CONSOLIDATED
FINANCIAL
STATEMENTS
of the CIECH Group for 2020
We are providing a courtesy English translation of our audited financial statements which were originally written in Polish. We take no responsibility for the accuracy
of our translation. For an accurate reading of our audited financial statements, please refer to the Polish language version of our audited financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
2
The CIECH Group – SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
in thousand PLN
in thousand EUR
12 months
ended
31.12.2020
12 months
ended
31.12.2019
12 months
ended
31.12.2020
12 months
ended
31.12.2019
Sales revenues on continued operations
2,975,733
3,241,862
665,087
753,606
Operating profit/(loss) on continued operations
249,968
253,476
55,869
58,923
Profit/(loss) before tax on continued operations
188,133
170,649
42,048
39,669
Net profit / (loss) for the period
128,030
109,081
28,615
25,357
Net profit/(loss) attributable to shareholders of the parent
company
129,277
110,359
28,894
25,654
Net profit/(loss) attributed to non-controlling interest
(1,247)
(1,278)
(279)
(297)
Other comprehensive income net of tax
13,702
(8,673)
3,062
(2,016)
Total comprehensive income
141,732
100,408
31,677
23,341
Cash flows from operating activities
767,186
535,433
171,469
124,467
Cash flows from investment activities
(833,999)
(410,912)
(186,402)
(95,521)
Cash flows from financial activities
211,697
(17,172)
47,315
(3,992)
Total net cash flows
144,884
107,349
32,382
24,954
Earnings (loss) per ordinary share (in PLN/EUR)
2.45
2.09
0.55
0.49
as at
31.12.2020
as at
31.12.2019
as at
31.12.2020
as at
31.12.2019
Total assets
5,707,733
5,046,545
1,236,832
1,185,053
Non-current liabilities
401,146
1,970,287
86,926
462,672
Current liabilities
3,188,049
1,099,479
690,831
258,185
Total equity
2,118,538
1,976,779
459,075
464,196
Equity attributable to shareholders of the parent
2,120,615
1,977,796
459,525
464,435
Non-controlling interest
(2,077)
(1,017)
(450)
(239)
Share capital
287,614
287,614
62,324
67,539
The above selected financial data were converted into PLN in accordance with the following principles:
• items in the consolidated 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 consolidated statement of profit or loss, consolidated statement of other comprehensive income and
consolidated statement of cash flows were converted using the exchange rate constituting the arithmetic mean of rates
determined by the National Bank of Poland on the last day of each calendar month of the reporting period.
as at 31.12.2020
as at 31.12.2019
12 months
ended 31.12.2020
12 months
ended 31.12.2019
EUR 1 = PLN 4.6148
EUR 1 = PLN 4.2585
EUR 1 = PLN 4.4742
EUR 1 = PLN 4.3018
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
3
TABLE OF CONTENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP .................................................................................................. 5
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP ....................................................................... 6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP ........................................................................................... 7
CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP ....................................................................................................... 8
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP ........................................................................................... 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 ........................................................... 11
1.2.1. REPRESENTATION BY THE MANAGEMENT BOARD ....................................................................................................................... 11
1.2.2. BASIS OF PREPARATION .............................................................................................................................................................. 11
1.3. FUNCTIONAL AND REPORTING CURRENCY .................................................................................................................................. 11
1.4. ACCOUNTING POLICIES ............................................................................................................................................................... 12
1.5. CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES ....................................................................................... 13
1.5.1. ADJUSTMENT OF PRIOR PERIOD ERRORS .................................................................................................................................... 14
2. SEGMENT REPORTING ................................................................................................................................................................. 17
3. NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME ...................................................................................................................................................................................... 25
3.1. SALES REVENUES......................................................................................................................................................................... 25
3.2. COST OF SALES ............................................................................................................................................................................ 26
3.3. COSTS BY TYPE ............................................................................................................................................................................ 26
3.4. OTHER OPERATING INCOME AND EXPENSES ............................................................................................................................... 27
3.4.1. DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES ................................................................................................ 30
3.5. FINANCIAL INCOME AND EXPENSES ............................................................................................................................................ 31
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME .................................................................................................................. 32
4. INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY ................................................................................................................... 33
4.1. MAIN COMPONENTS OF TAX EXPENSE ........................................................................................................................................ 33
4.2. EFFECTIVE TAX RATE ................................................................................................................................................................... 33
4.3. DEFERRED INCOME TAX .............................................................................................................................................................. 34
5. NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................ 38
5.1. PROPERTY, PLANT AND EQUIPMENT ........................................................................................................................................... 38
5.2. RIGHT-OF-USE ASSETS ................................................................................................................................................................. 41
5.3. INTANGIBLE ASSETS .................................................................................................................................................................... 43
5.4. GOODWILL IMPAIRMENT TESTING .............................................................................................................................................. 47
5.5. INVESTMENT PROPERTIES ........................................................................................................................................................... 48
5.6. LONG-TERM RECEIVABLES ........................................................................................................................................................... 49
5.7. LONG-TERM FINANCIAL ASSETS .................................................................................................................................................. 50
5.8. SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES ...................................................................................................... 50
5.9. INVENTORIES .............................................................................................................................................................................. 50
5.10. SHORT-TERM RECEIVABLES ......................................................................................................................................................... 51
5.11. SHORT-TERM FINANCIAL ASSETS ................................................................................................................................................. 53
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
4
5.12. CASH AND CASH EQUIVALENTS ................................................................................................................................................... 54
5.13. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND LIABILITIES CONNECTED WITH NON-CURRENT ASSETS CLASSIFIED AS
HELD FOR SALE ........................................................................................................................................................................... 55
6. EQUITY ....................................................................................................................................................................................... 57
6.1. CAPITAL MANAGEMENT.............................................................................................................................................................. 57
6.2. CONSOLIDATED EQUITY .............................................................................................................................................................. 57
6.3. DIVIDENDS PAID OR DECLARED ................................................................................................................................................... 60
6.4. BUSINESS COMBINATIONS AND ACQUISITION OF NON-CONTROLLING INTEREST ......................................................................... 60
6.5. SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST ................................................................................................. 63
6.6. EARNINGS PER SHARE ................................................................................................................................................................. 63
7. LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS ........................................................................................................................... 64
7.1. INFORMATION ABOUT SIGNIFICANT FINANCIAL LIABILITIES ........................................................................................................ 64
7.2. OTHER LONG-TERM LIABILITIES ................................................................................................................................................... 65
7.3. CURRENT TRADE AND OTHER LIABILITIES .................................................................................................................................... 66
7.4. LEASES ........................................................................................................................................................................................ 67
7.5. PROVISIONS FOR EMPLOYEE BENEFITS ........................................................................................................................................ 70
7.6. OTHER PROVISIONS .................................................................................................................................................................... 71
8. FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND IMPAIRMENT ........................................................................... 74
8.1. FINANCIAL INSTRUMENTS ........................................................................................................................................................... 74
8.2. FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING ............................................................................................. 76
8.3. FINANCIAL RISK MANAGEMENT .................................................................................................................................................. 80
8.4. DETERMINATION OF FAIR VALUE ................................................................................................................................................ 86
9. OTHER NOTES ............................................................................................................................................................................. 89
9.1. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................................... 89
9.2. INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS .................................................... 90
9.3. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES ........................................................................................................ 99
9.3.1. TRANSACTIONS WITH RELATED PARTIES IN TOTAL ...................................................................................................................... 99
9.3.2. SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED PARTIES OTHER THAN ON AN ARM’S
LENGTH BASIS ........................................................................................................................................................................... 100
9.3.3. DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES ................................................................................. 100
9.3.4. TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL ........................................................................................... 100
9.4. INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE CIECH GROUP’S CONSOLIDATED
FINANCIAL STATEMENTS ........................................................................................................................................................... 101
9.5. COMPOSITION OF THE GROUP .................................................................................................................................................. 102
9.6. EVENTS AFTER THE BALANCE SHEET DATE ................................................................................................................................. 105
9.7. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS PANDEMIC ON
THE CIECH GROUP'S ACTIVITIES ................................................................................................................................................. 106
REPRESENTATION BY THE MANAGEMENT BOARD ............................................................................................................................... 109
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
5
CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP
Note
01.01.-31.12.2020
01.01.-31.12.2019*
CONTINUING OPERATIONS
Sales revenues
3.1
Cost of sales
3.2
(2,345,067 )
(2,529,174 )
Gross profit/(loss) on sales
Other operating income
3.4
Selling costs
(173,146 )
(237,639 )
General and administrative expenses
(170,624 )
(197,848 )
Other operating expenses
3.4
(113,876 )
(134,896 )
Operating profit/(loss)
Financial income, including:
3.5
Profit from financial instruments
3.5
Financial costs, including:
3.5
(120,149 )
(88,998 )
Loss from financial instruments
3.5
(106,033 )
(56,325 )
Net financial income/(expenses)
(61,674 )
(83,933 )
Share of profit / (loss) of equity-accounted investees
5.8
(161 )
Profit/(loss) before tax
Income tax
4.1
(64,949 )
(65,390 )
Net profit/(loss) on continuing operations
DISCONTINUED OPERATIONS
Net profit/(loss) on discontinued operations
5.13
Net profit / (loss) for the period
including:
Net profit/(loss) attributable to shareholders of the parent company
Net profit/(loss) attributed to non-controlling interest
(1,247 )
(1,278 )
Earnings per share (in PLN):
Basic
6.6
2.09
Diluted
6.6
2.09
Earnings/(loss) per share (in PLN) from continuing operations:
Basic
2.02
Diluted
2.02
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
The consolidated statement of profit or loss of the CIECH Group should be analysed together with the notes which constitute
an integral part of the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
6
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP
Note
01.01.-31.12.2020
01.01.-31.12.2019*
Net profit/(loss) on continuing operations
Net profit/(loss) on discontinued operations
Net profit / (loss) for the period
Other comprehensive income before tax that may be reclassified to the
statement of profit or loss
3.6
(4,385 )
Currency translation differences (foreign companies)
(12,492 )
Profit (loss) from costs of hedging reserve
(3,443 )
Profit (loss) from cash flow hedge reserve
(37,327 )
Other components of other comprehensive income
(9 )
Other comprehensive income before tax that may not be reclassified to the
statement of profit or loss
3.6
(167 )
(590 )
Actuarial gains
(167 )
(590 )
Income tax attributable to other comprehensive income
(3,698 )
Income tax attributable to other comprehensive income that may be
reclassified to the statement of profit or loss
4.1.
(3,810 )
Income tax attributable to other comprehensive income that may not be
reclassified to the statement of profit or loss
4.1.
Other comprehensive income net of tax
(8,673 )
TOTAL COMPREHENSIVE INCOME
Comprehensive income including attributable to:
Shareholders of the parent company
Non-controlling interest
(1,094 )
(1,305 )
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
The consolidated statement of other comprehensive income of the CIECH Group should be analysed together with the notes
which constitute an integral part of the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP
Note
31.12.2020
31.12.2019*
01.01.2019*
ASSETS
Property, plant and equipment
5.1
Rights to use an asset
5.2
Intangible assets other than goodwill
5.3
Goodwill
5.4
Investment property
5.5
Non-current receivables
5.6
Investments in jointly-controlled entities measured under the equity
method
5.8
Long-term financial assets
5.7
Deferred income tax assets
4.3
Total non-current assets
Inventory
5.9
Short-term financial assets
5.11
Income tax receivables
Trade and other receivables
5.10
Cash and cash equivalents
5.12
Non-current assets and groups for disposal held for sale
5.13
Total current assets
Total assets
EQUITY AND LIABILITIES
Share capital
6.2
Share premium
Cash flow hedge reserve
8.2
(9,393 )
Hedging costs reserve
(3,659 )
(216 )
(4,625 )
Actuarial gains
(495 )
(360 )
Other reserve capitals
6.2
Currency translation reserve
(31,737 )
(75,944 )
(63,242 )
Retained earnings
Equity attributable to shareholders of the parent
Non-controlling interest
(2,077 )
(1,017 )
Total equity
Non-current loans, borrowings and other debt instruments**
7.1
Lease liabilities
7.4
Other non-current liabilities
7.2
Employee benefits reserve
7.5
Other provisions
7.6
Deferred income tax liability
4.3
Total non-current liabilities
Current loans, borrowings and other debt instruments**
7.1
Lease liabilities
7.4
Trade and other liabilities
7.3
Income tax liabilities
Employee benefits reserve
7.5
Other provisions
7.6
Liabilities related to non-current assets and groups for disposal
classified as held for sale
5.13
Total current liabilities
Total liabilities
Total equity and liabilities
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
** Reclassification of loans to current liabilities due to failure to meet the covenant of the loan agreement. Details are described in point 7.1.
The consolidated statement of financial position of the CIECH Group should be analysed together with the notes which
constitute an integral part of the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
8
CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP
Note
01.01.-31.12.2020
01.01.-31.12.2019*
Cash flows from operating activities
Net profit/(loss) for the period
Adjustments
Amortisation/depreciation
Recognition of impairment allowances
Foreign exchange (profit) /loss
(48,186 )
Investment property revaluation
(5,127 )
(873 )
(Profit) / loss on investment activities
(Profit) / loss on disposal of property, plant and equipment
(6,520 )
(1,719 )
Dividends and interest
Income tax
(Profit) / loss on the settlement of construction contracts (caverns)
(2,641 )
Share of (profit) / loss on equity accounted investees
(1,106 )
Change in liabilities due to loan arrangement fee
Valuation of derivatives
(5,083 )
(6,597 )
Other adjustments
(3,603 )
Change in receivables
9.1
Change in inventory
9.1
(19,350 )
Change in current liabilities
9.1
Change in provisions and employee benefits
9.1
Interest paid
(54,094 )
(76,294 )
(Profit) / loss on the settlement of construction contracts (caverns)
Income tax (paid)/returned
(75,265 )
(98,323 )
Net cash from operating activities
Cash flows from investment activities
Disposal of a subsidiary
Disposal of intangible assets and property, plant and equipment
Disposal of investment property
Dividends received
Interest received
Subsidies received
Proceeds from repaid borrowings
Acquisition of a subsidiary (after deduction of acquired cash)
(4,848 )
(4,650 )
Acquisition of intangible assets and property, plant and equipment
(693,963 )
(351,102 )
Development expenditures
(15,960 )
(33,118 )
Borrowings paid out
(720 )
Expenditure on the purchase of emission rights
(129,222 )
(31,409 )
Other investment inflows (outflows)
(331 )
Net cash from investment activities
(833,999 )
(410,912 )
Cash flows from financial activities
Proceeds from loans and borrowings
7.1
Repayment of loans and borrowings
7.1
(263,041 )
(268,016 )
Payments of lease liabilities
7.4
(31,536 )
(26,608 )
Other financial inflows (outflows)
(7 )
Net cash from financial activities
(17,172 )
Total net cash flows
Cash and cash equivalents as at the beginning of the period
Impact of foreign exchange differences
Cash and cash equivalents as at the end of the period **
5.12
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
**The difference in relation to cash and cash equivalents presented in the consolidated statement of financial position results from the
presentation of cash held by CIECH Żywice Sp. z o.o. as assets held for sale.
The consolidated statement of cash flows of the CIECH Group should be analysed together with the notes which constitute
an integral part of the consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
9
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP
Equity
attributable to
shareholders of
the parent
Non-
controlling
interest
Total equity
Share
capital
Share
premium
Cash flow hedge
reserve
Hedging costs
reserve
Other
reserve
capitals
Actuarial
gains
Currency
translation
reserve
Retained
earnings
01.01.2020
(216 )
(360 )
(75,944 )
(1,017 )
Transactions with the owners
(346,507 )
(7 )
Change in the Group’s structure
(7 )
(7 )
Reserve fund for the purchase of
own shares
(346,500 )
Total comprehensive income for
the period
(27,071 )
(3,443 )
(135 )
(1,094 )
Net profit / (loss) for the period
(1,247 )
Other comprehensive income
(27,071 )
(3,443 )
(135 )
(9 )
31.12.2020
(9,393 )
(3,659 )
(495 )
(31,737 )
(2,077 )
31.12.2018
(4,625 )
(63,242 )
Adjustments of prior period errors
(37,194 )
(22,756 )
(22,756 )
01.01.2019
(4,625 )
(63,242 )
Total comprehensive income for
the period
(479 )
(12,702 )
(1,305 )
Net profit / (loss) for the period
(1,278 )
Other comprehensive income
(479 )
(12,702 )
(8,646 )
(27 )
(8,673 )
31.12.2019*
(216 )
(360 )
(75,944 )
(1,017 )
*Restated data. For detailed information on restatement, see Note 1.5.1 to these statements.
The consolidated statement of changes in consolidated equity of the CIECH Group should be analysed together with the notes which constitute an integral part of the consolidated financial
statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
10
1. GENERAL INFORMATION
1.1. INFORMATION ON THE COMPANY’S ACTIVITIES
Parent company
Legal form
Registered office
Address
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
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
Principal place of business
Parent company of the higher level
(a subsidiary of Kulczyk Investments)
Ultimate parent company
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
11
1.2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES
1.2.1. REPRESENTATION BY THE MANAGEMENT BOARD
These consolidated financial statements of the CIECH Group for the period from 1 January 2020 to 31 December 2020,
including comparative data, were approved by the Management Board of CIECH S.A. on 22 April 2021.
The Management Board of CIECH S.A. represents that these consolidated financial statements of the CIECH Group 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 consolidated 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 the CIECH Group’s financial position and the results of operations.
Furthermore, the Management Board of CIECH S.A. represents that the Directors’ report on operations of the CIECH Group
and CIECH S.A. in 2020 contains a true image of the Group’s developments, achievements, and condition, including the
description of major risks and threats.
The Management Board of CIECH S.A. represents that Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its
registered office in Warsaw, entered into the list of entities authorised to audit financial statements under the registry No 73
kept by the National Chamber of Statutory Auditors was chosen in accordance with the binding legal regulations for the
auditor of these consolidated 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
These consolidated financial statements have been prepared on the historical cost basis except for investment property as
well as financial assets and liabilities (derivative instruments) measured at fair value through profit or loss.
These consolidated financial statements have been prepared based on individual financial statements of the CIECH Group’s
parent company and its subsidiaries, prepared from the accounting ledgers maintained in accordance with the applicable
accounting principles of their respective countries of operation. For the purpose of these consolidated financial statements,
adjustments have been made to the accounting policies used in the preparation of the abovementioned individual financial
statements for them to be aligned with International Financial Reporting Standards.
Since 2007, the Parent Company, CIECH S.A., has been preparing separate financial statements in accordance with IFRS.
Major accounting principles applied in the preparation of these consolidated financial statements are listed in note 1.4.
These principles have been applied on a continuous basis in all presented periods, except for changes described in Note 1.5.1.
These consolidated financial statements were prepared under the assumption that the CIECH Group will continue as a going
concern in the foreseeable future. As at the date of approval of these consolidated financial statements, no facts or
circumstances are known that would indicate any threat to the Group continuing as a going concern.
All entities belonging to the CIECH Group operate according to the financial year corresponding to the calendar year, except
for Cerium Sp. z o.o. whose financial year ends on 30 September. For the purposes of the consolidation process, figures of
Cerium Sp. z o.o. covered the reporting period of the CIECH Group and were restated accordingly.
These consolidated financial statements, except for the consolidated statement of cash flows, have been prepared on the
accrual basis. The consolidated statement of profit or loss of the CIECH Group is prepared in the cost by function format. The
Group’s consolidated statement of cash flows is prepared under 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
Group. Issues which require significant assessments or areas where the assumptions and estimates made have a significant
impact on these consolidated financial statements have been described in note 1.4.
1.3. FUNCTIONAL AND REPORTING CURRENCY
The Polish zloty (PLN) is the functional currency of the parent company, CIECH S.A., and the reporting currency of these
consolidated financial statements. Unless stated otherwise, all financial data in these consolidated financial statements have
been presented in thousands of Polish zlotys (PLN ’000).
The functional currencies for the significant foreign subsidiaries are as follows: SDC Group, Ciech Group Financing AB, Proplan
Plant Protection Company S.L. and CIECH Salz Deutschland GmbH – EUR, CIECH Soda Romania S.A. – RON. For the purpose of
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
12
conversion into PLN, the following foreign exchange rates determined on the basis of quotations announced by the National
Bank of Poland (“NBP”) have been applied for consolidation purposes:
NBP exchange rate as at the end day of the
reporting period
31.12.2020
1
31.12.2019
2
EUR
4.6148
4.2585
RON
0.9479
0.8901
Average NBP rate for the reporting period
12 months ended 31.12.2020
3
12 months ended 31.12.2019
4
EUR
4.4742
4.3018
RON
0.9239
0.9053
1
NBP’s average foreign exchange rates table applicable as at 31 December 2020.
2
NBP’s average foreign exchange rates table applicable as at 31 December 2019.
3
According to the exchange rate constituting the arithmetic mean of average exchange rates quoted by NBP on the last day of each month
of the period from 1 January 2020 to 31 December 2020.
4
According to the exchange rate constituting the arithmetic mean of average exchange rates quoted by NBP on the last day of each month
of the period from 1 January 2019 to 31 December 2019.
For each entity located abroad that draws up its financial statements in a currency other than the presentation currency, it is
necessary to translate their results and financial standing to the presentation currency in accordance with the following
procedure:
• all items of revenues and costs in the functional currency of a subsidiary are translated to the presentation currency at
the exchange rate of the transaction date. This procedure may be simplified by adopting average exchange rates for a
given period, however, only in a situation where there were no such exchange rate fluctuations that would have a
significant influence on the consolidated financial results.
• all items of assets and liabilities are translated to the presentation currency at the closing exchange rate as of the
relevant balance sheet date.
• individual items of equity capital are translated at historic exchange rates, e.g. share capital at the exchange rate of the
merger settlement date, revenues and costs recognised directly in equity capital are translated at the exchange rate of
the transaction date or by a simplified procedure at the average exchange rate of a given period.
The difference arising from the calculation of equity capital according to rates other than the closing rate as of the balance
sheet date, applied to other balance sheet items, is presented in equity capitals as “currency translation differences”.
