based on urea and ammonium sulfate,

■

Construction of ammonia storage and distribution facilities,

■

Purchase of 380 tanks with capacities of 25 cubic metres and 50 cubic metres for the UAN sales network, along with field commissioning

GRUPA AzOTy KĘDzIERzyN ■

Stage 1 of construction of a new CHP Plant

■

Upgrade of waste treatment facilities

■

Replacement of a LaMont boiler at the TK IV nitric acid unit

■

Launch of continuous production of Oxoviflex™

■

Replacement of the interior of the R-1001 ammonia synthesis reactor

inves TMenT woRTh

pl n b n

New investments in puławy – decision made in 2015 By 2019, a new power plant and mechanical granulation unit for ammonium nitrate-based fertilizers are to be built at Grupa Azoty PUŁAWy. By 2021, the company will also modernise and enlarge its nitric acid production installation. These three projects will jointly cost over PLN 2.2bn, and will be the largest investment projects of this type in the Lublin Province over the next five years.

These investment projects will give us new capacities in production, operations and logistics. We will become selfsuﬃcient in terms of electricity and heat supplies, will be able to offer modern fertilizer formulae to our customers and will create new jobs for the region’s community.

By 2019 the Group plans to build Europe’s largest and most advanced PDH unit for propylene production, sited in the town of Police. In addition to the PDH unit, the project involves construction of a power generating unit and expansion of the chemicals terminal in the port facilities owned by the Group. Worth PLN 1.7bn, it will be one of the largest investment projects in the history of the Grupa Azoty Group.

ouR business

1.7 2.2

pl n b n

New investments in police – decision made in 2015

Our projected propylene output is approximately 400,000 tonnes. Of that amount, around 60% will be sold for export or used in other process units. The balance will be sold in intraGroup transactions, including to the Kędzierzyn-Koźle plant, satisfying their total demand for propylene. It is for a reason that we named the project Grupa Azoty Police 2, as it actually involves the construction of another plant with production capacities equal to the existing plant’s. Krzysztof Jałosiński President of the Management Board of Grupa Azoty POLICE

Marian Rybak President of the Management Board of Grupa Azoty PUŁAWy

2. 5 I n novat i o n an d d e v elo pm en t

Without advantages based on knowledge it would be difficult to compete in today’s markets, and more difficult still to conduct business in line with the principles of sustainability. In the chemical industry, innovation is prerequisite for market expansion. On the one hand, it contributes to development of new, improved products and, on the other, helps us maintain full responsibility for the products, that is for the safety of their users and the environment in which they are used.

We also participate in sector programmes co-financed by the National Centre for Research and Development. The most important of them is the INNOCHEM programme, designed to stimulate financing of research, development and innovation in the Polish chemical industry, as well as to help tighten the links between industry and science through establishment of consortia including research centres, higher education institutions and businesses. In November 2014, the fourth edition of the Science-BusinessAgriculture Conference was held at the Puławy Science and Technology Park, organised by the PUŁAWY Competence Centre under the auspices of the Ministry of Agriculture and Rural Development, Ministry of State Treasury and Fertilizers Europe. The Conference was attended by representatives of science and government agencies, agricultural entrepreneurs and agrochemical leaders. Over 200 guests had an opportunity to share

experience and make new contacts for future partnerships. The event also provided a setting for a debate on Polish agricultural brands winning over European markets. Minister Włodzimierz Karpiński, attending the Conference, assessed its role saying, ‘Knowledgeable dialogue and cooperation between science and industry will serve well the Polish agriculture. What our agricultural sector needs is experience sharing between manufacturers and researchers, as well as new fertilizer research projects and knowledge provided by scientific institutions’. In June 2014 at the SAP Forum 2014 conference, Grupa Azoty S.A. was awarded for innovative implementations of SAP IT products. The rationale for the decision reads, ‘Grupa Azoty S.A. is awarded for the consistent IT support of the Grupa Azoty Group’s growth strategy using the latest SAP solutions. Using SAP’s innovations, the management of Grupa Azoty is carrying out a consolidation plan for the chemical conglomerate. Formerly separate entities, which now operate within a single group, use standardised business processes and uniform information flows, exploiting the economies of scale, cutting costs and maintaining the flexibility of their IT environments.’ Last year, we deployed several important modern systems. At Grupa Azoty S.A. and Grupa Azoty KĘDZIERZYN, the Janus Internal Logistics System was implemented, supporting goods acceptance planning. At Grupa Azoty PUŁAWY, the Maximo maintenance support system was launched. Moreover, in 2014, at Grupa Azoty POLICE, stateof-the-art policies were implemented for preventive maintenance and management of overhauls, supported by a Computerised Maintenance Management System (CMMS ). The system is to be rolled out at Grupa Azoty S.A. and Grupa Azoty KĘDZIERZYN in 2015.

Our partners In 2014, Grupa Azoty signed a letter of intent to cooperate with the following chemistry research institutes: ■■

Biopolymer and Chemical Fibre Institute,

■■

Ignacy Mościcki Industrial Chemistry Research Institute,

■■

Blachownia Institute of Heavy Organic Synthesis,

■■

New Chemical Syntheses Institute,

■■

Institute of Industrial Organic Chemistry.

2. 5 I n n ovat i o n an d d e velo pm en t

Grupa Azoty S.A. The Company’s R&D work focused on its two key product segments, that is Agro Fertilizers and Plastics, and on further diversification of its product mix. With respect to fertilizers, the work was aimed to enhance their physical and chemical properties through appropriate selection of inorganic additives and anti-caking agents. With respect to plastics, the work focused on enhancing the product offering to include new types of modified plastics. In the area of product offering diversification, the work focused on research into new materials, including engineering plastics and products manufactured from regenerative feedstock. Grupa Azoty S.A. has long-standing relationships with higher education and other research institutions. Quite recently, we successfully completed a research project on the quality of ammonium sulfate, conducted with the New Chemical Syntheses Institute. We achieved a significant improvement in the hardness and size of ammonium sulfate crystals, which directly translates into the price we achieve for the product. At the Silesian University of Technology, research is being conducted into a new type of catalyst for cyclohexane oxidation. Together with the Institute of Organic Chemistry of the Polish Academy of Sciences, we were working to improve the selectivity in cyclohexane oxidation.

Grupa Azoty PUŁAWY In December 2014, the National Centre for Research and Development recommended a financial grant for the project ‘Support for Low-Carbon Agriculture Able to Adapt to Climate Change Now and Within the 2030 and 2050 Timeframes’. The project, scheduled for three years, is being executed by a consortium including Grupa Azoty PUŁAWY, the Institute of Soil Science and Plant Cultivation, the Agrophysical Institute of the Polish Academy of Sciences and the Environmental Protection Institute. The objective of the project is to implement innovative low-carbon agricultural practices and promote sustainable application of mineral fertilizers at Polish farms. Based on this research, certificates will be issued to designate fertilizer applications with a reduced carbon footprint (greenhouse gas emissions). Another company of the Grupa Azoty PUŁAWY Group, Zakłady Azotowe Chorzów S.A., carried out work to obtain fatty acids through distillation of light fractions from residual distilled fatty acids remaining from stearin production.

Puławy Competence Centre The Puławy Competence Centre is the first Polish agricultural think tank, combining three different perspectives: the experience of agricultural entrepreneurs, the know-how of fertilizer manufacturers and the knowledge and vision of agricultural researchers. Established in 2011, the Competence Centre is now a strong platform for cooperation between agricultural research and business communities. The Puławy Competence Centre, whose mission is to promote a modern model of agricultural entrepreneurship, is an advanced centre for cooperation, as well as information and expertise sharing, networking farmers, advisers, representatives of science and business.

our business

For years, the Grupa Azoty Group has been engaged in applied science projects, which result in new or improved products. 2014 was no different; the main companies of the Group were undertaking numerous R&D projects, often of strategic importance to the entire Group. Below is a brief review of the projects.

Grupa Azoty POLICE

Grupa Azoty KĘDZIERZYN

In 2014, the company was engaged in research focused on enhancing the quality of fertilizers, including by appropriate selection of coating agents, and on evaluating the impact of cooling air parameters on the quality of fertilizers. The company was also exploring the possibility of producing AdBlue solution directly from urea solution discharged from the synthesis unit.

In 2014, the company carried out research related to the operations of its OXOPLAST Business Unit. The R&D initiatives were focused on new types of non-phthalate plasticisers and potential non-alcohol products of butyraldehyde processing (intermediate product of OXO synthesis). In addition, a new unit for producing bis(2-ethylhexyl)-1,4benzene dicarboxylate (Oxoviflex™), a plasticiser, with an annual capacity of 50,000 tonnes, started to be commissioned. Research was also continued to expand the range of non-phthalate plasticisers, including bio-based plasticisers.

At the Grupa Azoty Group, innovation is not limited to product quality enhancement. It has a much broader meaning and is applied to all aspects of our business. Thus we search for new, smarter solutions in other areas, such as corporate communications, computerisation, logistics and marketing. Creation of added value in all areas of our activity is among our strategic goals.

For more information on our links with higher education institutions and educational initiatives, see pp. 84−85.

Ethics and integrity

Society Natural environment Safety

Our responsibility

Employees

Grupa Azoty Group values eﬃciency We define efficiency as responsible management of our tangible and intangible assets based on the cost-benefit analysis, so as to maximise benefits to our shareholders and other stakeholders. professionalism We make every effort to ensure that our approach to company management, standards of conduct, and control systems are effective and conducive to the achievement of our strategy. For us, to be professional is to apply the highest standards of care and to make proper use of our expertise, skills and business competence.

Respect We are committed to ensuring full recognition of another person’s dignity, irrespective of his or her nationality, race, gender, age, physical ability, religion, political views or sexual orientation. Transparency We openly communicate all our decisions and actions, their underlying circumstances, as well as our expectations and requirements. We are guided by this principle in all areas of our activity, except those which must remain confidential for business or legal reasons.

G4-HR3

cooperation We believe that cooperation consists in building relations with our stakeholders in a manner that maximises benefits to the Grupa Azoty Group, but also considers and respects the interests of our counterparties. This requires communication aimed at achieving a win-win situation, building trust, and attaining common goals.

G4-SO5

The Code of Ethical Conduct is addressed to all employees of the Grupa Azoty Group, irrespective of their job, length of service, form of contract, and scope of responsibility. The Code is also addressed to our customers, trading partners, shareholders, and other stakeholder groups. We believe that they will not only respect, but also share, our commitment to these values.

In addition to general commitments, our Code includes practical recommendations to help navigate day-to-day issues of the Grupa Azoty Group. In an organisation this large and complex, there are bound to be problems, dilemmas and conflicts of interests. Our Code helps solve them in a manner benefiting all parties and ensuring that the rights of all stakeholders, whatever their connection to Grupa Azoty, are respected. Clearly, we expect our staff to be loyal – for instance to protect our trade secrets. We also advise them to remain loyal to one another and refrain from all forms of mobbing, harassment and discrimination of those who are weaker or simply different. As a business, we must maintain loyalty and integrity also towards our customers, trading partners and stakeholders. This too must not remain an empty declaration – we are all responsible for putting it into practice, irrespective of our position or job description. The Code helps convert these standards into everyday, practical choices, and prescribes procedures to be followed by employees who suspect that any of them are breached.

extract from the code

SO DMA

In 2014, we published the Grupa Azoty Group’s Code of Ethical Conduct, which reflects our values and principles. We made a commitment to adhere to its guidance both in our internal relations, and in our relations with the market, social and natural environment.

G4-HR3

HR DMA

LA DMA

G4-56

G4-34

3 .1 eThics and inTegRiTy

The Grupa Azoty Group’s Code of Ethical Conduct prescribes how to deal with any incidents of corruption. In 2014, the Group identified no such instances. In addition, no employee was dismissed or punished because of corruptive practices, nor were there any instances of business contracts not being renewed because of a breach of the rules for counteracting corruption. Finally, no action was brought to court against the Grupa Azoty Group or its employees on the grounds of alleged corrupt practices in the reporting period.

3 . 2 eMployees

The Grupa Azoty Group is a large community, with nearly 14 thousand employees, of whom 10 thousand work in the companies covered by this report. This entails great responsibility – for our employees, their families, their towns and neighbourhoods. Creating a fair and motivational employment system, respecting the staff’s interests and aligning with the good of the Group, represents another formidable challenge, not only in terms of ethics, but also conceptual work, organisation and management. We are well aware of that and make every effort to make it happen.

extract from our code All our current and prospective employees are evaluated fairly and based on merits only. The scope of responsibilities and expected performance for all jobs are communicated in a transparent and clear manner. We offer development and inservice training opportunities to all employees. All decisions relating to employee advancement are taken carefully and clearly justified. We treat everyone with respect, regardless of their position, length of service, or experience.

Grupa Azoty S.A. has launched a Shared Services Centre to handle financial, accounting, HR and payroll tasks, also for service companies such as Grupa Azoty Polskie Konsorcjum Chemiczne sp. z o.o., Grupa Azoty Automatyka Sp. z o.o., Grupa Azoty Prorem sp. z o.o. and Grupa Azoty Koltar Sp. z o.o. The Shared Services Centre is an outcome of the Grupa Azoty Group’s ongoing effort to unify its business processes, which will soon extend to other Group companies.

EC DMA

LA DMA

3.2.1 eMployMenT

The Grupa Azoty Group’s Code of Ethical Conduct adopted in 2014 defines the rules governing our employee relations. One of its key principles is the guarantee that the Group will treat all its employees fairly and equally, at all stages and across all aspects of our relationship. We follow a policy of equal opportunities and transparency in our recruitment processes, performance assessment, professional development planning, promotions and pay raises.

We are committed to developing uniform recruitment standards and mechanisms for all Group companies. HR needs are reported by unit heads, and a decision to launch recruitment is made by the managing director in consultation with the management board. Next, applications meeting the job description are gathered (ads, application data base, job centres). Subsequent stages involve interviews at the HR department, followed by interviews at target units, psychological assessment and, where relevant, language tests, leading to the final review and decision. The Grupa Azoty companies based in Tarnów, Puławy, KędzierzynKoźle and Police operate an e-recruitment system which facilitates the hiring process.

ouR ResponsibiliTy

Our staff receive fair wages – the vast majority of them are employed under permanent contracts and are offered various additional benefits, such as private healthcare and training to provide them with career development opportunities. We also carry out regular employee satisfaction surveys.

Shared Services centre

3 . 2 Employees 3.2.1 Employment

At the Grupa Azoty Group, 98.99% of employees are covered by collective bargaining agreements.

G4-10

G4-11

The total workforce by employment type, employment contract and region, broken down by gender Number of employees

Total number of employees by:

2013

2014

626

642

Grupa Azoty S.A. Women Men

1,446

Total

2,072

2,088

Women

473

478

Men

1,100

1,091

Total

1,573

1,569

789

793

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY Women Men

2,506

2514

Total

3,295

3,307

Grupa Azoty POLICE Women

554

541

Men

1,841

1,839

Total

2,395

2,380

Total for the Grupa Azoty Group Women

2,442

2,454

Men

6,893

6,890

Total

9,335

9,344

Number of employees Total number of employees by:

2013

2014

Women

Men

Women

Men

Full-time

625

1,445

642

1,445

Part-time

626

1,446

642

1,446

Full-time

469

1,098

475

1,090

Part-time

473

1,100

478

1,091

788

2,504

792

2,513

Grupa Azoty S.A.

Total Grupa Azoty KĘDZIERZYN

Total Grupa Azoty PUŁAWY Full-time Part-time Total

789

2,506

793

2,514

554

1,841

541

1,839

Grupa Azoty POLICE Full-time Part-time Total

554

1,841

541

1,839

2,436

6,888

2,450

9,587

Total for the Grupa Azoty Group Full-time Part-time Total

2,442

6,893

2,454

9,590

3 . 2 Employees 3.2.1 Employment

Number of employees Total number of employees by:

2013

2014

Women

Men

Women

Men

602

1,362

615

1,342

Fixed term contracts

104

Total

626

1,446

642

1,446

448

1,072

445

1,058

Fixed term contracts

Total

473

1,100

478

1,091

Open ended contracts

747

2,330

746

2,331

Fixed term contracts

176

183

Total

789

2,506

793

2,514

Open ended contracts

522

1,706

507

1,738

Fixed term contracts

135

101

Total

554

1,841

541

1,839

2,319

6,470

2,313

6,469

123

423

141

421

2,442

6,893

2,454

6,890

Grupa Azoty S.A. Open ended contracts

Grupa Azoty KĘDZIERZYN Open ended contracts

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

Our responsibility

Total for the Grupa Azoty Group Open ended contracts Fixed term contracts

G4-EC5

Total

There were no instances of unfair (i.e. drastically low) remuneration reported at any of the Grupa Azoty Group companies.

Lowest pay at the Grupa Azoty Group compared with the national minimum pay. Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

Pay (PLN) 2013

2014

2013

2014

2013

2014

2013

2014

Lowest pay at the company

2,800

2,500

2,413.86

2,545.16

3,020.81

2,904.92

1,770

1,680

National minimum pay in Poland

1,600

1,680

1,600

1,680

1,600

1,680

1,600

1,680

1.75

1.49

1.51

1.89

1.73

1.11

Lowest pay at the company to national minimum pay

3 . 2 eMployees 3.2.1 eMployMenT

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EMPLOyEE SATISFACTION SURVEy

EMPLOyEE OPINIONS ON A SCALE FROM 1 TO 7:

In 2014, the Group released the results of employee satisfaction surveys carried out between September and November 2013 in Tarnów, Puławy and Kędzierzyn-Koźle. These anonymous questionnaire surveys were performed by an external firm. The purpose was to define the level and structure of the staff’s work satisfaction, loyalty and commitment, as well as factors determining their satisfaction and drive, while also probing employee opinions on other crucial matters.

ATTRACTIVE WORKPLACE

5,5 5

+ 0.5

2011

2013

MOTIVATING WORKPLACE 5

5 4.5 4,5 + 0.5 4

2011

2013

ASSESSMENT OF THE COMPANy’S MANAGEMENT 5 4.5 4,5 4.1

+ 0.4

G4-LA10

2011

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For information on our employees’ safety, see pp. 112−114.

4.6

4,5

In general, our staff think it is worth working for the Grupa Azoty Group. They are satisfied with their jobs, which they find motivating and attractive. Our employees do not consider changing jobs and declare themselves loyal to their companies. They also have a positive opinion of the Management Board’s work. There is no unrest among the Grupa Azoty Group’s employees. In terms of payroll, our employees think that remuneration should be linked to company performance, as that would contribute to greater clarity of the remuneration policy. The surveys have also revealed a need to improve team management skills at lower levels and introduce better incentive schemes. Lower management should commit to broadening their management and decision-making skills, as well as improving internal communications. To address these issues, a remedial plan involving specific solutions and methods was adopted.

5.1

The Grupa Azoty Group attaches great importance to employee training. This policy benefits both parties − we gain more competent personnel, while our employees acquire new skills and opportunities which may advance their careers. Grupa Azoty organises training on management systems and occupational health and safety. Every employee must complete an obligatory orientation which covers these areas. The training sessions also address OHS issues, environmental protection, information protection, first aid, chemical rescue operations, labour law and the integrated

2013

management system. Our employees are required to expand their knowledge and skills through periodic training. In addition, the Group organises cyclical classes covering specific themes, such as management, finance, OHS, IT and foreign languages, on an as-needed basis. Irrespective of in-house training, our employees can receive full or partial financing of language courses or higher education studies. The terms of such financing vary from company to company. Furthermore, employees who are still working towards their degrees are entitled to additional leave.

3 . 2 eMployees

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3.2.2 TRaining and developMenT

In 2014, Grupa Azoty PUŁAWy launched the second part of the Masters of Management programme for production staff from senior foreman to department head. As part of this initiative, 319 persons took part in a two-day training session on a wide range of HR management issues.

PARTNERSHIPS WITH UNIVERSITIES

Individual Grupa Azoty Group companies have different performance review systems. Grupa Azoty S.A., Grupa Azoty KĘDzIERzyN and Grupa Azoty POLICE undertake quarterly work assessments.

The Group has a long track-record of working with research centres and universities to run educational initiatives for our employees. For several years now, engineering programmes, second-degree studies and postgraduate courses have been organised for employees who wish to raise their qualifications. Such initiatives are financed by the company and the European Social Fund.

For instance, at Grupa Azoty KĘDzIERzyN the quarterly evaluation covers all employees except Management Board members, management staff, employees delegated to trade unions, the Social Labour Inspector, and employee groups with individual performance targets in the Balanced Score Card system. The review is performed under the incentive scheme based on nine criteria. The quarterly evaluation at Grupa Azoty POLICE covers all employees, except for Management Board members, the Chief Accountant and persons employed under management contracts (while they are excluded from quarterly review, their performance is assessed otherwise), with the results fed to the bonus system. In 2014, 95% of the company’s employees were covered by the review. Additionally, Grupa Azoty S.A. and Grupa Azoty KĘDzIERzyN perform annual performance reviews. Performance reviews are not carried out for employees whose length of service is less than one year and Management Board members. The results of the annual reviews are used to determine bonuses and reassignments, select participants for the reserve staff initiative and evaluate the company’s needs related to employee training and development, as well as to assess the effects of completed training sessions. In 2014, 1,967 employees were covered by the review in Tarnów (94.2% of the workforce), whereas in KędzierzynKoźle the figure stood at 1,503 (95.79%). Grupa Azoty Puławy does not carry out periodic performance reviews, but operates a management by objectives system unrelated to the bonus scheme. In 2014, none of the company’s employees were subject to performance assessment, while objective cards were held by the Management Board and reviewed by the Supervisory Board.

Grupa Azoty S.A. cooperated with the University of Economics to launch a new postgraduate programme on Management in Multinational Corporations, headed by Prof. Jerzy Hausner. The first edition of this two-semester course, inaugurated on May 23rd 2014, is attended by 44 members of the Group’s management staff from Tarnów, Puławy and Kędzierzyn-Koźle. The curriculum, designed to reflect the needs of the Grupa Azoty Group, will cover strategic management, international marketing, intellectual capital management and leadership in global companies. June 2014 marked the completion of several major projects carried out by Grupa Azoty S.A. with the Kraków University of Economics (master’s programme in Finance and Accounting), Wyższa Szkoła Biznesu – National Louis University in Tarnów (Chemical Engineering studies) and Małopolska School of Economics in Tarnów (master’s programme in Financial and Corporate Management). The projects covered a total of 34 employees. At present, 17 of Grupa Azoty employees are enrolled in a postgraduate course on Polymer Engineering and Processing run by the Rzeszów University of Technology. The programme will be concluded in December 2015.

ouR ResponsibiliTy

Masters of Management

PERFORMANCE REVIEWS

3 . 2 Employees

G4 LA9

3.2.2 Training and development

Average hours of training per year per employee by gender, and by employee category

Total number of training hours by gender 2013 Men

Grupa Azoty S.A.

