FINANCIAL
STATEMENTS
of CIECH S.A. for 2020
We are providing a courtesy English translation of our audited financial statements which were originally written in Polish. We take no responsibility for the accuracy
of our translation. For an accurate reading of our audited financial statements, please refer to the Polish language version of our audited financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
2
CIECH S.A. – SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
in thousand PLN
in thousand EUR
12 months
ended
31.12.2020
12 months
ended
31.12.2019
12 months
ended
31.12.2020
12 months
ended
31.12.2019
Sales revenues on continued operations
1,654,075
2,085,515
369,692
484,801
Operating profit on continued operations
64,082
104,340
14,323
24,255
Profit before tax on continued operations
177,890
79,111
39,759
18,390
Net profit for the period
155,287
60,436
34,707
14,049
Other comprehensive income net of tax
(24,725)
69
(5,526)
16
Total comprehensive income
130,562
60,505
29,181
14,065
Cash flows from operating activities
66,310
(62,551)
14,821
(14,541)
Cash flows from investment activities
(303,166)
135,380
(67,759)
31,471
Cash flows from financial activities
327,809
42,089
73,267
9,784
Total net cash flows
90,953
114,918
20,329
26,714
as at
31.12.2020
as at
31.12.2019
as at
31.12.2020
as at
31.12.2019
Total assets
4,357,634
3,889,932
944,274
913,451
Total non-current liabilities
40,973
1,632,936
8,879
383,453
Total current liabilities
2,722,893
793,790
590,035
186,401
Total equity
1,593,768
1,463,206
345,360
343,597
Share capital
287,614
287,614
62,324
67,539
The above selected financial data were converted into PLN in accordance with the following principles:
• items in the statement of financial position were converted using the average exchange rate determined by the National
Bank of Poland on the last day of the reporting period,
• items in the statement of profit or loss, statement of other comprehensive income and statement of cash flows were
converted using the exchange rate constituting the arithmetic mean of rates determined by the National Bank of Poland
on the last day of each calendar month of the reporting period.
as at 31.12.2020
as at 31.12.2019
12 months
ended 31.12.2020
12 months
ended 31.12.2019
EUR 1 = PLN 4.6148
EUR 1 = PLN 4.2585
EUR 1 = PLN 4.4742
EUR 1 = PLN 4.3018
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
3
TABLE OF CONTENTS
STATEMENT OF PROFIT OR LOSS OF CIECH S.A. ....................................................................................................................................... 4
STATEMENT OF OTHER COMPREHENSIVE INCOME OF CIECH S.A. ............................................................................................................ 5
STATEMENT OF FINANCIAL POSITION OF CIECH S.A. ................................................................................................................................ 6
STATEMENT OF CASH FLOWS OF CIECH S.A. ............................................................................................................................................ 7
STATEMENT OF CHANGES IN EQUITY OF CIECH S.A. ................................................................................................................................. 8
1. GENERAL INFORMATION ............................................................................................................................................................... 9
1.1. INFORMATION ON THE COMPANY’S ACTIVITIES ................................................................................................................................... 9
1.2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES ................................................................. 9
1.4. ACCOUNTING POLICIES ......................................................................................................................................................................... 11
1.5. CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES ............................................................................................ 11
2. SEGMENT REPORTING ................................................................................................................................................................. 13
3. NOTES TO THE STATEMENT OF PROFIT OR LOSS AND STATEMENT OF OTHER COMPREHENSIVE INCOME ..................................... 19
3.1. SALES REVENUES .................................................................................................................................................................................. 19
3.2. COST OF SALES, SELLING COSTS, GENERAL AND ADMINISTRATIVE EXPENSES .................................................................................... 19
3.3. COSTS BY TYPE ...................................................................................................................................................................................... 20
3.4. OTHER OPERATING INCOME AND EXPENSES ....................................................................................................................................... 20
3.5. FINANCIAL INCOME AND EXPENSES ..................................................................................................................................................... 21
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME ......................................................................................................................... 23
4. INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY ................................................................................................................... 24
4.1. MAIN COMPONENTS OF TAX EXPENSE ................................................................................................................................................ 24
4.2. EFFECTIVE TAX RATE ............................................................................................................................................................................. 24
4.3. DEFERRED INCOME TAX ....................................................................................................................................................................... 25
5. NOTES TO ASSETS REPORTED IN THE STATEMENT OF FINANCIAL POSITION ................................................................................. 28
5.1. PROPERTY, PLANT AND EQUIPMENT ................................................................................................................................................... 28
5.2. RIGHT-OF-USE ASSETS .......................................................................................................................................................................... 30
5.3. INTANGIBLE ASSETS .............................................................................................................................................................................. 32
5.4. LONG-TERM FINANCIAL ASSETS ........................................................................................................................................................... 33
5.5. INVENTORIES ........................................................................................................................................................................................ 36
5.6. SHORT-TERM RECEIVABLES .................................................................................................................................................................. 37
5.7. SHORT-TERM FINANCIAL ASSETS ......................................................................................................................................................... 39
5.8. CASH AND CASH EQUIVALENTS ............................................................................................................................................................ 40
5.9. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND LIABILITIES CONNECTED WITH NON-CURRENT ASSETS CLASSIFIED AS
HELD FOR SALE ........................................................................................................................................................................... 41
6. EQUITY ....................................................................................................................................................................................... 42
6.1. CAPITAL MANAGEMENT ....................................................................................................................................................................... 42
6.2. EQUITY .................................................................................................................................................................................................. 42
6.3. DIVIDENDS PAID OR DECLARED............................................................................................................................................................ 44
6.4. BUSINESS COMBINATIONS AND ACQUISITION OF INTEREST .............................................................................................................. 44
6.5. EARNINGS PER SHARE ................................................................................................................................................................. 46
7. LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS ........................................................................................................................... 47
7.1. INFORMATION ABOUT FINANCIAL LIABILITIES .................................................................................................................................... 47
7.2. OTHER NON-CURRENT LIABILITIES ....................................................................................................................................................... 48
7.3. CURRENT TRADE AND OTHER LIABILITIES ............................................................................................................................................ 49
7.4. LEASES ................................................................................................................................................................................................... 50
7.5. PROVISIONS FOR EMPLOYEE BENEFITS ................................................................................................................................................ 53
7.6. OTHER PROVISIONS .............................................................................................................................................................................. 54
8. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT ................................................................................................. 55
8.1. FINANCIAL INSTRUMENTS .................................................................................................................................................................... 55
8.2. FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING ................................................................................................... 58
8.3. FINANCIAL RISK MANAGEMENT ........................................................................................................................................................... 60
8.4. DETERMINATION OF FAIR VALUE ......................................................................................................................................................... 67
9. OTHER NOTES ............................................................................................................................................................................. 70
9.1. NOTES TO THE STATEMENT OF CASH FLOWS ...................................................................................................................................... 70
9.2. INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS ....................................................... 71
9.3. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES .............................................................................................................. 74
9.4. INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE FINANCIAL STATEMENTS OF CIECH
S.A. .............................................................................................................................................................................................................. 77
9.5. EVENTS AFTER THE BALANCE SHEET DATE ........................................................................................................................................... 77
9.6. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS PANDEMIC ON
THE OPERATIONS OF CIECH S.A. .................................................................................................................................................................. 78
REPRESENTATION BY THE MANAGEMENT BOARD ........................................................................................................................................ 81
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
4
STATEMENT OF PROFIT OR LOSS OF CIECH S.A.
note
01.01.-31.12.2020
01.01.-31.12.2019*
CONTINUING OPERATIONS
Sales revenues
3.1
1,654,075
2,085,515
Cost of sales
3.2
(1,409,843)
(1,748,689)
Gross profit on sales
244,232
336,826
Other operating income
3.4
5,590
26,901
Selling costs
3.2
(108,042)
(177,464)
General and administrative expenses
3.2
(64,322)
(76,984)
Other operating expenses
3.4
(13,376)
(4,939)
Operating profit
64,082
104,340
Financial income
3.5
286,286
86,107
Profit from financial instruments
3.5
64,617
74,893
Financial expenses
3.5
(172,478)
(111,336)
(Loss) from financial instruments
3.5
(126,311)
(68,654)
Net financial income/(expenses)
113,808
(25,229)
Profit before tax
177,890
79,111
Income tax
4.1, 4.2
(23,056)
(26,695)
Net profit on continuing operations
154,834
52,416
DISCONTINUED OPERATIONS
Net profit/(loss) on discontinued operations
5.9
453
8,020
Net profit for the year
155,287
60,436
Earnings per share (in PLN):
Basic
2.95
1.15
Diluted
2.95
1.15
Earnings per share (in PLN) from continuing operations:
Basic
2.94
0.99
Diluted
2.94
0.99
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
The statement of profit or loss of CIECH S.A. should be analysed together with additional notes and explanations which
constitute an integral part of the financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
5
STATEMENT OF OTHER COMPREHENSIVE INCOME OF CIECH S.A.
note
01.01.-31.12.2020
01.01.-31.12.2019*
Net profit on continuing operations
154,834
52,416
Net profit/(loss) on discontinued operations
453
8,020
Net profit for the year
155,287
60,436
Other comprehensive income before tax that may be reclassified to the
statement of profit or loss
3.6
(30,466)
112
Cash flow hedge reserve
3.6
(30,466)
112
Other comprehensive income before tax that may not be reclassified to the
statement of profit or loss
3.6
(57)
(59)
Actuarial gains
3.6
(51)
(59)
Other components of other comprehensive income
3.6
(6)
-
Income tax attributable to other comprehensive income
4.1
5,798
16
Income tax attributable to other comprehensive income that may be reclassified to
the statement of profit or loss
4.1
5,788
5
Income tax attributable to other comprehensive income that may not be
reclassified to the statement of profit or loss
4.1
10
11
Other comprehensive income net of tax
(24,725)
69
TOTAL COMPREHENSIVE INCOME
130,562
60,505
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
The statement of other comprehensive income of CIECH S.A. should be analysed together with additional notes and
explanations which constitute an integral part of the financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
6
STATEMENT OF FINANCIAL POSITION OF CIECH S.A.
note
31.12.2020
31.12.2019
ASSETS
Property, plant and equipment
5.1
11,805
14,131
Intangible assets
5.3
57,428
54,414
Long-term financial assets
5.4
2,538,642
2,416,967
Deferred income tax assets
4.3
-
2,166
Rights to use an asset
5.2
26,057
29,336
Total non-current assets
2,633,932
2,517,014
Inventory
5.5
6,394
30,694
Short-term financial assets
5.7
1,189,162
794,231
Income tax receivables
-
1,792
Trade and other receivables
5.6
232,895
376,218
Cash and cash equivalents
5.8
265,287
169,983
Non-current assets held for sale
5.9
29,964
-
Total current assets
1,723,702
1,372,918
Total assets
4,357,634
3,889,932
EQUITY AND LIABILITIES
Share capital
6.2
287,614
287,614
Share premium
470,846
470,846
Cash flow hedge reserve
8.2
(25,713)
(1,035)
Actuarial gains
(78)
(37)
Other reserve capitals
6.2
422,699
76,199
Retained earnings
438,400
629,619
Total equity
1,593,768
1,463,206
Loans, borrowings and other debt instruments*
7.1
-
1,580,756
Lease liabilities
7.4
21,792
24,405
Other non-current liabilities
7.2
18,198
26,686
Employee benefits reserve
7.5
979
1,089
Deferred income tax liability
4.3
4
-
Total non-current liabilities
40,973
1,632,936
Loans, borrowings and other debt instruments*
7.1
2,238,619
301,762
Lease liabilities
7.4
6,332
5,035
Trade and other liabilities
7.3
438,836
451,315
Income tax liabilities
4,539
41
Employee benefits reserve
7.5
826
2,312
Other provisions
7.6
33,741
33,325
Total current liabilities
2,722,893
793,790
Total liabilities
2,763,866
2,426,726
Total equity and liabilities
4,357,634
3,889,932
* Reclassification of loans to short-term liabilities in connection with failure to meet the covenant of the loan agreement. Details are
described in point 7.1.
The statement of financial position of CIECH S.A. should be analysed together with additional notes and explanations which
constitute an integral part of the financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
7
STATEMENT OF CASH FLOWS OF CIECH S.A.
note
01.01.-31.12.2020
01.01.-31.12.2019
Cash flows from operating activities
Net profit for the period
155,287
60,436
Amortisation/depreciation
18,839
13,433
Recognition of impairment allowances
15,508
12,836
Foreign exchange (profit) /loss
(39,199)
2,335
(Profit) / loss on investment activities
461
-
(Profit) / loss on disposal of property, plant and equipment
(174)
(32)
Dividends and interest
(171,669)
8,342
Income tax
23,056
26,695
Change in liabilities due to loan arrangement fee
2,226
606
Value of derivatives
20,240
(9,867)
Cash from operating activities before changes in working capital and
provisions
24,575
114,784
Change in receivables
9.1
131,642
23,418
Change in inventory
24,300
10,325
Change in current liabilities
9.1
(57,121)
(81,054)
Change in provisions and employee benefits
9.1
(1,180)
(1,156)
Cash generated from operating activities
122,216
66,317
Interest paid
(47,943)
(78,990)
Income tax (paid)
(7,963)
(49,878)
Net cash from operating activities
66,310
(62,551)
Cash flows from investment activities
Disposal of a subsidiary
104
-
Disposal of intangible assets and property, plant and equipment
3,566
34
Dividends received
181,903
5,268
Interest received
37,713
18,607
Cash pooling inflows*
-
39,853
Proceeds from repaid borrowings
433,850
293,388
Acquisition of a subsidiary
(4,918)
(4,867)
Acquisition of intangible assets and property, plant and equipment
(11,710)
(19,893)
Raise capital expenditures and extra charge on capital
(4,855)
(13,780)
Borrowings paid out
(937,299)
(183,230)
Cash pooling outflows
(1,520)
-
Net cash from investment activities
(303,166)
135,380
Cash flows from financial activities
Proceeds from loans and borrowings
7.1
662,787
261,701
Cash pooling inflows*
19,442
42,317
Repayment of loans and borrowings
7.1
(347,813)
(256,500)
Repayment of lease liabilities
7.4
(6,607)
(5,429)
Net cash from financial activities
327,809
42,089
Total net cash flows
90,953
114,918
Cash and cash equivalents as at the beginning of the period
169,984
54,988
Impact of foreign exchange differences
4,350
77
Cash and cash equivalents as at the end of the period
5.8
265,287
169,983
* Cash pooling - presentation in cashflow:
• Investing activities - the company presents a change in cash pooling receivables.
• Financial activities - the company presents a change in cash pooling liabilities.
The statement of cash flows of CIECH S.A. should be analysed together with additional notes and explanations which
constitute an integral part of the financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
8
STATEMENT OF CHANGES IN EQUITY OF CIECH S.A.
Attributable to shareholders of the parent company
Total equity
Share capital
Share premium
Cash flow hedge
reserve
Other reserve
capitals
Actuarial gains
Retained
earnings
note
6.2
8.2
6.2
01.01.2020
287,614
470,846
(1,035)
76,199
(37)
629,619
1,463,206
Transactions with shareholders included directly in equity
-
-
-
346,500
-
(346,500)
-
Reserve fund for the purchase of own shares
-
-
-
346,500
-
(346,500)
-
Total comprehensive income for the period
-
-
(24,678)
-
(41)
155,281
130,562
Net profit / (loss) for the period
-
-
-
-
-
155,287
155,287
Other comprehensive income
-
-
(24,678)
-
(41)
(6)
(24,725)
31.12.2020
287,614
470,846
(25,713)
422,699
(78)
438,400
1,593,768
01.01.2019
287,614
470,846
(1,152)
76,199
11
569,183
1,402,701
Total comprehensive income for the period
-
-
117
-
(48)
60,436
60,505
Net profit / (loss) for the period
-
-
-
-
-
60,436
60,436
Other comprehensive income
-
-
117
-
(48)
-
69
31.12.2019
287,614
470,846
(1,035)
76,199
(37)
629,619
1,463,206
The statement of changes in equity of CIECH S.A. should be analysed together with additional notes and explanations which constitute an integral part of the financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
9
1. GENERAL INFORMATION
1.1. INFORMATION ON THE COMPANY’S ACTIVITIES
Company Name
CIECH S.A.
Legal form
Spółka Akcyjna
Registered office
Warsaw, Poland
Address
ul. Wspólna 62, 00-684 Warsaw, Poland
KRS (National Court
Register number)
0000011687
(District Court for the capital city of Warsaw in Warsaw
12
th
Commercial Division of the National Court Register)
Country of registration
Poland
Statistical identification
number (REGON)
011179878
Tax ID No (NIP)
118-00-19-377
BDO Registry Number
000015168
Website
www.ciechgroup.com
Branches held
CIECH S.A.’s Branch in Romania
CIECH S.A.’s Branch in Germany
Parent company
KI Chemistry s. à r. l
(a subsidiary of Kulczyk Investments)
Parent company of the
highest level
Luglio Limited
CIECH S.A. is a holding company that manages and provides support services to its subsidiaries — domestic and foreign
manufacturing, trade and service companies of the CIECH Group. The CIECH Group is an international, professionally managed
group with a well-established position of a leader of the chemical sector in Central and Eastern Europe. It manufactures
products which are used in the production of articles necessary in everyday life of people all over the world – state-of-the-
art products of the highest, world quality. Taking advantage of the support of a reliable strategic investor – Kulczyk
Investments – it implements the strategy of global development.
Key products manufactured by the CIECH Group include: sodium carbonate, sodium bicarbonate, evaporated salt,
agrochemical products, polyurethane foams, lanterns and jars, sodium and potassium silicates. The core sales market for the
CIECH Group is the European Union, including mainly Poland, Germany and Central Eastern European countries. Products
manufactured by the CIECH Group are also exported to overseas markets.
1.2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES
1.2.1. REPRESENTATION BY THE MANAGEMENT BOARD
These financial statements of CIECH S.A. for the period from 1 January 2020 to 31 December 2020, including comparative
data, were approved by the Management Board of CIECH S.A. on 22 April 2021.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
10
The Management Board of CIECH S.A. represents that these separate financial statements for the current and comparable
period have been prepared in compliance with International Financial Reporting Standards approved by the European Union
and related interpretations issued by the European Commission in the form of Regulations (IFRS).
The Management Board of CIECH S.A. represents that to the best of its knowledge these separate financial statements,
including corresponding figures, have been prepared in accordance with the generally acceptable accounting principles and
that they represent a true, accurate and fair reflection of CIECH S.A.’s financial position and the results of operations.
Furthermore, the Management Board of CIECH S.A. represents that the Directors’ report on operations of the CIECH Group
and CIECH S.A. in 2020 contains a true image of the Company’s developments, achievements, and condition, including the
description of major risks and threats.
The Management Board of CIECH S.A. represents that Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its
registered office in Warsaw, entered into the list of entities authorised to audit financial statements under the registry No 73
kept by the National Chamber of Statutory Auditors was chosen in accordance with the binding legal regulations for the
auditor of these separate financial statements. The above entity, including the certified auditors performing the audit, satisfy
all the conditions required in order to issue an unbiased and independent audit report, pursuant to the applicable domestic
legal regulations.
1.2.2. BASIS OF PREPARATION
On 31 January 2007, the Extraordinary General Meeting of Shareholders of CIECH S.A. adopted resolution No 4, concerning
the preparation of separate financial statements in accordance with International Financial Reporting Standards as approved
by the European Union. Due to the adopted resolution, since 2007 the reports of CIECH S.A. have been prepared in accordance
with the IFRS using the valuation of assets and liabilities and the measurement of net profit/loss. Major accounting principles
applied in the preparation of these financial statements are listed in note 1.4. These principles have been applied on a
continuous basis in all presented periods.
The financial statements of CIECH S.A. have been prepared on the historical cost basis except for financial assets and liabilities
(derivative instruments) measured at fair value through profit or loss.
These financial statements were prepared under the assumption that CIECH S.A. will continue as a going concern in the
foreseeable future. As at the date of approval of these financial statements, no facts or circumstances are known that would
indicate any threat to the Company continuing as a going concern.
The financial year for CIECH S.A is the calendar year.
These financial statements, with the exception of the separatory statement of cash flows, have been prepared on an accrual
basis. The statement of profit or loss of CIECH S.A. is prepared in the cost by function format. The statement of cash flows is
prepared using the indirect method.
Preparation of the financial statement in accordance with IFRS requires the Management Board to make own assessments
and apply certain assumptions and accounting estimates as part of the application of accounting principles adopted by the
Company. Issues which require significant assessments or areas where the assumptions and estimates made have a significant
impact on these financial statements have been described in note 1.4.
CIECH S.A. also prepares consolidated financial statements available at https://ciechgroup.com/en/relacje-
inwestorskie/reports/periodical-reports/.
1.3. FUNCTIONAL AND REPORTING CURRENCY
The Polish zloty (PLN) is the functional currency of CIECH S.A., and the reporting currency of these financial statements. Unless
stated otherwise, all financial data in these financial statements have been presented in thousands of Polish zlotys (PLN ’000).
CIECH S.A. has Branches (in Romania and Germany) whose accounting records are kept in local currencies (RON and EUR).
For the purpose of preparing the financial statements of CIECH S.A., accounting records of the Branch in Romania are
translated using the transaction exchange rates and the accounting records of the Branch in Germany – at the average NBP
rate for a given period. Due to an insignificant value of transactions, translation at this exchange rate does not result in a
material distortion of results.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
11
1.4. ACCOUNTING POLICIES
To ensure more legible presentation and better understanding of the information disclosed in the financial statements, key
accounting principles applicable in CIECH S.A. as well as judgements and estimates made have been presented in separate
notes.
Note
Title
Accounting
principles
Judgements
and
estimates
3.1.
Sales revenues
x
3.2.
Cost of sales
x
3.4.; 3.5.
Other income and expenses
x
x
4.1.
Income tax
x
4.3.
Deferred income tax
x
x
5.1.
Property, plant and equipment
x
x
5.2.
Right-of-use assets
x
x
5.3.
Intangible assets
x
x
5.4.
Long-term financial assets
x
x
5.5.
Inventories
x
x
5.6.
Short-term receivables
x
x
5.7.
Short-term financial assets
x
x
5.8.
Cash and cash equivalents
x
x
5.9.
Discontinued operations, assets and liabilities classified as held for sale
x
x
6.2.
Equity
x
x
7.1
Information on financial liabilities
x
7.2.
Other long-term liabilities
x
x
7.3.
Current trade and other liabilities
x
x
7.4.
Leases
x
x
7.5.
Provisions for employee benefits
x
x
7.6.
Other provisions
x
x
8.1.
Financial instruments
x
x
8.2.
Financial instruments designated
for hedge accounting
x
x
9.2.
Information on changes in contingent assets and liabilities and other matters
x
x
1.5. CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES
Amendments to IAS/IFRS and their potential impact on the Company’s financial statements are presented below:
New Standards, amendments to Standards and Interpretations:
Approved by the IASB for application
as at the balance sheet date
Impact on the financial statements
Effective year in the EU
Amendments to references to the Conceptual Framework in
IFRSs
No material impact on the financial
statements is estimated
2020
Amendments to IFRS 3 “Business Combinations” – definition of a
business – published on 22 October 2018
No material impact on the financial
statements is estimated
2020
Amendments to IAS 1 and IAS 8 – definition of “material”
No material impact on the financial
statements is estimated
2020
Amendments to IFRS 9, IAS 39 and IFRS 7 in response to the IBOR
reform – modification of IFRS and IAS so that the expected
reform of benchmark rates does not result in the termination of
hedge accounting.
The Company analyses issues related to
the expected reform of benchmark
rates – if there are any changes, their
estimated effects would be recognised
in the financial statements
2020
IFRS 14 “Regulatory deferral accounts”
No material impact on the financial
statements is estimated
n/a
Amendment to IFRS 16 “Leases” – Covid-19-related rent
concessions
No material impact on the financial
statements is estimated
2020
New standards and interpretations entering into force after the
balance sheet date
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
12
New Standards, amendments to Standards and Interpretations:
As at the date of approval of these financial statements,
amendments to IFRS 4 "Insurance Contracts" entitled “Extension
of the Temporary Exemption from Applying IFRS 9” have been
issued by the International Accounting Standards Board (IASB)
and adopted by the European Union on 16 December 2020, and
are effective as of a later date
No material impact on the financial
statements is estimated
The expiry date of the
temporary exemption
from IFRS 9 has been
extended from 1 January
2021 to annual periods
beginning on 1 January
2023
New standards and interpretations pending endorsement by
the European Union
Impact on the financial statements
Effective year in the EU
IFRS 14 “Regulatory Deferral Accounts”
No material impact on the financial
statements is estimated
The European Commission
has decided not to launch
the endorsement process
of this interim standard
until the final IFRS 14 is
issued.
Amendments to IAS 1 “Presentation of financial statements” –
classification of liabilities as current or non-current
No material impact on the financial
statements is estimated
2023
Amendments to IFRS 16 “Property, plant and equipment”
proceeds before intended use
No material impact on the financial
statements is estimated
2022
Amendments to IAS 37 “Provisions, Contingent Liabilities and
Contingent Assets” – onerous contracts – cost of fulfilling the
contract
No material impact on the financial
statements is estimated
2022
Amendments to IFRS 3 “Business Combinations” – amendments
to references in the Conceptual Framework along with
amendments to
IFRS 3
No material impact on the financial
statements is estimated
2022
Amendments to IFRS 10 “Consolidated Financial Statements” and
IAS 28 “Investments in Associates and Joint Ventures” – sale or
contribution of assets between an investor and its associate or
joint venture, and further amendments
No material impact on the financial
statements is estimated
The effective
date has been
postponed
Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial
Instruments: Recognition and Measurement” and IFRS 7
“Financial Instruments: Disclosures”, IFRS 4 “Insurance
Contracts” and IFRS 16 “Leases” – Reform of the Benchmark
Interest Rate – Stage 2
No material impact on the financial
statements is estimated
2021
Amendments to various standards resulting from “Annual
Improvements to IFRS Standards 2018–2020 Cycle” –
amendments made as part of the annual IFRS improvements
project (IFRS 1, IFRS 9, IAS 16 and IAS 41) primarily to correct
conflicts and clarify wording (amendments to IFRS 1, IFRS 9 and
IAS 41
No material impact on the financial
statements is estimated
2022
IFRS 17 “Insurance Contracts”
No material impact on the financial
statements is estimated
2023
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
13
2. SEGMENT REPORTING
Following the change of the business model and the adoption of the Reorganisation concept of the CIECH group, it was decided
to introduce the division of competences within the CIECH Group among individual business areas – business units (“BUs”). The
adoption of the Reorganisation Concept is to serve the implementation of the strategy adopted, as well as to streamline
business and decision-making processes and improving the transparency of the operation of the CIECH Group. In connection
with the reorganisation, the previously presented operating segments were assigned to the new business structure:
1. BU Soda
2. BU Salt
3. BU Agro
4. BU Resins
5. BU Foams
6. BU Silicates
7. BU Packaging.
Currently, the Company has reached its target structure for most BUs, assets and operations have been unambiguously assigned
to the designated areas. Below are presented the figures according to the new segment structure, taking into account its current
form:
Previous structure:
Current structure:
Soda Segment (BU Soda, BU Salt)
Soda Segment comprising BU Soda, BU Salt and transport services
assigned to these BUs
Organic Segment (BU Agro, BU Resins, BU Foams)
Agro Segment comprising BU Agro, Resins Segment comprising BU
Resins, Foams Segment comprising BU Foams and transport
services assigned to these Bus
Silicates and Glass Segment (BU Silicates, BU Packaging)
Silicates Segment comprising BU Silicates, Packaging Segment
comprising BU Packaging and transport services assigned to these
Bus
Transport Segment
Operations reallocated to individual segments
Other Segment
Other services provided to selected companies from the Group and
transport services assigned to this segment.
