FINANCIAL STATEMENTS
___________________
of CIECH S.A. for 2022
KRS (National Court Register number) 0000011687
Statistical ID No (REGON): 011179878
Tax ID No (NIP): 118-00-19-377
Share capital: PLN 263,500,965.00 (paid up in full)
2022
ul. Wspólna 62, 00-684 Warsaw
Tel. +48 22 639 11 00
ciech@ciechgroup.com
We are providing a courtesy English translation of our financial statements which were originally written in Polish. We take no
responsibility for the accuracy of our translation. For an accurate reading of our financial statements, please refer to the Polish
language version of our financial statements.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................................................................................................. 2
CIECH S.A. – SELECTED FINANCIAL DATA .................................................................................................................................................... 4
STATEMENT OF PROFIT OR LOSS OF CIECH S.A. .......................................................................................................................................... 5
STATEMENT OF OTHER COMPREHENSIVE INCOME OF CIECH S.A. .............................................................................................................. 6
STATEMENT OF FINANCIAL POSITION OF CIECH S.A. .................................................................................................................................. 7
STATEMENT OF CASH FLOWS OF CIECH S.A................................................................................................................................................ 8
STATEMENT OF CHANGES IN EQUITY OF CIECH S.A. ................................................................................................................................... 9
1 GENERAL INFORMATION ............................................................................................................................................................. 10
1.1 INFORMATION ON THE COMPANY’S ACTIVITIES ...................................................................................................................... 10
1.2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES .................................................... 10
1.2.1 REPRESENTATION BY THE MANAGEMENT BOARD....................................................................................................... 10
1.2.2 BASIS OF PREPARATION ............................................................................................................................................... 11
1.3 FUNCTIONAL AND REPORTING CURRENCY ............................................................................................................................... 11
1.4 ACCOUNTING POLICIES ............................................................................................................................................................. 11
1.5 CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES ................................................................................. 12
2 SEGMENT REPORTING ................................................................................................................................................................. 13
3 NOTES TO THE STATEMENT OF PROFIT OR LOSS AND STATEMENT OF OTHER COMPREHENSIVE INCOME .................................... 20
3.1 SALES REVENUES....................................................................................................................................................................... 20
3.2 COST OF SALES, SELLING COSTS, GENERAL AND ADMINISTRATIVE EXPENSES ......................................................................... 21
3.3 COSTS BY TYPE .......................................................................................................................................................................... 21
3.4 OTHER OPERATING INCOME AND EXPENSES............................................................................................................................ 22
3.5 FINANCIAL INCOME AND EXPENSES ......................................................................................................................................... 23
3.6 COMPONENTS OF OTHER COMPREHENSIVE INCOME .............................................................................................................. 25
4 INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY.................................................................................................................... 26
4.1 MAIN COMPONENTS OF TAX EXPENSE ..................................................................................................................................... 26
4.2 EFFECTIVE TAX RATE ................................................................................................................................................................. 26
4.3 DEFERRED INCOME TAX ............................................................................................................................................................ 27
5 NOTES TO ASSETS REPORTED IN THE STATEMENT OF FINANCIAL POSITION ................................................................................. 29
5.1 PROPERTY, PLANT AND EQUIPMENT ........................................................................................................................................ 29
5.2 RIGHT-OF-USE ASSETS .............................................................................................................................................................. 31
5.3 INTANGIBLE ASSETS .................................................................................................................................................................. 32
5.4 LONG-TERM FINANCIAL ASSETS................................................................................................................................................ 34
5.5 INVENTORIES ............................................................................................................................................................................ 38
5.6 SHORT-TERM RECEIVABLES ...................................................................................................................................................... 38
5.7 SHORT-TERM FINANCIAL ASSETS .............................................................................................................................................. 40
5.8 CASH AND CASH EQUIVALENTS ................................................................................................................................................ 41
5.9 DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND LIABILITIES CONNECTED WITH NON-CURRENT ASSETS
CLASSIFIED AS HELD FOR SALE .................................................................................................................................................. 42
6 EQUITY ........................................................................................................................................................................................ 43
6.1 CAPITAL MANAGEMENT ........................................................................................................................................................... 43
6.2 EQUITY ...................................................................................................................................................................................... 43
6.3 DIVIDENDS PAID OR DECLARED ................................................................................................................................................ 45
6.4 BUSINESS COMBINATIONS AND ACQUISITION OF INTEREST .................................................................................................... 45
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 .................................................................................................................................... 52
7.6 OTHER PROVISIONS .................................................................................................................................................................. 53
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 ............................................................................................................................................... 59
8.4 DETERMINATION OF FAIR VALUE ............................................................................................................................................. 67
9 OTHER NOTES .............................................................................................................................................................................. 69
9.1 NOTES TO THE STATEMENT OF CASH FLOWS ........................................................................................................................... 69
9.2 INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS ............................................. 70
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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9.3 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES ................................................................................................... 74
9.3.1 TRANSACTIONS WITH RELATED PARTIES IN TOTAL ...................................................................................................... 74
9.3.2 SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES OTHER THAN ON AN ARM’S LENGTH BASIS ........................... 75
9.3.3 DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES ................................................................. 75
9.3.4 TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL ............................................................................ 75
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 RUSSIAN INVASION OF
UKRAINE ON CIECH S.A.’S ACTIVITIES ....................................................................................................................................... 77
9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS
PANDEMIC ON CIECH S.A.’S ACTIVITIES .................................................................................................................................... 79
9.8 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF CIECH S.A. ..................................................... 80
10 REPRESENTATION BY THE MANAGEMENT BOARD ....................................................................................................................... 81
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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CIECH S.A. – SELECTED FINANCIAL DATA
in thousand PLN
in thousand EUR
12 months ended
31.12.2022
12 months ended
31.12.2021
12 months ended
31.12.2022
12 months ended
31.12.2021
Sales revenues on continued operations
2,672,503
1,618,680
570,037
353,617
Operating profit/(loss) on continued operations
184,530
(37,589)
39,360
(8,212)
Profit/(loss) before tax on continued operations
623,731
77,430
133,040
16,915
Net profit for the period
612,255
133,206
130,592
29,100
Other comprehensive income net of tax
(14,781)
45,726
(3,153)
9,989
Total comprehensive income
597,474
178,932
127,439
39,089
Cash flows from operating activities
210,470
39,141
44,893
8,551
Cash flows from investment activities
(200,643)
289,353
(42,796)
63,212
Cash flows from financial activities
(84,673)
(126,523)
(18,061)
(27,640)
Total net cash flows
(74,846)
201,971
(15,964)
44,123
as at 31.12.2022
as at 31.12.2021
as at 31.12.2022
as at 31.12.2021
Total assets
5,290,147
4,612,557
1,127,987
1,002,861
Total non-current liabilities
1,808,534
1,991,470
385,623
432,985
Total current liabilities
1,348,588
1,006,486
287,552
218,830
Total equity
2,133,025
1,614,601
454,812
351,046
Share capital
287,614
287,614
61,326
62,533
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 31.12.2022
as at 31.12.2021
12 months
ended 31.12.2022
12 months
ended 31.12.2021
EUR 1 = PLN 4.6899
EUR 1 = PLN 4.5994
EUR 1 = PLN 4.6883
EUR 1 = PLN 4.5775
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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STATEMENT OF PROFIT OR LOSS OF CIECH S.A.
Note
01.01.-31.12.2022
01.01.-31.12.2021
CONTINUING OPERATIONS
Sales revenues
3.1
2,672,503
1,618,680
Cost of sales
3.2
(2,203,099)
(1,429,542)
Gross profit on sales
469,404
189,138
Other operating income
3.4
17,571
14,089
Selling costs
3.2
(168,948)
(136,165)
General and administrative expenses
3.2
(122,501)
(98,333)
Other operating expenses
3.4
(10,996)
(6,318)
Operating profit
184,530
(37,589)
Financial income
3.5
587,576
330,865
Profit from financial instruments
3.5
254,341
97,329
Financial expenses
3.5
(148,375)
(215,846)
(Loss) from financial instruments
3.5
(121,741)
(168,290)
Net financial income/(expenses)
439,201
115,019
Profit before tax
623,731
77,430
Income tax
4.1, 4.2
(11,476)
14,095
Net profit on continuing operations
612,255
91,525
DISCONTINUED OPERATIONS
Net profit/(loss) on discontinued operations
5.9
-
41,681
Net profit for the year
612,255
133,206
Earnings per share (in PLN):
Basic
11.62
2.53
Diluted
11.62
2.53
Earnings per share (in PLN) from continuing operations:
Basic
11.62
1.74
Diluted
11.62
1.74
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 2022 (in PLN thousand)
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STATEMENT OF OTHER COMPREHENSIVE INCOME OF CIECH S.A.
Note
01.01.-31.12.2022
01.01.-31.12.2021
Net profit on continuing operations
612,255
91,525
Net profit/(loss) on discontinued operations
5.9
-
41,681
Net profit for the year
612,255
133,206
Other comprehensive income before tax that may be reclassified to the statement
of profit or loss
3.6
(18,304)
56,541
Cash flow hedge reserve
3.6
(18,304)
56,541
Other comprehensive income before tax that may not be reclassified to the
statement of profit or loss
3.6
54
(89)
Actuarial gains
3.6
54
(89)
Income tax attributable to other comprehensive income
4.1
3,469
(10,726)
Income tax attributable to other comprehensive income that may be reclassified to
the statement of profit or loss
4.1
3,479
(10,743)
Income tax attributable to other comprehensive income that may not be
reclassified to the statement of profit or loss
4.1
(10)
17
Other comprehensive income net of tax
(14,781)
45,726
TOTAL COMPREHENSIVE INCOME
597,474
178,932
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 2022 (in PLN thousand)
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STATEMENT OF FINANCIAL POSITION OF CIECH S.A.
Note
31.12.2022
31.12.2021
ASSETS
Property, plant and equipment
5.1
14,735
13,287
Intangible assets
5.3
82,123
72,316
Long-term financial assets
5.4
3,463,773
3,158,160
Deferred income tax assets
4.3
-
6,990
Rights to use an asset
5.2
25,178
22,235
Total non-current assets
3,585,809
3,272,988
Inventory
5.5
11,557
5,162
Short-term financial assets
5.7
939,376
662,051
Income tax receivables
43,755
37
Trade and other receivables
5.6
318,743
204,844
Cash and cash equivalents
5.8
390,907
467,475
Total current assets
1,704,338
1,339,569
Total assets
5,290,147
4,612,557
EQUITY AND LIABILITIES
Share capital
6.2
287,614
287,614
Share premium
470,846
470,846
Cash flow hedge reserve
8.2
5,260
20,085
Actuarial gains
(106)
(150)
Other reserve capitals
6.2
422,699
422,699
Retained earnings
946,712
413,507
Total equity
2,133,025
1,614,601
Loans, borrowings and other debt instruments
7.1
1,671,280
1,854,153
Lease liabilities
7.4
21,250
18,513
Other non-current liabilities
7.2
106,685
118,070
Employee benefits reserve
7.5
823
734
Deferred income tax liability
4.3
8,496
-
Total non-current liabilities
1,808,534
1,991,470
Loans, borrowings and other debt instruments
7.1
587,175
397,099
Lease liabilities
7.4
5,670
5,407
Trade and other liabilities
7.3
704,207
569,006
Income tax liabilities
3,117
-
Employee benefits reserve
7.5
346
413
Other provisions
7.6
48,073
34,561
Total current liabilities
1,348,588
1,006,486
Total liabilities
3,157,122
2,997,956
Total equity and liabilities
5,290,147
4,612,557
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 2022 (in PLN thousand)
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STATEMENT OF CASH FLOWS OF CIECH S.A.
Note
01.01.-31.12.2022
01.01.-31.12.2021
Cash flows from operating activities
Net profit for the period
612,255
133,206
Amortisation/depreciation
21,730
18,677
Recognition of impairment allowances
4,197
1,998
Foreign exchange (profit) /loss
(8,453)
(4,152)
(Profit) / loss on investment activities
476
(43,888)
(Profit) / loss on disposal of property, plant and equipment
34
(47)
Dividends and interest
(275,869)
(202,461)
Income tax
11,476
(14,095)
Change in liabilities due to loan arrangement fee
2,514
(7,318)
Value of derivatives
(93,308)
47,750
Other
26
(89)
Cash from operating activities before changes in working capital and provisions
275,078
(70,419)
Change in receivables
9.1
(131,123)
33,179
Change in inventory
(6,395)
1,232
Change in current liabilities
9.1
195,171
140,608
Change in provisions and employee benefits
9.1
6,338
162
Cash generated from operating activities
339,069
104,762
Interest paid
(138,385)
(46,032)
Effect of securing interest costs
35,716
(11,389)
Income tax (paid)
(25,930)
(8,200)
Net cash from operating activities
210,470
39,141
Cash flows from investment activities
Disposal of a subsidiary
-
74,289
Disposal of intangible assets and property, plant and equipment
2,629
139
Dividends received
288,181
204,619
Interest received
89,957
48,761
Proceeds from repaid borrowings
958,383
1,952,358
Other inflows
19,000
80,449
Acquisition of a subsidiary
(4,930)
(6,105)
Acquisition of intangible assets and property, plant and equipment
(28,770)
(28,267)
Acquisition of financial assets
(2,785)
-
Raise capital expenditures and extra charge on capital
(4,500)
(29,847)
Borrowings paid out
(1,516,101)
(2,005,133)
Cash pooling outflows
1
(1,707)
(1,910)
Net cash from investment activities
(200,643)
289,353
Cash flows from financial activities
Proceeds from loans and borrowings
7.1
234,500
385,493
Cash pooling inflows
1
23,516
4,046
Dividends paid to parent company
(79,050)
(158,099)
Repayment of loans and borrowings
7.1
(255,000)
(351,790)
Payments of lease liabilities
7.4
(8,639)
(6,173)
Net cash from financial activities
(84,673)
(126,523)
Total net cash flows
(74,846)
201,971
Cash and cash equivalents as at the beginning of the period
467,475
265,287
Impact of foreign exchange differences
(1,722)
217
Cash and cash equivalents as at the end of the period
5.8
390,907
467,475
1
Cash pooling – presentation in cashflow:
• Investing activities – the company presents the change in receivables from cash pooling
• Financing activities – the company presents the change in liabilities on account of cash pooling
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 2022 (in PLN thousand)
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STATEMENT OF CHANGES IN EQUITY OF CIECH S.A.
Share capital
Share premium
Cash flow
hedge reserve
Other reserve
capitals
Actuarial gains
Retained
earnings
Total equity
Note
6.2
8.2
6.2
01.01.2022
287,614
470,846
20,085
422,699
(150)
413,507
1,614,601
Transactions with shareholders included directly in equity
-
-
-
-
-
(79,050)
(79,050)
Dividend payment
-
-
-
-
-
(79,050)
(79,050)
Total comprehensive income for the period
-
-
(14,825)
-
44
612,255
597,474
Net profit / (loss) for the period
-
-
-
-
-
612,255
612,255
Other comprehensive income
-
-
(14,825)
-
44
-
(14,781)
31.12.2022
287,614
470,846
5,260
422,699
(106)
946,712
2,133,025
01.01.2021
287,614
470,846
(25,713)
422,699
(78)
438,400
1,593,768
Transactions with owners
-
-
-
-
-
(158,099)
(158,099)
Dividend payment
-
-
-
-
-
(158,099)
(158,099)
Total comprehensive income for the period
-
-
45,798
-
(72)
133,206
178,932
Net profit / (loss) for the period
-
-
-
-
-
133,206
133,206
Other comprehensive income
-
-
45,798
-
(72)
-
45,726
31.12.2021
287,614
470,846
20,085
422,699
(150)
413,507
1,614,601
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 2022 (in PLN thousand)
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1 GENERAL INFORMATION
1.1 INFORMATION ON THE COMPANY’S ACTIVITIES
Company name
CIECH S.A.