13,758

Grupa Azoty KĘDZIERZYN

4,824

Grupa Azoty PUŁAWY

18,736

Grupa Azoty POLICE

15,967

Workforce structure

Management Board Senior executives

Grupa Azoty S.A.

5,705

20,883

8,384

3,868

10,220

49,708

7,790

29,556.25

39,458

17,858.5

39,458

Total number of training hours by employee category

21 280 7,854 6,486

Senior staff

5,720

856

Supervisors

5,048

3,012

Operators

4,377

7,781

154

1,232

144

128

168

Senior executives

1,440

616

Managing officers

2,736

2,000

Specialists

2,248

2,164

Senior staff

1,024

632

Supervisors

1,872

1,732

Operators

2,480

4,040

Laboratory staff

560

888

Other blue-collar jobs

720

1,848

Management Board

528

Senior executives

8,227

2,243

Managing officers

13,034

4,766

Specialists

20,256

10,150.25

Senior staff

2,171

737

Supervisors

9,136

5,027

Operators

4,290

6,897

Laboratory staff Other blue-collar jobs Management Board Senior executives

Grupa Azoty POLICE

0 408 12,019

Management Board

Grupa Azoty PUŁAWY

2014

14,789

206

400

10,596

7,118

328

4,745

7,683.50

Managing officers

5,342

4,449

Specialists

18,931

15,821

Senior staff

630

3,007

Supervisors

4,733

4,634

Operators

14,863

11,499

Laboratory staff

1,039

1,093

8,802

Other blue-collar jobs

29,883

Specialists

Other blue-collar jobs

Grupa Azoty KĘDZIERZYN

Paweł Jarczewski President of the Management Board of Grupa Azoty

Men

Managing officers

Laboratory staff

On April 23rd 2014, the Grupa Azoty Management Board met with the Reserve Staff employees at the Company’s offices.

The Reserve Staff will be gradually taking over the responsibilities of foremen, supervisors, unit heads and managers. This introduces an element of healthy rivalry and competitiveness, inherent in all work environments. What is important, however, is that all participants play fair, on the strength of their competences, knowledge, experience, involvement and, last but not least, performance. Our objective is to create an environment in which everyone can successfully advance their careers.

Women

2013

Reserve Staff The Reserve Staff project is one of the crucial components of HR management at the Grupa Azoty Group. The initiative to select the most promising employees and enrol them in a programme fostering their management skills was designed to guarantee smooth replacement of management staff.

2014

Women

3 . 2 Employees 3.2.2 Training and development

Total number of training hours by gender 2013

2014

Women

Men

Women

Men

Grupa Azoty S.A.

21.98

Grupa Azoty Kędzierzyn

10.20

20.67

8.89

14.44

7.62

8.09

9.37

Grupa Azoty PUŁAWY

23.75

19.84

9.82

11.76

Grupa Azoty POLICE

28.82

18.68

33.01

21.46

Workforce structure

Total number of training hours by employee category 2013

Management Board

Grupa Azoty S.A.

Senior executives

17.74

9.66

Managing officers

89.03

61.84

Specialists

67.84

25.24

22.79

3.55

Supervisors

40.06

24.29

Operators

6.09

10.75

Laboratory staff

0.24

0.77

Other blue-collar jobs

3.10

0.38

Grupa Azoty PUŁAWY

Senior executives

55.38

26.78

Managing officers

27.92

19.05

Specialists

9.29

8.94

Senior staff

8.83

5.45

Supervisors

20.35

17.49

Operators

3.51

5.69

Laboratory staff

4.24

6.63

Other blue-collar jobs

4.62

13.49

Management Board

176.0

2.7

Senior executives

164.5

38.7

Managing officers

71.6

28.4

Specialists

35.7

17.6

Senior staff

14.3

4.8

Supervisors

36.8

20.2

Operators

4.3

6.8

Laboratory staff

1.1

2.1

Other blue-collar jobs

11.7

7.9

Management Board

Grupa Azoty POLICE

Senior executives

175.74

256.12

Managing officers

50.40

41.58

Specialists

45.62

38.78

Senior staff

300.70

Supervisors

33.33

32.18

Operators

14.77

11.46

Laboratory staff

5.47

Other blue-collar jobs

18.57

September 2nd 2014 marked the beginning of the Competence Archipelago, an 18-month management skills development programme for members of the Reserve Staff. Its aim is to prepare employees for gradually taking over the positions and responsibilities of foremen, supervisors, unit heads, managers and directors. On the one hand, the initiative is meant to raise the participants’ knowledge of team management techniques, and on the other – to develop their leadership skills, which they in turn will teach to their colleagues.

During the 18-month programme, the attendants will participate in a number of training courses on professional self-development and the effect of mental models and patterns on decision-making. They will also learn how to establish a common vision of work, the company and its environment. We want them to develop systemic thinking, reflected in seeing the company as a system of communicating vessels, or a single organism. Rafał Bednarczyk Head of the Corporate HR Management Office

Our responsibility

Senior staff

Management Board

Grupa Azoty Kędzierzyn

2014

3 . 2 Employees

G4-26

3.2.3 Communications

Channel

Formal meetings

Type of tool used

Description and purpose of the tool

Management Board meetings

Meetings devoted to strategic and day-to-day matters

Meetings between management staff and President of the Management Board/CEO

Meetings devoted to current affairs of the company and its group

Staff meetings, cascade communications

Transfer of current information

Meetings between the Management Board and trade unions

Meetings devoted to current affairs, as well as important social, employee, payroll and HR-related matters

Face-to-face meetings of employees with President of the Management Board/CEO

Opportunity to directly contact CEO on special matters

Meetings/celebrations organised for employees

Regular employee meetings to strengthen identification with the company and brand

Team building meetings of Departments/Units

Employee meetings focused on improving communication, motivation and work atmosphere

Safety at Work Days

Thematic management meetings attended by a Management Board member

Sports tournaments, company-sponsored local events

Regular employee meetings to improve communication, motivation and work atmosphere

Meetings with retired employees

Regular meetings with retired employees to help them stay in touch

Induction training

Mandatory training to familiarise an employee with the company’s operations in a given area

Periodic training

Mandatory training systematising an employee’s knowledge in a given area

Thematic/specialist training

Regular training dedicated to employees to broaden their relevant expertise and skills

Informal meetings

Training

External tool used to support internal communications through posts related to the company’s activities at large

Social media Intranet Notice boards

Boards located on the company’s premises to announce and promote corporate events (announcements, posters, etc.)

Comment/proposal boxes

Boxes located on the company’s premises for employees to submit (also anonymously) their comments and proposals concerning the company’s activities

Letter from the President of the Management Board

Letter from the President of the Management Board to the company’s employees to communicate important events pertaining to its activities, as well to usher in material processes at the company and its group

MULTIINFO texting platform

External tool used to simultaneously send specific text messages to all users of company telephones

Mailing

Information delivered to employees via electronic mail; it can relate to important events at the company, questionnaire surveys, published materials and contests involving the company

Newsletter

Bulletin in electronic form – sent out via electronic mail exclusively to registered subscribers; addressed to both employees of the Grupa Azoty Group, and external subscribers

Company newspaper

Bulletin discussing matters important to employees, supporting communications and building corporate culture

Leaflets and posters

Additional information materials, explaining, in accessible ways, matters important to employees or announcing events

Broadcasting system

Broadcasting system informing employees on intra-company events, broadcasting announcements of the company’s management and cooperating organisations, employee announcements, as well as local news service

Other materials (annual reports, brochures, etc.)

Publications issued by the company to describe its activities in social and business environments, presenting the company’s structure and management model, showcasing its products and promoting other matters important to the company

Company’s official documents

Procedures, instructions, decisions, official orders and circulars

Internal regulations setting down procedures to ensure effective operation of individual elements of the company’s management system

Questionnaire surveys

Surveys of employees’ satisfaction, opinions or/and involvement

Surveys giving insight into staff’s satisfaction with work, team atmosphere, internal communications, etc.; the findings form a basis for improvement-oriented initiatives

Supporting carriers/ channels for internal communications

Company media

Grupa Azoty police

Grupa Azoty pUŁAWY

Grupa Azoty S.A.

Grupa Azoty KĘDZieRZYN

3 . 2 eMployees

✓

Within such a large organisation, including companies based in various regions of the country, we will never meet everybody else in person. For this reason, we must take all the more care of internal communications within individual companies and across the entire Grupa Azoty Group. We do our best in order for employees of all levels to have access to information on developments taking place within the Group and its key companies. The point is we should, as a community, be aware of our objectives and methods applied to achieve them, as well as of what we have already achieved.

We do realise that improving intra-company and intra-group communications is a never-ending process, which always requires new initiatives. Out of concern for the fastest and best possible access of the Group’s employees to information under the ‘Effective Administration’ initiative included in the Azoty PRO scheme, we review and analyse communication techniques and methods applied at individual companies. This is expected to support the unification and streamlining of internal communications. In the opinion of the Grupa Azoty Group’s employees, the most valuable sources of information are company bulletins, radio broadcasting systems and peer discussions (based on employee satisfaction surveys 2013–2014).

To this end, we use various media, channels and forms of communication.

RANKING OF INFORMATION SOURCES

Most popular

✓

ouR ResponsibiliTy

✓

3.2.3 coMMunicaTions

Least popular

■

corporate bulletin

■

Radio broadcasting system

■

Fellow workers

■

Local media

■

Intranet

■

Trade unions

3 . 2 eMployees

EC DMA

G4-HR3

HR DMA

LA DMA

3.2.4 non -discRiMinaTion

Our non-tolerance for discrimination is not only about good atmosphere in the workplace. For us, it is a question of principles. Among the values included in our Code of Ethical Conduct there is respect, understood as full recognition of another personâ&#x20AC;&#x2122;s dignity, irrespective of his or her nationality, race, gender, age, physical ability, religion, political views or sexual orientation. Therefore, practices such as discrimination and mobbing will not be tolerated at the Grupa Azoty Group.

extract from our code Relations in the workplace are based on mutual trust and high standards of behaviour. We stand firmly against any behaviour that leads to conflicts and spoils the atmosphere at work. We will eliminate any discrimination on the grounds of race, ethnicity, religion, sexual orientation, age or gender. We are against and will prevent any forms of harassment and mobbing. We do not use our position in any way that would infringe on the personal rights of other employees. We do not spread false information about other employees or about the Grupa Azoty Group.

In 2013, a procedure was developed at Grupa Azoty S.A. for submitting complaints about events in the workplace, designed to support good relations between employees and their superiors. Every employee has the right to present their concerns relating to safety hazards, discrimination, mobbing, etc. To date, no complaint concerning discrimination or mobbing has been reported at the Grupa Azoty Group. In March 2014, an anti-mobbing order was issued at Grupa Azoty S.A. The employer guarantees support to employees who are exposed to persecution, humiliation or other reprehensible behaviour in the workplace. The Corporate HR Management Office monitors such incidents based on information gathered on an ongoing basis, HR analyses, and questionnaire surveys.

As both physical and psychological safety of employees is our priority, the Company has implemented anti-mobbing rules, which will hopefully protect them against harassment and intimidation from superiors and colleagues. RafaĹ&#x201A; Bednarczyk Head of the Corporate HR Management Office

No incident of discrimination was recorded in 2014 at any company covered by this report.

3 . 2 Employees

G4-LA1

3.2.4 Non - discrimination

Total number and rates of new employee hires and employee turnover by age group, gender and region.

New hires by gender

Total number of terminations by gender 2013

2013

2014 M

2014

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

151

Grupa Azoty POLICE

Percentage of new hires

Percentage of terminations by gender 2013

2014

2013

Grupa Azoty S.A.

60%

40%

29%

71%

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

54%

46%

32%

68%

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

28%

72%

22%

78%

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

19%

81%

16%

84%

Grupa Azoty POLICE

New hires by age group

2014 M

38.71%

61.29%

16.92%

83.08%

18.52%

81.48%

21.74%

78.26%

27.96%

72.04%

28.24%

71.76%

6.90%

93.10%

19.81%

80.19%

Total number of terminations by age group 2013

2013

2014

<30

30-50

>50

<30

30-50

>50

Grupa Azoty S.A.

2014

<30

30-50

>50

<30

30-50

>50

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

117

Grupa Azoty POLICE

Percentage of new hires by age group 2013

2014

<30

30-50

>50

<30

30-50

>50

Grupa Azoty S.A.

35.71%

50.00%

14.29%

63.95%

31.40%

4.65%

Grupa Azoty KĘDZIERZYN

37.84%

45.95%

16.21%

37.74%

45.28%

16.98%

Grupa Azoty PUŁAWY

48.5%

3.00%

57.84%

40.00%

1.96%

Grupa Azoty POLICE

62.57%

33.69%

3.74%

53.85%

42.86%

3.29%

30-50

>50

<30

30-50

>50

Percentage of terminations by age group 2013 <30

2014

Grupa Azoty S.A.

1.61%

16.13%

82.26%

0.00%

12.31%

87.69%

Grupa Azoty KĘDZIERZYN

3.70%

38.89%

57.41%

13.04%

28.26%

58.70%

Grupa Azoty PUŁAWY

17.20%

16.13%

66.67%

12.94%

15.29%

71.76%

Grupa Azoty POLICE

10.34%

19.54%

70.11%

10.38%

13.21%

76.42%

Our responsibility

Grupa Azoty S.A.

3 . 2 Employees 3.2.4 Non -discrimination

Turnover by gender

G4 LA1

2013

2014

Women

Men

Women

Men

Grupa Azoty S.A.

3.19%

1.72%

5.51%

Grupa Azoty KĘDZIERZYN

1.91%

3.88%

1.72%

4.59%

Grupa Azoty PUŁAWY

1.70%

4.31%

1.39%

4.26%

Grupa Azoty POLICE

1.75%

9.69%

1.51%

6.76%

Turnover by age group 2013

2014

<30

30-50

>50

<30

30-50

>50

Grupa Azoty S.A.

1.25%

2.17%

2.94%

2.63%

1.68%

2.92%

Grupa Azoty KĘDZIERZYN

1.02%

2.42%

2.35%

1.66%

2.36%

2.29%

Grupa Azoty PUŁAWY

1.97%

1.94%

1.97%

2.12%

0.82%

1.91%

Grupa Azoty POLICE

5.26%

3.34%

2.84%

2.52%

2.23%

3.53%

Total number and percentage of employees by gender

G4-LA12

2013

2014

Women

Men

Women

Men

626

1,446

642

1,446

30%

70%

31%

69%

473

1,100

478

1,091

30%

70%

30%

70%

789

2,506

793

2,514

24%

76%

24%

76%

554

1,841

541

1,839

23%

77%

23%

77%

Grupa Azoty S.A. Grupa Azoty KĘDZIERZYN Grupa Azoty PUŁAWY Grupa Azoty POLICE

Total number and percentage of employees by age group 2013 Grupa Azoty S.A. Grupa Azoty KĘDZIERZYN Grupa Azoty PUŁAWY Grupa Azoty POLICE

2014

<30

30-50

>50

<30

30-50

>50

1,268

725

132

1,264

692

61%

35.0%

61%

33%

114

911

548

892

584

58%

35%

57%

37%

510

1,864

921

376

1,873

1,058

15%

57%

28%

11%

57%

32%

231

1,142

1,022

225

1,128

1,027

48%

43%

10%

47%

43%

3 . 2 eMployees 3.2.4 non - discRiMinaTion

G4-LA12

TOTAL NUMBER OF EMPLOyEES By EMPLOyEE CATEGORy Workforce structure

Grupa Azoty S.A. 2013

Grupa Azoty KĘDzIERzyN

2014

2013

Grupa Azoty PUŁAWy

2014

2013

2014

Grupa Azoty POLICE 2013

2014

Management Board

Senior executives

Managing officers

135

127

105

182

168

106

107

Specialists

218

257

242

568

578

415

408

Senior staff

251

241

116

152

154

Supervisors

126

124

248

249

142

144

Operators

719

724

707

710

994

1,007

1,006

1,003

Laboratory staff

196

200

132

134

189

188

208

200

Other blue-collar jobs

397

379

156

137

909

902

478

474

2013

Grupa Azoty S.A.

2014

Women

Men

Women

Men

22%

78%

22%

78%

Grupa Azoty KĘDzIERzyN Grupa Azoty PUŁAWy Grupa Azoty POLICE

100%

17%

83%

17%

83%

COMPOSITION OF THE SUPERVISORy BOARD By AGE GROUP 2013

Grupa Azoty S.A. Grupa Azoty KĘDzIERzyN Grupa Azoty PUŁAWy Grupa Azoty POLICE

2014

<30

30-50

>50

<30

30-50

>50

67%

33%

67%

33%

60%

40%

50%

67%

33%

67%

33%

At the Grupa Azoty Group, we respect and value employees with the longest lengths of service. People aged 50 and more represent 36% of the total workforce on average, and 43% in Police. Although they are commonly referred to as individuals at risk of exclusion from the job market, the Grupa Azoty Group considers them exceptionally valuable. While we count on innovation, we also understand that without continued experience sharing, innovation would only be a void or even risky proposition. It is people with the longest lengths of service who guarantee that continuity.

ouR ResponsibiliTy

50+

COMPOSITION OF THE SUPERVISORy BOARD By GENDER

3 . 2 Employees

G4-LA2

3.2.5 Additional benefits

Additional benefits offered to the Grupa Azoty Group employees relate mostly to their safety – today and in the future. They include various forms of health care, as well as insurance policies and pension plans.

Last year, we announced a tender procedure to select a provider of group life insurance for employees of the Grupa Azoty Group. The procedure led to the execution of an agreement with PZU Życie S.A. in 2015. Under the agreement, uniform insurance coverage will be provided to all employees of the Group. PZU Życie S.A. was an insurance provider to Grupa Azoty S.A. in previous years, but when entering into the new insurance agreement, we managed to negotiate more favourable terms for the entire Group – much better coverage for the same insurance premiums. We also held a tender procedure to select a provider of medical insurance for employees of the Group. The procedure was concluded in 2015 by selecting LUX MED, which offered an extensive medical package, including access to medical specialists in 38 fields, analytical testing, imaging and physical therapy (rehabilitation). However, irrespective of the newly concluded insurance agreements, different forms of additional benefits were offered at the Group companies in 2014. Employees of the Grupa Azoty Group strategic companies can take advantage of additional medical care plans, which provide them with access to GPs and specialist physicians, as well as a selection of medical tests and diagnostics. In addition, Grupa Azoty KĘDZIERZYN has in place health promotion programmes. The employee pension plans (so-called

Pillar III of the pension system) implemented at the Tarnów, Police and Kędzierzyn-Koźle companies are also very popular with employees. Under the plans, the employer makes a basic monthly contribution to the pension fund for its employees, and the employees may choose to make additional contributions, which they pay for themselves. Grupa Azoty KĘDZIERZYN offers financial incentives for retiring employees, while Grupa Azoty PUŁAWY employees who retire due to disability or old age receive severance payments on terms more favourable than those required by the Polish labour law. In addition, Grupa Azoty KĘDZIERZYN has introduced support programmes for mothers returning to work after parental leave.

Retirement Employees of pre-retirement and retirement age are invited to an interview with an HR officer of their company to declare when they plan to retire. Retirement benefits are defined in the Collective Bargaining Agreement. Although there are no training programmes dedicated to retiring employees at the Grupa Azoty Group, we still try to provide them with different forms of support. Interactions with and additional benefits for former employees differ from company to company. They are invited to attend our corporate and other events, often actively participating in their organisation. Some Group companies organise regular or occasional events exclusively for retired employees, such as Christmas parties, New Year’s concerts or senior dance parties. In addition, our former employees are offered partial financing of holidays or sanatorium stays, as well as the services of our Employee Loan and Benefit Funds. They meet at company pensioner’s clubs and attend meetings of other organisations cooperating with the Grupa Azoty Group.

Cooperation with hospitals In September 2014, the Grupa Azoty Group companies signed an agreement with three specialist hospitals from Kraków, Tarnów and Łęczna to improve the standards of hospital treatment and rehabilitation of burn patients. This is designed to guarantee prompt medical care for employees of our companies who will suffer accidents at work. In exchange, the Grupa Azoty Group agreed to support the hospitals in purchasing state-of-theart medical equipment and in the area of medical research. In addition, Grupa Azoty SIARKOPOL is a partner of the Staszów hospital, having regularly supported it since 2008.

G4-EC8

G4-EC7

G4-SO1

G4-27

EC DMA

As one of the largest Polish companies, the Grupa Azoty Group takes responsibility for issues of nationwide importance. Our strength, however, comes from the experience, capabilities and tradition of companies operating in different regions of Poland. This is the second level of our responsibility.

Key areas of our social activity include investing for the benefit of local communities, solving social issues and providing assistance in the form of cash and non-cash donations

Our CSR and sponsoring activities at the national and international levels, going beyond merely local initiatives, are carried out on behalf of the entire Grupa Azoty Group by the Parent, Grupa Azoty S.A., guided by the corporate documents setting out its policies on CSR and sponsorship, scholarships and donations.

The documents are available at http://tarnow.grupaazoty.com/pl/ rozwoj/dialog/wsparcie

Mościce Forum 2020 An example of the Grupa Azoty Group’s approach to dialogue and cooperation with local communities is the Mościce Forum 2020, a citizen initiative animated by Grupa Azoty S.A., KANON Association and the moscice.pl portal. It has been implemented to integrate the local community, create a platform for exchanging opinions on the future of the Mościce district, where the Group’s Tarnów plant is located, and encourage people and institutions to work for the development of the district. In January 2014, a Mościce Forum 2020 meeting was held on the premises of Grupa Azoty S.A., attended by representatives of 15 organisations and institutions operating in Mościce, including a Vice-President of Grupa Azoty, principals of Mościce schools and CEOs of businesses, as well as representatives of the Tarnów City Office. The participants familiarised themselves with the results of the Forum’s activity so far and discussed the findings of the questionnaire, conducted through the moscice.pl portal, to ask the residents in what directions of Grupa Azoty’s sponsoring activity they would be most interested. The respondents pointed to sports and recreation, education, as well as infrastructure and entrepreneurship.

Our responsibility

What we do affects the lives of local communities, and so we must also consider their interests. But this is a mutual relation, because we would also have difficulties achieving our goals without employees who come from these communities, without schools that educate local youth, without healthcare centres, and without dialogue with local authorities and organisations. This is why we help each other, and why we talk to each other.

and services to charities and nongovernment organisations, as well as foundations, associations, schools and other non-profit organisations. In particular, we support initiatives to improve the quality of healthcare services and promote the development of children and young people. Sport is a separate area of our activity, because we are convinced that, apart from being the best school of life and success for everyone, it has an important community and identity-building role at all levels: school, college, university, region and country.