For details on the reorganisation of the CIECH Group, see current report No 47/2019.
The CIECH S.A.’s operating segments are designated on the basis of internal reports prepared by the Company’s and are
regularly reviewed by the Management Board, which is responsible for operating decisions aimed at allocating resources to
segments and assessing the subsidiaries performance.
CIECH S.A. has been divided into the following operating segments:
Soda Segment (comprising BU Soda, and BU Salt) – the most important products manufactured in this segment are: light and
dense sodium carbonate, evaporated salt, sodium bicarbonate and calcium chloride. The products of this area are sold mainly
by the parent company CIECH S.A. Production of the Segment goods is implemented in CIECH Soda Polska S.A., the Romanian
company CIECH Soda Romania S.A. (until September 2019) and in the German company CIECH Soda Deutschland GmbH&Co.
KG (German company also sells its own products) . These products are used in the glass, food, detergent and pharmaceutical
industries.
Agro Segment – the CIECH Group is a manufacturer of a number of crop protection products used in agriculture and produced
by the companies: CIECH Sarzyna S.A. and Proplan Plant Protection Company, S.L., and CIECH S.A. was the main supplier of
raw materials for production for CIECH Sarzyna S.A.
Resins Segment – the CIECH Group is a producer of a variety of organic compounds manufactured by CIECH Żywcie Sp. z o.o.
In 2020, it was producing, among others, epoxy resins and polyester resins. These products are used in the following
industries: automotive, paints and electronics. In 2020, CIECH Żywice Sp. z o.o. was designated for sale due to the signing of
a preliminary sales agreement with LERG S.A., and its figures are reported as discontinued operations. Data on discontinued
operations also include the result of CIECH S.A. obtained from transactions with CIECH Żywice Sp. z o.o.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
14
Foams Segment – the CIECH Group is a producer of polyurethane foams manufactured by CIECH Pianki Sp. z o.o and CIECH
S.A. was the main supplier of raw materials for production for this company.
Silicates Segment – CIECH S.A. sells silicates segment products manufactured by CIECH Soda Romania S.A. In 2020, these were
mainly glassy sodium silicate and sodium water glass. These products are used in the construction industry and for the
production of detergents.
Packaging Segment – within this segment, CIECH S.A. provides support services for the company CIECH Vitrosilicon S.A., which
deals with the production of glass packaging - lanterns and jars, used for the production of candles and in the food industry.
Other activities covers mainly services provided outside the Group and goods sold by CIECH S.A. outside the area of activity
of the above-mentioned segments.
The individual segments also show the support services provided by CIECH S.A. for companies from the CIECH Group, incl.
accounting, controlling, legal, administrative, IT.
The Company’s financing is managed (including finance expenses and income with the exception of interest and exchange
differences on trade receivables and liabilities) and income tax is calculated on the Group level and they are not allocated to
particular segments.
CIECH S.A. has been divided into the following geographical areas: Poland, European Union, Other European countries, Africa,
Asia, Other regions. Information on the Company’s geographical areas is established based on the Company’s assets
localisation.
Revenues and costs, assets and liabilities of segments are recognised and measured in a manner consistent with the method
used in the separate financial statements.
Operational segments results are assessed by the CIECH S.A’s Management Board on the basis of sales revenue, operating
profit, level of EBITDA and adjusted EBITDA. The need to separate additional segments in accordance with IFRS 8 has not
been identified.
EBITDA should be viewed as a supplement not as a substitute for the business performance presented in accordance with
IFRS. EBITDA is a useful ratio of the ability to incur and service debt. EBITDA and adjusted EBITDA levels are not defined by
the IFRS and can be calculated in a different manner by other entities.
The reconciliation and definitions applied by CIECH S.A. when determining these measures are presented below.
01.01.-31.12.2020
01.01.-31.12.2019*
Net profit/(loss) on continuing operations
154,834
52,416
Income tax
23,056
26,695
Financial expenses
172,478
111,336
Financial income
(286,286)
(86,107)
Amortisation/depreciation
18,839
13,433
EBITDA on continued operations
82,921
117,773
EBITDA on discontinued operations
2,400
5,632
EBITDA on continued and discontinued operations
85,321
123,405
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
01.01.-31.12.2020
01.01.-31.12.2019*
EBITDA on continued operations
82,921
117,773
One-offs including:
(1,016)
(3,819)
Cash items (a)
840
(40)
Non-cash items (without impairment) (b)
(1,856)
(3,779)
Adjusted EBITDA from continued operations
81,905
113,954
Adjusted EBITDA from discontinued operations
2,400
5,632
Adjusted EBITDA from continued and discontinued operations
84,305
119,586
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
(a) Cash items include, among others, gain/loss of the sale of property, plant and equipment, as well as fees and compensations received).
(b) Non-cash items include: provisions for liabilities, compensation and other provisions.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
15
OPERATING SEGMENTS
Revenue and costs data as well as assets, equity and liabilities data of particular CIECH S.A.’s operating segments for periods disclosed in statements are presented in the tables below.
OPERATING SEGMENTS
01.01.-31.12.2020
Soda
Segment
Agro Segment
Foams
Segment
Silicates
Segment
Packaging
Segment
Other
operations
Segment
Corporate
functions
TOTAL
Total sales revenues
1,407,865
106,351
100,511
30,828
194
8,326
-
1,654,075
Cost of sales
(1,182,762)
(99,198)
(93,210)
(27,703)
(186)
(6,784)
(1,409,843)
Gross profit /(loss) on sales
225,103
7,153
7,301
3,125
8
1,542
-
244,232
Selling costs
(103,883)
455
(2,294)
(1,889)
-
(431)
-
(108,042)
General and administrative expenses
(7,791)
-
-
(4)
-
-
(56,527)
(64,322)
Result on management of receivables
(8,925)
(158)
-
(3)
-
15
44
(9,027)
Result on other operating activities
1,959
(69)
-
-
-
(302)
(347)
1,241
Operating profit /(loss)
106,463
7,381
5,007
1,229
8
824
(56,830)
64,082
Exchange differences and interest on trade
settlements
(310)
(1,467)
(1,402)
-
-
(396)
(10)
(3,585)
Borrowing costs
-
-
-
-
-
-
(13,656)
(13,656)
Result on financial activity (non-attributable to
segments)
-
-
-
-
-
-
131,049
131,049
Profit /(loss) before tax
106,153
5,914
3,605
1,229
8
428
60,553
177,890
Income tax
-
-
-
-
-
-
-
(23,056)
Net profit /(loss) on continuing operations
154,834
Net profit /(loss) on discontinued operations
453
Net profit /(loss) for the period
-
-
-
-
-
-
-
155,287
Amortization/depreciation
3,526
44
-
-
-
417
14,852
18,839
EBITDA from continuing operations
109,989
7,425
5,007
1,229
8
1,241
(41,978)
82,921
Adjusted EBITDA from continuing operations*
108,860
7,425
5,007
1,229
8
1,241
(41,865)
81,905
* Adjusted EBITDA for the 12-month period ended 31 December 2020 is calculated as EBITDA adjusted for untypical one-off events such as: reversal of provisions for liabilities: PLN 1,856 thousand; donations given
– PLN 881 thousand; other: PLN 41 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
16
OPERATING SEGMENTS
01.01.-31.12.2019
Soda
Segment
Agro Segment
Foams
Segment
Silicates
Segment
Packaging
Segment
Other
operations
Segment
Corporate
functions
TOTAL*
Total sales revenues
1,773,696
133,587
138,584
29,780
-
9,868
-
2,085,515
Cost of sales
(1,449,335)
(129,385)
(133,229)
(27,460)
-
(9,280)
(1,748,689)
Gross profit /(loss) on sales
324,361
4,202
5,355
2,320
-
588
-
336,826
Selling costs
(169,235)
(3,431)
(2,337)
(2,190)
-
(271)
-
(177,464)
General and administrative expenses
(1,909)
-
-
(80)
-
(667)
(74,328)
(76,984)
Result on management of receivables
693
(78)
2
1
-
17
-
635
Result on other operating activities
1,337
-
-
-
-
(862)
20,852
21,327
Operating profit /(loss)
155,247
693
3,020
51
-
(1,195)
(53,476)
104,340
Exchange differences and interest on trade
settlements
(14,358)
(42)
336
-
-
(90)
-
(14,154)
Borrowing costs
-
-
-
-
-
-
(18,606)
(18,606)
Result on financial activity (non-attributable to
segments)
-
-
-
-
-
-
7,531
7,531
Profit /(loss) before tax
140,889
651
3,356
51
-
(1,285)
(64,551)
79,111
Income tax
-
-
-
-
-
-
-
(26,695)
Net profit /(loss) on continuing operations
-
-
-
-
-
-
52,416
Net profit /(loss) on discontinued operations
-
-
-
-
-
-
8,020
Net profit /(loss) for the period
-
-
-
-
-
-
-
60,436
Amortization/depreciation
3,794
45
-
3
-
630
8,961
13,433
EBITDA from continuing operations
159,041
738
3,020
54
-
(565)
(44,515)
117,773
Adjusted EBITDA from continuing operations**
158,702
738
3,020
54
-
(550)
(48,010)
113,954
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
** Adjusted EBITDA for the 12-month period ended 31 December 2019 is calculated as EBITDA adjusted for untypical one-off events such as: reversal of provisions for liabilities: PLN 3,779 thousand, other: PLN 40
thousand.
There are no significant customers outside the CIECH Group from whom the Company would earn 10% of its total revenues.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
17
ASSETS AND LIABILITIES BY OPERATING SEGMENTS
ASSETS
LIABILITIES
31.12.2020
31.12.2019
31.12.2020
31.12.2019
Soda Segment
85,672
175,122
263,849
290,366
Agro Segment
9,858
48,076
4,129
26,149
Resins Segment*
97,228
124,199
38,192
28,266
Foams Segment
1,326
4,747
9
16,944
Silicates Segment
4,224
3,870
9,636
2,686
Packaging Segment
83
-
-
-
Other operations Segment
13,901
6,527
16,191
21,337
Corporate functions
4,145,342
3,527,391
2,431,860
2,040,978
TOTAL
4,357,634
3,889,932
2,763,866
2,426,726
* Assets related to discontinued operations. Detailed information on discontinued operations is provided in Note 5.9 to this report.
In CIECH S.A. investment outlays for 2020 in the amount of PLN 17,072 thousand PLN and 2019 in the amount of
PLN 17,609 thousand were included in the Segment "Corporate functions".
SALES REVENUES BY BUSINESS SEGMENTS
At CIECH S.A., sales revenues are recognized upon the provision of services or delivery of goods. For detailed information on
the recognition of sales revenue, please refer to Note 3.1 to these financial statements.
01.01.-31.12.2020
01.01.-31.12.2019*
Change
2020/2019
Change %
Soda Segment, including:
1,407,865
1,773,696
(365,831)
(20.6%)
Dense soda ash
814,859
985,772
(170,913)
(17.3%)
Light soda ash
227,365
410,357
(182,992)
(44.6%)
Salt
190,410
200,990
(10,580)
(5.3%)
Sodium bicarbonate
105,770
98,702
7,068
7.2%
Calcium chloride
18,111
26,174
(8,063)
(30.8%)
Other goods and services
51,350
51,701
(351)
(0.7%)
Agro Segment, including:
106,351
133,587
(27,236)
(20.4%)
Raw materials for production of plant pro-tection products
98,137
129,381
(31,244)
(24.1%)
Other goods and services
8,214
4,206
4,008
95.3%
Foam Segment, including:
100,511
138,584
(38,073)
(27.5%)
Raw materials for the production of polyu-rethane foams
96,928
137,111
(40,183)
(29.3%)
Other goods and services
3,583
1,473
2,110
143.2%
Silicates Segment, including:
30,828
29,780
1,048
3.5%
Sodium silicates
11,279
10,436
843
8.1%
Other goods and services
19,549
19,344
205
1.1%
Packaging Segment, including:
194
-
194
-
Container glass
194
-
194
-
Other Segment, including:
8,326
9,868
(1,542)
(15.6%)
Revenues from third parties
8,326
9,868
(1,542)
(15.6%)
TOTAL
1,654,075
2,085,515
(431,440)
(20.7%)
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
18
INFORMATION ON GEOGRAPHICAL AREAS
Information on CIECH S.A.’s geographical areas is established based on the location of its assets.
ASSETS
31.12.2020
31.12.2019
Poland
2,204,723
2,230,288
European Union (excluding Poland)
2,152,810
1,639,972
Other European countries
51
6,665
Africa
-
911
Asia
50
12,096
TOTAL
4,357,634
3,889,932
The Company’s non-current assets are located in Poland and the European Union. As regards the European Union, the most
significant non-current assets comprise shares in subsidiaries having their registered offices mainly in Romania (PLN 111,000
thousand), Germany (PLN 810,493 thousand) and Spain (PLN 203,866 thousand). Trade and other receivables constitute the
main component of current assets presented in individual geographical areas.
REVENUES BY GEOGRAPHICAL SEGMENTS
01.01.-31.12.2020
01.01.-31.12.2019*
Poland
1,124,908
1,157,998
European Union (excluding Poland)
450,247
598,341
Germany
113,253
113,554
Romania
20,593
83,024
Czech Republic
143,580
132,759
Italy
5,342
5,867
The Netherlands
51,417
46,634
Finland
27,580
50,609
Sweden
21,168
37,327
Belgium
8,485
12,124
United Kingdom
2,880
32,343
Denmark
7,325
7,257
France
11,643
3,957
Luxembourg
1,046
161
Lithuania
6,996
7,537
Other EU countries
28,939
65,188
Other European Countries
64,482
122,583
Switzerland
2,393
12,684
Norway
43,486
44,452
Russia
1,016
863
Other European countries
17,587
64,584
Africa
9,355
69,459
Asia
4,300
131,969
Indie
121
64,802
Singapur
1,043
9,325
Bangladesz
-
24,471
Hongkong
-
15,023
Turcja
-
3,496
Other Asian countries
3,136
14,852
Other regions
949
2,440
Hedge accounting
(166)
2,725
TOTAL
1,654,075
2,085,515
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
19
3. NOTES TO THE STATEMENT OF PROFIT OR LOSS AND STATEMENT OF
OTHER COMPREHENSIVE INCOME
3.1. SALES REVENUES
Accounting policy
The Entity recognises revenues based on the so-called 5-step model – when it satisfies a performance obligation by
transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer
obtains control of that asset. When (or as) a performance obligation is satisfied, the Entity recognises as revenues the
amount of the transaction price that is allocated to that performance obligation.
At CIECH S.A., revenues for sales of goods are recognized upon their delivery in accordance with the INCOTERMS
conditions contained in contracts with customers. Most often, the company sells on the bases: DAP, FCA, DDP.
Revenues from sales of services are recognized upon the provision of services.
CIECH S.A. concludes contracts with contractors regarding the provision of CIECH S.A.’s products as part of consignment
warehouses owned by contractors. Control over the delivered products is transferred to the customer when they are
accepted for storage, and at this point sales revenue is recognized along with the corresponding cost of sale.
CIECH S.A. grants rebates to selected customers, and the value of these rebates reduces the value of sales revenues.
Revenues from the sales of products and goods are recognised in profit or loss at the NBP’s average exchange rate from
the date preceding the date of invoice, except for sales revenues earned by the Branch of CIECH S.A. in Germany whose
currency translation principle is described in note 1.3.
For detailed information on sales revenues by operating segment and by geographical market, please refer to Note 2 to
these financial statements.
Payment terms
Commercial contracts concluded by CIECH S.A. include various terms of payment of trade receivables depending on the
type of transaction, market characteristics and trade conditions. The most common payment terms are: 14, 30 and 60
days.
CIECH S.A. uses non-recourse factoring and detailed information is provided in Note 5.6 to these financial statements.
SALES REVENUES
01.01.-31.12.2020
01.01.-31.12.2019*
Revenues from sales of services
113,513
115,824
Revenues from sales of goods
1,540,562
1,969,691
Net sales of products, goods and materials
1,654,075
2,085,515
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
3.2. COST OF SALES, SELLING COSTS, GENERAL AND ADMINISTRATIVE EXPENSES
Accounting policy
Expenses are probable decreases in economic benefits in the form of outflows or depletions of assets or increases in
liabilities and provisions.
Cost of sales comprises the production cost of services sold and the cost of goods and materials sold.
Selling costs include, among others: costs of transport, sales commissions and the costs of advertising, promotion and
distribution.
General and administrative expenses are expenses associated with activities of the entity’s management or those of
general functions.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
20
Provisions for liabilities to employees arising from the employment relationship (salaries, bonuses, holiday
entitlements, etc.) are recognised in prime cos of sales, general and administrative expenses, cost od sale.
Provisions for liabilities to former key employees (compensation for termination of contracts, non-competition clauses,
etc.) are recognised in general and administrative expenses or selling expenses.
Provisions for length-of-service awards, retirement and disability benefits are recognised in other operating expenses.
Amortisation and depreciation
In this item, the Company recognises the cost of accrued depreciation charges on property, plant and equipment,
amortisation charges on intangible assets, and depreciation charges on right-of-use assets. Depreciation and
amortisation charges are recognised as operating expenses depending on where they arise.
COST OF SALES, SELING COST AND ADMINISTRATIVE EXPENSES
01.01.-31.12.2020
01.01.-31.12.2019*
Cost of manufacture of products and services sold
(94,108)
(100,987)
Cost of sold goods and materials sold
(1,315,735)
(1,647,702)
Cost of sales
(1,409,843)
(1,748,689)
Selling costs
(108,042)
(177,464)
General and administrative expenses
(64,322)
(76,984)
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
3.3. COSTS BY TYPE
COST BY KIND (SELECTED)
01.01.-31.12.2020
01.01.-31.12.2019*
Amortisation
(18,409)
(13,433)
Consumption of materials and energy
(2,727)
(3,073)
Employee benefits, including:
(83,740)
(84,641)
- payroll
(70,768)
(72,817)
- social security and other benefits
(9,324)
(10,042)
- other
(1,119)
(1,782)
External services
(153,653)
(235,126)
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
3.4. OTHER OPERATING INCOME AND EXPENSES
Accounting policy
The reporting period’s results are also affected by other operating income and expenses indirectly related to the
Company's core operations.
The key items include:
✓ recognition/reversal of provisions, among others for liabilities, employee benefits,
✓ gains/ losses on disposal and liquidation of non-financial non-current assets,
✓ recognition/ reversal of impairment losses (including allowances for doubtful receivables),
✓ penalty fees and compensation paid/ received;
✓ income from rental of investment property is recognised in profit or loss on a straight-line basis over the lease term.
Any lease incentives granted are an integral part of the net consideration agreed for the use of the asset.
Judgements and estimates - Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventory and deferred tax assets, are reviewed
at reporting date to determine whether there is any indication of impairment. If any such indication exists, then the
Company estimates the recoverable amount of the respective cash-generating unit.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value
in use. The recoverable amount is determined for individual assets, unless the asset does not generate cash inflows that
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
21
are largely independent of the cash inflows from other assets or groups of assets. If the asset's carrying amount exceeds
its recoverable amount, an impairment loss is recognised against the carrying amount of the asset. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessment of the time value of money and the risks specific to the asset.
Impairment losses are recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the unit (group of units) and then to reduce the carrying amount of the other assets
in the unit (group of units) on a pro rata basis. Impairment losses are recognised in profit or loss. Impairment losses in
respect of assets are recognised in those expense categories that correspond to the function of the asset to which they
relate.
OTHER OPERATING INCOME
01.01.-31.12.2020
01.01.-31.12.2019*
Rents/lease income
433
470
Gain on disposal of non-financial non-current assets
186
32
Reversal of impairment allowances on receivables
656
921
Reversal of provisions on employee benefits
158
-
Reversal of provisions for liabilities – changing the base
2,172
4,238
Reversal of other provisions
-
1,891
Other services
-
328
Car sale - lease
320
-
Revenues from sublease
570
-
Other
1,095
19,021
TOTAL
5,590
26,901
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
In the corresponding period, the “other” item included the amount of PLN 17,612 thousand, representing the value of
deferred payment for the acquisition of Proplan. EUR 4,136 thousand of discounted conditional deferred payment which
depended on Proplan’s results for 2018 and 2019, was payable respectively in 2019 and 2020 (the estimation of nominal
payments at the moment of acquisition of control was EUR 4,270 thousand). However, due to the fact that Proplan failed to
achieve financial results allowing for payment of this part of consideration for the acquisition of Proplan Plant Protection
Company, S.L., the value of this deferred payment was recognised on a one-off basis as other operating income in the amount
of PLN 17,612 thousand.
OTHER OPERATING EXPENSES
01.01.-31.12.2020
01.01.-31.12.2019
Rental costs
(766)
(847)
Recognition of impairment losses on receivables
(9,683)
(302)
Recognition of provisions on employee benefits
-
(2,767)
Recognition of provisions for liabilities
(316)
(251)
Sublease costs
(1,052)
-
Other
(1,559)
(772)
TOTAL
(13,376)
(4,939)
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
As at 31 December 2020, CIECH S.A. made an assessment of premises, originating both from external and internal sources of
information, of indicators of impairment of non-financial assets. These analyses did not indicate the need to conduct
impairment tests.
3.5. FINANCIAL INCOME AND EXPENSES
Accounting policy
Financial income and expenses relate to an entity’s financing activities including the acquisition and disposal of equity,
securities, drawing of loans and borrowings, issuance of debt securities. Key items of financing activities include:
✓ interest on borrowings determined based on the effective interest method,
✓ impairment losses on financial assets,
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
22
✓ interest earned by the Company on cash and cash equivalents (bank deposits and accounts loans granted and
receivables) – accounted for in the profit and loss on accrual basis using the effective interest method,
✓ dividend income – recognised in profit or loss when the Company’s right to receive payment is established,
✓ net foreign exchange gains or losses,
✓ gains/(losses) on sales of financial assets,
✓ gains/(losses) on derivatives.
Judgements and estimates
At each reporting date the Company assesses whether there is any evidence that a financial asset or a group of financial
assets is impaired. Where such evidence exists, the Company tests the value of interests in subsidiaries. The recoverable
value is defined as the higher of value in use and fair value less costs to sell. Value in use is determined using the
discounted cash flow model. The cash flows are based on financial plans covering a period of the next five years,
excluding the effects of restructuring, or significant future investments that can improve the operating results of assets
being part of the tested cash-generating unit. The recoverable amount is sensitive to the discount rate used in the
discounted cash flow model, as well as the expected future cash flows and growth rate adopted for the residual period.
Where it is necessary to recognise impairment losses on involvement in other companies, such losses are recognised in
the following order: on shares, on loans granted, on interest on loans.
Accounting policy concerning financial instruments is presented in note 8.1.
NET FINANCIAL INCOME (EXPENSES)
01.01.-31.12.2020
01.01.-31.12.2019*
Interest
46,299
45,625
Dividends and shares in profit
181,903
5,269
Net foreign exchange gains
35,793
2,277
Reversal of impairment losses
9,131
4,818
Profits from derivatives
11,589
25,515
Reversal of provision of financial liabilities
-
1,755
Other
1,571
848
Total financial income
286,286
86,107
Interest
(55,405)
(68,563)
Recognition of other impairment losses**
(24,642)
(17,730)
Bank fees and commissions
(3,540)
(3,077)
Recognition of provision for anticipated losses
(1,119)
(2,261)
Loss due to derivatives
(70,906)
(91)
Costs of discounting of liabilities
-
(2,522)
Guarantees costs
(15,171)
(14,001)
Other
(1,695)
(3,091)
Total financial expenses
(172,478)
(111,336)
Net Financial income (expenses)
113,808
(25,229)
*Restated data. Detailed information on discontinued operations is provided in Note 5.9 to this report.
**This includes, among other things, recognised and reversed impairment losses on financial assets, as described in more detail in Notes 5.4,
5.7.
In 2020, CIECH S.A. received the largest dividends from the following companies:
• CIECH Soda Deutschland GmbH, in the amount of PLN 126,743 thousand,
• CIECH Pianki Sp. z o.o., in the amount of PLN 30,000 thousand,
• CIECH Vitrosilicon S.A., in the amount of PLN 24,912 thousand.