1.4. ACCOUNTING POLICIES
To ensure more legible presentation and better understanding of the information disclosed in the consolidated financial
statements, key accounting policies applicable in the CIECH Group 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
Other operating income and expenses
x
x
3.5
Financial income and expenses
x
x
4.1
Main components of tax expense
x
4.3
Deferred income tax
x
x
5.1
Property, plant and equipment
x
x
5.2
Right-of-use assets
x
x
5.3
Intangible assets
x
x
5.5
Investment properties
x
x
5.6
Long-term receivables
x
5.7
Long-term financial assets
x
x
5.8
Shares in joint ventures / investments in associates
x
5.9
Inventories
x
x
5.10
Short-term receivables
x
x
5.11
Short-term financial assets
x
x
5.12
Cash and cash equivalents
x
x
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
13
Note
Title
Accounting principles
Judgements and estimates
5.13
Discontinued operations, non-current assets and liabilities
connected with non-current assets classified as held for sale
x
x
6.2
Consolidated equity
x
x
6.4
Business combinations and acquisition of non-controlling
interest
x
6.6
Earnings per share
x
7.1
Information about significant financial liabilities
x
7.2
Other non-current 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
9.5
Composition of the Group
x
1.5. CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES
Amendments to IAS/IFRS and their potential impact on the Group’s financial statements are presented below:
New Standards, amendments to Standards and Interpretations:
Approved by the IASB for application
as at the balance sheet date
Impact on the financial statements
Effective year in the EU
Amendments to references to the Conceptual Framework in
IFRSs
No material impact on the financial
statements is estimated
2020
Amendments to IFRS 3 “Business Combinations” – definition of a
business – published on 22 October 2018
No material impact on the financial
statements is estimated
2020
Amendments to IAS 1 and IAS 8 – definition of “material”
No material impact on the financial
statements is estimated
2020
Amendments to IFRS 9, IAS 39 and IFRS 7 in response to the IBOR
reform – modification of IFRS and IAS so that the expected
reform of benchmark rates does not result in the termination of
hedge accounting.
The Company analyses issues related to
the expected reform of benchmark
rates – if there are any changes, their
estimated effects would be recognised
in the financial statements
2020
IFRS 14 “Regulatory deferral accounts”
No material impact on the financial
statements is estimated
n/a
Amendment to IFRS 16 “Leases” – Covid-19-related rent
concessions
No material impact on the financial
statements is estimated
2020
New standards and interpretations entering into force after the
balance sheet date
As at the date of approval of these financial statements,
amendments to IFRS 4 "Insurance Contracts" entitled “Extension
of the Temporary Exemption from Applying IFRS 9” have been
issued by the International Accounting Standards Board (IASB)
and adopted by the European Union on 16 December 2020, and
are effective as of a later date
No material impact on the financial
statements is estimated
The expiry date of the
temporary exemption
from IFRS 9 has been
extended from 1 January
2021 to annual periods
beginning on 1 January
2023
New standards and interpretations pending endorsement by
the European Union
Impact on the financial statements
Effective year in the EU
IFRS 14 “Regulatory Deferral Accounts”
No material impact on the financial
statements is estimated
The European Commission
has decided not to launch
the endorsement process
of this interim standard
until the final IFRS 14 is
issued.
Amendments to IAS 1 “Presentation of financial statements” –
classification of liabilities as current or non-current
No material impact on the financial
statements is estimated
2023
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
14
New Standards, amendments to Standards and Interpretations:
Amendments to IFRS 16 “Property, plant and equipment”
proceeds before intended use
No material impact on the financial
statements is estimated
2022
Amendments to IAS 37 “Provisions, Contingent Liabilities and
Contingent Assets” – onerous contracts – cost of fulfilling the
contract
No material impact on the financial
statements is estimated
2022
Amendments to IFRS 3 “Business Combinations” – amendments
to references in the Conceptual Framework along with
amendments to
IFRS 3
No material impact on the financial
statements is estimated
2022
Amendments to IFRS 10 “Consolidated Financial Statements” and
IAS 28 “Investments in Associates and Joint Ventures” – sale or
contribution of assets between an investor and its associate or
joint venture, and further amendments
No material impact on the financial
statements is estimated
The effective
date has been
postponed
Amendments to IFRS 9 “Financial Instruments”, IAS 39 “Financial
Instruments: Recognition and Measurement” and IFRS 7
“Financial Instruments: Disclosures”, IFRS 4 “Insurance
Contracts” and IFRS 16 “Leases” – Reform of the Benchmark
Interest Rate – Stage 2
No material impact on the financial
statements is estimated
2021
Amendments to various standards resulting from “Annual
Improvements to IFRS Standards 2018–2020 Cycle” –
amendments made as part of the annual IFRS improvements
project (IFRS 1, IFRS 9, IAS 16 and IAS 41) primarily to correct
conflicts and clarify wording (amendments to IFRS 1, IFRS 9 and
IAS 41
No material impact on the financial
statements is estimated
2022
IFRS 17 “Insurance Contracts”
No material impact on the financial
statements is estimated
2023
1.5.1. ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY
As a result of an analysis, an incorrect approach to the recognition of the valuation of the hedging instruments held by the
Group was identified. After consulting with the Advisor, the Company decided to change its approach to:
a) the accounting recognition of the CCIRS transaction designated as a hedging instrument in two cash flow hedging
relationships – with the change relating to the settlement of a series of FX Forward transactions which hedge sales
revenues.
The Group applies hedge accounting in accordance with the provisions of IFRS 9 for the hedging of currency risk and interest
rate risk using CCIRS fix-to-float transactions. The CCIRS derivative has been decomposed to two instruments: series of
synthetic F/X Forwards to hedge expected sales revenues in EUR and Interest Rate Swap (IRS).
The company corrected the previously applied approach to the settlement of the F/X forward component. In the former
approach, the Company settled the hedged sales revenues according to the exchange rates of cash flows included in the
hedging instrument (despite the fact that the exchange rate values were non-market).
In the corrected approach, the amount recognised in other comprehensive income as at the balance sheet date will represent
the effective part of the change in valuation of cash flows falling after the balance sheet date, occurring between the balance
sheet date and the date of these cash flows designation to hedge accounting. The amount accumulated in this way in equity
(OCI) will be transferred to sales revenues at the moment when the hedged item is recognised in the statement of profit or
loss – which is in line with economic substance of the hedge transaction and in line with IFRS 9. Moreover if the hedged item
occurs in several points in time – the value accumulated in other comprehensive income is recognised in sales revenues
proportionally to the value of the hedged item realised in the relevant periods. The changed approach also assumes that the
hedge effectiveness will be measured not only as at the balance sheet date (as in the former approach) but also as at the
hedge settlement date so that only effective part will be transferred to the statement of profit or loss.
Therefore in the changed approach, the valuation accumulated in other comprehensive income is settled using forward rates
determined as at the date of concluding the instrument and establishing the hedging relationship and, in consequence, the
settlement of forward transactions will result in an adjustment to the hedged item (designated sales revenues in a given
period) by the difference between the valuation of a given forward transaction as at the designation date and as at the
moment of its realisation (with an adjustment, if any, for an ineffective part of the instrument).
b) recognition of futures transactions hedging the purchase price of CO
2
emission allowances.
The futures transactions concluded so far for the purchase of CO
2
emission allowances have been designated by the Company
for hedge accounting. After re-analysis, the Company concluded that IFRS 9 should not be applied in this respect as the
allowances are purchased for the Group's own needs and therefore the exception specified in the standard applies in this
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
15
situation (own use exemption). Therefore, the amounts resulting from settlements with the Clearing House for particular
balance sheet dates should not be included in the item “Cash flow hedge reserve” and in the item “Settlement with the
Clearing House” (reported under “Trade and other liabilities”).
Therefore, the Group corrected an error from previous years in the consolidated financial statements. In order to ensure
comparability of data concerning the periods presented, a retrospective approach was applied in the first reporting period
after identifying errors from previous years, restating the data from comparative periods. The impact of the adjustments on
the previously reported consolidated data is presented below.
CONSOLIDATED BALANCE SHEET
After adjustment as at 1
January 2019
FUTURES
CIRS
Before adjustment as at
1 January 2019
ASSETS
Deferred tax assets
73,210
5,338
-
67,872
Total non-current assets
3,674,001
5,338
-
3,668,663
Total current assets
1,272,558
-
-
1,272,558
Total assets
4,946,559
5,338
-
4,941,221
EQUITY AND LIABILITIES
Hedging reserve
17,553
(22,756)
37,194
3,115
Retained earnings
1,089,297
-
(37,194)
1,126,491
Equity attributable to shareholders of the parent
1,876,083
(22,756)
-
1,898,839
Non-controlling interest
288
-
-
288
Total equity
1,876,371
(22,756)
-
1,899,127
Total non-current liabilities
1,736,981
-
-
1,736,981
Trade and other liabilities
789,561
28,094
761,467
Total short-term liabilities
1,333,207
28,094
-
1,305,113
Total liabilities
3,070,188
28,094
-
3,042,094
Total equity and liabilities
4,946,559
5,338
-
4,941,221
CONSOLIDATED BALANCE SHEET
After adjustment as at
31 December 2019
Subsidies
FUTURES
CIRS
Before adjustment as
at 31 December 2019
ASSETS
Deferred tax assets
43,734
-
103
-
43,631
Total non-current assets
3,734,291
-
103
-
3,734,188
Total current assets
1,312,254
-
-
-
1,312,254
Total assets
5,046,545
-
103
-
5,046,442
EQUITY AND LIABILITIES
Hedging reserve
17,678
-
(438)
44,524
(26,408)
Retained earnings
1,199,657
-
-
(44,524)
1,244,181
Equity attributable to shareholders of the
parent
1,977,796
-
(438)
-
1,978,234
Non-controlling interest
(1,017)
-
-
-
(1,017)
Total equity
1,976,779
-
(438)
-
1,977,217
Total non-current liabilities
1,970,287
22,980
-
-
1,947,307
Total short-term liabilities
1,099,479
(22,980)
541
-
1,121,918
Total liabilities
3,069,766
-
541
-
3,069,225
Total equity and liabilities
5,046,545
-
103
-
5,046,442
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
16
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS
After adjustments
01.01.-31.12.2019
Change in
presentation due to
discontinuation of
operations
Change in
presentation costs
of idle assets and
production
capacity
CIRS
Previously
presented
01.01.-31.12.2019
Net sales revenues
3,241,862
(297,968)
-
(9,049)
3,548,879
Cost of sales
(2,529,174)
276,188
(38,200)
-
(2,767,162)
Gross profit/loss on sales
712,688
(21,780)
(38,200)
(9,049)
781,717
Other operating income
111,171
(1,651)
-
-
112,822
Selling costs
(237,639)
12,923
-
-
(250,562)
General and administrative
expenses
(197,848)
4,358
-
-
(202,206)
Other operating expenses
(134,896)
1,166
38,200
-
(174,261)
Operating profit/loss
253,476
(4,984)
-
(9,049)
267,510
Financial income
5,065
-
-
-
5,065
Financial expenses
(88,998)
1,162
-
-
(90,160)
Net financial income/expenses
(83,933)
1,162
-
-
(85,095)
Share in net profit of subordinated
entities accounted for with equity
method
1,106
-
-
-
1,106
Profit/loss before tax
170,649
(3,822)
-
(9,049)
183,521
Income tax
(65,390)
-
-
1,719
(67,109)
Net profit/loss
105,259
(3,822)
-
(7,330)
116,412
Profit/loss on sales relating to
discontinued operations
3,822
3,822
-
-
-
Net profit/loss for the financial
year
109,081
-
-
(7,330)
116,412
including:
-
Net profit/loss attributable to
shareholders of the parent
110,359
-
(7,330)
117,690
Net profit/loss attributable to non-
controlling interest
(1,278)
-
-
-
(1,278)
Earnings/loss per share (in PLN):
-
Basic
2.09
-
(0.14)
2.23
Diluted
2.09
-
-
(0.14)
2.23
Earnings/loss per share (in PLN)
from continuing operations:
-
Basic
2.02
(0.07)
(0.14)
2.23
Diluted
2.02
(0.07)
-
(0.14)
2.23
c) a change in the presentation of the costs of idle assets and production capacity
Until now, the costs related to idle assets and production capacity in the CIECH Group companies were presented as costs in
other operating activities. After the presentation change, these data are included in the core business and affect the cost of
sales, which better reflects the nature of these costs.
d) reclassification of subsidies
Reclassification of subsidies reported in current liabilities to long-term liabilities.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
17
2. SEGMENT REPORTING
Following the change of the business model and the adoption of the Reorganisation concept of the CIECH group, it was
decided to introduce the division of competences within the CIECH Group among individual business areas – business units
(“BUs”). The adoption of the Reorganisation Concept is to serve the implementation of the strategy adopted, as well as to
streamline business and decision-making processes and improving the transparency of the operation of the CIECH Group. In
connection with the reorganisation, the previously presented operating segments were assigned to the new business
structure:
1. BU Soda
2. BU Salt
3. BU Agro
4. BU Resins
5. BU Foams
6. BU Silicates
7. BU Packaging
Currently, the Group has reached its target structure for most BUs, assets and operations have been unambiguously assigned
to the designated areas. The changes in the adopted structure of reporting segments are presented below:
Previous structure:
Current structure:
Soda Segment (BU Soda, BU Salt)
Soda Segment comprising BU Soda, BU Salt and transport services
assigned to these BUs
Organic Segment (BU Agro, BU Resins, BU Foams)
Agro Segment comprising BU Agro, Resins Segment comprising BU
Resins, Foams Segment comprising BU Foams and transport
services assigned to these BUs
Silicates and Glass Segment (BU Silicates, BU Packaging)
Silicates Segment comprising BU Silicates, Packaging Segment
comprising BU Packaging and transport services assigned to these
BUs
Transport Segment
Transport activity shifted to individual segments
Other Segment
Supplemented by other subsidiaries of minor importance to the
Group.
For details on the reorganisation of the CIECH Group, see current report No 47/2019.
The CIECH Group’s operating segments are designated on the basis of internal reports related to the components of the
Group and are regularly reviewed by the Management Board, which is responsible for operating decisions aimed at allocating
resources to segments and assessing the subsidiaries performance.
From the product perspective, the CIECH Group has been divided into the following operating segments:
Soda Segment (comprising BU Soda, and BU Salt) – at the current stage of work on the reorganisation, performance figures
for BU Soda and BU Salt are analysed jointly, and the performance of BU Soda and BU Salt are closely linked due to sharing
the same raw material, i.e. brine, fed jointly to the production facilities of Soda and Salt, as well as a common power plant
and combined heat and power plant providing heat and electricity, within CIECH Soda Polska. For this reason, it is not possible
to allocate direct costs in an unambiguous way (mainly: coal, electricity, CO
2
, maintenance on shared infrastructure).
As a result, business decisions are made jointly for both BUs - e.g. in the case of limitations in the availability of raw material
or steam, the profitability analysis of all Soda and Salt products, rather than the fact of being part of a specific BU, determines
the production of particular products. A shared source of raw material, a shared infrastructure and practically indivisible costs
mean that, consequently, it is also not possible to allocate these values to the BU in question as regards liabilities and certain
inventories. This all makes the analysis of cash flow generating units at the BU level potentially misleading.
Decisions on the above matters are made at the level of the Management Board of CIECH S.A.
The most important products manufactured in this Segment are: light and dense sodium carbonate, evaporated salt, sodium
bicarbonate and calcium chloride. The products of this area are sold mainly by the parent company CIECH S.A. Production of
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
18
the Segment goods is implemented in CIECH Soda Polska S.A., the Romanian company CIECH Soda Romania S.A.
(until September 2019) and in the German company CIECH Soda Deutschland GmbH&Co. KG. These products are used in the
glass, food, detergent and pharmaceutical industries. The Soda Segment also includes the business of producing and selling
electricity, in the German company. The Soda Segment also includes the operations of CIECH Cargo Sp. z o.o., which renders
rail transport services, mainly to the companies within the Segment.
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.
Resins Segment – the CIECH Group is a producer of a variety of organic compounds manufactured by CIECH Żywcie Sp. z o.o.
In 2020, it was producing, among others, epoxy resins and polyester resins. These products are used in the following
industries: automotive, paints and electronics. In 2020, CIECH Żywice Sp. z o.o. was designated for sale due to the signing of
a preliminary sales agreement with LERG S.A., and its figures are reported as discontinued operations.
Foams Segment – the CIECH Group is a producer of polyurethane foams manufactured by CIECH Pianki Sp. z o.o.
These products are mainly used in the furniture industry – for upholstered furniture and mattresses.
Silicates Segment – includes mainly the products of CIECH Vitrosilicon S.A. and CIECH Soda Romania S.A. Products
manufactured by Ciech Soda Romania S.A. are sold by CIECH S.A. The Segment manufactures sodium silicates
(CIECH Vitrosilicon S.A. and CIECH Soda Romania S.A.) and potassium silicates (CIECH Vitrosilicon S.A.). These products are
used in the automotive, cosmetics and construction chemicals industries.
Packaging Segment – covers products of CIECH Vitrosilicon S.A. This Segment manufactures glass packaging – lanterns and
jars, used in the food industry and for the production of headstone lamps.
Other activities covers mainly services rendered outside the Group and goods sold mainly by CIECH S.A., and within the Group,
Ciech Serwisy i Remonty S.A. provides maintenance services, as well as services are provided by Ciech R&D Sp. z o.o. and
CIECH Services Sp. z o.o. that will provide support services in various areas.
The Group financing is managed (including finance expenses and income with the exception of interest and exchange
differences on trade receivables and liabilities) and income tax is calculated on the Group level and they are not allocated to
particular Segments.
The CIECH Group has been divided into the following geographical areas: Poland, European Union, Other European countries,
Africa, Asia, Other regions. Information on the Group geographical areas is established based on the Group’s assets
localisation.
Revenues and costs, assets and liabilities of Segments are recognised and measured in a manner consistent with the method
used in the consolidated financial statements.
Operational Segments results are assessed by the CIECH S.A’s Management Board on the basis of sales revenue, operating
profit, level of EBITDA and adjusted EBITDA. The need to separate additional Segments in accordance with IFRS 8 has not
been identified.
EBITDA should be viewed as a supplement not as a substitute for the business performance presented in accordance with
IFRS.
EBITDA is a useful ratio of the ability to incur and service debt. EBITDA and adjusted EBITDA levels are not defined by the IFRS
and can be calculated in a different manner by other entities. The reconciliation and definitions applied by the CIECH Group
when determining these measures are presented below.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
19
01.01.-31.12.2020
01.01.-31.12.2019*
Net profit/(loss) on continuing operations
123,184
105,259
Income tax
64,949
65,390
Share of profit / (loss) of equity-accounted investees
161
(1,106)
Financial expenses
120,149
88,998
Financial income
(58,475)
(5,065)
Amortisation/depreciation
333,280
299,994
EBITDA on continued operations
583,248
553,470
EBITDA on discontinued operations
19,693
15,489
EBITDA on continued and discontinued operations
602,941
568,959
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
01.01.-31.12.2020
01.01.-31.12.2019*
EBITDA on continued operations
583,248
553,470
One-offs including:
2,084
85,600
Impairment (a)
3,597
72,938
Cash items (b)
(6,324)
(913)
Non-cash items (without impairment) (c)
4,811
13,575
Adjusted EBITDA on continued operations
585,332
639,070
Adjusted EBITDA on discontinued operations
18,883
15,148
Adjusted EBITDA on continued and discontinued operations
604,215
654,218
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
(a) Impairment losses are associated with the recognition/reversal of impairment write-downs of assets value.
(b) Cash items include, among others, gain/loss of the sale of property, plant and equipment and other items (including costs associated with
discontinued operations, fees and compensations).