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investments benefiting the local communities,

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solving social issues,

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charitable assistance in the form of cash and non-cash donations and services, addressed directly to the communities or to charitable organisations, NGOs and non-profit organisations.

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Through donations, the Grupa Azoty Group seeks to actively respond to the needs of foundations, associations, schools, non-profit organisations and individuals in difficult circumstances. We particularly support projects contributing to the enhancement of medical care, social and educational development of children and youth, as well as other initiatives benefiting local communities.

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Out of a sense of responsibility towards the local communities of the Grupa Azoty Group, the Management Board declares its intention to undertake initiatives related to:

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In 2014, none of the Grupa Azoty Group companies covered by this report, i.e. Grupa Azoty S.A., Grupa Azoty KĘDzIERzyN, Grupa Azoty PUŁAWy and Grupa Azoty POLICE, made any financial donations to political parties, politicians or political institutions. Their absence follows from the Grupa Azoty Group’s Donation Policy, which prohibits such financial donations. While the Grupa Azoty Group does not rely on donations to lobby for any causes, the Donation Policy provides for making donations to organisations and institutions which support: ■

economic development, including entrepreneurship;

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development of technology, inventions and innovation, as well as promotion and implementation of new technological solutions in economic practice;

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promotion of the Republic of Poland abroad;

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assistance to Polish communities and Poles living abroad;

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European integration and development of international ties.

FUNDS CONTRIBUTED IN THE FORM OF DONATIONS, SPONSORING AND INVESTMENTS IN LOCAL INFRASTRUCTURE (PLN)

4,245,084 1,919020 919,020 1,304,400 432,696 GRUPA AzOTy PUŁAWy

GRUPA AzOTy S.A.

GRUPA AzOTy POLICE

GRUPA AzOTy KĘDzIERzyN

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The companies of the Grupa Azoty Group contribute significantly to the local governments’ budgets through tax payments, including primarily land and property tax. Also a substantial part of receipts from personal income tax paid by our employees residing in close vicinity to the companies go to local budgets.

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3.3.1 Development of local community

Local taxes paid by the Grupa Azoty Group’s key companies in 2014 (PLN) Grupa Azoty KĘDZIERZYN

Grupa Azoty Puławy

Grupa Azoty Police

17,691,014.19

21,983,300.00

34,452,600

30,494,400

Forest tax

1,100

500

Vehicle tax

890

6,400

25,000

2,100

1,422.34

5,400

17,693,326.53

21,989,700

34,478,700

30,502,400

Property tax,

Agricultural tax Total

Given the scale of their operations, the Grupa Azoty Group companies contribute to the growth of their towns by attracting residents, contributing to the development of local infrastructure and stimulating local business. Certain third parties operating close to our companies supply them with products and services, while others use the Grupa Azoty Group’s units and infrastructure, including those located within industrial and economic zones. Thanks to such zones, businesses enjoy numerous facilities, including the possibility to use separated parts of industrial installations without having to contain their impact to the physical limits of land to which they hold legal title.   A business operating within such a zone is subject to preferential taxation. Businesses gain access to well-situated land with all necessary utilities and good road access. On Grupa Azoty S.A.’s grounds there is a Special Industrial Zone covering

over 231 hectares, and 276 land lots. It includes the main section of the plant, where production units are located. On May 27th 2014, the Council of Ministers revised the borders of the Kraków Special Economic Zone extending it to include land in Tarnów, thus creating conditions conducive to further growth of Grupa Azoty S.A.’s business. In the area of Grupa Azoty Puławy’s operations, there is the Puławy Industrial Park, with an area of almost 700 ha, the Starachowice Special Economic Zone and the Puławy Sub-Zone. In the area of Grupa Azoty KĘDZIERZYN’s operations, a Special Demographic Zone has been established.

systems, while the towns (excluding Kędzierzyn-Koźle) use our wastewater treatment plants. However, there are much more dimensions and facets to the relations between our companies and their home towns. They pertain to various aspects of local community life, such as healthcare, recreation, environmental awareness and protection, safety, social assistance, charitable initiatives and citizen autonomy. Below are discussed several events and initiatives in which companies of the Grupa Azoty Group acted as organisers or partners. For information on safety in our relations with local communities, see p. 115.

Decades of the common history of our companies and towns in which they operate have rendered their mutual links almost organic. Heat from the CHP plants operating within our production facilities in Tarnów, Police, Kędzierzyn-Koźle and Puławy is transmitted to municipal heating

Our responsibility

Grupa Azoty S.A.

Tax

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3.3.1 Development of local community

Charity concerts in 2014

Academy of Ecological Skills

Police Day – Chemists’ Day

In 2014, Grupa Azoty S.A. organised the first New Year’s Charity Concert. The initiative was launched to support the construction of Via Spei, Tarnów’s first facility for the terminally ill, offering professional medical, psychological and spiritual help to several dozen patients. Proceeds from the concert, which reached almost PLN 88,000, were applied in full towards the construction of the hospice. In January 2015, the Second Grupa Azoty New Year’s Charity Concert took place in the Krzysztof Penderecki European Centre for Music in Lusławice. The proceeds of nearly PLN 60,000 were donated to the Tarnów branch of the Polish Multiple Sclerosis Society.

The Academy of Ecological Skills is an environmental education project launched in Puławy in 2009 for local school teachers, mainly of biology and chemistry. It consists of 40 hours of classes during which experts from Grupa Azoty PUŁAWY and other institutions share their knowledge about protecting and shaping the natural environment at the national, local and company levels. Lectures and presentations are supplemented with trips and tours of the relevant units. In 2014, 20 teachers took part in the project.

Police Day − Chemists’ Day is an important local event. Every year, the first weekend of June is a time when Police residents gather to watch sports events and concerts, which appeal not only to locals and residents of nearby towns. The quality programme and celebrity performances attract spectators from all around the province, and even from Germany.

Safety is Our Common Goal

Saturday with Grupa Azoty In 2013 and 2014, the Company’s employees and their families, as well as – for the first time ever – persons with no relation to Grupa Azoty, were invited to the Grupa Azoty open doors event organised as part of the Employee Festival. The event included a film screening, a performance for children, theatrical workshops, activities connected with sports supported by Grupa Azoty (e.g. speedway and sport climbing), as well as Safety Academy classes. All those interested had an opportunity to tour the Kwiatkowski Villa with the surrounding park. In 2014, the programme was further expanded to include cooking with master chefs, the first Mościce race for the Grupa Azoty CEO Cup and fitness classes. The event attracted a turnout of several thousand.

‘Safety is Our Common Goal’ is an educational project for young people from the Puławy region, initiated in 2012 together with the local police and fire service units. As part of the initiative, pre-school, elementary school and middle school children take part in meetings devoted to fire safety and road traffic rules. They receive educational brochures and gifts, such as reflective bands or visibility vests for students who travel to school by bike. In addition, the children can compete in a contest of knowledge on fire security and win carbon monoxide detectors provided by Grupa Azoty PUŁAWY. The event ended with a family picnic, featuring skills competitions, rescue equipment demonstrations and football matches.

Tree for a Bottle The initiative was launched at Polish schools in 2005 as part of the Responsible Care programme, implemented by the four main companies of the Grupa Azoty Group. Children compete to collect the greatest number of empty PET bottles for recycling. In exchange, schools receive tree and bush seedlings, while the winners receive awards, diplomas and other prizes. In 2014, 18 elementary schools and two preschools from Puławy participated in the project, collecting 844,359 bottles (the highest number to date) and planting 401 trees.

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The Chemical Sector Environmental Forum

Catch the Hare

In December 2014, Grupa Azoty KĘDZIERZYN organised the fourth edition of the 10 Metres of Sweets charity campaign. Sweets collected by company employees were donated to children’s hospital wards and care institutions in the Opole region. As part of the Christmas Bundle for Kids initiative, organised in local parishes together with Radio Doxa, our employees made parcels for children from poor families of Kędzierzyn-Koźle. The grand finale of the project was a Christmas ball for employees’ children at the Centralny (currently Solidaris) Hotel, during which the children donated books, colouring books and art supplies to children’s hospital wards in the region.

‘Catch the Hare’ is a photo contest held by the Grupa Azoty Group companies involved in the Responsible Care programme in which participants are asked to take interesting photos of animals or plants using any kind of equipment. The purpose of the initiative is to promote environmental awareness. The 8th edition of ‘Catch the Hare’ and the 2nd edition of ‘Catch the Hare – Junior’ were co-organised by Grupa Azoty S.A., Grupa Azoty KĘDZIERZYN., Grupa Azoty PUŁAWY and Grupa Azoty POLICE.

Our responsibility

Initiated as part of the Responsible Care programme, the Forum is a major event for all Polish chemical sector companies. It is a yearly meeting for managers of chemical, distribution and recycling companies, academics, public administration representatives, as well as environmental protection experts, to discuss environmental protection and OHS issues in the context of the Responsible Care initiative. An important topic of the meeting is the implementation of the European Union regulations into Polish environmental protection law. The Chemical Sector Environmental Forum has a long-standing tradition and attracts many participants from the Polish chemical industry. At the 11th Forum held in Toruń on October 8th-10th 2014, Grupa Azoty S.A. received a statuette to mark 20 years of its involvement in the Responsible Care programme.

For children in need

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3.3.2 Youth and education

We plan for the Grupa Azoty Group’s long-term future, thinking in the same terms of the regions in which our companies operate. This is why we support local schools, universities, and other educational initiatives in a variety of ways. After all, the future of these areas and the future of our Group are in the hands of today’s youth. With this in mind, we help young people forge their own futures.

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty S.A. works with local schools and universities to carry out research programmes, internships, work placement opportunities and workshops for students. Internships at the Company are offered to graduates of upper secondary schools and universities. In 2014, Grupa Azoty S.A. cooperated with several institutions of poststatutory education, including the Ignacy Mościcki Technical School Complex. An agreement was executed whereby the Company undertook to employ up to ten pupils per year, provide internships, help the school prepare instruction classes, and provide it with assistance in organising educational field trips and support in applying for the EU funds. The Company is also running a scholarship programme for students of the Kraków University of Technology, launched in 2014–2015. Following graduation, scholarship holders will find employment with Grupa Azoty, to support its growth with their knowledge.

Grupa Azoty KĘDZIERZYN supports local schools, for instance High School No. 2 in Kędzierzyn Koźle and the Diocesan Liberal Arts High School in Nysa. Furthermore, the company runs a scholarship programme for the most talented students and sponsors a class with a special chemistry curriculum at the Mikołaj Rej School Complex No. 3 in Kędzierzyn-Koźle. In October 2014, the semester-long scholarships were awarded for the third time, and the company donated new equipment for the school’s science lab. As part of our cooperation with the school, we take part in open classes, organise seminars and conferences and provide expert and financial support to chemistry competitions for students from the Kędzierzyn-Koźle region.

At present, Grupa Azoty S.A. has relations with the Kraków University of Technology, the Kraków University of Economics, the Jagiellonian University, the Kraków Province School of Economics, Wyższa Szkoła Biznesu – the National Louis University, the Catholic University of Lublin and the Rzeszów University of Technology.

In the second half of the year, the company held environmental awareness workshops at local elementary schools focusing on water and its importance to the ecosystem. 2014 saw the fifth edition of the initiative, run with the RIAD Foundation as part of the Responsible Care programme, consisting of 17 workshops attended by some 300 pupils. Furthermore, Grupa Azoty KĘDZIERZYN has sponsored the Marian Górny Prize. The award was funded five years ago by the late Marian Górny, a long-time Investment Project Director at Zakłady Azotowe Kędzierzyn and President of SITPChem, the Association of Chemical Industry Engineers and Technicians, in Kędzierzyn-Koźle. It is granted to students of the KędzierzynKoźle Technical and General Education School Complex who excel in technical subjects. Ever since 2013, the prize has been sponsored by Grupa Azoty KĘDZIERZYN. The company also works with universities, in particular by providing internships, work placement schemes and classes about chemistry and chemical engineering to students of technical universities. In addition, Grupa Azoty KĘDZIERZYN is happy to share information with students writing their theses.

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3.3.2 Youth and education

Grupa Azoty POLICE

Grupa Azoty PUŁAWY

By cooperating with local authorities, Grupa Azoty POLICE seeks to restore vocational training, particularly with respect to professions useful to the company. This project will help young people on the job market, while providing the company with skilled workforce. The company supports upper secondary and vocational schools from Police and Szczecin in several areas, for instance allowing students to tour the plant during a yearly daytrip.

Grupa Azoty PUŁAWY has developed a ‘Policy for Engagement with Schools and Universities for the Development of Intellectual Capital’. The document clarifies the terms of cooperation with the Technical School Complex of Puławy, the Maria Curie-Skłodowska University in Lublin (Puławy Campus), the Warsaw University of Technology (Faculty of Chemical and Process Engineering), the Warsaw University of Life Sciences (postgraduate programme for agricultural consultants), the Catholic University of Lublin and the Warsaw School of Economics, our current partners, while also setting guidelines for future relations with other schools and universities.

Grupa Azoty POLICE has established ties mainly with tertiary schools from the Szczecin Province, including the University of Szczecin, the West Pomeranian University of Technology, the Maritime University and the West Pomeranian Business School, but supports also the Warsaw University of Technology, the Łódź University of Technology, the University of Warsaw and the Warsaw School of Economics. In addition, the company provides expert support to students writing theses in the fields of chemistry, manufacturing, environmental protection, corporate management, marketing and HR.

In 2014, the Maria Curie-Skłodowska University in Lublin opened a campus in Puławy on the initiative of the Grupa Azoty PUŁAWY Management Board and the university’s rector. The classes started on October 2nd. The cooperation agreement, signed in 2013, provides for the creation and launch of an engineering programme in technical chemistry in Puławy and a postgraduate course for company employees, internship and work placement initiatives for students, master and doctoral theses on topics related to the company’s operations, and support of research and its commercialisation. As a result, a four-year engineering programme in Technical Chemistry was launched in Puławy. The freshmen class consisted of a total of 80 full-time and extramural students, who will be given the opportunity to complete work placements at Grupa Azoty PUŁAWY.

Grupa Azoty PUŁAWY has extended for another three years its patronage agreement with the Technical School Complex in Puławy, whereby the company agreed to hire at least ten of each year’s graduates. Last year, 16 of the school’s graduates were hired, and 61 completed work placements. Under the partnership agreement, the school will receive better equipment for its science labs and support in scientific competitions, while the best students will be awarded scholarships. In total, the value of the company’s donations to the school reach several dozen thousand złoty per year.

In 2014, Grupa Azoty POLICE sponsored ‘Eco-Meetings in the Forest’, an event promoting ecofriendly behaviour among pre-school children, and Santa Claus gift-giving events held by the Słowianin Cultural Centre in Szczecin.

Our responsibility

In 2014, the company was involved in several events with a scientific and/or educational agenda, such as the 15th International Financial Management Conference, the 2nd International Maritime Congress in Szczecin, the Corporate Taxation Conference, a nationwide event organised by the University of Szczecin, the 9th Grand Gala of the Northern Commercial Chamber and the International Environmental Forum.

Since 2012, the Puławy Competence Centre has been developing an extensive educational offering for agricultural technicians and agents. Furthermore, the Puławy Competence Centre and the Faculty of Agriculture at the Warsaw University of Life Sciences have developed a postgraduate programme with a special profile: ‘Management of Fertilizers and Crop Protection Products in a Sustainable Agriculture System’. January 2015 marked the end of its second edition.

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3.3.3 Culture

Culture plays a special role in social life: as a component of education, it forms and develops imagination, sensitivity and creativity of generation after generation, contributing to the development of both personal and regional identity. Aware of this, Grupa Azoty supports a number of cultural institutions and projects.

Grupa Azoty KĘDZIERZYN Grupa Azoty KĘDZIERZYN is the main sponsor of the Youth Marine Brass Orchestra, a respected brand promoting Opole and its region in Poland and abroad. The company supports a number of local cultural initiatives, such as the Gitariada guitar festival, and the Echo Kresów and Cantabile choirs. Grupa Azoty KĘDZIERZYN also works on various projects with the Koźle Region Association.

Grupa Azoty POLICE Grupa Azoty S.A. In 2014, Grupa Azoty S.A. supported a number of cultural events and institutions, including the Krzysztof Penderecki European Centre for Music in Lusławice, the Grupa Azoty International Jazz Contest, the Tarnów Film Prize, the Girls Cathedral Choir Puellae Orantes, the City Art Gallery BWA in Tarnów, the Tarnów Traditional Jazz Association Leliwa and the Tarnów Fine Arts Association Zachęta.

Grupa Azoty POLICE became a sponsor of the Explorers of Imagination Audiobook Festival, the GRYFIA Polish Award for Female Writers and the Literary Town festival. The company also helped stage Ionesco’s play ‘The Lesson’ at the Chamber Theatre of the Szczecin Friends of the Arts Association and organise the International Organ and Chamber Music Festival in Kamień Pomorski.

Grupa Azoty PUŁAWY

Grupa Azoty Grand Festival An example of the Company’s commitment to integrating the local communities is the Grupa Azoty Grand Festival, an event run since 2011, featuring free concerts of Polish and foreign music stars for residents of Tarnów and the neighbouring areas. The aim is to engage directly with the local community, demonstrating Grupa Azoty’s achievements.

Grupa Azoty PUŁAWY has been involved in a number of important cultural events, supporting institutions with cultural agendas. For instance, the company is a partner of the Dom Chemika Puławy Cultural Centre, which hosts the International Jazz Workshops. It has also supported the Nadwiślańskie Museum. In 2014, Grupa Azoty PUŁAWY sponsored Cohen Nohavica, a play directed by Marian Opania, who celebrated an anniversary of his stage debut. First staged in the Buffo Theatre in Warsaw, the play was also performed in Dom Chemika. The company was also one of the sponsors of the Two Riversides Film and Art Festival in Kazimierz Dolny.

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3.3.4 Sports

Grupa Azoty has long been involved in sports, both at the national and regional levels. We support sports because we believe them to be a formative experience preparing people for success in other areas. But we also do this because athletes win medals and break records not just for themselves − their efforts are meant for everyone who can appreciate hard work, ambition and drive. They are a source of pride for Poland, their home regions, local communities, sports clubs and schools.

Our responsibility

Grupa Azoty is one of the top sports patrons in Poland, supporting worldclass competitors, including Robert Kubica, Piotr Żyła and Sylwia Jaśkowiec in 2014. But that is not all. Grupa Azoty has also sponsored Bartłomiej Mróz, a para-badminton player, the ZAKSA Kędzierzyn-Koźle volleyball team, the Chemik Police female volleyball team, the Pogoń Szczecin football club, the AZS Koszalin basketball team and the Unia Tarnów speedway team. Indirectly, we also sponsor Kamil Stoch and Justyna Kowalczyk. In addition, Grupa Azoty supports Marek Cieślak, the manager of Poland’s national speedway team. We know that sustained, longterm promotion and advertising through sports can bring positive and lasting effects, both financially and in terms of corporate image.

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3.3.4 spoRTs

MAJOR ACHIEVEMENTS IN 2014 Sochi Winter olympic Games – athletes from the polish Skiing Association The Sochi Winter Olympic Games were a great success for Polish national team members. One of the event’s heroes was Kamil Stoch, who became the third ski jumper in history to win two gold medals in individual competitions during a single Olympic tournament. Justyna Kowalczyk also snatched a remarkable victory in classic cross-country skiing on her favourite distance of 10 kilometres.

KpS cHeMiK police – polish champion and winner of the polish cup The Chemik Police female volleyball team has opened a new chapter in the history of Polish volleyball. The Grupa Azoty sponsored team won the gold medal in the Orlen League and secured the Polish Cup in the 2013/2014 volleyball season.

Grupa Azoty – Main Partner of the Polish Skiing Association

zAKSA KĘDzIERzyN-KOŹLE – POLISH CUP The zAKSA Kędzierzyn-Koźle team repeated its 2013 success by winning the Enea Cup 2014 tournament in zielona Góra, thus securing the Polish men’s volleyball cup. In the final match, zAKSA defeated Węgiel from Jastrzębie-zdrój.

AzOTy-PUŁAWy 4TH IN PGNIG

UNiA TARNÓW ŻSSA Despite great performances throughout the 2014 season, speedway riders from the Grupa Azoty Unia Tarnów team, led by Marek Cieślak, finished in the third place in the ENEA Ekstraliga league.

In the 2013/2014 season, the AzotyPuławy handball players ranked fourth in the PGNiG Superliga men’s league, winning the third place in the Polish Cup. In 2014, the team advanced to the semi-finals of the European Challenge Cup. Azoty Puławy is also the home club of members of the national team, among them Piotr Wyszomirski and Michał Szyba, who represented Poland in the past, and Przemysław Krajewski and Piotr Masłowski, who recently joined the national squad.

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The Grupa Azoty Group actively supports sports clubs and institutions of great importance to the regions where the Group’s core companies are located. These include the Tarnów Handball Association, the Unia Tarnów Sports Club (football), the Jedynka Tarnów Sports Club (women’s volleyball), the Wisła Puławy (multidiscipline club) and the Chemik Police Football Club.

CHASING DREAMS

Members of the Polish sport climbing team − Marcin Dzieński, Klaudia Buczek and Edyta Ropek – have achieved considerable successes. In 2014, Marcin Dzieński (AzS PWSz Tarnów) recorded a magnificent performance, placing him third in the World Cup’s overall ranking. Klaudia Buczek (KU AzS PWSz Tarnów), silver medallist from Gijon, ranked fourth, whereas Edyta Ropek (MKS Tarnovia Grupa Azoty Elzat), the world’s current No. 2 in sport climbing, multiple medal winner in Polish and European competitions and three time World Cup winner, finished the World Cup 2014 season in the ninth place.

Another great cause for celebration was the success of Michał Derus, a Tarnów born athlete, who made his debut last year in the 2013 IPC Athletics World Championships in Lyon, winning gold and silver in the 100 and 200-metre runs.

ouR ResponsibiliTy

Even outstanding professional athletes need support, and so do promising young sportsmen and tomorrow’s champions, who need even more attention and encouragement. This is why, as a renowned patron of Polish sports, Grupa Azoty takes great care to nurture young athletes. Discovering raw talent is not easy, but Grupa Azoty can boast several successes, as many young sportsmen we took under our wings are already celebrating victories.

CLIMBING FOR SUCCESS

A GIRL IN GLOVES Justyna Walaś, a young boxer from Tarnów, is another great athlete supported by Grupa Azoty. She recently became a junior world champion, and her extraordinary performance last year was recognised by editors of the Ring Bulletin magazine. Justyna honed her skills in the Global Boxing training complex in North Bergen, USA, studying hard under famous boxing masters, including Monte Barrett and Aurelio Toyo.