Legal form
Joint-stock Company
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)
Ultimate parent company
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: soda ash, 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 2022 to 31 December 2022, including comparative data, were
approved by the Management Board of CIECH S.A. on 23 March 2023.
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 2022 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 BDO Spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered
office in Warsaw, entered into the list of entities authorised to audit financial statements under the registry No 3 355 kept by the National
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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11
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, except for the separate statement of cash flows, have been prepared on the 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/relacje-inwestorskie/raporty/raporty-
okresowe/.
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 branches are translated 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.
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
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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12
Note
Title
Accounting principles
Judgements and
estimates
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:
Impact on the financial
statements
Effective year in the EU
Approved by the IASB for application as at the balance sheet date
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 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
Annual Improvements to IFRSs, 2018–2020 Cycle – amendments in respect of
recognition and measurement: IFRS 1, IFRS 9, IAS 41
No material impact on the
financial statements is
estimated
2022
New standards and interpretations entering into force after the balance sheet
date
IFRS 17 “Insurance Contracts”
No material impact on the
financial statements is
estimated
2023
Amendments to IAS 1 “Presentation of financial statements” – disclosures of
accounting policies used in practice – the issue of materiality in relation to
accounting policies
No material impact on the
financial statements is
estimated
2023
Amendments to IAS 8 “Accounting policies, changes in accounting estimates and
errors” – definition of accounting estimates
No material impact on the
financial statements is
estimated
2023
Amendments to IAS “12 Income Tax” – deferred tax related to assets and liabilities
arising from a single transaction
No material impact on the
financial statements is
estimated
2023
Amendments to IFRS 17 “Insurance contracts” – Initial Application of IFRS 17 and
IFRS 9 Financial Instruments – comparative information
No material impact on the
financial statements is
estimated
2023
Approved by the IASB for application after 1 January 2024
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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13
New Standards, amendments to Standards and Interpretations:
Impact on the financial
statements
Effective year in the EU
Amendments to IFRS 16 “Leases” - lease obligations in sale and leaseback
transactions
No material impact on the
financial statements is
estimated
Not endorsed
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
Not endorsed
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 effective date has been
postponed
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
1.5.1 ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY
Compared to previously published comparable data as at 31 December 2021, the following changes were made:
Change in the presentation of
comparable data on interest on
loans in the Statement of cash
flows
In order to improve the presentation and provide better information content for the recipient, the method of
presenting interest was changed (separating the effect of hedging interest costs).
After adjustment
31.12.2021
Interest presentation
adjustment
Previously presented as at
31.12.2021
Dividends and interest
(202,461)
11,389
(213,850)
Cash from operating activities before changes in working
capital and provisions
(70,419)
11,389
(81,808)
Cash generated from operating activities
(104,762)
11,389
93,373
Effect of securing interest costs
(11,389)
(11,389)
-
Net cash from operating activities
(39,141)
-
39,141
2 SEGMENT REPORTING
CIECH S.A.’s operating segments are designated on the basis of internal reports prepared in the Company and 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 manufactured goods in the scope of the Soda segment products are: light and dense sodium carbonate, evaporated
salt, sodium bicarbonate and calcium chloride. The products of this Segment are sold mainly by the parent company CIECH S.A. Production
of the Soda Segment goods manufactured by the CIECH Group is implemented in CIECH Soda Polska S.A., the Romanian company CIECH
Soda Romania S.A. (until September 2019) and in the German companies CIECH Soda Deutschland GmbH&Co. KG and CIECH Salz
Deutschland GmbH (the German companies also sell their products on their own). Soda Segment products are used in the glass, food,
detergent and pharmaceutical industries.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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14
Agro Segment
The CIECH Group is a manufacturer 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 (in the corresponding period) the supplier of raw materials for production
for CIECH Sarzyna S.A. and provided support services within this segment.
Resins Segment (comparable figures)
The CIECH Group was a producer of a variety of organic compounds manufactured by CIECH Żywice Sp. z o.o. In the first quarter of 2021,
it was producing, among others, epoxy resins and polyester resins. These products are used in the following industries: automotive, paints
and electronics.
On 1 March 2021, CIECH Żywice Sp. z o.o. was sold to LERG S.A.The figures for discontinued operations include the result of CIECH S.A.
obtained from the transactions with CIECH Żywice Sp. z o.o., and from the sale of this company.
Foams Segment
Within the Foams Segment, CIECH S.A. provides support services to CIECH Pianki Sp. z o.o., which is a producer of polyurethane foams.
Silicates Segment
CIECH S.A. sells the Silicates and Glass Segment products manufactured by CIECH Soda Romania S.A. In 2022, these were primarily the
products such as glassy sodium silicate and sodium water glass. These products are used by the construction industry and in the production
of detergents.
Packaging Segment
Within this segment, CIECH S.A. provides support services to CIECH Vitro S.A., which manufactures glass packaging - lanterns and jars,
used for the production of headstone lamps and in the food industry.
Other activities Segment
It covers mainly services rendered outside the Group and goods sold by CIECH S.A. outside the scope of the above segments.
The data concerning individual segments includes support services provided by CIECH S.A. to the CIECH Group companies, such as accounting,
controlling, legal, administrative and IT services.
The financing is managed (including finance expenses and incomes with the exception of interest on trade receivables and liabilities) and
income tax is calculated on the Company level. The data concerning these areas is 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 location of its assets.
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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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15
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. No need to separate additional segments under IFRS 8 regulations has 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.-31.12.2022
01.01.-31.12.2021
Net profit/(loss) on continuing operations
612,255
91,525
Income tax
11,476
(14,095)
Financial expenses
148,375
215,846
Financial income
(587,576)
(330,865)
Amortisation/depreciation
21,730
18,677
EBITDA on continued operations
206,260
(18,912)
EBITDA on discontinued operations
-
(3,414)
EBITDA on continued and discontinued operations
206,260
(22,326)
01.01.-31.12.2022
01.01.-31.12.2021
EBITDA on continued operations
206,260
(18,912)
One-offs including:
(4,409)
(6,411)
Impairment (a)
-
(210)
Cash items (b)
(4,262)
(7,505)
Non-cash items (without impairment) (c)
(147)
1,304
Adjusted EBITDA on continued operations
201,851
(25,323)
Adjusted EBITDA on discontinued operations
-
(3,414)
Adjusted EBITDA on continued and discontinued operations
201,851
(28,737)
The catalogue of items for adjusting adjusted EBITDA for the purposes of these financial statements is as follows:
(a) Impairment losses associated with the recognition/reversal of impairment losses on property, plant and equipment and intangible assets.
(b) Cash items: gain/loss of the sale of property, plant and equipment, fines and compensations received or paid, donations given, fortuitous events.
(c) Non-cash items: costs of liquidation of inventories and property, plant and equipment, the costs of suspended investments, restructuring costs,
environmental provisions, provisions for liabilities and compensation and other items (including extraordinary costs and other provisions).
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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16
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.-31.12.2022
Soda segment
Agro segment
Foams segment
Silicates segment
Packaging
segment
Other operations
segment
Corporate
functions
TOTAL
Total sales revenues
2,616,201
16,167
1,939
27,831
1,422
5,476
3,468
2,672,503
Cost of sales
(2,150,335)
(15,920)
(1,846)
(24,370)
(1,352)
(5,953)
(3,325)
(2,203,099)
Gross profit /(loss) on sales
465,867
247
93
3,461
70
(477)
143
469,404
Selling costs
(168,948)
-
-
-
-
-
(168,948)
General and administrative expenses
(15,933)
-
-
(376)
-
-
(106,192)
(122,501)
Result on management of receivables
5,290
(22)
-
-
-
(14)
187
5,441
Result on other operating activities
(2,153)
6
4,740
-
-
52
(1,511)
1,134
Operating profit /(loss)
284,123
231
4,833
3,085
70
(439)
(107,373)
184,530
Exchange differences and interest on trade settlements
(1,171)
2
-
(9)
-
63
418
(697)
Borrowing costs
-
-
-
-
-
-
(3,696)
(3,696)
Result on financial activity (non-attributable to segments)
-
-
-
-
-
-
443,594
443,594
Profit /(loss) before tax
282,952
233
4,833
3,076
70
(376)
332,943
623,731
Income tax
-
-
-
-
-
-
-
(11,476)
Net profit /(loss) on continuing operations
612,255
Net profit /(loss) for the period
-
-
-
-
-
-
-
612,255
Amortization/depreciation
3,023
43
-
-
-
692
17,972
21,730
EBITDA from continuing operations
287,146
274
4,833
3,085
70
253
(89,401)
206,260
Adjusted EBITDA from continuing operations
1
287,092
274
93
3,085
70
253
(89,016)
201,851
ASSETS
193,577
2,611
217
472
142
20,194
5,072,934
5,290,147
LIABILITIES
597,605
1,816
-
51
-
18,645
2,539,005
3,157,122
Investment outlays
-
-
-
-
-
-
27,744
27,744
1
Adjusted EBITDA for the 12-month period ended 31 December 2022 is calculated as EBITDA adjusted for untypical one-off events, including: net gain on restructuring: PLN 4,743 thousand; donations given: PLN -695 thousand; other:
PLN 361 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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17
OPERATING SEGMENTS
01.01.-31.12.2021
Soda segment
Agro segment
Foams segment
Silicates segment
Packaging
segment
Other operations
segment
Corporate
functions
TOTAL
Total sales revenues
1,490,385
19,129
10,244
20,348
1,230
77,344
-
1,618,680
Cost of sales
(1,313,044)
(17,773)
(1,438)
(19,066)
(1,201)
(77,020)
(1,429,542)
Gross profit /(loss) on sales
177,341
1,356
8,806
1,282
29
324
-
189,138
Selling costs
(134,956)
(51)
-
(898)
-
(260)
(136,165)
General and administrative expenses
2,276
-
(3)
20
-
(8,167)
(92,459)
(98,333)
Result on management of receivables
200
28
-
1
-
585
-
814
Result on other operating activities
4,107
4,218
-
-
-
(71)
(1,297)
6,957
Operating profit /(loss)
48,968
5,551
8,803
405
29
(7,589)
(93,756)
(37,589)
Exchange differences and interest on trade settlements
568
(79)
(1)
5
-
(521)
162
134
Borrowing costs
-
-
-
-
-
-
(10,765)
(10,765)
Result on financial activity (non-attributable to segments)
-
-
-
-
-
-
125,650
125,650
Profit /(loss) before tax
49,536
5,472
8,802
410
29
(8,110)
21,291
77,430
Income tax
-
-
-
-
-
-
-
14,095
Net profit /(loss) on continuing operations
-
-
-
-
-
-
91,525
Net profit /(loss) on discontinued operations
-
-
-
-
-
-
41,681
Net profit /(loss) for the period
-
-
-
-
-
-
133,206
Amortization/depreciation
3,356
35
-
-
-
673
14,613
18,677
EBITDA from continuing operations
52,324
5,586
8,803
405
29
(6,916)
(79,143)
(18,912)
Adjusted EBITDA from continuing operations
1
49,041
1,310
8,803
405
29
(6,890)
(78,021)
(25,323)
ASSETS
90,758
3,972
1,011
4,307
315
17,948
4,494,246
4,612,557
LIABILITIES
424,241
2,177
12
1,856
-
13,745
2,555,925
2,997,956
Investment outlays
-
-
-
-
-
-
29,592
29,592
1
Adjusted EBITDA for the 12-month period ended 31 December 2021 is calculated as EBITDA adjusted for untypical one-off events, including: net gain on restructuring: PLN 3,263 thousand; penalty fees and compensation received:
PLN 3,353 thousand; other: PLN -187 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 2022 (in PLN thousand)
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18
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.-31.12.2022
01.01.-31.12.2021
Change
2022/2021
Change %
Soda segment, including:
2,616,201
1,490,385
1,125,816
75.5%
Dense soda ash
1,561,058
797,947
763,111
95.6%
Light soda ash
518,653
305,715
212,938
69.7%
Salt
278,366
192,643
85,723
44.5%
Sodium bicarbonate
167,321
111,015
56,306
50.7%
Calcium chloride
34,346
33,194
1,152
3.5%
Other goods and services
56,457
49,871
6,586
13.2%
Agro segment, including:
16,167
19,129
(2,962)
(15.5%)
Raw materials for production of plant pro-tection products
-
13,534
(13,534)
-
Other goods and services
16,167
5,595
10,572
188.9%
Foam segment, including:
1,939
10,244
(8,305)
(81.1%)
Other goods and services
1,939
10,244
(8,305)
(81.1%)
Silicates segment, including:
27,831
20,348
7,483
36.8%
Sodium silicates
13,947
11,007
2,940
26.7%
Other goods and services
13,884
9,341
4,543
48.6%
Packaging segment, including:
1,422
1,230
192
15.6%
Other goods and services
1,422
1,230
192
15.6%
Other segment, including:
5,476
77,344
(71,868)
(92.9%)
Revenues from third parties
5,476
77,344
(71,868)
(92.9%)
Corporate functions
3,468
-
3,468
-
TOTAL
2,672,503
1,618,680
1,053,823
65.1%
INFORMATION ON GEOGRAPHICAL AREAS
Information on CIECH S.A.’s geographical areas is established based on the location of its assets.
ASSETS
Sales revenues
31.12.2022
31.12.2021
01.01.-31.12.2022
01.01.-31.12.2021
Poland
2,723,683
2,462,473
1,809,078
1,013,829
European Union (excluding Poland)
2,564,767
2,149,546
710,904
519,678
Other European countries
-
-
134,976
61,283
Africa
-
538
10,581
8,007
Asia
1,697
-
6,964
13,616
Other regions
-
-
-
2,267
TOTAL
5,290,147
4,612,557
2,672,503
1,618,680
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 30,551 thousand), Germany (PLN
838,346 thousand) and Spain (PLN 203,866 thousand). Trade and other receivables constitute the main component of current assets
presented in individual geographical areas.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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19
SALES REVENUES – GEOGRAPHICAL STRUCTURE OF MARKETS
01.01.-31.12.2022
01.01.-31.12.2021
Poland
1,809,078
1,013,829
European Union (excluding Poland)
710,904
519,678
Germany
212,335
133,917
Romania
21,504
42,269
Czech Republic
256,030
149,894
Italy
7,469
5,946
The Netherlands
83,061
47,923
Finland
45,049
19,033
Sweden
-
22,753
Belgium
8,032
22,213
Denmark
22,315
14,112
Lithuania
8,117
8,755
Other EU countries
46,992
52,863
Other European Countries
134,976
61,283
Norway
78,033
44,375
Other European countries
56,943
16,908
Africa
10,581
8,007
Asia
6,964
13,616
Other regions
-
2,267
TOTAL
2,672,503
1,618,680
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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20
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 from the sale of goods are recognised upon their delivery in accordance with the INCOTERMS terms and conditions
contained in contracts with customers. The company usually sells using the following delivery bases: DAP, FCA, DDP.
Revenues from the sale of services are recognised when the service is provided.
CIECH S.A. enters into agreements with counterparties concerning the provision of CIECH S.A. products through consignment warehouses
owned by the counterparties. Control of delivered products is passed to the customer when they are accepted for storage and at that
point in time sales revenues are recognised along with the corresponding cost of sales.