CIECH S.A. recorded a loss on the following derivatives:
• CIRS, in the amount of PLN 49,202 thousand,
• Forward, in the amount of PLN 18,381 thousand,
• SWAP, in the amount of PLN 3,323 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
23
The item "Profit / loss on financial instruments" in the statement of profit or loss consists of the following values:
01.01.-31.12.2020
01.01.-31.12.2019
Profit on financial instruments
64,617
74,893
Interest
46,299
45,625
Profit on derivatives
11,182
24,571
Write -offs
7,136
4,697
Loss on financial instruments
(126,311)
(68,654)
Interest
(55,405)
(68,563)
Loss on derivatives
(70,906)
(91)
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME
01.01.-31.12.2020
01.01.-31.12.2019
Tax effect of each component of other comprehensive
income of the CIECH Group
Before
tax
Tax
After tax
Before
tax
Tax
After tax
Cash flow hedge
(30,466)
5,788
(24,678)
112
5
117
Valuation of actuarial provisions
(51)
10
(41)
(59)
11
(48)
Other components of other comprehensive income
(6)
-
(6)
-
-
-
TOTAL
(30,523)
5,798
(24,725)
53
16
69
Income tax and reclassification adjustments in other comprehensive income
Other comprehensive income before tax
01.01.-31.12.2020
01.01.-31.12.2019
Cash flow hedge
(30,466)
112
fair value remeasurement in the period
(34,661)
(4,912)
reclassification to profit or loss
4,195
5,024
Valuation of actuarial provisions
(51)
(59)
remeasurement for the current period
(51)
(59)
Other components of other comprehensive income
(6)
-
remeasurement for the current period
(6)
-
Income tax attributable to other components of other comprehensive income
5,798
16
accrued for the current period
6,596
883
reclassification to profit or loss
(798)
(867)
Other comprehensive income net of tax
(24,725)
69
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
24
4. INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY
Accounting policy
Current tax receivables and liabilities for the current and prior periods are measured in the amount of the expected tax
amount to be paid to tax authorities (recoverable from tax authorities) using tax rates and tax laws that are legally or
substantively enacted at the reporting date.
4.1. MAIN COMPONENTS OF TAX EXPENSE
The main components of tax expense include:
THE MAIN COMPONENTS OF TAX EXPENSE (TAX INCOME)
01.01.-31.12.2020
01.01.-31.12.2019
Current income tax
(15,088)
(3,331)
Income tax for the reporting period
(14,449)
(1,842)
Adjustment to tax for previous years
(639)
(1,489)
Deferred tax
(7,968)
(23,364)
Origination/reversal of temporary differences
7,120
(23,364)
Unrecognized deferred tax assets
(15,088)
-
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS
(23,056)
(26,695)
For a detailed description of proceedings concerning tax settlements, see note 9.2 to these financial statements.
INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME
01.01.-31.12.2020
01.01.-31.12.2019
Cash flow hedge
5,788
5
Valuation of actuarial provisions
10
11
TOTAL
5,798
16
4.2. EFFECTIVE TAX RATE
The following represents a reconciliation of income tax calculated by applying the currently enacted statutory tax rate to the
Company’s pre-tax financial result to income tax calculated based on the effective tax rate:
`EFFECTIVE TAX RATE
01.01.-31.12.2020
01.01.-31.12.2019
Profit (loss) before tax
177,890
79,111
Tax calculated at the applicable tax rate
(33,799)
(15,031)
Difference resulting from the application of tax rates applicable in other countries*
(1,152)
(1,469)
Tax effect of revenues that are not revenues according to tax regulations (permanent
difference)**
53,735
9,008
Tax effect of costs that are non-deductible according to tax regulations (permanent
difference)***
(24,842)
(16,191)
Deferred tax asset from tax losses from previous years
1,470
-
Tax losses from statment periods from which deferred tax asset was not included
(15,961)
-
Income tax for the previous years recognised in the statement of profit or loss
(2,421)
(1,488)
Other
(86)
(1,524)
Income tax recognised in statement of profit or loss
(23,056)
(26,695)
Effective tax rate
13%
34%
*The Branch of CIECH S.A. in Romania is subject to a tax rate of 16% and the Branch of CIECH S.A. in Germany – to a tax rate of 30.88%. The
tax rates were applied continuously in both periods.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
25
**The main items included in the amount of revenues which are not revenues according to tax regulations result from dividend income,
reversal of impairment losses on investments in subsidiaries.
***The main items included in the amount of non-tax deductible expenses result from the recognition of provisions and impairment losses on
investments in subsidiaries (including those resulting from the applicable IFRS 9).
4.3. DEFERRED INCOME TAX
Accounting policy
Deferred tax is recognised in respect of temporary differences between the tax values of assets and liabilities and the
carrying amounts recognised in the financial statements.
Deferred tax liability is recognised for all taxable temporary differences, unless:
✓ the deferred tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or liability
in a transaction that is not a business combination and at the time of the transaction affects neither accounting
profit nor taxable profit, or
✓ the investor is able to control the timing of the reversal of temporary differences in respect of investments in
subsidiaries, associates and joint ventures, and it is probable that the temporary differences will not reverse in the
foreseeable future.
A deferred tax asset is recognised for all deductible temporary differences and for unused tax credits and tax losses
carried forward to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and losses can be utilised:
✓ unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and at the time of the transaction affects neither accounting profit nor taxable profit, and
✓ deductible temporary differences in respect of investments in subsidiaries, associates and joint ventures are
recognised in statement of financial position only to the extent that it is probable that the temporary difference will
reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be
utilised.
The carrying amount of a deferred tax asset is reviewed at the end of every reporting period and is reduced to the
extent that it is no longer probable that sufficient taxable income will be available against which the asset can be
utilised. Any previously unrecognised deferred tax asset is reassessed at each reporting date and is recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the temporary
differences when they reverse, based on the tax rates and laws that have been enacted at the reporting date or whose
application in the future is certain at the reporting date.
Income tax related to items recognised outside profit or loss is itself recognised either in other comprehensive income,
when it relates to items recognised in other comprehensive income, or directly in equity, when it relates to items
recognised directly in equity.
Deferred tax assets and liabilities are offset solely if there is a legally enforceable right to offset current tax assets and
liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity.
The entity does not create deferred tax on lease contracts.
Judgements and estimates
Deferred income tax is based on the assumption that future taxable profit will allow for its usage. In determining the
amount of deferred tax assets, CIECH S.A. bases its calculations on estimates related to the term and amount of future
taxable income.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
26
Deferred income tax is attributable to the following items:
DEFERRED INCOME TAX ASSETS AND DEFERRED
INCOME TAX LIABILITY
31.12.2020
31.12.2019
Total asset
Total
liability
Net value
Total asset
Total
liability
Net value
Property, plant and equipment
40
3,407
(3,367)
40
74
(34)
Financial assets
6,399
10,197
(3,798)
641
9,971
(9,330)
Inventory
-
70
(70)
-
177
(177)
Trade and other receivables
117
-
117
118
-
118
Provisions for employee benefits
187
-
187
240
-
240
Tax losses carried forward
15,088
-
15,088
331
-
331
Foreign exchange differences
-
4,073
(4,073)
2,593
46
2,547
Liabilities
10,954
47
10,907
8,378
-
8,378
Other
93
-
93
93
-
93
Deferred tax assets/liability
32,878
17,794
15,084
12,434
10,268
2,166
Set - off of deferred tax assets/ liability
(17,790)
(17,790)
-
(10,268)
(10,268)
-
Unrecognized deferred tax assets
(15,088)
-
(15,088)
-
-
-
Deferred tax assets/liability recognised
in the statement of financial position
-
4
(4)
2,166
-
2,166
The Company estimates that within more than 12 months from the period of the financial statements presentation the
deferred tax asset will be utilised in the amount of PLN 533 thousand. In the same period, the estimated amount of settlement
of the deferred tax liability will be PLN 11,251 thousand.
The Company creates a provision and determines deferred income tax assets based on temporary differences between the
value of assets and liabilities shown in the books and their tax value and tax loss possible to deduct in the future and other
unused corporate income tax reliefs. Temporary differences may be:
• positive that gives rise to taxable amounts that will be taken into account in determining taxable profit (tax loss) in future
periods when the carrying amount of the asset or liability will be recovered or settled, or
• negative ones that give rise to amounts that are deductible in determining taxable profit (tax loss) in future periods when
the carrying amount of the asset or liability will be recovered or settled.
CHANGE IN TEMPORARY
DIFFERENCES IN THE PERIOD
01.01.2020
Change in temporary
differences recognised in
the statement of profit or
loss
Change in temporary
differences recognised in the
other comprehensive
income
31.12.2020
Property, plant and
equipment
(181)
(17,540)
-
(17,721)
Financial assets
(49,105)
(1,352)
30,466
(19,991)
Inventory
(930)
562
-
(368)
Trade and other receivables
621
(5)
-
616
Provisions for employee
benefits
1,263
(336)
57
984
Tax losses carried forward
1,740
77,672
-
79,412
Foreign exchange differences
13,405
(34,842)
-
(21,437)
Liabilities
44,584
12,820
-
57,404
Other
489
-
-
489
TOTAL
11,886
36,979
30,523
79,388
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
27
CHANGE IN TEMPORARY
DIFFERENCES IN THE PERIOD
01.01.2019
Change in temporary
differences recognised in the
statement of profit or loss
Change in temporary
differences recognised
in the other
comprehensive income
31.12.2019
Property, plant and equipment
(181)
-
-
(181)
Financial assets
(48,603)
(390)
(112)
(49,105)
Inventory
(1,068)
138
-
(930)
Trade and other receivables
(800)
1,421
-
621
Provisions for employee benefits
541
663
59
1,263
Tax losses carried forward
83,770
(82,030)
-
1,740
Foreign exchange differences
13,221
184
-
13,405
Liabilities
86,337
(41,753)
-
44,584
Other
1,105
(616)
-
489
TOTAL
134,322
(122,383)
(53)
11,886
The company did not recognize the deferred tax asset in the amount of PLN 15,088 thousand due to the tax loss generated
on the capital source in 2019-2020 (PLN 79,412 thousand), as it determined that recovery of this asset over the next 5 years
is less than more probable.
In the light of provisions of the General Anti-Avoidance Rule (“GAAR”), applicable as of 15 July 2016 and aimed at preventing
the origination and use of factitious legal structures designed to avoid payment of taxes in Poland, the Management Board
of CIECH S.A. considered the impact of transactions which could potentially be subject to the GAAR regulations on the
deferred tax, tax value of assets and deferred tax provisions. In the opinion of the Management Board, the analysis conducted
did not demonstrate the need to adjust the reported current and deferred income tax items. However, in the opinion of the
Management Board, there is an inherent uncertainty arising from GAAR that tax authorities will interpret these provisions
differently, will change their approach to their interpretation or the rules themselves will change, which may affect the ability
to utilise the deferred tax assets in future periods and the possible payment of an additional tax for past periods.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
28
5. NOTES TO ASSETS REPORTED IN THE STATEMENT OF FINANCIAL POSITION
5.1. PROPERTY, PLANT AND EQUIPMENT
Accounting policy
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and all other
costs directly attributable to the acquisition of the asset and bringing it to a working condition for its intended use. The
cost also includes the cost of replacing components of machinery and equipment when incurred if the recognition
criteria are met.
Subsequent expenditure
The cost of replacing a part of an item of property, plant and equipment are capitalised. Other costs are capitalised only
to the extent that it is probable that the future economic benefits embodied within the part will flow to the Group and
its cost can be measured reliably. Other subsequent costs are recognised in the profit or loss statement as incurred
expenses.
A separate component of an item of property, plant and equipment, requiring replacement at regular intervals, is
depreciated over its economic useful life.
The Company increases the value of property, plant and equipment by the value of outlays for periodic major overhauls,
necessary for the functioning of a given item of property, plant and equipment. These expenditures are treated as a
separate item of property, plant and equipment and depreciated through the anticipated period to the next planned
overhaul. Upon capitalisation of new costs of overhauls, the non-depreciated value of previous repairs is allocated to
operating expenses.
Upon the acquisition or creation of an item of property, plant and equipment, the Company separates from the cost a
value equal to the expenditures that need to be made during the next overhaul of a given item of property, plant and
equipment and depreciates it through the anticipated period left until the next planned overhaul.
Depreciation
Items of property, plant and equipment, and also their significant and separate components, are depreciated on a
straight-line basis over their respective estimated useful lives. Land is not depreciated. The estimated useful lives are
as follows:
Judgements and estimates
Depreciation rates are determined on the basis of the expected useful lives of property, plant and equipment, and are
subject to annual verification. Any adjustments resulting from the verification are made prospectively as a change in
estimate.
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in
accounting policies, in note 3.4.
Buildings
5-7 years
Machinery and equipment
2-5 years
Other
5 years
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
29
01.01.-31.12.2020
Buildings
offices and
land and
water
engineering
facilities
Machinery
and
equipment
Means of
transport
Other
tangible
fixed assets
Tangible
fixed assets
under
construction
TOTAL
Gross value of property, plant and equipment at
the beginning of the period
550
24,612
138
1,732
3,785
30,817
Purchase/ Adoption of investment
-
1,472
-
312
5,336
7,120
Reclassification
-
-
-
-
(1,784)
(1,784)
Sales
-
(191)
-
(319)
(3,040)
(3,550)
Deficiencies revealed during the inventory
-
(813)
-
(114)
-
(927)
Other
(7)
(7)
4
(95)
(14)
(119)
Gross value of property, plant and equipment at
the end of the period
543
25,073
142
1,516
4,283
31,557
Accumulated depreciation at the beginning of
the period
(184)
(15,107)
(31)
(1,364)
-
(16,686)
Depreciation for the period
(91)
(3,217)
(68)
310
-
(3,066)
Annual depreciation charge
(97)
(4,183)
(69)
(213)
-
(4,562)
Sales
-
190
-
319
-
509
Deficiencies revealed during the inventory
-
776
-
111
-
887
Other
6
-
1
93
-
100
Accumulated depreciation at the end of the
period
(275)
(18,324)
(99)
(1,054)
-
(19,752)
Impairment losses at the beginning of the period
-
-
-
-
-
-
Impairment losses at the end of the period
-
-
-
-
-
-
Carrying amount of property, plant and
equipment at the beginning of period
366
9,505
107
368
3,785
14,131
Carrying amount of property, plant and
equipment at the end of the period
268
6,749
43
462
4,283
11,805
01.01.-31.12.2019
Buildings
offices and
land and
water
engineering
facilities
Machinery
and
equipment
Means of
transport
Other
tangible
fixed assets
Tangible
fixed assets
under
construction
TOTAL
Gross value of property, plant and equipment at
the beginning of the period
413
23,273
60
1,696
501
25,943
Purchase/ Adoption of investment
-
1,498
44
136
1,678
3,356
Investment outlays
-
-
-
-
3,427
3,427
Reclassification
137
-
93
(93)
(1,815)
(1,678)
Sales
-
(159)
(59)
(4)
(6)
(228)
Liquidation
-
-
-
(3)
-
(3)
Gross value of property, plant and equipment at
the end of the period
550
24,612
138
1,732
3,785
30,817
Accumulated depreciation at the beginning of
the period
(128)
(11,035)
(60)
(1,169)
-
(12,392)
Depreciation for the period
(56)
(4,072)
29
(195)
-
(4,294)
Annual depreciation charge
(60)
(4,169)
(30)
(225)
-
(4,484)
Sales
-
90
59
3
-
152
Other
4
7
-
27
-
38
Accumulated depreciation at the end of the
period
(184)
(15,107)
(31)
(1,364)
-
(16,686)
Impairment losses at the beginning of the period
-
-
-
-
-
-
Impairment losses at the end of the period
-
-
-
-
-
-
Carrying amount of property, plant and
equipment at the beginning of period
285
12,238
-
527
501
13,551
Carrying amount of property, plant and
equipment at the end of the period
366
9,505
107
368
3,785
14,131
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
30
Depreciation of property, plant and equipment was charged to the following line items in the statement of profit or loss:
PROPERTY, PLANT AND EQUIPMENT DEPRECIATION CHARGES
01.01.-31.12.2020
01.01.-31.12.2019
General and administrative expenses
(4,562)
(4,484)
TOTAL
(4,562)
(4,484)
In the current period changes in accounting estimates did not have a material impact and it is not expected that they will
have a material impact in future periods.
In 2020, CIECH S.A. did not receive from third parties for impaired property, plant and equipment (in the corresponding
period: PLN 180 thousand).
As at 31 December 2020, all items of property, plant and equipment at CIECH S.A. were pledged as collateral for financial
liabilities on account of the term loan, revolving facility and overdraft facilities.
Future commitments arising from agreements concerning acquisition of property, plant and equipment amounted to
PLN 83 thousand in 2019; there are no such commitments in the current period.
5.2. RIGHT-OF-USE ASSETS
Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2020 are as follows:
Accounting policy
Initial measurement of right-of-use assets
At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset
comprises:
a) the amount of the initial measurement of the lease liability,
b) any lease payments made at or before the commencement date, less any lease incentives received;
c) any initial direct costs incurred by the lessee; and
d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the
site on which it is located or restoring the underlying asset to the condition required by the terms and conditions
of the lease, unless those costs are incurred to produce inventories.
Subsequent measurement of right-of-use assets
After initial recognition, the Company measures the right-of-use asset at cost less any accumulated depreciation and any
accumulated impairment losses, and adjusted for any remeasurement of the lease liability.
In the case of leasehold improvements, expenditures on the purchase or production of third-party fixed assets, once
incurred, do not result in the necessity to make payments in the future, and therefore do not meet the definition of
lease. The recognition of these expenditures is regulated by IAS 16.
If the lease transfers ownership of the underlying asset to the Company by the end of the lease term or if the cost of the
right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the right-of-use
asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company
depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-
of-use asset or the end of the lease term.
The Company applies IAS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account
for any impairment loss identified.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
31
01.01.-31.12.2020
Buildings offices
and land and
water
engineering
facilities
Means of transport
TOTAL
CHANGE OF RIGHTS TO USE ASSETS
Gross value at the beginning of the period
32,906
1,051
33,957
Conclusion of new lease agreements
-
3,401
3,401
Modification of the leasing contract
(962)
14
(948)
Closing of the contract
(30)
(90)
(120)
Gross value at the end of the period
31,914
4,376
36,290
Accumulated depreciation at the beginning of the period
(3,959)
(662)
(4,621)
Depreciation for the period
(4,139)
(1,473)
(5,612)
Annual depreciation charge
(4,139)
(1,473)
(5,612)
Accumulated depreciation at the end of the period
(8,098)
(2,135)
(10,233)
Net value of rights to use assets at the beginning of the period
28,947
389
29,336
Net value of rights to use assets at the end of the period
23,816
2,241
26,057
01.01.-31.12.2019
Buildings offices
and land and water
engineering facilities
Means of transport
TOTAL
CHANGE OF RIGHTS TO USE ASSETS
Adjustment of the opening balance (IFRS 16)
31,616
902
32,518
Gross value at the beginning of the period
31,616
902
32,518
Modification of the leasing contract
1,290
-
1,290
Conclusion of new lease agreements
-
204
204
Closing of the contract
-
(55)
(55)
Gross value at the end of the period
32,906
847
33,957
Accumulated depreciation at the beginning of the period
-
-
-
Depreciation for the period
(3,959)
(662)
(4,621)
Annual depreciation charge
(3,959)
(662)
(4,621)
Accumulated depreciation at the end of the period
(3,959)
(662)
(4,621)
Net value of rights to use assets at the beginning of the period
31,616
902
32,518
Net value of rights to use assets at the end of the period
28,947
389
29,336
In 2019, CIECH S.A. implemented IFRS 16 “Leases”. Under this standard, leases of office and warehouse space, as well as
leases of passenger cars were identified in the company as lease agreements.
CIECH S.A. is a lessee of office and warehousing space, in which the largest item (approx. 2 thousand m
2
) is the office
in Warsaw at Wspólna Street, where the Company’s registered office is located. The term of the lease agreement expires in
2028. CIECH S.A. also leases passenger cars. The value of cars includes the value of discounted lease fees as at the conclusion
of the lease agreement, less the accumulated amortization for a given group of fixed assets.
Some agreements are denominated in foreign currencies and indexed to price indices. Some agreements contain an extension
option.
For detailed information on lease liabilities, see Note 7.4.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
32
5.3. INTANGIBLE ASSETS
Accounting policy
Intangible assets acquired by the company are measured at cost less accumulated amortisation and accumulated
impairment losses. Any expenditure on internally generated goodwill and brands, is recognised in the profit or loss as
incurred.
Subsequent expenditure
Subsequent expenditure on existing intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other subsequent expenditure is expensed as incurred.
Amortisation
Intangible assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives of
the following categories of intangible assets are as follows:
Judgements and estimates
Amortisation rates are determined on the basis of the expected useful lives of intangible assets, and are subject to
periodical verification. Any adjustments resulting from the verification are made prospectively as a change in estimate.
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in
accounting policies, in note 3.4.
Patents and licences
8 years
Other
2-5 years
01.01.-31.12.2020
Licences,patents,
permits, etc.
obtained
Intangible assets
under
development
Other
intangible
assets
TOTAL
Gross value of intangible assets at the beginning of the
period
73,672
6,173
18,979
98,824
Investment outlays
-
11,736
-
11,736
Reclassifications
4,943
(4,943)
-
-
Liquidation
(20,931)
-
-
(20,931)
Gross value of intangible assets at the end of the period
57,684
12,966
18,979
89,629
Accumulated amortisation at the beginning of the period
(33,204)
-
(10,996)
(44,200)
Amortisation for the period
14,971
-
(2,762)
12,209
Annual amortisation charge
(5,903)
-
(2,762)
(8,665)
Exchange differences
(39)
-
-
(39)
Liquidation
20,913
-
-
20,913
Accumulated amortisation at the end of the period
(18,233)
-
(13,758)
(31,991)
Impairment losses at the beginning of the period
-
(210)
-
(210)
Impairment losses at the end of the period
-
(210)
-
(210)
Net value of intangible assets at the beginning of the
period
40,468
5,963
7,983
54,414
Net value of intangible assets at the end of the period
39,451
12,756
5,221
57,428
01.01.-31.12.2019
Licences,patents,
permits, etc.
obtained
Intangible assets
under
development
Other
intangible
assets
TOTAL
Gross value of intangible assets at the beginning of the
period
37,373
29,823
18,979
86,175
Purchase
145
145
-
290
Investment outlays
-
12,504
-
12,504
Reclassifications
36,154
(36,299)
-
(145)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
33
01.01.-31.12.2019
Licences,patents,
permits, etc.
obtained
Intangible assets
under
development
Other
intangible
assets
TOTAL
Gross value of intangible assets at the end of the period
73,672
6,173
18,979
98,824
Accumulated amortisation at the beginning of the period
(31,879)
-
(8,029)
(39,908)
Amortisation for the period
(1,325)
-
(2,967)
(4,292)
Annual amortisation charge
(1,325)
-
(2,967)
(4,292)
Accumulated amortisation at the end of the period
(33,204)
-
(10,996)
(44,200)
Impairment losses at the beginning of the period
-
(210)
-
(210)
Impairment losses at the end of the period
-
(210)
-
(210)
Net value of intangible assets at the beginning of the
period
5,494
29,613
10,950
46,057
Net value of intangible assets at the end of the period
40,468
5,963
7,983
54,414
In 2020, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 2,5%,
whereas in 2019 it amounted to approx. 3,2%.
CIECH S.A. is the owner of all intangible assets held. The largest item in the Company’s intangible assets is the SAP accounting
system with the gross carrying amount of PLN 41,189 thousand (net carrying amount: PLN 36,429 thosuand).
As at 31 December 2020, all intangible assets at CIECH S.A. were pledged as collateral for financial liabilities on account of
the term loan, revolving facility and overdraft facilities.
An increase in capital expenditure in 2020 was driven by expenditure related to the implementation of the SAP system.
Amortisation of intangible assets was included in the following line items of the statement of profit or loss:
AMORTISATION CHARGES ON INTANGIBLE ASSETS
01.01.-31.12.2020
01.01.-31.12.2019
General and administrative expenses
(5,917)
(1,543)
Selling costs
(2,748)
(2,749)
TOTAL
(8,665)
(4,292)
The Company does not have intangible assets with indefinite useful life. In the current period changes in accounting estimates
did not have a material impact and it is not expected that they will have a material impact in future periods.
As at 31 December 2020, future commitments arising from agreements concerning acquisition of intangible assets amounted
to PLN 411 thousand (in the comparable period: PLN 3,221 thousand).
In the reporting period and in the presented comparable period, the Company did not incur any expenditure on development
activities.
5.4. LONG-TERM FINANCIAL ASSETS
Accounting policy
Shares in subsidiaries and associates are stated at purchase price less any impairment losses.
Loans are measured at their nominal value increased by the value of interest and decreased by any impairment losses
due to the small difference to measurement at amortized cost.
Accounting policy concerning financial instruments is presented in note 8.1.
Judgements and estimates
Accounting policy concerning judgements and estimates is presented in note 3.5.
NON-CURRENT FINANCIAL ASSETS
31.12.2020
31.12.2019
Shares
2,137,655
2,172,271
Loans granted
400,413
239,817
Derivatives
574
4,879
TOTAL
2,538,642
2,416,967
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
34
Change in long-term stocks and shares
01.01.-31.12.2020
01.01.-31.12.2019
Gross value at the beginning of the period
2,328,605
2,325,395
Purchase
17,752
3,210
Writing-off / redemption
(1,012)
-
Transfer to assets held for sale
(30,015)
-
Sales/liquidation
(78,000)
-
Gross value at the end of the period
2,237,330
2,328,605
Impairment update at the beginning of the period
(156,334)
(140,927)
Recognition
(21,839)
(15,407)
Reversal/usage
77,436
-
Transfer to assets held for sale
50
-
Other
1,012
-
Impairment update at the end of the period
(99,675)
(156,334)
Net value of the shares at the beginning of the period
2,172,271
2,184,468
Net value of the shares at the end of the period
2,137,655
2,172,271
CHANGE IN LIABILITIES DUE TO LONG-TERM LOANS
31.12.2020
31.12.2019
Gross value at the beginning of the period
243,123
144,995
Grant
-
100,240
Repayment
-
(585)
Reclassification to long-term positions*
160,153
-
Foreign exchange differences
-
(1,527)
Gross value at the end of the period
403,276
243,123
Impairment update at the beginning of the period
(3,306)
(2,134)
Recognition
(1,422)
(1,218)
Reversal
1,865
46
Closing balance
(2,863)
(3,306)
Carrying amount of loans at the beginning of period
239,817
142,861
Carrying amount of loans at the end of the period
400,413
239,817
* Reclassification to long-term loans in connection with the signing of annexes to loan agreements postponing the repayment date by
another year.