THE GOAL IS EVERyTHING Setting a goal is the first step towards success. Renata Knapik-Miazga, twotime Polish épée fencing champion and bronze medal winner in the 2013 European Championships, is well aware of that. Her current objective is to qualify for the 2016 Summer Olympic Games in Rio de Janeiro, and to successfully compete there. To achieve this goal, she will need backing from her club and coaches, as well as firm financial and backstage support.

In 2014, we also sponsored Maciej Dreszer, a racing driver, and a swimmer Konrad Czerniak.

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3.3.4 spoRTs In 2014, the Grupa Azoty Group supported numerous nationwide and local sporting events. According to experts, the Grupa Azoty brand created through consolidation has become one of the most visible brands in Polish sports, particularly in such disciplines as ski jumping, volleyball and speedway. We are happy to hear that, since visibility translates into awareness of the Grupa Azoty brand in all areas of our activity.

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The START programme is a comprehensive sports-focused CSR initiative designed to discover new talents. We support young people who dream about competing with the best in various disciplines. For many of them, this will mark the beginning of their ascent to the top. As part of the programme, in the 2014/2015 season we became involved in the National Ski Jumping Development Programme â&#x20AC;&#x2DC;Race to the Olympicsâ&#x20AC;&#x2122;. We also support young athletes competing in other disciplines, such as climbing, basketball and speedway. Soon, the list will also include football and handball.

ouR ResponsibiliTy

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3.3.5 coMMunicaTion wiTh The MaRkeT enviRonMenT

The Grupa Azoty Group maintains contacts with local communities, the media and other stakeholders, informing them about its operations. We want people to know what we are doing and what we are planning to do. We want to

disclose our motives. After all, our success affects their lives in many different ways, big and small. For the same reason, we would like to know what our stakeholders expect of us, which is why we strive towards dialogue-based communication.

Employees Suppliers

OUR STAKEHOLDERS First, we defined the key stakeholders groups for the Grupa Azoty Group, its companies and main business segments. We make every effort to ensure that our stakeholder relations are based on trust and transparency, which is why for the last two years we have yearly updated our stakeholder register to make sure that our communications reach all interested parties.

State Treasury

Local governments

Public authorities

Trade unions

Banks and financial institutions

Customers

Local governments Shareholders FORMS OF COMMUNICATION Annual reports are a major element of our communication with stakeholders. In 2014, we issued the 2013 integrated annual report, which – for the first time in the Group’s history – was compliant with the GRI G4 guidelines. The document presented our achievements across all material areas of our operations, as well as their social and environmental context. It was distributed among all key stakeholders, including local governments, members of the parliament, local organisations and schools, trading partners, investors and other parties. In addition, it was made available online, at grupaazoty.com. Our website, grupaazoty.com, featuring all key information on the Group, is another platform for

communication. The website is regularly updated and expanded to include new sections and functionalities. In addition, the Grupa Azoty Group engages in active dialogue through social media such as Facebook, Twitter and the corporate blog. The Group undertakes periodic image surveys to learn more about how people perceive it and where they get their information from. These data allow us to adjust our communications to the needs of particular target groups. The most recent study, conducted between November 2014 and January 2015, included a countrywide survey, interviews with opinion leaders, an in-depth survey and countrywide surveys among representatives of the chemical industry.

Meetings with individual stakeholders groups are another vital element of corporate communication, especially quarterly conferences with shareholders, financial analysts and the press at which we discuss the Group’s performance in the past period and key developments on the market. Following the release of quarterly results, we also hold chats with retail investors. In addition, we meet with our customers and offer them training led by our experts. During these sessions, we present our product mix, but also give advice and discuss state-of-the-art solutions. Our activity in this area is supported by dedicated industry websites (nawozy.eu and e-plastics.eu).

3.3

So ci e t y

3.3.5 Communication with the market environment

Key communication channels and forms used by the four companies

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty POLICE

Grupa Azoty PUŁAWY

Press conferences

Themed or periodic meetings with representatives of local, national and industry media to announce key developments at the companies and the Group

✓

Conferences, congresses, symposia, conventions (at international, national, industry and local levels)

The Group attends such events to play an active part in creating the future of the Polish chemical industry

✓

Meetings with representatives of local communities (artists, teachers, athletes, businessmen and others)

Themed meetings devoted to social outreach initiatives, projects, key developments at the companies and in their immediate environment, or to preventing potential social unease

✓

Articles (including interviews with company representatives) and advertisements in national, industry and local press

Themed or periodic articles (including interviews with company representatives) and advertisements to familiarise readers with the company’s operations and inform them of major events for the company, the industry and Poland

✓

Distribution of company newspapers to external recipients

By distributing our in-house publications to stakeholders we can maintain contact and keep them posted about our affairs

✓

Website

Our website is one of the fastest communication channels reaching all interested parties

✓

Earnings conferences

Conferences with shareholders and analysts to discuss the company’s financial standing and key developments

✓

Grupa Azoty image surveys

Nationwide and regional surveys to assess brand awareness and probe opinions about Grupa Azoty

✓

Our responsibility

Objective / Description

Form

G4-SO8

SO DMA

Compliance To maintain compliance with legal requirements and the highest standards, including ethical norms, we undertake periodic self-assessments for conformity with the applicable standards in quality, environmental protection, occupational health and safety, and food safety. The results of these compliance checks are presented during management system reviews in the presence of senior executive staff, and analysed to design appropriate remedial measures and fine-tune the management systems.

In 2014, no significant fines or nonmonetary sanctions were imposed on any of the four Group companies due to their non-compliance with law, or due to anti-competitive or corruptive practices.

3 . 4 Nat u r al en vi ro n m en t

EN DMA

In the 21st century, respect for the natural environment is an indisputable principle. However, the scale of our responsibility as a major European chemical group is so huge that we must and want to use every opportunity to talk about environmental protection, if not for any other reason than for our stakeholders to know that we make every effort in this area.

The companies of the Grupa Azoty Group are in compliance with all formal and legal requirements related to environmental protection and imposed by the Environmental Protection Law. They carry out their industrial operations pursuant to a number of decisions issued by provincial governors and marshals, such as integrated permits for the operation of industrial facilities, permits to release gases and dusts into the air, permits to discharge sewage to water, permits for waste generation, permits for recovery of waste, permits for collective water intake and collective wastewater discharge, and permits to emit greenhouse gases. On January 9th 2014, Grupa Azoty POLICE obtained a new integrated permit for the operation of process units situated on the company’s premises.

At the Grupa Azoty Group, an Environmental Management System compliant with the ISO 14001:2004 standard supports efforts related to environmental protection and prevention of contamination. It has been implemented in the four main companies of the Group, requiring them to assess compliance of their operations with legal regulations and other standards and to continuously enhance the effects of their proenvironmental initiatives.

The Grupa Azoty Group’s environmental impacts include:

Grupa Azoty PUŁAWY ■■

Construction of NOx reduction units at two boilers of the CHP plant

■■

Biological Wastewater Treatment Plant’s precipitate dehydration unit

■■

Upgrade of the P1, P2, P3 pump system of filters and solution piping on Line 3 of the Ammonium Nitrate Unit

other local environment-related matters.

■■

Mounting of an ammonium ion analyser at outlet of the drainage system to the discharge channel

Within the Environmental Management System, specific material issues have been identified. Processes and operations significantly affecting the environment are subject to monitoring and measurements.

■■

Upgrade of the sulfuric acid unloading station

■■

Upgrade of the Biological Blackwater Treatment Plant

■■

Upgrade of Line III of the Gas PreTreatment System

■■

air emissions,

■■

discharge to water,

■■

waste management,

■■

soil contamination,

■■

impact on society,

■■

use of raw materials and natural resources,

■■

An example of our continuous effort to harmonise internal procedures with future legal regulations is the ‘Computation of the Carbon Footprint for Products of the Plastics Business Segment’ project. Also at Grupa Azoty Puławy, an interdisciplinary task force computed the carbon footprint for the company’s commercial products, both chemicals and fertilizers.

In 2014, the Grupa Azoty Group was running a number of investment projects designed to better protect the natural environment:

Grupa Azoty POLICE ■■

Expansion of the post-calcination gas desulfurisation system through the addition of two new reactors

■■

Exhaust gas treatment unit and upgrade of the EC II CHP plant

■■

Construction of an industrial wastewater neutralisation unit at the titanium white plant

■■

Continuous monitoring of SO2 and dust emissions at the titanium white plant

■■

Construction of a decomposition sludge neutralisation unit

■■

Construction of barriers to clean up the soil-water environment at the iron sulfate landfill site

■■

Upgrade of the post-calcination gas distribution system

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

■■

Flue gas desulfurisation unit and flue gas denitriding unit

■■

Continuation of the construction of a new CHP plant – Phase 1

■■

Upgrade of the interiors of ammonia synthesis reactors

■■

Upgrade of waste treatment facilities

■■

Modernisation of handling stands

■■

Construction of a dust granulation system for the iron-chromium catalyst together with the sorting and dust removal stand,

Filter press for dehydration of the precipitate from the biological wastewater treatment plant

■■

Upgrade of the isobutanol and n-butanol rail and road tanker loading bays

■■

Overhaul of a 69-metre section of the storm water drainage system

■■

Modernisation of the cold water pumping station at the Ammonia Plant

3 . 4 Nat u r al envi ro n m en t

Coal will remain the main fuel for our plants in the coming years. This is yet another reason for us to seek energy efficiency gains. For several years now, our CHP plants have been modernised to ensure compliance with the changing standards and legal requirements concerning the environmental impact of industrial facilities. Rational and efficient use of energy is as important as its generation, and so we strive to implement modern, energy efficient facilities and technologies across the Grupa Azoty Group. In the years ahead, we will undertake projects to upgrade the Group’s power assets. The plants in Tarnów, Police, and Puławy will be brought in line with the requirements of the IED Directive on industrial emissions, and a new energy source will be built at the Kędzierzyn-Koźle plant and launched after 2015. At Grupa Azoty PUŁAWY, work will be continued, on a standalone basis or with a strategic partner, on the construction of a power plant to satisfy the company’s long-term demand. In addition, the internal power system is being upgraded.

Further development of the Group’s power generation capacities will be based on previous years’ R&D projects. Work is ongoing on ways to reduce the energy intensity of existing technologies and use of energy sources alternative to natural gas.

Energy from primary sources (by energy carriers)

Grupa Azoty S.A. Fuels used to generate electricity within the organisation

Quantity (in GJ) 2013

2014

Power coal

8,500,000

8,269,000

Natural gas

4,300

31,130

Fuel-grade MEK

171,700

167300

Process gas

53,000

63,260

Mazut

33,800

27,100

Our responsibility

A large conglomerate like the Grupa Azoty Group has to have its own energy security policy. In our operations so much depends on the stability and reliability of energy supplies that we must not rely on external sources only. For this reason, our main companies operate their own CHP plants satisfying a major part of their demand for heat and power. Thus we are able to control our energy sources and, partially, energy costs. But this also means that we are responsible for the environmental impact of our energy generation. Therefore, we invest in new, more efficient and cleaner generating units and continually modernise the existing ones.

G4-EN3

EN DMA

3.4.1 Energy

Grupa Azoty PUŁAWY Fuels used to generate electricity within the organisation Power hard coal High-methane natural gas Petroleum-based fuels

Quantity (in GJ) 2013

2014

3,708,506

4,117,121

4,354

5,682

113,438

127,324

Grupa Azoty KĘDZIERZYN Fuels used to generate electricity within the organisation Fine coal Fuel oil

Quantity (in GJ) 2013

2014

502,507

484,726

479

377

Grupa Azoty POLICE Fuels used to generate electricity within the organisation Fine coal Fuel oil

Quantity (in GJ) 2013

2014

7,070,489.738

7,336,878.104

24,042.000

15,544.000 95

3 . 4 naT u R al en vi Ro n M en T

G4-EN3

3.4.1 eneRgy TOTAL ENERGy CONSUMPTION (IN GJ) Grupa Azoty S.A.

Grupa Azoty KĘDzIERzyN

Grupa Azoty PUŁAWy

Grupa Azoty POLICE

Quantity (in GJ) 2013

2014

2013

2014

2013

2014

2013

2014

Electricity, heat, cooling and steam purchased for consumption

211,400

205,600

1,323,494

1,226,440

3,829,040

3,542,141

1,507,092

1,764,724

Electricity, heat, cooling and steam generated by the organisation

4,550,000

4,285,350

6,869,426

6,612,240

17,642,379

17,400,172

10,306,784.448

9,434,249.575

Electricity, heat, cooling and steam sold by the organisation

343,000

328,600

557,314

458,706

1,558,919

1,208,121

510,543.4

445,306.9

4,418,400

4,162,350

7,635,606

7,379,974

19,912,500

19,734,192

11,303,332.999

10,753,666.838

Total energy consumption within the organisation

G4-EN6

In Tarnów, heat is supplied exclusively by the EC II CHP plant, while electricity comes from the Company’s own and external sources. In 2014, purchases from external sources were reduced after the Company’s own power system had been upgraded. The demand for heat was reduced compared with 2013. At the Puławy plant, energy consumption fell slightly.

s av ed f R o M R ed u ced en eR g y co n s u M p T i o n

REDUCTION OF ENERGy CONSUMPTION

Total savings from reduced energy consumption and higher energy efficiency

pl n M

Grupa Azoty S.A.

Grupa Azoty KĘDzIERzyN

Grupa Azoty PUŁAWy

Grupa Azoty POLICE

PLN 4,070,000

PLN 2,700,000 saved on heat and PLN 100,000 saved on electricity

PLN 565,000

PLN 2,592,000

3 . 4 Nat u r al envi ro n m en t

G4-EN5

G4-EN6

3.4.1 Energy

Initiatives which contributed to reduced energy consumption

Energy intensity/electricity consumption intensity (in %) 2013

2014*

Grupa Azoty S.A.

8.02

Grupa Azoty KĘDZIERZYN

11.49

24.72

Grupa Azoty S.A.

Grupa Azoty PUŁAWY

9.12

43.75

Upgrade of the interiors of ammonia synthesis reactors, upgrade of the cold water pumping station at the Ammonia Plant, use of gaseous ammonia in cyclohexanone oximation.

Grupa Azoty POLICE

4.63

33.87

* As agreed on the Grupa Azoty Group level, the index for 2014 was computed in accordance with the guidelines stipulated in the RES Act of February 20th 2015, while for 2013, it was computed based on the Energy Law. This means that the percentage figure for 2013 is the energy intensity index, whereas that for 2014 represents the electricity consumption intensity.

Grupa Azoty PUŁAWY

0.6 Mpa steam network – loss minimisation thanks to improved network configuration, better insulation and consumption metering, leading to steam heat savings. Replacement of old 3 x 1,000 kVA and 1 x 630 kVA transformers with new energy efficient ones, leading to electricity savings.

Replacement of two feedwater pumps (including engines). Pumping engines No. 1 and No. 5, feeding OP215 boilers at the Puławy CHP plant, were replaced. Old SIGMA CHP 200 1,600 kW pumps were replaced with new CND 4 1,450 kW units.

Grupa Azoty POLICE Installation of drain valves on steam pipelines (GI), upgrade of circulation pump system – Phase 2 (GE), replacement of 0.8 MPa steam fed to evaporator stations with 0.3 MPa steam (GN), replacement of 0.8 MPa steam fed to evaporator stations with 0.3 MPa steam (GP), replacement of engines and lighting with more energy efficient equipment (GE, GA, GL, GN, GP), improvement of combustion process in OP-230 boilers (GE).

New CHP plant

On May 23rd 2014, representatives of Grupa Azoty KĘDZIERZYN and RAFAKO S.A. signed a contract for Phase 1 construction of the ‘New CHP Plant at Grupa Azoty KĘDZIERZYN’ project. The cost of the phase is estimated at PLN 375m. The contractor undertook to complete the task by the end of 2016. The need to build a new CHP plant in Kędzierzyn-Koźle is due to significant wear and tear of the currently operated equipment and installations and the need to reduce emissions of gaseous and particulate matter arising from the requirements of the IED. The new CHP plant will operate in parallel with the existing one until around 2019, when the latter will be shut down and its boilers decommissioned.

Our responsibility

Grupa Azoty KĘDZIERZYN

3 . 4 Nat u r al en vi ro n m en t

EN DMA

3.4.2 water

We all need water. Without water there is no life. The Grupa Azoty Group also needs it. We use water for industrial purposes, as a cooling agent, for drinking and as sanitary water, to produce process waters, and for fire fighting. We remember that everyone needs water, clean water. Therefore, the Grupa Azoty Group has in place procedures to ensure rational water management, prevent water losses, minimise the amount of effluents, and prevent industrial failures.

All organisational units are required to ensure rational water management, prevent water losses, minimise the amount of effluents, and take measures to prevent industrial failures. Total water withdrawal can be reduced by water-tight sealing of units, as well as ensuring that as much water as possible is reused in production processes and that all processes are duly optimised. Water withdrawal from water intakes is governed by the terms of relevant permits for the withdrawal of surface and underground water. At Grupa Azoty KĘDZIERZYN, the

positive shift involving replacement of ground water with surface water was possible due to increased use of the wastewater recirculation system to produce industrial water and a change in the requirements of one of the customers, as a result of which ground water used in the cooling circulation system was replaced with industrial water (produced from treated wastewater and waters of the Oder river). The main factor allowing to reduce water withdrawal is the production of industrial water from treated industrial wastewater and storm water.

G4-EN8

Total water withdrawal by source (M3)

Total volume of water withdrawn by the Company by source (m3)

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

2013

2014

2013

2014

2013

2014

2013

2014

Surface water

12,673,000

12,549,000

3,839,540

3,859,600

103,431,596

94,239,843

147,905,778

168,025,287

Ground water

594,000

688,000

1,345,200

989,400

3,813,180

3,600,425

–

Municipal water supply

–

340,756

291,977

Other

–

1,867,500

1,921,700

–

Total

13,267,000

13,237,000

7,052,240

6,770,700

107,244,776

97,840,268

148,246,534

168,317,264

Water intakes

Grupa Azoty S.A.

Grupa Azoty POLICE

■■

Surface intake on the right bank of the Dunajec river

■■

Surface intake from the Oder river

■■

Underground intake from Quaternary water-bearing formations (first aquifer)

■■

Surface intake from the Gunica river

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

■■

Surface intake from the Oder river

■■

Surface intake from the Łącza stream

Surface intake from the Wisła river (through four pipelines: R1–R4)

■■

Tertiary and Quaternary groundwater intakes (deep wells)

■■

Surface intake from the Kurówka river

■■

Purchase of water drained from the Kotlarnia Sand Mine (Kopalnia Piasku Kotlarnia S.A.)

■■

Underground intake from Quaternary water-bearing formations (deep wells)

3 . 4 Nat u r al envi ro n m en t

G4-EN10

3.4.2 water

We conserve water and optimise its use, for instance by reusing water. The method and extent of water reuse depend on the specifics of a given plant’s manufacturing process.

Percentage and total volume of water recycled or reused Percentage of reused water

Total volume of reused water

Grupa Azoty S.A.

25.8%*

2,934,461 m3

Luwa unit – 2,000,426 m3 Reverse osmosis unit – 104,025 m3 Condensate treatment plant – 830,010 m3

Grupa Azoty KĘDZIERZYN

45.6%

3,087,200 m

Recirculation system for treated industrial wastewater, ash and slag hydraulic transport water, spent cooling water, and storm water to be used in the production of industrial water. Recirculation of wastewater reduces water withdrawal from the Oder river and the volume of effluents discharged.

Grupa Azoty PUŁAWY

11.6%

11,433,644 m3

Partial recirculation of water from the discharge channel to be reused in cooling processes, reducing water withdrawal from the Wisła river.

Grupa Azoty POLICE

9.74%

16,388,610 m3

Reuse of spent cooling water which is fed to decarbonation stations, recirculation of water to surface water intakes, recycling of condensates, closed cooling circuits.

* Percentage of reused water, assuming water consumption for the plant’s needs at 11,394,000 m 3 in 2014 (net of water losses and water sales)

hydraulic transport water, spent cooling water, and storm water to be used in the production of industrial water. Recirculation of wastewater reduces water withdrawal from the Oder river and the volume of effluents discharged. Grupa Azoty PUŁAWY uses partial recirculation of water from the discharge channel to be

reused in cooling processes, which reduces surface water withdrawal from the Wisła river by corresponding amounts. Grupa Azoty POLICE reuses spent cooling water, which is fed to decarbonation stations, and also recirculates water to surface water intakes, and recycles condensates.

Our responsibility

At Grupa Azoty S.A., recycled water includes the total volume of water used and recovered to be reused in three cooling circuits to compensate losses. Unused water is fed back to the industrial water system. Grupa Azoty KĘDZIERZYN has in place a recirculation system for treated industrial wastewater, ash and slag

3 . 4 Nat u r al en vi ro n m en t 3.4.2 water

G4-EN22

Total water discharge by quality and destination Volume (m3)

Wastewater discharge destination (ground water, surface water, sewage system, etc.) 2013

2014

Central Wastewater Treatment Plant

4,042,000

3,544,000

Biological Wastewater Treatment Plant

1,415,000

1,339,000

Ditch EF+A0

824,000

808,000

Oder river

6,098,670

6,782,409

Wisła river

98,155,513

90,899,718

Oder river − internal waters

36,419,081

37,045,743

Wastewater treatment method

Treated wastewater volume (m3) 2013

2014

Central wastewater treatment plant – mechanical and chemical treatment

4,042,000

3,544,000

Biological wastewater treatment plant – biological treatment

1,415,000

1,339,000

2,231,333

2,147,870

6,098,670

6,782,409

Central industrial wastewater treatment plant – mechanical and chemical treatment

2,580,467

1,939,531

Biological industrial wastewater treatment plant – biological treatment

1,332,850

1,438,220

Blackwater treatment plant – biological treatment

126,760

154,870

Dawidagi – mechanical treatment

254,040

98,155,513

90,899,718

36,419,081

37,045,743

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN Wastewater treatment system Piskorzowiec Wastewater Treatment Plant Grupa Azoty PUŁAWY

Biological treatment – tertiary treatment Grupa Azoty POLICE Mechanical and Chemical Wastewater Treatment Plant

100

3 . 4 Nat u r al envi ro n m en t

EN DMA

3.4.2 water

An on-site wastewater treatment plant operates in Police. In addition to industrial wastewater, sanitary sewage, leachate from landfill sites and municipal wastewater from the town and municipality of Police are also treated at the plant (following preliminary treatment at the municipal pretreatment facility, the wastewater is directed to the on-site plant). The treatment technology in use at the on-site plant in Police is listed in the BAT document among the Best Available Techniques (BAT). It involves lime milk-based wastewater neutralisation, aeration, coagulation, sedimentation, centrifugation, and final treatment

in retention and equalisation ponds where the separated effluent is treated naturally. As the treatment process is highly efficient, the discharged wastewater’s parameters are much better than the prescribed values, and the impact of discharged wastewater on the quality of receiving waters is negligible. As spent cooling water and storm water from the Police plant are discharged directly into the Oder river, they undergo regular automatic pH monitoring to control their acidity. At the Puławy plant, treated wastewater is discharged into the Wisła river. However, depending on its types, wastewater is first treated at the Central Industrial Wastewater Treatment Plant (mechanical and chemical treatment), the Biological Industrial Wastewater Treatment Plant (biological treatment), the Blackwater Treatment Plant (biological treatment), and local pretreatment facilities. The discharged water’s parameters are well below the limits specified in the integrated permit. In 2014, the Blackwater Treatment Plant was modernised, which consisted in changing the wastewater aeration method in biological ditches.