CIECH S.A. grants discounts to selected customers, and the value of these discounts 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.-31.12.2022
01.01.-31.12.2021
Revenues from sales of products and services
104,170
97,223
- services
104,170
97,223
Revenues from sales of goods and materials
2,568,333
1,521,457
- goods
2,568,333
1,521,457
Net sales of products, goods and materials
2,672,503
1,618,680
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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21
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.
Provisions for liabilities to employees arising from the employment relationship (salaries, bonuses, holiday entitlements, etc.) are
recognised in costs of sales, general and administrative expenses and in selling expenses.
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.-31.12.2022
01.01.-31.12.2021
Cost of manufacture of products and services sold
(96,576)
(81,044)
Cost of sold goods and materials sold
(2,106,523)
(1,348,498)
Cost of sales
(2,203,099)
(1,429,542)
Selling costs
(168,948)
(136,165)
General and administrative expenses
(122,501)
(98,333)
3.3 COSTS BY TYPE
COST BY KIND (SELECTED)
01.01.-31.12.2022
01.01.-31.12.2021
Amortisation
(21,382)
(17,666)
Consumption of materials and energy
(8,157)
(4,409)
Employee benefits, including:
(107,957)
(74,898)
- payroll
(97,560)
(67,097)
- social security and other benefits
(8,154)
(6,167)
- expenditure on retirement benefit and jubilee awards (including provisions)
(224)
(275)
- other
(2,019)
(1,359)
External services
(242,207)
(185,983)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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22
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, such as 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 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.-31.12.2022
01.01.-31.12.2021
Rents/lease income
1,375
1,216
Reversal of impairment allowances on receivables
5,641
1,976
Reversal of impairment losses on property, plant and equipment and intangible assets
-
210
Reversal of provisions for liabilities – changing the base
1,276
168
Penalty fees and compensations received
-
3,353
Car sale - lease
2,457
83
Revenues from sublease
428
1,333
Income from reorganization
4,743
4,271
Other
1,651
1,479
TOTAL
17,571
14,089
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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23
OTHER OPERATING EXPENSES
01.01.-31.12.2022
01.01.-31.12.2021
Rental costs
(1,470)
(1,424)
Recognition of impairment losses on receivables
(200)
(1,162)
Recognition of provisions on employee benefits
(154)
-
Recognition of provisions for liabilities
(770)
(85)
Sublease costs
(3,366)
(1,629)
Return to the insurer
(3,028)
-
Other
(1,962)
(2,018)
TOTAL
(10,996)
(6,318)
As at 31 December 2022, 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 a need to perform 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,
• 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 derivative instruments.
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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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24
NET FINANCIAL INCOME (EXPENSES)
01.01.-31.12.2022
01.01.-31.12.2021
Interest
118,712
48,866
Dividends and shares in profit
288,182
204,620
Net foreign exchange gains
19,728
5,192
Reversal of impairment losses
729
11,719
Profits from derivatives
157,612
36,794
Other
2,613
23,674
Total financial income
587,576
330,865
Interest
(118,511)
(51,721)
Recognition of impairment losses
(4,376)
(13,860)
Bank fees and commissions
(4,594)
(7,881)
Recognition of provision for anticipated losses
(2,172)
(921)
Loss due to derivatives
(1,966)
(105,264)
Guarantees costs
(9,541)
(14,893)
Other
(7,215)
(21,306)
Total financial expenses
(148,375)
(215,846)
Net Financial income (expenses)
439,201
115,019
Interest income mainly includes interest on loans advanced within the Group in the amount of PLN 91,114 thousand and interest on
receivables from the budget in the amount of PLN 22,712 thousand.
In 2022, CIECH S.A. received the highest dividends from the following companies:
• CIECH Soda Polska S.A. – PLN 150,000 thousand,
• CIECH Pianki Sp. z o.o. – PLN 41,043 thousand,
• Verbis ETA Sp. z o.o. SKA – PLN 33,963 thousand,
• CIECH Sarzyna S.A. – PLN 29,849 thousand,
• Proplan Plant Protection Company – PLN 18,230 thousand,
• CIECH Vitrosilicon S.A. – PLN 12,267 thousand,
• CIECH Vitro Sp. z o.o. – PLN 2,547 thousand,
Gains on derivative instruments resulting from:
• positive valuation of CIRS and FX swap transactions in the amount of PLN 84,439 thousand,
• proceeds from the exercise of CIRS and FX forwards in the amount of PLN 73,173 thousand.
The loss on derivatives resulted from the negative valuation of FX forwards in the amount of PLN 1,966 thousand.
Interest expenses primarily relate to the syndicated loan described in detail in Note 7.1 hereto. This item is also adjusted for the outflow on
exercise of interest rate hedging instruments.
The item in the statement of profit or loss “Gains/losses on financial instruments” comprises the following values:
01.01.-31.12.2022
01.01.-31.12.2021
Gains on financial instruments
254,341
97,329
Interest
96,000
48,866
Gains on derivative instruments
157,612
36,794
Impairment losses
729
11,669
Losses on financial instruments
(121,741)
(168,290)
Interest
(115,851)
(51,721)
Losses on derivative instruments
(1,966)
(105,264)
Impairment losses
(3,924)
(11,305)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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25
3.6 COMPONENTS OF OTHER COMPREHENSIVE INCOME
Tax effect of each component of other comprehensive income of CIECH S.A.
Tax effect of each component of other
comprehensive income of the CIECH Group
01.01.-31.12.2022
01.01.-31.12.2021
Before tax
Tax
After tax
Before tax
Tax
After tax
Cash flow hedge
(18,304)
3,479
(14,825)
56,541
(10,743)
45,798
Valuation of actuarial provisions
54
(10)
44
(89)
17
(72)
TOTAL
(18,250)
3,469
(14,781)
56,452
(10,726)
45,726
Income tax and reclassification adjustments in other comprehensive income
Other comprehensive income before tax
01.01.-31.12.2022
01.01.-31.12.2021
Cash flow hedge
(18,304)
56,541
fair value remeasurement in the period
(18,304)
37,765
reclassification to profit or loss
-
18,776
Valuation of actuarial provisions
54
(89)
remeasurement for the current period
54
(89)
reclassification to profit or loss
-
-
Income tax attributable to other components of other comprehensive income
3,469
(10,726)
accrued for the current period
3,469
(7,158)
reclassification to profit or loss
-
(3,568)
Other comprehensive income net of tax
(14,781)
45,726
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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26
4 INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY
Accounting policy
Current tax
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.-31.12.2022
01.01.-31.12.2021
Current income tax
7,476
(3,623)
Income tax for the reporting period
(29,083)
(2,426)
Adjustment to tax for previous years
36,559
(1,197)
Deferred income tax
(18,952)
17,718
Origination/reversal of temporary differences
(34,898)
49,350
Unrecognized deferred tax assets
15,946
(31,632)
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS
(11,476)
14,095
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.-31.12.2022
01.01.-31.12.2021
Cash flow hedge
3,479
(10,743)
Valuation of actuarial provisions
(10)
17
TOTAL
3,469
(10,726)
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.-31.12.2022
01.01.-31.12.2021
Profit/(loss) before tax
623,731
77,430
Tax calculated at the applicable tax rate
(118,509)
(14,712)
Difference resulting from the application of tax rates applicable in other countries
(355)
(949)
Tax effect of revenues adjusting profit (loss) before tax (permanent difference)
61,282
41,485
Tax effect of expenses adjusting profit (loss) before tax (permanent difference)
(8,322)
10,417
Adjustment of current income tax for previous years
36,559
-
Deferred tax asset for tax losses carried forward
20,798
(1,197)
Tax losses for the reporting period for which a deferred tax asset has not been recognised
(2,929)
(18,532)
Other
-
(2,417)
Income tax recognised in statement of profit or loss
(11,476)
14,095
EFFECTIVE TAX RATE
1.84%
(18.2%)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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27
The basic corporate tax rate for CIECH S.A. is 19%. 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.
CIECH S.A.'s effective tax rate in 2022 was largely driven by:
• receipt of dividend income from subsidiaries in the total amount of PLN 287,990 thousand, which is exempt from income tax,
• adjustment (reduction) of current income tax for previous years in the total amount of PLN 36,559 thousand, comprising provisions
recognised for potential additional income tax liabilities for 2013 and 2014 in the amount of PLN 7,195 thousand and the expected
return of overpaid income tax for 2012 in the amount of PLN 43,754 thousand in connection with the ruling of the Supreme
Administrative Court received (for a detailed description of tax audits and the status of cases, see Note 9.3),
• inclusion of costs listed in Articles 15c and 15e of the Corporate Income Tax Act in 2022 in the total amount of PLN 99,249 thousand
that were not accounted for in previous years and for which no deferred tax asset was recognised in tax-deductible expenses in 2021.
4.3 DEFERRED INCOME TAX
Accounting policy
Deferred tax
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.
Judgements and estimates
Deferred tax
Deferred income tax asset 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 2022 (in PLN thousand)
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28
Deferred income tax is attributable to the following items:
DEFERRED INCOME TAX ASSETS AND DEFERRED
INCOME TAX LIABILITY
31.12.2022
31.12.2021
Total asset
Total liability
Net value
Total asset
Total liability
Net value
Property, plant and equipment
-
11,847
(11,847)
-
6,046
(6,046)
Financial assets
453
11,046
(10,593)
368
14,568
(14,200)
Inventory
-
-
-
-
290
(290)
Trade and other receivables
313
374
(61)
39
-
39
Provisions for employee benefits
157
-
157
142
-
142
Tax losses carried forward
33,510
-
33,510
52,106
-
52,106
Foreign exchange differences
-
1,011
(1,011)
-
1,375
(1,375)
Liabilities
17,549
5,427
12,122
26,101
2,813
23,288
Other
1
-
1
46
-
46
Deferred tax assets/liability
51,983
29,705
22,278
78,802
25,092
53,710
Set - off of deferred tax assets/ liability
(21,209)
(21,209)
-
(25,092)
(25,092)
-
Unrecognized deferred tax assets
(30,774)
-
(30,774)
(46,720)
-
(46,720)
Deferred tax assets/liability recognised in the
statement of financial position
-
8,496
(8,496)
6,990
-
6,990
01.01.-31.12.2022
01.01.-31.12.2021
Change recognized in the statement of profit or
loss
(18,954)
17,719
Change recognized in other comprehensive
income
3,468
(10,725)
Total change of deferred tax
(15,486)
6,994
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 2,893 thousand. In the same period, the estimated amount of settlement of the deferred tax liability
will be PLN 11,847 thousand.
The Company did not recognise a deferred tax asset in the total amount of PLN 30,774 thousand. The Company has not recognised a deferred
tax asset in respect of the tax loss generated on the capital source in 2018-2022 (PLN 161,966 thousand). The Company 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 2022 (in PLN thousand)
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29
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.
Amortisation and 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:
Fixed assets
Useful lives
5-7 years
1-10 years
1-10 years
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.
01.01.-31.12.2022
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
547
29,807
44
1,498
3,547
35,443
Investment outlays
-
-
-
-
5,345
5,345
Reclassification
132
4,765
-
20
(4,790)
127
Sales
-
(824)
(44)
(13)
-
(881)
Other
-
-
-
49
-
49
Gross value of property, plant and
equipment at the end of the period
679
33,748
-
1,554
4,102
40,083
Accumulated depreciation at the
beginning of the period
(371)
(20,704)
(30)
(1,051)
-
(22,156)
Depreciation for the period
(139)
(3,009)
30
(74)
-
(3,192)
Annual depreciation charge
(139)
(3,791)
(10)
(87)
-
(4,027)
Sales
-
782
40
13
-
835
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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30
01.01.-31.12.2022
Buildings offices
and land and
water
engineering
facilities
Machinery and
equipment
Means of
transport
Other tangible
fixed assets
Tangible fixed
assets under
construction
TOTAL
Accumulated depreciation at the
end of the period
(510)
(23,713)
-
(1,125)
-
(25,348)
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
176
9,103
14
447
3,547
13,287
Carrying amount of property, plant
and equipment at the end of the
period
169
10,035
-
429
4,102
14,735
01.01.-31.12.2021
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
543
25,073
142
1,516
4,283
31,557
Investment outlays
-
-
-
-
4,347
4,347
Reclassification
4
5,023
-
56
(5,083)
-
Sales
-
(748)
-
(85)
-
(833)
Other
-
459
(98)
11
-
372
Gross value of property, plant and
equipment at the end of the period
547
29,807
44
1,498
3,547
35,443
Accumulated depreciation at the
beginning of the period
(275)
(18,324)
(98)
(1,055)
-
(19,752)
Depreciation for the period
(96)
(2,380)
68
4
-
(2,404)
Annual depreciation charge
(96)
(3,123)
(15)
(81)
-
(3,315)
Sales
-
743
-
85
-
828
Other
-
-
83
-
-
83
Accumulated depreciation at the
end of the period
(371)
(20,704)
(30)
(1,051)
-
(22,156)
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
268
6,749
44
461
4,283
11,805
Carrying amount of property, plant
and equipment at the end of the
period
176
9,103
14
447
3,547
13,287
Depreciation of property, plant and equipment was recognised in general and administrative expenses in the amount of PLN 4,027 thousand
and PLN 3,315 thousand, respectively, for 2022 and the corresponding period.
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 2022 and 2021, CIECH S.A. did not receive from third parties for impaired property, plant and equipment.
As at 31 December 2022, 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.
As at 31 December 2022, there were no agreements for the acquisition of property, plant and equipment giving rise to future commitments
(in the corresponding period, the value of future commitments amounted to PLN 24 thousand).
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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31
5.2 RIGHT-OF-USE ASSETS
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:
• the amount of the initial measurement of the lease liability,
• any lease payments made at or before the commencement date, less any lease incentives received;
• any initial direct costs incurred by the lessee; and
• 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.
Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2022 are as follows:
Buildings offices and
land and water
engineering facilities
Machinery and
equipment
Means of transport
TOTAL
30,893
483
5,995
37,371
170
-
3,342
3,512
5,143
-
(483)
4,660
36,206
483
8,854
45,543
(11,302)
(110)
(3,724)
(15,136)
(3,138)
(166)
(1,925)
(5,229)
(3,138)
(166)
(1,925)
(5,229)
(14,440)
(276)
(5,649)
(20,365)
19,591
373
2,271
22,235
21,766
207
3,205
25,178
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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32
Buildings offices and
land and water
engineering facilities
Machinery and
equipment
Means of transport
TOTAL
31,914
-
4,376
36,290
-
483
1,654
2,137
(1,021)
-
(35)
(1,056)
30,893
483
5,995
37,371
(8,098)
-
(2,135)
(10,233)
(3,204)
(110)
(1,589)
(4,903)
(3,204)
(110)
(1,589)
(4,903)
(11,302)
(110)
(3,724)
(15,136)
23,816
-
2,241
26,057
19,591
373
2,271
22,235
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 2030. CIECH S.A. also leases passenger
cars.
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.
