gRUPA AzOTy sTRATEgystatic.grupaazoty.com/files/1383910862/grupa_azoty_strategy_2013... · 2 gRUPA AzOTy sTRATEgy 2013-2020 3 gRUPA AzOTy sTRATEgy 2013-2020 TABLE OF CONTENTs sKUTECzNA

gRUPA A zOT y s TRATEgy

2013 -2020

Powering Creation

INTRODUC TION

Nigdy w przeszoci ani w teraniejszoci nie

byo postawione w Polsce zadanie tak trudne,

tak skomplikowane, tak nowe, tak wielkie do

zrealizowania w tak krtkim okresie czasu.

At no other time in Polands past or present

had a task so daunting, so complicated, so

new and so extensive been set to accomplish

in such a short period of time.

Eugeniusz Kwiatkowski | 1930

sKUTEC zNA s TRATEgIA NA PR z ysz O

The sTraTegy for The fuTure

INTRODUC TION

Pawe Jarczewski

President of the Management Boardof grupa azoty s.a.

Dear reader

It is with great satisfaction that I present to you the updated grupa azoty strategy for 2013-2020.

The document which was first presented last year outlines a real vision of the groups growth and value building in the nearest future. Time, however, does not stand still. since the document was first published in June 2012, grupa azoty has undergone significant changes.

Implementation of the consolidation strategy has already shown its first effects. as a result of the acquisition process of Pulawys azoty shares running since July 2012, grupa azoty s.a. currently holds a 95.89% stake in the company. This fact is not without impact on the groups condition and competitive position. even more its a new chapter in its history. a chapter which requires very special framing. recent months, on the other hand, witnessed grupa azoty s.a.s entry into WIg30, the Warsaw stock exchanges main index and its inclusion in the international MsCI (Morgan stanley Capital International Index).

a breakthrough event changing the face of Polish chemistry was the introduction of a new brand grupa azoty. The decision was taken within the context of the dynamically changing landscape of the european and global chemical industry.

Therefore, taking the groups ongoing development process into account, an updated grupa azoty strategy for 2013-2020 has been created within the framework of a special consolidation team, one with which we hereby present you.



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gRUPA AzOTy sTRATEgy 2013-2020

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TABLE OF CONTENT s



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The key element of the game is

the strike itself. The ball is situated

centimetres away from the players

feet. setting it in motion does not

require strong force. Its safe

to say that the players task is not

so much using his muscles to hit the

ball as hard as possible, but rather

skilfully directing the club to let it

perform independently.

The power of global business is

built upon focused development.

This is why precision of strategic

aims and professionally applied

potential ensure that the chosen

objective is met naturally. accurate

assumptions and the right decisions

define the tactics and technique

in golfing, as well as in business

operations.

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MIssION OF gRUPA A zOT y

VIsION OF gRUPA A zOT y

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By the end of the decade, we will:

be listed on the main index of the Warsaw stock exchange,

ensure that the companies shareholders obtain one

of the highest returns on

invested capital in the industry,

maintain our standing position as one of europes three largest

fertilizer manufacturers.

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We add life to the land, and colour

to life. Thanks to the experience

gained and competencies developed

we make chemistry safe and useful

to people.

We constantly strive to increase the

value of grupa azoty, making effective

use of all synergies and innovations.

MIssION OF gRUPA A zOT y

VIsION OF gRUPA A zOT y

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DEVELOPMENT DIREC TIONs

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DEVELOPMENT DIREC TIONs

In our strive to increase value, grupa azoty will concentrate its activities on taking advantage of the opportunities found in its environment and developing the competencies which are key to the groups competitive position, especially:

increasing the scale of the groups operations through internal growth, as well as alliances, mergers and acquisitions in Poland and abroad,

deepening integration between group entities in order to maximize synergies,

reducing the groups vulnerability to energy costs through the application of effi cient technological and energy solutions,

decreasing vulnerability to fl uctuating economic cycles, as well as natural gas and petrochemical raw materials prices through extending product chains,

lowering production costs through the modernization of main production lines,

forging stable and eff ective customer relations, increasing awareness of the groups leading brands and optimizing logistics and product distribution systems,

increasing the eff ectiveness of key processes while securing and eff ectively managing intellectual capital,

ongoing adaptation of product quality and range to customer requirements,

related diversifi cation through the application of synergies including elements of the current product portfolio,

developing the organizations intellectual capital, creating the conditions necessary for transforming it into market value.