Change in the gross value of long-term shares results primarily from:
• shares in CIECH Żywice Sp. z o.o. in the amount of PLN 30,015 thousand were reclassified to assets held for sale due to
the planned sale of the company,
• purchase of shares in CIECH Vitro Sp. z o.o. (PLN 400 thousand) and CIECH Services Sp. z o.o. (PLN 5 thousand),
• acquisition of shares in the increased share capital of CIECH Salz Deutschland GmbH – PLN 12,898 thousand (EUR 3,000
thousand),
• acquisition of shares in the increased share capital of CIECH Nieruchomości Sp. z o.o. – PLN 4,000 thousand,
• acquisition of shares in the increased share capital of CIECH Serwis i Remonty Sp. z o.o. – PLN 450 thousand,
• write-off of shares in Chemia.com in the amount of PLN 1,012 thousand,
• recognition of impairment losses on shares held by CIECH S.A. in CIECH Trading Sp. z o.o., CIECH Nieruchomości
Sp. z o.o. and Ciech Group Financing AB,
• sale of shares in JANIKOSODA S.A. in the gross amount of PLN 78,000 thousand and the reversal of the write-down on
shares in this company in the amount of PLN 77 436 thousand.
The change in long-term loans granted resulted from unrealised foreign exchange differences on the revaluation of loans as
at the balance sheet date.
As at 31 December 2020, all long-term receivables from loans at CIECH S.A. were pledged as collateral for financial liabilities
on account of the term loan, revolving facility and overdraft facilities.
CIECH S.A. analyses its involvement in the subsidiaries on the basis of their net assets as at the balance sheet date (for the
company CIECH Żywice Sp.z o.o. from the preliminary purchase agreement). If any evidence of impairment is identified, the
Company estimates the recoverable amount. Due to the occurrence of premises, CIECH S.A. analysed the recoverability of
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
35
involvement in subsidiaries. The recoverable value applied was the value in use estimated based on the discounted cash flows
determined based on five-year financial plans of the subsidiaries. The following assumptions were applied in the impairment
tests:
• the weighted average cost of capital for domestic companies was: 6.5% – for cash flows in PLN, 5.3% – for cash flows in
EUR and 6.5% – for cash flows in USD;
• the weighted average cost of capital for SDC GmbH and CIECH Salz Deutschland GmbH for cash flows in EUR was 4.6%;
• the weighted average cost of capital for Proplan Plant Protection Company, S.L. was 5.2% – for cash flows in EUR and
6.6% – for cash flows in USD;
• the assumed growth rate for the residual period was 2.0% for both the domestic and foreign companies.
Based on analyses conducted, the Management Board of CIECH S.A. decided to recognise/reverse impairment losses on
involvement in, among others, the following companies:
• recognition of impairment losses:
o CIECH Trading Sp. z o.o. – impairment loss on shares in the amount of PLN 21,615 thousand.
In the first quarter of 2021, the Management Board of CIECH Trading Sp. z o.o. made a decision to discontinue business
activity by the company.
o CIECH Group Financing AB – impairment loss on shares in the amount of PLN 90 thousand,
o CIECH Nieruchomości Sp. z o.o. – impairment loss on shares in the amount of PLN 134 thousand.
CARRYING AMOUNT OF SHARES IN RELATED ENTITIES
31.12.2020
31.12.2019
The
Company’s
direct share in
the share
capital/ total
number of
votes as at 31
December
2020
The
Company’s
direct share in
the share
capital/ total
number of
votes as at 31
December
2019
Core activities
Subsidiary (registered office)
SDC GmbH
(Stassfurt – Germany)
797,471
797,471
100%
100%
Manufacture of other basic inorganic chemicals,
wholesale of chemical products, power generation
and distribution.
CIECH Soda Polska S.A.
(Inowrocław)
553,097
553,097
100%
100%
Manufacture of other basic inorganic chemicals,
wholesale of chemical products, power generation
and distribution.
CIECH Sarzyna S.A.
(Nowa Sarzyna)
266,867
295,947
100%
100%
Manufacture of resins, manufacture of pesticides and
other chemical products.
CIECH Soda Romania S.A.
(Rm. Valcea , Romania)
111,000
111,000
98.74%
98.74%
Manufacture of other basic inorganic chemicals,
wholesale of chemical products.
Manufacture of soda products was suspended in
September 2019 due to discontinuation of supplies of
process steam to the plant.
CIECH Trading Sp. z o.o.
(Warsaw)
22,441
44,056
100%
100%
Wholesale and distribution of solid inorganic and
organic chemicals, wholesale and distribution of raw
materials for household chemicals, wholesale and
distribution of raw materials for cosmetic and
pharmaceutical products, wholesale and distribution
of acids, bases and other liquid chemicals,
distribution of fillers, pigments, raw materials for
paints and varnishes, wholesale and distribution of
feed additives and fodder
CIECH Pianki
Sp. z o.o. (Bydgoszcz)
57,451
57,451
100%
100%
Manufacture of organic and other inorganic
chemicals.
VERBIS ETA
Sp. z o.o. SKA (Warsaw)
37,971
37,971
100%
100%
Financing activities, direct lending to the CIECH Group
companies.
CIECH R&D Sp. z o.o.
(Warsaw)
47,915
47,915
100%
100%
Granting licences to the CIECH Group companies to
use the trademarks: “Ciech”, “Ciech Trading” and “Sól
Kujawska naturalna czysta” for business activity
purposes, research and developments activities.
CIECH Vitrosilicon S.A.
(Iłowa)
12,302
12,302
83.03%
83.03%
Production of other basic inorganic chemicals,
manufacture of hollow glass and technical glassware,
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
36
*Value of shares at 31 December 2020 reported as non-current assets held for sale.
5.5. INVENTORIES
Accounting policy
Raw materials and goods are measured at cost being the purchase price increased by other costs incurred in bringing
the asset to its present location and condition or place on the market but not higher than the selling price possible to
achieve.
The cost of inventory is measured using the weighted average method.
Judgements and estimates
CIECH S.A. recognises inventory impairment allowances for damaged and slow moving inventory. Inventory impairment
allowances are also recognised for inventory with a carrying amount that exceeds the realisable net selling price.
Reversal occurs as a result of the use or sales of inventory in the course of business activities while usage is the result
of inventory being scrapped.
INVENTORY
31.12.2020
31.12.2019
Materials
16
36
Goods
6,378
30,658
TOTAL
6,394
30,694
In the reporting periods, no inventories were written down to their net selling prices.
manufacture of plastic packaging goods, manufacture
of other plastic products.
CIECH Vitro
Sp. z o.o.
400
-
100%
-
Production of other basic inorganic chemicals,
manufacture of hollow glass and technical glassware,
manufacture of plastic packaging goods, manufacture
of other plastic products.
CIECH Transclean Sp. z o.o.
(Bydgoszcz)
3,455
3,455
100%
100%
International transport of liquid chemicals
Gamma Finanse Sp. z o.o.
(Warsaw)
2,889
2,889
100%
100%
Financing activities.
Ciech Group Financing AB
(Sweden)
1,477
1,567
100%
100%
Financing activities.
VERBIS ETA Sp. z o.o.
(Warsaw)
5
5
100%
100%
Other activities.
CIECH Serwis i Remonty
Sp. z o.o. (Warsaw)
450
-
100%
100%
Repair and maintenance of machinery.
CIECH Nieruchomości S.A.
(Warsaw)
3,866
-
99.33%
99.18%
Buying and selling of own real estate.
Proplan Plant Protection
Company S.L. (Madrid)
203,866
203,866
100%
100%
Production and sales of crop protection chemicals.
Janikosoda
Sp. z o.o.
(formerly Janikosoda S.A.
(Warsaw)
-
564
-
17.60%
The company was sold on 31 December 2020.
CIECH Żywice
Sp. z o.o.
(Nowa Sarzyna)*
- *
885
100%
100%
Manufacture of plastics in primary forms. These
activities were commenced on 2 January 2020.
CIECH Salz Deutschland
GbmH
13,022
125
100%
100%
Production and sales of salt products.
CIECH SERVICES
Sp. z o.o.
5
-
100%
-
Provision of support services to CIECH Group
companies.
Other subsidiaries
842
842
Associates
863
863
Carrying amount of shares
in related entities
2,137,655
2,172,271
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
37
The value of inventories (taking into account write-downs to net selling prices) recognised as costs in 2020 amounted to
PLN 1,449,934 thousand (in the comparable period: PLN 1,837,919 thousand).
As at 31 December 2020, all inventories at CIECH S.A. were pledged as collateral for financial liabilities on account of the term
loan, revolving facility and overdraft facilities.
5.6. SHORT-TERM RECEIVABLES
Accounting policy
After initial recognition, current trade and other receivables are measured at the amortised cost using the effective
interest method less any impairment losses.
Receivables denominated in foreign currencies are recognised at the average NBP exchange rate effective on the
working day immediately preceding the date of the transaction, unless a different exchange rate was indicated in the
customs declaration or another binding document.
At the reporting date, receivables denominated in foreign currencies are translated at the average exchange rate
established for that date by the NBP except for prepayments made for deliveries, which are translated using sell
exchange rate of the bank effective on the payment date.
Factoring
The Company uses non-recourse factoring services. The factor transfers advance payments to the Company’s account
in the full amount of invoices accepted for financing. The financing of receivables transferred is provided in various
timeframes, therefore, as at the balance sheet date, there may be receivables which have not been financed yet and
are reported as factoring receivables. Advance payments received are posted as factoring liabilities. In the statement
of financial position, factoring receivables and liabilities are recognised on a net basis up to 95% of the value of advance
payments received from the factor (the 95% limit results from the level of the receivables insurance). The remaining
5% of receivables value is reported as factoring receivables, and 5% of the value of advance payments received is
reported as factoring liabilities.
Judgements and estimates
Impairment allowances are recognised on interest receivable on late payments of receivables, in the full amount of
interest accrued. These allowances are recognised upon accrual, as at the due date or balance sheet date, and deducted
from finance income from interest accrued.
The Entity estimates allowances always at the amount of long-term expected credit losses, regardless of whether there
is an evidence of a material increase in credit risk.
At each balance sheet date, the Entity estimates allowances for all receivables regardless of their repayment status.
The Entity estimates impairment allowances primarily on the basis of portfolio PD ratios estimated on the basis of
historical observations for debt portfolios with similar characteristics. If it is not possible to estimate portfolio ratios,
the Group permits the use of individual parameters (benchmark or expert parameters).
In addition, regardless of the foregoing, the Entity recognises impairment allowances in respect of receivables:
1. from debtors in liquidation or bankruptcy, up to the amount not guaranteed or secured in another manner, as
reported to a receiver or judge-commissioner during bankruptcy proceedings;
2. from debtors where a bankruptcy petition has been dismissed, if the debtor's assets are not sufficient to cover the
cost of bankruptcy proceedings – in full;
3. contested by debtors (disputed receivables) and where payments due are delayed and either the debtor’s financial
standing makes the collection no longer probable – up to the amount of receivables not guaranteed or secured in
another manner;
4. receivables claimed in court.
Moreover, allowances in the full amount of receivables are recognised in relation to receivables that are more than 180
days past their maturity as at the balance sheet date.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is
in possession of reliable documents, indicating that the receivables were secured and their payment is highly probable.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
38
Impairment allowances on receivables are charged to other operating expenses.
TRADE AND OTHER RECEIVABLES
31.12.2020
31.12.2019
Trade receivables, including:
170,758
287,389
- up to 12 months
169,664
285,995
- prepayments for inventory
1,094
1,394
Public and legal receivables (excluding income tax)
8,621
33,244
Factoring receivables
35,946
30,856
Assets due to continuous involvement
513
2,035
Receivables from cashpool
7,992
6,496
Advance payments fro shares
-
12,947
Other receivables
9,065
3,251
NET TRADE AND OTHER RECEIVABLES
232,895
376,218
Impairment allowances with respect to trade receivables including
(20,733)
(12,357)
- impairment allowance recognized in the current reporting period
(9,642)
(290)
Impairment allowances with respect to other current receivables including
(16,114)
(16,197)
- impairment allowance recognized in the current reporting period
(43)
(2)
GROSS TRADE AND OTHER RECEIVABLES
269,742
404,772
Fair value of trade receivables and other receivables does not differ significantly from their carrying value.
As at the balance sheet date, continuing involvement is reported. It is calculated as a product of the financing received,
interest and the period of delay in payments. As at 31 December 2020, the asset from continuing involvement amounted to
PLN 513 thousand. The value of factoring assets derecognised from the statement of financial position is PLN 129,777
thousand (PLN 153,897 thousand in the comparable period).
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(28,554)
(31,491)
Recognized
(9,685)
(292)
Reversed
869
3,170
Used
466
56
Exchange differences
(292)
3
Other
349
-
Closing balance
(36,847)
(28,554)
The principles for recognising impairment allowances for short-term receivables are described above, in the “Accounting
Policy” section.
AGEING OF PAST DUE TRADE RECEIVABLES
31.12.2020
31.12.2019
Up to 1 month
17,657
30,786
Between 1 and 3 months
8,065
62,120
3 to 6 months
65
41,547
6 months to 1 year
303
3,572
Above 1 year
20,733
11,434
Total (gross) past due trade receivables
46,823
149,459
Impairment allowances on past due trade receivables
(20,530)
(12,200)
Total (net) past due trade receivables
26,293
137,259
Terms of transactions with related entities have been presented in note 9.3.
Commercial contracts concluded by CIECH S.A. include various terms of payment of trade receivables depending on the type
of transaction, market characteristics and trade conditions. The most common payment terms are: 14, 30 and 60 days.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
39
As at 31 December 2020, all receivables (both long- and short-term) at CIECH S.A. were pledged as collateral for financial
liabilities on account of the term loan, revolving facility and overdraft facilities.
5.7. SHORT-TERM FINANCIAL ASSETS
Accounting policy
Loans after initial recognition are measured at amortised cost using the effective interest method less any impairment
losses.
Accounting policy concerning financial instruments is presented in note 8.1.
Judgements and estimates
Accounting policy concerning judgements and estimates is presented in note 3.5.
SHORT-TERM FINANCIAL ASSETS
31.12.2020
31.12.2019
Derivatives
1,261
13,236
Loans granted
1,187,901
780,995
Total (net) short-term financial assets
1,189,162
794,231
Impairment of short-term financial assets
(8,494)
(14,382)
Total (gross) short-term financial assets
1,197,656
808,613
CHANGE IN LIABILITIES DUE TO SHORT-TERM LOANS
31.12.2020
31.12.2019
Gross value at the beginning of the period
795,377
1,008,530
Grant
957,503
126,562
Change of liabilities presented
(452,951)
(337,173)
Reclassification to long-term positions
(160,153)
-
Exchange differences
56,619
(2,542)
Gross value at the end of the period
1,196,395
795,377
Impairment update at the beginning of the period
(14,382)
(18,126)
Recognition
(1,228)
(977)
Reversal
7,116
4,682
Used
-
28
Exchange differences
-
11
Closing balance
(8,494)
(14,382)
Carrying amount of loans at the beginning of period
780,995
990,404
Carrying amount of loans at the end of the period
1,187,901
780,995
As at 31 December 2020, all short-term receivables from loans at CIECH S.A. were pledged as collateral for financial liabilities
on account of the term loan, revolving facility and overdraft facilities.
Material items affecting the change in short-term loans including interests are as follows:
• granting a loan to CIECH Soda Deutschland GmbH&CO KG in the amount of PLN 146,121 thousand (the nominal value
of the loan granted is EUR 33,055 thousand),
• granting a loan to CIECH Salz Deutschland GmbH in the amount of PLN 358,694 thousand (nominal value EUR 80,500
thousand),
• granting a loan to CIECH Soda Polska S.A. in the amount of PLN 418,187 thousand (nominal value of PLN 402,000
thousand),
• granting a loan to CIECH Nieruchomości Sp. z o.o. in the amount of PLN 32,107 thousand (nominal value of PLN 31,000
thousand),
• granting a loan to CIECH Serwis i Remonty Sp. z o.o. in the amount of PLN 182 thousand (nominal value of PLN 171
thousand),
• granting a loan to CIECH Services Sp. z o.o. in the amount of PLN 250 thousand (nominal value of PLN 250 thousand),
• repayment of loans (with interest) by subsidiaries (CIECH Soda Polska S.A. in the amount of PLN 418,187 thousand,
CIECH Nieruchomości Sp. z o.o. in the amount of PLN 32,957 thousand).
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
40
5.8. CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash equivalents include cash in hand and bank deposits repayable on demand. Current investments that
are not subject to significant changes in value and that may be easily exchanged for a determinable amount of cash
and that form an integral part of the Entity’s cash management are recognised as cash and cash equivalents for the
purposes of the statement of cash flows.
At the reporting date, any foreign currencies in bank accounts and on hand are measured at the average exchange
rate for a given currency, quoted by the President of the NBP.
For cash and cash equivalents, impairment allowances are estimated using individual parameters determined on the
basis of benchmarks (using information on bank ratings).
For cash and cash equivalents for which there is evidence of impairment due to credit risk, the Entity analyses
recoveries using probability-weighted scenarios.
CASH AND CASH EQUIVALENTS
31.12.2020
31.12.2019
Bank accounts
263,110
125,757
Short-term deposits
2,313
44,341
Cash in hand
14
13
Impariment in accordance with IFRS 9
(150)
(128)
Cash and cash equivalents – presented in the statement of financial position
265,287
169,983
Cash and cash equivalents – presented in the cash flow statement
265,287
169,983
The effective interest rates of short-term bank deposits are similar to the nominal interest rates, and fair value of short-term
bank deposits is not significantly different from carrying value. Interest rates are based on WIBOR, EURIBOR and LIBOR.
As at 31 December 2020, all cash and cash equivalents at CIECH S.A. were pledged as collateral for financial liabilities on
account of the term loan, revolving facility and overdraft facilities.
Restricted cash represented the funds in the VAT account due to the introduction of "split payment" procedures.
As at 31 December 2020, they amounted to PLN 1,930 thousand. As at 31 December 2019, restricted cash in CIECH S.A.
amounted to PLN 3,108 thousand.
Cash and cash equivalents are covered only by an allowance for expected credit losses in accordance with IFRS 9.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
41
5.9. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND LIABILITIES CONNECTED WITH NON-
CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
As at 31 December 2020, the value of shares held in CIECH Żywice Sp. z o.o. was reported in CIECH S.A. as non-current assets
held for sale, in connection with the signing of a preliminary agreement for the sale of shares in the aforementioned company
to LERG S.A. The value of these shares is PLN 29,965 thousand.
Discontinued operations
The accounting principles applied in the preparation of the statement of profit or loss for discontinued operations are
consistent with the Company's accounting policy. The results of discontinued operations include:
For the period from 1 January to 31 December 2020 and for the period from 1 January to 31 December 2019, the figures for
discontinued operations include the result of CIECH S.A. obtained from the transactions with CIECH Żywice Sp. z o.o., i.e. an
entity reported under discontinued operations.
Below are the figures for the period from 1 January to 31 December 2020 and for the period from 1 January to 31 December
2019 for the discontinued operations in the area of resins.
Discontinued operations
01.01.-31.12.2020
01.01.-31.12.2019
Net sales revenues
151,432
200,550
Cost of sales
(147,458)
(194,120)
Gross profit/(loss) on sales
3,974
6,430
Other operating income
-
2
Selling costs
(1,574)
(792)
General and administrative expenses
-
-
Other operating expenses
-
(8)
Operating profit/(loss)
2,400
5,632
Financial income
375
2,388
Financial expenses
(2,322)
-
Net financial income/(expenses)
(1,947)
2,388
Profit/(loss) before tax
453
8,020
Income tax
-
-
Net profit/(loss)
453
8,020
Accounting policy
Assets and liabilities classified as held for sale
Non-current assets are classified as held for sale when their carrying amounts are expected to be recovered primarily
through a sale transaction and when they are available for sale in their current condition with such transaction being
highly probable.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
42
6. EQUITY
6.1. CAPITAL MANAGEMENT
Capital structure management
CIECH S.A.’s capital structure consist of its debts, including the credit facilities presented in note 7.1, cash and cash equivalents
and equity, including shares issued, reserve capital and retained earnings.
CIECH S.A. manages its capital in order to ensure its ability to continue as a going concern and, at the same time, maximize
returns for stakeholders by optimising the debt to equity ratio. In 2019-2020 there were no changes in aims, principles and
processes of capital management.
6.2. EQUITY
Accounting policy
CIECH S.A.’s share capital is disclosed at nominal value, adjusted by the effects of hyperinflation in the years 1989-1996.
When shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, is
recognised as a change in equity. The purchased shares are presented as a deduction from total equity.
A liability for a dividend payable is recognised when authorised.
Net profit (loss) is presented in equity under retained earnings.
As at 31 December 2020, the carrying amount of the share capital of CIECH S.A. amounted to PLN 287,614 thousand and
comprised the share capital from the share issues and from the hyperinflation adjustment. As at the date of adopting the
IFRS, i.e. 1 January 2004, the share capital of the Company was adjusted for hyperinflation between 1989 and 1996. The
hyperinflation adjustment of PLN 24,114 thousand was charged to retained earnings.
The shares of CIECH S.A. are listed on Warsaw Stock Exchange and on Frankfurt Stock Exchange. The share capital of CIECH
S.A. amounts to PLN 263,500,965 and is divided into 52,699,909 shares with a nominal value of PLN 5 each, including:
• 20,816 A-series ordinary bearer shares,
• 19,775,200 B-series ordinary bearer shares,
• 8,203,984 C-series ordinary bearer shares,
• 23,000,000 D-series ordinary bearer shares,
• 1,699,909 E-series ordinary bearer shares.
The shares of all series are ordinary shares and do not carry any additional rights, preferences or restrictions as to dividend
distribution or return of capital. Share capital is fully paid up.
To the best knowledge of the Company, as at the day of approving this report, entities holding significant blocks of shares (at
least 5%) are the entities listed below:
Shareholder structure of CIECH S.A. as at the date of approval of the report (according to the best knowledge of the
Company)
Shareholder
Type of shares
Number of
shares
Number of votes at
the General
Meeting of
Shareholders
Share in the total
number of votes at
the General Meeting
of Shareholders
Stake in share
capital (%)
KI Chemistry s. à r. l.
with its registered office
in Luxembourg*
Ordinary
bearer
26,952,052
26,952,052
51.14%
51.14%
Nationale-Nederlanden
Otwarty Fundusz
Emerytalny**
Ordinary
bearer
2,729,507
2,729,507
5.18%
5.18%
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
43
Shareholder
Type of shares
Number of
shares
Number of votes at
the General
Meeting of
Shareholders
Share in the total
number of votes at
the General Meeting
of Shareholders
Stake in share
capital (%)
Aviva Otwarty Fundusz
Emerytalny Aviva
Santander ***
Ordinary
bearer
3,084,470
3,084,470
5.85%
5.85%
Other
Ordinary
bearer
19,933,880
19,933,880
37.83%
37.83%
* In accordance with information dated 9 June 2014 provided by Shareholder under Article 77(7) and Article 69(1)(1) of the Act of 29 July 2005
on Public Offering and Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (CR
26/2014).
** on the basis of the list of shareholders holding at least 5% of votes at the Extraordinary General Meeting of Shareholders of CIECH S.A.
on 15 March 2021, CR 6/2021 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on Public Offering and Conditions
Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (Journal of Laws of 2009, No 185, item
1439).
*** on the basis of the list of shareholders holding at least 5% of votes at the Extraordinary General Meeting of Shareholders of CIECH S.A.
on 15 March 2021, CR 6/2021 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on Public Offering and Conditions
Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (Journal of Laws of 2009, No 185, item
1439).
The percentage share of above-listed shareholders in the share capital of CIECH S.A. equals the percentage share in the
number of votes at the General Shareholders Meeting of CIECH S.A.
From the date of the Extraordinary General Meeting of CIECH S.A. (information about the shareholders is based on the List
of attendance at the EGM of 15 March 2021) for the submission of this report, from the shareholders of CIECH S.A. no
information on a change in the ownership status of (+) or (-) resulting in a change in the ownership structure of significant
blocks of shares of the issuer was affected.
Treasury shares
In 2020 and in the comparable period, CIECH S.A. did not purchase or hold treasury shares.
Share premium
The share premium arose from the surplus in excess of nominal value achieved upon the issue of C, D and E series shares.
Other reserve capital
The table below presents the balances of other reserve capital, consisting of the following items:
OTHER RESERVE CAPITAL BY PURPOSE
31.12.2020
31.12.2019
Commercial risk fund
3,330
3,330
Fund for purchasing soda companies
15,200
15,200
Development funds
57,669
57,669
Fund for the purchase of treasury shares
346,500
-
TOTAL
422,699
76,199
On 21 May 2020, the Annual General Meeting of CIECH S.A. authorised the Management Board of CIECH S.A. to purchase
fully paid shares issued by CIECH S.A. from one or more of CIECH S.A.'s shareholders. Treasury Shares may be acquired in
particular for the purpose of:
✓ their cancellation by way of reduction of the share capital of CIECH S.A.,
✓ their resale against remuneration;
✓ using them to acquire or exchange shares or interest in any other companies.
The maximum amount of remuneration for shareholders will not be higher than PLN 346,500 thousand and a reserve fund
has been created for this purpose in this amount. For details, see current report No 24/2020.
Cash flow hedge reserve
The cash flow hedge reserve reflects the valuation and settlement of hedging instruments to which the hedge accounting
applies. Detailed information is presented in note 8.2.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
44
Actuarial gains
Actuarial valuation reserve comprises actuarial gains or losses, i.e. the effects of differences between the previous
assumptions made in the valuation of employee benefit provisions and what has actually occurred and the effects of changes
in assumptions for these provisions, including change in discount rate.
6.3. DIVIDENDS PAID OR DECLARED
Until the date of approval of the report for publication, the Management Board of CIECH S.A. has not adopted a resolution
on the proposed distribution of the net profit for 2020.
On 21 May 2020, the Ordinary General Meeting resolved to distribute CIECH S.A.’s net profit for the financial year 2019,
amounting to PLN 60,436 thousand, and to allocate the entire profit to CIECH S.A.’s supplementary capital.
6.4. BUSINESS COMBINATIONS AND ACQUISITION OF INTEREST
There were no business combinations in the presented periods.
In 2020, changes in the CIECH Group’s structure that occurred in relation to the companies in which CIECH S.A. held shares,
either directly or indirectly, were related to, among others:
• CIECH Żywice Sp. z o.o.
The Court registered the increase of the share capital of CIECH Żywice Sp. z o.o. on 2 January 2020 and on this date CIECH
S.A. became the holder of all newly created shares whilst remaining the sole shareholder of CIECH Żywice Sp. z o.o.