(c) Non-cash items include: fair value measurement of investment properties, costs of liquidation of inventories and property, plant and
equipment, the costs of suspended investments, environmental provisions, provisions for liabilities and compensation, costs of unused
production capacity and other items (including extraordinary costs and other provisions).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
20
OPERATING SEGMENTS OF THE CIECH GROUP
Revenue and costs data as well as assets, equity and liabilities data of particular CIECH Group operating segments for periods disclosed in statements are presented in the tables below:
OPERATING SEGMENTS
01.01.-31.12.2020
Soda
Segment
Agro Segment
Foams
Segment
Silicates
Segment
Packaging
Segment
Other
operations
Segment
Corporate
functions -
reconciliation
item
Eliminations
(consolidation
adjustments)
TOTAL
Revenues from third parties
2,031,043
365,490
267,733
171,852
67,051
72,564
-
-
2,975,733
Revenue from inter-segment transactions
57,227
684
82
229
3
55,318
-
(113,543)
-
Total sales revenues
2,088,270
366,174
267,815
172,081
67,054
127,882
-
(113,543)
2,975,733
Cost of sales
(1,636,797)
(285,103)
(222,188)
(132,861)
(44,052)
(117,615)
-
93,549
(2,345,067)
Gross profit /(loss) on sales
451,473
81,071
45,627
39,220
23,002
10,267
-
(19,994)
630,666
Selling costs
(111,811)
(41,765)
(8,212)
(19,612)
(7,581)
(3,659)
-
19,494
(173,146)
General and administrative expenses
(74,735)
(29,885)
(3,516)
(3,202)
(1,213)
(7,330)
(57,248)
6,505
(170,624)
Result on management of receivables
(9,933)
(2,983)
(5)
(3)
4
(263)
44
-
(13,139)
Result on other operating activities
(14,933)
1,848
(206)
103
(1,313)
(3,789)
375
(5,874)
(23,789)
Operating profit /(loss)
240,061
8,286
33,688
16,506
12,899
(4,774)
(56,829)
131
249,968
Exchange differences and interest on trade settlements
(1,741)
(642)
(1,119)
-
1,197
(532)
(10)
-
(2,847)
Group borrowing costs
-
-
-
-
-
-
(58,642)
-
(58,642)
Result on financial activity (non-attributable to
segments)
-
-
-
-
-
-
(185)
-
(185)
Share of profit / (loss) of equity-accounted investees
(161)
-
-
-
-
-
-
-
(161)
Profit /(loss) before tax
238,159
7,644
32,569
16,506
14,096
(5,306)
(115,666)
131
188,133
Income tax
-
-
-
-
-
-
-
-
(64,949)
Net profit /(loss) on continuing operations
-
-
-
-
-
-
-
-
123,184
Net profit /(loss) on discontinued operations
-
-
-
-
-
-
-
-
4,846
Net profit /(loss) for the period
-
-
-
-
-
128,030
Amortization/depreciation on continued operations
266,791
29,644
3,945
9,561
7,709
778
14,852
-
333,280
EBITDA on continued operations
506,852
37,930
37,633
26,067
20,608
(3,996)
(41,977)
131
583,248
Adjusted EBITDA on continued operations*
510,090
41,128
37,494
25,964
22,020
(9,631)
(41,865)
132
585,332
*Adjusted EBITDA for the 12-month period ended 31 December 2020 is calculated as EBITDA adjusted for untypical one-off events: impairment losses: PLN -3.6 million; change in provisions: PLN -7.9 million; valuation
of investment properties: PLN 5.1 million; reimbursed charges, fines and compensations received: PLN 4.7 million; other: PLN 0.4 million
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
21
OPERATING SEGMENTS
01.01.-31.12.2019
Soda
Segment
Agro Segment
Foams
Segment
Silicates
Segment
Packaging
Segment
Other
operations
Segment
Corporate
functions -
reconciliation
item
Eliminations
(consolidation
adjustments)
TOTAL*
Revenues from third parties
2,352,869
292,920
259,166
175,977
69,205
91,725
-
-
3,241,862
Revenue from inter-segment transactions
70,898
506
81
537
1
10,902
-
(82,925)
-
Total sales revenues
2,423,767
293,426
259,247
176,514
69,206
102,627
-
(82,925)
3,241,862
Cost of sales
(1,852,222)
(230,697)
(221,901)
(138,877)
(49,176)
(94,620)
-
58,319
(2,529,174)
Gross profit /(loss) on sales
571,545
62,729
37,346
37,637
20,030
8,007
-
(24,606)
712,688
Selling costs
(186,156)
(37,240)
(6,961)
(19,010)
(9,258)
(7,844)
-
28,830
(237,639)
General and administrative expenses
(83,913)
(26,070)
(3,716)
(4,630)
(1,937)
(6,381)
(74,328)
3,127
(197,848)
Result on management of receivables
187
(57)
84
1
4
562
-
-
781
Result on other operating activities
(26,613)
2,026
(400)
(2,789)
1,581
(12,174)
20,852
(6,989)
(24,506)
Operating profit /(loss)
275,050
1,388
26,353
11,209
10,420
(17,830)
(53,476)
362
253,476
Exchange differences and interest on trade settlements
(7,565)
(888)
336
-
(19)
(279)
-
-
(8,415)
Group borrowing costs
-
-
-
-
-
-
(54,978)
-
(54,978)
Result on financial activity (non-attributable to
segments)
-
-
-
-
-
-
(20,540)
-
(20,540)
Share of profit / (loss) of equity-accounted investees
1,106
-
-
-
-
-
-
-
1,106
Profit /(loss) before tax
268,591
500
26,689
11,209
10,401
(18,109)
(128,994)
362
170,649
Income tax
-
-
-
-
-
-
-
-
(65,390)
Net profit /(loss) on continuing operations
-
-
-
-
-
-
-
-
105,259
Net profit /(loss) on discontinued operations
-
-
-
-
-
-
-
-
3,822
Net profit /(loss) for the period
-
-
-
-
-
109,081
Amortization/depreciation
236,886
28,215
4,222
11,817
8,647
1,246
8,961
-
299,994
EBITDA on continued operations
511,936
29,603
30,575
23,026
19,067
(16,584)
(44,515)
362
553,470
Adjusted EBITDA on continued operations**
599,034
30,028
30,570
25,815
17,954
(17,877)
(48,010)
1,556
639,070
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
**Adjusted EBITDA for the 12-month period ended 31 December 2019 is calculated as EBITDA adjusted for untypical one-off events: change in provisions: PLN -12.3 million; impairment losses: PLN -72.6 million; other:
PLN -0.3 million.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
22
SALES REVENUES — BUSINESS SEGMENTS
01.01.-31.12.2020
01.01.-31.12.2019*
Change 2020/2019
Change %
Soda Segment, including:
2,088,270
2,423,767
(335,497)
(13.8%)
Dense soda ash
1,159,682
1,316,420
(156,738)
(11.9%)
Light soda ash
269,129
444,555
(175,426)
(39.5%)
Salt
183,468
197,732
(14,264)
(7.2%)
Sodium bicarbonate
193,001
166,374
26,627
16.0%
Energy
146,955
140,469
6,486
4.6%
Calcium chloride
17,809
26,402
(8,593)
(32.5%)
Other products
60,999
60,917
82
0.1%
Revenues from inter-segment transactions
57,227
70,898
(13,671)
(19.3%)
Agro Segment, including:
366,174
293,426
72,748
24.8%
Agro products
365,490
292,920
72,570
24.8%
Revenues from inter-segment transactions
684
506
178
35.2%
Foams Segment, including:
267,815
259,247
8,568
3.3%
Polyurethane foams
267,733
259,166
8,567
3.3%
Revenues from inter-segment transactions
82
81
1
1.2%
Silicates Segment, including:
172,081
176,514
(4,433)
(2.5%)
Sodium silicates
163,773
169,824
(6,051)
(3.6%)
Potassium silicates
8,079
6,153
1,926
31.3%
Revenues from inter-segment transactions
229
537
(308)
(57.4%)
Packaging Segment, including:
67,054
69,206
(2,152)
(3.1%)
Glass packaging
67,051
69,205
(2,154)
(3.1%)
Revenues from inter-segment transactions
3
1
2
200.0%
Other Segment, including:
127,882
102,627
25,255
24.6%
Revenues from third parties
72,564
91,725
(19,161)
(20.9%)
Revenues from inter-segment transactions
55,318
10,902
44,416
407.4%
Consolidation adjustments
(113,543)
(82,925)
(30,618)
(36.9%)
TOTAL
2,975,733
3,241,862
(266,129)
(8.2%)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
For detailed information on the recognition of sales revenue, please refer to Note 3.1 to these financial statements.
ASSETS AND LIABILITIES BY OPERATING SEGMENTS
ASSETS
LIABILITIES
31.12.2020
31.12.2019*
31.12.2020
31.12.2019*
Soda Segment
3,632,188
3,130,649
290,786
233,784
Resins Segment*
203,699
169,919
58,312
42,407
Agro Segment
755,969
733,139
93,704
68,395
Foams Segment
68,447
85,094
59,174
30,050
Silicates Segment
84,898
85,605
19,010
23,316
Packaging Segment
33,047
49,439
8,846
907
Other operations Segment
23,016
27,835
25,451
34,548
Corporate functions - reconciliation item
1,015,451
799,067
3,076,077
2,672,341
Eliminations (consolidation adjustments)
(108,982)
(34,202)
(42,165)
(35,982)
TOTAL
5,707,733
5,046,545
3,589,195
3,069,766
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
23
The value of investments in equity-accounted entities occurs only for the assets of the Soda Segment and amounts to
PLN 5,646 thousand as at 31 December 2020.
The value of increases in expenditure on property, plant and equipment and intangible assets by operating segment is as
follows:
Capital expenditure
31.12.2020
31.12.2019
Soda Segment
812,033
542,373
Agro Segment
75,094
43,663
Resins Segment
9,422
2,742
Foams Segment
1,497
1,601
Silicates Segment
5,854
2,082
Packaging Segment
3,515
5,850
Other Segment
120
780
Corporate Functions
16,937
17,754
TOTAL
924,472
616,845
INFORMATION ON GEOGRAPHICAL AREAS
Information on the CIECH Group geographical areas is established based on the Group’s assets location.
ASSETS DIVIDED ON
GEOGRAPHICAL REGIONS
Non-current assets
other than financial
instruments
Deferred income tax assets
Other assets
Total assets
31.12.2020
Poland
2,412,273
50,688
1,085,526
3,548,487
European Union (excluding
Poland)
1,787,812
-
337,954
2,125,766
Other European countries
-
-
14,788
14,788
Africa
-
-
3,923
3,923
Asia
-
-
4,493
4,493
Other regions
-
-
10,276
10,276
TOTAL
4,200,085
50,688
1,456,960
5,707,733
31.12.2019*
Poland
2,349,618
43,734
938,760
3,332,112
European Union (excluding
Poland)
1,336,062
-
333,671
1,669,733
Other European countries
-
-
13,065
13,065
Africa
-
-
3,658
3,658
Asia
-
-
19,022
19,022
Other regions
-
-
8,955
8,955
TOTAL
3,685,680
43,734
1,317,131
5,046,545
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
SALES REVENUES – GEOGRAPHICAL STRUCTURE OF MARKETS
01.01.-31.12.2020
01.01.-31.12.2019*
Change 2020/2019
Poland
1,473,672
1,381,765
12.9%
European Union (excluding Poland)
1,358,770
1,462,859
(10.8%)
Germany
673,359
632,069
3.1%
Romania
34,465
96,546
(64.3%)
Czech Republic
161,196
154,302
4.5%
Italy
35,259
54,681
(35.5%)
The Netherlands
110,549
108,216
2.2%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
24
01.01.-31.12.2020
01.01.-31.12.2019*
Change 2020/2019
Finland
55,960
51,837
8.0%
Sweden
21,715
38,667
(43.8%)
Belgium
28,192
27,196
3.7%
United Kingdom
4,568
36,350
(87.4%)
Denmark
38,353
39,549
(3.0%)
Spain
93,513
79,400
17.8%
Austria
17,717
27,017
(34.4%)
France
13,960
11,028
26.6%
Luxembourg
22,348
23,893
(6.5%)
Lithuania
13,299
13,510
(1.6%)
Other EU countries
34,317
68,598
(50.0%)
Other European Countries
73,529
131,171
(43.9%)
Switzerland
3,627
14,572
(75.1%)
Norway
43,486
47,389
(8.2%)
Russia
7,086
1,793
295.2%
Other European countries
19,330
67,417
(71.3%)
Africa
17,959
78,011
(77.0%)
Asia
31,741
150,158
(78.9%)
India
1,042
65,765
(98.4%)
Singapore
3,257
9,431
(65.5%)
Bangladesh
-
24,471
(100.0%)
Hong Kong
-
15,023
(100.0%)
Turkey
12,688
15,441
(17.8%)
Other Asian countries
14,396
20,018
(28.1%)
Other regions
32,592
29,033
12.3%
Cash flow hedge adjustment
(12,530)
8,865
(241.3%)
TOTAL
2,975,733
3,241,862
(8.2%)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
25
3. NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
3.1. SALES REVENUES
Accounting policy
The Group 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 Group recognises as revenues the
amount of the transaction price that is allocated to that performance obligation.
At the CIECH Group, sales revenues are recognized upon the provision of services or delivery of products or goods, in
accordance with INCOTERMS stipulated in contracts with customers. Most often, the Group sells on the bases of: DAP,
FCA, EXW, CPT, DDP, CIF.
CIECH Group concludes contracts with contractors regarding the provision of CIECH SGroup’s products as part of
consignment warehouses owned by contractors. Control over the delivered products is transferred to the customer
when they are accepted for storage, and at this point sales revenue is recognized along with the corresponding cost of
sale.
Moreover, the Group, in accordance with IAS 15 Revenue from contracts with customers, attributes revenues and costs
connected with contracts concerning cavern desalination to particular periods in which the works were conducted. For
more detailed information, see Note 5.6 to these statements.
CIECH Group companies grant discounts to selected customers, and the value of these discounts reduces the value of
consolidated sales revenues.
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 the CIECH Group 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.
The CIECH Group companies use non-recourse factoring and detailed information is provided in Note 5.10 to these
financial statements.
SALES REVENUES
01.01.-31.12.2020
01.01.-31.12.2019*
Revenues from sales of products and services
2,856,932
3,101,853
- products
2,801,552
3,048,641
- services
55,380
53,212
Revenues from sales of goods and materials
118,801
140,009
- goods
111,262
133,485
- materials
7,539
6,524
Net sales of products, goods and materials
2,975,733
3,241,862
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
26
3.2. COST OF SALES
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 products and services sold and the value of sold goods and materials.
Selling costs include, among others: 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 prime cost of sales/general and administrative expenses/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 Group 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
01.01.-31.12.2020
01.01.-31.12.2019*
Cost of manufacture of products and services sold
(2,225,114)
(2,394,808)
Cost of sold goods and materials sold
(91,867)
(106,185)
Reversal of impairment losses on inventory
4,250
12,804
Recognition of impairment losses on inventory
(9,158)
(9,660)
Write off / liquidation of materials
(4,847)
-
Costs of idle assets and production capacity
(18,331)
(31,325)
TOTAL
(2,345,067)
(2,529,174)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
3.3. COSTS BY TYPE
COST BY KIND (SELECTED)
01.01.-31.12.2020
01.01.-31.12.2019*
Amortisation
(314,760)
(299,936)
Consumption of materials and energy
(1,369,661)
(1,635,080)
Employee benefits, including:
(357,161)
(352,620)
- payroll
(291,699)
(290,033)
- social security and other benefits
(59,383)
(57,043)
- expenditure on retirement benefit and jubilee awards (including provisions)
(3,282)
(414)
- expenditure on pension schemes with defined benefits
(824)
(342)
- other
(1,972)
(4,788)
External services
(297,205)
(424,979)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
27
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
Group's core operations. The key items include:
✓ gains/ losses on disposal and liquidation of non-financial non-current assets,
✓ gains/ losses on sales of emission rights,
✓ recognition/ reversal of impairment losses (including allowances for doubtful receivables),
✓ recognition/ reversal of provisions, among others, for liabilities, employee benefits,
✓ 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,
✓ gains/losses on valuation of fair value of investment property,
Subsidies
Government subsidies are recognised when there is reasonable assurance that the subsidy will be received and that
the entity will comply with all relevant conditions of the subsidy. Subsidies are recognised as income in profit or loss on
a systematic basis when the entity recognises, as expenses, the related costs that the subsidies are intended to
compensate.
Government subsidies related to assets, including non-monetary subsidies at fair value, are presented in the balance
sheet by setting up the subsidy as deferred income. It is recognised as income over the useful life of the asset.
Repayment of a subsidy related to income should be applied first against any unamortised deferred credit set up in
respect of the subsidy. To the extent that the repayment exceeds any such deferred credit, or where no deferred credit
exists, the repayment should be recognised immediately in profit or loss. Repayment of a subsidy related to an asset
should be recorded by increasing the carrying amount of the asset or reducing the deferred income balance by the
amount repayable.
In connection with the implementation of investment projects to improve energy efficiency, the Group companies
receive energy efficiency certificates which are recognised at market value in the statement of financial position as a
subsidy. If the value of certificates received exceeded the value of expenditures incurred on the implementation of
projects, this amount is recognised on a one-off basis in profit or loss as other operating income.
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.
For goodwill, intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is
estimated at each reporting date, irrespective of the existence of the aforesaid indications.
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.-31.12.2020
01.01.-31.12.2019*
Subsidies
5,511
10,237
The right to emit greenhouse gases
1,805
21,436
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
28
OTHER OPERATING INCOME
01.01.-31.12.2020
01.01.-31.12.2019*
Rents/lease income
2,418
2,799
Gain on disposal of non-financial non-current assets
3,419
469
Reversal of impairment allowances on receivables
6,530
2,988
Reversal of provisions on employee benefits
1,713
879
Reversal of provisions for compensation
1,077
258
Reversal of provisions for environmental protection
488
1,020
Reversal of provisions for liabilities
2,321
4,263
Reversal of other provisions
6,651
2,000
Penalty fees and compensations received
7,653
3,458
Refund of taxes and charges
13,349
6,080
Valuation of investment property in fair value
5,126
873
Other services
3,812
4,424
Settlement of inventory taking
4,596
8,765
Settlement of white certificates
-
15,974
Other
10,479
25,248
TOTAL
76,948
111,171
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
In the corresponding period, the “other” item included the amount of PLN 17,612 thousand, representing the value of
deferred payment for the acquisition of Proplan. EUR 4,136 thousand of discounted conditional deferred payment which
depended on Proplan’s results for 2018 and 2019, was payable respectively in 2019 and 2020 (the estimation of nominal
payments at the moment of acquisition of control was EUR 4,270 thousand). However, due to the fact that Proplan failed to
achieve financial results allowing for payment of this part of consideration for the acquisition of Proplan Plant Protection
Company, S.L., the value of this deferred payment was recognised on a one-off basis as other operating income (line “Other”)
in the amount of PLN 17,612 thousand.
Moreover, in 2019 due to the implementation of investment tasks aimed at improving energy efficiency in the previous
periods, in 2019 CIECH Soda Polska S.A. received new energy efficiency certificates (white certificates) whose value, due to
the sharp increase in the prices of the certificates on the exchange, exceeded the value of expenditure on investment projects.
The surplus amounted to PLN 13.5 million (the value of certificates obtained was determined on the basis of market prices)
and was recognised on a one-off basis in other operating income (line “Settlement of white certificates”).
Subsidies and other forms of State aid
Subsidies recognised in the statement of profit or loss in the reporting period amounted to PLN 5,514 thousand
(PLN 10,237 thousand in the comparable period) settled over time in proportion to the depreciation/amortisation of non-
current assets to which they relate. Subsidies included in liabilities as at 31 December 2020 amounted to PLN 67,300 thousand
(compared to PLN 65,378 thousand as at 31 December 2019). The CIECH Group companies receive subsidies for research and
development activities, purchase of property, plant and equipment and for adapting investment projects to environmental
requirements. The subsidies are mainly received by the CIECH Group companies from the National Centre for Research and
Development, the National Fund for Environmental Protection and Water Management and Ministry of Development.
The most significant subsidies presented in statement of financial position are as follows:
SIGNIFICANT SUBSIDIES RECEIVED BY:
CIECH
Soda Polska S.A.
CIECH
Sarzyna S.A.
“Extension of the centre of decantation and filtration of distillation sludge in the
Plant in Inowrocław”
10,930
Reduction of dust emissions from the Inowrocław CHP Plant by modernising boiler
ESPs – OP 110 No 1, 2, 3, 4
5,727
“Developing and testing, on a demonstrable scale, internationally innovative agro-
chemical preparations of a unique composition and formulation”
14,581
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
29
In 2020, the CIECH Group companies continued publicly subsidised projects launched in previous years. Particularly intensive
work was carried out by CIECH Salz Deutschland GmbH as part of the project to build a new salt production plant in Stassfurt,
Germany (over EUR 11 million in funding awarded in 2017).
In June 2020, CIECH R&D Sp. z o.o. settled the project “Development by CIECH R&D sp. z o.o. in cooperation with Nicolaus
Copernicus University in Toruń (subcontractor) of a globally innovative technology for ammonia brine carbonation allowing
the increase of sodium efficiency in the sodium carbonate production process”. CIECH R&D Sp. z o.o. received over
PLN 370 thousand as the last tranche of the subsidy. A project aimed at reversing CO
2
in the soda production process was
also implemented by CIECH R&D Sp. z o.o. for another year. The work carried out in 2020 resulted in the receipt of a refund
in the amount of over PLN 330 thousand. The project will be continued in 2021. The company also continued the
implementation of the project entitled “Establishment of a Research and Development Center of Ciech R&D Sp. z o.o.”.
The financial and material settlement of the aforementioned project will be carried out in 2021.
Smart Fluid Sp. z o.o. continued to carry out R&D works aimed at verifying in real conditions the thesis about the possibility
of using shear thickened liquids for large-scale, economically viable production of material, which is a semi-finished product
for manufacturers of widely understood clothing / protective elements / sports accessories. The work completed allowed the
company to receive a refund of more than PLN 440 thousand from a subsidy granted in the amount of more than
PLN 5 million.
CIECH Soda Polska S.A. received a positive decision regarding the change of the commencement date of the project aimed at
the development and implementation of anomaly detection methods and algorithms, predictive and prescriptive algorithms
and the development of a neural metamodel to optimise processes at some nodes of the sodium carbonate production plant.
The project will be launched in 2021, rather than in 2020, as originally planned. The company has also submitted an
application for subsidy for the project entitled "Construction of a Gas and Steam Complex together with a recovery boiler on
the premises of the Inowrocław Plant". The requested subsidy amount is over PLN 30.2 million.
OTHER OPERATING EXPENSES
01.01.-31.12.2020
01.01.-31.12.2019*
Costs related to investment property
(4,202)
(3,898)
Recognition of impairment losses on receivables
(19,670)
(2,207)
Recognition of impairment losses on property, plant and equipment and
intangible assets
(3,692)
(73,600)
Recognition of provisions on employee benefits
(1,584)
(17,228)
Recognition of provisions for compensation
(602)
(180)
Recognition of provisions for environmental protection
(228)
(974)
Recognition of provisions for liabilities and anticipated losses
(16,640)
(8,941)
Liquidation costs of property, plant and equipment
(1,787)
(1,520)
Liquidation costs of materials
(400)
(1,817)
Costs of remediating the effects of fortuitous events
(1,534)
-
Penalties and compensations paid
(1,223)
(1,740)
Settlement of energy purchase costs for previous years
(5,016)
-
Other fees
(2,976)
(737)
Inventory differences
(2,034)
(5,932)
Costs of idle assets and production capacity
(24,699)
-
Other
(27,589)
(16,122)
TOTAL
(113,876)
(134,896)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
In 2020, the amount of PLN 24,699 thousand was disclosed in other operating expenses related to the costs of idle assets and
production capacity in CIECH Soda Romania S.A. in connection with the factory hibernation from September 2019.
In other companies of the CIECH Group that conduct production activities, these costs are recognized in the core business
and affect the level of cost of sales.
The largest item among the write-offs updating the value of receivables are those created in the Romanian branch of
CIECH S.A. due to the high risk of non-payment of these receivables by foreign recipients.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
30
In addition, in subsidiaries, the largest write-offs were created based on the aging of receivables - these are write-offs for
receivables overdue more than 180 days.
The item "other" includes CO
2
costs in value of PLN 9,459 thousand used to cover emissions for 2019 in the Romanian
company CIECH Soda Romania S.A.
The item "other" also includes costs in the amount of PLN 9,181 thousand (EUR 2,052 thousand), which adjusts previously
booked profits related to the contract for the construction of caverns in the SDC Group, because the contract was extended
(the volume of caverns has been increased and therefore their construction has not been finalized yet).
3.4.1. Detailed information on significant impairment losses
Detailed information on significant impairment losses
In connection with the suspension in 2019 of production by a subsidiary, CIECH Soda Romania S.A., resulting from the
discontinuation of supplies of process steam by its supplier, S.C. CET Govora S.A., the CIECH Group evaluated the evidence of
impairment of assets, based on possible scenarios of actions. Following the analysis, the Group recognised an impairment
loss on property, plant and equipment in the total amount of PLN 73,486 thousand as at 31 December 2019. The decision to
recognise the impairment loss was made as a result of:
1. failure to reach agreement between the CIECH Soda Romania S.A. and the sole provider of steam – S.C. CET Govora S.A.
based in Romania in composition bankruptcy (“CET”), as to the level of the price of process steam, as confirmed by CET
in its letter with information on the inability to supply the steam at the price agreed in the terminated contract,
2. analysis of possible steam delivery options from a new source, the probability of which, as at the date of decision making,
was assessed as insufficiently high.
The amount of the impairment loss on property, plant and equipment was determined in accordance with IAS 36 “Impairment
of assets”. The following assumptions were adopted to determine the value of particular groups of fixed assets:
• for land – the value from market valuations was used as the selling price,
• for fixed assets and fixed assets under construction that could potentially be used by other CIECH Group companies and
relocated there – the book value was used,
• for vehicles and other fixed assets – it was assumed that the book value reflected the market value,
• for other fixed assets not included above – the price of scrap less the costs of disassembly was used as the selling price.