Between 20132020, the core activity of grupa azoty will be production and trade in the following sectors:

agricultural products sector, especially mineral fertilizers,

state-of-the-art materials sector, especially construction plastics,

organic chemicals sector, especially caprolactam, oXo alcohols, plasticizers and specialist chemicals,

inorganic chemicals sector, especially ammonia and titan white.

The group will continue to follow the rules of sustainable development, limiting its impact on the natural environment within an economically rational framework while simultaneously taking into account the needs of local communities.

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gRUPA AzOTy sTRATEgy 2013-2020gRUPA AzOTy sTRATEgy 2013-2020

lowering production costs through the modernization of main production lines,

forging stable and eff ective customer relations, increasing awareness of the groups leading brands and optimizing logistics and product distribution systems,

increasing the eff ectiveness of key processes while securing and eff ectively managing intellectual

ongoing adaptation of product quality and range to customer requirements,

related diversifi cation through the application of synergies including elements of the current product

developing the organizations intellectual capital, creating the conditions necessary for transforming it into market value.

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PRODUC T s TRATEgy

THE MAIN sTRATEgIC AIMs IN CORE PRODUCT AREAs

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PRODUC T s TRATEgy

THE MAIN sTRATEgIC AIMs IN CORE PRODUCT AREAs

MINERAL FERTILIzERs

The mineral fertilizers sector will be the largest area of activity during the strategic period, with key importance to the groups operations.

The group continues expanding its fertilizer range to include liquid and specialist fertilizers, as well as other products and services for agriculture.

Increasing production capacity of mechanically-granulated nitrogen fertilizers is planned and, moreover, modernization of ammonia lines will be conducted with the aim of decreasing the processes energy consumption.

In the event of favourable market conditions, the group will conduct projects leading to mergers, acquisitions and strategic alliances.

PLAsTICs

During the strategys lifetime, polyamides, polyoxymethylene and modified plastics will continue to form the key elements of the groups construction plastics product portfolio.

Increasing the existing production capacity of construction plastics and further product diversification in this sector is planned for the period 2013-2020.

CHEMICALs

During the strategys lifetime, caprolactam, oXo alcohols, plasticizers, ammonia, concentrated nitric acid, titan white and urea for non-fertilizer purposes will continue to form the key elements of the groups chemicals product portfolio.

a greater degree of diversification of the chemicals product portfolio is also planned, especially with regard to specialist chemicals. activities leading to balancing caprolactam and polyamide 6 production capacity will also be conducted. Plans for plasticizers include expansion of the product range to cover a new generation of plasticizers.

Modernization projects will be implemented on existing production units, directed primarily at improving energy efficiency and consequently lowering production costs of the chemicals on offer.

ENERgy

Between 2013-2020, the existing coal power plants will continue to provide the majority of thermoelectric energy for the production complexes in Tarnw and Police.

The operating thermoelectric plants will be systematically modernized, with the scale and scope of the modernization adapted to changing legislation, especially with regard to environmental impacts.

following 2015, the main source of thermoelectric power in Kdzierzyn-Kole will be provided by a new power plant

Work leading to the realization of a project for the construction of a thermoelectric plant in Puawy will be conducted with a strategic partner in order to secure the long-term energy supply needs of grupa azoty Puawy.

securing thermoelectric energy requirements in the longer term will depend primarily on adopted legal and market regulations.

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INNOVATION s TRATEgy

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INNOVATION s TRATEgy

The implementation of the adopted product-market strategy will be supported through intensified activities in the sphere of r&D.

The key aim of research and development work will focus on building competitive advantage based on know-how, which will result in increased innovativeness of the product portfolio, processes and technology.

grupa azoty will further its activities in the r&D and innovation sphere based on partnership with universities, academic institution and clients. a research and development center will function within the group, based on current centers:

The Chemical Center for Technology and Development in Tarnw,

The PuaWy Competencies Center in Puawy.

With the allocation of up to 1% of its revenue to research and development aims, the group would like to offer the market its innovative products, which will gain a growing share of the groups sales. The group will be an active participant of consortia created with other partners in order to implement innovative solutions and ensure they gain market acceptance.

The groups main areas of research activity will include:

technologically-advanced materials,

high added value specialist chemicals,

innovative products, including bioproducts,

specialist mineral fertilizers, processes to increase energy -efficiency of existing technologies,

technologies utilizing synergies linked with the groups by products.

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OPERATIONs s TRATEgy

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OPERATIONs s TRATEgy

strategic aims in this area include:

maximisation of production processes eff ectiveness while ensuring top standards related to use of capital,

optimal use of assets, ensuring maximum safety of employees and installations.

implementing an operational excellence program within the group.