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 and depreciation
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:
Fixed assets
Useful lives
2–10 years
2-5 years
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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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33
01.01.-31.12.2022
Licences,patents, permits,
etc. obtained
Intangible assets
under development
Other intangible
assets
TOTAL
Gross value of intangible assets at the
beginning of the period
74,912
20,258
18,985
114,155
Investment outlays
-
22,399
-
22,399
Reclassifications
10,385
(11,190)
678
(127)
Liquidation
(266)
(313)
-
(579)
Activated costs
-
321
-
321
Gross value of intangible assets at the end of
the period
85,031
31,475
19,663
136,169
Accumulated amortisation at the beginning of
the period
(25,329)
-
(16,510)
(41,839)
Amortisation for the period
(9,830)
-
(2,377)
(12,207)
Annual amortisation charge
(10,096)
-
(2,377)
(12,473)
Liquidation
266
-
-
266
Accumulated amortisation at the end of the
period
(35,159)
-
(18,887)
(54,046)
Impairment losses at the beginning of the
period
-
(210)
210
-
Other
-
210
(210)
-
Impairment losses at the end of the period
-
-
-
-
Net value of intangible assets at the beginning
of the period
49,583
20,048
2,685
72,316
Net value of intangible assets at the end of the
period
49,872
31,475
776
82,123
01.01.-31.12.2021
Licences,patents, permits,
etc. obtained
Intangible assets
under development
Other intangible
assets
TOTAL
Gross value of intangible assets at the
beginning of the period
57,684
12,966
18,979
89,629
Investment outlays
-
25,401
-
25,401
Reclassifications
17,228
(17,234)
6
-
Activated costs
-
(875)
-
(875)
Gross value of intangible assets at the end of
the period
74,912
20,258
18,985
114,155
Accumulated amortisation at the beginning of
the period
(18,233)
-
(13,758)
(31,991)
Amortisation for the period
(7,096)
-
(2,752)
(9,848)
Annual amortisation charge
(7,096)
-
(2,752)
(9,848)
Accumulated amortisation at the end of the
period
(25,329)
-
(16,510)
(41,839)
Impairment losses at the beginning of the
period
-
(210)
-
(210)
Other
-
-
210
210
Impairment losses at the end of the period
-
(210)
210
-
Net value of intangible assets at the beginning
of the period
39,451
12,756
5,221
57,428
Net value of intangible assets at the end of the
period
49,583
20,048
2,685
72,316
In 2022, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 3.0%, whereas in 2021 it
amounted to approx. 1.9%.
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 58,968 thousand (net carrying amount: PLN 40,826 thousand).
As at 31 December 2022, 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 2022 was driven by expenditure related to the implementation of the SAP system.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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34
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.-31.12.2022
01.01.-31.12.2021
General and administrative expenses
(10,100)
(7,100)
Selling costs
(2,373)
(2,748)
TOTAL
(12,473)
(9,848)
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 2022, future commitments arising from agreements concerning acquisition of intangible assets amounted to PLN 443
thousand (in the comparable period: PLN 4,300 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 nominal value plus interest and net of any impairment losses due to the insignificant difference compared to
measurement at amortised 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
31.12.2022
31.12.2021
Shares
2,072,573
2,066,181
Loans granted
1,386,967
1,091,317
Derivatives
4,233
662
TOTAL
3,463,773
3,158,160
Change in long-term stocks and shares
01.01.-31.12.2022
01.01.-31.12.2021
Gross value at the beginning of the period
2,089,442
2,237,330
Purchase
7,295
30,847
Writing-off/redemption
(214)
(80,449)
Sales/liquidation
-
(98,440)
Other
-
154
Gross value at the end of the period
2,096,523
2,089,442
Impairment update at the beginning of the period
(23,261)
(99,675)
Recognition
(903)
(2,311)
Reversal/usage
214
78,725
Impairment update at the end of the period
(23,950)
(23,261)
Net value of the shares at the beginning of the period
2,066,181
2,137,655
Net value of the shares at the end of the period
2,072,573
2,066,181
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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35
CHANGE IN LIABILITIES DUE TO LONG-TERM LOANS
01.01.-31.12.2022
01.01.-31.12.2021
Gross value at the beginning of the period
1,098,789
403,276
Grant
544,260
1,326,132
Change of liabilities presented
(189,947)
-
Reclassification to long-term positions
(68,524)
(637,695)
Foreign exchange differences
11,604
7,076
Gross value at the end of the period
1,396,182
1,098,789
Impairment update at the beginning of the period
(7,472)
(2,863)
Recognition
(2,209)
(7,472)
Reversal
466
2,863
Closing balance
(9,215)
(7,472)
Carrying amount of loans at the beginning of period
1,091,317
400,413
Carrying amount of loans at the end of the period
1,386,967
1,091,317
Change in the gross value of long-term shares results primarily from:
• acquisition of shares in the increased share capital of CIECH Ventures Sp. z o.o. – PLN 4,500 thousand,
• payment of contributions to the investment fund Emerald Industrial Innovation Fund Limited Partnership – PLN 2,785 thousand,
CIECH S.A. analyses its involvement in the subsidiaries on the basis of their net assets as at the balance sheet date.
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 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: 11.9% – for cash flows in PLN, 8.8% – for cash flows in EUR and 9.8%
– 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 7.5%;
• the weighted average cost of capital for Proplan Plant Protection Company, S.L. was 8.6% – for cash flows in EUR and 9.9% – 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 impairment losses on involvement in the following
companies:
• CIECH Group Financing AB – impairment loss on shares in the amount of PLN 347 thousand,
• CIECH Transclean Sp. z o.o. – impairment loss on shares in the amount of PLN 105 thousand;
Long-term loans were advanced by CIECH S.A. to subsidiaries of the CIECH Group. As at 31 December 2022, 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.
Additionally, as at 31 December 2022, shares in CIECH Soda Polska S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o.,
CIECH Vitrosilicon S.A., CIECH Vitro Sp. z o.o., CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy Deutschland GmbH and CIECH Salz
Deutschland Gmbh, who are guarantors of the term loan, revolving credit facilities and overdraft facilities, were pledged as collateral for
financial liabilities on account of the term loan, revolving facility and overdraft facilities.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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36
CARRYING AMOUNT OF SHARES IN RELATED ENTITIES
31.12.2022
31.12.2021
The Company’s direct
share in the share capital/
total number of votes as
at 31 December 2022
The Company’s direct
share in the share capital/
total number of votes as
at 31 December 2021
Core activities
Subsidiaries (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
266,867
100%
100%
Manufacture of pesticides and other chemical products
CIECH Soda Romania S.A.
(Rm. Valcea , Romania)
30,551
30,551
98.74%
98.74%
Manufacture of other basic inorganic chemicals, wholesale of chemical
products.
CIECH Trading Sp. z o.o.
(Warsaw)
5,291
5,291
100%
100%
The company is preparing for the liquidation process, operations are being
phased out.
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 licenses 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)
10,594
10,594
100%
100%
Manufacture of other basic inorganic chemicals, manufacture of other plastic
products.
CIECH Vitro Sp. z o.o.
(Iłowa)
2,108
2,108
39.41%
39.41%
manufacture of hollow glass and technical glassware and processing of other
glass, including technical glassware.
CIECH Transclean Sp. z o.o.
(Bydgoszcz)
-
105
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
(Stockholm, Sweden)
1,027
1,374
100%
100%
Financing activities.
VERBIS ETA Sp. z o.o.
(Warsaw)
5
5
100%
100%
Other activities.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
ciechgroup.com
37
31.12.2022
31.12.2021
The Company’s direct
share in the share capital/
total number of votes as
at 31 December 2022
The Company’s direct
share in the share capital/
total number of votes as
at 31 December 2021
Core activities
CIECH Serwis i Remonty Sp. z o.o.
(Warsaw)
450
450
100%
100%
Repair and maintenance of machinery, electrical equipment, fabricated
metal products, Installation of industrial machinery, fittings and
fixtures.
Ciech Nieruchomości Sp. z o.o.
(Warsaw)
2,597
2,597
99.18%
99.18%
Buying and selling of own real estate.
Proplan Plant Protection Company S.L.
(Madrid, Spain)
203,866
203,866
100%
100%
Production and sales of crop protection chemicals.
CIECH Salz Deutschland GmbH
(Stassfurt, Germany)
40,875
40,875
100%
100%
Production and sales of salt products.
CIECH SERVICES Sp. z o.o.
(Bydgoszcz)
2,000
2,000
100%
100%
Provision of support services to CIECH Group companies.
CIECH Ventrures Sp. z o.o.
(Warsaw)
5,500
1,000
100%
100%
Holding activities, other financial activities.
CIECH Sól Sp. z o.o.
(Warsaw)
5
-
100%
-
Production and sales of salt products.
CIECH Nieruchomości Rolne Sp. z o.o.
(Warsaw)
5
-
100%
-
Buying and selling of own real estate.
Other subsidiaries
842
842
Associates
863
863
Other shares
2,334
-
Carrying amount of shares in related
entities
2,072,573
2,066,181
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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38
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
31.12.2022
31.12.2021
Materials
16
15
Goods
11,541
5,147
TOTAL
11,557
5,162
In the reporting periods, no inventories were written down to their net selling prices.
The value of inventories (taking into account write-downs to net selling prices) recognised as costs in 2022 amounted to PLN 2,106,522
thousand (in the comparable period: PLN 1,371,223 thousand).
As at 31 December 2022, 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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39
Accounting policy
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:
• 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;
• 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;
• 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;
• 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.
Impairment allowances on receivables are charged to other operating expenses.
TRADE AND OTHER RECEIVABLES
31.12.2022
31.12.2021
Trade receivables, including:
204,883
110,720
- up to 12 months
204,397
109,409
- over 12 months
303
628
- prepayments for inventory
183
683
Prepayments for non-current assets
72
-
Public and legal receivables (excluding income tax)
46,896
36,763
Factoring receivables
36,108
21,437
Assets due to continuous involvement
13,514
2,370
Receivables from cashpool
5,688
3,912
Receivables from the sale of shares and stocks
330
19,330
Other receivables
11,252
10,312
NET TRADE AND OTHER RECEIVABLES
318,743
204,844
Impairment allowances with respect to trade receivables including:
(15,906)
(20,422)
- impairment allowance recognized in the current reporting period
(199)
(1,151)
Impairment allowances with respect to other current receivables including:
(17,500)
(16,741)
- impairment allowance recognized in the current reporting period
(11)
(11)
GROSS TRADE AND OTHER RECEIVABLES
352,149
242,007
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 2022, the asset from continuing involvement amounted to PLN 13,514 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
ciechgroup.com
40
As at 31 December 2022, trade receivables assigned to the factor amounted to PLN 277,634 thousand (PLN 192,557 thousand in the
corresponding period).
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES
01.01.-31.12.2022
01.01.-31.12.2021
Opening balance
(37,163)
(36,847)
Recognized
(210)
(1,162)
Reversed
5,631
2,138
Used
-
1
Exchange differences
(1,664)
(675)
Other
-
(618)
Closing balance
(33,406)
(37,163)
The principles for recognising impairment allowances for short-term receivables are described above, in the “Accounting Policy” section.
AGEING OF PAST DUE TRADE RECEIVABLES
31.12.2022
31.12.2021
Up to 1 month
6,456
5,438
Between 1 and 3 months
86
3,620
3 to 6 months
35
9
6 months to 1 year
24
1,354
Above 1 year
11,327
20,182
Total (gross) past due trade receivables
17,928
30,603
Impairment allowances on past due trade receivables
(11,351)
(20,135)
Total (net) past due trade receivables
6,577
10,468
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.
As at 31 December 2022, 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
31.12.2022
31.12.2021
Derivatives
108,159
102,220
Loans granted
831,217
559,831
Total (net) short-term financial assets
939,376
662,051
Impairment of short-term financial assets
(5,523)
(3,833)
Total (gross) short-term financial assets
944,899
665,884
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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CHANGE IN LIABILITIES DUE TO SHORT-TERM LOANS
01.01.-31.12.2022
01.01.-31.12.2021
Gross value at the beginning of the period
563,664
1,196,395
Grant
1,076,745
737,607
Change of liabilities presented
(872,195)
(2,001,110)
Reclassification to long-term positions
68,524
637,695
Exchange differences
2
(6,923)
Gross value at the end of the period
836,740
563,664
Impairment update at the beginning of the period
(3,833)
(8,494)
Recognition
(1,708)
(3,832)
Reversal
18
8,493
Closing balance
(5,523)
(3,833)
Carrying amount of loans at the beginning of period
559,831
1,187,901
Carrying amount of loans at the end of the period
831,217
559,831
Short-term loans were advanced by CIECH S.A. to subsidiaries of the CIECH Group. As at 31 December 2022, 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.
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
31.12.2022
31.12.2021
Bank accounts
210,291
210,697
Short-term deposits
180,614
257,013
Cash in hand
8
9
Write-off
(6)
(244)
Cash and cash equivalents – presented in the statement of financial position
390,907
467,475
Cash and cash equivalents – presented in the cash flow statement
390,907
467,475
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.
As at 31 December 2022, 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 2022, they amounted to PLN 28,455 thousand. As at 31 December 2021, restricted cash in CIECH S.A. amounted to
PLN 2,239 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 2022 (in PLN thousand)
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5.9 DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND LIABILITIES CONNECTED WITH
NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
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.
As at 31 December 2022 and 2021 CIECH S.A. carries no non-current assets held for sale.
Discontinued operations
During 2022, there were no discontinued operations at CIECH S.A. In the corresponding period, there was a discontinued operation
concerning the sale of 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) is PLN 157,410 thousand. The final price of the Shares being sold was determined in accordance
with the rule arising from the Agreement and amounted to PLN 74,289 thousand. For details of the transaction, see current reports No
27/2020 and 4/2021.
Cash received from sale of shares
74,289
Cash received from repayment of debt (including loans repaid
1
)
83,121
TOTAL Value of the Agreement
157,410
1
The loan of PLN 27 million was repaid on 30 July 2021.
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 separate results of discontinued operations include the results of CIECH S.A. obtained from transactions
with the entity recognised in discontinued operations of CIECH Żywice Sp. z o.o. and the result on the sale of the company in connection with
the conclusion of the agreement for the sale of 74,677 shares of CIECH Żywice Sp. z o.o. to LERG S.A.
Below is the separate result on discontinued operations (in the resins area) of CIECH S.A.
CIECH S.A.
01.01.-31.12.2021
Net sales revenues
30,804
Cost of sales
(30,584)
Gross profit/(loss) on sales
220
Selling costs
(96)
General and administrative expenses
(3,538)
Operating profit/(loss)
(3,414)
Financial income
821
Financial expenses
-
Net financial income/(expenses)
821
Profit/(loss) before tax
(2,593)
Income tax
-
Net profit/(loss) (1)
(2,593)
Income form the sale of CIECH Żywice Sp. z o.o.
74,289
Value of shares sold
(30,015)
Separate gain on disposal of CIECH Żywice Sp. z o.o. (2)
44,274
Total net profit/(loss) on discontinued operations (1+2)
41,681
Cash received from the sale of shares in CIECH Żywice amounted to PLN 74,289 thousand and was reported in the statement of cash flows
of CIECH S.A. under “Disposal of a subsidiary”.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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 2021-2022 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 2022, 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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44
Shareholder structure of CIECH S.A. as at the date of approval of the report (according to the best knowledge of the Company):
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
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
1
Ordinary bearer
26,952,052
26,952,052
51.14%
51.14%
Nationale-Nederlanden Otwarty Fundusz
Emerytalny
2
Ordinary bearer
2,729,507
2,729,507
5.18%
5.18%
PTE Allianz Polska S.A.
3
Ordinary bearer
3,389,024
3,389,024
6.43%
6.43%
Other
Ordinary bearer
19,629,326
19,629,326
37.25%
37.25%
1
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).
2
On the basis of the list of shareholders holding at least 5% of votes at the Annual General Meeting of Shareholders of CIECH S.A. on 28 April 2022, Current
Report 16/2022 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).
3
In accordance with information provided by Shareholder (CR 1/2023).