The impairment loss was recognised for buildings, premises, civil and marine engineering structures, technical equipment
and machinery, fixed assets under construction.
The impairment loss (recognised as other operating expenses in the period from 1 January to 31 December 2019), calculated
on the basis of the above assumptions, was PLN 73,486 thousand.
The amount of the impairment loss was allocated to the profit or loss of the industry Segments in which CIECH Soda Romania
S.A. conducts its operations. The impact on the operating profit or loss of particular Segments in 2019 was as follows:
1. Soda Segment: PLN 70,986 thousand,
2. Silicates Segment: PLN 2,500 thousand.
As at the balance sheet date, the analysis of the situation in CIECH Soda Romania S.A. has been performed. To date, the
situation has not changed – possible scenarios are still being analysed.
In addition, the Group analysed the list fixed assets and fixed assets under construction that could potentially be used by
other CIECH Group companies and relocated there, and confirmed its validity. In addition, the financial statements for 2020
include a depreciation charge that takes into account the wear and tear of these fixed assets in the amount of
PLN 8,851 thousand, which is presented under other operating expenses as the cost of idle capacity which, in the opinion of
the Management Board, reflects the status of the above-mentioned fixed assets.
The status of the Romanian plant has not changed compared to the status at the end of 2019. In 2020, the Group continues
to identify the reasons for the decision to recognise an impairment loss. At the end of 2020, the fixed assets held were
measured at fair value on a going concern basis, but taking into account hibernation of the plant, by an independent valuer
to determine whether the value of the assets recognised in the Company's accounting records exceeds the value determined
by the valuer. Based on the valuation it was determined that no additional impairment losses were necessary. As a result, the
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
31
amount of impairment losses on fixed assets in CIECH Soda Romania S.A. did not change. The net value of the company's
fixed assets as at 31 December 2020 is PLN 79,539 thousand.
At the same time, the Group still continues analyses of the possibility of obtaining a new source of steam at a reasonable cost
and long-term cooperation in the supply of other raw materials necessary for production (guaranteeing cost predictability in
subsequent years). The result of these analyses may affect the amount of impairment losses recognised in the consolidated
financial statements of the CIECH Group for subsequent reporting periods.
3.5. FINANCIAL INCOME AND EXPENSES
Accounting policy, judgements and estimates
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. Accordingly, key items of financing activities
include:
✓ interest on borrowings determined based on the effective interest method,
✓ interest earned by the Group 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 Group’s right to receive payment is established,
✓ write-downs on investments,
✓ net foreign exchange gains or losses,
✓ gains/ losses on sales of financial assets,
✓ gains / losses on the measurement of financial instruments not assigned to hedge accounting and the ineffective
part relating to financial instruments designated for hedge accounting.
FINANCIAL INCOME
01.01.-31.12.2020
01.01.-31.12.2019*
Interest
1,870
1,441
Dividends and shares in profit
114
136
Net foreign exchange gains
45,172
-
Reversal of provision of financial liabilities
-
1,755
Other
11,319
1,733
TOTAL
58,475
5,065
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
FINANCIAL EXPENSES
01.01.-31.12.2020
01.01.-31.12.2019*
Total interest
(55,991)
(53,394)
Net foreign exchange losses
-
(648)
Recognition of other impairment losses
(853)
(139)
Factoring commissions
(1,593)
(1,971)
Bank fees and commissions
(3,744)
(3,107)
Recognised provisions
(3,703)
(20,990)
Costs of discounting of liabilities
-
(2,522)
Losses on financial instruments
(48,175)
(883)
Other
(6,090)
(5,344)
TOTAL
(120,149)
(88,998)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
32
Main amounts due to losses on financial instruments related to:
• negative valuation of futures contracts in CIECH Soda Romania S.A. for the sale of CO
2
certificates, which was established
before the date of designation of the hedge accounting instrument: PLN 17,237 thousand,
• negative valuation of the CCIRS instrument not assigned to hedge accounting: PLN 12,742 thousand,
• negative valuation and realization of forward instruments not assigned to hedge accounting: PLN 5,064 thousand.
The item "Profit / loss on financial instruments" in the statement of profit or loss consists of the following values:
01.01.-31.12.2020
01.01.-31.12.2019
Profit on financial instruments
4 573
1 583
Interest
1 870
1 441
Profit on derivatives
2 449
-
Reversal of write -offs
254
142
Loss on financial instruments
(106 033)
(56 325)
Interest
(55 990)
(53 394)
Loss on derivatives
(50 043)
(2 931)
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME
Tax effect of each component of other comprehensive income of the CIECH Group
01.01.-31.12.2020
01.01.-31.12.2019*
Tax effect of each component of other comprehensive
income of the CIECH Group
Before tax
Tax
After
tax
Before
tax
Tax
After
tax
Net currency at translation differences
42,397
2,031
44,428
(12,492)
(237)
(12,729)
Cash flow hedge reserve
(37,327)
10,188
(27,139)
3,698
(3,573)
125
Profit (loss) from costs of hedging reserve
(3,443)
-
(3,443)
4,409
-
4,409
Valuation of actuarial provisions
(167)
32
(135)
(590)
112
(478)
Other components of other comprehensive income
(9)
-
(9)
-
-
-
TOTAL
1,451
12,251
13,702
(4,975)
(3,698)
(8,673)
*Restated data. For detailed information on restatement see Note 1.5.1 to these statements.
Income tax and reclassification adjustments in other comprehensive income
Other comprehensive income before tax
01.01.-31.12.2020
01.01.-31.12.2019*
Currency translation differences (foreign companies)
42,397
(12,492)
remeasurement for the current period
42,397
(12,492)
Profit (loss) from cash flow hedge reserve
(37,327)
3,698
fair value remeasurement in the period
(53,129)
4,761
reclassification to profit or loss
15,802
(1,063)
Profit (loss) from costs of hedging reserve
(3,443)
4,409
fair value remeasurement in the period
(4,407)
4,409
reclassification to profit or loss
964
-
Valuation of actuarial provisions
(167)
(590)
remeasurement for the current period
(167)
(590)
Other components of other comprehensive income
(9)
-
remeasurement for the current period
(9)
-
Income tax attributable to other components of other comprehensive income
12,251
(3,698)
accrued for the current period
15,318
(3,988)
reclassification to profit or loss
(3,067)
290
Other comprehensive income net of tax
13,702
(8,673)
*Restated data. For detailed information on restatement see Note 1.5.1 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
33
4. INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY
4.1. MAIN COMPONENTS OF TAX EXPENSE
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.
The main components of tax expense include:
THE MAIN COMPONENTS OF TAX EXPENSE (TAX INCOME)
01.01.-31.12.2020
01.01.-31.12.2019*
Current income tax
(70,219)
(55,391)
Income tax for the reporting period
(66,089)
(53,007)
Adjustment to tax for previous years
(4,130)
(2,384)
Deferred tax
5,270
(9,999)
Origination/reversal of temporary differences
1,651
(6,135)
Unrecognized deferred tax assets
3,619
(3,864)
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS
(64,949)
(65,390)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
For a detailed description of proceedings concerning tax settlements, see note 9.2 to these financial statements.
INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME
01.01.-31.12.2020
01.01.-31.12.2019
Net currency at translation differences
2,031
(237)
Cash flow hedge
10,188
(3,573)
Valuation of actuarial provisions
32
112
TOTAL
12,251
(3,698)
4.2. EFFECTIVE TAX RATE
The following represents a reconciliation of income tax calculated by applying the currently enacted statutory tax rate to the
Group’s pre-tax financial result to income tax calculated based on the effective tax rate:
EFFECTIVE TAX RATE
01.01.-31.12.2020
01.01.-31.12.2019
Profit/(loss) before tax
188,133
170,649
Income tax based on currently enacted tax rate
(35,745)
(32,423)
Difference due to the application of tax rates of other tax jurisdictions
(7,695)
(8,700)
Tax effect of revenues adjusting profit (loss) before taxes (permanent difference)
21,740
9,657
Effect of participation in equity-accounted investees
192
198
Tax effect of costs adjusting profit (loss) before taxes (permanent difference)
(16,736)
(27,392)
Current income tax adjustment of previous years
(17,504)
(357)
Deferred tax asset from tax losses from previous years
1,470
(3,843)
Tax losses from statement periods from which deferred tax asset was not included
(27,656)
-
Special economic zone
19,040
(2,505)
Tax reliefs
491
488
Writing down the asset for deferred tax
(1,048)
(1,048)
Other
(1,498)
535
Income tax recognised in income statement
(64,949)
(65,390)
EFFECTIVE TAX RATE
34,5%
38,3%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
34
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
✓ unless 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 statement is itself recognised outside profit or loss: either
in other comprehensive income, when it relates to items recognised in other comprehensive income, or directly in
equity, when it relates to items recognised directly in equity.
Deferred tax assets and liabilities are offset solely if there is a legally enforceable right to offset current tax assets and
liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity.
The Group does not recognise deferred tax on leases.
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, the CIECH Group subsidiaries base their calculations on estimates related to the
term and amount of future taxable income.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
35
Deferred income tax is attributable to the following items:
DEFERRED INCOME TAX ASSETS AND DEFERRED
INCOME TAX LIABILITY
31.12.2020
31.12.2019*
Total asset
Total
liability
Net value
Total asset
Total
liability
Net value
Property, plant and equipment
1,221
136,672
(135,451)
1,647
143,006
(141,359)
Intangible assets
5,032
22,982
(17,950)
6,055
23,113
(17,058)
Rights to use an asset**
-
4,686
(4,686)
-
4,933
(4,933)
Investment property
1,133
1,099
34
1,573
1,562
11
Financial assets
6,795
3,340
3,455
641
3,677
(3,036)
Inventory
2,590
426
2,164
650
3,012
(2,362)
Trade and other receivables
9,152
-
9,152
4,757
1,177
3,580
Provisions for employee benefits
2,523
-
2,523
5,119
-
5,119
Other provisions
18,210
-
18,210
18,553
-
18,553
Tax losses carried forward
38,413
-
38,413
28,627
-
28,627
Foreign exchange differences
471
4,312
(3,841)
2,620
289
2,331
Liabilities
32,600
47
32,553
30,907
-
30,907
Special economic zone
95,369
-
95,369
109,870
-
109,870
Other
369
43
326
445
914
(469)
Deferred tax assets/liability
213,878
173,607
40,271
211,464
181,683
29,781
Set - off of deferred tax assets/ liability
(124,591)
(124,591)
-
(123,269)
(123,269)
-
Unrecognized deferred tax assets
(38,599)
-
(38,599)
(44,461)
-
(44,461)
Deferred tax assets/liability recognised in the
statement of financial position
50,688
49,016
1,672
43,734
58,414
(14,680)
*Restated data. For detailed information on restatement and discontinued operations, see Notes 1.5.1 and 5.13 to these statements.
** The value relates to the valuation of the right to use an asset in one of the Group companies, which was recognized at the time of acquisition
of the company and the valuation at fair value of its assets.
The Group estimates that within more than 12 months from the period of the consolidated financial statements presentation
the deferred tax asset will be utilised in the amount of PLN 140,124 thousand (this amount does not include the unrecognised
amount of the deferred tax asset). In the same period, the estimated amount of settlement of the deferred tax liability will
be PLN 144,095 thousand.
The Group recognises deferred tax liabilities and deferred tax assets on the basis of temporary differences between the
carrying amounts of assets and liabilities and their tax bases and tax losses deductible in the future as well as other unused
tax credits relating to corporate income tax. Temporary differences can be:
• taxable, resulting in taxable amounts to be included in the determination of taxable income (tax loss) in future periods
when the carrying amount of the asset or liability is recovered or settled, or
• deductible, resulting in deductible amounts in the determination of taxable income (tax loss) in future periods when
the carrying amount of the asset or liability is recovered or settled.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
36
CHANGE IN TEMPORARY DIFFERENCES IN THE
PERIOD
01.01.2020
Change in
temporary
differences
recognised in
the statement
of profit or
loss
Change in
temporary
differences
recognised in
other
comprehensive
income
Currency
translation
differences
31.12.2020
Property, plant and equipment
(658,209)
52,185
-
(12,642)
(618,666)
Intangible assets
(80,909)
3,254
-
(6,702)
(84,357)
Rights to use an asset
(25,962)
1,295
-
-
(24,667)
Investment property
9,600
87
-
-
9,687
Financial assets
(91,734)
(9,686)
30,466
(12)
(70,966)
Inventory
(12,353)
23,844
-
-
11,491
Trade and other receivables
19,262
15,693
-
356
35,311
Provisions for employee benefits
28,543
(17,290)
79
776
12,108
Other provisions
58,915
(5,510)
-
4,281
57,686
Tax losses carried forward
150,673
59,397
-
-
210,070
Foreign exchange differences
18,630
(44,465)
11,974
-
(13,861)
Liabilities
140,306
7,150
-
-
147,456
Other
(3,601)
4,423
-
5
827
TOTAL
(446,839)
90,377
42,519
(13,938)
(327,881)
CHANGE IN TEMPORARY DIFFERENCES IN
THE PERIOD
01.01.2019
Change in
temporary
differences
recognised in the
statement of profit
or loss
Change in
temporary
differences
recognised in
other
comprehensive
income
Currency
translation
differences
31.12.2019
Property, plant and equipment
(697,587)
37,334
-
2,044
(658,209)
Intangible assets
(81,416)
(289)
-
796
(80,909)
Rights to use an asset
(26,332)
370
-
-
(25,962)
Investment property
8,309
1,291
-
-
9,600
Financial assets
(135,667)
16,517
27,421
(5)
(91,734)
Inventory
3,916
(16,269)
-
-
(12,353)
Trade and other receivables
(53,772)
71,205
-
1,829
19,262
Provisions for employee benefits
12,959
15,363
591
(370)
28,543
Other provisions
62,603
(3,172)
-
(516)
58,915
Tax losses carried forward
233,240
(82,567)
-
-
150,673
Foreign exchange differences
17,988
2,327
(1,685)
-
18,630
Liabilities
213,504
(73,227)
-
29
140,306
Other
(61,731)
58,128
-
2
(3,601)
TOTAL
(503,986)
27,011
26,327
3,809
(446,839)
The above table does not contain any temporary differences from the deferred tax asset of the special economic zone as
according to the rules, the above-mentioned relief is tax-deductible rather than income-deductible.
Dividend payment to the shareholders of the CIECH Group has no effect on deferred tax.
The CIECH Group companies who recognised deferred tax assets in respect of tax loss carried forward, on the basis of their
tax budgets, predict that sufficient taxable profits will be realised in the period when losses can be utitlised against which
the Group can fully utilise the benefits therefrom.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
37
The CIECH Group companies did not recognize the deferred tax asset in the amount of PLN 38,599 thousand due to the tax
loss generated in 2015 and due to tax loss on the capital source in 2019-2020 (PLN 79,412 thousand), as it determined that
recovery of this asset over the next 5 years is less than more probable.
In August 2016, the headcount-related condition provided for in the Zone Permit No 126/PSSE dated 23 May 2014 for carrying
out business activities in the Pomeranian Special Economic Zone (as amended by Decision of the Minister of Economy No.
252/ IW/15 of 21 July 2015), was fulfilled. Thereby CIECH Soda Polska S.A. had fulfilled all the conditions related to the Zone
Permit and, as of 1 September 2016, started to take advantage of its exemption from the corporate income tax on account
of operations carried out in the Pomeranian Special Economic Zone. In view of the above, in 2016 CIECH Soda Polska S.A.
recognised a deferred tax asset of PLN 95,422 thousand. Following the receipt of explanations from the European
Commission, via the Office for Competition and Consumer Protection, regarding the definition and calculation of the value of
a single investment project, the value of available State aid determined for the Company increased by PLN 44,911 thousand
in 2017. The Company cautiously analyzed the capabilities of using available public aid by calculating the amount of the
exemption in accordance with the methodology adopted in this respect and decided finally to recognise in the financial
statements for 2017 the additional deferred tax assets in the amount of PLN 10,457 thousand. In turn, in the year 2018 –
an additional amount of the deferred tax asset due to operating in a special economic zone, i.e. PLN 20,939 thousand, and
not to recognize a deferred income tax asset in the amount of PLN 13,515 thousand. At the end of 2019, net asset
(after taking into account the non-recognised asset in the amount of PLN 16,020 thousand) resulting from operations carried
out in the Special Economic Zone is PLN 93,850 thousand.
At the end of 2020, after taking into account the updates and based on the estimated level of aid utilization in the following
years, the net asset for operating in the Special Economic Zone amounts to PLN 95,369 thousand.
In total, CIECH Soda Polska S.A. as a result of obtaining the above-mentioned permits recognized the amount of
PLN 156,038 thousand of the available maximum public aid on this account. The amount of available public aid is limited
by the maximum amount of aid that CIECH Soda Polska S.A. and related parties may be received for the implementation of
projects forming the so-called Single Investment Project. The deferred income tax asset was recognized in this amount.
First in 2016 in the amount of PLN 95,422 thousand, and then as a supplement in 2017 in the amount of an additional
PLN 44,911 thousand. In the period from September 2016 to the end of 2020, the Company used PLN 44,965 thousand assets
set up for this purpose, in connection with the use of the income tax exemption for operating in the special economic zone.
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
38
5. NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
5.1. PROPERTY, PLANT AND EQUIPMENT
Accounting policy
Own property, plant and equipment
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.
Property, plant and equipment used under lease agreements
As of 1 January 2019, property, plant and equipment used under lease agreements are reported in the balance sheet
as right-of-use assets.
Subsequent expenditure
The cost of replacing a part of an item of property, plant and equipment are capitalised. Other costs are capitalised only
to the extent that it is probable that the future economic benefits embodied within the part will flow to the Group and
its cost can be measured reliably. Other subsequent costs are recognised in the profit or loss statement as incurred
expenses.
A separate component of an item of property, plant and equipment, requiring replacement at regular intervals, is
depreciated over its economic useful life.
The Group increases the value of property, plant and equipment by the value of outlays for periodic major overhauls,
necessary for the functioning of a given item of property, plant and equipment. These expenditures are treated as a
separate item of property, plant and equipment and depreciated through the anticipated period to the next planned
overhaul. Upon capitalisation of new costs of overhauls, the non-depreciated value of previous repairs is allocated to
operating expenses.
Upon the acquisition or creation of an item of property, plant and equipment, the Group separates from the cost a
value equal to the expenditures that need to be made during the next overhaul of a given item of property, plant and
equipment and depreciates it through the anticipated period left until the next planned overhaul.
Depreciation
Items of property, plant and equipment, and also their significant and separate components, are depreciated on a
straight-line basis over their respective estimated useful lives. Land is not depreciated. The estimated useful lives are
as follows:
Buildings 20-50 years
Technical equipment and machinery 2-20 years
Vehicles 2-20 years
Others 1-15 years
Borrowing costs
For qualifying assets, the borrowing costs that otherwise would have been avoided if the expenditure on the qualifying
asset has not been made are included in purchase price of these assets. The amount of borrowing costs eligible for
capitalisation is defined as the appropriate portion of loan interest, the cost of arranging financing and respectively
foreign exchange differences on foreign currency loans.
Judgements and estimates
Depreciation rates. These 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
39
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in
accounting policies, in note 3.4.
01.01.-31.12.2020
Land
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
83,826
1,281,139
3,147,510
79,627
61,134
701,150
5,354,386
Purchase
139
2,306
5,372
5,577
2,025
727,329
742,748
Reclassification
102
84,326
457,607
1,112
9,515
(575,772)
(23,110)
Capitalised borrowing costs
-
-
2,473
-
-
11,522
13,995
Exchange differences
6,641
20,882
82,581
1,343
1,009
43,412
155,868
Sales
(6)
(1,125)
(316)
(223)
(802)
(7,990)
(10,462)
Liquidation
-
(3,152)
(22,050)
(3,307)
(1,159)
(30)
(29,698)
Change in the Group’s structure
-
25
84
10
(9,005)
-
(8,886)
Transferred from/to assets classified as
held for sale
-
(66,828)
(97,178)
(682)
(4,469)
-
(169,157)
Other
-
3,089
7,179
5
4,453
(622)
14,104
Gross value of property, plant and
equipment at the end of the period
90,702
1,320,662
3,583,262
83,462
62,701
898,999
6,039,788
Accumulated depreciation at the
beginning of the period
(11,208)
(596,760)
(1,679,547)
(60,283)
(40,466)
-
(2,388,264)
Depreciation for the period
(5,280)
(28,046)
(169,013)
(3,619)
(263)
-
(206,221)
Annual depreciation charge
(4,211)
(65,694)
(206,161)
(4,879)
(6,350)
-
(287,295)
Sales
-
609
220
195
1,027
-
2,051
Liquidation
-
1,660
21,939
1,814
1,148
-
26,561
Change in the Group’s structure
-
(25)
(92)
(10)
3,405
-
3,278
Exchange differences
(1,070)
(11,580)
(46,557)
(959)
(728)
-
(60,894)
Reclassification
-
-
(602)
-
(675)
-
(1,277)
Transferred from/to assets classified as
held for sale
-
46,983
61,467
263
1,710
110,423
Other
1
1
773
(43)
200
-
932
Accumulated depreciation at the end of
the period
(16,488)
(624,806)
(1,848,560)
(63,902)
(40,729)
-
(2,594,485)
Impairment losses at the beginning of
the period
-
(41,291)
(15,310)
-
95
(18,409)
(74,915)
Recognition
-
-
-
-
-
(510)
(510)
Reversal
-
-
-
-
-
95
95
Exchange differences
-
(2,681)
(994)
-
6
(1,114)
(4,783)
Other
-
-
-
-
-
1,106
1,106
Impairment losses at the end of the
period
-
(43,972)
(16,304)
-
101
(18,832)
(79,007)
Carrying amount of property, plant and
equipment at the beginning of period
72,618
643,088
1,452,653
19,344
20,763
682,741
2,891,207
Carrying amount of property, plant and
equipment at the end of the period
74,214
651,884
1,718,398
19,560
22,073
880,167
3,366,296
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
40
01.01.-31.12.2019
Land
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
82,164
1,258,088
3,131,875
115,384
53,975
400,455
5,041,941
Purchase
3,352
762
10,592
3,533
2,918
526,481
547,638
Reclassification
-
29,523
38,666
(34,766)
5,032
(134,449)
(95,994)
Capitalised borrowing costs
-
-
-
-
-
10,376
10,376
Exchange differences
(1,198)
(4,626)
(15,538)
(600)
(228)
(5,464)
(27,654)
Sales
(499)
-
(311)
(1,702)
(132)
(96,211)
(98,855)
Liquidation
-
(303)
(14,720)
(2,222)
(431)
-
(17,676)
Other
7
(2,305)
(3,054)
-
-
(38)
(5,390)
Gross value of property, plant and
equipment at the end of the period
83,826
1,281,139
3,147,510
79,627
61,134
701,150
5,354,386
Accumulated depreciation at the
beginning of the period
(11,317)
(537,705)
(1,530,907)
(65,735)
(35,688)
-
(2,181,352)
Depreciation for the period
109
(59,055)
(148,640)
5,452
(4,778)
-
(206,912)
Annual depreciation charge
-
(63,847)
(193,477)
(4,977)
(5,957)
-
(268,258)
Sales
-
-
220
1,685
38
-
1,943
Liquidation
-
265
14,416
836
428
-
15,945
Exchange differences
109
2,218
9,942
394
170
-
12,833
Reclassification
-
-
17,198
7,514
516
-
25,228
Other
-
2,309
3,061
-
27
-
5,397
Accumulated depreciation at the end of
the period
(11,208)
(596,760)
(1,679,547)
(60,283)
(40,466)
-
(2,388,264)
Impairment losses at the beginning of
the period
-
(1,395)
(810)
-
98
(1,283)
(3,390)
Recognition
-
(41,261)
(14,778)
-
-
(17,447)
(73,486)
Exchange differences
-
731
278
-
(3)
293
1,299
Other
-
634
-
-
-
28
662
Impairment losses at the end of the
period
-
(41,291)
(15,310)
-
95
(18,409)
(74,915)
Carrying amount of property, plant and
equipment at the beginning of period
70,847
718,988
1,600,158
49,649
18,385
399,172
2,857,199
Carrying amount of property, plant and
equipment at the end of the period
72,618
643,088
1,452,653
19,344
20,763
682,741
2,891,207
In 2020, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 2.5%,
whereas in 2019 it amounted to approx. 3.2%.