The share capital was increased at the Extraordinary Shareholders' Meeting of CIECH Żywice Sp. z o.o. on 16 December 2019
which adopted a resolution on the demerger of CIECH Sarzyna S.A., following the adoption of the Demerger Plan of CIECH
Sarzyna S.A., by deciding on:
✓ CIECH Żywice Sp. z o.o.’s participation in the demerger of CIECH Sarzyna S.A. effected through the spin-off of an
organised part of the enterprise on the terms set forth in the Demerger Plan,
✓ approval of the Demerger Plan of CIECH Sarzyna S.A, as agreed by the Management Board of CIECH Sarzyna S.A.
on 31 October 2019,
✓ increase the share capital of Ciech Żywice Sp. z o.o. from PLN 56 thousand by PLN 3,678 thousand, i.e. to PLN
3,734 thousand, through the creation of 73,567 new shares with a nominal value of PLN 50 per share and the
total value of PLN 3,734 thousand. All newly created shares in the increased share capital of Ciech Żywice Sp. z
o.o. were allotted to the sole shareholder of CIECH Sarzyna S.A., i.e. CIECH S.A., in the following manner: 8,490
thousand shares in CIECH Sarzyna S.A. entitle to the receipt of 73,567 shares in CIECH Żywice Sp. z o.o.
As a result of the increase, the share capital of CIECH Żywice Sp. z o.o. amounts to PLN 3,734 thousand and is
divided into 74,677 shares with a value of PLN 50 per share and a total value of PLN 3,734 thousand.
On 20 July 2020, CIECH S.A. and LERG S.A. with its registered office in Pustków-Osiedle entered into a preliminary agreement
for the sale of 74,677 shares representing 100% of the share capital in CIECH Żywice Sp. z o.o. The value of this transaction is
approx. PLN 160 million. The final sale agreement was signed on 1 March 2021, and details are presented in Note 9.5 of this
report.
• CIECH Serwis i Remonty Sp. z o.o. (until 22 April 2020: BOSTEN S.A.; from 22 April 2020 to 15 December 2020: CIECH
Serwis i Remonty S.A.)
On 31 January 2020, the Extraordinary Shareholders’ Meeting of BOSTEN S.A. increased the Company's share capital by PLN
450, i.e. from PLN 100 thousand to PLN 550 thousand, by way of issue of 45,000 new C series shares with the nominal value
of PLN 10 per share and total nominal value of PLN 450 thousand. The issue price of C series shares is equal to the nominal
price per share and amounts to PLN 10 per share. C series shares were earmarked for acquisition by CIECH S.A. in exchange
for a cash contribution of PLN 450 thousand, in a private placement. The Extraordinary General Meeting also changed the
name of the company from BOSTEN S.A. to: CIECH Serwis i Remonty S.A. The court registered the share capital increase and
change of the company’s name on 22 April 2020. On 15 December 2020, the company was transformed from a joint stock
company to a limited liability company.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
45
• CIECH Salz Deutschland GmbH
On 11 December 2019, the Shareholders' Meeting of CIECH Salz Deutschland GmbH increased the share capital from EUR 25
thousand to EUR 3,025 thousand, by creating 100 new shares with a value of EUR 30 thousand per share and a total value of
EUR 3 million. New shares from the increase of the share capital of Ciech Salz Deutschland GmbH were acquired by CIECH
S.A. in exchange for cash. The share capital increase was registered on 5 March 2020.
• CIECH Vitro Sp. o.o.
On 4 January 2020, the Deed of incorporation of CIECH Vitro Sp. z o.o., with its registered office in Iłowa and a share capital
of PLN 5 thousand, divided into 100 equal and indivisible shares with a nominal value of PLN 50 each, was drawn up.
The share capital was paid in full in cash of PLN 400 thousand by CIECH SA. The share premium of PLN 395 thousand was
transferred to the supplementary capital. The Company was registered by the court on 7 May 2020.
• CIECH Trading Sp. z o.o. (former name: CIECH Trading S.A.)
On 27 March 2020, CIECH S.A. sold to BOSTEN S.A. 100 series A registered shares in CIECH Trading S.A. with a total nominal
value of PLN 900, for a total price of PLN 300.
On 30 March 2020 the Management Board of CIECH Trading S.A. notified the shareholders of its intention to adopt a
resolution on the transformation of CIECH Trading Spółka Akcyjna into a limited liability company under the name of CIECH
Trading Spółka z ograniczoną odpowiedzialnością and presented the Transformation Plan prepared on 30 March 2020.
The court registered the transformation on 18 June 2020. On 22 June 2020, CIECH Serwis i Remonty S.A. (formerly: BOSTEN
S.A.) sold 18 shares in the Company to CIECH S.A. for the total price of PLN 300 and ceased to be a shareholder of the
Company.
Extraordinary Meeting of Shareholders of CIECH Trading Sp. z o.o. on 2 March 2021, approved the decision of the
Management Board of the Company to cease conducting business activities specified in the Company's agreement and
obliged the Management Board of the Company to take all necessary actions aimed at ceasing and extinguishing business
activities, and after completing the above-mentioned actions to decide on the dissolution of the Company pursuant to Art.
270 of the Commercial Companies Code.
• Janikowskie Zakłady Sodowe JANIKOSODA Sp. z o.o. (former name: Janikowskie Zakłady Sodowe JANIKOSODA S.A.)
On 16 June 2020, the Extraordinary Shareholders’ Meeting of Janikowskie Zakłady Sodowe JANIKOSODA S.A. adopted a
resolution on the transformation of Janikowskie Zakłady Sodowe JANIKOSODA Spółka Akcyjna into a limited liability company
under the name of Janikowskie Zakłady Sodowe JANIKOSODA Spółka z ograniczoną odpowiedzialnością.
The share capital of JANIKOSODA Sp. z o.o. amounts to PLN 44,330 thousand and is divided into 2 shares of unequal nominal
value, i.e. PLN 36,530 thousand – one share held by CIECH FINANCE Sp. z o.o. and PLN 7,800 thousand – one share held by
CIECH S.A. The court registered the transformation on 2 October 2020.
On 31 December 2020, the shareholders of JANIKOSODA Sp. z o.o. entered into an agreement to sell their shares in the
company to two Buyers for a total price of PLN 590 thousand, including:
✓ CIECH S.A. sold its 1 share, representing 17.6% of the share capital, with a nominal value of PLN 7,800 thousand, for PLN
103.84 thousand. The legal title to the share passed to the Buyers on the date of payment of the price, i.e. on 31
December 2020, and on that date CIECH S.A. ceased to be a shareholder of JANIKOSODA Sp. z o.o;
✓ CIECH FINANCE Sp. z o.o. sold its 1 share, accounting for 82.4% of the share capital, with a nominal value of PLN 36,530.5
thousand, for PLN 486.16 thousand. The legal title to the share passed to the Buyers as of the date of payment of the
price, i.e. on 31 December 2020, and on that date CIECH FINANCE Sp. z o.o. ceased to be a shareholder of JANIKOSODA
Sp. z o.o.
• CIECH Nieruchomości Sp. z o.o. (former name: CIECH Nieruchomości S.A.)
On 28 May 2020, the General Meeting of CIECH Nieruchomości S.A. resolved to increase the share capital by issuing
200,008,926 series E shares with a total nominal value of PLN 4,000 thousand and an issue price equal to the nominal value
of the shares. Series E shares were earmarked to and acquired by CIECH S.A. The agreement to take up series E shares was
concluded on 2 June 2020. The court registered the increase of the share capital on 2 September 2020. On 2 November 2020,
the Extraordinary General Meeting of CIECH Nieruchomości S.A. resolved to transform the joint-stock company into a limited
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
46
liability company. The court registered the transformation on 22 December 2020. The share capital of CIECH Nieruchomości
Sp. z o.o. amounts to PLN 22,148.5 thousand and is divided into 221,485 shares with a nominal value of PLN 100 per share.
The shareholders of the Company are its existing shareholders, i.e.:
✓ CIECH S.A. – holding 220,001 shares, with a value of PLN 100 per share, with a total value of PLN 22,000.1 thousand,
representing 99.33% of the share capital,
✓ CIECH FINANCE Sp. z o.o. – holding 1,484 shares, with a value of PLN 100 per share, with a total value of PLN 148.4
thousand, representing 0.67% of the share capital.
• CIECH SERVICES sp. z o.o. – new company
On 14 September 2020, the Deed of incorporation by CIECH S.A. of CIECH SERVICES sp. z o.o., with its registered office in
Bydgoszcz and a share capital of PLN 5 thousand, divided into 100 equal and indivisible shares with a nominal value of PLN
50 each, was drawn up. The share capital was paid in full in cash of PLN 5 thousand. The new company is a special purpose
vehicle and will become a shared service center. The Court registered CIECH SERVICES Sp. z o.o. on 19 October 2020.
• CIECH Soda Romania S.A.
On 17 September 2020, the Extraordinary General Meeting of Shareholders of CIECH Soda Romania S.A. (hereinafter referred
to as “CSR”) resolved to reduce the share capital by RON 325,840 thousand, i.e. from RON 525,085 thousand to RON 199,245
thousand by reducing the number of shares by 1,303,360,796 shares, i.e. from 2,100,338,803 shares to 796,978,007 shares.
The capital reduction was made from the assets of each shareholder by reducing the number of shares in proportion to their
shareholding. The capital reduction was based on a calculation algorithm whose application resulted in fractional figures, so
by decision of the General Meeting the fractional figures were rounded down to reflect the full share. Shares arising from
fractional calculation parts – mainly small shareholders, representing a total of 5,835 shares, were taken over by CSR. The
proceeds from the reduction of share capital were used to cover accumulated losses from previous years, as reported by CSR
in its financial statements for the financial year ended 31 December 2019. The reduction of the share capital is effective from
15 December 2020. Following the share capital reduction, CIECH S.A.'s shareholding has not changed and amounts to 98.74%,
resulting from the currently held 786,912,905 shares.
6.5. EARNINGS PER SHARE
The table below presents profit and shares data used in the calculation of the basic and diluted earnings per share:
01.01.-31.12.2020
01.01.-31.12.2019
Net profit (loss) from continued operations
154,834
52,416
Net profit (loss) from discontinued operations
453
8,020
Basic and diluted earnings per share (continuing operations)
2.94
0.99
Basic and diluted earnings per share (discontinuing operations)
0.01
0.16
Weighted average number of issued ordinary shares used in calculation of basic and
diluted earnings per share
52,699,909
52,699,909
Accounting policy
Basic earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided
by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity
divided by the weighted average number of ordinary shares outstanding during the year adjusted for the effects of all
dilutive potential ordinary shares.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
47
7. LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS
7.1. INFORMATION ABOUT FINANCIAL LIABILITIES
LOANS, BORROWINGS AND OTHER DEBT INSTRUMENTS
31.12.2020
31.12.2019
LONG-TERM
-
1,580,756
Loans and borrowings
-
1,580,756
SHORT-TERM
2,238,619
301,762
Loans and borrowings
2,095,105
177,612
Cash pooling liabilities
143,514
124,150
TOTAL
2,238,619
1,882,518
Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
1,758,368
1,749,631
Proceeds from debt incurred
662,788
261,701
financing received
662,788
261,701
Accrual of interest
47,853
57,183
Repayment of debt
(395,756)
(309,293)
repayment of principal
(347,813)
(256,500)
interest paid
(47,943)
(52,793)
Realised exchange differences on foreign currency debt
-
(6)
Foreign exchange differences on measurement of liabilities
19,598
(1,454)
Other
2,254
606
Closing balance
2,095,105
1,758,368
Debt financing
The CIECH S.A.'s debt financing is secured mainly through loans made available to CIECH S.A. under the Facilities Agreement
dated 9 January 2018:
1. The Facilities Agreement signed with a consortium of banks dated 9 January 2018:
o term loan in the amount of PLN 1,212,520 thousand and EUR 30,000 thousand (the total amount of the loan as at 31
December 2020 was PLN 1,350,964 thousand),
o revolving credit facility granted to CIECH S.A. in the amount of up to PLN 250,000 thousand (the amount of used credit
as at 31 December 2020 was PLN 0 thousand).
2. Overdraft facilities up to PLN 100,000 thousand and EUR 10,000 thousand under agreements dated 28 and 29 August
2018 (as at 31 December 2020, the amount used was PLN 43,095 thousand),
3. Revolving credit facilities up to PLN 392,788 thousand and EUR 25,000 thousand, under three agreements dated 18 April
2019 (as at 31 December 2020, the amount used was PLN 508,158 thousand).
The total value of facilities available under the aforesaid agreements is PLN 2,255,269 thousand; the limits are drown down
in the amount of PLN 1,902,217 thousand.
Accounting policy
Financial liabilities are an entity’s liabilities to deliver financial assets to another entity or to exchange a financial
instrument with another entity under conditions that are unfavourable. When a financial liability is recognised
initially, an entity shall measure it at its fair value plus, in the case of a financial liability not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition or issue of the financial liability. Interest
accrued is recognised under finance costs or, if it is subject to capitalisation, to property, plant and equipment or
intangible assets.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
48
Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2020,
in section 4.6.
As at 31 December 2020, CIECH S.A. has a short-term liability on account of loans received in the amount of PLN 192,380
thousand, including:
• a loan from Gamma Finanse Sp. z o.o. in the amount of PLN 105,000 thousand,
• a loan from Verbis Eta Sp. z o.o. SKA in the amount of PLN 28,500 thousand,
• a loan from CIECH Pianki Sp. z o.o. in the amount of PLN 35,000 thousand,
• a loan from CIECH Vitrosilicon S.A. in the amount of PLN 20,000 thousand,
• interest accrued on loans in the amount of PLN 3,880 thousand.
Interest rate:
The Term loans bear interest at a floating rate determined on the basis of the WIBOR / EURIBOR base rate, plus margin, the
level of which depends on the level of the net debt to EBITDA. The current level of margin, set on the basis of financial ratios
as at the end of the first half of 2020, is 1.50%.
Information about the financial covenants included in loan agreements
During the period covered by these financial statements, no loan agreement was called to maturity and there were no
violations of payment terms for repayment of principal or interest due in relation to financial liabilities recognised in the
balance sheet. Under the Facilities Agreement dated 29 October 2015 and under three revolving credit facilities agreements
dated 18 April 2019, CIECH S.A. and its selected subsidiaries were obliged to, among others, maintain a certain level of:
o net leverage ratio for the Group specified in the Facilities Agreement (the ratio of the CIECH Group’s consolidated net
debt to consolidated EBITDA of the CIECH Group calculated according to the guidelines in the amount of at least 4.0,
measured at the end of a year and first six months of a year). As at the balance sheet date, i.e. 31 December 2020, this
ratio was maintained and amounted to 2.45.
o the guarantor coverage ratio (share of subsidiaries being guarantors in the consolidated EBITDA of the CIECH Group,
calculated according to the guidelines) at a level of at least 80%; this ratio was not met as at the balance sheet date: the
share of the subsidiaries in the consolidated EBITDA value, which are guarantors, in the Facilities Agreement did not
exceed the required threshold of 80% and amounted to 76.7%. Due to the breach of the ratio and failure to repeal the
breach as at the balance sheet date, the total value of loans made available on the basis of the above-mentioned
agreements, was reclassified into short-term loan liabilities in accordance with IAS 1. In connection with the occurrence
of a breach of the guarantor coverage ratio, the Company asked the lenders to change the method of calculating the
ratio, by: not taking into account the results of CIECH Soda Romania S.A. in the calculation. and not included in the
calculation of the results of CIECH Żywice Sp. z o.o. and for lenders waiving their rights related to the occurrence of a
breach of the index. The lenders being a party to the syndicated Loan Agreement of 29 October 2015 and the lenders of
the revolving loan agreements (except for Banco de Sabadell, for a EUR 25 million loan), accepted the Company's
application by 31 March 2021, i.e. during the recovery period (cure period) provided for in credit agreements.
At the same time, on 16 March 2021, a new long-term loan agreement was signed for a total of PLN 2,115,000 thousand.
Detailed information on the agreement can be found in the current report 7/2021. Under the new loan agreement, the
guarantor coverage ratio will be tested for the first time according to the data as at the balance sheet date,30 June 2021. The
catalog of guarantors has been changed in the new loan agreement and, in line with the Company's forecasts, the guarantor
coverage ratio will be met.
7.2. OTHER NON-CURRENT LIABILITIES
Accounting policy, judgements and estimates
Accounting policy concerning financial instruments is presented in note 8.1.
OTHER NON-CURRENT LIABILITIES
31.12.2020
31.12.2019
Derivatives*
14,327
6,487
Liabilities due to purchase of shares and other financial assets
3,871
7,478
Other
-
12,721
TOTAL
18,198
26,686
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
49
* At the end of 2020, we do not report the long-term portion of IRS transactions designated for hedge accounting. These transactions hedge
the interest rate on loans that were recognized as short-term liabilities due to the breach of one of the covenants as at the balance sheet
date. Details are described in point 7.1.
Liabilities due to purchase of shares include the long-term portion of the deferred payment for the acquisition of Proplan
Plant Protection Company, S.L., i.e.:
• EUR 2,929 thousand of discounted deferred payment (the remaining 10% of the purchase price), payable in cash in 4
installments of EUR 1,115 thousand on subsequent anniversaries (in 2019-2022 respectively – the first payment was
made in July 2019) of the takeover of control over Proplan (nominal value of EUR 4,461 thousand).
In 2019, other long-term liabilities also included the corresponding portion of the estimated value of the three-year Long-
term Incentive Plan of the CIECH Group for 2019-2021 for the key management personnel of the CIECH Group. The estimates
made at the end of 2020 did not substantiate the payments under the above Plan, therefore as at 31 December 2020 there
is no liability in this respect.
7.3. CURRENT TRADE AND OTHER LIABILITIES
Accounting policy
Trade and other liabilities are classified as current or non-current based on the following principles:
✓ trade liabilities are reported as current liabilities, regardless of maturity,
✓ other liabilities due to be settled within 12 months of the balance sheet date are classified as current liabilities,
✓ other payables, which do not meet the current liability conditions, are classified as non-current liabilities.
Liabilities denominated in foreign currencies are recognised at the NBP’s average exchange rate effective on the last
working day before the date of transaction.
At the reporting date foreign currency denominated liabilities are translated at the average exchange rate announced
for that day by the NBP except for received prepayments. Currency translation differences arising upon the repayment
of a liability (realised) or its valuation (unrealised) are presented within financial income or expense. Prepayments for
deliveries denominated in foreign currencies are recognised at the exchange rate applicable as at the transaction day.
Factoring
The Company uses non-recourse factoring services. The factor transfers advance payments to the Company’s account
in the full amount of invoices accepted for financing. The financing of receivables transferred is provided in various
timeframes, therefore, as at the balance sheet date, there may be receivables which have not been financed yet and
are reported as factoring receivables. Advance payments received are posted as factoring liabilities. In the statement
of financial position, factoring receivables and liabilities are recognised on a net basis up to 95% of the value of advance
payments received from the factor (the 95% limit results from the level of the receivables insurance). The remaining
5% of receivables value is reported as factoring receivables, and 5% of the value of advance payments received is
reported as factoring liabilities.
Judgements and estimates
At the reporting date trade payables are measured at amortised cost (i.e. they are discounted using the effective
interest method) and increased by any applicable late interest accrued.
Late interest is not accrued when a formal waiver is received from the counterparty. In all other cases such interest is
accrued and recognised in accordance with the following principles:
✓ on an ongoing basis, based on interest notes received;
✓ in estimated amounts, with such estimates based on comparison of interest charged in the past by a counterparty
to the related amounts owed.
CURRENT TRADE AND OTHER LIABILITIES
31.12.2020
31.12.2019
Trade liabilities and advances taken
332,006
385,748
- in up to 12 months
332,006
382,909
- prepayments received for supplies
-
2,839
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
50
CURRENT TRADE AND OTHER LIABILITIES
31.12.2020
31.12.2019
Public and legal liabilities (excluding income tax)
3,762
3,108
Liabilities for purchase of property, plant and equipment
8,401
1,905
Financial instruments liabilities
45,119
18,533
Liabilities to employees
4,136
1,195
Payroll liabilities
13,943
4,829
Holiday leave accrual
3,213
2,705
Social security and other employee benefits
2,258
824
Factoring liabilites
6,830
17,097
Liabilities due to purchase of shares, stocks and other financial assets
5,255
5,118
Other
13,913
10,253
TOTAL
438,836
451,315
Trade liabilities do not bear interest. Commercial contracts concluded by CIECH S.A. include various terms of payment of
trade liabilities depending on the type of transaction, market characteristics and trade conditions. The most common
payment terms are: 14, 30 and 60 days.
7.4. LEASES
Accounting policy
On 1 January 2019, CIECH S.A. adopted a new financial reporting standard, IFRS 16 Leases.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration.
The Company combines two or more contracts entered into at or near the same time with the same counterparty (or
related parties of the counterparty), and account for the contracts as a single contract if one or more of the following
criteria are met:
a) the contracts are negotiated as a package with an overall commercial objective that cannot be understood without
considering the contracts together;
b) the amount of consideration to be paid in one contract depends on the price or performance of the other contract;
or
c) the rights to use underlying assets conveyed in the contracts (or some rights to use underlying assets conveyed in
each of the contracts) form a single lease component.
A contract contains a lease if:
a) it concerns an identified asset that is explicitly specified in the contract (e.g. using an inventory number, address
(for premises), etc.) or implicitly specified at the time that the asset is made available for use by the customer, and
the supplier does not have the substantive right to substitute the asset throughout the period of use and
b) the lessee receives essential all of the economic benefits from such assets during the period of use, i.e. both basic
benefits and the benefits derived from it (if any); and
c) the lessee has the right to specify the method in which it uses the identified asset.
Initial measurement of the lease liability
The lease payments included in the measurement of the lease liability comprise the following payments that are not
paid:
a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
c) amounts expected to be payable by the lessee under residual value guarantees;
d) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to
terminate the lease and it is highly likely that this option will be exercised.
Subsequent measurement of the lease liability
After the commencement date, the Company measures the lease liability by:
a) increasing the carrying amount to reflect interest on the lease liability;
b) reducing the carrying amount to reflect the lease payments made; and
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
51
c) remeasuring the carrying amount to reflect any reassessment or lease modifications.
The Company, as a lessee, recognises in profit or loss of the current period both:
a) interest on the lease liability; and
b) variable lease payments not included in the measurement of the lease liability in the period in which the event or
condition that triggers those payments occurs, unless these costs are included in the carrying amount of another asset
in accordance with the accounting policy for property, plant and equipment.
In-substance fixed lease payments
In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are
unavoidable. In-substance fixed lease payments exist, for example, if:
a) payments are structured as variable lease payments, but there is no genuine variability in those payments. Those
payments contain variable clauses that do not have real economic substance. Examples of those types of payments
include:
• payments that must be made only if an asset is proven to be capable of operating during the lease, or only if an
event occurs that has no genuine possibility of not occurring; or
• payments that are initially structured as variable lease payments linked to the use of the underlying asset but
for which the variability will be resolved at some point after the commencement date so that the payments
become fixed for the remainder of the lease term. Those payments become in-substance fixed payments when
the variability is resolved,
b) there is more than one set of payments that a lessee could make, but only one of those sets of payments is realistic.
In this case, an entity considers the realistic set of payments to be lease payments.
c) there is more than one realistic set of payments that a lessee could make, but it must make at least one of those sets
of payments. In this case, an entity considers the set of payments that aggregates to the lowest amount (on a
discounted basis) to be lease payments.
Variable lease payments
Variable lease payments that depend on an index or a rate include, for example, payments linked to a consumer price
index, payments linked to a benchmark interest rate (such as WIBOR) or payments that vary to reflect changes in market
rental rates (e.g. periodical changes in perpetual usufruct rates, in connection with the revision of a valuation report).
Variable lease payments that do not depend on an index or a rate, i.e. depend on the use, are not included in the
measurement of lease liabilities (e.g. fees for exceeding the mileage limit).
Exemptions/ simplifications applied
The Company applies the simplifications for short-term leases and low-value asset leases provided for in the standard.
It is assumed that assets whose unit value does not exceed approximately PLN 20 thousand, which corresponds to
approximately USD 5 thousand, are low-value assets. Short-term leases are those whose term is shorter than 12 months.
The company also benefits from the practical exemption regarding the lack of separation of non-lease components.
Judgements and estimates
Adoption of IFRS 16 entailed also the need to make estimates and judgments which are reflected in the measurement
of lease liabilities and right-of-use assets, including:
• assessing whether a contract contains a lease in accordance with IFRS 16,
• determining the duration of contracts (including contracts with an indefinite term or with an extension option):
With respect to contracts for an indefinite term, the company, when estimating the irrevocable lease term, assumed
the period in which it intends to use the underlying assets, also taking into account the parties' right to terminate and
the occurrence of significant penalties in contracts. The lease term over which the lease liability is recognised also
includes any periods resulting from an extension or early termination if any of the above scenarios is sufficiently certain
in the entity's judgement. In the case of contracts with an extension option, the lease liability would be respectively
higher, while termination options resulted in a reduction in the liability amount.
• assessing lease payments as either fixed or variable,
• determining depreciation and amortisation rates.
• determining the interest rate to be used in discounting future cash flows:
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
52
Discount rate
The present value of future lease payments is calculated using the lease rate. If the lease rate is not known, the Company
applies the incremental borrowing rate for a given lease agreement, i.e. the rate of interest that the Company would
have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar economic environment.
Assets used in CIECH S.A. under lease agreements include passenger cars and premises – mainly office and warehouse space.
The lease agreement for cars is a renewable agreement, making it possible to acquire an asset at its estimated market value
at the end of its use. The Company is not obliged to purchase the leased assets.
To calculate discount rates for the purposes of IFRS 16, the Company assumes that the discount rate should reflect the cost
that it would have to pay to borrow the funds necessary to purchase the leased asset.The calculation of interest rates took
account of credit risk (reflected in the margin assumed), economic conditions in which the transactions took place (country,
currency of the contract) and the duration of the contract (preparation of calculations for the relevant periods within which
the Company holds lease contracts). Interest rates range from 1.91% to 5.07% (for PLN 1.91%-5.07%; for EUR 3.07%). A single
discount rate was applied to the entire contract portfolio.