Our responsibility

Process wastewater and sanitary sewage as well as spent cooling water and storm water are generated at the Grupa Azoty plants. At the Tarnów plant, wastewater, depending on its type, is transported to be treated at the Central Wastewater Treatment Plant or the Biological Wastewater Treatment Plant. Industrial wastewater and sanitary sewage are transported to the Central Wastewater Treatment Plant, where they are treated mechanically and chemically, and then discharged to the Biała Tarnowska river. Industrial wastewater containing biodegradable substances is transported via drains and trestle-supported sewer lines to the Biological Wastewater Treatment Plant, and then for further treatment to the Tarnów municipal wastewater treatment facility. Storm water and spent cooling water from the plant’s premises are drained separately, collected in a retention pond and then directed through the Sutro weir into the Dunajec river. If a failure occurs and wastewater contaminates the EF drain, the drain may be cut off completely and all of the wastewater may be pumped to the Central Wastewater Treatment Plant. It is also possible to flow the entire volume of wastewater to the municipal treatment facility.

The quality of wastewater discharged into the Oder river from our plant in Kędzierzyn-Koźle was equally good. Our Kędzierzyn-Koźle plant operates a wastewater treatment system comprising local pretreatment facilities, the Central Mechanical Wastewater Treatment Plant, and the Central Mechanical and Biological Wastewater Treatment Plant. Wastewater is also directed to the Piskorzowiec Wastewater Treatment Plant. In 2014, the Central Mechanical Wastewater Treatment Plant was modernised.

101

3 . 4 Nat u r al en vi ro n m en t

G4 EC2

G4-EN15

102

We strive to mitigate our atmospheric emissions, both in terms of emission volumes and pollutant concentrations. The air protection equipment in place reduces the amount of flue gases and dust discharged into the atmosphere. Emissions from installations that the largest emitters are regularly measured. Measurements are taken on a continuous basis or on a periodic basis at selected process emitters. Measurements are taken in compliance with the applicable legal and administrative requirements. As participants of the emissions trading scheme, the companies review their annual reports and obtain emission rights on an annual basis.

The Grupa Azoty Group’s GHG emissions include not only carbon dioxide (CO2), but also nitrous oxide (N2O) generated in the production of nitric acid. The main sources of carbon dioxide emissions are the Group’s CHP plants as well as ammonia, hydrogen, caprolactam, melamine and urea production units. Carbon dioxide emissions are also generated in the production process of synthesis gas, aldehydes and alcohols. In addition to environmental benefits, reduction of greenhouse gas emissions is a source of significant savings under the European Union’s greenhouse gas emissions trading scheme (EU ETS).

G4-EC2

EN DMA

3.4.3 Emissions

CO2 emission allowances The Grupa Azoty Group has in place a CO2 emissions monitoring and reporting system for Phase 3 of the EU ETS (2013-2020). In early 2014, audits were carried out in all Grupa Azoty Group companies to verify the level of CO2 emissions for 2013. The audits confirmed the calculated emission levels. The verified reports were sent to the National Centre for Emissions Balancing and Management (KOBiZE), serving as the basis for redeeming emission rights in proportion to the annual emissions. Similar audits for 2014 were carried out in Q1 2015. Actual emissions do not exceed the planned emission volumes. In order to secure a sufficient amount of emission units required to settle the 2014 emissions, the Grupa Azoty Group companies purchased emission units in the course of the year. Grupa Azoty KĘDZIERZYN purchased missing units in the previous years. The planned contracts had been performed by the end of April 2015. Grupa Azoty KĘDZIERZYN did not enter into any forward contracts. For some of the installations operated at our companies, free allowances allocated by the National Centre for Emissions Balancing and Management (KOBIZE) do not cover all greenhouse gas emissions. Therefore, in 2014– 2020, the estimated requirement for emission allowances will exceed the free allocation. The Grupa Azoty Group is working on a common emissions trading management policy, which is to be launched in 2015. Following implementation of the Industrial Emissions Directive (IED) in January 2014, the Grupa Azoty Group will be required to bring its production facilities to compliance with the new regulations. The Grupa Azoty Group companies will have to bring their on-site CHP plants in line with the new, more restrictive, standards of NOx, SO2 and dust emissions. The Group will have to modernise the urea plant in Kędzierzyn-Koźle (to reduce urea and ammonia dust emissions into the atmosphere) and the titanium white unit in Police. In January 2015,

a continuous emission monitoring system was placed in service at the Police plant. The alterations of dedusting and desulfurisation units to adapt them to the new emission standards are nearing completion. Changes in the legal requirements concerning greenhouse gas emissions may require the Grupa Azoty Group to undertake adaptive work and incur the related costs. As the volume of carbon dioxide emissions is related to the energy intensity of production processes, the Grupa Azoty Group companies seek to reduce it.

Development costs Seeking to reduce emissions, we use proven solutions and technologies, but also search for new ones. The numerous research projects run at the Grupa Azoty Group in 2014 included projects designed to reduce the energy intensity of production and its negative impact on the quality of air. Work was in progress in Tarnów to reduce the use of heat in caprolactam production. Another project related to the optimisation of Tarnoform® production with a view to improving the product quality, reducing feedstock consumption and bringing down residual formaldehyde emissions. Work was also in progress to modernise the production of iron-chromium catalyst to improve its properties and minimise its environmental impact. In Puławy, work was under way on a technology to reduce emissions of nitric oxides (NOx) with the application of a urea solution.

3 . 4 Nat u r al envi ro n m en t 3.4.3 Emissions

G4-EN19

Investment projects to reduce emissions carried out in 2014 At Grupa Azoty S.A., work commenced on flue gas desulfurisation and denitriding units. At Grupa Azoty PUŁAWY, NOx reduction units were installed at two boilers of the on-site CHP plant. Grupa Azoty PUŁAWY also completed work on a flue gas desulfurisation unit which will allow it to reduce the emissions of sulfur oxides and use them in the production of ammonium sulfate. Grupa Azoty POLICE added two new reactors to its postcalcination gas desulfurisation system and modernised the distribution of post-calcination gas. It also completed work on an exhaust gas treatment unit and modernised the EC II CHP plant.

Grupa Azoty S.A.

Grupa Azoty PUŁAWY

1. In 2013, the catalyst for hightemperature decomposition of nitrous oxide in the ammonia oxidation reactors of the dual pressure nitric acid facility was replaced. Thanks to the resulting reduction of the N2O content in outlet gases by up to 95%, emissions of this greenhouse gas have been substantially lowered. The new catalyst is highly selective.

1. Improved efficiency of the N2O reduction process and regular inspections of catalyst mounting in the nitric acid unit’s reactors contributed to reduced emissions in 2014, reducing the requirement to purchase emission allowances for the unit. 2. In 2014, emissions were reduced below 1 kg N2O/t HNO3, while average annual emissions for all four nitric acid units dropped to 0.88 kg N2O/t HNO3.

2. Nitrous oxide emissions were reduced by 101 Mg relative to 2013.

3. In 2014, no additional measures were taken to reduce greenhouse gas emissions.

Grupa Azoty KĘDZIERZYN

Grupa Azoty POLICE

1. In 2014, N2O emissions were reduced following replacement of the boiler and oxidiser on the TKIV nitric acid unit.

1. Operational continuity of the ammonia production unit was improved, which reduced CO2 emissions by 28.3 thousand Mg.

2. Nitrous oxide emissions were reduced by 24,918 tonnes of CO2(e).

2. Energy efficiency of the CHP plant and the steam network was improved, which reduced CO2 emissions by 3.2 thousand Mg.

3. N2O emission reduction catalysts continued to be used in the nitric acid units. Emissions from the TKIV nitric acid unit were reduced by 322,520 tonnes of CO2(e).

3. I n 2014, no additional measures were taken to reduce greenhouse gas emissions.

G4-EN15

Emissions of CO2 equivalent (tonnes)

Greenhouse gas Carbon dioxide Nitrous oxide

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

2013

2014

2013

2014

2013

2014

2013

2014

1,210,550

1,214,236

1,103,766

1,099,672

3,382,499

3,414,213

1,676,201

1,699,227

118,419

88,248

147,887

123,591

303,614

232,747

not applicable

103

Our responsibility

3. Emission reductions achieved as part of the Joint Implementation projects amounted to 1,676,711 tonnes of CO2(e).

3 . 4 Nat u r al en vi ro n m en t 3.4.3 Emissions

At Grupa Azoty S.A., main emitters include the Ammonia Unit, the Nitric Acid Unit and the Hydrogen Unit. Another material emission source is the CHP Plant. To control emissions, computations and measurements are used.

nitric acid unit (in ammonia oxidation). At the CHP plant, emissions are generated from the combustion of coal, natural gas, as well as postreaction gases and liquids from the caprolactam unit. Measurements are conducted on a continuous basis on all four production lines (on-line analysers). CO2 emissions from chemical units are computed based on continuous measurements of natural gas consumed and chromatographic analysis of gas composition, while CO2 emissions from the CHP plant are measured based on the mass of coal combusted, as well as continuous measurements of natural gas and post-reaction gases and liquids from the caprolactam unit. In the computations, mass and flow measurements are supported by laboratory analyses. N2O and CO2 emissions are verified by an independent expert. Therefore, the emission figures for 2013 and 2014 have been verified. The CO2 emissions from chemical units have been covered by the ETS system since 2013. In 2014, CO2 emissions increased slightly year on year, which was attributable to increased production

Grupa Azoty KĘDZIERZYN determines its N2O emissions by way of continuous measurements. CO2 emissions from combustion sources are measured with the standard method, while from other processes – with the mass balance method. Greenhouses gases are generated in the manufacture of ammonia, hydrogen and synthesis gas, aldehydes and alcohols, nitric acid, as well as during combustion of hard coal and fuel oil at the company’s CHP plant. N2O emissions were reduced thanks to replacement of the boiler and oxidiser on the TKIV nitric acid unit and replacement of catalyst kits on the two nitric acid units (TKIV and TKV).

G4-EN18

At Grupa Azoty PUŁAWY, the source of CO2 emissions is the use of natural gas in industrial processes and as a fuel, and of N2O emissions – the

At Grupa Azoty POLICE, main emitters include the ammonia unit, the EC I and EC II CHP plants, the fertilizers unit and the titanium white unit. Emissions are computed based on the standard methodology in accordance with Art. 24.1 of Commission Regulation (EU) 601/2012. Laboratory analyses are run for fuel used on the ammonia unit and in the EC I and EC II CHP plants, and their results are used to determine the calorific value, emission factor and oxidation factor (for the CHP plants). In the case of the titanium white and fertilizers units, these values and factors are sourced from data published annually by the National Centre for Emissions Balancing and Management.

Greenhouse gas (GHG) emissions intensity (%)

Grupa Azoty S.A. Item

104

volumes, especially of ammonia. N2O emissions in 2014 were approximately 30% lower than in 2013, thanks to the increased efficiency of the N2O reduction process and regular inspections of catalyst mounting in the reactors on all four nitric acid lines.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty POLICE

2013

2014

2013

2014

2013

2014

2013

2014

CO2 emissions intensity ratio

6.69

6.57

1.73

1.58

1.68

1.93

1.87

N2O emissions intensity ratio (kg N2O/t HNO3)

1.36

1.03

0.85

1.16

0.88

not applicable

3 . 4 Nat u r al envi ro n m en t

N2O emissions against the ETS benchmark (ca. 1 kg N2O/t HNO3) and BAT recommendations for individual unit types:

G4 EN21

3.4.3 Emissions

NOX, SOX, and other significant air emissions by type and weight

Compound,emitted,into,the,air

2013

Grupa Azoty S.A. In 2013, N2O emissions (in kg) were 397,378, and emissions intensity ratio was 1.35 against the benchmark of 1. In 2014, the respective figures were 296,134 and 1.03 (benchmark: 1).

Emissions,(in,Mg)

change

2014

Grupa Azoty S.A. Ammonia (NH3) Sulfur dioxide (SO2)

185.3

202.5

4,454.6

4,240.6

-5%

Carbon dioxide (CO2)

1,210,550

1,248,761.4

Sulfuric acid (H2SO4)

87.2

82.4

-6%

Methane (CH4)

74.6

8.1

-89%

378.5

387.1

Grupa Azoty KĘDZIERZYN

214.6

239.1

11%

Nitrogen oxides (NOx)

6,501.1

7,555.4

16%

The nitric acid units operated by Grupa Azoty KĘDZIERZYN are modern facilities compliant with the BAT standards, with N2O emissions below the benchmark.

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY N2O emissions intensity ratio in the production of nitric acid was 1.16 kg N2O/t HNO3 in 2013 and 0.88 kg N2O/t HNO3 in 2014. The improvement was possible thanks to continuous enhancement of the N2O reduction process. The ratio achieved in 2014 was significantly below the level prescribed by the Best Available Techniques (BAT) for existing mediumpressure installations (1.85 kg of N2O/ tHNO3) and lower than the benchmark used to calculate a share of emission allowances to be allocated for free under the EU ETS (ca. 1 kg of N2O/ tHNO3). The CO2 emissions intensity ratio in ammonia production stayed flat at 1.68 t CO2/t NH3.

Ammonia (NH3)

459

477

Sulfur dioxide (SO2)

2,154

1,800

-16%

Organic acids

Volatile organic compounds (VOC)

13%

Methane (CH4)

20%

Nitrous oxide (N2O)

496

415

-16%

Total dust

324

317

-2%

Particulate matter

209

230

10%

Carbon monoxide (CO)

1,922

1,595

-17%

Nitrogen oxides (NOx)

1,184

1,079

-9%

Persistent organic pollutants (POP) Grupa Azoty PUŁAWY Ammonia (NH3)

902

1,117

24%

Sulfur dioxide (SO2)

4,111

4,202

Melamine dust

Urea dust

Ammonium nitrate dust

385

412

Ammonium sulfate dust

6.2

Dust from fuel combustion Nitrogen oxides (NOx)

113

157

39%

2,951

3,213

1,075.17

1,077.11

Grupa Azoty POLICE Ammonia (NH3) Benzo(alpha)pyrene (C2OH12) Sulfur dioxide (SO2)

3,010.85

2,906.81

-3%

1,462,010.32

1,436,361.1

-2%

Grupa Azoty POLICE

Carbon dioxide (CO2)

Not applicable.

Sulfuric acid (H2SO4)

36.86

45.6

24%

NO2

1,476.6

1,204.15

-18%

Total dust

603.85

725.73

20%

Carbon monoxide (CO)

194.92

304.87

56%

Aliphatic hydrocarbons

0.04

0.03

-25%

Fluorine compounds

4.83

3.96

-18%

105

Our responsibility

Total dust Carbon monoxide (CO)

3 . 4 Nat u r al en vi ro n m en t

G4 EN21

3.4.3 Emissions

At Grupa Azoty S.A., the main sources of emissions are the Company’s CHP plant and process units. Postcombustion emissions are measured on a continuous basis at the CHP plant’s two stacks. Measurements are also taken on a periodic basis on selected process emitters. The scope, frequency and method of measuring pollutant emissions in flue gases are defined in the annually updated schedule accessible in the intranet page of the Safety and Environmental Protection Office. Nitrogen oxides – the increase in emissions is attributable to higher output of ammonium nitrite and hydroxylamine sulfate. Sulfur dioxide – emissions fell thanks to combustion of coal with a lower sulfur content. The average level was 0.59% in 2013 and 0.5% in 2014. Ammonia – the change is attributable to higher output of ammonium nitrite at the Plastics Business Unit and of ammonia at the Fertilizers Business Unit. Methane – the change results from a failure which occurred in 2013, bringing about an increase in methane emissions after gas mixture with methane was redirected to the waste gas collector. No such failure occurred in 2014. The emission levels disclosed at Grupa Azoty KĘDZIERZYN were derived from measurements taken on a continuous basis at the CHP plant and nitric acid unit, periodic measurements taken twice a year on the main process emitters and process ratios for the other emission sources. Emissions of carbon monoxide decreased thanks to reduced emissions from the production of phthalic anhydride, following replacement of the reaction catalyst. The lower emissions of SO2, NOx and dust are mainly attributable to stable operation of the CHP plant. N2O emissions were reduced following replacement of the boiler and oxidiser on the TKIV nitric acid unit and replacement of catalyst kits on the two nitric acid units (TKIV and TKV).

106

At Grupa Azoty PUŁAWY, a new FGD unit was launched at the CHP plant in the second half of 2013, and thus a new source of ammonia emissions emerged. The increase in ammonia emissions is attributable to the fact that the unit’s operation time in 2014 doubled compared with 2013. Postcombustion dust emissions were higher, because coal with a larger ash content was used. Grupa Azoty POLICE monitors, on a continuous basis, air emissions from the EC II CHP plant, and, on a periodic basis, emissions from the other units. Emission volumes and pollutant concentrations are measured in line with the applicable legal and administrative requirements. Since January 2015, dust and SO2 emissions from the titanium white unit have been monitored on a continuous basis. The company also monitors the air quality (concentration of pollutants) at three measurement points located on the outskirts of its premises. Three pollutants (SO2, fluorine compounds and NH3) are monitored on a continuous basis as daily concentrations. On December 23rd 2014, the National Centre for Research and Development announced that it had carried out an evaluation of the project ‘Support for Low-Emission Agriculture Able to Adapt to Climate Change now and Within the 2030 and 2050 Timeframes’ with positive results and recommended that the project be subsidised. The project is being implemented by a consortium of Grupa Azoty PUŁAWY, the Institute of Soil Science and Plant Cultivation – State Research Institute (Project Coordinator), the Agrophysical Institute of the Polish Academy of Sciences and the Environmental Protection Institute – State Research Institute. The objective of the three-year project is to enable more efficient resource utilisation by implementing innovative low-carbon agricultural

solutions and promoting sustainable application of mineral fertilizers at Polish farms. Based on this research, certificates will be developed for Grupa Azoty PUŁAWY to designate fertilizer applications with a reduced carbon footprint (greenhouse gas emissions). The results will be used to chart Poland’s agricultural policy with respect to climate-related activities and improving the methods for estimating agricultural emissions within the National System for Surveying and Estimating Emissions.

NOXy® (AdBlue) In September 2013, a concept was approved for integrated marketing and sales initiatives with respect to RedNOx®, a line of products designed to reduce the content of noxious substances in vehicle exhaust emissions. In line with the concept, a new proprietary brand (NOXy®) was introduced for the product previously marketed as AdBlue®. The Grupa Azoty Group’s trading partners were involved in its distribution as ambassadors of the brand. 2014 saw record high sales of NOXy® (160,000 tonnes, up 20% on 2013). The NOXy® market keeps expanding with the growing number of vehicles which meet the Euro 6 exhaust gas emission standards, effective since September 2014. As of January 1st 2015, the Euro 6 standards are obligatory for every new vehicle.

3 . 4 Nat u r al envi ro n m en t 3.4.4 Noise

As production processes tend to generate noise, the Group companies select equipment with appropriate acoustic parameters for every new unit already at the design stage. Integrated permits define the maximum permitted noise emissions, both with respect to noise at the workplace and noise emitted outside. The Grupa Azoty Group monitors its noise emissions.

The main types of waste produced by the Grupa Azoty Group include residue of coal combustion at the CHP plants and sludge from effluent treatment. The main type of waste produced by Grupa Azoty Police is phosphogypsum, which is mixed with power generation waste and landfilled. Sustainable waste management takes more than just modern technologies. It also requires appropriate staff attitudes and clearly defined rules of waste and packaging disposal. Having put in place relevant procedures, companies of the Grupa Azoty Group have considerably reduced waste volumes, while improving waste recovery rates.

EN DMA

3.4.5 Waste

Waste-related risks can be effectively minimised by planning production processes so as to avoid waste, also after products have been consumed. This has been the Grupa Azoty Group’s strategic objective for years. Upgrades of old installations and launch of new, low-emission and lowwaste BAT-compliant technologies are yet another important element of our waste management policy. Such technologies minimise the output of waste, but also often reduce the consumption of resources. The third element is to improve waste sorting for recovery and recycling.

An optimum waste management solution is to use waste within the Grupa Azoty Group as part of other production processes. At the Tarnów plant, plastic waste is reused by the Compounding PA6 and Compounding POM units, and at Grupa Azoty Police hydrolytic sulfuric acid and iron (II) sulfate, by-products of titanium white production, are utilised in a similar way. The waste is stored (hydrolytic sulfuric acid) or extracted from the landfill site (iron (II) sulfate) for reprocessing. The hydrolytic sulfuric acid is used in the fertilizer production unit, the iron (II) sulfate waste is dried and sold to customers, while the leachate which has passed through the iron (II) sulfate landfill site is used as a coagulant in the company’s wastewater treatment facility. As more iron (II) sulfate is processed than generated in a year, waste landfilled in previous years is also extracted. At Grupa Azoty Puławy, some laboratory reagent waste is used at the Biological Wastewater Treatment Plant or the Central Industrial Wastewater Treatment Plant, while plastic waste is recycled at the packaging production unit.

At a meeting of the Economic Council of the President of Tarnów, Grupa Azoty S.A. has presented the ‘Feasibility Study for an Integrated Waste and Energy Management System’. The aim of the project is to organise municipal waste management in the region, reduce environmental emissions and optimise heat supplies. The document, prepared by Ramboll Polska Sp. z o.o., lists various benefits for the residents of Tarnów and the neighbouring municipalities once a thermal treatment plant is constructed at Grupa Azoty and a link is established between the Company’s heating systems and the municipal CHP plant. The project will optimise waste management in the region and improve its energy infrastructure. It will also help ensure that waste is managed in compliance with domestic and European legal, technical and environmental requirements.

107

Our responsibility

Waste generated in our facilities is sorted and stored at designated and properly marked locations. Individual companies have their own recovery and disposal processes for some waste, while other waste is transferred to licensed waste management contractors.

Partnership with the town

3 . 4 Nat u r al en vi ro n m en t 3.4.5 waste

G4-EN23

Total weight of waste by type and disposal method

Grupa Azoty S.A.