In 2020, there were no significant impairment losses on property, plant and equipment.
In 2019, in connection with the suspension of production resulting from the discontinuation of supplies of process steam,
CIECH Soda Romania S.A. recognised an impairment loss on fixed assets, as described in detail in Note 3.4.1 to these
statements.
Depreciation of property, plant and equipment was charged to the following line items in the consolidated statement of profit
or loss:
PROPERTY, PLANT AND EQUIPMENT DEPRECIATION CHARGES
01.01.-31.12.2020
01.01.-31.12.2019
Cost of sales
(261,334)
(259,488)
Selling costs
(147)
(161)
General and administrative expenses
(7,215)
(8,551)
Other operating expenses
(18,599)
(58)
TOTAL
(287,295)
(268,258)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
41
Purchases of property, plant and equipment were made with own financial resources. The increase in the value of property,
plant and equipment is related to investment projects carried out in the CIECH Group, mainly in the production companies
of the Group.
As of 1 January 2019, the value of fixed assets accounted for in accordance with IFRS 16 Leases is reported in the balance
sheet as right-of-use assets.
In the reporting period the CIECH Group received compensation from third parties for impaired tangible fixed assets in
the amount of PLN 304 thousand (PLN 2,039 thousand in the comparable period).
As at 31 December 2020, all items of property, plant and equipment at CIECH S.A. were pledged as collateral for financial
liabilities on account of the term loan, revolving facility and overdraft facilities.
Future commitments arising from agreements concerning acquisition of property, plant and equipment amounted to
PLN 120,509 thousand in 2020 (in the comparable period: PLN 153,731 thousand).
5.2. RIGHT-OF-USE ASSETS
Accounting policy
Initial measurement of right-of-use assets
At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-of-use asset
comprises:
a) the amount of the initial measurement of the lease liability,
b) any lease payments made at or before the commencement date, less any lease incentives received;
c) any initial direct costs incurred by the lessee; and
d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the
site on which it is located or restoring the underlying asset to the condition required by the terms and conditions
of the lease, unless those costs are incurred to produce inventories.
Subsequent measurement of right-of-use assets
After initial recognition, the Group 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 Group by the end of the lease term or if the cost of the
right-of-use asset reflects that the Group will exercise a purchase option, the Group depreciates the right-of-use asset
from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group 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 Group applies IAS 36 Impairment of Assets to determine whether the right-of-use asset is impaired and to account
for any impairment loss identified.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
42
Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2020 are as follows:
01.01.-31.12.2020
Land
Buildings
offices and
land and
water
engineering
facilities
Machinery
and
equipment
Means of
transport
Other
tangible
fixed assets
TOTAL
Gross value of rights to use an asset at the
beginning of the period
72,209
48,476
33,629
97,395
1,403
253,112
Reclassifications
-
-
(1,036)
-
(855)
(1,891)
Adopted on the basis of a finance lease
agreement
-
-
-
3,401
-
3,401
Modifications to leasing contracts
-
(542)
-
(50)
-
(592)
New leasing agreements
-
893
-
3,506
297
4,696
Closing the contract
(183)
(30)
-
(90)
-
(303)
Exchange differences
386
1,607
2,517
192
29
4,731
Transferred from/to assets classified as held
for sale
(961)
-
-
(176)
-
(1,137)
Other
(23)
-
-
21
-
(2)
Gross value at the end of the period
71 428
50 404
35 110
104,199
874
262,015
Accumulated amortisation at the beginning of
the period
(10,728)
(3,816)
(19,778)
(23,049)
(949)
(58 320)
Amortisation for the period
(1,117)
(4,291)
(2,000)
(19 262)
(491)
(27 161)
Reclassifications
-
-
602
-
675
1 277
Exchange differences
-
(62)
(1,521)
(77)
(20)
(1 680)
Transferred from/to assets classified as held
for sale
151
-
-
89
-
240
Closing the contract
30
171
-
117
-
318
Other
(1)
-
-
-
-
(1)
Accumulated amortisation at the end of the
period
(11,665)
(7,998)
(22,697)
(42,182)
(785)
(85,327)
Net value of rights to use an asset at the
beginning of the period
61,481
44,660
13,851
74,346
454
194,792
Net value of rights to use an asset at the end
of the period
59,763
42,406
12,413
62,017
89
176,688
01.01.-31.12.2019
Land
Buildings
offices and
land and
water
engineering
facilities
Machinery
and
equipment
Means of
transport
Other
tangible
fixed assets
TOTAL
Gross value of rights to use an asset at the
beginning of the period
-
-
-
-
-
-
Changes in accounting policies
32,919
47,032
-
38,574
564
119,089
Gross value of rights to use an asset at the
beginning of the period after adjustments
32,919
47,032
-
38,574
564
119,089
Reclassifications
39,249
-
31,958
42,024
855
114,086
Modifications to leasing contracts
-
1,290
-
398
-
1,688
New leasing agreements
98
344
1,977
16,118
-
18,537
Closing the contract
-
-
-
(55)
-
(55)
Exchange differences
(45)
(190)
(306)
(23)
(16)
(580)
Other
(12)
-
-
359
-
347
Gross value at the end of the period
72,209
48,476
33,629
97,395
1,403
253,112
Accumulated amortisation at the beginning of
the period
-
-
-
-
-
-
Amortisation for the period
(1,125)
(3,821)
(2,761)
(15,563)
(437)
(23,707)
Reclassifications
(9,603)
-
(17,198)
(7,514)
(516)
(34,831)
Other
-
5
181
28
4
218
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
43
01.01.-31.12.2019
Land
Buildings
offices and
land and
water
engineering
facilities
Machinery
and
equipment
Means of
transport
Other
tangible
fixed assets
TOTAL
Accumulated amortisation at the end of the
period
(10,728)
(3,816)
(19,778)
(23,049)
(949)
(58,320)
Net value of rights to use an asset at the
beginning of the period
-
-
-
-
-
-
Net value of rights to use an asset at the end
of the period
61,481
44,660
13,851
74,346
454
194,792
In 2019, the CIECH Group implemented IFRS 16 “Leases”. Under this standard, leases and rentals, leases of passenger cars,
wagons, locomotives and perpetual usufruct rights were identified in the Group as lease agreements.
CIECH S.A. is a lessee of office and warehousing space, in which the largest item (approx. 2 thousand m
2
) is the office
in Warsaw at Wspólna Street, where the Company’s registered office is located. The term of the lease agreement expires in
2028. CIECH S.A. also leases passenger cars. The value of these cars includes the value of discounted lease payments at the
moment of concluding the lease agreement, less the annual depreciation rate for this group of fixed assets.
Some agreements are denominated in foreign currencies and indexed to price indices. Some agreements contain an extension
option. For detailed information on lease liabilities, see Note 7.4.
5.3. INTANGIBLE ASSETS
Accounting policy
Goodwill
Goodwill arises on a combination of two separate entities or businesses into one reporting entity. It specifically relates
to the acquisitions of subsidiaries, associates, or jointly controlled entities. All business combinations of unrelated
entities are recognised using the acquisition method.
The Group initially measures goodwill as the difference between the total value:
✓ the acquisition-date fair value of the consideration transferred,
✓ the amount of any non-controlling interest in the acquiree measured either at fair value or at their proportionate
share in the fair value of the acquiree's net assets, and
✓ in a business combination achieved in stages the acquisition-date fair value of the acquirer’s previously held equity
interest in the acquire
and the net recognised amounts (fair value) of the identifiable assets acquired and liabilities assumed measured at the
acquisition date.
Occasionally, a bargain purchase may occur, i.e. a business combination in which the net recognised amounts of the
identifiable assets acquired and liabilities assumed measured at the acquisition date exceed the aggregate of the
acquisition-date fair value of the consideration transferred, the amount of any non-controlling interest measured at fair
value or at their proportionate share in the acquiree's net assets, and in a business combination achieved in stages, the
acquisition-date fair value of the acquirer’s previously held equity interest in the acquire. Before recognising a gain on
a bargain purchase, the acquirer reassesses whether it has correctly identified and measured the amounts of assets
acquired and liabilities assumed, non-controlling interest, consideration transferred, and in a business combination
achieved in stages, the acquirer’s previously held equity interest in the acquiree. The purpose of the reassessment is to
ensure that the measurements appropriately reflect consideration of all available information as of the acquisition date.
Any remaining gain from a bargain purchase after completing the reassessment is recognised in profit or loss at the
acquisition date (as other operating income).
At the date of an acquisition, any goodwill acquired in a business combination is allocated to the cash-generating units
that are expected to benefit from the synergies of the combination. Each cash-generating unit or a group of units to
which the goodwill was allocated:
✓ is the lowest level within the Group at which goodwill is monitored for internal management purposes,
✓ is not larger than an operating segment as defined in IFRS 8 “Operating Segments”.
Goodwill represents an asset with indefinite useful life and as such is subject to annual impairment tests. Goodwill is
tested at a minimum at the operating segment level.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
44
Goodwill related to investments in associates is reflected in their carrying amounts in the Group’s consolidated financial
statements. Consequently, any investments in associates and the related goodwill are analysed for impairment on a
combined basis.
Other intangible assets
Other intangible assets that are acquired by the Group 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.
The costs of registering a substance in the REACH system, such as participation in research, consulting services linked
to a specific registration, costs of preparing the registration documents and Chemical Safety Reports, registration fees
and authorisation, are capitalised as intangible assets.
CO
2
emission allowances
In the event of a purchase of additional allowances on the market, the allowances are measured at cost and presented
as intangible assets.
The acquired emission allowances are not amortised as their residual value corresponds to the purchase price. In the
event of allowances purchased being used to cover a shortfall occurring at the date of the annual limit settlement, the
allowances used at book value are settled against a provision recognised previously to cover the shortfall.
Subsequent expenditure
Subsequent expenditure on existing intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other subsequent expenditure is expensed as incurred.
Amortisation
Intangible assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives of
intangible assets are as follows:
Amortisation periods and residual values are reviewed. Any adjustments resulting from the verification are made
prospectively as a change in estimate.
Amortisation of intangible assets related to the costs incurred in respect of registration in the REACH system begins in the
month following the month of proper registration of a given substance. The amortisation period is 12 years with
amortisation charged to cost of sales.
Costs of completed development activities
Research activities represent an innovative and scheduled search for solutions, undertaken with the prospect of gaining
new scientific or technical knowledge. Development activities are understood as a practical application of discoveries or
achievements of other knowledge in planning and designing the production of new or considerably improved materials,
devices, products, technological processes, systems or services, taking place prior to starting mass production or prior to
their application.
All expenditure on research activities is recognised in profit or loss as incurred. Whenever a clear distinction between
research and development activities cannot be made, the Group treats the related expenditure as though it were incurred
in the research phase only.
Development expenditure is capitalised as part of intangible assets only if the Group is able to prove:
✓ that the product or process is technically and commercially feasible (assessed from a technical perspective),
✓ its intent to complete development and to use or sell the asset,
✓ the ability to use or sell the asset,
✓ the manner in which the asset will bring future economic benefits (inter alia, the entity should prove the existence of
a market for new products created by the asset or a market for the asset itself, or – if the asset is to be used by the
Group – the usefulness of the intangible asset to the Group),
✓ the availability of appropriate technical, financial and other resources required to complete development activities
and then use or sell the asset, and,
Development costs
2-5 years
Patents and licences
2–10 years
Other
2-12 years
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
45
✓ its ability to reliably measure development costs attributable to the asset.
Internally generated trademarks, magazine titles, editorial titles, customer lists and other items of similar nature are not
recognised in the financial statements.
The amortisation periods of capitalised development costs should reflect their estimated useful lives.
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.
01.01.-31.12.2020
Development
costs
Goodwill
Licences,patents,
permits, etc.
obtained
Other
intangible
assets
Intangible
assets under
development
TOTAL
Gross value of intangible assets at the
beginning of the period
29,733
548,195
268,101
130,126
140,213
1,116,368
Purchase
-
-
9,948
9,509
19,456
38,913
Investment outlays
-
-
-
-
177,687
177,687
Reclassifications
-
-
5,125
106,086
(118,400)
(7,189)
Transferred from/to assets classified as
held for sale
(9,851)
-
(10,514)
-
(13,191)
(33,556)
Exchange differences
-
41,745
11,575
9,527
133
62,980
Sales
-
-
(370)
(23,135)
(29,193)
(52,698)
Liquidation
(27)
-
(22,973)
-
(15)
(23,015)
Cancellation of CO
2
emission rights
-
-
-
(78,366)
-
(78,366)
Change in the Group’s structure
-
-
-
-
(104)
(104)
Other
-
-
12,725
(9,964)
(2,765)
(4)
Gross value of intangible assets at the
end of the period
19,855
589,940
273,617
143,783
173,821
1,201,016
Accumulated amortisation at the
beginning of the period
(18,073)
-
(107,465)
(50,497)
-
(176,035)
Amortisation for the period
5,206
-
13,077
(7,001)
-
11,282
Annual amortisation charge
(3,554)
-
(18,419)
(2,976)
-
(24,949)
Transferred from/to assets classified as
held for sale
8,479
-
10,316
-
-
18,795
Exchange differences
-
-
(1,775)
(4,025)
-
(5,800)
Sales
254
-
-
-
-
254
Liquidation
27
-
22,955
-
-
22,982
Accumulated amortisation at the end of
the period
(12,867)
-
(94,388)
(57,498)
-
(164,753)
Impairment losses at the beginning of
the period
-
(408,650)
(3,258)
(41,025)
(928)
(453,861)
Recognition
-
-
-
-
(3,182)
(3,182)
Exchange differences
-
(31,581)
-
(3,427)
-
(35,008)
Other
-
-
-
-
690
690
Impairment losses at the end of the
period
-
(440,231)
(3,258)
(44,452)
(3,420)
(491,361)
Net value of intangible assets at the
beginning of the period
11,660
139,545
157,378
38,604
139,285
486,472
Net value of intangible assets at the end
of the period
6,988
149,709
175,971
41,833
170,401
544,902
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
46
01.01.-31.12.2019
Development
costs
Goodwill
Licences,patents,
permits, etc.
obtained
Other
intangible
assets
Intangible
assets under
development
TOTAL
Gross value of intangible assets at the
beginning of the period
20,733
555,096
232,004
127,742
141,010
1,076,585
Purchase
-
-
615
31,824
32,038
64,477
Investment outlays
-
-
-
-
58,326
58,326
Reclassifications
9,000
-
36,795
12,489
(90,322)
(32,038)
Exchange differences
-
(6,917)
(1,292)
(1,203)
(26)
(9,438)
Liquidation
-
-
(21)
(15,579)
-
(15,600)
Cancellation of CO
2
emission rights
-
-
-
(25,191)
-
(25,191)
Change in the Group’s structure
-
16
-
-
-
16
Other
-
-
-
44
(813)
(769)
Gross value of intangible assets at the
end of the period
29,733
548,195
268,101
130,126
140,213
1,116,368
Accumulated amortisation at the
beginning of the period
(16,012)
-
(94,496)
(47,703)
-
(158,211)
Amortisation for the period
(2,061)
-
(12,969)
(2,794)
-
(17,824)
Annual amortisation charge
(2,061)
-
(13,178)
(3,254)
-
(18,493)
Exchange differences
-
-
188
460
-
648
Liquidation
-
-
21
-
-
21
Accumulated amortisation at the end of
the period
(18,073)
-
(107,465)
(50,497)
-
(176,035)
Impairment losses at the beginning of
the period
-
(414,383)
(3,253)
(41,364)
(1,216)
(460,216)
Recognition
-
-
(5)
(59)
(50)
(114)
Reversal
-
-
-
-
338
338
Exchange differences
-
5,733
-
398
-
6,131
Impairment losses at the end of the
period
-
(408,650)
(3,258)
(41,025)
(928)
(453,861)
Net value of intangible assets at the
beginning of the period
4,721
140,713
134,255
38,675
139,794
458,158
Net value of intangible assets at the end
of the period
11,660
139,545
157,378
38,604
139,285
486,472
The largest item in the Company’s intangible assets is the SAP accounting system with the gross carrying amount of
PLN 41,189 thousand (net carrying amount: PLN 36,429 thousand).
A significant item presented in intangible assets are CO
2
emission rights intended to cover shortages of rights The value of
the acquired rights as at 31 December 2020 is PLN 31,362 thousand.
At CIECH Sarzyna S.A. the highest values under development relate to product registrations, which will allow for further
production of plant protection products (value of PLN 142,969 thousand).
At CIECH R&D Sp. z o.o. the largest intangible assets under development relate to research and development projects
regarding the optimization of soda production and the innovative technology of brine carbonization. The value of these
projects as at 31 December 2020 is approximately PLN 14,018 thousand.
In CIECH S.A. intangible assets under development relate to works related to the implementation of IT systems for the value
of PLN 12,756 thousand.
Other intangible assets of the CIECH Group include mainly IT systems, licences and patents, other software, development
works and other intangible assets. All intangible assets belong to the CIECH Group.
Amortisation of intangible assets was included in the following line items of the consolidated statement of profit or loss:
AMORTISATION CHARGES ON INTANGIBLE ASSETS
01.01.-31.12.2020
01.01.-31.12.2019
Cost of sales
(15,724)
(13,516)
Selling costs
(422)
(3,095)
General and administrative expenses
(6,521)
(1,882)
Other operating expenses
(2,282)
-
TOTAL
(24,949)
(18,493)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
47
As at 31 December 2020, all intangible assets at CIECH S.A. were pledged as collateral for financial liabilities on account of
the term loan, revolving facility and overdraft facilities.
An increase in capital expenditure in 2020 was driven by expenditure related to the implementation of the SAP system.
In the current period changes in accounting estimates did not have a material impact and it is not expected that they will
have a material impact in future periods.
As at 31 December 2020, future commitments arising from agreements concerning acquisition of intangible assets amounted
to PLN 411 thousand (in the comparable period: PLN 3,221 thousand).
Apart from goodwill, the CIECH Group does not have other intangible assets with an indefinite useful life. Additional
information about the goodwill is presented in note 5.4.
Development works
Development works carried out by the CIECH Group are aimed at increasing economic potential; and are related mainly to
the modernisation of technological processes, reduction of manufacturing costs and optimisation of technical and
technological parameters. The Group continues the development of the R&D area to support the development of products
being a response to growing needs of the market.
The total amount of expenditure on research and development expensed in the period, as not meeting the capitalisation
criteria, amounted to PLN 933 thousand (PLN 5,654 thousand in the comparable period) and is presented as general and
administrative expenses.
5.4. GOODWILL IMPAIRMENT TESTING
In preparing the consolidated financial statements of the CIECH Group, the goodwill recognised in the consolidated financial
statements in relation to a subsidiary CIECH Sarzyna S.A. and German SDC Group, as well as to the Spanish company Proplan
Plant Protection Company S.L. and Smart Fluid Sp. z o.o. acquired in 2018, was tested for impairment. The recoverable
amount of cash-generating units to which goodwill has been allocated, was calculated based on the value in use. The value
in use was calculated on the basis of the Group’s five-year plans. In 2020, no impairment of goodwill was identified for any
of the above entities.
The following assumptions were applied in the impairment tests:
• the weighted average cost of capital for CIECH Sarzyna S.A. was: 6.5% – for cash flows in PLN, 5.3% – for cash flows in
EUR and 6.5% – for cash flows in USD;
• the weighted average cost of capital for the SDC Group for cash flows in EUR was 4.6%;
• the weighted average cost of capital for Proplan Plant Protection Company, S.L. was 5.2% – for cash flows in EUR and
6.6% – for cash flows in USD;
• the weighted average cost of capital for Smart Fluid Sp. z o.o. for cash flows in PLN was 15%;
• the assumed growth rate for the residual period was 2.0% for all companies.
According to the estimates of the Management Board for CIECH Sarzyna S.A., the SDC Group, Smart Fluid Sp. z o.o. and
Proplan Plant Protection Company, S.L. an increase in the weighted average cost of capital of 1 p.p. for each currency without
changing other factors would not lead to any change in the carrying amount of goodwill.
Goodwill is the most valuable component of intangible fixed assets and is presented at the level of the CIECH Group and on
the lower tier group level – the SDC Group. Goodwill presented in consolidated financial statements was recognised as a
result accounting for acquisition of companies in 2006 and 2007 and acquisition of companies in 2018.
Goodwill presented in the consolidated financial statements as at 31 December 2020 amounted to PLN 149,709 thousand:
• Soda Segment – PLN 51,204 thousand: SDC Group - PLN 51,187 thousand, CIECH Salz Deutschland - PLN 17 thousand,
• Silicates Segment – PLN 39 thousand – CIECH Vitrosilicon S.A.,
• Agro Segment – PLN 95,512 thousand; CIECH Sarzyna S.A. – PLN 15,070 thousand, Proplan Plant Protecton Company SL –
PLN 80,442 thousand,
• Other Segment – PLN 2,954 thousand – Smart Fluid Sp. z o.o.