On 10 January 2023, CIECH S.A. announced that it had received notification of the merger of Polskie Towarzystwo Emerytalne Allianz Polska
S.A. with Aviva Powszechne Towarzystwo Emerytalne Aviva Santander S.A., as a result of which the total shareholding in the Allianz OFE,
Allianz DFE and Drugi Allianz OFE managed by them increased to 3,389,024 shares representing 6.43% of the Company's share capital.
Treasury shares
In 2022 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.
KI Chemistry s. a r.l.
51,14%
PTE Allianz Polska
6,43%
Nationale-Nederlanden OFE
5,18%
Other
37,25%
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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45
Other reserve capital
The table below presents the balances of other reserve capital, consisting of the following items:
OTHER RESERVE CAPITAL BY PURPOSE
31.12.2022
31.12.2021
Commercial risk fund
3,330
3,330
Fund for purchasing soda companies
15,200
15,200
Development fund
57,669
57,669
Fund for the purchase of treasury shares
346,500
346,500
TOTAL
422,699
422,699
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.
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 financial statements for publication, the Management Board of CIECH SA has not adopted a resolution on
the proposed distribution of net profit for 2022.
The Management Board of CIECH S.A. decided on the distribution an interim dividend for 2022, in accordance with Article 349 § 1 of the
Commercial Companies Code, out of the net profit reported for the period from 1 January to 30 September 2022. The interim dividend for
2022 amounted to a total of PLN 79,050 thousand, representing an amount of PLN 1.50 per share. The Interim dividend record date was
22 December 2022, and the interim dividend was paid on 29 December 2022. For details, see current reports No 32/2022 and 40/2022.
On 28 April 2022, the Ordinary General Meeting resolved to distribute CIECH S.A.’s net profit for the financial year 2021, amounting to
PLN 133,206 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 2022, 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 Transclean Sp. z o.o.
The Court, in its decision of 3 February 2022, registered the reduction in the share capital of CIECH
Transclean Sp. z o.o. resulting from the cancellation of shares, which was carried out on 21 July 2021 at the
Extraordinary Shareholders' Meeting of CIECH Transclean Sp. z o.o. by deciding on the cancellation of
shares against consideration and amending the Articles of Association of the Company:
• 8,548 shares in the Company's share capital with a total nominal value of PLN 4,274 thousand were
cancelled in exchange for consideration of PLN 506.56 per canceled share, i.e. for total consideration
amounting to PLN 4,330 thousand by way of purchase of the above shares on the basis of an
agreement to sell the shares by the Company against the above consideration,
• The Management Board of the Company was authorised to purchase the shares (conclude an
agreement) in order to cancel them, The agreement for the purchase of shares for cancellation against
consideration was concluded on 10 November 2021; according to this agreement, the consideration
was transferred within 14 days from the date on which the reduction of capital was registered by the
court,
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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46
• following the cancellation of shares, the share capital was reduced from PLN 4,322 thousand (by PLN
4,274 thousand) to PLN 48 thousand through the cancellation of 8,548 shares with a total value of
PLN 4,274 thousand.
As a result of the decrease, the share capital of CIECH Transclean Sp. z o.o. is divided into 96 shares, with
a total nominal value of PLN 48 thousand (the nominal value for 1 share is PLN 500).
CIECH Sól Sp. z o.o.
On 13 December 2021, the Deed of Incorporation of CIECH Sól sp. z o.o., with a share capital of PLN 5
thousand, divided into 100 shares with a nominal value of PLN 50 each, was drawn up. The share capital
was fully covered with cash, all shares were taken up by CIECH S.A. The court, by decision of 7 February
2022, registered CIECH Sól Sp. z o.o. CIECH S.A. is the sole shareholder of the Company.
CIECH Soda Romania S.A.
As of 1 March 2022, a reduction in the share capital resulting from the cancellation of 26,819 treasury
shares of CIECH Soda Romania S.A. effected by resolution of the General Meeting held on 7 December
2022 became effective.
Following the cancellation, the share capital amounts to RON 111,573 thousand and is divided into
796,951,188 shares with a nominal value of RON 0.14 each. The number of shares held by CIECH S.A.
remains unchanged - 786,912,905 shares; their proportion in the share capital changes from 98.737% to
98.740%.
CIECH Nieruchomości
Rolne Sp. z o.o.
The court, in its decision of 22 August 2022, registered CIECH Nieruchomości Rolne Sp. z o.o., established
on 26 May 2022 with a share capital of PLN 5 thousand, which is divided into 100 shares, with a nominal
value of PLN 50 each.
The Company’s share capital was paid in full in cash. CIECH S.A. is the sole shareholder of the Company.
CIECH Ventures Sp. z o.o.
On 27 October 2022 and 23 November 2022, the Extraordinary Shareholders' Meeting of CIECH Ventures
Sp. z o.o. adopted resolutions to make additional contributions to the share capital by the sole shareholder
of the company, i.e. CIECH S.A., in the total amount of PLN 4,500 thousand.
6.5 EARNINGS PER SHARE
Accounting policy
Basic earnings per share is the net profit for the year attributable to ordinary shareholders of the company 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 company divided by the weighted
average number of ordinary shares outstanding during the year adjusted for the effects of all dilutive potential ordinary shares.
The table below presents profit and shares data used in the calculation of the basic and diluted earnings per share:
01.01.-31.12.2022
01.01.-31.12.2021
Net profit (loss) from continuing operations attributable to the shareholders of the parent
612,255
91,525
Net profit (loss) from discontinued operations attributable to the shareholders of the parent
-
41,681
Basic and diluted earnings per share (continuing operations)
11.62
1.74
Basic and diluted earnings per share (discontinuing operations)
-
0.79
Weighted average number of issued ordinary shares used in calculation of basic and diluted earnings
per share
52,699,909
52,699,909
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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7 LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS
7.1 INFORMATION ABOUT FINANCIAL LIABILITIES
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.
LOANS, BORROWINGS AND OTHER DEBT INSTRUMENTS
31.12.2022
31.12.2021
LONG-TERM
1,671,280
1,854,153
Loans and borrowings
1,671,280
1,854,153
SHORT-TERM
587,175
397,099
Loans and borrowings
421,313
255,396
Cash pooling liabilities
165,862
141,703
TOTAL
2,258,455
2,251,252
Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans:
01.01.-31.12.2022
01.01.-31.12.2021
Opening balance
2,109,549
2,095,105
Proceeds from debt incurred
234,500
385,493
financing received
1
234,500
385,493
Accrual of interest
137,814
38,196
Repayment of debt
(393,064)
(397,822)
repayment of principal
1
(255,000)
(351,790)
interest paid
(138,064)
(46,032)
Realised exchange differences on foreign currency debt
6
18,998
Foreign exchange differences on measurement of liabilities
1,274
(22,880)
Other
2,514
(7,540)
Closing balance
2,092,593
2,109,549
1
The loan repayment in 2021 in the amount of PLN 1,669,403 thousand was settled without any flow through the accounts of CIECH S.A. (refinancing of the loan).
DEBT FINANCING
CIECH S.A.’s debt financing is secured mainly through facilities made available to CIECH S.A. under facilities agreements:
• The Facilities Agreement signed with a banking syndicate dated 16 March 2021 with the total value of approx. PLN 2,116,810 thousand:
• amortised term facility in tranches in PLN and EUR in the amount of PLN 540,700 thousand and EUR 4,231 thousand (the facility
is fully drawn down),
• non-amortised term facility in tranches in PLN and EUR in the amount of PLN 1,260,100 thousand and EUR 9,844 thousand
(the facility is fully drawn down),
• revolving credit facility in the amount of up to PLN 250,000 thousand (the amount of used credit as at 31 December 2022 was
PLN 0),
• 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 2021, the amount used was PLN 0 thousand),
The total value of facilities available under the aforesaid agreements is PLN 2,263,709 thousand; the limits are drown down in the amount
of PLN 1,866,810 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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48
Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2022, in Section 4.6.
As at 31 December 2022, CIECH S.A. has a short-term liability on account of intercompany loans received in the amount of PLN 234,665
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 84,500 thousand,
• a loan from CIECH Pianki Sp. z o.o. in the amount of PLN 45,000 thousand, and interest accrued in the amount of PLN 165 thousand.
Interest rate:
The 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, such that if the level of the ratio is lower, the margin applied will also be lower. The financial terms of
the Facilities Agreement do not differ from those commonly used for this type of agreements.
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 statement of financial position. Under the
Facilities Agreement dated 16 March 2021, CIECH S.A. and its selected subsidiaries were obliged to, among others, maintain a certain level
of:
• 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 4.0x,, measured at the end
of a year and first six months of a year. As at the balance sheet date, i.e. 31 December 2022, this ratio was maintained and amounted
to 1,2.
• 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 met as at the balance sheet date and amounted to 93,0%.
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
31.12.2022
31.12.2021
Derivatives
86,207
91,857
Other
20,478
26,213
TOTAL
106,685
118,070
Other long-term liabilities primarily include the value of liabilities under the CIECH Group's three-year Long-Term Incentive Plans for 2019-
2021 and 2022-2024 for the key management personnel of the CIECH Group (the short-term portion of the Plans is presented in Note 7.3
under other short-term liabilities). The intention behind the introduction of the Plans is to harmonise the activities of key managers of the
CIECH Group with the achievement of the objectives set out in the CIECH Group Strategy. The main criterion is the achievement by the CIECH
Group in a given three-year period of the specified increase in value in relation to the reference year (for the 2019-2021 Programme at the
level of not less than 11% in relation to 2018 – this has been met, and for the 2022-2024 Programme at the level of not less than 20.5% in
relation to 2021). The increase in value is measured using the TSR (Total Shareholder Return) ratio, with an additional 10% of the pool for
the 2022-2024 Plan subject to meeting 4 ESG targets.
The discounted value of the liabilities of the 2019-2022 Plan amounted to PLN 12,086 thousand for the long-term portion and PLN 14,202
thousand for the short-term portion, while for the 2022-2024 Plan the long-term portion stood at PLN 8,378 thousand.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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
31.12.2022
31.12.2021
Trade liabilities and advances taken
618,112
442,031
Liabilities for purchase of property, plant and equipment
9,079
9,526
Financial instruments liabilities
-
59,843
Liabilities to employees
3,932
3,284
Payroll liabilities
20,626
25,402
Holiday leave accrual
3,327
4,904
Social security and other employee benefits
2,972
1,992
Liabilities due to continuous involvement
13,514
2,370
Factoring liabilites
14,612
8,244
Liabilities due to the purchase of shares, stocks and other financial assets
-
4,921
Other
18,033
6,489
TOTAL
704,207
569,006
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 standard payment term is 60 days.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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:
• the contracts are negotiated as a package with an overall commercial objective that cannot be understood without considering the
contracts together;
• the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or
• 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:
• 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
• 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
• 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:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the lessee under residual value guarantees;
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• 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:
• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made; and
• 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:
• interest on the lease liability; and
• 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.
Fixed lease payments
In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable. Fixed lease
payments exist, for example, if:
• 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
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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Accounting policy
• 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,
• 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.
• 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.
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 rights of termination of the parties and the existence of significant
penalties in the 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:
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
2.34% to 9.39% (for PLN 2.34%-9.39%; for EUR 2.56%-4.88%). A single discount rate was applied to the entire contract portfolio.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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52
The nominal value and the value lease interest are as follows:
LEASE LIABILITIES
Nominal payments
Effective interest
Discounted lease
liability
31.12.2022
0–6 months
2,795
99
2,696
Up to 1 year
2,945
112
2 833
1–2 years
8,393
890
7,503
2–5 years
10,281
2,210
8,071
More than 5 years
8,430
2,613
5,817
TOTAL
32,844
5,924
26,920
31.12.2021
0–6 months
2,783
225
2,558
Up to 1 year
3,049
200
2,849
1–2 years
8,117
573
7,544
2–5 years
6,061
331
5,730
More than 5 years
5,343
104
5,239
TOTAL
25,353
1,433
23,920
Reconciliation of changes in liabilities resulting from financing activities – lease liabilities
01.01.-31.12.2022
01.01.-31.12.2021
Opening balance
23,920
28,124
Modifications of agreements
4,287
(1,030)
Signing new agreements
3,477
2,680
Interest accrued
715
532
Repayment of liability
(6,260)
(6,387)
Foreign exchange differences
780
1
Closing balance
26,920
23,920
The total lease cash outflow is as follows:
01.01-31.12.2022
01.01-31.12.2021
Payment of liabilities, including:
9,063
9,267
Principal amount
5,606
5,821
Interest
654
566
Variable payments other than those linked to an index/rate
2,097
2,074
Low-value leases
706
806
The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for the period:
01.01-31.12.2022
01.01-31.12.2021
Costs of lease of low-value assets
(706)
(806)
Costs related to variable lease payments not included in the measurement of lease liabilities
(2,097)
(2,074)
For details of the right-of-use assets resulting from leases see 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
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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Accounting policy
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.
PROVISIONS FOR EMPLOYEE BENEFITS
LONG-TERM
SHORT-TERM
01.01.-31.12.2022
01.01.-31.12.2021
01.01.-31.12.2022
01.01.-31.12.2021
Opening balance
734
979
413
826
Recognition
75
-
79
-
Use and reversal
(28)
(58)
(86)
(339)
Foreign exchange differences
-
-
7
-
Other
42
(187)
(67)
(74)
Closing balance
823
734
346
413
In 2022, an amount of PLN -54 thousand (PLN 89 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 6.61% 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. The remuneration growth rates of 5.0% were applied for 2023 and subsequent 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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54
CHANGE IN OTHER SHORT-TERM PROVISIONS
Provisions for liabilities
TOTAL
01.01.-31.12.2022
Opening balance
34,561
34,561
Recognition
14,040
14,040
Use and reversal
(528)
(528)
Closing balance
48,073
48,073
01.01.-31.12.2021
Opening balance
33,741
33,741
Recognition
988
988
Use and reversal
(168)
(168)
Closing balance
34,561
34,561
The amount of provisions is an estimated value and may be subject to change during utilisation.Short-term provisions of PLN 48,073 thousand
are related to potential claims (principal liability plus interest payable) resulting from litigation. The increase in provisions during 2022 is
mainly associated with the tax settlement audits pending at the company.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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 under finance income.
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.
Financial liabilities at fair value
through other comprehensive
income
At fair value
Changes from remeasurement at fair value are recognised in other
comprehensive income.
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 (not applicable to assets measured through profit or loss or equity investments
designated as 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:
• the financial instrument has a low risk of default,
• the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and
• 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:
• significant financial difficulty of the issuer or the borrower;
• a breach of contract, such as a default or past due event;
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Accounting policy
• 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;
• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; or
• 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, as it believes that the risk of default by counterparties increases significantly after that 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.
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 chose 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 2022 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 2022 (in PLN thousand)
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Carrying amount of financial instruments
Class of financial instruments
note
31.12.2022
31.12.2021
Categories of financial instruments
Cash and cash equivalents
5.8
390,907
467,475
Measured at amortised cost
Loans granted
5.4;5.7
2,218,184
1,651,148
Measured at amortised cost
Trade receivables
5.6
204,700
110,037
Measured at amortised cost
Factoring receivables
5.6
36,108
21,437
Measured at amortised cost
Derivatives with positive value
5.4;5.7
105,898
88,783
Measured at fair value through profit or
loss
Hedging derivatives with positive value
5.4;5.7
6,494
14,099
Financial assets at fair value through other
comprehensive income
Cash pooling receivables
5.6
5,688
3,912
Measured at amortised cost
ASSETS
2,967,979
2,356,891
Trade liabilities
7.3
(618,022)
(442,025)
Measured at amortised cost
Credits and loans
7.1
(2,092,593)
(2,109,549)
Measured at amortised cost
Lease liabilities
7.4
(26,920)
(23,920)
Measured at amortised cost
Factoring liabilities
7.3
(14,612)
(8,244)
Measured at amortised cost
Derivatives with negative value
7.2;7.3
(86,207)
(151,564)
Measured at fair value through profit or
loss
Hedging derivatives with negative value
7.2;7.3
-
(136)
Financial liabilities measured at fair value
through profit or loss.