Grupa Azoty KĘDZIERZYN Amount (in Mg)

Waste type

2013

2014

108.174

78.309

Non-hazardous waste

96,834.858

94,721.72

Total

96,943.032

94,800.029

Hazardous waste

Waste disposal method (e.g. recycling, storage, transfer to third-party contractors)

Amount (in Mg)

2013

2014

4,816

7,415

Non-hazardous waste

110,466

121,214

Total

115,282

128,629

Hazardous waste

Waste disposal method (e.g. recycling, storage, transfer to third-party contractors)

2013

2014

2,500

2,754.46

89.7

Transfer to third party contractors

94,500

92,045.89

Storage

Total

97,000

94,890.05

Total

Storage On site recovery

Transfer to third-party contractors

Amount (in Mg)

Waste type

2013

2014

605

517

Non-hazardous waste

212,135

209,925

Non-hazardous waste

Total

212,740

210,442

Total

Hazardous waste

Waste disposal method (e.g. recycling, storage, transfer to third-party contractors)

Amount (in Mg)

Hazardous waste

Waste disposal method (e.g. recycling, storage, transfer to third-party contractors)

2014

125,121

168,593

48,871

125,121

217,464

2014

68,245.267

9,687.4

2,817,866.843

3,249,921.785

2,886,112.11

3,259,609.185

Amount (in Mg)

371,573.8

Recovery by third-party contractor

84,271.34

76,113.169

On-site disposal other than storage

883,914.251

1,129,115.639

0.077

195.5

1,533,476.745

1,683,744.485

4.78

2,908,536.736

3,260,863.934

780

898

On-site storage

26,237

27,003

Transfer to third-party contractors

185,140

182,370

Waste stored at year end compared with waste generated during the year – hazardous waste

Disposal other than through storage by third-party contractor

Waste stored at year end compared with waste generated during the year – non-hazardous waste

534

On-site storage

On-site recovery

Third-party storage 210,442

2013

403,284.284

On-site recovery

212,740

Amount (in Mg)

2014

108

2013

Total

Amount (in Mg)

Grupa Azoty POLICE

Grupa Azoty PUŁAWY

Waste type

Amount (in Mg)

Waste type

Total

3 . 4 Nat u r al envi ro n m en t

G4-EN28

3.4.5 waste

The Grupa Azoty Group companies comply with the legal requirement defining a percentage of packaging materials that must be reclaimed through a professional provider of recycling services. In 2014, all the companies met the legally prescribed levels of packaging reclaimed and recycled.

Percentage of packaging waste reclaimed and recycled in 2014

Grupa Azoty KĘDZIERZYN

Grupa Azoty PUŁAWY

Grupa Azoty S.A. entered into an agreement with Branżowa Organizacja Odzysku S.A.  whereby the latter is to fulfil the Company’s obligation to reclaim and recycle packaging introduced to the domestic market. Branżowa Organizacja Odzysku will ensure that the statutory reclamation and recycling levels for various types of packaging are met, and will carry out educational campaigns on packaging on behalf of the Company. The Company’s rules on handling packaging waste are specified in Internal Order No. 26/2013 – ‘Management of Packaging Waste at Grupa Azoty’.

Grupa Azoty KĘDZIERZYN has contracted the services of INTERSEROH Organizacja Odzysku Opakowań S.A.

Grupa Azoty PUŁAWY complies with the legal requirement defining a percentage of packaging materials that must be reclaimed and recycled, and the requirement to carry out public educational campaigns, through a professional provider of recycling services. The company also carries out on-site recycling of plastic packaging, which is melted, pelletised and moulded into new packaging. The recycling activities are conducted in accordance with the ‘Integrated Permit’. The company meets the statutory requirement for reclamation of hazardous materials packaging waste through an agreement with the provincial marshal.

Plastic packaging Steel packaging Wooden packaging

Steel and steel sheet packaging

56%

Total packaging reclaimed

51% 61%

Wooden packaging

61%

Grupa Azoty POLICE

56%

Grupa Azoty POLICE has contracted the services of Organizacja Odzysku TOM S.A.

Total packaging reclaimed

Plastic packaging

Wooden packaging

61%

Total packaging recycled

23.7%

56%

Total packaging reclaimed

Paper and cardboard packaging

61%

77% Hazardous materials packaging reclaimed

14%

16%

Paper and cardboard packaging

61%

10%

24%, including 0.5% recycled on site

Plastic packaging

16%

Total packaging recycled

Hazardous materials packaging reclaimed

16%

Total packaging recycled

Paper and cardboard packaging

Composite packaging recycled

51%

23.5%

Plastic packaging

Composite packaging reclaimed

23.5%

Steel sheet packaging

51%

Wooden packaging

49%

In 2014, Grupa Azoty S.A. met the statutory targets of waste reclamation and recycling. It also achieved the required reclamation and recycling levels for composite and hazardous materials packaging.

109

Our responsibility

Grupa Azoty S.A.

3 . 4 Nat u r al en vi ro n m en t

The Grupa Azoty Group companies operate in various regions of Poland, often in the vicinity of areas of high biodiversity value or protected areas. Our priority is to respect this diversity.

Grupa Azoty POLICE owns or holds perpetual usufruct right to land adjacent to areas protected under the Natura 2000 scheme. The protected areas include: ‘Police – Kanały’ (Police – Canals) (code: PLH320015; area: 100.2 ha), ‘Zalew Szczeciński’ (Szczecin Lagoon) (code: PLB320009; area: 47,194.6 ha), ‘Ujście Odry i Zalew Szczeciński’ (Oder Estuary and Szczecin Lagoon) (code: PLH320018, area: 52,612.0 ha). At some distance from the premises of Grupa Azoty POLICE there are also several areas designated as nature reserves, including:

Grupa Azoty S.A. Grupa Azoty S.A. leases 72.2 ha of land located within a Natura 2000 nature protection area of the Dunajec river catchment basin. The operations carried out within this area, which contains surface and underground water intake facilities, pose no threat to biodiversity. The maximum quantities of water that may be withdrawn are specified in the relevant permits. In the case of Grupa Azoty S.A., the protected areas include ‘Dolny Dunajec’ (Lower Dunajec River) (code: PLH120085; area: 1,293.9 ha) and ‘Biała Tarnowska’ (Biała Tarnowska River) (code: PLH120090, area: 957.5 ha).

110

Dolny Wieprz (Lower Wieprz River) Area, ca. 4.6 km away from the planned project,

■■

Płaskowyż Nałęczowski (Nałęczów Plateau) Area, ca. 9.2 km away from the planned project,

■■

Dolina Środkowej Wisły (Middle Wisła River Valley) Area, ca. 4.5 km away from the planned project,

■■

Małopolski Przełom Wisły (Lesser Poland Wisła River Gorge) Area, ca. 16.2 km away from the planned project,

■■

Przełom Wisły w Małopolsce (Wisła River Gorge in Lesser Poland) Area, ca. 7.0 km away from the planned project.

G4-EN12

■■

Białokrzew Kopicki (distance: 13 km),

■■

Uroczysko Święta (distance: 4.2 km),

■■

Olszanka (distance: 4.5 km),

■■

Świdwie (distance: 9.3 km),

■■

Ostoja Wkrzańska (distance: 1.8 km).

Grupa Azoty KĘDZIERZYN does not own, lease or manage any land located within protected areas or adjacent to such areas. Areas subject to protection under the Nature Conservation Act are located a considerable distance away from the company’s premises.

The Grupa Azoty PUŁAWY facilities are located within a forest complex on the right bank of the Wisła river. The site is not covered by any form of nature protection, nor adjacent to any protected areas. In the vicinity of the facilities, though, there are areas designated as protected, including: Puławy Area, ca. 1.8 km away from the planned project,

■■

GrupA Azoty Kędzierzyn

Grupa Azoty PUŁAWY

■■

The companies of the Grupa Azoty Group observe the relevant environmental regulations and comply with the requirements of the Environmental Protection Law regarding use of the environment’s resources.

GrupA Azoty Police

Grupa Azoty Group products and services have no impacts on biodiversity. The Group companies have registered their products in accordance with the REACH regulation. Appropriate usage instructions and data sheets detailing their possible effects on living organisms have been prepared for each product. Periodic inspections and other measures have revealed no irregularities. The allowable concentrations of pollutants outside the areas owned by the companies have not been exceeded.

G4-EN29

G4-EN11

EN DMA

3.4.6 Biodiversity

In 2014, Grupa Azoty S.A. was not penalised for non-compliance with environmental laws and regulations. At Grupa Azoty KĘDZIERZYN, there were no incidents related to environmental protection that could lead to sanctions. However, a penalty was imposed on the company for discharging wastewater into the Oder river in 2012 in violation of the terms of the relevant permit. The discharged wastewater temporarily exceeded the permissible levels of pH and ammonia nitrogen (N-NH4) content. The company planned certain measures to solve the problem of temporary exceedance of permitted parameters of discharged wastewater and obtained a decision extending the penalty payment deadline based on the planned remedial measures. In 2014, no administrative proceedings related to environmental protection were pending against Grupa Azoty PUŁAWY. Analysis of data from the continuous emissions monitoring system at the on-site CHP plant showed isolated instances of exceeding the sulfur dioxide emission standards. They were caused by the change-over from the main emitter to the back-up emitter at the flue gas desulfurisation unit, an investment project aimed at improving the quality of flue gases. As at the date of this report, no decision on a penalty had been made and no other violations had been identified. In 2014, no instances of non-compliance with environmental regulations were identified at Grupa Azoty POLICE, and no penalties for such noncompliance were imposed on the company.

LA DMA

EN DMA

3 . 5 safe T y

The Grupa Azoty Group’s business requires compliance with the most exacting safety standards at all stages of the production cycle – from supply of raw materials, through production, to delivery and use of finished products.

✓ ✓ ✓ ✓

identification of hazards inherent in technological processes, storage and transport, and implementation of technical solutions and organisational measures to minimise the risk of an accident, ongoing monitoring of the operation of machinery and equipment and evaluation of their technical condition, fitting of plants and units with safety and protection systems to minimise the risk of a major accident and environmental contamination, as well as risks to life and limb, ouR ResponsibiliTy

Accordingly, the Group has in place safety systems and preventive measures at all organisational and technological levels, including occupational health and safety. We have implemented monitoring and protection systems, as well as procedures for preventing industrial accidents and mitigating their consequences. Their relevance is assessed by external and internal inspection authorities, as well as accreditation and certification bodies. Our plants maintain well-trained on-site fire brigades, with additional support from chemical rescue teams and other services. Limiting the negative impact of our operations on the environment is another matter of utmost importance.

Some of the measures designed to improve safety include:

implementation of technical and organisational solutions designed to ensure occupational health and safety (the Group’s facilities are compliant with the Best Available Techniques (BAT) reference documents, which are the source of the world’s strictest safety requirements, including with respect to environmental impact), scheduled maintenance shutdowns to maintain the units and equipment in good operating condition, ongoing employee training, introduction of corporate rules on how to report and investigate industrial accidents and failures and prevent their recurrence, analysis of technical and technological risks at the Grupa Azoty Group.

111

3 . 5 safe t y

G4-LA8

3.5.1 Occupational health and safety

At the Grupa Azoty Group, safety issues are covered in the companies’ internal documents and at meetings between the Management Board members and trade unions. Interaction with the social labour inspectors is also very important.

assessments, providing opinions on workplace accident and occupational disease prevention measures implemented by the Management Boards, formulating conclusions to improve workplace safety, and working with the Management Boards in the pursuit of their OHS objectives. Meetings of the Health and Safety Committees are held with varying frequency depending on the company, but at least once every quarter.

Extract from our Code All OHS standards and rules are strictly observed. In any situations which pose a threat to human health or safety, we act in line with adopted instructions. We participate in training and other knowledge-sharing initiatives relating to health and safety at work. We care for the safety of all visitors staying on the Grupa Azoty Group’s premises.

G4-LA5

At Grupa Azoty S.A., OHS matters are regulated by the Work Rules, which are regularly submitted to the Company’s social labour inspector for consultation and, once a quarter, discussed at meetings of the Health and Safety Committee. In the case of Grupa Azoty KĘDZIERZYN, relevant provisions are incorporated into the Integrated Management System. The Management Board holds regular, monthly consultations with trade unions, while its individual members consult specific matters with labour organisations. At Grupa Azoty PUŁAWY, OHS matters are addressed by the Health and Safety Committee and discussed at monthly meetings between trade unions and the Management Board. At Grupa Azoty POLICE, general OHS rules are covered by its Collective Bargaining Agreement, while internal regulations contain more detailed provisions. Consultations are held during the Health and Safety Committee’s meetings at least once a quarter.

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Each of the four companies covered by this report has set up a Health and Safety Committee, representing all employees. The compositions and remits of individual committees are similar. They comprise representatives of the employer (delegates from HR and OHS units and occupational physicians providing preventive care to employees) and of the employees (trade union delegates and social labour inspectors). Their responsibilities include conducting workplace safety inspections and periodic OHS

STOP programme For many years, the Grupa Azoty Group has been taking steps to reduce the number of accidents at work. In 2015, we began to implement the STOP™ Safety Monitoring Programme at Grupa Azoty S.A. and Grupa Azoty KĘDZIERZYN. The Programme, already in place at Grupa Azoty POLICE, is designed to encourage employees to make an active effort to prevent accidents and foster a culture of safety.

All situations which pose a threat to health and safety at work are immediately reported when noticed.

3 . 5 safe t y 3.5.1 Occupational health and safety

Type of injury and rates of injury, occupational diseases, lost days, absenteeism, and total number of work-related fatalities, by region and by gender Grupa Azoty S.A.

G4-LA6

2013

Grupa Azoty KĘDZIERZYN 2014

2013

2014

Total workplace accidents Fatalities

Severe injuries

Minor injuries

Total days lost due to workplace accidents

499

957

459

321

228

281

506

Incidence rate (total number of accidents/ headcount × 1,000)

3.82

5.73

4.68

4.14

10.57

5.45

16.74

8.25

Severity rate (days lost/number of accidents)

62.37

79.75

29.66

76.5

64.2

35.13

56.22

Reported cases of occupational disease

* In 2014, there were nine accidents at Grupa Azoty KĘDZIERZYN, including one group accident involving nine casualties: six women and three men.

Grupa Azoty PUŁAWY

G4-LA6

2014

2013

Total

2014

2013

2014

Total workplace accidents

Fatalities

Severe injuries

Minor injuries

Total days lost due to workplace accidents

408

1,287

667

603

227

530

1,304

3,075

602

2,162

Incidence rate (total number of accidents/ headcount × 1,000)

12.7

1.26

11.91

0.9

4.3

1.2

6.3

10.24

11.32

6.11

8.71

Severity rate (days lost/number of accidents)

40.8

25.7

22.23

60.3

75.6

35.33

52.16

39.42

40.13

36.03

Reported cases of occupational disease

By involving the management personnel and bringing safety within the scope of operational management, we are able to prevent dangerous situations in the workplace. I believe that all hazards related to our work can be effectively mitigated, but to do so we must first develop a suitable safety culture, which is what the STOP™ programme is for. Artur Kopeć Member of the Management Board of Grupa Azoty

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Our responsibility

2013

Grupa Azoty POLICE

3 . 5 safe T y

G4-LA7

3.5.1 occupaTional healTh and safeTy

Given the nature of the Grupa Azoty Group’s operations, its employees are often exposed to conditions which may be dangerous or harmful to human health. The Group takes preventative and remedial actions wherever its employees are in danger. Risks are assessed on an ongoing basis. At Grupa Azoty in Tarnów, one employee is exposed to noise, and 478 employees are affected by insufficient workstation lighting. In 2014, occupational risk assessments were carried out for 56 workstations used by 355 staff. In the same year, Grupa Azoty KĘDzIERzyN, for the first time ever, managed to effectively prevent excess exposure of its employees to dangerous and onerous factors. Occupational risk assessment forms for 148 workstations were reviewed and updated. Technical means of eliminating or reducing occupational risks were implemented in the case of 29 workstations, while organisational and personal protection measures were put in place for all the 148 workstations. At Grupa Azoty PUŁAWy, employees were exposed to certain risks and hazards in their work environment, such as chemical substances (2 persons), industrial dusts (96), noise (560), vibrations (11), and hot microclimate (167). Onerous factors included excessive physical strain (531 employees) and insufficient workstation lighting (624 employees). Four persons were exposed to mechanical hazards related to high-risk equipment. Risk assessments were carried out for 169 workstations (632 employees). Risks were eliminated or reduced at 40 workstations (116 employees), using technical safeguards (20 workstations), organisational means (16 workstations) and personal protection measures (4 workstations). At Grupa Azoty POLICE, a total of 698 employees were exposed to workplace hazards, such as dusts (108 persons), other dusts (145 persons), and noise (445 persons). In the case of two employees, the exposure to fibrogenic dust was reduced to acceptable levels.

114

i’m visible, i’m safe As part of this initiative launched in 2014, Grupa Azoty PUŁAWy has encouraged its bikeriding employees to wear visibility vests. Vests were distributed to those employees who travel by bike on the plant’s premises. Visibility vests became mandatory in mid-2014 and now, marked with the slogan ‘I’m visible, I’m safe’, are worn by employees also outside the company’s premises.

peR s o n a l pR oT ec T i o n M e a s u R e s w eR e a ppl i ed

wo R k s TaT i o n s

Occupational risk assessments were carried out for 206 workstations used by 597 staff, with risk exposures eliminated or reduced at 191 of them (512 staff ). Technical safeguards were used at 20 workstations (100 employees) and organisational means – at 32 workstations (106 employees). Personal protection measures were applied at 136 workstations (462 employees).

aT wo R k s TaT i o n s R i s k e xp o s u R e s w eR e el i M i n aT ed o R R ed u ced

3 . 5 safe t y

G4-SO2

3.5.2 Safe neighbourhood

At the Grupa Azoty Group, we keep a watchful eye on the environmental impacts of the Group companies, by measuring our air emissions, the amount and quality of abstracted waters, discharged effluents and generated waste, as well as noise levels. Valid environmental permits are proof that our negative environmental impacts are contained within the premises of individual Group companies and that we maintain high standards of environmental quality.

Due to the risk of a chemical plant failure at the Grupa Azoty Group, we have classified such events into several categories, depending on their scope and associated emergency levels. For instance, at Grupa Azoty S.A. we have adopted a three-level classification: level one

There are systems and methods in place to alert employees and inhabitants of the neighbouring areas of any hazards or failures, including on-site and local alarm sirens, barrier and xenon lights, gates, plant broadcasting system and loudspeakers in neighbouring estates, fire alarms, detectors of harmful concentrations, cars equipped with loudspeakers, and wind indicators.

Fire Protection Team The Grupa Azoty Group’s Fire Protection Team consists of fire protection units of the Group’s four key companies, as well as Grupa Azoty SIARKOPOL’s Rescue Service and Siarkopol’s Onsite Mining Rescue Station. Thanks to the Team’s involvement over the past two years, we have developed a ‘Strategy for Selection of the Amount and Quality of Fire-Fighting Foams for Grupa Azoty Units’, adopted a single ‘Dress Code for Uniformed Services’, and established the Grupa Azoty Rescue Education Centre.

The Grupa Azoty Rescue Education Centre The Grupa Azoty Rescue Education Centre – CERGA is a modern unit responsible for training of firefighters and chemical rescuers working for Grupa Azoty. The Centre was established based on the assets and resources of the Grupa Azoty PUŁAWY Company Fire Brigade, and its operations were launched on March 12th 2015 with the inaugural training for chemical rescuers. Its role will be to organise and run training for the entire Grupa Azoty Group. The key responsibility of the Centre is to enhance the qualifications and develop the skills of employees responsible for security, rescue and fire protection. The idea behind its establishment is to support the development of common safety standards, share experience and exploit synergies across the Grupa Azoty Group. Its operations will cover Grupa Azoty S.A., Grupa Azoty PUŁAWY, Grupa Azoty POLICE, Grupa Azoty KĘDZIERZYN, Grupa Azoty SIARKOPOL, and other entities interested in the educational offering.

To guarantee the security of our employees at the workplace is our priority. With a specialist training centre, which educates rescuers and firefighters from all of the Group companies, we will be able to achieve a consistent and highest possible level of rescue services at all our plants. The establishment of CERGA is yet another effect of the consolidation and implementation of the Azoty PRO Operational Excellence Programme. It brings a new quality to chemical rescue and firefighting activities in Poland. Artur Kopeć Member of the Management Board of Grupa Azoty

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Our responsibility

The Group companies have implemented safety systems in accordance with the Environmental Protection Law. Analyses have shown that all legally prescribed standards, including those set out in the integrated permits held by our companies, are met. We have also been taking measures to mitigate our environmental impacts and pursuing a number of pro-environmental projects to eliminate potential hazards to the environment and local communities. In 2014, there were no complaints concerning negative environmental impacts of the Grupa Azoty Group companies on the natural environment or local communities.

is a local hazard contained within the installation (up to 200 metres), level two is a local hazard with the range exceeding 200 metres but still contained within the plant, while level three involves a hazard which goes beyond the plant’s boundaries. At Grupa Azoty KĘDZIERZYN, there is a two-level emergency system in the event of a failure, fire, explosion or another local hazard: level one emergency is confined within a specific location (facility or installation), while level two emergency is declared when negative environmental effects cover a large part of Grupa Azoty KĘDZIERZYN or go beyond the plant’s boundaries.

3 . 5 safe T y 3.5.3 safeTy duRing TRanspoRT

EN DMA

PR DMA G4-EN30

Aeo Chemical substances may pose a hazard not only at manufacturing and storage sites, but also during transport. The risk is particularly high when chemicals are transported by road; for that reason, Grupa Azoty is determined to increasingly rely on rail transport. This, however, is not always a viable option, which is why we have implemented strict rules for road transport across the Group companies and require our carriers to observe them. In transporting particularly dangerous goods, we apply the ADR regulations. We do our best to transport feedstocks for chemical production in closed rail tankers (with various RID classifications), minimising the use of road tankers. For safety reasons, special tank cars designed to fit the equipment in place at the loading and receiving terminals are increasingly used.

For a detailed description of transport structure see chapter ‘Logistics and transport’

116

TRANSPORT AND THE ENVIRONMENT Although Grupa Azoty does not enforce a requirement on its carriers to meet specific EURO emission standards, it does oblige them to deliver the goods via the shortest routes possible and using EURO 5 and 6-compliant vehicles. The Group’s own passenger cars and delivery trucks are fitted with fuel-efficient, low-emission engines. In utilising our vehicle fleet, we comply with environmentally-friendly procedures for recycling of waste, such as used batteries and tyres. In 2014, no road transport accidents were reported at the Grupa Azoty Group. However, three rail transport incidents occurred in the EU countries, which involved leakage (by dripping) of concentrated nitric acid from upper fittings. In all the three cases, the leakage was caused by a pressure increase in the tank car due to high ambient temperature. None of those incidents led to a direct hazard to the natural environment or to human life or health, but we still took corrective action replacing the older rail tanker fleet with modern rail tankers made of special uranus steel.