As compared to 2019, goodwill increased by PLN 10,164 thousand as a result of:
• change in the EUR exchange rate used to translate the goodwill recognised on acquisition of Proplan Plant Protection
Company, S.L. in 2020 – an increase by PLN 6,211 thousand.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
48
• change in the EUR exchange rate used to translate the goodwill recognised in the statements of the lower tier group,
the SDC Group, in 2020 – increase by PLN 3,953 thousand.
5.5. INVESTMENT PROPERTIES
Accounting policy
Investment property is held to earn rentals or for capital appreciation (or both). Investment property is remeasured at fair
value. At initial recognition, investment property is accounted for in accordance with policies applicable for property, plant
and equipment i.e. purchase price or cost. In subsequent reporting periods change in fair value of investment property is
recognised in profit or loss in the period when change occurred and is presented in other operating expenses.
Judgements and estimates
Investment property valuation. The CIECH Group presents investment property at fair value, recognising the fair value
valuation in the statement of profit or loss. Investment property valuation is performed using:
✓ comparative method based on observable market data, including the price of comparable investment properties and
adjusted with the specific factors such as the capability of the property, its location and condition.
INVESTMENT PROPERTIES
01.01.-31.12.2020
01.01.-31.12.2019
Carrying amount at the beginning of period
36,717
37,766
Sales
(686)
(1,922)
Liquidation
(10)
-
Goodwill valuation
5,126
873
Transferred from/to assets classified as held for sale
(199)
-
Gross value at the end of the period
40,948
36,717
The item “Investment property” presented by the CIECH Group includes land, buildings and structures that have been
acquired only in order to achieve economic benefits from rents or for the increase of their value.
As at 31 December 2020, the CIECH Group held the following investment property:
• CIECH Nieruchomości Sp. z o.o. – As at 31 December 2020, the investment property line item for
CIECH Nieruchomości S.A. included real property located in Bydgoszcz. The real property was acquired from Infrastruktura
Kapuściska S.A in liquidation bankruptcy. In 2020, the company also acquired investment properties from
CIECH Trading Sp. z o.o.
• CIECH Soda Polska S.A. – Buildings acquired by CIECH Soda Polska S.A. as a result of a merger with Soda Med. Sp. z o.o.
These are buildings leased for medical outpatient, clinics, nursing and treatment rooms as well as private doctor’s and
dentist’s consulting rooms.
• CIECH Sarzyna S.A. – 29 buildings and structures located on the premises of CIECH Sarzyna S.A. In the past, they were
used by the company for its own needs, currently they are leased to generate rental income.
• CIECH Trading Sp. z o.o. – the company recognised land located in Bydgoszcz as investment property (acquired from
Infrastruktura Kapuściska S.A. in liquidation bankruptcy). In 2020, these properties were sold to
CIECH Nieruchomości Sp. z o.o. As at 31 December 2020, CIECH Trading Sp. z o.o. no longer held investment properties.
01.01.-31.12.2020
01.01.-31.12.2019
Rental income from investment property
5,609
5,347
Operating expenses relating to investment property
that generated rental income during the period in question
2,693
2,413
Operating expenses relating to investment property that did not generate rental
income during the period in question
-
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
49
5.6. LONG-TERM RECEIVABLES
Accounting policy
Contract assets resulting from transactions that are within the scope of IFRS 15 – receivables in relation to caverns (a salt
cavern is a void in the rock most often used to store gases).
If an entity performs by transferring goods or services to a customer before the customer pays consideration or before
payment is due, the entity presents the contract as a contract asset, excluding any amounts presented as a receivable. A
contract asset is an entity's right to consideration in exchange for goods or services that the entity has transferred to a
customer.
For these categories of assets, the Group chose a simplified approach to estimating impairment due to expected credit
losses, whereby lifetime expected credit losses are always estimated from the moment of initial recognition of exposures,
whether or not an evidence of a significant increase in credit risk exists.
NON-CURRENT RECEIVABLES
31.12.2020
31.12.2019
Receivables in relation to caverns
53,564
57,492
Other
138
132
Net non-current receivables
53,702
57,624
Write-down on receivables
(1,015)
(975)
Gross non-current receivables
54,717
58,599
CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM RECEIVABLES
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(975)
(1,441)
Reversed
40
456
Exchange differences
(80)
10
Closing balance
(1,015)
(975)
Impairment losses on long-term receivables are calculated using the default rate determined on the basis of the
counterparty’s rating and the long-term receivable payment schedule.
Desalination of caverns
The SDC Group, in accordance with IAS 15 Revenue from contracts with customers, recognizes revenues connected with
contracts concerning cavern desalination over time, in line with the progress of work.
Project 2 (Project 1 has been completed)– the Contract includes the sale of mining rights, land and preparation of four gas
caverns (S113to S116). The stage of completion is determined as a proportion between the costs incurred for work performed
to date and the estimated total contract costs or completion of a physical proportion of the contract work.
Revenue recognised in statement of profit or loss represent the amount of the expected sales revenues multiplied by the
percentage of completion of the contract in the accounting period less the value of revenues recognized in previous years. In
2020, there were no revenues. In the corresponding period, the Group’s revenues from the cavern desalination contract
amounted to PLN 3,299 thousand (EUR 767 thousand).
Other operating costs include costs in the amount of PLN 9,181 thousand (EUR 2,052 thousand), which adjusts previously
booked profits related to the contract for the construction of caverns in the SDC Group, because the contract was extended
(the volume of caverns has been increased and therefore their construction has not been finalized yet).
The receivables relating to the cavern desalination contracts (Project 2) recognised in assets as long-term receivables
amounted to PLN 53,564 thousand (EUR 11,607 thousand) as at the end of 2020. As at 31 December 2019, they amounted
to PLN 57,494 thousand (EUR 13,501 thousand). The total amount of costs incurred and profits recognised (less recognised
losses) due to ongoing contracts for the period of duration of these contracts amounted to PLN 155,932 thousand.
Due to the nature of the transaction, the long-term receivable reported in the balance sheet will not be repaid until Innogy
Gas Storage NEW GmbH actually fills the caverns with gas to test the density of the gas, which is planned for no earlier than
2023.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
50
5.7. LONG-TERM FINANCIAL ASSETS
Accounting policy
Shares are stated at purchase price less any impairment losses.
Accounting policy concerning derivatives is presented in note 8.1.
NON-CURRENT FINANCIAL ASSETS
31.12.2020
31.12.2019
Shares
11,800
12,819
Derivatives
574
4,879
Other
103
89
TOTAL
12,477
17,787
CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM FINANCIAL ASSETS
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(1,342)
(1,342)
Recognized
(2,085)
-
Other
1,012
-
Closing balance
(2,415)
(1,342)
In 2020, CIECH S.A.'s shares in Chemia.com were written off and the values were finally derecognised from the balance sheet.
5.8. SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES
Accounting policy
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Joint venture is a contractual arrangement whereby two or more parties undertake an economic
activity subject to joint control and have rights to the net assets of the arrangement.
The consolidated financial statements include the Group's share of the income and expenses of equity accounted
associates and joint ventures from the date that significant influence or joint control commences until the date that
significant influence or joint control ceases. The Group also measures impairment of the share in the net assets of
associates and joint ventures and creates appropriate allowance. When the Group’s share of losses exceeds the carrying
amount of its interest in an associate or a joint venture, such carrying amount is reduced to nil and the recognition of
further losses is discontinued if the Group is not obliged to cover them.
The CIECH Group holds a 50% share in Kaverngesellschaft Stassfurt mbH. It is a jointly-controlled company measured under
the equity method at the lower-tier group level – the SDC Group (50% direct share in Kaverngesellschaft Stassfurt mbH). This
company is not listed on the stock market so the fair value of this investment is not available. Balance sheet days and reporting
periods of Kaverngesellschaft Stassfurt mbH are the same as those adopted by the Group.
The following table presents the carrying amounts of investments in jointly-controlled entities:
INVESTMENTS IN ASSOCIATES ENTITIES
31.12.2020
31.12.2019
Investments in jointly-controlled entities
5,646
5,958
Share in net profit of subordinated entities accounted for with equity method
(161)
1,106
5.9. 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
51
Finished goods and work in progress are measured at cost including direct manufacturing costs and reasonable portion
of costs indirectly connected with the manufacturing process, but not higher than the selling price possible to achieve.
The cost of inventory is measured using the weighted average method.
Judgements and estimates
The CIECH Group companies recognise inventory impairment allowances for damaged and slow moving inventory.
Inventory impairment allowances are also recognised for inventory with a carrying amount that exceeds the realisable
net selling price. Reversal occurs as a result of the use or sales of inventory in the course of business activities while
usage is the result of inventory being scrapped.
INVENTORY
31.12.2020
31.12.2019
Materials
195,706
218,396
Semi-finished products and work in progress
43,237
50,198
Finished products
92,692
122,003
Goods
17,354
65,107
TOTAL
348,989
455,704
CHANGE OF INVENTORY IMPAIRMENT WRITE-DOWNS
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(33,327)
(40,695)
Recognized
(9,933)
(9,660)
Reversed / released
5,169
12,800
Used
-
3,947
Exchange differences
(547)
260
Transferred from/to assets classified as held for sale
335
-
Other
-
21
Closing balance
(38,303)
(33,327)
As at 31 December 2020, all inventories at CIECH S.A. were pledged as collateral for financial liabilities on account of the term
loan, revolving facility and overdraft facilities.
5.10. SHORT-TERM RECEIVABLES
Accounting policy
Short-term trade and other receivables are measured at the amount due, less write-downs for expected credit 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 Group companies use 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 approx. 95% of
the value of advance payments received from the factor (the approx. 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
52
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 Group estimates allowances always at the amount of lifetime 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 Group 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 Group recognises impairment allowances in respect of receivables:
1. from debtors in liquidation or bankruptcy, up to the amount not guaranteed or secured in another manner, as
reported to a receiver or judge-commissioner during bankruptcy proceedings;
2. from debtors where a bankruptcy petition has been dismissed, if the debtor's assets are not sufficient to cover the
cost of bankruptcy proceedings – in full;
3. contested by debtors (disputed receivables) and where payments due are delayed and either the debtor’s financial
standing makes the collection no longer probable – up to the amount of receivables not guaranteed or secured in
another manner;
4. receivables claimed in court.
Moreover, allowances in the full amount of receivables are recognised in relation to receivables that are more than 180
days past their maturity as at the balance sheet date.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is
in possession of reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances on receivables are charged to other operating expenses.
TRADE AND OTHER RECEIVABLES
31.12.2020
31.12.2019
Trade receivables, including:
203,249
295,534
- up to 12 months
175,697
293,895
- prepayments for inventory
27,552
1,639
Prepayments for non-current assets
4,137
3,204
Public and legal receivables (excluding income tax)
167,150
144,181
Receivables from sales of energy
8,164
11,668
Factoring receivables
47,425
43,590
Other receivables
25,793
27,113
NET TRADE AND OTHER RECEIVABLES
455,918
525,290
Impairment allowances with respect to trade receivables including
(48,515)
(39,670)
- impairment allowance recognized in the current reporting period
(15,666)
(3,121)
Impairment allowances with respect to other current receivables including
(18,117)
(17,209)
- impairment allowance recognized in the current reporting period
(5,024)
(9)
GROSS TRADE AND OTHER RECEIVABLES
522,550
582,169
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 maximum period of delay in payments. As at 31 December 2020, the asset from continuing involvement
amounted to PLN 513 thousand (presented under other receivables). The value of receivables transferred to the factor was
PLN 307,509 thousand as at 31 December 2020 (as at 31 December 2019: PLN 311,646 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
53
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(56,879)
(58,991)
Recognized
(20,690)
(3,130)
Reversed
7,762
3,150
Used
527
3,742
Exchange differences
(436)
(849)
Change in the Group’s structure
-
280
Other
3,084
(1,081)
Closing balance
(66,632)
(56,879)
The principles for recognising impairment allowances for short-term receivables are described above, in the “Accounting
Policy” section. Terms of transactions with related entities have been presented in note 9.3.
Commercial contracts concluded by the CIECH Group 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 2020, all receivables (both long- and short-term) at the CIECH Group were pledged as collateral for
financial liabilities on account of the term loan, revolving facility and overdraft facilities.
5.11. SHORT-TERM FINANCIAL ASSETS
Accounting policy
Accounting policy concerning financial instruments is presented in note 8.1.
SHORT-TERM FINANCIAL ASSETS
31.12.2020
31.12.2019
Derivatives
19,688
13,236
Financial assets from the valuation of embedded derivatives
-
2,206
Loans granted
146
1,800
Other
29
40
Total (net) short-term financial assets
19,863
17,282
Impairment of short-term financial assets
(28,343)
(27,942)
Total (gross) short-term financial assets
48,206
45,224
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM FINANCIAL ASSETS
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
(27,942)
(27,953)
Recognized
(401)
-
Exchange differences
-
11
Closing balance
(28,343)
(27,942)
In 2020, CIECH Trading Sp. z o.o. recognised an impairment loss on a loan granted in the past to
Infrastruktura Kapuściska S.A. according to information obtained from the receiver, who estimated the recoverable amount
at PLN 12 thousand. An impairment loss of PLN 400 thousand was recognised on the remaining balance of the loan.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
54
5.12. 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 Group 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 Group analyses
recoveries using probability-weighted scenarios.
CASH AND CASH EQUIVALENTS
31.12.2020
31.12.2019
Bank accounts
440,543
249,246
Short-term deposits
3,612
44,431
Cash in hand
47
37
Other cash
-
6,066
Impairment of cash and cash equivalents
(316)
(200)
Cash and cash equivalents
443,886
299,580
Cash reclassified to non-current assets held for sale *
4,913
-
Cash and cash equivalents – presented in the cash flow statement
448,799
299,580
*Cash held by CIECH Żywice Sp. z o.o. is presented as fixed assets and groups held for sale.
CHANGE IN IMPAIRMENT CASH AND CASH EQUIVALENTS
31.12.2020
31.12.2019
Opening balance
(200)
(142)
Recognized
(252)
(139)
Reversed
139
60
Exchange differences
(3)
21
Closing balance
(316)
(200)
The effective interest rates of short-term bank deposits are similar to the nominal interest rates, and fair value of short-term
bank deposits is not significantly different from carrying value. Interest rates are based on WIBOR, EURIBOR and LIBOR.
Cash and cash equivalents are covered only by an allowance for expected credit losses in accordance with IFRS 9.
The value of restricted cash
As at 31 December 2020, all cash and cash equivalents in Polish companies (CIECH S.A., CIECH Soda Polska S.A., CIECH Sarzyna
S.A.), German companies (CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy Deutschland GmbH), and Romanian
company CIECH Soda Romania S.A., 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
As at 31 December 2020, the balance of cash restricted due to a deposit placed for transactions concluded with
the PGE Brokerage House (futures contracts for the purchase of CO
2
certificates) amounted to PLN 21,265 thousand
(EUR 4,608 thousand) (as at 31 December 2019: PLN 28,540 thousand (EUR 6,702 thousand)).
In addition, restricted cash represented the funds in the VAT account due to the introduction of "split payment" procedures.
As at 31 December 2020 and 31 December 2019, it amounted to PLN 9,809 thousand and PLN 13,370 thousand, respectively.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
55
5.13. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND GROUPS FOR DISPOSAL HELD FOR
SALE, LIABILITIES CONNECTED WITH NON-CURRENT ASSETS AND GROUPS FOR DISPOSAL
CLASSIFIED AS HELD FOR SALE
Assets and liabilities classified as held for sale
Accounting policy
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 2020, the largest item of “Non-current assets and groups for disposal held for sale” were assets of
CIECH Żywice Sp. z o.o., which was classified as group held for sale in connection with the signing of the preliminary contract
for the sale of shares in the aforementioned company to LERG S.A. (current report No 274/2020). These figures are presented
in the table below.
Moreover, as at 31 December 2020 and 31 December 2019, the CIECH Group presented the following assets under the item
“Non-current assets and groups for disposal classified as held for sale”:
• CIECH Vitrosilicon S.A. presented property, plant and equipment in the amount of PLN 368 thousand (land located in the
town of Iłowa) redundant from the point of view of the enterprise; a potential buyer of the land is now being sought.
These assets are included in the Silicates Segment.
• CIECH Transclean Sp. z o.o. presented a real property with the carrying amount of PLN 422 thousand, located in Bydgoszcz,
containing an administrative building together with equipment. These assets are presented in the “Other activities”
Segment.
Analysis of assets and liabilities held for sale – CIECH Żywice Sp. z o.o.:
in thousand PLN
31.12.2020
ASSETS
Property, plant and equipment
62,386
Right-of-use assets
897
Intangible assets, including:
14,071
Investment properties
199
Deferred tax assets
1,641
Total non-current assets
79,194
Inventories
34,795
Trade and other receivables
45,055
Cash and cash equivalents
4,913
Total current assets
84,763
Total assets
163,957
EQUITY AND LIABILITIES
Share capital
3,734
Retained earnings
5,964
Total equity
9,698
Lease liabilities
58
Provisions for employee benefits
461
Deferred tax liabilities
-
Total non-current liabilities
519
Loans, borrowings and other debt instruments
57,249
Lease liabilities
73
Trade and other liabilities
93,884
Income tax liabilities
1,872
Provisions for employee benefits
614
Other provisions
48
Total short-term liabilities
153,740
Total liabilities
154,259
Total equity and liabilities
163,957
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
56
Discontinued operations
The accounting principles applied in the preparation of the statement of profit or loss for discontinued operations are
consistent with the Group's accounting policy. The results of discontinued operations include:
For the period from 1 January to 31 December 2020 and for the period from 1 January to 31 December 2019:
• results of CIECH Żywice Sp. z o.o. for the period of being in a subsidiary of the Group – in connection with the planned
sale of the company and the conclusion of the preliminary agreement for the sale of 74,677 shares in CIECH Żywice Sp.
z o.o. to LERG S.A. – activities presented in the Resins Segment,
• elimination of results on transactions between consolidated entities of the CIECH Group and the entity reported under
discontinued operations,
• results of the CIECH Group companies (including CIECH S.A.) generated from transactions with the entity reported under
discontinued operations.
Below are the figures for the 2020 of: CIECH Żywice Sp. z o.o. – a company held for sale (for the corresponding period, the
figures of CIECH Sarzyna S.A. with respect to the resins business are presented). CIECH S.A. – with respect to discontinued
operations in the area of resins and the consolidated result on discontinued operations for the CIECH Group.
01.01.-31.12.2020
01.01.-31.12.2019
CIECH
Żywice
Sp. z o.o.
CIECH
S.A.
Consolidation
adjustmets
CIECH
Group
CIECH
Sarzyna
S.A.
CIECH
S.A.
Consolidation
adjustmets
CIECH
Group
Net sales revenues
283,931
151,432
(161,005)
274,358
297,968
200,550
(200,550)
297,968
Cost of sales
(242,078)
(147,458)
145,074
(244,462)
(273,211)
(194,120)
191,143
(276,188)
Gross profit/(loss) on sales
41,853
3,974
(15,931)
29,896
24,757
6,430
(9,407)
21,780
Other operating income
2,802
-
811
3,613
1,649
2
-
1,651
Selling costs
(17,527)
(1,574)
11,219
(7,882)
(17,989)
(792)
5,858
(12,923)
General and administrative
expenses
(10,428)
-
955
(9,473)
(7,907)
-
3,549
(4,358)
Other operating expenses
(1,789)
-
(1)
(1,790)
(1,158)
(8)
-
(1,166)
Operating profit/(loss)
14,911
2,400
(2,947)
14,364
(648)
5,632
-
4,984
Financial income
6,279
375
(6,615)
39
2,431
2,388
(4,819)
-
Financial expenses
(11,781)
(2,322)
6,615
(7,488)
(6,200)
-
5,038
(1,162)
Net financial
income/(expenses)
(5,502)
(1,947)
-
(7,449)
(3,769)
2,388
219
(1,162)
Profit/(loss) before tax
9,409
453
(2,947)
6,915
(4,417)
8,020
219
3,822
Income tax
(2,069)
-
-
(2,069)
-
-
-
-
Net profit/(loss)
7,340
453
(2,947)
4,846
(4,417)
8,020
219
3,822
Cash flows from discontinued operations for CIECH Żywice Sp. z o.o.:
01.01.-31.12.2020
Net cash from operating activities
(19,490)
Net cash from investing activities
24,291
Net cash from financing activities
(79)
Total net cash flows
4,722
Free cash flows
4,801
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
57
6. EQUITY
6.1. CAPITAL MANAGEMENT
Capital structure management
The capital structure of the Group consists of debt comprising the credit facilities, cash and cash equivalents and equity
attributable to shareholders of the parent, including shares issued, reserve capital and retained earnings.
The Group manages its capital in order to ensure that subsidiaries are able to continue their activity and at the same time
maximise returns for stakeholders by optimising the debt to equity ratio.
In 2019-2020 there were no changes in aims, principles and processes of capital management.
The Group monitors the effectiveness and stability of capitals using the debt ratio calculated based on the net debt value in
relation to EBITDA. The consolidated net debt of the Group calculated as the sum of non-current and current liabilities for
credits, loans and other debt instruments (lease liabilities + liabilities for net loss on derivatives calculated separately for each
instrument + factoring liabilities) less cash.
EBITDA is calculated as operating profit plus amortisation and depreciation.
31.12.2020
31.12.2019
Loans, borrowings and other debt instruments
1,911,475
1,645,400
Lease liabilities
129,258
143,934
Factoring liabilities
16,174
25,536
Net measurement of derivative financial liabilities
57,611
7,071
Gross financial liabilities
2,114,518
1,821,941
Cash and cash equivalents
443,886
299,580
Net financial liabilities
1,670,632
1,522,361
01.01.- 31.12.2020
01.01. - 31.12.2019
Operating profit for continuing operations
249,968
253,477
Depreciation and amortisation for continuing operations
333,280
299,994
EBITDA for continuing operations
583,248
553,471
Debt ratio
2.9
2.8
As at 31 December 2020, net debt to EBITDA stood at 2.9 and was higher than as at the end of 2019 by 0.1. The ratio has
deteriorated due to an increase in debt from revolving and overdraft facilities contracted by CIECH S.A.
6.2. CONSOLIDATED EQUITY
Accounting policy
The total consolidated shareholders’ equity includes equity attributable to shareholders of the parent company and
non-controlling interest.
The Group’s share capital is represented by the share capital of the parent company and is accounted for at its nominal
value adjusted by the effects of hyperinflation in the years 1989–1996.
Post-acquisition changes in the equity of subsidiaries are recognised in the Group’s equity to the extent of the parent
company’s interest in those subsidiaries. The remaining equity of the consolidated entities is recognised in non-
controlling interest, described below.