In order to achieve the aims listed above, the group will adopt criteria for sustainable development, striving to fulfi l the requirements of the best technologies available, as well as environmental protection requirements.

grupa azoty operations

sphere will concentrate on the

optimal use of production capacity

and the potential of synergies eff ects

between particular entities.

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gRUPA AzOTy sTRATEgy 2013-2020gRUPA AzOTy sTRATEgy 2013-2020

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COMMERCIAL s TRATEgy

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RAPORT RODOwIsKOwy 2012

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COMMERCIAL s TRATEgy

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RAPORT RODOwIsKOwy 2012

Making chemistry safe

to people and striving

to increase the groups

worth, we care for lasting and

successful relations with our

clients. we aim to become

our clients first choice of

supplier, which is why our

products are of the highest

quality. we also conduct

ongoing improvement of

service, seeking out effective

and innovative solutions.

sALEs

MINERAL FERTILIzERs

The key aim of grupa azoty in the area of mineral fertilizer sales will be to build our position as fertilizer market leader based on an innovative customer service system through:

direct and indirect sales reach with our complementary product range for farmers,

flexible and profitable sales using synergies found within the group,

elongating the value chain of fertilizer products on offer,

expanding the value chain by adding assets from complementary businesses,

implementation of agricultural consulting sales support,

creation of a single sales headquarters, centralizing commerce and marketing,

ongoing presence in selected global markets,

identifying markets with asymmetric demand cycles and developing a product offer for them.

RAw MATERIALs

grupa azoty will strive to ensure strategic materials supply security, which will enable sustained continuity of production processes, as well as maximum use of production capacity. These aims will be achieved through the diversification of supply sources.

In our search for new and alternative sources of raw materials, the group may consider capital links with materials suppliers.

The group will also work towards minimising raw materials costs through the integration of purchasing structures.

MARKETINg

We aim to achieve successful market competitiveness and increased value by building a central office providing innovative market knowledge management and new product brand development.

To achieve these aims, the group will implement effective know-how management for decision-making purposes, assessment of trade security, raising product brand awareness and indicate prospective markets for product offer development.

LOgIsTICs

grupa azoty delivers its products to two groups of clients, both requiring different customer service: clients of agricultural products and clients of chemical products.

The group will continue to perfect its customer service and delivery chain management, optimize conditions of cooperation with transport, as well as make optimal use of its storage and transhipment infrastructure.

PLAsTICs

The goal of grupa azoty with regard to plastics will be maintaining our position as a leading plastics supplier through:

extending the value chain, diversification of applications and regions of target market segments,

adding dedicated products to the range

developing direct collaboration with plastics processors,

expanding and improving technical service,

development of technical consulting,

adapting the product range to current and future market trends,

creation of a single sales headquarters, centralizing product commerce and marketing.

CHEMICALs

grupa azoty aim in the sphere of chemicals will be maintaining its leading position on the plasticizers and oXo alcohols Central and eastern european market, as well as the growth of sales of other chemicals found in the groups chemical products portfolio. This goal will be achieved by:

introducing a new generation of plasticizers into the product range,

expanding product chains, improving the customer service system through the application of innovative logistics solutions,

expansion into new, promising market segments and locations,

concentration of marketing efforts on processors as end-customers.

The group will be a supplier of chemical products furthering its clients competitiveness on global markets as well as improving their finished products.

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FINANCIAL s TRATEgy

DIVIDEND POLICy

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FINANCIAL s TRATEgy

DIVIDEND POLICy

The main objective of grupa

azoty for the strategic period

is the generation of increasing

economic value added (eVa)

and distribution of profits

to stakeholders, especially

shareholders, through the

implementation of an optimal

profit redistribution strategy

(dividend policy) at a level of

approximately 40% of net income.

In order to effectively achieve the economic value added (eVa) growth strategy, the group has adopted detailed financial goals expressed by increasing main operating and financial indicators, descriptive of the effects of implementing a value-based enterprise management model (VBM):

roe > 12%, roCe > 14%, eBIT/eBITDa margin > 8%/ 14%.

The long-term group financing program has been adapted to group development aims and assumptions, taking into account appropriate investment expenditure levels.

The above factors comprise the main axis of financing strategy, simultaneously guaranteeing liquidity as well as solvency of all of the groups companies, as measured by a group of indicators which additionally fulfil creditor requirements.