Cash pooling liabilities
7.3
(165,862)
(141,703)
Measured at amortised cost
LIABILITIES
(3,004,216)
(2,877,141)
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 uses reverse factoring. Due to the terms of the agreements, these liabilities are reported as trade liabilities.
Revenues, costs, profit and loss recognised in the income statement by the category of financial instruments.
Revenues, costs, profit and loss recognised in the
income statement– for continuing and
discontinued operations
01.01.-31.12.2022
01.01.- 31.12.2021
Categories of financial instruments
Interest income/(expenses), including calculated
using the effective interest rate method
(55,567)
(143)
96,000
48,844
Financial assets measured at amortised cost
(150,915)
(48,479)
Financial liabilities measured at amortised cost
(652)
(508)
Financial liabilities excluded from
IFRS 9
Foreign exchange gains/(losses)
19,728
5,863
19,728
5,863
Financial liabilities measured at amortised cost
-
-
Financial liabilities excluded from
IFRS 9
Recognition of impairment losses
(4,570)
(1,167)
Financial assets measured at amortised cost
Reversal of impairment losses
6,126
2,138
Financial assets measured at amortised cost
Income/expenses from use of derivative financial
instruments
191,362
(79,859)
155,646
(68,470)
Financial assets/liabilities measured at fair value
through profit or loss
35,716
(11,389)
Hedging instruments
-
44,274
Financial assets/liabilities measured at fair value
through profit or loss
TOTAL
157,079
(28,894)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• 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):
o the cumulative gain or loss on the hedging instrument from inception of the hedge; and
o the cumulative change in fair value (present value) of the hedged item (i.e. 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 (i.e. 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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The table below presents a summary of specific groups of relationships existing in 2022, designated for hedge accounting:
Type of
instrument
Hedged item
Nominal value/
Volume as at
31.12.2022
Maturity
31.12.2022
31.12.2021
Value in
financial assets
Value in
financial
liabilities
Value in
financial assets
Value in
financial
liabilities
Interest rate
swap – 6M
EURIBOR to
fixed rate
Interest payments on
debt in EUR with a
maximum nominal
amount of EUR
14,075 thousand
EUR 14,075
thousand
2026
6,494
-
526
-
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
-
2022
-
-
13,437
-
31.12.2022
31.12.2021
Before tax
Tax
After tax
Before tax
Tax
After tax
Cash flow hedge reserve as at the beginning of
the period
24,797
(4,711)
20,085
(31,744)
6,032
(25,713)
Effective portion of gains/(losses) on hedging
instruments:
- interest rate risk
(18,304)
3,479
(14,825)
37,765
(7,175)
30,590
Reclassification to profit or loss:
- interest rate risk (interest expense)
-
-
-
18,776
(3,568)
15,208
Cash flow hedge reserve as at the end of the
period
6,493
(1,232)
5,260
24,797
(4,711)
20,085
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.
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.
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 (for net exposure) and hedging of up to 90% of projected annual net exposure to currencies
exchange rate change by using derivative instruments and 100% exposure to interest rate risk.
In 2022, 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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Cash management
CIECH S.A. cooperates with bank service providers of high credit rating. Surplus cash is held in the form of deposits with short maturities with
banks with investment grade credit ratings. 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 strategic 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. Risk effects are materialised in the cash flow statement, statement
of financial position and the statement of profit or loss.
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 16 March 2021 in the amount of
PLN 1,801 million and EUR 14 million, a revolving credit facility in the amount of up to PLN 250 million (as at the end of 2022, the debt
amounted to PLN 0), overdraft facilities (as at the end: PLN 0 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 reduced by:
• assets owned by CIECH S.A. (bank deposits), earning interest at variable interest rate,
• hedging transactions concluded.
In 2022, 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 March 2021. The transaction hedges indebtedness in the amount of EUR 14 million (as at 31 December 2022), 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 March 2021. The transaction hedges indebtedness in the nominal amount of 1,538 million
(as at 31 December 2022), amortised in accordance with the schedule of the CIRS transaction.
The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to interest rate
risk:
Total carrying amount
31.12.2022
31.12.2021
Fixed interest rate instruments
1,388,923
1,024,037
Financial assets
1,388,923
1,024,037
Financial liabilities
-
-
Floating interest rate instruments
(1,074,131)
(1,184,918)
Financial assets
1,225,856
1,098,498
Financial liabilities
(2,299,987)
(2,283,416)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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
(impact of profit/loss on equity is not
included)
increase by 100
bp
decrease by 100
bp
increase by 100
bp
decrease by 100
bp
31.12.2022
Floating interest rate instruments
(10,741)
10,741
-
-
Interest rate swaps (IRS)
44,137
(45,971)
1,658
(1,726)
Sensitivity of cash flows (net)
33,396
(35,230)
1,658
(1,726)
31.12.2021
Floating interest rate instruments
(11,849)
11,849
-
-
Interest rate swaps (IRS)
52,085
(55,141)
5,439
(5,638)
Sensitivity of cash flows (net)
40,236
(43,292)
5,439
(5,638)
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 which exposed companies within the CIECH Group in 2022 included: sales of products, purchases (raw materials, expenditure related to
investment projects), loans taken out and cash in foreign currencies. Unfavourable changes in currency exchange rates may worsen the
Company’s financial results.
In 2022, 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 2022 and 2021 due to financial
instruments:
Exposure to currency risk in EUR (figures in
EUR)
31.12.2022
31.12.2021
Impact on the
statement of profit or
loss
Impact on the
statement of other
comprehensive
income
Assets
Loans granted sensitive to FX rate changes
297,700
224,000
x
-
Trade and other receivables
2,921
2,681
x
-
Cash including bank deposits
35,005
2,475
x
-
Equity and liabilities
Trade and other liabilities
(3,228)
(172)
x
-
Term loan liabilities
(14,075)
(14,075)
x
-
Other liabilities in respect of credits and
loans
(112)
(3,577)
x
-
Forward not designated to hedge
accounting)
(257,713)
(192,913)
x
-
CIRS
(342,249)
(403,590)
x
-
Total exposure
(281,752)
(385,171)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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62
Exposure to currency risk in USD
(figures in USD)
31.12.2022
31.12.2021
Impact on the
statement of profit or
loss
Impact on the
statement of other
comprehensive
income
Assets
Trade and other receivables
245
127
x
-
Cash including bank deposits
1,242
77
x
-
Equity and liabilities
Trade and other liabilities
(445)
(33)
x
-
Total exposure
1,042
171
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
2022.
Figures in EUR
(Increase of EUR/PLN exchange rate by 1 grosz)
TOTAL
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive
income
Analysis of sensitivity to currency risk – EUR, 2022
Foreign-currency balance sheet items
(2,818)
(2,818)
-
Analysis of sensitivity to currency risk – EUR, 2021
Foreign-currency balance sheet items
(3,852)
(3,852)
-
Figures in USD
(Increase of USD/PLN exchange rate by 1 grosz)
TOTAL
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive
income
Analysis of sensitivity to currency risk – EUR, 2022
Foreign-currency balance sheet items
10
10
-
Analysis of sensitivity to currency risk – EUR, 2021
Foreign-currency balance sheet items
2
2
-
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
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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63
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. 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.
31.12.2022
31.12.2021
Cash and cash equivalents
390,907
467,475
Loans granted
2,218,184
1,651,148
Trade receivables
204,700
110,037
Factoring receivables
36,108
21,437
Cash pooling receivables
5,688
3,912
Financial assets from valuation of derivatives
112,392
102,882
TOTAL
2,967,979
2,356,891
The fair value of financial assets exposed to credit risk is similar to their carrying amount.
The Company has no material items which would be uncollectible as at the reporting date and not covered by an impairment allowance.
Information on guarantees and sureties granted is provided in note 9.2 to these statements.
Trade receivables
and net factoring receivables (net amount)
Loans granted (net amount)
31.12.2022
31.12.2021
31.12.2022
31.12.2021
Poland
163,379
103,197
829,260
627,110
European Union
75,783
27,641
1,388,923
1,024,038
Other European countries
-
98
-
-
Africa
-
538
-
-
Asia
1,646
-
-
-
TOTAL
240,808
131,474
2,218,183
1,651,148
Trade receivables
and net factoring receivables (net amount)
Loans granted (net amount)
31.12.2022
31.12.2021
31.12.2022
31.12.2021
Soda segment
217,371
104,619
-
-
Agro Segment
2,611
3,972
-
-
Foams Segment
217
1,011
-
-
Silicates Segment
472
4,307
-
-
Packaging Segment
142
315
-
-
Other activities (including corporate functions)
19,995
17,250
2,218,183
1,651,148
TOTAL
240,808
131,474
2,218,183
1,651,148
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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Impairment of financial assets
Changes in the gross carrying amounts of trade receivables and loans with reconciliation of write-downs as at 31 December 2022 and as at
31 December 2021 to opening balances are presented in the table below:
Trade receivables
Loans
Stage 2
Stage 3
TOTAL
Stage 1
Stage 3
Stage 3
TOTAL
Lifetime ECL –
not impaired
Lifetime ECL –
impaired
12-month
ECL
Lifetime
ECL
Lifetime ECL
Gross carrying amount as
at 01.01.2022
110,233
20,226
130,459
1,659,652
-
2,801
1,662,453
Recognised
889,731
754
890,485
1,516,102
-
-
1,516,102
Interest accrued
-
-
-
104,904
-
-
104,904
Written-down
-
(10)
(10)
-
-
-
-
Repaid
(799,805)
(5,435)
(805,240)
(1,062,144)
-
-
(1,062,144)
Foreign exchange
differences
4,718
193
4,911
11,606
-
-
11,606
Gross carrying amount as
at 31.12.2022
204,877
15,728
220,605
2,230,120
-
2,801
2,232,921
Opening balance of
write-downs as at
01.01.2022
(196)
(20,226)
(20,422)
(8,504)
-
(2,801)
(11,305)
Change in write-downs
19
4,498
4,517
(3,432)
-
-
(3,432)
Closing balance of write-
downs as at 31.12.2022
(177)
(15,728)
(15,905)
(11,936)
-
(2,801)
(14,737)
Net carrying amount as
at 31.12.2022
204,700
-
204,700
2,218,184
-
-
2,218,184
Trade receivables
Loans
Stage 2
Stage 3
TOTAL
Stage 1
Stage 3
Stage 3
TOTAL
Lifetime ECL –
not impaired
Lifetime ECL –
impaired
12-month
ECL
Lifetime
ECL
Lifetime ECL
Gross carrying amount as
at 01.01.2021
169,867
20,530
190,397
1,596,870
-
2,801
1,599,671
Recognised
808,575
910
809,485
2,015,131
-
-
2,015,131
Interest accrued
151
151
48,615
-
-
48,615
Written-down
-
1
1
-
-
-
Repaid
(878,925)
(1,941)
(880,866)
(2,001,117)
-
-
(2,001,117)
Foreign exchange
differences
10,565
726
11,291
153
-
-
153
Gross carrying amount as
at 31.12.2021
110,233
20,226
130,459
1,659,652
-
2,801
1,662,453
Opening balance of
write-downs as at
01.01.2021
(203)
(20,530)
(20,733)
(8,556)
-
(2,801)
(11,357)
Change in write-downs
7
304
311
52
-
-
52
Closing balance of write-
downs as at 31.12.2021
(196)
(20,226)
(20,422)
(8,504)
-
(2,801)
(11,305)
Net carrying amount as
at 31.12.2021
110,037
-
110,037
1,651,148
-
-
1,651,048
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 2021 and 31 December 2022, loans were
not reclassified to Stage 2 or Stage 3.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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65
The following table presents an analysis of the credit risk stages of loans measured at amortised cost.
31.12.2022
31.12.2021
Estimated Rating
Stage 1
Stage 3
TOTAL
Stage 1
Stage 3
TOTAL
12-month ECL
Lifetime ECL
12-month ECL
Lifetime ECL
Rating CIECH S.A. (Ba2 Moody’s)
1
2,232,921
-
2,232,921
1,662,453
-
1,662,453
Gross carrying amount
2,232,921
-
2,232,921
1,662,453
-
1,662,453
Impairment losses
(14,737)
-
(14,737)
(11,305)
-
(11,305)
Net carrying amount
2,218,184
-
2,218,184
1,651,148
-
1,651,148
1
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 Ba2.
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
Non past due
receivables
Non past due
0-30 days
30-60 days
> 90 days
> 180 days
Gross carrying amount of receivables as at
31.12.2022
220,606
202,375
6,456
86
35
11,654
Default rate
0.03%
0.02%
0.00%
20.00%
97.33%
Total expected losses
145
58
1
-
7
79
from collective analysis
15,906
4,555
1
-
7
11,343
from case-by-case analysis
145
58
1
-
7
79
TOTAL
Non past due
receivables
Non past due
0-30 days
30-60 days
> 90 days
> 180 days
Gross carrying amount of receivables as at
31.12.2021
130,459
99,856
5,438
3,620
9
21,536
Default rate
0.13%
0.03%
0.26%
0.18%
94%
Total expected losses
20,422
228
3
9
-
20,182
from collective analysis
195
130
3
9
-
53
from case-by-case analysis
20,227
98
-
-
-
20,129
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 2022, the facility was drawn down in the amount
of PLN 0 million), and overdraft facilities (as at the end of 2022, they were drown down in the amount of PLN 0 thousand) have been made
available to the Company.
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66
The table below presents financial liabilities at face value grouped by maturity.
31.12.2022
Carrying
amount
Contractual
cash flows
Less than
6 months
up to 12
months
1-2 years
3-5 years
More than 5
years
Other financial liabilities:
(2,891,089)
(3,364,348)
(982,316)
(415,282)
(326,012)
(1,640,739)
-
Trade liabilities
(618,022)
(618,022)
(618,022)
-
-
-
-
Credits and loans
(2,092,593)
(2,565,852)
(183,820)
(415,282)
(326,012)
(1,640,739)
-
Factoring liabilities
(14,612)
(14,612)
(14,612)
-
-
-
-
Cash pooling liabilities
(165,862)
(165,862)
(165,862)
-
-
-
-
Lease liabilities
(26,920)
(32,844)
(2,795)
(2,945)
(8,393)
(10,281)
(8,430)
Derivatives with negative value
(86,207)
(254,675)
-
-
-
(254,675)
-
Hedging derivatives with negative
value
-
-
-
-
-
-
-
Total financial liabilities
(3,004,216)
(3,651,867)
(985,111)
(418,227)
(334,405)
(1,905,694)
(8,430)
31.12.2021
Carrying
amount
Contractual
cash flows
Less than
6 months
up to 12
months
1-2 years
3-5 years
More than 5
years
Other financial liabilities:
(2,701,521)
(2,875,356)
(611,380)
(288,750)
(112,782)
(1,862,444)
-
Trade liabilities
(442,025)
(442,025)
(442,025)
-
-
-
-
Credits and loans
(2,109,549)
(2,283,384)
(19,408)
(288,750)
(112,782)
(1,862,444)
-
Factoring liabilities
(8,244)
(8,244)
(8,244)
-
-
-
-
Cash pooling liabilities
(141,703)
(141,703)
(141,703)
-
-
-
-
Lease liabilities
(23,920)
(25,353)
(2,571)
(2,894)
(7,843)
(9,270)
(2,775)
Derivatives with negative value
(151,564)
(271,530)
(16,215)
-
-
(255,315)
-
Hedging derivatives with negative
value
(136)
(84)
(39)
(30)
(15)
-
-
Total financial liabilities
(2,877,141)
(3,172,323)
(630,205)
(291,674)
(120,640)
(2,127,029)
(2,775)
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.