All the four Group companies are certified as AEOs (Authorised Economic Operators). The AEO certificate evidences compliance with extremely strict requirements related to production, logistics and transport of goods, entitling their holders to simplified customs and border control procedures.

SpoT The Grupa Azoty companies are members of the SPOT System of Assistance in Hazardous Materials Transport, which brings together the largest chemical companies. It helps improve the safety of transport in Poland, and in the case of any incidents − facilitates effective removal of their consequences by joint effort and measures of the national rescue and fire services and SPOT members.

3 . 5 safe T y 3.5.4 cusToMeR safeTy

Although users of Grupa Azoty products are professionals in their respective fields, their safety is our priority and so we uniformly mark and provide complete descriptions of products made across all segments of our business.

G4-PR4

Products from the Plastics segment are also marked in accordance with applicable regulations, in line with a uniform system adopted across the Grupa Azoty Group.

In 2014, there were no incidents of non-compliance at the Grupa Azoty Group with regulations or voluntary codes concerning product and service information and labelling, which would result in any fines, penalties or warnings. No significant penalties were imposed on the Grupa Azoty Group in 2014 for non-compliance with laws and regulations concerning the provision and use of products and services.

Hazardous substances must have their safety data sheets, drawn up in the language of the customer’s country. A safety data sheet contains a summary of the information included in the chemical safety report, specifying what technical and organisational measures must be applied to safely use the substance. Depending on the product, safety data sheets are published on the Grupa Azoty websites, including the nawozy.eu and e-plastics.eu portals and the grupaazoty.com website. If no safety data sheet is required, we prepare information sheets containing directions for safe product handling. These are not mandatory – we only prepare them to facilitate access to information for our customers.

ouR ResponsibiliTy

All packagings bear information about their contents (product trade name), manufacturer (name and address) and product weight. As far as fertilizers are concerned, product information is provided in accordance with the provisions of Regulation (EC) No. 2003/2003 and includes designation of fertilizer type, the ‘EC Fertilizer’ marking (if applicable), content and form of nutrients, as well as directions for use and basic safety precautions (optionally). If a fertilizer is sold in bulk, an accompanying document is made, containing all the required label elements. The packaging of feed additives should also bear a label compliant with the requirements applicable to feeds and feed additives (Regulation (EC) No. 1831/2003), containing information on dosage and storage life.

Additional information to be found in a safety data sheet includes first aid measures, fire-fighting and accidental release measures, measures relating to the handling of substances and mixtures, storage information, personal protection measures (if applicable), waste disposal information, as well as information on toxicity and ecotoxicity.

G4 PR9

G4-PR3

PR DMA

Safety data sheets

For chemical substances and mixtures classified as hazardous and falling within the scope of the CLP Regulation the disclosure requirements are broader, with the following essential information that must appear on a label: product identifier (name of the substance and its identity number), hazard pictograms and signal words, as well as information about the type of hazard, precautions, storage and transport.

117

3 . 5 safe t y

With respect to chemical substances used in manufacturing, Grupa Azoty seeks to follow the principles of caution and substitution. We do not use any substances which have not been sufficiently investigated, and we do our best to replace extremely hazardous substances with those presenting a lower risk. In the case of some substances (for instance cyclohexanone), the classification criteria applied by Grupa Azoty are more rigid than those required in the CLP Regulation.

REACH Grupa Azoty meets the requirements of Regulation (EC) No. 1907/2006 (REACH) concerning the registration, evaluation, authorisation and restriction of chemicals. We adhere to the regulations that require thorough testing of all marketed chemical substances for hazardous properties, as well as specification of conditions for their use and, in justified cases, restrictions and bans. The Group companies evaluate the chemical safety of high-risk substances and make available test results for all chemical substances placed on the market. On the basis of this information, chemical safety reports are prepared, covering the entire life cycle of a chemical substance – from production, to use, to disposal. We have implemented the REACH Regulation and Regulation (EC) No. 1272/2008 on classification, labelling and packaging of substances and

118

mixtures (CLP). In 2014, the Grupa Azoty Group companies submitted to the European Chemicals Agency registration dossiers for new products. In addition, registration dossiers submitted in previous years are updated as needed. Pursuant to the REACH Regulation, registration of new substances will be necessary in 2018. These substances are manufactured on a limited scale (less than 100 tonnes per year) and are of lesser importance for the Grupa Azoty Group’s revenue.

G4-PR2

PR DMA

G4-EN27

G4-14

G4-PR1

3.5.5 Product safety

In 2014, there were no incidents of non-compliance at the Grupa Azoty Group with regulations or voluntary codes concerning the health and safety impacts of products and services at each stage of their life cycle, which would result in any fines, penalties or warnings.

Kosher certificate Grupa Azoty KĘDZIERZYN’s kosher certificate was extended for all its existing products. On July 4th 2014, the KędzierzynKoźle plant was visited by Michael Schudrich, Chief Rabbi of Poland, who extended the kosher certificate for all products made at Grupa Azoty KĘDZIERZYN, including Oxoplast® Medica, the company’s latest product. With the certificate, Grupa Azoty KĘDZIERZYN is able to place its branded products on any market, including those which require kosher status attestation. The company’s successful effort to obtain the certificate is its response to diverse customer needs and expectations. The new certificate will remain valid until August 2015.

Product Stewardship In June 2014, at Fertilizers Europe’s meeting, the Grupa Azoty Group received a prestigious Product Stewardship certificate, confirming that our fertilizer products do not pose any hazards to health, safety or the environment throughout their lifespans. The award was preceded by an audit held across the Group by independent auditors DNV (Det Norske Veritas). Few companies in our sector have undergone such a strict and multi-dimensional evaluation, but we decided to have our processes audited, which confirmed that Grupa Azoty meets the highest global standards. Product Stewardship covers all stages of the fertilizer lifecycle, from product development, through production, distribution, and application in the field, to verification whether it has the functions declared by its manufacturer. The certificate represents a commitment for fertilizer manufacturers to process and transport materials in a manner that is safe to human health and the environment. The 2014 audit covered the following Group companies: ■■

Grupa Azoty S.A.

■■

Grupa Azoty POLICE

■■

Grupa Azoty PUŁAWY

■■

Grupa Azoty KĘDZIERZYN

Product Stewardship is an ongoing process which starts with the involvement of a company’s senior management. First, the company reviews all risks related to fertilizer properties, manufacture, storage, distribution and use, and develops product management systems covering their lifespans, in keeping with Fertilizers Europe’s standards. Next, it sets realistic goals for improvement and monitors their achievement. The next step is to make sure that product standards are maintained and aligned with the adopted rules. If necessary, corrective and preventive measures are taken.

3 . 5 safe T y PR DMA

3.5.5 pRoducT safeTy

ELEMENTS OF PRODUCT STEWARDSHIP Determining the objectives and tasks of Product Stewardship

■

Defining the programme (tasks, responsibilities, deadlines)

■

Setting up the programme management team

■

Communicating the company’s Product Stewardship policy to clients

■

Communicating the programme to employees

■

Training for the programme management team and employees involved

■

Documenting the measures taken

■

Maintaining and controlling documents required by the programme

■

Monitoring of responsibilities up and down the supply chain, namely the monitoring of suppliers (on the one end) and distributors and carriers (on the other)

TEN AREAS OF AUDIT 1. Management and administration 2. Product development 3. Sourcing of feedstocks, additives and third-party products 4. Production 5. Packing 6. Transport 7. Storage (outside of production site) 8. Marketing and sales 9. Product application and services for farmers 10. Monitoring and reviews product application and farmer services

marketing and sales

product development

storage

W aR

Ds H

materials sourcing

t PRO D U c t s

transport

manufacture

packaging

119

ouR ResponsibiliTy

■

3 . 5 safe t y 3.5.6 Food security

At any large manufacturing company, corporate social responsibility has many aspects; in this report we have discussed them all in detail. However, the operations of Grupa Azoty, one of Europe’s largest manufacturer of mineral fertilizers, have an additional specific dimension – at least as important. Given the scale of our fertilizer production, it is of critical importance for Poland’s food security.

120

The first condition of a country’s food security is the availability of food for everyone – even the poorest citizens. Secondly, food must be clean and safe, and must contain all necessary nutrients. The third condition, which is rarely achievable in 100%, is a country’s self-sufficiency in food production through efficient and modern agriculture. And in today’s world, modern agriculture amounts to modern fertilizers. In the 21st century, the composition, formulation and quality of fertilizers is as important as their volume. Therefore our research, often conducted in partnership with leading scientific and research centres, focuses on development of new products in line with

the concept of intelligent fertilization – understood as efficient application of fertilizers guaranteeing biological purity of crops with minimum impact on the environment. What we propose our customers is a switch from simple fertilization to the latest biomodelling solution. Not long ago, our portfolio included less than twenty products; today, we offer nearly forty fertilizers, suited to specific soil and crop types. We are currently working to roll out a new solution, called microstarters. The fertilizer industry has entered the 21st century, and we are determined to always stay at its forefront.

3 . 5 safe T y 3.5.6 food secuRiTy

Report on the condition of polish agriculture On November 19th 2014, the ‘25 years of Polish Agriculture. Food Security in Europe’ report prepared by the Puławy Competence Centre was presented at the Chancellery of the President of Poland. Work on the report was supervised by Prof. Janusz Igras, Head of the New Chemical Syntheses Institute of Puławy.

Its authors have stressed that agriculture is a key (fourth largest) sector of Poland’s economy, which is growing rapidly and bringing benefits to Polish society as a whole. Exports of agricultural and food products account for 12% of Poland’s total export volume, and their value in 2003–2013 went up from EUR 4m to just under EUR 20m. Today, Poland ranks eighth among European food exporters, and Grupa Azoty is determined to contribute to Polish agriculture’s further growth domestically and on the European scale.

ouR ResponsibiliTy

The report shows an objective picture of Polish agriculture as a sector ensuring food security not only in Poland, but also in other European countries. It also challenges the false stereotype, frequently recurring in public debate, that Poland’s agricultural sector is outdated and not worth investing in.

our objectives 1. To offer fertilizers supporting efficient and environmentallyfriendly crop production to make agriculture profitable and guarantee the supply of affordable food. 2. To contribute to the security of food supply, thereby reducing poverty and supporting human development. 3. To prevent degradation of soils and restore them to original condition with a view to achieving wider environmental goals, such as prevention of desertification. 4. To eliminate (wherever possible) or mitigate the negative environmental impacts of our fertilizers and agricultural production.

121

4 financial INFORMATION

SU M MARY CONSOLIDAT ED FINANCIAL S TAT EM EN T S

SUMMARY CONSOLIDATED FINANCIAL S TATEMENT S

G4 17

G4-EC1

EC DMA

4.1 Basis of preparation of the summary consolidated financial statements

The financial results presented in this Report are consistent, and should be read in conjunction, with the results presented in the publicly available financial statements for 2014, including in particular the explanatory the notes, which form an integral part of the consolidated annual financial statements.

The Groupâ&#x20AC;&#x2122;s financial results presented below comprise not only the performance (social or environmental) of the four key companies presented in this Report but all entities included in the consolidated financial statements of the Grupa Azoty Group. The summary consolidated financial statements presented in this Report are only an extract of the information included in the consolidated financial statements of the Grupa Azoty Group, approved by the Grupa Azoty Management Board on March 10th 2015. It is not a complete version of the Groupâ&#x20AC;&#x2122;s financial statements and does not include information sufficient to fully understand its assets, financial position and financial performance. The summary consolidated financial statements should be read in conjunction with the audited consolidated financial statements prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRS EU) and other applicable laws. The summary consolidated financial statements were prepared in accordance with the accounting policies described in Note 2 to the consolidated financial statements of the Group. financial INFORMATION

The consolidated financial statements for the 12 months ended December 31st 2014 prepared in accordance with International Financial Reporting Standards as adopted by the European Union are available at http://tarnow.grupaazoty.com/pl/relacje/ raportyr.

125

SUMMARY CONSOLIDAT ED FINANCIAL S TAT EM EN T S 4.2 SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

Continuing operations Revenue

9,898,476

9,821,023

Cost of sales

(8,231,565)

(8,441,783)

Gross profit

1,666,911

1,379,240

Selling and distribution expenses

(581,145)

(447,750)

Administrative expenses

(739,977)

(707,766)

Other income, including:

58,421

602,697

â&#x20AC;&#x201C;

517,125

Other expenses

(101,980)

(128,558)

Results from operating activities

302,230

697,863

45,767

73,761

(58,398)

(56,225)

(12,631)

17,536

13,940

12,361

Gain on a bargain purchase

Finance income Finance costs Net finance (costs)/income Share of profit of equity-accounted investees Profit before tax Tax expense Net profit from continuing operations

303,539

727,760

(37,731)

(18,439)

265,808

709,321

Discontinued operations Net loss from discontinued operations Profit for the year

(753)

(554)

265,055

708,767

(23,542)

(4,032)

4,420

678

(19,122)

(3,354)

Other comprehensive income Items that will never be reclassified to profit or loss Remeasurements of defined benefit liability Tax on items that will never be reclassified to profit or loss

All amounts in PLN â&#x20AC;&#x2122;000, unless indicated otherwise. * Financial information restated due to completion of acquisition accounting of African Investment Group S.A., as presented in point 1.2.1 of the Notes to the consolidated financial statements available at: http://tarnow.grupaazoty.com/pl/relacje/raportyr

126

SUMMARY CONSOLIDATED FINANCIAL S TATEMENT S 4.2 SUMMARY CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

Items that are or may be reclassified to profit or loss Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets reclassified to profit or loss Foreign currency translation differences â&#x2C6;&#x2019; foreign operations Tax on items that are or may be reclassified to profit or loss

(24)

(15,751)

(2,912)

(27,256)

7,807

(5,063)

559

8,239

5,430

(39,831)

Other comprehensive income for the year

(13,692)

(43,185)

Total comprehensive income for the year

251,363

665,582

231,350

676,948

33,705

31,819

216,144

639,040

35,219

26,542

Basic (PLN)

2.33

6.93

Diluted (PLN)

2.33

6.93

Profit attributable to: Equity holders of the Parent Company Non-controlling interests Total comprehensive income attributable to: Equity holders of the Parent Company Non-controlling interests Earnings per share:

financial INFORMATION

127

SUMMARY CONSOLIDAT ED FINANCIAL S TAT EM EN T S 4.3 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

5,966,287

5,780,924

Assets Non-current assets Property, plant and equipment Investment property

54,968

53,374

Intangible assets

510,415

519,631

Goodwill

12,600

11,617

Investments in subordinated entities

110,842

128,944

Available-for-sale financial assets

12,371

23,989

Other financial assets

19,054

2,932

3,408

Non-current receivables Deferred tax assets

86,941

103,540

Other non-current assets

4,675

4,462

Total non-current assets

6,781,085

6,629,942

1,347,826

1,165,507

68,484

106,822

Current assets Inventories Other financial assets Current tax assets

6,720

40,558

Trade and other receivables

1,161,389

1,273,112

Cash and cash equivalents

558,603

713,024

Other current assets

24,118

21,016

Assets held for sale

107

792

Total current assets

3,167,247

3,320,831

9,948,332

9,950,773

Total assets

128

SUMMARY CONSOLIDATED FINANCIAL S TATEMENT S 4.3 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

495,977

2,418,270

â&#x20AC;&#x201C;

2,346

1,403

(3,681)

2,843,389

2,649,822

Equity and liabilities Equity Share capital Share premium Fair value reserve Translation reserve Retained earnings, including: Profit for the year Equity attributable to owners of the Parent Company Non-controlling interests Total equity

231,350

676,948

5,759,039

5,562,734

729,097

707,820

6,488,136

6,270,554

476,932

634,693

312,419

254,613

1,498

61,821

113,106

119,343

Liabilities Loans Employee benefits Other non-current payables Provisions Government grants

24,906

231,692

284,068

Other financial liabilities

20,205

22,513

1,195,845

1,401,957

509,259

604,140

30,494

34,008

2,934

4,903

1,425,553

1,313,547

211,432

213,839

2,982

2,936

Total non-current liabilities Loans Employee benefits Current tax liabilities Trade and other payables Provisions Government grants Deferred income

2,322

25,921

79,375

78,968

2,264,351

2,278,262

Total liabilities

3,460,196

3,680,219

Total equity and liabilities

9,948,332

9,950,773

Other financial liabilities Total current liabilities

129

financial INFORMATION

39,993

Deferred tax liabilities

SUMMARY CONSOLIDAT ED FINANCIAL S TAT EM EN T S 4.4 SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

Profit before tax

303,539

727,760

Adjustments for:

589,459

65,689

Depreciation and amortisation

520,175

548,123

Impairment losses

Cash flows from operating activities

40,300

49,568

Loss/(profit) from investing activities

1,628

(547,255)

Profit on disposal of financial assets

(2,912)

(12)

(13,940)

(12,361)

48,740

38,443

(807)

(1,251)

Share of profit of equity-accounted investees Interest, foreign exchange gains or losses Dividends Change in fair value of financial assets at fair value through profit or loss

(3,725)

(9,566)

892,998

793,449

108,537

(42,953)

Change in inventories

(181,530)

196,385

Changes in trade and other payables

(20,733)

95,942

57,824

78,815

Cash generated from operating activities before changes in working capital Changes in trade and other receivables

Changes in provisions, prepayments and grants

761

(8,176)

Cash generated from operating activities

Other adjustments

857,857

1,113,462

Income taxes paid

(38,076)

(122,965)

Net cash from operating activities

819,781

990,497

130

SUMMARY CONSOLIDATED FINANCIAL S TATEMENT S 4.4 SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

For the period 01.01.2014 31.12.2014

For the period 01.01.2013 31.12.2013* restated

8,786

15,627

(676,398)

(680,878)

11,971

28,067

Cash flows from investing activities Proceeds from sale of property, plant and equipment, intangible assets and investment property Acquisition of property, plant and equipment, intangible assets and investment property Dividends received Acquisition of financial assets

(179,583)

(128,499)

Acquisition of subsidiaries, net of cash acquired

(23,443)

(230,956)

Proceeds from sale of financial assets

215,686

43,787

Cash acquired, net of consideration transferred in acquisition of subsidiaries Interest received Government grants received Loans Other disbursements Net cash used in investing activities

–

273,797

3,480

816

–

497

(645)

(525)

(7,920)

(10,271)

(648,066)

(688,538)

–

(11,159)

(41,768)

(170,813)

288,300

1,020,372

–

(311,316)

(541,358)

(324,710)

(43,766)

(40,470)

Cash flows from financing activities Disbursements from issue of share capital Dividends paid Proceeds from loans and borrowings Acquisition of non-controlling interests Payment of loans and borrowings Interest paid

(13,191)

(12,623)

23,742

20,172

Net cash from financing activities

(328,041)

169,453

Net increase/decrease in cash and cash equivalents

(156,326)

471,412

713,024

243,440

1,905

(1,828)

558,603

713,024

Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the period

All amounts in PLN ’000, unless indicated otherwise. * Financial information restated due to completion of acquisition accounting of African Investment Group S.A., as presented in point 1.2.1 of the Notes to the consolidated financial statements available at: http://tarnow.grupaazoty.com/pl/relacje/raportyr

131

financial INFORMATION

Payment of finance lease liabilities Other investment disbursements

SUMMARY CONSOLIDAT ED FINANCIAL S TAT EM EN T S 4.5 FINANCIAL RESULTS OF THE OPERATING SEGMENTS

REVENUE, EXPENSES AND FINANCIAL RESULT OF OPERATING SEGMENTS FOR THE 12-MONTH PERIOD ENDED DECEMBER 31ST 2014

Continued operations

Other Activities

Total

194,621

157,688

9,898,476

2,933,148

802,963

7,457,912

3,127,769

960,651

17,356,388

(3,568,630)

(3,123,579)

(949,441)

(17,010,599)

(53,566)

(130,041)

(82)

(1,611)

(581,145)

(123,773)

(184,559)

(12,565)

(51,552)

(739,977)

Agro Fertilizers

Plastics

Chemicals

External revenues

5,580,374

1,460,155

2,505,638

Inter-segment revenue

2,323,040

348,170

1,050,591

7,903,414

1,808,325

3,556,229

(7,468,963)

(1,899,986)

Selling and distribution expenses (-)

(395,845)

Administrative expenses (-)

(367,528)

Total revenue Operating expenses, including:(-)

Other income

Energy

14,929

12,923

4,778

10,336

15,455

58,421

(13,960)

(2,678)

(47,709)

(8,582)

(29,051)

(101,980)

435,420

(81,416)

(55,332)

5,944

(2,386)

302,230

Finance income

–

45,767

Finance costs (-)

–

(58,398)

Share of profit of equity-accounted investees

–

13,940

Profit before tax

–

303,539

Result on discontinued operations

–

(753)

Tax expense

–

(37,731)

Other expenses(-) Segment results from operating activities EBIT

–

265,055

EBIT*

435,420

(81,416)

(55,332)

5,944

(2,386)

302,230

Depreciation and amortisation

158,972

47,870

100,947

74,050

80,285

462,124

–

58,051

594,392

(33,546)

45,615

79,994

77,899

822,405

Net profit

Unallocated depreciation and amortisation EBITDA** All amounts in PLN ’000, unless indicated otherwise.

* EBIT is calculated as results from operating activities disclosed in the statement of profit or loss, adjusted for gain on a bargain purchase. ** EBITDA is calculated as results from operating activities before depreciation and amortisation, adjusted for gain on a bargain purchase.

132

SUMMARY CONSOLIDATED FINANCIAL S TATEMENT S 4.5 FINANCIAL RESULTS OF THE OPERATING SEGMENTS

REVENUE, EXPENSES AND FINANCIAL RESULT OF OPERATING SEGMENTS FOR THE 12-MONTH PERIOD ENDED DECEMBER 31ST 2013 – RESTATED*

Continued operations

Plastics

Chemicals

External revenues

5,565,074

1,466,548

2,385,331

265,516

138,554

9,821,023

Inter-segment revenue

2,061,724

355,834

728,472

2,903,162

782,352

6,831,544

Total revenue

7,626,798

1,822,382

3,113,803

3,168,678

920,906

16,652,567

Operating expenses, including:(-)

Energy

Other Activities

Agro Fertilizers

Total

(7,240,598)

(1,932,912)

(3,128,175)

(3,173,286)

(953,872)

(16,428,843)

Selling and distribution expenses (-)

(301,809)

(51,901)

(82,642)

(171)

(11,227)

(447,750)

Administrative expenses (-)

(349,822)

(121,261)

(136,979)

(14,793)

(84,911)

(707,766)

Other income

8,012

11,611

4,764

16,172

85,572

(53,597)

(4,671)

(3,522)

(54,950)

(128,558)

419,395

(156,115)

(7,432)

(3,366)

(71,744)

180,738

–

517,125

419,395

(156,115)

(7,432)

(3,366)

(71,744)

697,863

Finance income

–

73,761

Finance costs (-)

–

(56,225)

Share of profit of equity-accounted investees

–

12,361

Profit before tax

–

727,760

Result on discontinued operations

–

(554)

Tax expense

–

(18,439)

Net profit

–

708,767

EBIT**

419,395

(156,115)

(7,432)

(3,366)

(71,744)

180,738

Depreciation and amortisation

213,061

46,997

78,710

72,516

131,023

542,307

–

5,816

632,456

(109,118)

71,278

69,150

59,279

728,861

Segment results from operating activities EBIT Gain on a bargain purchase Result from operating activities

Unallocated depreciation and amortisation EBITDA*** All amounts in PLN ’000, unless indicated otherwise. *

Financial information restated in connection with the final accounting for the acquisition of African Investment Group S.A.; see Note 1.2.1 to the consolidated financial statements available at: http://tarnow.grupaazoty.com/pl/relacje/raportyr ** EBIT is calculated as results from operating activities disclosed in the statement of profit or loss, adjusted for gain on a bargain purchase. *** EBITDA is calculated as results from operating activities before depreciation and amortisation, adjusted for gain on a bargain purchase.