The groups financing strategy will be implemented in line with the following conditions for ensuring the minimum levels of grupa azotys and its leading companies indicators:

net financial debt ratio in relation to eBITDa, calculated as net financial debt/ eBITDa (per annum) -below 2.5,

net debt/own capital not exceeding 0.8.

The main premise of grupa azotys dividend payout policy is payment according to the level of profit attained and the Companys financial capabilities. Management, when submitting proposals for dividend payout, will consider the need to ensure an appropriate level of financial indicators, financial standing and capital necessary for the groups further growth. Management will make future recommendations that the agM pass resolutions concerning dividend payout at a level between 40% and 60% of the Companys unconsolidated net profit for the given fiscal year.

Decisions regarding dividend payout will take into account factors affecting the Company and grupa azoty, including perspectives for future operations, future profits, monetary requirements, financial situation, expansion plans and relevant legal requirements.

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CORPORATE gOVERNANCE s TRATEgy

grupa azoty will apply the

highest standards of capital

market communication

and corporate governance

principles in all its operations,

in accordance with the

guidelines laid out in the Code

of Best Practice for Wse Listed

Companies.

CORPORATE gOVERNANCE

In keeping with group policy regarding market communication and providing information about the principles of management and oversight while ensuring their transparency, the group plans to continue its participation in programs which safeguard the equal rights of shareholders, in particular minority shareholders. The main objectives of taking part in the above programs will include establishing and promoting the highest standards of communication between companies listed on the Warsaw stock exchange regulated market and investors, as well as developing the best practical solutions for investor relations, encompassing contacts between such companies and individual investors.

The group will endeavour to maintain its place among companies managed in a responsible and sustainable manner, which actively pursue a strategy of corporate social responsibility.

MANAgEMENT MODEL

The key premise of the adopted management model is increased group value through operating as one company.

In order to ensure consistent value growth for shareholders and other stakeholders, grupa azoty will develop its value management model, facilitating the implementation of group strategy by management.

The groups management model entails the centralization of areas which provide the highest synergy effects and managing main economic processes at group level, while maintaining recognition of grupa azotys business companies.

group management authority will be allocated to corporate departments, reporting to grupa azoty Management.

To ensure effectiveness of the model, management systems based on international Iso 9001:2008; Iso 14001:2004; PN-N 18001:2004, Bs ohsas 18001:2007; and haCCP standards will be applied, along with IT activities resulting in:

transparency of business processes,

integrated management of all elements of the value chain,

data reliability, comparability and integrity,

speedy analysis, reliability and ease of report generation,

dedicated availability of management information,

progressive automation of data processing and distribution,

high degree of IT infrastructure reliability, stability, speed and flexibility,

coherent information security system, building trust in the organization and its effective functioning on the market.

HUMAN REsOURCEs MANAgEMENT

The main objective of the grupa azoty human resources Management strategy is treating employees as the companys most important capital.

The key goals of the groups personnel policy are:

hiring the best employees, building an organizational culture which will aim to constantly raise productivity and employees creativity,

maximum use of employees knowledge, competencies and skills.

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CORPORATE gOVERNANCE s TRATEgy

IMAgE AND BRAND

The main objective of the grupa azoty human resources Management strategy is treating employees as the companys most important capital.

The key goals of the groups personnel policy are:

hiring the best employees, building an organizational culture which will aim to constantly raise productivity and employees creativity,

maximum use of employees knowledge, competencies and skills.

REsPONsIBILITy

grupa azoty implements a strategy of sustainable development and social responsibility based on a model solution adopted by the Parent entity, the azoty Tarnw sustainable Development strategy. This strategy is a reflection of an integrated approach to actions taken with regard to economic efficiency, responsibility towards employees and the environment, and environmental relations.

The strategy will be based on three pillars:

sustainable production (minimised environmental impact by group companies, development of cooperation with academic institutions, fostering ecological awareness, manufacturing of sustainable products, continuing engagement in the responsible Care program a voluntary commitment by chemical sector companies to conduct operations in compliance with bioethics standards, improve work conditions, increase safety of installations functioning and maintain ongoing contact with surroundings),

the workplace (increased employee satisfaction, improved occupational health and safety, launching employee development initiatives),

dialogue and relation building (supporting the development of local communities, adopting a formula for dialogue with each of the key stakeholder groups, building effective communication regarding sustainable development, developing an ethical group culture).

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grupa azoty

ul. eugeniusza Kwiatkowskiego 8,

33-101 Tarnw, Poland

www.grupaazoty.com

gruPa azoTy sTraTegy 20132020

Designed & Published by grupa tomami | www.tomami.pl

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