When a foreign operation is disposed of, the relevant amounts in the currency translation differences are transferred to
profit or loss.
When shares are repurchased by the parent company or a consolidated subsidiary, 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
58
A liability for a dividend payable is recognised when authorised.
Dividends payable from pre-acquisition profits do not reduce the acquisition price of the shares, however, they may
provide evidence of impairment.
The consolidated net profit (loss) attributable to shareholders of the parent company is presented in shareholders’
equity within retained earnings and represents the sum of the net profit (loss) of the parent company, its share in net
profit (loss) of equity accounted investees, net profit (loss) of fully-consolidated subsidiaries.
Non-controlling interest
Non-controlling interest represents interest in a subsidiary’s equity which is not directly or indirectly attributable to the
parent company.
Non-controlling interest is measured:
✓ at the amount of proportionate interest in subsidiary's net assets, or
✓ at fair value,
for each business combination separately at the time of initial recognition.
The carrying amount of non-controlling interest should correspond to the amount calculated by adding changes in the
current period to the carrying amount of non-controlling interest at the end of the preceding period. These changes may
result from:
✓ changes in the percentage share of interest held by non-controlling shareholders – e.g. purchase, sale, increase or
decrease of share capital;
✓ changes in equity not related to the changes in the interest held – e.g. increase or decrease of equity with no effect
on shareholding, additional equity contributions made by non-controlling shareholders, net result of the current
year, transactions recognised directly in other comprehensive income, dividends paid.
Profit or loss as well as any component of other comprehensive income are attributable to the shareholders of the parent
company and to non-controlling interest even where the attribution results in a negative carrying amount of non-
controlling interest.
As at 31 December 2020, the carrying amount of the share capital of the parent company CIECH S.A. amounted to PLN 287,614
thousand and comprised the share capital from the share issues and from the hyperinflation adjustment.
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.
Shareholder structure of CIECH S.A. as at the date of approval of the report (according to the best knowledge of the
Company)
Shareholder
Type of shares
Number of
shares
Number of votes at
the General
Meeting of
Shareholders
Share in the total
number of votes at
the General Meeting
of Shareholders
Stake in share
capital (%)
KI Chemistry s. à r. l.
with its registered office
in Luxembourg*
Ordinary
bearer
26,952,052
26,952,052
51.14%
51.14%
Nationale-Nederlanden
Otwarty Fundusz
Emerytalny**
Ordinary
bearer
2,729,507
2,729,507
5.18%
5.18%
Aviva Otwarty Fundusz
Emerytalny Aviva
Santander ***
Ordinary
bearer
3,084,470
3,084,470
5.85%
5.85%
Other
Ordinary
bearer
19,933,880
19,933,880
37.83%
37.83%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
59
* In accordance with information dated 9 June 2014 provided by Shareholder under Article 77(7) and Article 69(1)(1) of the Act of 29 July 2005
on Public Offering and Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (CR
26/2014).
** on the basis of the list of shareholders holding at least 5% of votes at the Extraordinary General Meeting of Shareholders of CIECH S.A.
on 15 March 2021, CR 6/2021 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on Public Offering and Conditions
Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (Journal of Laws of 2009, No 185, item
1439).
*** on the basis of the list of shareholders holding at least 5% of votes at the Extraordinary General Meeting of Shareholders of CIECH S.A.
on 15 March 2021, CR 6/2021 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on Public Offering and Conditions
Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (Journal of Laws of 2009, No 185, item
1439).
The percentage share of above-listed shareholders in the share capital of CIECH S.A. equals the percentage share in the
number of votes at the General Shareholders Meeting of CIECH S.A.
From the date of the Extraordinary General Meeting of CIECH S.A. (information about the shareholders is based on the List
of attendance at the EGM of 15 March 2021) for the submission of this report, from the shareholders of CIECH S.A. no
information on a change in the ownership status of (+) or (-) resulting in a change in the ownership structure of significant
blocks of shares of the issuer was affected.
Treasury shares
In 2020 and in the comparable period, CIECH S.A. did not purchase or hold treasury shares.
Share premium
The share premium arose from the surplus in excess of nominal value achieved upon the issue of C, D and E series shares.
Other reserve capital
The table below presents the balances of other reserve capital, consisting of the following items:
OTHER RESERVE CAPITAL BY PURPOSE
31.12.2020
31.12.2019
Commercial risk fund
3,330
3,330
Fund for purchasing soda companies
15,200
15,200
Development funds
57,669
57,669
Fund for the purchase of treasury shares
346,500
-
Other
2,322
2,322
TOTAL
425,021
78,521
On 21 May 2020, the Annual General Meeting of CIECH S.A. authorised the Management Board of CIECH S.A. to purchase
fully paid shares issued by CIECH S.A. from one or more of CIECH S.A.'s shareholders. Treasury Shares may be acquired in
particular for the purpose of:
✓ their cancellation by way of reduction of the share capital of CIECH S.A.,
✓ their resale against remuneration;
✓ using them to acquire or exchange shares or interest in any other companies.
The maximum amount of remuneration for shareholders will not be higher than PLN 346,500 thousand and a reserve fund
has been created for this purpose in this amount. For details, see current report No 24/2020.
Cash flow hedge reserve
The cash flow hedge reserve reflects the valuation and settlement of hedging instruments to which the hedge accounting
applies. Detailed information is presented in note 8.2.
Cost of hedging reserve
The cost of hedging reserve includes the time value of the gas purchase option which, in accordance with IFRS 9, has been
left outside hedge accounting by the Group and the value of the basis currency spread for the CIRS transaction which was
excluded from hedge accounting.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
60
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.
Foreign currency translation reserve (foreign companies)
The balance of this equity item is adjusted by exchange differences on the translation of the financial statements of foreign
subsidiaries, i.e. CIECH Soda Romania S.A., SDC Group, Ciech Group Financing AB, Proplan Plant Protection Company, S.L.,
CIECH Salz Deutschland GmbH.
The balance of this item of equity also represents accumulated exchange differences on the measurement of net investments
in a foreign entity and effective part of profit and losses from measurement of an instrument used for hedging shares in net
assets of foreign companies.
6.3. DIVIDENDS PAID OR DECLARED
Until the date of approval of the report for publication, the Management Board of CIECH S.A. has not adopted a resolution
on the proposed distribution of the net profit for 2020.
On 21 May 2020, the Ordinary General Meeting resolved to distribute CIECH S.A.’s net profit for the financial year 2019,
amounting to PLN 60,436 thousand, and to allocate the entire profit to CIECH S.A.’s supplementary capital.
6.4. BUSINESS COMBINATIONS
Basis of consolidation
The subsidiaries’ net equity in the amount as at the acquisition date, in the part corresponding to Group’s share in the
share capital, is compensated with acquisition value of the shares included in statement of financial position of the
parent company at the date of acquisition. Consolidation adjustments, depending on their nature, are recorded against
appropriate items of equity. Changes in the parent company's ownership interest that do not result in a loss of control
of the subsidiary are accounted for as equity transactions.
Subsidiaries of the CIECH Group are fully consolidated from the date on which control is transferred to the Group, and
cease to be consolidated from the date such control ends.
Balances, revenues and costs, unrealized profits or losses from transactions between the Group subsidiaries are
eliminated in the process consolidation.
There were no significant business combination transactions in the periods presented.
In 2020, the following changes occurred in relation to the companies in which CIECH S.A. held shares, either directly or
indirectly. These changes translated into changes in the structure of the CIECH Group.
• CIECH Żywice Sp. z o.o.
The Court registered the increase of the share capital of CIECH Żywice Sp. z o.o. on 2 January 2020 and on this date CIECH
S.A. became the holder of all newly created shares whilst remaining the sole shareholder of CIECH Żywice Sp. z o.o.
The share capital was increased at the Extraordinary Shareholders' Meeting of CIECH Żywice Sp. z o.o. on 16 December 2019
which adopted a resolution on the demerger of CIECH Sarzyna S.A., following the adoption of the Demerger Plan of CIECH
Sarzyna S.A., by deciding on:
✓ CIECH Żywice Sp. z o.o.’s participation in the demerger of CIECH Sarzyna S.A. effected through the spin-off of an
organised part of the enterprise on the terms set forth in the Demerger Plan,
✓ approval of the Demerger Plan of CIECH Sarzyna S.A, as agreed by the Management Board of CIECH Sarzyna S.A.
on 31 October 2019,
✓ increase the share capital of Ciech Żywice Sp. z o.o. from PLN 56 thousand by PLN 3,678 thousand, i.e. to PLN
3,734 thousand, through the creation of 73,567 new shares with a nominal value of PLN 50 per share and the
total value of PLN 3,734 thousand. All newly created shares in the increased share capital of Ciech Żywice Sp. z
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
61
o.o. were allotted to the sole shareholder of CIECH Sarzyna S.A., i.e. CIECH S.A., in the following manner: 8,490
thousand shares in CIECH Sarzyna S.A. entitle to the receipt of 73,567 shares in CIECH Żywice Sp. z o.o.
As a result of the increase, the share capital of CIECH Żywice Sp. z o.o. amounts to PLN 3,734 thousand and is
divided into 74,677 shares with a value of PLN 50 per share and a total value of PLN 3,734 thousand.
On 20 July 2020, CIECH S.A. and LERG S.A. with its registered office in Pustków-Osiedle entered into a preliminary agreement
for the sale of 74,677 shares representing 100% of the share capital in CIECH Żywice Sp. z o.o. The value of this transaction is
approx. PLN 160 million.
• CIECH Serwis i Remonty Sp. z o.o. (until 22 April 2020: BOSTEN S.A.; from 22 April 2020 to 15 December 2020: CIECH
Serwis i Remonty S.A.)
On 31 January 2020, the Extraordinary Shareholders’ Meeting of BOSTEN S.A. increased the Company's share capital by PLN
450, i.e. from PLN 100 thousand to PLN 550 thousand, by way of issue of 45,000 new C series shares with the nominal value
of PLN 10 per share and total nominal value of PLN 450 thousand. The issue price of C series shares is equal to the nominal
price per share and amounts to PLN 10 per share. C series shares were earmarked for acquisition by CIECH S.A. in exchange
for a cash contribution of PLN 450 thousand, in a private placement. The Extraordinary General Meeting also changed the
name of the company from BOSTEN S.A. to: CIECH Serwis i Remonty S.A. The court registered the share capital increase and
change of the company’s name on 22 April 2020. On 15 December 2020, the company was transformed from a joint stock
company to a limited liability company.
• CIECH Salz Deutschland GmbH
On 11 December 2019, the Shareholders' Meeting of CIECH Salz Deutschland GmbH increased the share capital from EUR 25
thousand to EUR 3,025 thousand, by creating 100 new shares with a value of EUR 30 thousand per share and a total value of
EUR 3 million. New shares from the increase of the share capital of Ciech Salz Deutschland GmbH were acquired by CIECH
S.A. in exchange for cash. The share capital increase was registered on 5 March 2020.
• CIECH Vitro Sp. o.o.
On 4 January 2020, the Deed of incorporation of CIECH Vitro Sp. z o.o., with its registered office in Iłowa and a share capital
of PLN 5 thousand, divided into 100 equal and indivisible shares with a nominal value of PLN 50 each, was drawn up.
The share capital was paid in full in cash of PLN 400 thousand by CIECH SA. The share premium of PLN 395 thousand was
transferred to the supplementary capital. The Company was registered by the court on 7 May 2020.
• CIECH Trading Sp. z o.o. (former name: CIECH Trading S.A.)
On 27 March 2020, CIECH S.A. sold to BOSTEN S.A. 100 series A registered shares in CIECH Trading S.A. with a total nominal
value of PLN 900, for a total price of PLN 300.
On 30 March 2020 the Management Board of CIECH Trading S.A. notified the shareholders of its intention to adopt a
resolution on the transformation of CIECH Trading Spółka Akcyjna into a limited liability company under the name of CIECH
Trading Spółka z ograniczoną odpowiedzialnością and presented the Transformation Plan prepared on 30 March 2020.
The court registered the transformation on 18 June 2020. On 22 June 2020, CIECH Serwis i Remonty S.A. (formerly: BOSTEN
S.A.) sold 18 shares in the Company to CIECH S.A. for the total price of PLN 300 and ceased to be a shareholder of the
Company.
Extraordinary Meeting of Shareholders of CIECH Trading Sp. z o.o. on 2 March 2021, approved the decision of the
Management Board of the Company to cease conducting business activities specified in the Company's agreement and
obliged the Management Board of the Company to take all necessary actions aimed at ceasing and extinguishing business
activities, and after completing the above-mentioned actions to decide on the dissolution of the Company pursuant to Art.
270 of the Commercial Companies Code.
• Janikowskie Zakłady Sodowe JANIKOSODA Sp. z o.o. (former name: Janikowskie Zakłady Sodowe JANIKOSODA S.A.)
On 16 June 2020, the Extraordinary Shareholders’ Meeting of Janikowskie Zakłady Sodowe JANIKOSODA S.A. adopted a
resolution on the transformation of Janikowskie Zakłady Sodowe JANIKOSODA Spółka Akcyjna into a limited liability company
under the name of Janikowskie Zakłady Sodowe JANIKOSODA Spółka z ograniczoną odpowiedzialnością.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
62
The share capital of JANIKOSODA Sp. z o.o. amounted to PLN 44,330 thousand and was divided into 2 shares of unequal
nominal value, i.e. PLN 36,530 thousand – one share held by CIECH FINANCE Sp. z o.o. and PLN 7,800 thousand – one share
held by CIECH S.A. The court registered the transformation on 2 October 2020.
On 31 December 2020, the shareholders of JANIKOSODA Sp. z o.o. entered into an agreement to sell their shares in the
company to two Buyers for a total price of PLN 590 thousand, including:
✓ CIECH S.A. sold its 1 share, representing 17.6% of the share capital, with a nominal value of PLN 7,800 thousand, for PLN
103.84 thousand. The legal title to the share passed to the Buyers on the date of payment of the price, i.e. on 31
December 2020, and on that date CIECH S.A. ceased to be a shareholder of JANIKOSODA Sp. z o.o;
✓ CIECH FINANCE Sp. z o.o. sold its 1 share, accounting for 82.4% of the share capital, with a nominal value of PLN 36,530.5
thousand, for PLN 486.16 thousand. The legal title to the share passed to the Buyers as of the date of payment of the
price, i.e. on 31 December 2020, and on that date CIECH FINANCE Sp. z o.o. ceased to be a shareholder of JANIKOSODA
Sp. z o.o.
• CIECH Nieruchomości Sp. z.o.o. (former name: CIECH Nieruchomości S.A.)
On 28 May 2020, the General Meeting of CIECH Nieruchomości S.A. resolved to increase the share capital by issuing
200,008,926 series E shares with a total nominal value of PLN 4,000 thousand and an issue price equal to the nominal value
of the shares. Series E shares were earmarked to and acquired by CIECH S.A. The agreement to take up series E shares was
concluded on 2 June 2020. The court registered the increase of the share capital on 2 September 2020. On 2 November 2020,
the Extraordinary General Meeting of CIECH Nieruchomości S.A. resolved to transform the joint-stock company into a limited
liability company. The court registered the transformation on 22 December 2020. The share capital of CIECH Nieruchomości
Sp. z o.o. amounts to PLN 22,148.5 thousand and is divided into 221,485 shares with a nominal value of PLN 100 per share.
The shareholders of the Company are its existing shareholders, i.e.:
• CIECH S.A. – holding 220,001 shares, with a value of PLN 100 per share, with a total value of PLN 22,000.1
thousand, representing 99.33% of the share capital,
• CIECH FINANCE Sp. z o.o. – holding 1,484 shares, with a value of PLN 100 per share, with a total value of
PLN 148.4 thousand, representing 0.67% of the share capital.
• EL-POMIAR Spółka z ograniczoną odpowiedzialnością (indirect subsidiary of CIECH Soda Polska S.A.)
On 9 December 2019, CIECH Soda Polska S.A. concluded with the Shareholders of El-Pomiar Sp. z o.o., holding a total of
67 shares, representing 32.2% of the Company's share capital, a Preliminary Sales Agreement for Shares in the Limited Liability
Company. Under this agreement, the Shareholders who are parties to the Preliminary Agreement agreed to sell shares held
and to convene a Shareholders' Meeting in order to adopt a resolution on granting consent to the sale of shares held by other
shareholders of the Company to CIECH Soda Polska S.A. and to execute the Sales Agreement, provided that the conditions
precedent included therein are met. On 18 December 2019, the Extraordinary Shareholders' Meeting of El-Pomiar Sp. z o.o.
adopted a resolution to grant consent to all Shareholders of the Company to sell the shares held.
The first shares were acquired under conditional sales agreements of 28 January 2020, with the proviso that the agreements
will be effective from the date of acquisition by CIECH Soda Polska S.A. of 110 shares in the Company. On 10 February 2020,
CIECH Soda Polska S.A. acquired a total of 110 shares, representing 52.9% of the share capital, thus becoming the majority
shareholder in El-Pomiar Sp. z o.o.
CIECH Soda Polska S.A. acquired two more shares, the ownership of one share was transferred to CIECH Soda Polska S.A. on
10 July 2020, and the ownership of the other share was transferred to CIECH Soda Polska S.A. on 24 July 2020 and the third
one was transferred on 17 November 2020. Thus, CIECH Soda Polska S.A. holds 196 shares representing 94.23% of the share
capital.
• CIECH SERVICES sp. z o.o. – new company
On 14 September 2020, the Deed of incorporation by CIECH S.A. of CIECH SERVICES sp. z o.o., with its registered office in
Bydgoszcz and a share capital of PLN 5 thousand, divided into 100 equal and indivisible shares with a nominal value of PLN
50 each, was drawn up. The share capital was paid in full in cash of PLN 5 thousand. The new company is a special purpose
vehicle and will become a shared service center. The Court registered CIECH SERVICES Sp. z o.o. on 19 October 2020.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
63
• CIECH Soda Romania S.A.
On 17 September 2020, the Extraordinary General Meeting of Shareholders of CIECH Soda Romania S.A. (hereinafter referred
to as “CSR”) resolved to reduce the share capital by RON 325,840 thousand, i.e. from RON 525,085 thousand to RON 199,244
thousand by reducing the number of shares by 1,303,360,796 shares, i.e. from 2,100,338,803 shares to 796,978,007 shares.
The capital reduction was made from the assets of each shareholder by reducing the number of shares in proportion to their
shareholding. The capital reduction was based on a calculation algorithm whose application resulted in fractional figures, so
by decision of the General Meeting the fractional figures were rounded down to reflect the full share. Shares arising from
fractional calculation parts – mainly small shareholders, representing a total of 5,835 shares, were taken over by CSR.
The proceeds from the reduction of share capital were used to cover accumulated losses from previous years, as reported
by CSR in its financial statements for the financial year ended 31 December 2019. The reduction of the share capital is effective
from 15 December 2020. Following the share capital reduction, CIECH S.A.'s shareholding has not changed and amounts to
98.74%, resulting from the currently held 786,912,905 shares.
6.5. SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST
In 2020 and 2019, there was no significant non-controlling interest in any of the significant subsidiaries of the CIECH Group.
6.6. EARNINGS PER SHARE
Accounting policy
Basic earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided by
the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided
by the weighted average number of ordinary shares outstanding during the year adjusted for the effects of all dilutive
potential ordinary shares.
The table below presents profit and shares data used in the calculation of the basic and diluted earnings per share:
in PLN
01.01.-31.12.2020
01.01.-31.12.2019
Basic and diluted earnings per share (continuing operations)
2.36
2.02
Basic and diluted earnings per share (discontinuing operations)
0.09
0.07
01.01.-31.12.2020
01.01.-31.12.2019
Net profit (loss) from continuing operations attributable to the shareholders of the
parent
124,431
106,537
Net profit (loss) from discontinued operations attributable to the shareholders of the
parent
4,846
3,822
Weighted average number of issued ordinary shares used in calculation of basic and
diluted earnings per share
52,699,909
52,699,909
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
64
7. LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS
7.1. INFORMATION ABOUT SIGNIFICANT 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
31.12.2020
31.12.2019
LONG-TERM
360
1,583,799
Loans and borrowings
360
1,583,799
SHORT-TERM
1,911,115
61,601
Loans and borrowings
1,911,115
61,601
TOTAL
1,911,475
1,645,400
Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans:
01.01.–31.12.2020
01.01.–31.12.2019
Opening balance
1,645,400
1,632,666
Proceeds from debt incurred
506,313
277,459
Accrual of interest
43,064
51,903
Repayment of debt, including:
(306,233)
(315,543)
repayment of principal
(263,300)
(268,016)
interest paid
(42,933)
(47,527)
Realised exchange differences
-
(6)
Foreign exchange differences on measurement of liabilities
20,677
(1,303)
Other
2,254
224
Closing balance
1,911,475
1,645,400
Debt financing of the Group
The CIECH S.A.'s debt financing is secured mainly through loans made available to CIECH S.A. under the Facilities Agreement
dated 9 January 2018:
1. The Facilities Agreement signed with a consortium of banks dated 9 January 2018:
• term loan in the amount of PLN 1,212,520 thousand and EUR 30,000 thousand (the total amount of the loan as at
31 December 2020 was PLN 1,350,964 thousand),
• revolving credit facility granted to CIECH S.A. in the amount of up to PLN 250,000 thousand (the amount of used credit
as at 31 December 2020 was PLN 0 thousand).
2. Overdraft facilities up to PLN 100,000 thousand and EUR 10,000 thousand under agreements dated 28 and
29 August 2018 (as at 31 December 2020, the amount used was PLN 43,095 thousand),
3. Revolving credit facilities up to PLN 392,788 thousand and EUR 25,000 thousand, under three agreements dated
18 April 2019 (as at 31 December 2020, the amount used was PLN 508,158 thousand).
The total value of facilities available under the aforesaid agreements is PLN 2,255,269 thousand; the limits are drown down
in the amount of PLN 1,902,217 thousand.
In addition, Proplan Plant Protection Company, S.L. has external debt on account of loans.
Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2020
published on 22 April 2021 in Section 4.6.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
65
Interest rate:
The Term loans bear interest at a floating rate determined on the basis of the WIBOR / EURIBOR base rate, plus margin, the
level of which depends on the level of the net debt to EBITDA. The current level of margin, set on the basis of financial ratios
as at the end of the first half of 2020, is 1.50%.