133

financial INFORMATION

45,013 (11,818)

Other expenses(-)

4.6 INDEPENDEN T AUDI TO R S’ R EPO R T on THE SUMMARY CONSOLIDATED FINANCIAL S TATEMENT s

To the General Meeting of Grupa Azoty S.A. The accompanying summary consolidated financial statements, which comprise the summary consolidated statement of financial position as at 31 December 2014, the summary consolidated statement of profit or loss and other comprehensive income and the summary consolidated statement of cash flows for the year then ended, and related notes, are derived from the audited consolidated financial statements of the Group, whose parent entity is Grupa Azoty S.A. with its registered office in Tarnów, ul. Kwiatkowskiego 8 (“the Group”) for the year ended 31 December 2014. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated 10 March 2015. Those consolidated financial statements, and the summary consolidated financial statements, do not reflect the effects of events that occurred subsequent to that date.

Management of the Parent Entity is responsible for the preparation of the summary consolidated financial statements on the basis described in Note “Basis of preparation of the summary consolidated financial statements”.

Auditor’s Responsibility Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with national standards on auditing issued by the Polish National Council of Certified Auditors and International Standards on Auditing (ISA) 810, Engagements to Report on Summary Financial Statements.

Opinion In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of the Group for the year ended 31 December 2014 are consistent, in all material respects, with those consolidated financial statements, on the basis described in Note “Basis of preparation of the summary consolidated financial statements”.

financial INFORMATION

The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards, as adopted by the European Union and other applicable regulations. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of the Group.

Management’s Responsibility for the Summary Consolidated Financial Statements

On behalf of KPMG Audyt Sp. z o.o. Registration No. 458 ul. Chłodna 51 00-867 Warsaw Marcin Domagała Key Certified Auditor Registration No. 90046 Member of the Management Board 10 June 2015

135

136

d e scr i p t i o n

I n d epen d en t a s su r an ce r epo rt

5 137

Our Report

GRI content index

5.1 D e scr i p t i o n

33-101 Tarnów, Poland NIP: 873-000-68-29

G4-28

ul. Kwiatkowskiego 8

G4-30

Grupa Azoty S.A.

KRS: 0000075450 ISIN: PLZATRM00012

G4-33

Ticker GPW: ATT

G4 18

This year’s report is the second integrated report of the Grupa Azoty Group. The previous one, covering the 2013 calendar and financial year, was released in August 2014. This report, like the previous one, covers the performance of the four largest Group companies:

Grupa Azoty PUŁAWY Al. Tysiąclecia Państwa Polskiego 13

G4 23

G4-29

G4-22

G4-5

G4-3

Report profile This report has been prepared in accordance with the ‘core’ option of the GRI G4 Guidelines, and covers the financial year 2014, identical with the calendar year. In order to exercise due care, we engaged a third-party expert to assist in the preparation of this report, and have had it verified by an independent auditor (Deloitte Advisory sp. z o.o.). Financial data sourced from the financial statements have been audited by independent auditors (KPMG Audyt sp. z o.o.).

24-110 Puławy, Poland ■■

Grupa Azoty S.A. of Tarnów (Parent),

■■

Grupa Azoty Zakłady Azotowe Puławy S.A. of Puławy (Grupa Azoty PUŁAWY),

■■

Grupa Azoty Zakłady Azotowe Kędzierzyn S.A. of Kędzierzyn-Koźle (Grupa Azoty KĘDZIERZYN), Grupa Azoty Zakłady Chemiczne Police of Police (Grupa Azoty POLICE).

NIP: 716-000-18-22 Ticker GPW: ZAP KRS: 0000011737 ISIN: PLZAPUL00057

Grupa Azoty POLICE ul. Kuźnicka 1 72-010 Police, Poland NIP: 851-02-05-573 Ticker GPW: PCE

These companies account for the vast majority of the Grupa Azoty Group’s revenue.2

KRS: 0000015501 ISIN: PLZCPLC00036

Grupa Azoty KĘDZIERZYN ul. Mostowa 30 A, skr. poczt. 163 1 No need to make any significant changes relative to the previous year’s report. 2 Apart from the companies listed above, the consolidated financial statements include the financial data of seven other companies (subsidiaries of Grupa Azoty): Grupa Azoty ATT Polymers GmbH (Guben, Germany), Grupa Azoty Polskie Konsorcjum Chemiczne Sp. z o.o. (Tarnów), Grupa Azoty KOLTAR Sp. z o.o. (Tarnów), Grupa Azoty Kopalnie i Zakłady Chemiczne Siarki SIARKOPOL (Grzybów), Grupa Azoty Folie Sp. z o.o., Grupa Azoty Compounding Sp. z o.o., and Navitrans Sp. z o.o. (Gdynia, an indirectly controlled subsidiary). The above subsidiaries also have their own subsidiaries and associates – for more information, see the Directors’ Report on the Operations of the Grupa Azoty Group in the 12 months ended December 31st 2014 (page 4).

The report scope and boundary, as well as methods of measurement, were not subject to any major changes. The impact areas and indicators specified by the Expert Committee for CSR, which included employees responsible for different areas of the Group’s business supported by third‑party experts, were considered still relevant. Aspects of low, medium and high relevance were identified. The aspects of low relevance, providing no measurable added value for the organisation and recipients of this report, were disregarded.

47-220 Kędzierzyn-Koźle, Poland NIP: 749-00-05-094 KRS: 0000008993

In order to ensure the highest quality of information, and to comply with the GRI requirements as to information balance, comparability, accuracy, timeliness, clarity and reliability, a software application dedicated to GRI reporting was developed. Approximately 70 employees of the four key Group companies were involved in the process of collecting data.

GRI Global Reporting Initiative (GRI) is a non-profit organisation founded in 1997 in the US by CERES and the United Nations Environment Programme (UNEP). Currently, its registered office is in Amsterdam, where GRI moved in 2002. GRI developed and popularised new reporting standards for companies and other organisations. Reports prepared in compliance with these standards concentrate on sustainable development, which is given as much priority as financial and business data. GRI developed a framework for measuring and reporting the economic, environmental, and social performance of an organisation, currently applied all over the world. It is thanks to GRI that the world’s largest companies started to include in their reports such matters as ethics and responsibility for suppliers, employees, customers, local communities and natural environment.

https://www.globalreporting.org/

138

Ultimately, this report covers the following CSR aspects (given the horizontal strategic integration of the Group, the impact areas of the Group’s four key entities are practically the same):

eNViRoNMeNT

G4-21

G4-20

G4-19

G4 18

5.1 d e scR i p T i o n

ecoNoMY

High relevance

SocieTY

Occupational health and safety Biodiversity Environmental protection Emissions Energy Materials Product and service labelling

Effluents and waste Transport Water Economic performance Employment Customer health and safety Compliance

Medium relevance Training and education Marketing communications Market presence Indirect economic impacts Diversity and equal opportunity Freedom of association and collective bargaining Public policy

The individual impact categories should be viewed in the context of the expectations of specific stakeholder groups. The Grupa Azoty Group has in place a formal register of stakeholders, which defines a method of assessing the materiality and ability of individual stakeholders to affect the Group’s operations. As per the register, stakeholders are divided into the following main groups: ■

Employees

■

Customers

■

Local communities

■

Research and development institutions

■

Suppliers

■

Shareholders

■

Public institutions

■

Trade unions

■

Local government authorities

■

State Treasury

■

Banks and financial institutions

The form and frequency of stakeholder dialogue depends on the characteristics of a given group as well as the current expectations and issues relevant to both parties. At present, stakeholder panels and similar solutions are not yet an effective tool in Poland, one of the reasons being the business environment’s limited trust in dialogue as such. Therefore, we continue to rely on more traditional tools, such as qualitative and quantitative market research, meetings and workshops. Responsibility for maintaining the dialogue lies with the heads of individual functional areas of the Group companies, who are most familiar with the expectations of individual stakeholder groups. Therefore, at the stage of defining the scope of this report, it was important to hold meetings directly at the companies and to engage in the process of collecting data several dozen people, who know their respective areas of responsibility as well as the expectations and potential concerns of the social environment. As a result, the CSR aspects identified as material are those which are mentioned most often in stakeholder inquiries.

139

ouR RepoRT

Compliance (compliance with laws and regulations concerning the provision and use of products and services)

G4-25

Local communities

G4-26

Anti-corruption

G4-27

Non-discrimination

G4-24

Products and Services

G4 32

5. 2 G R I Co n t en t I n d e x

Indicator

Name

Note

Audit p. 145

Page

General Standard Disclosures Strategy and Analysis

G4-1

Statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability



G4-2

Description of key impacts, risks, and opportunities



2, 16, 21

Organizational Profile G4-3

Name of the organization



138

G4-4

Primary brands, products, and services



9, 30-37

G4-5

Location of the organisation’s headquarters



138

G4-6

Number of countries where the organisation operates, and names of countries where either the organisation has significant operations or that are specifically relevant to the sustainability topics covered in the report



10-14

G4-7

Nature of ownership and legal form



23-24

G4-8

Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries)



G4-9

Scale of the organisation



G4-10

Total number of employees by employment contract and gender



G4-11

Percentage of total employees covered by collective bargaining agreements



G4-12

Organisation’s supply chain



14, 38-40

G4-13

Significant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain



G4-14

Whether and how the precautionary approach or principle is addressed by the organisation



118

G4-15

Externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses



52-53

G4-16

Memberships of associations (such as industry associations) and national or international advocacy organisations



52-53

Identified Material Aspects and Boundaries G4-17

Entities included in the organisation’s consolidated financial statements



125

G4-18

Process for defining the report content



138-139

G4-19

Identified Material Aspects regarding environmental and social impacts



139

G4-20

Materiality of identified environmental and social impacts for individual entities



139

G4-21

Report limitations regarding impacts of material environmental and social aspects, including entities outside of the organisation



138

G4-22

Effect of any restatements of information provided in previous reports, and the reasons for such restatements (e.g. mergers or acquisitions, change of base years or periods, nature of business, measurement methods)



138

G4-23

Significant changes from previous reporting periods in the scope and measurement methods



139

Stakeholder Engagement G4-24

List of stakeholder groups engaged by the organisation



92-93, 139

G4-25

Basis for identification and selection of stakeholders with whom to engage



92-93, 139

G4-26

Organisation’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group



31, 44, 72-73, 92-93, 139

G4-27

Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting



44, 79, 92-93, 139

140

5. 2 G R I Co n t en t I n d e x

Report Profile G4-28

Reporting period (such as fiscal or calendar year)



138

G4-29

Date of most recent previous report (if any)



138

G4-30

Reporting cycle (such as annual, biennial)

G4-31

Contact point



148

G4-32

CSR index



140-144

G4-33

Organisation’s policy and current practice with regard to seeking external assurance for the report. If not included in the assurance report accompanying the sustainability report, reporting on the scope and basis of any external assurance provided, as well as the relationship between the organisation and the assurance providers



138

Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight



18-21, 64



16, 64

Annual



Governance

G4-34

Ethics and Integrity G4-56

Organisation’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics

Specific Standard Disclosures CATEGORY: ECONOMIC Aspect: Economic Performance DMA

Management approach



16, 22-23, 125

G4-EC1

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments



80, 125-133

G4-EC2

Financial implications and other risks and opportunities for the organisation’s activities due to climate change



102

G4-EC4

Significant financial assistance received from government



Aspect: Market Presence DMA

Management approach



54, 55, 65, 74

G4-EC5

Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation



Aspect: Indirect Economic Impacts DMA

Management approach



79, 81

G4-EC7

Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, inkind, or pro bono engagement



79-91

G4-EC8

Identification and description of significant indirect economic impacts, including the extent of impacts



79-91

CATEGORY: ENVIRONMENTAL Aspect: Materials DMA

Management approach

G4-EN1

Materials used by weight or volume

Partially reported



38, 54



Aspect: Energy Management approach



G4-EN3

Direct and indirect energy consumption within the organisation



95-96

G4-EN5

Energy intensity



G4-EN6

Reduction of energy consumption



96-97

Partially reported

Our Report

DMA

141

5. 2 G R I Co n t en t I n d e x

Aspect: Water DMA

Management approach



94, 98

G4-EN8

Total water abstraction by source



G4-EN10

Percentage and total volume of water recycled and reused



Aspect: Biodiversity DMA

Management approach



110

G4-EN11

Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas



110

G4-EN12

Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas



110

Aspect: Emissions DMA

Management approach



94, 102

G4-EN15

Total direct greenhouse gas emissions by weight



102, 103

G4-EN18

Greenhouse gas (GHG) emissions intensity



104

G4-EN19

Reduction of greenhouse gas (GHG) emissions



103

G4-EN21

NOX, SOX, and other significant air emissions by type and weight



105-106

Aspect: Effluents and Waste DMA

Management approach



94, 101, 107

G4-EN22

Total water discharge by quality and destination



100

G4-EN23

Total weight of waste by type and disposal method



108

Aspect: Products and Services DMA

Management approach



94, 111

G4-EN27

Extent of impact mitigation of environmental impacts of products and services



118-119

G4-EN28

Percentage of products sold and their packaging materials that are reclaimed by category



109

Aspect: Compliance DMA

Management approach



G4-EN29

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations



110

Aspect: Transport DMA

Management approach



42, 116

G4-EN30

Significant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce



42-43

CATEGORY: SOCIAL Labor practices and decent work Aspect: Employment DMA

Management approach



65, 68-69

G4-LA1

Total number and rates of new employee hires and employee turnover by age group, gender and region



75-76

G4-LA2

Benefits provided to full-time employees that are not provided to temporary or parttime employees, by significant locations of operation



142

5. 2 G R I Co n t en t I n d e x

Aspect: Occupational Health and Safety DMA

Management approach



111

G4-LA5

Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs



112

G4-LA6

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender



113

G4-LA7

Workers with high incidence or high risk of diseases related to their occupation



114

G4-LA8

Health and safety topics covered in formal agreements with trade unions



112

Aspect: Training and Education DMA

Management approach



68-69

G4-LA9

Average hours of training per year per employee by gender, and by employee category



70-71

G4-LA10

Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings



68-69

G4-LA11

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category



Aspect: Diversity and Equal Opportunity DMA

Management approach



64-65, 74

G4-LA12

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity



76-77

Human Rights Aspect: Non-discrimination DMA

Management approach



64, 74

G4-HR3

Total number of incidents of discrimination and corrective actions taken



64, 74

Society Aspect: Local Communities DMA

Management approach



G4-SO1

Percentage of operations with implemented local community engagement, impact assessments, and development programs



79-91

G4-SO2

Operations with significant actual and potential negative impacts on local communities



115

Aspect: Anti-corruption DMA

Management approach



G4-SO5

Confirmed incidents of corruption and actions taken



Aspect: Public Policy DMA

Management approach



G4-SO6

Total value of financial and in-kind political contributions to parties, politicians and similar institutions by country.



Aspect: Compliance DMA

Management approach



20, 93

G4-SO8

Monetary value of significant fines and total number of non-monetary sanctions for noncompliance with laws and regulations



Our Report

143

5. 2 G R I Co n t en t I n d e x

Product Responsibility Aspect: Customer Health and Safety DMA

Management approach



116-119

G4-PR1

Percentage of significant product and service categories for which health and safety impacts are assessed for improvement



118

G4-PR2

Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes



118

Aspect: Product and Service Labelling DMA

Management approach



117

G4-PR3

Type of product and service information required by the organisation’s procedures for product and service information and labelling, and percentage of significant product and service categories subject to such information requirements



117

G4-PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes



117

G4-PR5

Results of surveys measuring customer satisfaction



Aspect: Marketing Communications DMA

Management approach



20, 44

G4-PR7

Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes



Aspect: Compliance DMA

Management approach



G4-PR9

Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services



51, 117

144

5. 3 I n d epen d en t a s su r an ce r epo rt pertaining to the non - financial part of the Grupa A zot y Integr ated Report 2014

To the Management Board of Grupa Azoty S.A. We have reviewed the non-financial part of the Grupa Azoty Integrated Report 2014 (“Integrated Annual Report”) developed by Grupa Azoty S.A. with the registered address in Tarnów, at 8 Kwiatkowskiego St. (“Company”), with respect to material aspects identified by the Company and indicators reported on the basis of G4 Sustainability Reporting Guidelines for “Core” level, issued by Global Reporting Initiative (GRI). The assurance works covered the period from 1 January 2014 to 31 December 2014 with relation to quantity and quality of available evidence. The Management Board of the Company is responsible for reliable, correct and fair information and for correct preparation of the documentation. Our task was to issue an independent assurance report based on the Integrated Annual Report. Our procedures did not include assessment of the fairness, correctness and completeness of documents provided by the Company, nor did they constitute an audit of the internal control system implemented therein. Therefore, we do not express an opinion regarding correctness of the system. Our procedures did not constitute an audit of financial statements as defined in the Accounting Act. Therefore, we do not express an opinion concerning the auditor’s Report nor do we make statements regarding the financial statements of the Company as determined in regulations applicable to certified auditors. Planning and performing our works had the nature of a limited assurance engagement performed in line with

ISAE 3000 (Assurance Engagements Other than Audits or Reviews of Historical Financial Information), which requires us to plan and perform the engagement in a manner which allows for limited assurance that the non-financial part of the Integrated Annual Report does not include significant misstatements. The scope and methodology of a review of the Integrated Annual Report significantly differ from those applied during an audit, which is aimed at expressing reasonable assurance. The purpose of the review is not to issue an opinion on correct, true and fair nature of the Integrated Annual Report, and therefore no such opinion has been issued. The procedures followed during the review of the non-financial part of the Integrated Annual Report comprised: ■■

Identifying issues and results significant for the content of the Integrated Annual Report from the viewpoint of the corporate social responsibility strategy followed by the Company and stakeholders’ expectations.

■■

Comparing data included in the non-financial part of the Integrated Annual Report to those presented in the Financial Statements of Grupa Azoty for 2014.

■■

Interviewing individuals in charge of the implementation of the corporate social responsibility strategy in the Company and of the preparation of the Integrated Annual Report.

■■

Verifying the information included in the Integrated Annual Report for compliance with the internal documentation of the Company.

■■

Assessing the level of compliance with Sustainable Development Reporting Guidelines and GRI Reporting Framework.

Based on the review we obtained limited assurance that the information concerning identified material aspects and indicators reported by the Company included in the Integrated Annual Report developed by the Grupa Azoty S.A. is free from material misstatements and it is compliant with G4 Sustainability Reporting Guidelines for ‘Core’ level issued by Global Reporting Initiative.

Deloitte Advisory sp. z o.o. Warsaw, 10 June 2015

Our Report

145

tab l e of co n t en t s

146

Letter from the President of the Management Board

Grupa Azoty in key figures

1 the group

1.1 Who we are

1.2 what we do

1.3 Where we operate

1.4 Our strategy and mission

1.5 Management standards

1.5.1 Corporate governance

1.5.2 Management systems

1.5.3 Internal audit

1.5.4 Risk management

1.6 Financial highlights

1.7 Capital market

2 our business

2.1 Products and markets

2.1.1 Fertilizers

2.1.2 Plastics

2.1.3 Chemicals

2.1.4 Energy

2.1.5 Other goods and services

2.2 Partners

2.2.1 Raw materials, energy and the supply chain

2.2.2 Logistics and transport

2.2.3 Dialogue with customers

2.2.4 Marketing and distribution

2.2.5 Partnership and membership of organisations

2.3 Strategy in action

2.3.1 Organic growth

2.3.2 Operational excellence

2.3.3 Mergers and acquisitions

2.4 Investments

2.5 Innovation and development

tab l e o f co n t en t s

3 Our responsibility

3.1 Ethics and integrity

3.2 Employees

3.2.1 Employment

3.2.2 Training and development

3.2.3 Communications

3.2.4 Non-discrimination

3.2.5 Additional benefits

3.3 Society

3.3.1 Development of local community

3.3.2 Youth and education

3.3.3 Culture

3.3.4 Sports

3.3.5 Communication with the market environment

3.4 Natural environment

3.4.1 Energy

3.4.2 Water

102

3.4.3 Emissions

107

3.4.4 Noise

107

3.4.5 waste

110

3.4.6 Biodiversity

111

3.5 Safety

112

3.5.1 Occupational health and safety

115

3.5.2 Safe neighbourhood

116

3.5.3 Safety during transport

117

3.5.4 Customer safety

118

3.5.5 Product safety

120

3.5.6 Food security

123

4 financial information

125

4.1 Basis of preparation of the summary consolidated financial statements

126

4.2 Summary CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

128

4.3 Summary CONSOLIDATED STATEMENT OF FINANCIAL POSITION

130

4.4 Summary CONSOLIDATED STATEMENT OF CASH FLOWS

132

4.5 FINANCIAL RESULTS OF THE OPERATING SEGMENTS

135

4.6 Independent auditorsâ&#x20AC;&#x2122; report

137

5 Our Report

138

5.1 description

140

5.2 GRI content index

145

5.3 Independent assurance report

147

G4 31

The report is a translation from the original Polish version. In case of any discrepancies between the Polish and English version, the Polish version shall prevail.

For additional information on this Report or Grupa Azoty’s approach to corporate social responsibility, please contact: Magdalena Urbanik magdalena.urbanik@grupaazoty.com

We are keen to receive your feedback on this Report, and the scope of information you would like to see in our next report. In order to express your opinion or order a copy of this Report, please contact us at: pr@grupaazoty.com

Contact for media Grupa Azoty Group, Press Officer: rzecznik@grupaazoty.com

Contact for investors Investor Relations, Team: ir.tarnow@grupaazoty.com

Issued by Grupa Azoty S.A. ul. Kwiatkowskiego 8 33-101 Tarnów Poland

grupaazoty.com