The nominal value and the value lease interest are as follows:
LEASE LIABILITIES
Nominal payments
Effective interest
Discounted lease
liability
31.12.2020
0–6 months
2,943
23
2,920
Up to 1 year
3,493
81
3,412
1–2 years
9,593
589
9,004
2–5 years
9,233
1,176
8,057
More than 5 years
5,836
1,105
4,731
TOTAL
31,098
2,974
28,124
31.12.2019
0–6 months
2,356
58
2,298
Up to 1 year
2,850
113
2,737
1–2 years
9,832
806
9,026
2–5 years
10,397
1,449
8,948
More than 5 years
8,171
1,740
6,431
TOTAL
33,606
4,166
29,440
Reconciliation of changes in liabilities resulting from financing activities – lease liabilities
01.01.-31.12.2020
01.01.-31.12.2019
Implementation of IFRS 16 as at 01.01.2019
-
32,518
Opening balance
29,440
-
Modifications of agreements
(962)
1,290
Signing new agreements
3,415
202
Early termination of agreement
(120)
(55)
Interest accrued
1,109
1,132
Repayment of liability
(6,607)
(5,429)
Foreign exchange differences
1,849
(218)
Closing balance
28,124
29,440
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
53
The total cash outflow for the lease is as follows:
01.01-31.12.2020
01.01.-31.12.2019
Liabilities payments, including:
10,812
7,551
Equity
5,483
4,388
Interests
1,124
1,041
Variable fees other than those depending on the
index/rate
3,268
1,220
Short-term leases
-
2
Lease of assets with low initial value
937
900
The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for
the period:
01.01-31.12.2020
01.01-31.12.2019
Costs of short-term leases (concluded for a period of up to 12 months),
-
2
Costs of lease of low-value assets
(938)
(900)
Costs related to variable lease payments not included in the measurement of lease
liabilities
(3,269)
(1,220)
Detailed information on the right to use assets under lease agreements is presented in note 5.2.
7.5. PROVISIONS FOR EMPLOYEE BENEFITS
Accounting policy
Provisions for retirement and disability benefits
Based on the Company’s remuneration plan, the employees of CIECH S.A. are entitled to retirement and
disability benefits. The Company’s obligations in respect of the above benefits is the amount of benefit entitlement that
employees have earned as a result of their service in the current and prior years.
Net defined benefit liabilities are calculated separately for each plan by estimation of future payments required to settle
the obligation resulting from employee service in the current and prior periods (discounted to its present value). The
discount rate is the rate of return for low-risk debt securities with similar maturity date as the Company’s liabilities as
at the end of the reporting period. An appropriate estimation is made by an authorised actuary with the application of
forecast discounted unit right method.
The use of such provisions results in a decrease in the provision, while the reversal of the said provision increases other
operating income.
The increase in the provision for employment costs is recognised respectively in other operating expenses. Changes in
provisions resulting from the passage of time (i.e. the unwinding of the discount) and the effect resulting from changes
in discount rates are always presented in financing activities.
The Company recognises in other comprehensive income actuarial gains and losses – changes in provisions for
retirement benefits resulting differences between the previous actuarial assumptions and what has actually occurred
and the effects of changes in actuarial assumptions and change in discount rate.
Judgements and estimates
The amount of the provision for employee benefits is determined based on actuarial valuations performed by
independent professional firms. By actuarial valuation estimates are made regarding the rotation in employment, wage
growth, discount rates and inflation.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
54
PROVISIONS FOR EMPLOYEE BENEFITS
LONG-TERM
SHORT-TERM
01.01.-31.12.2020
01.01.-31.12.2019
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
1,089
574
2,312
421
Recognition
-
456
-
2,329
Use and reversal
-
-
(1,595)
(438)
Other
(110)
59
109
-
Closing balance
979
1,089
826
2,312
In 2019, within the short-term provision, a provision was recognised for the “voluntary redundancy programme” in the
amount of PLN 2,099 thousand. During 2019, PLN 341 thousand was paid out on this account and during 2020, PLN 1,363
thousand was paid out.
In addition, an amount of PLN 51 thousand (PLN 59 thousand in the corresponding period) was recognised in other
comprehensive income. This is a change in provisions for retirement benefits resulting from differences between the previous
actuarial assumptions and what has actually occurred as well as from changes in the parameters and assumptions used in the
calculations, such as the discount rate, the salary growth rate, and assumptions concerning the future mobility of employees.
Employee benefits are measured on the basis of actuarial valuations and including provision for retirement and disability
benefits. A discount rate of 1.4% p.a. was applied in order to determine the current value of future liabilities due to employee
benefits. The discount rate applied is established in nominal value. At the same time, future inflation in the amount of 2.5%
per annum was taken into account. For 2021, the wage growth rate was adopted at the level of 6% and 2% in the following
years. Staff turnover ratio is established based on historic data, adjusted for employment restructuring plans. According to
the Company’s estimations, a change in actuarial assumptions will not have a significant impact on financial results.
7.6. OTHER PROVISIONS
Accounting policy
A provision is recognised if, as a result of a past event, the Company has a present obligation and it is probable that an
outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability.
A provision for restructuring is recognised when the Management Board has approved a detailed and formal
restructuring plan, and the restructuring either has commenced or has been announced publicly and a reliable estimate
can be made.
Judgements and estimates
For measurement of the provisions, the Company is required to make estimates, assumptions regarding discount rates,
expected costs and payment terms.
CHANGE IN OTHER SHORT-TERM PROVISIONS
Provision for liabilities and expected losses
TOTAL
01.01.-31.12.2020
Opening balance
33,325
33,325
Recognition
1,435
1,435
Use and reversal
(2,172)
(2,172)
Other
1,153
1,153
Closing balance
33,741
33,741
01.01.-31.12.2019
Opening balance
103,284
103,284
Recognition
2,513
2,513
Use and reversal
(72,389)
(72,389)
Other
(83)
(83)
Closing balance
33,325
33,325
The amount of provisions is an estimated value and may be subject to change during utilisation.
Short-term provisions of PLN 33,741 thousand are related to potential claims (principal liability plus interest payable) resulting
from litigation. In 2019, the utilisation of the provision in the amount of PLN 66,400 thousand relates to the payment of a tax
liability together with overdue interest on CIT for 2012. More information on tax audits is provided in Note 9.2.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
55
8. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
8.1. FINANCIAL INSTRUMENTS
Accounting policy
Principles of measurement after initial recognition/at the end of reporting period and presentation of financial instruments in financial
statements
Category of assets or
liabilities
Measurement
Recognition
Assets at fair value through
profit or loss
At fair value
Remeasurement changes adjust the carrying
amount of the asset and are recognised in current
period profit or loss.
Financial assets measured at
amortised cost
At amortised cost using the effective
interest rate (EIR)
Remeasurement changes adjust the carrying
amount of the asset and are recognised in current
period profit or loss.
Financial assets at fair value
through other
comprehensive income
At fair value
Changes from remeasurement at fair value are
recognised in other comprehensive income. For
debt instruments interest is recognised directly in
profit or loss.
Liabilities at fair value
through profit or loss
At fair value
Remeasurement changes adjust the carrying
amount of the asset and are recognised in current
period profit or loss.
Impairment of financial assets
At each balance sheet date, the Entity assesses whether there has been a significant increase in credit risk for a single
financial asset (financial instrument) since its initial recognition (does not apply to assets measured through profit or loss
or equity investments designated as options measured at fair value through other comprehensive income).
If such a significant increase has taken place, the Entity estimates allowances in the amount of long-term expected credit
losses. Otherwise, the Entity estimates allowances in the amount of 12-month expected credit losses, even if in previous
periods allowances were recognised in the amount of long-term expected credit losses.
The Entity assumes that in the case of financial instruments that meet the definition of a low credit risk instrument as at a
given balance sheet date, there has been no significant increase in credit risk and therefore the allowance is estimated at
the amount of 12-month expected credit losses. The credit risk on a financial instrument is considered low for these
purposes, if:
a) the financial instrument has a low risk of default,
b) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and
c) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the
ability of the borrower to fulfil its contractual cash flow obligations.
The Entity considers that there has been a significant increase in credit risk for a given financial instrument, if there has
been a delay in contractual payments of more than 30 days.
For a financial asset that is credit-impaired at the reporting date, but that is not a purchased or originated credit-impaired
financial (POCI) asset, the Entity measures the expected credit losses as the difference between the asset's gross carrying
amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest
rate. Any adjustment is recognised in profit or loss as an impairment gain or loss.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash
flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about
the following events:
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
56
a) significant financial difficulty of the issuer or the borrower;
b) a breach of contract, such as a default or past due event;
c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty,
having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
e) the disappearance of an active market for that financial asset because of financial difficulties; or
f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused
financial assets to become credit-impaired. Regardless of the above criteria, the Entity considers that there has been an
impairment loss in the event of a delay in payment of more than 180 days, because, in company’s opinion, after this date,
the risk of non-performance by contractors increases significantly.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in
possession of reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances are estimated using individual parameters determined on the basis of benchmarks (using
information on bank ratings) or values provided by experts, scaled down to the horizon for estimating expected credit
losses.
For trade receivables the Entity uses a simplified approach whereby lifetime expected credit losses are estimated from the
moment of initial recognition of exposures.
The main financial instruments disclosed in the statement of financial position of CIECH S.A. as at 31 December 2020 include:
Financial assets:
• cash and cash equivalents,
• loans granted,
• financial instruments with positive valuation,
• trade receivables,
• factoring receivables,
• cash pooling receivables.
Financial liabilities:
• term loan liabilities, revolving facility liabilities and overdraft liabilities,
• trade payables,
• financial instruments with negative valuation,
• lease liabilities,
• loan liabilities,
• cash pooling liabilities,
• factoring liabilities.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
57
Carrying amount of financial instruments
CLASSES OF FINANCIAL INSTRUMENTS
note
31.12.2020
31.12.2019
CATEGORIES OF FINANCIAL
INSTRUMENTS
Cash and cash equivalents
5.8
265,287
169,983
Loans measured at amortized cost
Loans granted
5.4;5.7
1,588,314
1,020,812
Loans measured at amortized cost
Trade receivables
5.6
169,664
285,995
Loans measured at amortized cost
Factoring receivables
5.6
35,946
30,856
Loans measured at amortized cost
Derivatives with positive value
5.4;5.7
1,835
14,377
Valued in fair value through income
statement
Derivatives recognized in financial assets designated
as hedging instruments
5.4;5.7
-
3,738
Financial assets valued at fair value
through other comprehensive income
Cash pooling receivables
5.6
7,992
6,496
Loans measured at amortized cost
ASSETS
2,069,038
1,532,257
Trade liabilities
7.3
(332,006)
(382,909)
Loans measured at amortized cost
Loans and borrowings
7.1
(2,095,105)
(1,758,368)
Loans measured at amortized cost
Lease liabilities
7.4
(28,124)
(29,440)
Loans measured at amortized cost
Factoring liabilities
7.3
(6,830)
(17,097)
Loans measured at amortized cost
Derivatives with negative value
7.2;7.3
(27,702)
(20,005)
Valued in fair value through income
statement
Derivatives recognized in financial liabilities
designated as hedging instruments
7.2;7.3
(31,744)
(5,015)
Financial liabilities valued at fair value
through other comprehensive income
Cash pooling liabilities
7.1
(143,514)
(124,150)
Loans measured at amortized cost
LIABILITIES
(2,665,025)
(2,336,984)
Selected trade receivables in CIECH S.A. are subject to factoring. This is factoring with the assumption of insolvency risk
whereby the factor assumes the risk in the amount specified in the insurance policy.
CIECH S.A. also has reverse factoring. Due to the conditions included in the contracts, these liabilities are disclosed as trade
liabilities.
Revenues, costs, profit and loss recognised in the income statement by the category of financial instruments.
Items of revenues, costs, profits and losses
recognized in the statement of profit or loss
01.01.-
31.12.2020
01.01.-
31.12.2019
Categories of financial instruments
Revenues/(costs) due to interests, including
those calculated using the effective interest
rate method
(7,891)
(25,630)
46,268
44,379
Financial assets valued at amortized cost
(53,049)
(68,877)
Financial liabilities valued at amortized cost
(1,110)
(1,132)
Financial liabilities excluded from IFRS 9
Profits/(losses) due to exchange differences
33,471
2,432
33,471
2,432
Financial liabilities valued at amortized cost
Recognition of impairment losses
(9,690)
(295)
Financial assets valued at amortized cost
Reversal of impairment losses
675
3,171
Financial assets valued at amortized cost
Income/expenses due to the use of derivative
financial instruments
(57,206)
25,606
(52,671)
26,152
Assets/financial liabilities valued in fair value through
income statement
(4,535)
(546)
Hedging instruments
TOTAL
(40,641)
5,284
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
58
8.2. FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING
Accounting policy
Hedge accounting recognises the offsetting effects on profit or loss of changes in the fair values of the hedging
instrument and the hedged item. Derivatives such as options, forwards, swaps are held to hedge the fair value of assets
or liabilities or expected future cash flows.
For the hedging instruments, the Entity may apply hedge accounting if, and only if, all the following conditions are met:
✓ the hedging relationship consists only of eligible hedging instruments and eligible hedged items.
✓ at the inception of the hedging relationship there is formal designation and documentation of the hedging
relationship and the entity's risk management objective and strategy for entity the hedge. That documentation
shall include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and
how the entity will assess whether the hedging relationship meets the hedge effectiveness requirements (including
its analysis of the sources of hedge ineffectiveness and how it determines the hedge ratio).
✓ the hedging relationship meets all of the following hedge effectiveness requirements:
a) there is an economic relationship between the hedged item and the hedging instrument;
b) the effect of credit risk does not dominate the value changes that result from that economic relationship;
and
c) the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
item that the entity actually hedges and the quantity of the hedging instrument that the entity actually
uses to hedge that quantity of hedged item. However, that designation shall not reflect an imbalance
between the weightings of the hedged item and the hedging instrument that would create hedge
ineffectiveness (irrespective of whether recognised or not) that could result in an accounting outcome
that would be inconsistent with the purpose of hedge accounting.
Cash flow hedge:
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated
with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate
debt) or a highly probable forecast transaction, and could affect profit or loss.
Cash flow hedge shall be accounted for as follows:
a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted
to the lower of the following (in absolute amounts):
i. the cumulative gain or loss on the hedging instrument from inception of the hedge; and
ii. the cumulative change in fair value (present value) of the hedged item (ie the present value of the
cumulative change in the hedged expected future cash flows) from inception of the hedge.
b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (ie
the portion that is offset by the change in the cash flow hedge reserve calculated in accordance with (a))
shall be recognised in other comprehensive income.
c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change
in the cash flow hedge reserve calculated in accordance with (a)) is hedge ineffectiveness that shall be
recognised in profit or loss.
The effective portion of the hedge is transferred to profit or loss as a reclassification adjustment in the period or periods
when the hedged expected future cash flows affect profit or loss.
The table below presents a summary of specific groups of relationships existing in 2020, designated for hedge accounting:
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
59
31.12.2020
31.12.2019
Type of
instrument
Hedged item
Nominal
value/Volume
Maturity
Average
price
obtained
on the
contract
Value in
financial
assets
Value in
financial
liabilities
Value in
financial
assets
Value in
financial
liabilities
Derivative instruments – cash flow hedge
Interest rate risk
Interest rate
swaps – 6M
WIBOR to
fixed rate
Interest
payments on
term loan
contracted by
CIECH S.A.
with initial
nominal
amount of
PLN 1,212,520
thousand
PLN 1,212,520
thousand
2022
Interest
rate paid:
1.8% p.a.
-
(31 126)
3,453
(4,526)
Interest rate
swap – 6M
EURIBOR to
fixed rate
Interest
payments on
term loan
contracted by
CIECH S.A.
with initial
nominal
amount of
EUR 30,000
thousand
EUR 30,000 thousand
2022
Interest
rate paid:
-0.25%
p.a.
-
(618)
118
(489)
31.12.2020
31.12.2019
Before tax
Tax
After tax
Before tax
Tax
After tax
Cash flow hedge reserve as at the beginning
of the period
(1,278)
243
(1,035)
(1,391)
239
(1,152)
Effective portion of gains/(losses) on
hedging instruments:
- currency risk
-
-
-
(4,825)
855
(3,970)
- interest rate risk
(34,661)
6,586
(28,075)
(906)
172
(734)
Reclassification to profit or loss:
- currency risk (sales revenues)
(166)
32
(134)
2,725
(518)
2,207
- interest rate risk (interest expense)
4,361
(830)
3,531
217
(41)
176
- closure of designation
-
-
-
2,902
(464)
2,438
Cash flow hedge reserve as at the end of
the period
(31,744)
6,031
(25,713)
(1,278)
243
(1,035)
The aim of CIECH S.A. when taking the decision concerning the implementation of the principles of cash flow hedging was to
reduce the influence of interest rate movements and exchange rates differences from valuation of financial instruments on
the statement of profit or loss by reflecting their hedging nature in the financial statements.
In the reporting period, there were no instances of identifying the inability to realise a future transaction in respect of which
the cash flow hedge accounting was applied.
However, in the third quarter of 2019, due to the discontinuation of production at CIECH Soda Romania S.A. and the absence
of any further USD/RON exposure, part of the transaction was closed with a negative valuation, which was reflected in the
consolidated financial statements.
Sales revenues designated to hedge accounting are considered as highly probable. Their occurrence is anticipated in the
Company’s long-term financial forecast. Additionally, majority of these transactions are concluded with regular customers of
CIECH S.A., which supports the probability of their occurrence.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
60
In IRS transactions, in order to identify sources of ineffectiveness of the hedge, key parameters of the hedged credit and IRS
transactions (nominal amount, interest rate, interest periods) were compared. Credit risk is considered negligible. No sources
of ineffectiveness were identified.
8.3. FINANCIAL RISK MANAGEMENT
Risk management principles
CIECH S.A. actively manages operational and financial risk, striving to reduce the fluctuation of cash flows and maximise the
companies’ market value.
CIECH S.A.’s policy assumes natural hedging of imports and exports and hedging of up to 90% of net exposure to currencies
exchange rate change by using derivatives and 100% exposure to interest rate risk.
In 2020, forward currency and interest rate risk hedging transactions (forwards, IRSs and CIRSs) were entered into (or
continued to exist after being entered into in previous years) at the company.
Cash management
CIECH S.A. cooperates with bank service providers of high credit rating and with substantial experience in the cash
management area. Allocation of financial resources is performed through the use of intra-group loans, dividends payout by
subsidiaries, participation in a cash management system (cash pooling) and increase of share capital in the subsidiaries.
Quantitative and qualitative information on financial risks
CIECH S.A. manages financial risks based on, among others, the developed and adopted market risk hedging strategy. The
aim of the financial risk management policy is to identify areas requiring risk analysis to determine methods to identify and
measure it, to determine activities undertaken in relation to identified risk areas and to define organisational solutions in the
risk management process.
In fulfilling its main goals, CIECH S.A. aims to avoid excessive market risk. This goal is realised by identifying, monitoring and
hedging cash flow fluctuation risk and monitoring the size and costs of the Company’s debt. When assessing risk, the Company
takes into account the risk portfolio effect resulting from the variety of conducted business activities. Effects of the risk are
reflected in the financial statements.
Financial risk management covers processes of identifying, measuring and establishing the manner of responding to that risk,
including processes related to currency exchange rates and interest rate fluctuations. CIECH S.A. monitors risk areas which
are most important for its activities.
Interest rate risk
CIECH S.A. finances its activity mainly through term loans. The amount of the costs of interest-bearing debt held by the
Company depends on the reference rate. This refers to term loans made available under a facilities agreement dated 9
January 2018 in the amount of PLN 1,212 million and EUR 30 million, a revolving credit facility made available under a facilities
agreement dated 9 January 2015 in the amount of PLN 250 million (as at the end of 2020, the debt amounted to PLN 0),
overdraft facilities (as at the end: PLN 551,253 thousand) and a part of lease and factoring contracts.
Therefore, the Company is exposed to risk of change in finance costs due to changing interest rates on existing debt. This may
result in increased financial costs and, consequently, deterioration of the Company’s financial performance. The risk is
partially reduced by:
✓ assets owned by CIECH S.A. (bank deposits), earning interest at variable interest rate,
✓ hedging transactions concluded.
In 2020, CIECH S.A. used the following interest rate hedging transactions:
• interest rate swap transaction to hedge the variable interest rate levels applicable to the calculation of interest on the
term loan made available in November 2015 and annexed on 9 January 2018. The transaction hedges indebtedness in
the amount of EUR 30 million, amortised in accordance with the schedule of the IRS transaction;
• currency and interest rate swap transactions to hedge the variable interest rate levels applicable to the calculation of
interest on the term loan made available in November 2015 and annexed on 9 January 2018. The transaction hedges
indebtedness in the initial nominal amount of 1,212 million, amortised in accordance with the schedule of the CIRS
transaction.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
61
The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to
interest rate risk:
Total carrying amount
31.12.2020
31.12.2019
Fixed interest rate instruments
990,508
415,194
Financial assets
990,508
430,194
Financial liabilities
-
(15,000)
Floating interest rate instruments
(1,395,246)
(1,129,861)
Financial assets
871,331
767,097
Financial liabilities
(2,266,577)
(1,896,958)
The table below shows the effects of a change in the interest rate by 100 basis points in relation to the floating interest rate
instruments presented in the statement of financial position.
Statement of profit or loss
Equity*
increase by 100 bp
decrease by 100 bp
increase by 100 bp
decrease by 100 bp
31.12.2020
Floating interest rate instruments
(13,955)
13,955
-
-
Interest rate swaps (IRS)
2,617
(2,690)
15,878
(16,409)
Sensitivity of cash flows (net)
(11,338)
11,265
15,878
(16,409)
31.12.2019
Floating interest rate instruments
(11,299)
11,299
-
-
Interest rate swaps (IRS)
7,517
(7,680)
24,901
(26,011)
Sensitivity of cash flows (net)
(3,782)
3,619
24,901
(26,011)
* Do not include the impact of profit/loss on equity.
Currency risk
Currency risk is an inevitable component of commercial activity denominated in foreign currencies. Due to the nature of
conducted import and export operations, CIECH S.A. is subject to currency exposure related to the significant lead of export
over import. Sources of currency risk to which the Company was exposed in 2020 included: purchase of raw materials, product
sales, loans taken out and cash in foreign currencies. Unfavourable changes in currency exchange rates may worsen the
Company’s financial results.
In 2020, CIECH S.A. used hedging contracts, such as forward options, to partially cover currency risk. CIECH S.A. tries to
naturally hedge the foreign currency exposure, including matching of currency flows arising from sales and purchases as well
as strategic debt denominated in EUR, in order to fit it to the expected exposure to currency risk in operations.
The table below presents the estimated currency exposure of CIECH S.A. in EUR and USD as at 31 December 2020 and 2019
due to financial instruments:
Exposure to currency risk in EUR (figures
in EUR)
31.12.2020
31.12.2019
Impact on the
statement of profit
or loss
Impact on the
statement of other
comprehensive
income*
Assets
Loans granted sensitive to FX rate
changes
215,955
102,400
x
Trade and other receivables
7,849
24,926
x
Cash including bank deposits
315
6,305
x
Liabilities
Trade and other liabilities
(1,675)
(10,876)
x
Term loan liabilities
(30,000)
(30,000)
x
Working capital facility liabilities
(25,000)
(25,000)
x
Other liabilities in respect of credits and
loans
(13,030)
(9,441)
x
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
62
Exposure to currency risk in EUR (figures
in EUR)
31.12.2020
31.12.2019
Impact on the
statement of profit
or loss
Impact on the
statement of other
comprehensive
income*
Hedging instruments: Forward*
-
(36,784)
x
Forward not designated to hedge
accounting)
(214,025)
-
x
CIRS
(60,000)
(186,880)
x
Total exposure
(119,611)
(165,350)
* Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is
recognised in the profit or loss statement.
Exposure to currency risk in USD
(figures in USD)
31.12.2020
31.12.2019
Impact on the
statement of profit
or loss
Impact on the
statement of other
comprehensive
income*
Assets
Trade and other receivables
29
1,630
x
Cash including bank deposits
142
5,655
x
Liabilities
Trade and other liabilities
(111)
(5,619)
x
Forward not designated to hedge
accounting)
-
(5,363)
x
Total exposure
60
(3,697)
* Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is
recognised in the profit or loss statement.
The table contains an analysis of the sensitivity of individual statement of financial position items to exchange rate changes
as at 31 December 2020.
Figures in EUR*
Impact on the statement
of profit or loss
Impact on the statement
of other comprehensive
income
Analysis of sensitivity to currency risk – EUR, 2020
Foreign-currency balance sheet items
(1,196)
(1,196)
-
Analysis of sensitivity to currency risk – EUR, 2019
Foreign-currency balance sheet items
(1,286)
(1,286)
-
Hedging instruments: Forward
(368)
-
(368)
* Increase of EUR/PLN exchange rate by 1 grosz.
Figures in USD*
Impact on the statement
of profit or loss
Impact on the statement
of other comprehensive
income
Analysis of sensitivity to currency risk – EUR, 2020
Foreign-currency balance sheet items
1
1
-
Analysis of sensitivity to currency risk – EUR, 2019
Foreign-currency balance sheet items
17
17
-
Derivatives: Forward
(54)
(54)
-
* Increase of EUR/PLN exchange rate by 1 grosz
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
63
Raw material price risk
A significant portion of CIECH S.A.’s activity is the import and export of chemical raw materials. The raw materials markets
are characterised by a cyclical nature related to fluctuations of the global economy. The growing prices of raw materials cause
a decrease in margins of trade intermediaries and a decrease of demand generated by recipients. On the other hand, the
falling prices are usually a symptom of a decreasing demand and the beginning of an economic downturn. On the domestic
market, raw materials are subject to similar tendencies. The maintenance of a stable pace of economic growth and stable
prices of chemical raw materials will have a positive impact on the commercial activity of CIECH S.A. Considerable fluctuations
of demand and prices caused either by fast economic growth or economic stagnation will have a negative influence on the
activity related to trading in chemical raw materials by the Company. CIECH S.A. reduces price risk through concluding
agreements with suppliers with appropriate price formula.
Credit risk
Credit risk means a threat of the counterparty not fulfilling the obligations stipulated in the agreement, exposing the lender
to financial loss.
From the CIECH S.A.'s point of view, credit risk is linked to:
• trade receivables from customers,
• loans granted,
• cash and bank deposits,
• guarantees and sureties granted.
CIECH S.A. is exposed to credit risk connected with the credit rating of customers being parties to products and goods sales
transactions. That risk is limited by using internal procedures to establish amounts of credit limits for customers and to
manage trade receivables (the Company uses securities in the form of a letter of credit, bank guarantees, mortgages,
receivables insurance and non-recourse factoring). Customers’ creditworthiness is assessed and appropriate collateral is
obtained from the borrowers, allowing for a reduction of potential losses in the case of failure to repay the debt. Credit risk
assessment for customers is performed prior to concluding an agreement and periodically at subsequent deliveries of goods
in accordance with the binding procedures. The risk of the receivables portfolio is assessed on a weekly basis. On selected
markets, where more risky payment deadlines are applied, the Company makes use of services provided by companies
specialising in insuring receivables. Credit risk connected with cash in bank and bank deposits is low as CIECH S.A. enters into
transactions with high-rating banks with stable market position.