CIECH S.A.’s liquidity
Liquidity ratios as at 31 December 2022 remained relatively flat as compared to their level as at 31 December 2021. The current ratio,
calculated as the ratio of total current assets to total current liabilities, amounted to 1.26 as at 31 December 2022.
31.12.2022
31.12.2021
Current ratio
1.26
1.33
Quick ratio
1.26
1.33
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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67
8.4 DETERMINATION OF FAIR VALUE
The following list presents the fair value of financial instruments.
31.12.2022
31.12.2021
Carrying amount
Fair value
Carrying amount
Fair value
Cash and cash equivalents
390,907
390,907
467,475
467,475
Loans granted
2,218,184
2,218,184
1,651,148
1,651,148
Trade receivables
204,700
204,700
110,037
110,037
Derivatives with positive value
105,898
105,898
88,783
88,783
Hedging derivatives with positive value
6,494
6,494
14,099
14,099
Cash pooling receivables
5,688
5,688
3,912
3,912
Factoring receivables
36,108
36,108
21,437
21,437
ASSETS
2,967,979
2,967,979
2,356,891
2,356,891
Credits and loans
(2,092,593)
(2,101,462)
(2,109,549)
(2,120,932)
Trade liabilities
(618,022)
(618,022)
(442,025)
(442,025)
Derivatives with negative value
(86,207)
(86,207)
(151,564)
(151,564)
Hedging derivatives with negative value
-
-
(136)
(136)
Cash pooling liabilities
(165,862)
(165,862)
(141,703)
(141,703)
Factoring liabilities
(14,612)
(14,612)
(8,244)
(8,244)
LIABILITIES
(2,977,296)
(2,986,165)
(2,853,221)
(2,864,604)
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 amount, loans are based on a variable rate, commissions and fees are not amortised.
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
31.12.2022
31.12.2021
Level 2
Level 2
ASSETS
112,392
102,882
Hedging instruments
6,494
14,099
Derivative instruments measured at fair value through profit or loss
105,898
88,783
LIABILITIES
(86,207)
(151,700)
Hedging instruments
-
(136)
Derivative instruments measured at fair value through profit or loss
(86,207)
(151,564)
TOTAL
26,185
(48,818)
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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68
As at 31 December 2022, 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 contracts hedging the interest
rate are 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
31.12.2022
IRS EUR
4,233
2,261
-
-
6,494
CIRS
-
96,376
(86,207)
-
10,169
Forward EUR/PLN
-
9,522
-
-
9,522
TOTAL
4,233
108,159
(86,207)
-
26,185
31.12.2021
IRS EUR
662
-
-
(136)
526
IRS PLN
-
13,437
-
-
13,437
CIRS
-
85,607
(91,857)
(59,707)
(65,957)
Forward EUR/PLN
-
3,176
-
-
3,176
TOTAL
662
102,220
(91,857)
(59,843)
(48,818)
The above financial instruments were classified at level 2 of the fair value hierarchy. In 2022, there were no transfers within the fair value
hierarchy of instruments measured at fair value.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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69
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 cash flows statement
31.12.2022
31.12.2021
Change in receivables reported in the statement of financial position
(157,617)
28,014
Receivables from the purchase of shares
(19,000)
19,175
Reclassification of cash pooling receivables
1,776
(4,047)
Offsetting loan receivables against loan liabilities
-
(10,000)
Reclassification of income tax receivables
43,718
37
Change in receivables in the statement of cash flows
(131,123)
33,179
31.12.2022
31.12.2021
Change in liabilities reported in the statement of financial position
137,136
312,211
Change in financial liabilities
16,925
(14,444)
Change in income tax liabilities
(3,117)
4,539
Change in liabilities relating to non-current assets
970
(1,125)
Reclassification of cash pooling liabilities
(24,159)
1,811
Measurement of financial instruments
65,493
(170,534)
Change in lease liabilities
(3,000)
4,204
Change in liabilities on account of purchase of financial assets
4,921
3,871
Other
2
75
Change in liabilities in the statement of cash flows
195,171
140,608
31.12.2022
31.12.2021
Change in provisions and employee benefits reported in the statement of financial position
13,534
162
Change in provision for income tax liability
(7,196)
-
Change in provisions and employee benefits reported in the statement of cash flows
6,338
162
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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70
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 2022, 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 2022, 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 liabilities including guarantees and sureties, excluding liabilities related to proceedings before
administrative authorities
The amounts of contingent liabilities related to proceedings before administrative authorities and changes therein in 2022 are described in
the note below under the heading: “Audits of tax settlements at the CIECH Group and related contingent liabilities”.
Contingent assets and contingent liabilities including guarantees and sureties
31.12.2022
31.12.2021
Contingent assets
34,153
18,864
Other contingent receivables
34,153
18,864
Contingent liabilities
2,278,195
1,764,507
Guarantees granted
2,021,130
1,539,555
Tax liabilities (including interest)
2,404
10,160
Letters of support
254,662
214,792
The value of contingent assets comprises:
• 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.
• contingent asset in the amount of PLN 15,289 thousand related to the value of potential interest to be returned from the tax office in
relation to the payment of the additional income tax liability with interest for 2012 following the decision of the 2
nd
instance authority
in 2019. The contingent asset relates to interest for the period from the date of payment of tax plus interest to 31 December 2022.
As at 31 December 2022, contingent liabilities amounted to PLN 2,278,195 thousand and increased as compared to 31 December 2021 by
PLN 513,688 thousand. The change was mainly attributable to changes in the value of the guarantees granted for the liabilities of subsidiaries
described in the table below.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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71
Sureties granted as at 31 December 2022
Beneficiary’s name
Principal
Financial terms, including surety fee due to the company; surety period
Total amount of liabilities covered by surety
in whole or in specific part
currency
PLN
CIECH S.A.
Landesamt fuer Geologie und
Bergwesen Sachsen-Anhalt
CIECH Soda Deutschland GmbH&Co. KG.
(subsidiary)
Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to
liability; no time limit
EUR 8,403 thousand
39,411 thousand
Axpo Solutions AG
CIECH Energy Deutschland GmbH
(subsidiary)
Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to
claims related to the agreement; until 31 December 2023
EUR 46,000 thousand
215,735 thousand
Investitionsbank_Sachsen-Anhalt
(IBSA)
CIECH Salz Deutschland GmbH
(subsidiary)
Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to
claims related to the subsidy;
EUR 11,250 thousand
52,761 thousand
Evatherm AG
CIECH Salz Deutschland GmbH
(subsidiary)
Commission of 0.97% 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
EUR 21,900 thousand
102,709 thousand
BNP Paribas S.A.
CIECH Soda Deutschland GmbH & Co. KG; CIECH
Energy Deutschland GmbH (subsidiaries)
Commission of 0.97% p.a. of the guaranteed liability; ISDA agreement –
liabilities under the agreement; indefinite term
EUR 200,000 thousand
937,980 thousand
BNP Paribas S.A.
CIECH Soda Deutschland GmbH & Co. KG;
CIECH Energy Deutschland GmbH (subsidiaries)
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
PLN 62,500 thousand
62,500 thousand
BNP Paribas Faktoring Sp. z o.o.
CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z
o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon S.A.
(subsidiaries)
Commission of 0.55% p.a. of the guaranteed liability; supplier financing
agreement; indefinite term
PLN 150,000 thousand
150,000 thousand
mBank S.A.
CIECH Sarzyna S.A. (subsidiary)
Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to
claims under the Guarantee agreement; until 30 June 2023
PLN 3,000 thousand
3,000 thousand
CITI Handlowy (reverse factoring)
CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z
o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon S.A.
(subsidiaries)
Commission of 0.55% p.a. of the guaranteed liability; 12 March 2022
(automatically extended)
PLN 162,422 thousand
162,422 thousand
SEFE Marketing & Trading Ltd.
(formerly: Gazprom Marketing &
Trading Limited)
CIECH Energy Deutschland GmbH
(subsidiary)
Commission 0.97%p.a. of the average outstanding balance; open-ended
EUR 9,475 thousand
44,435 thousand
Vitol S.A.
CIECH Soda Polska S.A. (subsidiary)
Commission of 0.18% p.a. of the guaranteed liability; until 31 May 2023
PLN 20,000 thousand
20,000 thousand
IKS Solino S.A.
CIECH Soda Polska S.A. (subsidiary)
Commission of 0.57% p.a. of the guaranteed liability; until 31 December 2028
PLN 220,000 thousand
220,000 thousand
PGNiG Obrót Detaliczny Sp. z o.o.
CIECH Vitro Sp. z o.o. (subsidiary)
Commission of 0.57% p.a. of the guaranteed liability; until 30 June 2024
PLN 10,176 thousand
10,176 thousand
Total nominal amount of contractual commitments for which sureties were granted
PLN 2,021,130
thousand
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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72
Letters of support
As at 31 December 2022, 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 54.3 million from Innogy by 31 December 2022. 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 2022, the following audits and proceedings were carried out at CIECH S.A.:
• audit concerning Corporate Income Tax settlements for 2012 (CIT 2012) – awaiting the Director of the Tax Administration Chamber
decision in line with the Supreme Administrative Court judgment,
• audit concerning Corporate Income Tax settlements for 2013 (CIT 2013) – court stage
• a customs and fiscal audit concerning Corporate Income Tax settlements for 2014 (CIT 2014).
• a customs and fiscal audit concerning Corporate Income Tax settlements for 2016 (CIT 2016).
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 the former 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 recognised 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 (“PAC”) in Kraków. 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. On 8 December 2022, the Supreme Administrative Court
issued a judgement in which it overturned the judgment of the Provincial Administrative Court. The
Supreme Administrative Court also overturned the decision of the Second Instance Authority and the case
was referred back to that Authority for reconsideration. On 8 February 2023, the Company received a
written statement of reasons for the SAC's judgement. In its statement of reasons, the Supreme
Administrative Court indicated that the Authority, when re-examining the case, would be obliged to follow
the court's interpretation of the law. The attached ruling is final and not subject to appeal.
Currently, the Company is waiting for the decision of the tax authorities in accordance with the judgment
of the Supreme Administrative Court, after which it should receive a refund of the overpaid tax liability,
interest paid for late payment, interest for the period when the paid funds were at the disposal of the tax
authority and reimbursement of court costs.
CIT audit for 2013 at
CIECH S.A.
It 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.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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73
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 (hereinafter referred to as the “SAC”) in September
2019. On 6 July 2022, the SAC rendered a judgement in which it dismissed the Company's cassation
complaint. The court upheld the auditors’ position and denied the Company the right to recognise interest
on external financing earmarked for the reserve capital in CIECH Soda Deutschland GmbH & Co. KG and
the expense in relation to tax consultancy as tax costs. As far as the fee for the use of the CIECH trademark
is concerned, the SAC found that the office that had carried out the audit did not clarify the matter in depth
and, therefore, the SAC referred the matter for reconsideration by the office. On 26 July 2022, the
Company received a written statement of reasons for the SAC's judgement. In view of the content of the
aforementioned statement of reasons, the Company intends to reiterate and expand on the arguments
supporting its position. The case was returned to the Director of the Tax Administration Chamber in
Warsaw. On 27 February 2023, the Company received the Decision of DIAS in Warsaw of February 14,
2023. In the decision, DIAS will determine the amount of the tax liability at PLN 1.4 million. The Office
refrained from questioning trademark fees as tax deductible costs. The Office, however, did not take into
account the additional evidence submitted by the Company regarding interest on external financing
allocated to the reserve capital of CIECH Soda Deutschland GmbH & Co. KG. and expenses related to tax
consultancy and refused to recognize them as tax costs. The Company and its advisors do not agree with
the issued Decision and intend to sue it in court.
CIT audit for 2014 at
CIECH S.A.
It 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 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 22.6 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.
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.
On 28 February 2022, the Company received the Order of the Head of the Małopolskie Province Customs
and Tax Office to suspend the Tax proceedings, in which the Auditing Authority indicates that the
consideration of the case and the issue of the decision depends on the resolution of the preliminary issue
by another authority or court, and the proceedings before the Supreme Administrative Court regarding
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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74
the dispute on the settlement of the corporate income tax for 2013 is directly related to the correct
settlement of corporate income tax for 2014.
CIT audit for 2016 at
CIECH S.A.
On 25 May 2021, CIECH S.A. received an authorisation from the Head of the Małopolskie Province Customs
and Tax Office in Kraków to carry out a customs and fiscal audit with regard to corporate income tax (CIT)
for 2016. On 25 July 2022, the Company received a decision of the Head of the Małopolskie Province
Customs and Tax Office to suspend the tax proceedings, in which the Auditing Authority indicates that the
dispute between CIECH S.A. and the Head of the Tax Administration Chamber in Warsaw regarding the
settlement of corporate income tax for 2013 is directly related to the correct settlement of corporate
income tax for 2016. In view of the above, the Head of the Małopolskie Province Customs and Tax Office
in Kraków suspended the customs and fiscal audit. In addition, on 2 September 2022 the company received
from the Head of the Małopolskie Province Customs and Tax Office a notice of suspension, as of 19 August
2022, of the statute of limitations for tax liabilities for 2016 due to the initiation of proceedings for a fiscal
offence.
The Company estimated that the potential impact on income tax expense (in the form of additional tax liabilities), in connection with the
above events which are or may continue to be challenged, would amount to PLN 8.6 million if it were no longer probable that the Company
would be able to uphold its tax interpretations before the tax authorities. From the above-mentioned amount of PLN 8.6 million due to the
audits conducted, despite the continued dispute with the tax authorities, the Company has paid PLN 1.8 million in tax (of which PLN 0.4
million should be returned by the Tax Office after issuing a new decision specifying a lower tax liability) and an amount of PLN 7.2 million is
covered by the provision. The entire amount of tax paid of PLN 1.8 million is reported as a receivable from the Tax Office. The company has
recognised an impairment loss on this amount receivable. In addition, the Company paid PLN 0.3 million in interest.
After winning the CIT case for 2012 before the Supreme Administrative Court, the Company should receive a refund of the overpaid tax
liability in the amount of PLN 43.7 million and a refund of the interest paid in the amount of PLN 22.7 million.
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 higher level in relation to CIECH S.A. — Kulczyk Investments S.A. and non-consolidated companies of the CIECH Group, and with the
Polenergia Group companies - linked via a personal relationship with the ultimate parent company of CIECH S.A.) is presented below:
CIECH S.A.’S TRANSACTIONS WITH RELATED
ENTITIES
Subsidiaries
Associates
Other related parties
TOTAL
01.01.-31.12.2022
Sales revenues
282,971
14,143
-
297,114
Financial income, including:
413,349
215
8
413,572
Dividend
297,966
215
-
288,181
Purchases of products, goods, materials and
services, including:
2,170,271
6,309
2,755
2,179,335
KI One SA
-
-
104
104
Financial expenses
59,717
-
-
59,717
31.12.2022
Receivables
75,586
4,949
-
80,535
Loans granted
2,218,183
-
-
2,218,183
Trade and other liabilities
746,341
825
13
747,179
Loans received
234,665
-
-
234,665
01.01.-31.12.2021
Sales revenues
223,598
16,976
-
240,574
Financial income, including:
316,009
-
-
316,009
Dividend
204,620
-
-
204,620
Purchases of products, goods, materials and
services, including:
1,310,969
25,546
5,828
1,342,343
KI One SA
-
-
199
199
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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75
CIECH S.A.’S TRANSACTIONS WITH RELATED
ENTITIES
Subsidiaries
Associates
Other related parties
TOTAL
Financial expenses
76,889
-
-
76,889
31.12.2021
Receivables
74,873
609
-
75,482
Loans granted
1,651,026
-
-
1,651,026
Trade and other liabilities
548,277
2,098
45
550,420
Loans received
255,219
-
-
255,219
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 2022 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
2022.