The table below presents the maximum exposure of financial assets to credit risk as at the end of reporting period.
31.12.2020
31.12.2019
Cash and cash equivalents
265,287
169,983
Loans granted
1,588,314
1,020,812
Trade receivables
169,664
285,995
Factoring receivables
35,946
30,856
Cash pooling receivables
7,992
6,496
Assets due to valuation of derivatives
1,835
18,115
TOTAL
2,069,038
1,532,257
The fair value of financial assets exposed to credit risk is similar to their carrying amount.
At the end of 2020, there was one loan granted to an unrelated party with a nominal value of PLN 120 thousand.
The Company has no material items which would be uncollectible as at the reporting date and not covered by an impairment
allowance.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
64
Information on guarantees and sureties granted is provided in Note 9.2 to these statements.
Trade receivables and factoring
receivables (net value)
Loans granted (net value)
31.12.2020
31.12.2019
31.12.2020
31.12.2019
Poland
181,672
258,623
597,805
590,617
European Union
23,837
45,221
990,509
430,195
Other European countries
51
-
-
-
Africa
-
911
-
-
Asia
50
12,096
-
-
TOTAL
205,610
316,851
1,588,314
1,020,812
Trade receivables and factoring
receivables (net value)
Loans granted (net value)
31.12.2020
31.12.2019
31.12.2020
31.12.2019
Soda Segment
114,333
132,447
-
-
Agro Segment
8,294
45,978
-
-
Foams Segment
995
93,856
-
-
Resins Segment*
64,890
4,747
-
-
Silicates Segment
4,224
3,870
-
-
Packaging Segment
83
-
-
-
Other activities
12,791
35,953
1,588,314
1,020,812
TOTAL
205,610
316, 851
1,588,314
1,020,812
* Assets related to discontinued operations. Detailed information on discontinued operations is provided in Note 5.9 to this report.
Impairment of financial assets
Changes in the gross carrying amounts of trade receivables and loans with reconciliation of write-downs as at 31 December
2020 and as at 31 December 2019 to opening balances are presented in the table below:
Trade receivables
Loans
Stage 2
Stage 3
TOTAL
Stage 1
Stage 2
Stage 3
TOTAL
Lifetime ECL –
not impaired
Lifetime ECL –
impaired
12-month
ECL
Liftime
ECL
Lifetime
ECL
Gross carrying amount
as at 01.01.2020
286,152
12,200
298,352
1,035,699
-
2,801
1,038,500
Recognised
1,036,789
9,596
1,046,385
918,823
-
-
918,823
Interest accrued
-
-
-
38,680
-
-
38,680
Written-down
-
(829)
(829)
-
-
-
-
Repaid
(1,152,447)
(466)
(1,152,913)
(452,951)
-
-
(452,951)
Foreign exchange
differences
(627)
29
(598)
56,619
-
-
56,619
Gross carrying amount
as at 31.12.2020
169,867
20,530
190,397
1,596,870
-
2,801
1,599,671
Opening balance of
write-downs as at
01.01.2020
(351)
(15,048)
(15,399)
(14,887)
-
(2,801)
(17,688)
Change in write-downs
194
2,848
3,042
6,331
-
-
6,331
Closing balance of
write-downs as at
31.12.2020
(157)
(12,200)
(12,357)
(8,556)
-
(2,801)
(11,357)
Net carrying amount as
at 31.12.2020
169,664
-
169,664
1,588,314
-
-
1,588,314
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
65
Trade receivables
Loans
Stage 2
Stage 3
TOTAL
Stage 1
Stage 2
Stage 3
TOTAL
Lifetime ECL –
not impaired
Lifetime ECL –
impaired
12-month
ECL
Liftime
ECL
Lifetime
ECL
Gross carrying amount
as at 01.01.2019
280,497
15,048
295,545
1,150,196
-
3,328
1,153,524
Recognised
1,221,893
290
1,222,183
236,737
-
-
236,737
Interest accrued
-
-
-
43,575
-
-
43,575
Written-down
-
(3,079)
(3,079)
-
-
-
-
Repaid
(1,216,388)
(56)
(1,216,444)
(390,739)
-
(527)
(391,266)
Foreign exchange
differences
150
(3)
147
(4,070)
-
-
(4,070)
Gross carrying amount
as at 31.12.2019
286,152
12,200
298,352
1,035,699
-
2,801
1,038,500
Opening balance of
write-downs as at
01.01.2019
(351)
(15,048)
(15,399)
(16,931)
-
(3,328)
(20,259)
Change in write-downs
194
2,848
3,042
2,044
-
527
2,571
Closing balance of
write-downs as at
31.12.2019
(157)
(12,200)
(12,357)
(14,887)
-
(2,801)
(17,688)
Net carrying amount as
at 31.12.2019
285,995
-
285,995
1,020,812
-
-
1,020,812
The net carrying amount of trade receivables and loans reflects the maximum exposure to credit risk.
Calculation of impairment losses on loans granted
As at the date of initial application of IFRS 9, the Company, in accordance with the three-stage expected credit loss model,
calculated the expected credit loss on the basis of the probability of default (calculated based on the assessment of credit
risk, i.e. the Company's rating). All loans were classified by the Company in Stage 1 (loans for which no significant deterioration
in credit quality was observed and expected credit losses are estimated in the period of 12 months after the reporting date).
As at 31 December 2019 and 31 December 2020, loans were not reclassified to Stage 2 or Stage 3.
The following tables present the reconciliation of impairment losses on financial assets.
31.12.2020
31.12.2019
Gross carrying amount
1,599,671
1,038,500
Write-off
(11,357)
(17,688)
TOTAL
1,588,314
1,020,812
The following table presents an analysis of the credit risk stages of loans measured at amortised cost.
31.12.2020
31.12.2019
Rating
Bakset 1
Basket 3
TOTAL
Bakset 1
Basket 3
TOTAL
12-month ECL
ECL in life
12-month ECL
ECL in life
Rating CIECH S.A. (Ba3 Moody’s)*
1,599,671
-
1,599,671
1,035,699
2,801
1,038,500
Gross value
1,599,671
-
1,599,671
1,035,699
2,801
1,038,500
Impariment loss
(11,357)
-
(11,357)
(14,887)
(2,801)
(17,688)
Net value
1,588,314
-
1,588,314
1,020,812
-
1,020,812
*CIECH S.A.'s rating was estimated on the basis of Moody's methodology (Rating Scorecard) and the most recent financial data of CIECH S.A.,
according to which the calculated rating of CIECH S.A. is Ba3.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
66
Calculation of impairment allowances for trade receivables
The following tables present the reconciliation of impairment allowances for financial assets in accordance with IFRS 9.
TOTAL
Not overdue
0-30 days
30-60 days
> 90 days
> 180 days
Receivables as at 31.12.2020
190,397
143,575
17,657
8,064
65
21,036
Gross receivables
-
0.07%
0.03%
0.36%
0.15%
100.00%
Expected credit losses
20,733
101
5
29
-
20,598
Total expected losses
203
101
5
29
-
68
from group analysis
20,530
-
-
-
-
20,530
TOTAL
Not overdue
0-30 days
30-60 days
> 90 days
> 180 days
Receivables as at 31.12.2019
298,352
141,173
30,786
62,117
48,640
15,636
Gross receivables
-
0.03%
0.03%
0.03%
0.22%
100.00%
Expected credit losses
12,357
42
9
19
87
12,200
Total expected losses
157
42
9
19
87
-
from group analysis
12,200
-
-
-
-
12,200
Liquidity risk
CIECH S.A. is exposed to risk connected with maintaining liquidity due to the considerable share of external financing (due to
the term loan, working capital facility and lease agreements) in relation to operating results, the limited ability to obtain new
financing due to the existing high level of indebtedness and the risk of losing the existing long-term financing as a result of
violating covenants stipulated in the bond issue terms and loan agreements.
The following measures are applied to reduce liquidity risk:
• current monitoring of liquidity of CIECH S.A.,
• monitoring and optimisation of the level of working capital,
• adjusting the level and schedule of capital expenditure,
• intragroup borrowings and sureties for the liabilities from the CIECH Group’s companies,
• current monitoring of the settlement of liabilities under the loan agreements conditions.
The CIECH S.A.’s debt financing is ensured by a term loan. In addition, a revolving credit facility in the amount of PLN 250
million, constituting an additional source of current liquidity and working capital financing (as at 31 December 2020, the
facility was drawn down in the amount of PLN 0 million), and overdraft facilities (as at the end of 2020, they were drown
down in the amount of PLN 551,253 thousand) have been made available to the Company.
As at 31 December 2020, one of the ratios included in the loan agreement was not met: the share of subsidiaries in the
consolidated EBITDA value, which are guarantors in the loan agreement, did not exceed the required threshold of 80%.
Therefore, the total value of loans made available on the basis of the above-mentioned contracts has been reclassified into
short-term loan liabilities.
The table below presents financial liabilities at face value grouped by maturity.
31.12.2020
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5 years
Other financial liabiliies:
(2,577,455)
(2,607,704)
(2,424,637)
(183,067)
-
-
-
Trade liabilities
(332,006)
(332,006)
(332,006)
-
-
-
-
Loans and borrowings
(2,095,105)
(2,125,354)
(1,942,287)
(183,067)
-
-
-
Factoring liabilities
(6,830)
(6,830)
(6,830)
-
-
-
-
Cash pooling liabilities
(143,514)
(143,514)
(143,514)
-
-
-
-
Lease liabilities
(28,124)
(31,098)
(2,943)
(3,493)
(9,593)
(9,233)
(5,836)
Derivative instruments with
negative value
(27,702)
(27,739)
(8,208)
(5,167)
(14,364)
-
-
Hedging derivatives with
negative value
(31,744)
(31,452)
(31,452)
-
-
-
-
Total financial liabilities
(2,665,025)
(2,697,993)
(2,467,240)
(191,727)
(23,957)
(9,233)
(5,836)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
67
31.12.2019
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5 years
Other financial liabiliies:
(2,282,524)
(2,378,658)
(589,441)
(143,984)
(384,733)
(1,260,500)
-
Trade liabilities
(382,909)
(382,909)
(382,909)
-
-
-
-
Loans and borrowings
(1,758,368)
(1,854,502)
(65,285)
(143,984)
(384,733)
(1,260,500)
-
Factoring liabilities
(17,097)
(17,097)
(17,097)
-
-
-
-
Cash pooling liabilities
(124,150)
(124,150)
(124,150)
-
-
-
-
Lease liabilities
(29,440)
(33,606)
(2,356)
(2,850)
(9,832)
(10,397)
(8,171)
Derivative instruments with
negative value
(20,005)
(20,396)
(40)
(17,495)
(2,861)
-
-
Hedging derivatives with
negative value
(5,015)
(4,812)
(97)
(862)
(3,853)
-
-
Total financial liabilities
(2,336,984)
(2,437,472)
(591,934)
(165,191)
(401,279)
(1,270,897)
(8,171)
Detailed information concerning revenues and costs pertaining to financial instruments, recognised in the statement of profit
or loss has been presented in note 8.1.
Liquidity of CIECH S.A.
The liquidity ratios as at 31 December 2020 decreased significantly compared to the level on 31 December 2019. It is related
to the failure to meet the level of the ratio under the loan agreement, described in point 7.1 of this report. As at 31 December
2020, the current ratio, calculated as the quotient of total current assets and total short-term liabilities, was 0.63
31.12.2020
31.12.2019
Current ratio
0.63
1,73
Quick current ratio
0.63
1,69
8.4. DETERMINATION OF FAIR VALUE
The following list presents the fair value of financial instruments.
31.12.2020
31.12.2019
Carrying
amount
Fair value
Carrying
amount
Fair value
Cash and cash equivalents
265,287
265,287
169,983
169,983
Loans granted
1,588,314
1,588,314
1,020,812
1,020,812
Trade receivables
169,664
169,664
285,995
285,995
Assets due to valuation of derivatives
1,835
1,835
14,377
14,377
Derivative instruments recognized in financial assets designated
as hedging instruments
-
-
3,738
3,738
Cash pooling receivables
7,992
7,992
6,496
6,496
Factoring receivables
35,946
35,946
30,856
30,856
ASSETS
2,069,038
2,069,038
1,532,257
1,532,257
Loans and borrowings
(2,095,105)
(2,089,233)
(1,758,368)
(1,760,399)
Trade liabilities
(332,006)
(332,006)
(382,909)
(382,909)
Liabilities due to valuation of derivatives
(27,702)
(27,702)
(20,005)
(20,005)
Derivative instruments recognized in financial liabilities
designated as hedging instruments
(31,744)
(31,744)
(5,015)
(5,015)
Cash pooling liabilities
(143,514)
(143,514)
(124,150)
(124,150)
Factoring liabilities
(6,830)
(6,830)
(17,097)
(17,097)
LIABILITIES
(2,636,901)
(2,631,029)
(2,307,544)
(2,309,575)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
68
The fair value of financial assets and liabilities corresponds with the amounts for which these instruments may be exchanged
in a market transaction between well informed parties. The following assumptions were made in establishing the fair value:
• cash, trade receivables and liabilities are not measured at fair value – it is assumed that the carrying amount is the closest
to fair value due to the short maturities of these instruments,
• fair value of financial assets and liabilities recognised in the statement of financial position at amortised cost for which
no active market exists was established as the present value of future cash flows discounted at market interest rate.
The carrying amount is the net value, the loans are floating rate, commissions and fees are not amortized.
Measurement at fair value is grouped according to three-level hierarchy:
• Level 1 – fair value based on market listing stock exchange prices (unadjusted) offered for identical assets or liabilities
on active markets – did not occur.
• Level 2 – CIECH S.A. measures derivatives at fair value by using measurement models for financial instruments and
applying generally available interest rates, currency exchange rates etc.
• Level 3 – fair value estimated on the basis of various valuation techniques which are not based on observable market
inputs - did not occur.
Assets and liabilities measured at fair value
31.12.2020
31.12.2019
Level 2
Level 2
ASSETS
1,835
18,115
Hedging instruments
-
3,738
Derivative instruments measured at fair value through
profit or loss
1,835
14,377
LIABILITIES
(59,446)
(25,020)
Hedging instruments
(31,744)
(5,015)
Derivative instruments measured at fair value through
profit or loss
(27,702)
(20,005)
TOTAL
(57,611)
(6,905)
As at 31 June 2020, CIECH S.A. held the following types of financial instruments measured at fair value: interest rate swap
contracts, currency forward contracts EUR/PLN and CIRS (currency and interest rate swap) contract EUR/PLN. The IRS contract
hedging the interest rate is designated for hedge accounting.
The fair value of the interest rate swap contract is determined as a difference in the discounted interest rate cash flow (cash
flow based on a floating rate, the so-called floating leg, and a fixed rate, the so-called fixed leg). The input data for the method
is the market data for interest rates provided by Reuters. The fair value of the CIRS contract is determined as a difference in
discounted interest and capital cash flows. The input data for the method is the market data for interest rates and cross
currency basis-swaps quotations provided by Reuters. The fair value of the currency forward is determined as a difference
between the transaction rate and the forward rate at the valuation date multiplied by the nominal value of the contract in
the foreign currency. The input data for the method is the market data for interest rates and cross currency basis-swaps
quotations provided by Reuters.
Fair value of financial
instruments
Long-term financial
assets
Short-term
financial assets
Other long-term
liabilities
Trade and other
liabilities
TOTAL
31.12.2020
IRS EUR*
-
-
-
(618)
(618)
IRS PLN*
-
-
-
(31,126)
(31,126)
CIRS
574
1,261
(14,327)
-
(12,492)
Forward EUR/PLN
-
-
-
(13,375)
(13,375)
TOTAL
574
1,261
(14,327)
(45,119)
(57,611)
31.12.2019
IRS EUR
118
-
(29)
(460)
(371)
IRS PLN
3,048
405
(3,711)
(815)
(1,073)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
69
Fair value of financial
instruments
Long-term financial
assets
Short-term
financial assets
Other long-term
liabilities
Trade and other
liabilities
TOTAL
CIRS
1,713
12,664
(2,747)
(17,217)
(5,587)
Forward EUR/PLN
-
167
-
-
167
Forward RON/PLN
-
-
-
(6)
(6)
Forward USD /RON
-
-
-
(35)
(35)
TOTAL
4,879
13,236
(6,487)
(18,533)
(6,905)
* At the end of 2020, we do not report the long-term portion of IRS transactions designated for hedge accounting. These transactions hedge
the interest rate on loans that were recognized as short-term liabilities due to the breach of one of the covenants as at the balance sheet
date. Details are described in point 7.1.
The above financial instruments were classified at level 2 of the fair value hierarchy. In 2020, there were no transfers within
the fair value hierarchy of instruments measured at fair value.
Financial instruments not measured at fair value
CIECH S.A. has taken out term and revolving credit facilities whose book value, as at 31 December 2020, is PLN 1,902,725
thousand, and whose fair value amounts to PLN 1,902,917 thousand (Level 2 of fair value hierarchy).
In the case of the remaining financial instruments held by CIECH S.A. (classified mainly as cash and cash equivalents, financial
assets and liabilities measured at amortised cost), the fair value is close to the book value.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
70
9. OTHER NOTES
9.1. NOTES TO THE STATEMENT OF CASH FLOWS
The tables below present the reasons for the differences between the changes of particular items of the statement
of financial position and changes resulting from the statement of cash flows:
31.12.2020
31.12.2019
Change in receivables reported in the statement of financial position
144,972
22,663
Receivables from the purchase of shares
(12,891)
171
Reclassification of cash pooling receivables
1,496
(35,702)
Change in receivables due to increase in subsidiary's capital
-
10,524
Reclassification of receivables from the sale of fixed assets
(143)
-
Reclassification of income tax receivables
(1,792)
-
Change in receivables – netting of interest on loan
-
25,762
Change in receivables in the statement of cash flows
131,642
23,418
31.12.2020
31.12.2019
Change in liabilities reported in the statement of financial position
336,207
(30,474)
Change in financial liabilities
(336,571)
(55,222)
Change in income tax liabilities
(2,396)
867
Change in liabilities relating to non-current assets
(5,341)
2,716
Reclassification of cash pooling liabilities
(19,364)
-
Measurement of financial instruments
(34,426)
19,748
Change in lease liabilities
1,316
(24,011)
Change in liabilities on account of purchase of financial assets
3,607
4,742
Other
(153)
580
Change in liabilities in the statement of cash flows
(57,121)
(81,054)
31.12.2020
31.12.2019
Change in provisions and employee benefits
(1,180)
(67,553)
Change in provision for income tax liability
-
66,397
Change in receivables in the statement of cash flows
(1,180)
(1,156)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
71
9.2. INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS
Accounting policy
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow
of economic benefits to the Company. Contingent assets are not recognised in the statement of financial position since
this may result in the recognition of income that may never be realised.
A contingent liability is a possible future obligation, whose existence will be confirmed by the occurrence or non-
occurrence of uncertain future events not wholly within the Company’s control. These are also liabilities that arose
from past events but were not recognised in the financial statements because it is not probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, or the amount of obligation cannot
be measured with sufficient reliability. Contingent liabilities are not recognised in the statement of financial position.
Significant disputed liabilities of CIECH S.A.
As at 31 December 2020, CIECH S.A. did not have any significant disputed liabilities pursued in all types of proceedings before
court, body appropriate for arbitration proceedings or public administration bodies, except for the cases described in section
“Audits of tax settlements at CIECH S.A.” in this chapter.
Significant disputed receivables of the CIECH Group
As at 31 December 2020, CIECH S.A. did not hold any significant disputed receivables pursued in all types of proceedings
before court, body appropriate for arbitration proceedings or public administration bodies,apart from the case disclosed
below in section “Contingent assets and contingent liabilities including guarantees and sureties”.
Contingent assets and contingent liabilities including guarantees and sureties
31.12.2020
31.12.2019
Contingent assets
18,864
18,864
Other contingent receivables*
18,864
18,864
Contingent liabilities
1,150,213
739,506
Guarantees and sureties granted**
1,150,213
739,506
*Contingent asset in the amount of PLN 18,864 thousand related to the action against GZNF “FOSFORY” Sp. z o.o. for the payment of
compensation for making an alleged untrue declaration by GZNF “FOSFORY” Sp. z o.o. to CIECH S.A. about the condition of Agrochem
Człuchów Sp. z o.o. with its registered office in Człuchów.
**Including:
• guarantee granted up to the amount of 125% of liability related to term loan in the amount of PLN 1,212,520 thousand and revolving
loan in the amount of PLN 250,000 thousand – contingent liability in the amount of PLN 365,630 thousand,
• guarantee granted up to the amount of 125% of liability related to term loan in the amount of EUR 30,000 thousand – contingent liability
in the amount of PLN 34,611 thousand,
• guarantee granted up to the amount of 125% of liability related to short-term loan in the amount of EUR 50,000 thousand – contingent
liability in the amount of PLN 12,500 thousand,
• guarantee granted up to the amount of 125% of liability related to short-term loan in the amount of EUR 10,000 thousand – contingent
liability in the amount of PLN 11,537 thousand.
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of EUR 25,000 thousand – contingent
liability in the amount of PLN 28,843 thousand,
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of PLN 300,000 thousand – contingent
liability in the amount of PLN 75,000 thousand,
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of PLN 92,788 thousand – contingent
liability in the amount of PLN 23,197 thousand.
As at 31 December 2020, contingent liabilities amounted to PLN 1,150,213 thousand and increased
as compared to 31 December 2019 by PLN 410,707 thousand. The change was primarily attributable to a change in the value
of guarantees related to loans (as described above) and change in the value of guarantees for liabilities of subsidiaries:
• issue of new guarantees for the liabilities of subsidiaries in connection with a reverse factoring agreement in the amount
of PLN 362,500 thousand,
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
72
• issue of new guarantees for the liabilities of the subsidiary CIECH Salz Deutschland GmBH in the amount of EUR 6,325
thousand (PLN 29,187 thousand),
• issue of new guarantees for the liabilities of the subsidiary CIECH Sarzyna S.A. in the amount of PLN 3,000 thousand,
• decrease in a contingent liability under a guarantee in the amount of EUR 1,300 thousand (PLN 5,999 thousand) following
the expiry of a surety for liabilities of a subsidiary, Ciech Soda Deutschland GmBH & CO. KG.
Sureties and guarantees granted as at 31 December 2020
Beneficiary’s name
Total amount of liabilities covered by
guarantee/surety in whole or in specific part
Financial terms, including guarantee fee due to the
company; guarantee period
Principal
currency
PLN
CIECH S.A.
Landesamt fuer
Geologie und
Bergwesen Sachsen-
Anhalt
EUR 7,101
thousand
32,769 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to liability; no time limit
CIECH Soda
Deutschland
GmbH&Co. KG.
(subsidiary)
MECALUX
Sp. z o.o.
EUR 4,000
thousand
18,459 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims related to the
subsidy; until 2 July 2021
CIECH Salz
Deutschland
GmbH
(subsidiary)
Evatherm AG
EUR 21,900
thousand
101,064 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to liability; until the liabilities
arising from the agreement between Evatherm AG
and CIECH Salz Deutschland GmbH have been
settled
CIECH Salz
Deutschland
GmbH
(subsidiary)
IP System
Manufacturing
Sp. z o.o
EUR 6,325
thousand
29,187 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims related to the
agreement; until 30 April 2021
CIECH Salz
Deutschland
GmbH
(subsidiary)
BNP Paribas S.A.
PLN 62,500
thousand
62,500 thousand
Commission of 0.55% p.a. of the guaranteed
liability; supplier financing agreement; until all
obligations have been repaid no later than 36
months after the date of termination
CIECH Soda
Deutschland
GmbH & Co. KG;
Ciech Energy
Deutschland
GmbH
BNP Paribas
Faktoring Sp. z o.o.
PLN 150,000
thousand
150,000 thousand
Commission of 0.55% p.a. of the guaranteed
liability; supplier financing agreement; indefinite
term
CIECH S.A., CIECH
Sarzyna S.A.,
CIECH Pianki Sp. z
o.o., CIECH Soda
Polska S.A., CIECH
Vitrosilicon S.A.
mFaktoring S.A.
PLN 150,000
thousand
150,000 thousand
Commission of 1.5% p.a. of the guaranteed liability;
supplier financing agreement – security for
repayment of claims; until 31 December 2021
CIECH Sarzyna
S.A., CIECH Żywice
Sp. z o.o.
mBank S.A.
PLN 3,000
thousand
3,000 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims under the Guarantee
agreement; until 30 June 2023
CIECH Salz
Deutschland
GmbH
(subsidiary)
Total nominal amount of liabilities resulting from the contract for which guarantees and
sureties were granted
PLN 546,978 thousand
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
73
Letters of support
As at 31 December 2020, CIECH S.A. was the obliged party in the letter of support (Patronatserklärung) regarding CIECH Soda
Deutschland GmbH&Co. KG seated in Staßfurt (CSD) granted to Innogy Gas Storage NWE GmbH (“Innogy”) relating to
liabilities of CSD resulting from the agreement dated 5 May 2009 on salt caverns construction for the purpose of natural gas
storage on the Staßfurt mining field according to which CSD received payments of EUR 45.8 million from Innogy by 31
December 2020. In the letter of support, CIECH S.A. has committed, among other things, to ensure that CSD will have
sufficient funds to fulfil its financial commitments against Innogy resulting from the above-mentioned agreement.
Audits of tax settlements and related contingent liabilities
In 2020, the following audits and proceedings were carried out at CIECH S.A.:
1. audit concerning Corporate Income Tax settlements for 2012 (CIT 2012) – court stage
2. audit concerning Corporate Income Tax settlements for 2013 (CIT 2013) – court stage
3. a customs and fiscal audit concerning Corporate Income Tax settlements for 2014 (CIT 2014).
CIT audit for 2012 at CIECH S.A. was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on
5 April 2018. CIECH S.A. received the outcome of the audit on 4 July 2018. The tax authority challenged the transaction
concerning the capital increase in a subsidiary. In the opinion of the authority, making a cash contribution by means of a
contractual set-off of mutual receivables gives rise to income on the part of the Company for which, according to the auditors,
the company cannot recognise a cost. The company's management board and its tax advisors do not agree with the findings
made by the auditors
In December 2018, the company received a decision of the Head of the Małopolskie Province Customs and Tax Office in
Kraków, upholding the previous position of the authority. The Company contested the position and filed an appeal.
In April 2019, the Company received a decision of the second instance, upholding the decision of the first instance. In April
and May 2019, the Company paid up the outstanding tax along with interest in three tranches in the total amount of PLN
66.4 million (tax: PLN 43.7 million, interest: PLN 22.7 million). The disputed amount of tax and interest were covered by the
provision created in 2018, which was used as a result of their payment. CIECH S.A. appealed against the decision of the second
instance to the Provincial Administrative Court in Cracow. On 9 October 2019, the Provincial Administrative Court issued a
ruling in which it confirmed the approach presented by the authority. The court indicated that the company was obliged to
recognise the income and did not have the right to recognise the tax deductible cost. After receipt of a written statement of
reasons, the company lodged a cassation complaint with the Supreme Administrative Court on 23 December 2019. Currently,
the company is waiting for the date of the hearing to be set.
CIT audit for 2013 at CIECH S.A. was initiated by the Tax Audit Office in Warsaw on 30 November 2016. The tax audit report
was issued on 16 May 2017. The authority claims that the Company has overestimated the tax deductible cost of interest on
cash obtained as a result of the issue of bonds and allocated to the reserve capital of CIECH Soda Deutschland GmbH & Co.
KG. Moreover, the authority is of the opinion that the fee for the “CIECH” trademark should not be recognised by CIECH S.A.
as a tax deductible cost.
The tax base challenged by the authority is PLN 9.4 million (after taking into account the tax loss incurred in the audited year),
which translates into a tax of PLN 1.8 million.
The company and its advisors did not agree with the findings of the auditors and as a result of the tax proceedings, the
Decision of the First Instance was issued, against which the company filed an appeal in 2017. On 14 March 2018 CIECH S.A.
received the decision of the Second Instance in which the auditors upheld their findings contained in the Decision of the First
Instance.
The company appealed to the Provincial Administrative Court against this decision. Despite this, the company decided to pay
tax in the amount of PLN 1.8 million and interest (PLN 0.3 million) on 10 April 2018. The Court made its decision on 6 June
2019. The Court complied with the CIECH S.A. appeal as regards the costs of trademark fees, repealing the decision of the
second instance. However, as regards the costs of consulting and financing of Soda Deutschland, the Court adjudicated that
said costs could not constitute tax costs. After receipt of a written statement of reasons, the company lodged a cassation
complaint with the Supreme Administrative Court in September 2019. Currently, the company is waiting for the date of the
hearing to be set.
CIT audit for 2014 at CIECH S.A. was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków
(hereinafter: Head of the Małopolskie Province Customs and Tax Office in Kraków) on 13 November 2019. The Company
received the outcome of the audit on 22 May 2020. The authority claims that the Company has overestimated the tax
deductible cost by including interest on external financing contributed to the capital reserves of Soda Deutschland Ciech
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
74
GmbH (hereinafter: SDC) and the costs of obtaining this financing in tax deductible costs. Moreover, the authority is of the
opinion that expenses incurred on account of trade mark fees paid to the CIECH Group company should not be recognised by
CIECH S.A. as a tax deductible cost. The taxable amount challenged by the authority is PLN 32.5 million which translates into
a potential tax liability of PLN 6.2 million. The Company does not agree with the findings made by the auditors As a result,
the customs and fiscal audit was converted into tax proceedings. On 15 October 2020, the Company received a report on the
audit of the books in which the Head of the Małopolskie Province Customs and Tax Office leaves only the charge that the
company overestimated the tax deductible cost by including interest on external financing contributed to the capital reserves
of SDC and the costs of obtaining this financing in tax deductible costs (the taxable amount is PLN 22.7 million which translates
into a potential tax liability of PLN 4.3 million). Thus, the office has refrained from questioning the expenses incurred for trade
mark fees as a tax deductible cost. In the same month, the company submitted objections to the report on the audit of the
books. Tax proceedings are currently underway.
In addition, on 6 October 2020 the company received from the Head of the Małopolskie Province Customs and Tax Office a
notice of suspension, as of 1 September 2020, of the statute of limitations for tax liabilities for 2014 due to initiation of
proceedings for fiscal offences.
The Company estimated that the potential impact on the income tax burden (in the form of additional tax liabilities) in
connection with the current or further possible questioning of the above-described events would be PLN 57.5 million, if it is
no longer probable that the Company will be able to uphold its tax interpretations before the tax authorities. Out of the
above-mentioned amount of PLN 57.5 million, in connection with the conducted inspections, despite an appeal to the court
against the received measurement decisions, the Company paid PLN 45.5 million in tax. The remaining amount, ie PLN 12.0
million, is disclosed as a contingent liability. From the amount of tax paid, PLN 1.8 million is shown as receivable from the Tax
Office. The company has created a write-down for this receivable. Additionally, the Company paid PLN 23.0 million in interest.
9.3. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES
9.3.1. TRANSACTIONS WITH RELATED PARTIES IN TOTAL
Detailed information about transactions between CIECH S.A. and other related entities (i.e. companies controlled by the
parent company at the highest level in relation to CIECH S.A. — Kulczyk Investments S.A.) as well as subsidiaries and associates
of CIECH S.A. is presented below:
CIECH S.A.’S TRANSACTIONS WITH
RELATED ENTITIES
Subsidiaries
Associates
Other related
parties
TOTAL
01.01.-31.12.2020
Sales revenues
529,147
25,602
-
554,749
Financial income, including:
290,244
114
-
290,358
Dividend
181,789
114
-
181,903
Purchases of products, goods, materials
and services , including:
1,169,256
13,041
6,002
1,188,299
KI One S.A.
-
-
242
242
Financial expenses
52,238
-
-
52,238
31.12.2020
Trade receivables
128,907
372
-
129,279
Loans granted
1,588,191
-
-
1,588,191
Trade and other liabilities
405,656
1,226
48
406,930
Loans received
192,380
-
-
192,380
01.01.-31.12.2019
Sales revenues
668,950
48,781
-
717,731
Financial income, including:
60,167
153
-
60,320
Dividend
5,133
135
-
5,268
Purchases of products, goods, materials
and services , including:
1,429,774
8,211
4,616
1,442,601
KI One S.A.
-
-
210
210
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
75
CIECH S.A.’S TRANSACTIONS WITH
RELATED ENTITIES
Subsidiaries
Associates
Other related
parties
TOTAL
Financial expenses
45,165
-
-
45,165
31.12.2019
Trade receivables
215,239
5,497
706
221,442
Loans granted
1,020,812
-
-
1,020,812
Trade and other liabilities
400,818
428
-
401,246
Loans received
125,753
-
-
125,753
Terms of transactions with related entities
Material sales to and purchases from related entities are carried out on terms which do not differ from arm’s length terms.
Overdue liabilities and receivables are not secured and are settled through bank transfers.
No material non-standard or non-routine transactions were concluded with related entities in 2020 except for the ones
presented in section 9.3.3.
In the presented period, the key management personnel of CIECH S.A. did not conclude any material transactions with
members of the CIECH Group.
9.3.2. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES OTHER THAN ON AN ARM’S LENGTH BASIS
To the best of the Company’s judgement, there were no transactions with related entities in CIECH S.A. on other than market
conditions in 2020.
9.3.3. DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES
Information on significant transactions with related parties is provided in note 6.4 to these financial statements.
9.3.4. TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL
Key managerial personnel comprises persons who are authorised to and are responsible for direct and indirect planning,
managing and controlling the activities of CIECH S.A.
Remuneration of the Management Board of CIECH S.A.
The following table presents the amount of remuneration and additional benefits paid or payable to particular Members of
the Management Board in 2020 and in the comparable period. In the years 2019-2020, members of the Management Board
of CIECH S.A. did not receive any remuneration for holding a position in the Supervisory Boards or any other functions
performed in the subsidiaries of the CIECH Group.
31.12.2020
Short-term employee
benefits
Post-employment
benefits
Termination benefits
TOTAL
Management Board
6,231
-
-
6,231
Former members of the
Management Board
1,361
1,202
1,258
3,821
TOTAL
7,592
1,202
1,258
10,052
31.12.2019
TOTAL
Management Board
3,900
-
-
3,900
Former members of the
Management Board
2,324
1,280
2,660
6,264
TOTAL
6,224
1,280
2,660
10,164
Members of the Management Board are employed based on employment contracts. Remuneration of the Management
Board Members are set out in individual employment contracts. Members of the Management Board are also entitled to:
• discretionary bonus in the amount determined by the Supervisory Board of CIECH S.A.;
• annual bonus determined in individual employment contracts.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
76
Remuneration of the Managing Director
The following table presents the amount of remuneration and additional benefits paid or payable to the Managing Director
in 2020.
During this period, the Managing Director received remuneration for serving on the Supervisory Boards of:
Polsin Overseas Shipping Ltd. Sp. z o.o. and Proplan Plant Protection Company S.L.
Short-term employee benefits
01.01 – 31.12.2020
01.06 – 31.12.2019
Rafał Czubiński
1,096
396
The Managing Director is employed on the basis of an employment contract which defines the base salary and the applicable
rules for the bonus system.
Remuneration of the Supervisory Board of CIECH S.A.
Short-term employee benefits
Salary received from CIECH S.A.
CIECH S.A. in 2020
Salary received from CIECH S.A.
CIECH S.A. in 2019
Sebastian Kulczyk
-*
-*
Piotr Augustyniak**
483
461
Artur Olech
387
369
Marek Kośnik
372
171
Łukasz Rędziniak
181
-
Martin Laudenbach
118
-
Tomasz Mikołajczak
88
215
Mariusz Nowak
24
369
TOTAL
1,653
1,585
*From 1 April 2016, Chairman of the Supervisory Board, Mr. Sebastian Kulczyk does not receive any remuneration due to the waiver of the
claim for remuneration for the position of the Chairman of the Supervisory Board.
** On 16 March 2021, Mr. Piotr Augustyniak resigned from the position of a member of the Supervisory Board of CIECH S.A.
In accordance with a Resolution of the Extraordinary General Shareholders’ Meeting, as of 1 November 2017 Members of the
Supervisory Board are entitled to a monthly gross remuneration computed as a percentage of the calculation base. The
calculation base is the average monthly remuneration in the sector of enterprises with profit distributions for the month
preceding the calculation, announced by the President of the Central Statistical Office. This remuneration is paid in the
following amount:
• to the Chairman of the Supervisory Board – 400% of the calculation base,
• to the Deputy Chairman – 350% of the calculation base,
• to a Board Member – 300% of the calculation base.
The Chairman of the Audit Committee is entitled to an additional gross monthly remuneration amounting to 150% of the
remuneration payable to a Member of the Supervisory Board. Members of the Audit Committee are entitled to an additional
gross monthly remuneration amounting to 100% of the remuneration payable to a Member of the Supervisory Board.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
77
9.4. INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE
FINANCIAL STATEMENTS OF CIECH S.A.
The entity authorised to audit financial statements for the period from 1 January 2020 to 31 December 2020 was
Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw. On
14 May 2020, CIECH S.A. signed an agreement with Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. on the
review of semi-annual and audit of annual financial statements for the years 2020 and 2021. Value of agreements concluded
with Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. is presented below:
31.12.2020*
31.12.2019*/**
Audit of the annual financial statements and review of the semi-annual financial
statements
529
662
Other attestation services
45
1
TOTAL
574
663
* The remuneration includes additional costs, such as travel, accommodation and nourishment costs – additional costs may amount to a
maximum of approx. 10% of the agreement value.
** The figures for the comparable period refer to agreements with PricewaterhouseCoopers Sp. z o.o. Sp. k. who provided audit services in
2014-2019.
9.5. EVENTS AFTER THE BALANCE SHEET DATE
Closing of the transaction for the sale of 100% shares in CIECH Żywice Sp. z o.o.
On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with LERG S.A.
with its registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice Sp. z o.o. The
value of the Agreement (equal to the enterprise value being sold), taking into account, among others, the share disposal price,
is approximately PLN 160 million. The final price of the Shares being sold will be determined in accordance with the rule arising
from the Agreement. For details of the transaction, see current reports No 27/2020 and 4/2021.
Conclusion of a loan agreement
On 16 March 2021, a Loan Facility Agreement was concluded between, inter alia, CIECH S.A. (as the borrower and guarantor),
its selected subsidiaries: CIECH Soda Polska S.A., CIECH Sarzyna S.A., CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy
Deutschland GmbH and CIECH Salz Deutschland GmbH (as borrowers and guarantors), BNP Paribas Bank Polska S.A. (as an
agent), Powszechna Kasa Oszczędności Bank Polski S.A. (as a security agent) and banks: Powszechna Kasa Oszczędności Bank
Polski S.A., mBank S.A., BNP Paribas Bank Polska S.A., Industrial and Commercial Bank of China (Europe) S.A. Branch in Poland,
Bank Polska Kasa Opieki S.A., Bank Millennium S.A., Credit Agricole Bank Polska S.A., Société Générale S.A., Bank Handlowy w
Warszawie S.A., Bank Ochrony Środowiska S.A. and Intesa Sanpaolo S.P.A. ARE. Branch in Poland (as lenders). The Facility
Agreement provides for loans in PLN and EUR up to the total amount (expressed in PLN) of PLN 2,115,000 thousand. The
agreement provides for an over 2-year grace period for the repayment of the term loan (the first repayment is required on 30
June 2023), during which the repayment of the loan principal will not be required. Detailed information on the agreement was
included in the current report 7/2021.
Resignation of the supervisor
On 16 March 2021, Mr. Piotr Augustyniak resigned from the function of a member of the Supervisory Board of CIECH S.A.
A new company of the CIECH Group
On 25 February 2021, the Founding Act of CIECH VENTURES Sp.z o.o. was signed, the sole shareholder of which is CIECH S.A.
The company was established with the share capital of PLN 1,000 thousand which is divided into 20 thousand shares with a
nominal value of PLN 50 each. The shares are acquired by CIECH S.A. in return for cash. The company is being organized, we
are waiting for registration in the National Court Register.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
78
Signing a letter of intent
On 26 March 2021, between CIECH S.A., CIECH Soda Polska S.A., Budimex S.A., EEW Energy from Waste GmbH, EEW Energy
from Waste Polska sp.z o.o., FBSerwis S.A. and the Janikowo Commune was signed:
• letter of intent regarding the continuation of cooperation in the implementation of the investment consisting in the
construction by EEW, EEW Polska and FBSerwis on real estate belonging to CIECH Soda Polska S.A. installations for thermal
treatment of waste and
• Memorandum of Understanding.
Detailed information on the cooperation was included in the current report 9/2021.
Division of the company
On 25 February 2021, the Extraordinary General Meeting was held on the division of the Company by transferring part of the
assets of the Divided Company, CIECH Vitrosilicon S.A. on the Acquiring Company CIECH Vitro Sp. z o.o. in return for the shares
that the shareholders of the Divided Company will receive in the increased share capital of the Acquiring Company - division by
spin-off. Separated from the company CIECH Vitrosilicon S.A. an organized part of the enterprise, which may be an independent
enterprise that independently performs production and sales tasks, in particular glass packaging in the form of lanterns and
utility jars ("Packaging Activity").
The Extraordinary Meeting of Shareholders of CIECH Vitro sp.z o.o., which due to the division of CIECH Vitrosilicon S.A. ("Divided
Company"), increases the share capital of the Company from the amount of PLN 5 thousand up to the amount of PLN 1,135.5
thousand, that is by the amount of PLN 1 130.5 thousand by creating 22,610 new shares in CIECH Vitro sp.z o.o. with a nominal
value of PLN 50 each share and a total nominal value of PLN 1,135.5 thousand, which will be granted to the shareholders of the
Divided Company using the following share exchange ratio: 6,679,109 shares of the Divided Company entitles to receive 22,610
shares of CIECH Vitro sp.z o.o. ("Acquiring Company") (ie 295.4 shares of the Divided Company entitle to receive 1 share of the
Acquiring Company), as follows:
• CIECH Soda Polska S.A., in exchange for 1,133,246 shares in the Divided Company (constituting all shares in the Divided
Company owned by CIECH Soda Polska S.A.), will take up 13,759 shares in CIECH Vitro Sp. z o.o., which will be covered by the
acquired organized part of the enterprise from CIECH Vitrosilicon S.A.,
• CIECH S.A., in exchange for 728,982 shares of the Divided Company (constituting part of the shares in the Divided Company
owned by CIECH S.A.), will take up 8,851 shares in CIECH Vitro Sp. z o.o., which will be covered with part of the organized part
of the enterprise acquired from CIECH Vitrosilicon S.A.
As of the date of registration by the court of the share capital increase, the capital structure will be as follows:
• CIECH Soda Polska S.A. will own 13,759 shares, representing 60.59% of the share capital,
• CIECH S.A. will own 8,951 shares, constituting 39.41% of the share capital.
On 1 April 2021, the Court registered the division of CIECH Vitrosilicon S.A., a decrease in the share capital of CIECH Vitrosilicon
S.A. and an increase in the share capital of CIECH Vitro Sp.z o.o.
9.6. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19
CORONAVIRUS PANDEMIC ON THE OPERATIONS OF CIECH S.A.
Due to the global COVID-19 pandemic, 2020 was a special year, the effects of which will also be felt in the coming years. The
COVID-19 pandemic has caused an economic slowdown unprecedented in recent years. CIECH S.A. also experienced the
adverse effects of the pandemic, which had an impact on the achievement of the Company's goals in 2020.
The outbreak of the COVID-19 coronavirus pandemic and the resulting decisions and recommendations of state authorities
influenced the functioning of the Company and the entire CIECH Group, causing temporary and limited to individual segments
disruptions in the day-to-day operations.
Since the outbreak of the COVID-19 pandemic, the Company has taken the necessary steps to prepare and implementation
of solutions aimed at protecting the health and life of employees, third-party employees and business partners. When making
decisions related to counteracting the effects of the pandemic, the Management Board was guided by care for the health of
employees and care for the long-term value of the Company. The protection of the health and life of employees was the
overriding goal for the Company.
From March 2020, employees were allowed to remotely perform work. Along with introducing the possibility of remote work,
the Company adapted internal procedures regulating the new solutions. The company has provided the necessary and
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
79
required protective measures to minimize the risk of infection and outbreaks. As a result of the implemented solutions, in
2020 the Company recorded only single cases of infection of employees.
The key objective for the Management Board of the Company, in addition to ensuring the health and safety of employees,
was to ensure the continuity of the Company's operations and due to the role that the Company plays in the structures of
the CIECH Capital Group, individual segments and production plants of the Group. As a result of the introduced solutions,
during the period of the greatest restrictions announced by the government, the Company conducted its operations on an
ongoing basis. There were no cases of interruptions in the supply chain due to disruptions in transport, availability of raw
materials, or temporary suspension of production in any of the Group's production plants.
The consequence of the economic slowdown caused by the pandemic, however, was a decrease in sales in the main operating
segment, ie the Soda Segment. The situation deteriorated especially in the second quarter of 2020. The second half of the
year brought an improvement in the situation, along with the return to normality of individual countries and the unfreezing
of economies in Poland and Europe. Key clients resumed operations, but the losses from the second quarter could not be
recovered. Despite the drop in demand for soda products, under the contracts concluded back in 2019, the Company made
deliveries at previously agreed prices. Strong price competition, caused by the oversupply of soda products on the market,
was observed in spot transactions. The industries that were heavily affected by the effects of the pandemic were the hotel
and restaurant industry (HoReCa) and the automotive industry of key importance for the Soda Segment. While the situation
in the automotive industry has stabilized and started to return to equilibrium (car manufacturers resumed production and
restored previously limited production capacity), the HoReCa industry until the end of 2020 in many European countries
remained frozen or operated to a limited extent, making it impossible to fill previous contractual obligations. The expected
collapse in demand and a quick V-shaped rebound did not take place. Finally, 2020 turned out to be weaker compared to
2019. In the entire 2020, the Group's consolidated revenues in the Soda Segment, compared to 2019, decreased by PLN 349
million to PLN 2 088 million, with about PLN 290 million of decrease resulting from the hibernation of the plant in Romania.
Detailed information on the results of individual segments can be found in note 2 of the Consolidated Financial Statements
of the CIECH Group for 2020 and in point 4.2.2. Management Board Report on the activities of the CIECH Group and CIECH
S.A. for 2020.
The Silicates Segment suffered a similar effect of the pandemic - the demand for silicates fell with the freezing of European
economies. Major customers from the automotive sector either stopped production or significantly reduced it, thus reducing
the demand for silicates. Nevertheless, since mid-year, when the automotive sector began to restore production capacity,
demand for silicates returned to the pre-pandemic level. The breakdown in the Silicate Segment took a V-shape.
The Foam Segment has been hit hard by the pandemic and freezing-related restrictions, in particular due to the closure of
upholstered furniture factories. The reduction in demand and thus the production of foams at the Bydgoszcz plant took place
in April and May 2020. In addition to the pandemic, the risk of shortage of basic raw materials for foam production, i.e. TDI
and polyols, has materialized in the Foam Segment. In the second half of the year, the plant in Bydgoszcz, along with the
unfrozen economies and the return to the operation of furniture factories, restored full production capacity. The slowdown
in this Segment took the shape of a V. In addition, in the second half of 2020, suppliers also restored supplies of TDI raw
materials and polyols, however, their prices at the end of 2020, compared to 2019, increased by 90%. However, the specificity
of this industry made customers accept new, higher prices.
The area of packaging production also felt the negative effects of the pandemic - compared to 2019, lower quantitative sales
of glass packaging were recorded. The drop in sales was caused by the freezing of social life, including the closure of
cemeteries. There has also been an increase in competition on the glass packaging market. As a result of unfavorable
phenomena, the Company focused its sales activities on high-margin products.
From the Company's perspective, the Agro Segment turned out to be the Segment that turned out to be immune to the
negative effects of the pandemic. The pandemic did not negatively affect the demand for plant protection products. This
Segment is much more dependent on natural and weather factors than pandemic events. The only unfavorable phenomena
in this sector, in connection with the outbreak of the pandemic, took place at the turn of the first and second quarter of 2020,
due to short-term difficulties in the availability of raw materials and an increase in the costs of logistics services from Asia
(from where most raw materials for the production of the Agro Segment are imported). However, these were short-term
difficulties which, in terms of the entire 2020, did not adversely affect the results of this Segment's operations.
The occurrence of the COVID-19 pandemic and the analyzes carried out by the Company did not show any indications of a
higher risk of impairment of the used tangible fixed assets and intangible assets, and investments in progress.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2020 (in PLN thousand)
80
The liquidity situation of the Company and the CIECH Group in 2020 remained stable. The company had sufficient cash and
available sources of financing to meet its obligations on time. In 2020, CIECH generated a net cash flow from operating
activities in the amount of PLN 66 million. As at 31 December 2020, the Company had cash in the amount of PLN 265 million
and available limits under the granted credit lines in the amount of PLN 353 million. In 2020, the Company and the Group
had access to funds provided under promised loan agreements (syndicated loan agreement and bilateral revolving loan
agreements, with a total value of PLN 2,109 million) and additional sources of financing in the form of factoring agreements,
reverse factoring and overdrafts.
On 28 December 2020, taking into account the favorable conditions on the banking market regarding the availability of debt
financing, the Management Board of CIECH S.A. decided to start negotiations on the conclusion of a new loan agreement
with a value of PLN 2,115 million and a 5-year repayment period, in order to refinance the existing debt. The new loan
agreement was signed on 16 March 2021. Under the new loan agreement, the following loans will be made available: a term
loan amortized (PLN 560 million), a term loan without amortization (PLN 1,305 million) and a revolving loan with the value of
PLN 250 million. The agreement provides for an over 2-year grace period for the repayment of the term loan (the first
repayment is required on 30 June 2023), during which the repayment of the loan principal will not be required.
Currently, the Company does not identify the risk of defaulting on debt repayment obligations under loan agreements or the
risk of maturity due to failure to meet the level of ratios tested under loan agreements. The Group's consolidated net debt
to consolidated EBITDA (adjusted) ratio tested under loan agreements was [2.45x] at the end of 2020 against the maximum
level of 4.0x specified in the agreement. At the end of 2020, there was a breach of the guarantor coverage ratio tested under
the existing loan agreements, but lenders agreed to waive the effects of the breach, including refinancing of the existing debt
through a new loan agreement.
There was no significant deterioration in the terms of payment of receivables by contractors. The share of receivables overdue
by more than 7 days in total receivables remained at the end of the year at a level similar to that at the end of the previous
calendar year. The vast majority of the Company's receivables were insured and financed through non-recourse factoring. It
should be noted that the pandemic did not adversely affect the liquidity and working capital of the Company and the
Company's availability to capital.
In addition, as a result of the COVID-19 pandemic, the Company did not report the risk of non-performance of contracts at a
higher level than in the course of ongoing operations in the absence of a pandemic.
In 2020, an adverse impact of the pandemic on the Company's operations was observed, but the impact on the Company's
results was not significant, in the opinion of the Management Board.
As a result of the pandemic, no additional revaluation write-offs were made for fixed or current assets, and there was no
need to recognize additional provisions apart from write-offs and provisions which are recognized in the course of the
Company's regular operations.
The Management Board estimates that in 2021 both the parent company and its subsidiaries will continue their operations
in a substantially unchanged scope for a period of at least 12 months from the date of preparation of the report, except for
CIECH Trading Sp. z o.o., for which a liquidation plan has been implemented.
Nevertheless, it should be stated that the pandemic situation causes economic uncertainty and therefore it is not possible to
fully predict its effects, including the impact of the pandemic on the financial statements, including the results and the
valuation of individual items in the statement of financial position in subsequent reporting periods.
REPRESENTATION BY THE MANAGEMENT BOARD
REPRESENTATION BY THE MANAGEMENT BOARD
These financial statements of CIECH S.A. for the financial year ended 31 December 2020 were approved by the Company’s
Management Board on 22 April 2021.
Warsaw, 22 April 2021.
(signed on the polish original)
……………………………................................................
Dawid Jakubowicz — President of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
………………………………………………………………………………
Jarosław Romanowski — Member of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
………………………………………………………………………………
Mirosław Skowron — Member of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
…………………………………………………………………..…………..
Katarzyna Rybacka — Chief Accountant of CIECH Spółka Akcyjna