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 payable to particular Members of the Management Board
in 2022 and in the comparable period. In the years 2021-2022, 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,
except for Mr Mirosław Skowron, who served on the Management Board of Ciech Salz Deutschland GmbH, and Mr Kamil Majczak, who serves
on the Management Board of CIECH Ventures Sp. z o.o.
Short-term
employee benefits
Long-term
Incentive Plan
Post-employment
benefits
Termination
benefits
TOTAL
31.12.2022
Management Board
13,485
8,808
-
-
22,293
Former members of the Management
Board
-
-
-
-
-
TOTAL
13,485
8,808
-
-
22,293
31.12.2021
Management Board
9,368
-
-
-
9,368
Former members of the Management
Board
-
-
524
-
524
TOTAL
9,368
-
524
-
9,892
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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76
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
• payments from the Long-Term Incentive Plan for three subsequent years, adopted on the basis of a decision of the Supervisory Board,
with payments in three consecutive years after the end of the reference period.
Remuneration of the Managing Director
The following table presents the amount of remuneration and additional benefits payable to the Managing Director in 2022.
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.
Managing Director
01.01 – 31.12.2022
01.06 – 31.12.2021
Short-term employee benefits
817
1,019
Long-term Incentive Plan
1,807
-
TOTAL
2,624
1,019
The Managing Director is employed under an employment contract which specifies the basic remuneration and the applicable rules of the
bonus system.
Remuneration of the Supervisory Board of CIECH S.A.
Short-term employee benefits
Remuneration due
from CIECH S.A. in
2022
Remuneration due
from CIECH S.A. in
2021
Sebastian Kulczyk
-
1
-
1
Natalia Scherbakoff
2
510
39
Artur Olech
1,607
447
Marek Kośnik
1,554
476
Łukasz Rędziniak
1,168
368
Martin Laudenbach
1,003
209
Piotr Augustyniak
3
-
108
TOTAL
5,842
1,647
1
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.
2
Appointed to the Supervisory Board on 26 October 2021.
3
On 16 March 2021, Mr Piotr Augustyniak resigned as Member of the Supervisory Board of CIECH S.A.
Members of the Supervisory Board are entitled to the gross monthly remuneration specified in the Resolution of the Annual General Meeting
of CIECH S.A. of 28 April 2022.
The Chairman of the Supervisory Board Committee is entitled to an additional gross monthly remuneration of 10% of the amount set out in
the aforementioned Resolution. Members of the Supervisory Board committee are entitled to an additional gross monthly remuneration of
5% of the amount set out in the aforementioned Resolution.
In 2022, the Supervisory Board Members additionally received individual awards based on the Resolution of the Annual General Meeting of
CIECH S.A. of 28 April 2022.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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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 2022 to 31 December 2022 was BDO Spółka z ograniczoną
odpowiedzialnością spółka komandytowa with its registered office in Warsaw. On 8 June 2022, CIECH S.A. signed an agreement with BDO
Spółka z ograniczoną odpowiedzialnością spółka komandytowa on the review of semi-annual and audit of annual financial statements for
the years 2022 and 2023. Value of agreements concluded with BDO Spółka z ograniczoną odpowiedzialnością spółka komandytowa is
presented below:
31.12.20221
31.12.20211/2
Audit and review of the annual and semi-annual financial statements
682
623
Audit of the financial statements as at 30 September 2022
185
-
Other attestation services
20
45
TOTAL
1
887
668
1
The above amounts do not include additional costs, such as travel, accommodation and nourishment costs – additional costs may amount to a maximum of
approx. 10% of the agreement value.
2
The figures for the comparable period refer to agreements with Deloitte Audyt Sp. z o.o. Sp. k. who provided audit services in 2020-2021.
9.5 EVENTS AFTER THE BALANCE SHEET DATE
• On 19 January 2023, the Extraordinary Shareholders’ Meeting of CIECH Nieruchomości Rolne Sp. z o.o. increased the Company's share
capital by PLN 200 thousand, i.e. from PLN 5 thousand to PLN 205 thousand through creation of 40,000 new, equal and indivisible shares
with a nominal value of PLN 50 per share. The right to subscribe for all 40,000 shares was granted to CIECH S.A., the sole shareholder of
the Company. Registration of the increase of the share capital by the court is pending.
• On 31 January 2023, Mr Mirosław Skowron tendered his resignation as Member of the Management Board of CIECH S.A.
• On 13 February 2023, a notice of intention to announce a tender offer to subscribe for the shares in CIECH S.A. issued by Santander
Bank Polska S.A. – Santander Brokerage Office on behalf of KI Chemistry SARL, the main shareholder of CIECH S.A., was published.
• On March 3 2023, a tender offer to subscribe for the shares in CIECH S.A was published. Subscriptions for shares under the Tender
offer will be accepted from March 10, 2023 to April 12, 2023. The expected date of settlement of the share purchase
transaction in the Tender Offer is April 19, 2023.
9.6 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
RUSSIAN INVASION OF UKRAINE ON CIECH S.A.’S ACTIVITIES
The Russian invasion of Ukraine in February 2022 was an event that shattered the existing order of life in Europe known up to the outbreak
of the conflict. Russia's aggression against Ukraine has led to a collapse in Europe's energy order and stability, and consequently also to force
previously unplanned measures aimed at making European Union countries independent of the monopoly of Russian energy supplies.
The conflict in Ukraine resulted in a worsening of the adverse phenomena related to price fluctuations and availability of raw materials.
Below is a description of the potential impact of the invasion of Ukraine on the operations of CIECH S.A. – mainly from the perspective of the
company as the parent company in the CIECH Group.
Soda Segment
Soda segment suffered the greatest impact of the conflict in the Group, through an increase in the price of energy inputs and a
deterioration in their availability. The inability to import anthracite from Russia, as a result of the economic sanctions in place since April
2022, resulted in the soda plants switching to the use of more expensive coke from Polish manufacturers. Coal deliveries continue and
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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Soda Segment
are sourced from the existing suppliers, PGG and Węglokoks, however the terms of cooperation and deliveries have been renegotiated
due to the unprecedented increase in global market prices. The price of coal purchased has increased, but in view of the need to secure
the continuity of production of soda plants and ensure the availability of soda products to customers, the aspect of increased coal costs
has faded into the background. For gas, the level of risk increased too high for the Stassfurt plant. It was assumed that there would be
limitations in gas supply or even a stoppage of supply, which could have resulted in the soda plant and salt brewing plants in Stassfurt
halting production. However, by the end of 2022, the situation with raw materials had stabilised slightly and the risk of reduced gas
supplies and thus the need for the Stassfurt plant to reduce or suspend production had not materialised. Following significant increases
in the prices of energy inputs, resulting in an increase in production costs, the Group decided to react proactively to the fluctuating prices
of raw materials and renegotiated the prices of soda products with its customers along with the increase in the prices of these raw
materials (despite the fact that contracts were binding for the whole of 2022 and the commercial terms were set). Owing to the favourable
situation in demand, the Group was able to pass on to its customers the rising costs of soda products. As a result, the Soda Segment
delivered the highest revenues in the Group's history.
Agro Segment
For the Agro Segment, the impact of the Russian invasion of Ukraine was significantly lower than for the soda segment. The countries
involved in the ongoing conflict, i.e. Russia, Belarus and Ukraine, did not represent large markets for the products of the Nowa Sarzyna
plant. Also, raw materials (mainly active substances) and inputs necessary for the production of CIECH Sarzyna's crop protection products
were not sourced from these countries (the main purchase market for raw materials is Asia and manufacturers from India and China). The
unfavourable impact of the conflict in Ukraine for the company materialised due to the occurrence of an oversupply of cereals on the
Polish market in 2022. Large quantities of cereals from Ukraine entered the market, resulting in Polish farmers reducing the acreage of
their own crops and thus decreasing the demand for crop protection products from Nowa Sarzyna. An additional risk factor that weakened
the demand for crop protection products in the Agro Segment was unfavourable weather conditions (prolonged drought in the spring in
Poland and drought in Spain at the turn of spring and summer). However, the segment met its targets, owing to high demand at the
beginning of the year, even before the onset of Russia's invasion of Ukraine, and later at the end of the year when weather conditions
improved.
Foams Segment
The impact of the armed conflict in Ukraine on the Foams segment materialised in the form of uncertainty and fear of economic recession
for individual upholstered furniture manufacturers' customers. The segment experienced a decline in demand for upholstered furniture
and lower than expected demand for foams during 2022. The challenging demand situation was further exacerbated by high price pressure
from other foam manufacturers and price reductions. The Bydgoszcz plant took measures to maintain the level of margins earned and
meet the financial targets set for the segment.
Silicates Segment and Packaging Segment
For both of these segments, the detrimental phenomenon caused by Russia's invasion of Ukraine was a significant and unpredictable
increase in gas prices. In addition, both segments also saw increases in soda prices. As a result of increased prices for two key raw
materials, both segments experienced significant increases in production costs. The Silicates Segment was in a better position than the
Packaging Segment in the realities that occurred, as it was possible to raise prices for silicate customers in response to rising production
costs. Owing to such measures, CIECH Vitrosilicon has minimised the effects of rising production costs and passed them on to its
customers. Such measures were also supported by the level of demand in the silicate market. For the Packaging Segment, the ability to
pass the effects of rising raw material prices on to customers was very limited. The purchasing capacity of individual customers has also
been further reduced by the high level of inflation in 2022 - a decline in purchases of headstone lamps and lanterns by end customers,
which had already been ongoing in previous years, was observed. Given the situation, the Packaging Segment focused its efforts on the
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Silicates Segment and Packaging Segment
most efficient use of raw materials and sought to optimise their use at every stage of the production process. The segment was unable to
avoid, like other segments, price increases for its products, which offset, to a limited extent, the effects of rising raw material prices.
Strengthening IT infrastructure
Another threat that has emerged following the outbreak of conflict in Ukraine has been the increase in the risk of cyber-attacks.
In this area, the Company has, since the beginning of the conflict, when increased activity of hacker groups and attacks on information
systems and resources was observed, strengthened the security measures in place and performs continuous monitoring of unusual events,
logs and operations. These measures have been implemented as part of the IT security policy and information security policy.
Addressing financial risks
Another significant issue that affected the Company and Group in connection with Russia's invasion of Ukraine is that prices in the financial
markets, including commodity prices, exchange rates and interest rates, become highly volatile.
In the wake of the ongoing conflict, prices of assets perceived as more risky also weakened, which translated into the depreciation of PLN
against, among others, EUR and USD. The Company has a significant exposure to the EUR/PLN exchange rate (total position of EUR -281.7
million) and a relatively low exposure to USD/PLN (total position of USD -1.0 million). In the short term, the weakening of the PLN against
the EUR led to an increase in negative valuations of derivatives contracted that are sensitive to the EUR/PLN exchange rate (forward and
CCIRS transactions), foreign currency credit facilities in EUR and trade payables in EUR, which was offset by an increase in the valuation of
loans granted in foreign currency, receivables and cash held in foreign currency and an increase in the expected value of future revenues in
foreign currency. Taking into account the hedging relationships regarding future revenues in foreign currencies, the impact of changes in the
EUR/PLN rate on the Company’s profit/loss is limited (the position affecting the current profit/loss is EUR 60.5 million). The valuation of
derivatives contracted did not involve any cash margin and an increase in the negative valuation of transactions did not have a negative
impact on the Company's current liquidity.
Market interest rate risk in respect of the Company's term loans has been fully hedged with PLN IRS and CCIRS transactions entered into in
May 2021 following the refinancing of the loan, therefore an increase in market interest rates had a limited impact on the Company's cash
flows. The increase in interest rates drove up the cost of servicing short-term working capital funding (factoring and credit facilities) and lease
funding.
As at the date of these statements, the Company's analyses did not reveal any indications of a materially higher risk of impairment of
property, plant and equipment and intangible assets in use or investments in progress was found. However, due to the uncertainty associated
with the conflict and its further development and subsequent impact on the global economy, the measurement of individual balance sheet
items, including: fixed assets and intangible assets, inventories, receivables, measurement of financial instruments, provisions and liabilities,
will be closely monitored and it is not excluded that they may change in subsequent reporting periods.
It should be reiterated that the Management Board of CIECH S.A. monitors the situation related to the conflict on an ongoing basis and takes
measures to ensure the continuity of the Group's and its individual companies' operations and to maintain the assumed margin levels.
9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
COVID-19 CORONAVIRUS PANDEMIC ON CIECH S.A.’S ACTIVITIES
Throughout 2022, CIECH S.A. did not experience any negative impact of the COVID-19 coronavirus on its ongoing operating activity and
operated without interruptions. None of the CIECH S.A.'s business segments recorded negative events or incidents caused by the ongoing
pandemic. As far as other areas of the CIECH S.A.'s operations are concerned, also no adverse effects of the ongoing COVID-19 pandemic
were recorded during 2022.
FINANCIAL STATEMENTS OF CIECH S.A. FOR 2022 (in PLN thousand)
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9.8 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF
CIECH S.A.
The impact of climate issues has been determined in accordance with management's current, obtainable and best estimates of the economic
conditions likely to occur in the foreseeable future. These estimates take into account the current knowledge of the potential wide-ranging
impacts of climate change (risks described in, amongst others, the Directors’ Report for the CIECH Group and CIECH S.A. for 2022, in Section
3.4). Operational plans and impairment tests take into account mitigating measures. Mitigating the threats associated with the effects of
climate change includes, among others Initiatives aimed at geographical and product diversification in the Agro segment, especially exposed
to the effects of drought. In addition, the Ciech Group invests in energy transformation, both in terms of improving the effectiveness of
currently used technologies and diversification of sources of energy acquisition in low and zero-emission solutions. These expenditures fall
within the Group's and the Company's long-term strategy of, among other things, achieving climate neutrality by 2040. The first stage
assumes a 33% reduction in CO
2
emissions from Scopes 1 and 2 by the end of 2026 compared to the baseline year of 2019
(https://ciechgroup.com/relacje-inwestorskie/o-ciech/strategia-grupy/). There were no significant impairment losses on non-
current/operating assets during 2022 (see Section 5 of these financial statements for details). There was also no need to recognise additional
provisions other than allowances and provisions which are recognised in the course of the Company's ordinary activities.
REPRESENTATION BY THE MANAGEMENT BOARD
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10 REPRESENTATION BY THE MANAGEMENT BOARD
These financial statements of CIECH S.A. for the financial year ended 31 December 2022 were approved by the Company’s Management
Board on 23 March 2023.
Warsaw, 23 March 2023
(signed on the polish original) (signed on the polish original)
Dawid Jakubowicz
President of the Management Board of
CIECH Spółka Akcyjna
Kamil Majczak
Member of the Management Board of
CIECH Spółka Akcyjna
(signed on the polish original)
Jarosław Romanowski
Member of the Management Board of
CIECH Spółka Akcyjna
Signature of person responsible for the preparation
of the financial statements
(signed on the polish original)
Katarzyna Rybacka
Chief Accountant of CIECH Spółka Akcyjna