Information about the financial covenants included in loan agreements
During the period covered by these financial statements, no loan agreement was called to maturity and there were no
violations of payment terms for repayment of principal or interest due in relation to financial liabilities recognised in the
balance sheet. Under the Facilities Agreement dated 29 October 2015 and under three revolving credit facilities agreements
dated 18 April 2019, CIECH S.A. and its selected subsidiaries were obliged to, among others, maintain a certain level of:
• net leverage ratio for the Group specified in the Facilities Agreement (the ratio of the CIECH Group’s consolidated net
debt to consolidated EBITDA of the CIECH Group calculated according to the guidelines in the amount of at least 4.0,
measured at the end of a year and first six months of a year). As at the balance sheet date, i.e. 31 December 2020, this
ratio was maintained and amounted to 2.45.
• the guarantor coverage ratio (share of subsidiaries being guarantors in the consolidated EBITDA of the CIECH Group,
calculated according to the guidelines) at a level of at least 80%; this ratio was not met as at the balance sheet date: the
share of the subsidiaries in the consolidated EBITDA value, which are guarantors, in the Facilities Agreement did not
exceed the required threshold of 80% and amounted to 76.7%. Due to the breach of the ratio and failure to repeal the
breach as at the balance sheet date, the total value of loans made available on the basis of the above-mentioned
agreements, was reclassified into short-term loan liabilities in accordance with IAS 1. In connection with the occurrence
of a breach of the guarantor coverage ratio, the Company asked the lenders to change the method of calculating the
ratio, by: not taking into account the results of CIECH Soda Romania S.A. in the calculation. and not included in the
calculation of the results of CIECH Żywice Sp. z o.o. and for lenders waiving their rights related to the occurrence of a
breach of the index. The lenders being a party to the syndicated Loan Agreement of 29 October 2015 and the lenders of
the revolving loan agreements (except for Banco de Sabadell, for a EUR 25 million loan), accepted the Company's
application by 31 March 2021, i.e. during the recovery period (cure period) provided for in credit agreements.
At the same time, on 16 March 2021, a new long-term loan agreement was signed for a total of PLN 2,115,000 thousand.
Detailed information on the agreement can be found in the current report 7/2021. Under the new loan agreement, the
guarantor coverage ratio will be tested for the first time according to the data as at the balance sheet date,30 June 2021. The
catalog of guarantors has been changed in the new loan agreement and, in line with the Company's forecasts, the guarantor
coverage ratio will be met.
7.2. OTHER LONG-TERM LIABILITIES
Accounting policy
Accounting policy concerning financial instruments is presented in note 8.1.
The accounting policy for grants received is presented in Note 3.4.
OTHER NON-CURRENT LIABILITIES
31.12.2020
31.12.2019
Subsidies
62,372
59,429
PUT options
-
8,508
Derivatives*
14,327
6,487
Liabilities due to the purchase of shares and other financial assets
3,871
7,478
Other
1,458
15,261
TOTAL
82,028
97,163
* At the end of 2020, we do not report the long-term portion of IRS transactions designated for hedge accounting. These transactions hedge
the interest rate on loans that were recognized as short-term liabilities due to the breach of one of the covenants as at the balance sheet
date. Details are described in point 7.1.
Liabilities due to purchase of shares include the long-term portion of the deferred payment for the acquisition of Proplan
Plant Protection Company, S.L., i.e.:
• EUR 2,929 thousand of discounted deferred payment (the remaining 10% of the purchase price), payable in cash in 4
installments of EUR 1,115 thousand on subsequent anniversaries (in 2019-2022 respectively – the first payment was
made in July 2019) of the takeover of control over Proplan (nominal value of EUR 4,461 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
66
In 2019, other long-term liabilities also included the corresponding portion of the estimated value of the three-year Long-
term Incentive Plan of the CIECH Group for 2019-2021 for the key management personnel of the CIECH Group. The estimates
made at the end of 2020 did not substantiate the payments under the above Plan, therefore as at 31 December 2020 there
is no liability in this respect.
In 2020, the PUT option liability in the SDC Group also expired, as the option was not used by the supplier.
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.
Judgements and estimates
At the reporting date trade payables are measured at amortised cost (i.e. they are discounted using the effective
interest method) and increased by any applicable late interest accrued.
Late interest is not accrued when a formal waiver is received from the counterparty. In all other cases such interest is
accrued and recognised in accordance with the following principles:
✓ on an ongoing basis, based on interest notes received;
✓ in estimated amounts, with such estimates based on comparison of interest charged in the past by a counterparty
to the related amounts owed.
CURRENT TRADE AND OTHER LIABILITIES
31.12.2020
31.12.2019
Trade liabilities and advances taken
492,998
397,425
- in up to 12 months
490,430
393,687
- above 12 months
181
107
- prepayments received for supplies
2,387
3,631
Public and legal liabilities (excluding income tax)
44,931
22,622
Liabilities for purchase of property, plant and equipment
185,505
161,094
Financial instruments liabilities
45,119
18,533
Liabilities to employees
17,990
13,373
Payroll liabilities
28,952
10,499
Holiday leave accrual
8,852
7,719
Taxes and charges
115,462
95,757
Materials and energy consumption
32,945
39,752
Subsidies
4,928
5,949
Environmental charges
-
10,589
Factoring liabilites
16,174
25,536
Other
84,590
38,330
TOTAL
1,078,446
847,178
Terms of transactions with related entities have been presented in note 9.3.
Trade liabilities do not bear interest. Commercial contracts concluded by the CIECH Group include various terms of payment
of trade liabilities depending on the type of transaction, market characteristics and trade conditions. The most common
payment terms are: 14, 30 and 60 days.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
67
7.4. LEASES
Accounting policy
On 1 January 2019, the CIECH Group 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 Group combines two or more contracts entered into at or near the same time with the same counterparty (or
related parties of the counterparty), and account for the contracts as a single contract if one or more of the following
criteria are met:
a) the contracts are negotiated as a package with an overall commercial objective that cannot be understood without
considering the contracts together;
b) the amount of consideration to be paid in one contract depends on the price or performance of the other contract;
or
c) the rights to use underlying assets conveyed in the contracts (or some rights to use underlying assets conveyed in
each of the contracts) form a single lease component.
A contract contains a lease if:
a) it concerns an identified asset that is explicitly specified in the contract (e.g. using an inventory number, address
(for premises), etc.) or implicitly specified at the time that the asset is made available for use by the customer, and
the supplier does not have the substantive right to substitute the asset throughout the period of use and
b) the lessee receives essential all of the economic benefits from such assets during the period of use, i.e. both basic
benefits and the benefits derived from it (if any); and
c) the lessee has the right to specify the method in which it uses the identified asset.
Initial measurement of the lease liability
The lease payments included in the measurement of the lease liability comprise the following payments that are not
paid:
a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
c) amounts expected to be payable by the lessee under residual value guarantees;
d) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to
terminate the lease and it is highly likely that this option will be exercised.
Subsequent measurement of the lease liability
After the commencement date, the Group measures the lease liability by:
a) increasing the carrying amount to reflect interest on the lease liability;
b) reducing the carrying amount to reflect the lease payments made; and
c) remeasuring the carrying amount to reflect any reassessment or lease modifications.
The Group, as a lessee, recognises in profit or loss of the current period both:
a) interest on the lease liability; and
b) variable lease payments not included in the measurement of the lease liability in the period in which the event or
condition that triggers those payments occurs, unless these costs are included in the carrying amount of another asset
in accordance with the accounting policy for property, plant and equipment.
In-substance fixed lease payments
In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are
unavoidable. In-substance fixed lease payments exist, for example, if:
a) payments are structured as variable lease payments, but there is no genuine variability in those payments. Those
payments contain variable clauses that do not have real economic substance. Examples of those types of payments
include:
• payments that must be made only if an asset is proven to be capable of operating during the lease, or only if an
event occurs that has no genuine possibility of not occurring; or
• payments that are initially structured as variable lease payments linked to the use of the underlying asset but
for which the variability will be resolved at some point after the commencement date so that the payments
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
68
become fixed for the remainder of the lease term. Those payments become in-substance fixed payments when
the variability is resolved,
b) there is more than one set of payments that a lessee could make, but only one of those sets of payments is realistic.
In this case, an entity considers the realistic set of payments to be lease payments.
c) there is more than one realistic set of payments that a lessee could make, but it must make at least one of those sets
of payments. In this case, an entity considers the set of payments that aggregates to the lowest amount (on a
discounted basis) to be lease payments.
Variable lease payments
Variable lease payments that depend on an index or a rate include, for example, payments linked to a consumer price
index, payments linked to a benchmark interest rate (such as WIBOR) or payments that vary to reflect changes in market
rental rates (e.g. periodical changes in perpetual usufruct rates, in connection with the revision of a valuation report).
Variable lease payments that do not depend on an index or a rate, i.e. depend on the use, are not included in the
measurement of lease liabilities (e.g. fees for exceeding the mileage limit).
Exemptions/ simplifications applied
The Group applies the simplifications for short-term leases and low-value asset leases provided for in the standard. It is
assumed that assets whose unit value does not exceed approximately PLN 20 thousand, which corresponds to
approximately USD 5 thousand, are low-value assets. Short-term leases are those whose term is shorter than 12 months.
The Group also benefits from the practical exemption regarding the lack of separation of non-lease components.
Judgements and estimates
Adoption of IFRS 16 entailed also the need to make estimates and judgments which are reflected in the measurement
of lease liabilities and right-of-use assets, including:
• assessing whether a contract contains a lease in accordance with IFRS 16,
• determining the duration of contracts (including contracts with an indefinite term or with an extension option):
With respect to contracts for an indefinite term, the Group, 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 Group
applies the incremental borrowing rate for a given lease agreement, i.e. the rate of interest that the Group 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.
The CIECH Group uses property, plant and equipment (mainly means of transport and various types of machinery and
equipment) pursuant to lease agreements. The agreements include the return option, extension of the agreement or the
option to buy all or a part of the equipment after the lease period.
CIECH Cargo Sp. z o.o. signed lease agreements, under which the Company uses additional wagons to carry coal fines and
stones. In the agreements, purchase options are provided for after the end of lease.
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.
The largest leased asset in the CIECH Group, in accordance with the adopted accounting principles, is the right of perpetual
usufruct of land obtained by administrative decision. No conditions for extending lease agreements or purchasing the subject
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
69
of lease have been included in administrative decisions concerning the right of perpetual usufruct of land. Price indexation
may occur in relation to land revaluation. Furthermore, the SDC Group recognises a long-term sewage system agreement
effective until 2095 as a lease. Group companies also recognise leases of property.
To calculate discount rates for the purposes of IFRS 16, the Group 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 0.83% to 6.02% (for PLN: 2.34%-3.43%; for EUR: 0.83%-4.69%; for
USD: 3.74%-4.69%; for RON: 4.94%-6.02%). A single discount rate was applied to the entire contract portfolio.
The nominal value and the value lease interest are as follows:
LEASE LIABILITIES
Nominal payments
Effective interest
Discounted lease liability
31.12.2020
0–6 months
14,242
156
14,086
Up to 1 year
11,878
216
11,662
1–2 years
32,086
1,948
30,138
2–5 years
22,908
2,082
20,826
More than 5 years
172,109
119,563
52,546
TOTAL
253,223
123,965
129,258
31.12.2019
0–6 months
16,160
719
15,441
Up to 1 year
13,177
550
12,627
1–2 years
37,276
2,401
34,875
2–5 years
36,471
4,219
32,252
More than 5 years
167,544
118,805
48,739
TOTAL
270,628
126,694
143,934
Reconciliation of changes in liabilities resulting from financing activities – lease liabilities
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
143,934
23,540
Adjustment to the opening balance as at 1 January 2019
-
119,089
Adjusted opening balance
143,934
142,629
Modifications of agreements
1,563
1,453
Signing new agreements
6,515
24,025
Early termination of agreement
(1,047)
(55)
Interest accrued
4,591
5,056
Repayment of liability
(30,139)
(28,151)
Foreign exchange differences
5,687
(1,023)
Other
(1,846)
-
Closing balance
129,258
143,934
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
70
The total outflow of funds related to lease liabilities is respectively:
01.01-31.12.2020
01.01.-31.12.2019
Liabilities payments, including:
44,005
31,944
Equity
25,500
23,917
Interests
4,639
4,493
Variable fees other than those depending on the index/rate
10,522
1,108
Short-term leases
2,348
1,463
Lease of assets with low initial value
996
963
The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for
the period:
01.01.-31.12.2020
01.01-31.12.2019
Costs of short-term leases (concluded for a period of up to 12 months),
1,398
5,534
Costs of lease of low-value assets
938
1,072
Costs related to variable lease payments not included in the measurement of lease
liabilities
10,609
9,714
For details of the right-of-use assets resulting from leases see Note 5.2
7.5. PROVISIONS FOR EMPLOYEE BENEFITS
Accounting policy
Jubilee awards, retirement benefits pays and disability pay:
Based on the Group’s remuneration plan, the employees of its companies are entitled to retirement benefits. The Group’s
obligations in respect of the above benefits is the amount of benefit entitlement that employees have earned as a result
of their service in the current and prior years.
Net defined benefit liabilities are calculated separately for each plan by estimation of future payments required to settle
the obligation resulting from employee service in the current and prior periods (discounted to its present value). The
discount rate is the rate of return for low-risk debt securities with similar maturity date as the Group’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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
71
PROVISIONS FOR EMPLOYEE BENEFITS
LONG-TERM
SHORT-TERM
01.01.-31.12.2020
01.01.-31.12.2019
01.01.-31.12.2020
01.01.-31.12.2019
Opening balance
12,848
11,851
15,465
877
Recognition
1,200
1,200
1,151
16,046
Use and reversal
(1,975)
(846)
(14,070)
(1,231)
Foreign exchange differences
381
(74)
513
(213)
Other
504
717
41
(14)
Closing balance
12,958
12,848
3,100
15,465
In 2020, a change in provision for retirement benefits in the amount of PLN -167 thousand was recognised in other
comprehensive income (PLN -591 thousand in the comparable period). This is a change resulting from differences between
the previous actuarial assumptions and what has actually occurred as well as from changes in the parameters and
assumptions used in the calculations, such as the discount rate, the salary growth rate, and assumptions concerning the
future mobility of employees.
Employee benefits are measured on the basis of actuarial valuations and including provision for retirement and disability
benefits. A discount rate of 1.4% p.a. was applied in order to determine the current value of future liabilities due to employee
benefits. The discount rate applied is established in nominal value. At the same time, future inflation in the amount of 2.5%
per annum was taken into account. The remuneration growth rates of 6% and 2% were applied for 2021 and subsequent
years, respectively. Staff turnover ratio is established based on historic data, adjusted for employment restructuring plans.
According to the Group estimations, a change in actuarial assumptions will not have a significant impact on financial results.
In 2019, within the short-term provision, a provision was recognised for the “voluntary redundancy programme” in the
amount of PLN 14,956 thousand. During 2019, PLN 341 thousand was paid out on this account and during 2020,
PLN 12,526 thousand was paid out.
7.6. OTHER PROVISIONS
Accounting policy
A provision is recognised if, as a result of a past event, the Group 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.
Provision for environmental protection
In accordance with the Group’s published and currently enforced environmental policy and applicable legal
requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognised.
The provision is recognised in the amount of the expected future restoration costs discounted to present value.
Judgements and estimates
For measurement of the provisions, the Group is required to make estimates, assumptions regarding discount rates,
expected costs and payment terms.
CHANGE IN OTHER LONG-TERM PROVISIONS
Provision for
liabilities and
expected losses
Provision for
environmental
protection
TOTAL
01.01.-31.12.2020
Opening balance
8,762
93,435
102,197
Recognition
2,947
204
3,151
Use and reversal
(224)
-
(224)
Foreign exchange differences
-
7,365
7,365
Change in discount rate
-
2,471
2,471
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
72
CHANGE IN OTHER LONG-TERM PROVISIONS
Provision for
liabilities and
expected losses
Provision for
environmental
protection
TOTAL
Reclassification from (to) long-term provisions
29,291
(889)
28,402
Other (related to caverns)
-
9,899
9,899
Closing balance
40,776
112,485
153,261
01.01.-31.12.2019
Opening balance
3,286
75,794
79,080
Recognition
-
28
28
Use and reversal
(2,015)
-
(2,015)
Foreign exchange differences
-
(821)
(821)
Change in discount rate
-
18,434
18,434
Reclassification from (to) long-term provisions
7,491
-
7,491
Other
-
-
-
Closing balance
8,762
93,435
102,197
CHANGE IN OTHER SHORT-TERM PROVISIONS
Provision for
restructuring
Provision for
liabilities and
expected losses
Provision for
environmental
protection
Provision
for
bonuses
TOTAL
01.01.-31.12.2020
Opening balance
111
97,998
1,516
-
99,625
Recognition
-
35,956
24
-
35,980
Use and reversal
-
(19,958)
(1,390)
-
(21,348)
Foreign exchange differences
-
1,441
-
-
1,441
Reclassification from (to) long-term provisions
-
(29,141)
739
-
(28,402)
Transffer to liabilities connected with assets held for
sale
-
(614)
-
-
(614)
Other
-
8,517
-
38
8,555
Closing balance
111
94,199
889
38
95,237
01.01.-31.12.2019
Opening balance
218
170,495
2,311
-
173,024
Recognition
-
18,250
946
-
19,196
Use and reversal
(107)
(83,049)
(1,739)
-
(84,895)
Foreign exchange differences
-
(133)
(2)
-
(135)
Reclassification from (to) long-term provisions
-
(7,491)
-
-
(7,491)
Other
-
(74)
-
-
(74)
Closing balance
111
97,998
1,516
-
99,625
The most significant provisions of the CIECH Group are:
Provisions for expected losses and liabilities
CIECH S.A. – Short-term provisions of PLN 33,741 thousand are related to potential claims (principal liability plus interest
payable) resulting from litigation.
In 2019, the utilisation of the provision in the amount of PLN 66,400 thousand related to the payment of a tax liability together
with overdue interest on CIT for 2012, details are described in note 9.2, in the part " Audits of tax settlements at the
CIECH Group and related contingent liabilities".
CIECH Sarzyna S.A. – recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 965 thousand (the total balance of provisions for tax liabilities is PLN 18,027 thousand).
CIECH Vitrosilicon S.A. – recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 1,050 thousand (the total balance of provisions for tax liabilities is PLN 17,107 thousand).
CIECH Pianki Sp. z o.o. – recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 533 thousand (the total balance of provisions for tax liabilities is PLN 8,372 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
73
CIECH Cargo Sp. z o.o. – recognition of a provision for income tax and interest in relation to a potential tax liability in the
amount of PLN 865 thousand .
SDC Group – short-term provision of PLN 2,677 thousand (EUR 580 thousand) related to a potential claim from the water
management authority and a provision of PLN 14,767 thousand (EUR 3,200 thousand) related to a potential tax liability.
CIECH Trading S.A. – a provision for VAT and interest in relation to a potential tax liability in the amount of PLN 5,209 thousand
was recognised in 2019. During 2020, PLN 3,171 thousand was paid out on this account.
In 2020, a provision in the amount of PLN 5,696 thousand was created.
CIECH Soda Polska S.A. – long-term provision in the amount of PLN 1,047 thousand for potential environmental fees resulting
from exceeded emission limits. In addition, provisions of PLN 2,407 thousand, related to customers' claims in connection with
defective deliveries of products and the resulting losses, were recognised.
During 2020, a provision for possible penalties in the amount of PLN 3,985 thousand relating to the termination of the
agreement with a counterparty was recognised.
Provisions for environmental protection
SDC Group– a long-term provision for environmental protection in the amount of PLN 102,952 thousand (EUR 22,309
thousand), covering, among others:
• reclamation of tailing ponds in Unseburg – provision of EUR 3,017 thousand (PLN 13,923 thousand) – the schedule
provides for work for a maximum of 17 years from 2008 (ponds 1-6) and a maximum of 14 years from 2015 (pond 7),
• restoration activities in the limestone mine – provision of EUR 3,690 thousand (PLN 17,029 thousand) – the schedule
provides for work until 2052 starting in 2015,
• restoration of the remains of old limestone quarries (the value of the provision: EUR 975 thousand (PLN 4,499 thousand
- the schedule provides for work over a period of 5 years),
• closure of caverns - provision of EUR 12,594 thousand (PLN 58,119 thousand) – the schedule provides for work in the
period from 8 to 75 years.
The provisions were calculated based on reports from independent environmental engineering advisors.
CIECH Soda Polska S.A. – provision for land reclamation costs, calculated in accordance with expenditure planned until 2042,
in line with the expected inflation rate: 2.2% adjusted by a discount factor, calculated as the average of the discount factor
at the beginning and end of every annual period. The annual expenditure arising therefrom will amount to approx.
PLN 870 thousand until 2042. The amount of the respective provision recognised in the statements amounts to
PLN 9,422 thousand.
CIECH Sarzyna S.A. – a provision for the costs of water and soil reclamation in the amount of PLN 1,000 thousand. The
provision was estimated based on a technical and financial project including a schedule of works for the years 2008-2020 of
expenses to be incurred. In 2021, work is underway on the preparation of a new plan for remediation of soil pollution and a
schedule of expenses for the coming years.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
74
8. FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND
IMPAIRMENT
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.
Impairment of financial assets
At each balance sheet date, the Group 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).
The Group assumes that in the case of financial instruments that meet the definition of a low credit risk instrument as at
a given balance sheet date, there has been no significant increase in credit risk and therefore the allowance is estimated
at the amount of 12-month expected credit losses. The credit risk on a financial instrument is considered low for these
purposes, if:
a) the financial instrument has a low risk of default,
b) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and
c) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the
ability of the borrower to fulfil its contractual cash flow obligations.
The Group 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 Group measures the expected credit losses as the difference between the asset's gross carrying
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
75
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:
a) significant financial difficulty of the issuer or the borrower;
b) a breach of contract, such as a default or past due event;
c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty,
having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
e) the disappearance of an active market for that financial asset because of financial difficulties; or
f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused
financial assets to become credit-impaired. Regardless of the above criteria, the Group considers that there has been an
impairment loss in the event of a delay in payment of more than 180 days, because, in Group’s opinion, after this date,
the risk of non-performance by contractors increases significantly.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in
possession of reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances are estimated using individual parameters determined on the basis of benchmarks (using
information on bank ratings) or values provided by experts.
For trade receivables and contract assets arising from transactions that fall within the scope of IFRS 15, the Group uses a
simplified approach whereby impairment losses are estimated over the lifetime of the asset, already from the initial
recognition of the exposure in the accounting records.
The main financial instruments disclosed in the statement of financial position of the CIECH Group as at 31 December 2020
include:
Financial assets:
• loans granted,
• derivatives with positive valuation,
• embedded instruments with positive valuation,
• trade receivables and factoring receivables,
• cash and cash equivalents.
Financial liabilities:
• term loan liabilities, revolving facility liabilities and overdraft liabilities,
• trade liabilities and factoring liabilities,
• lease agreements,
• derivatives with negative valuation.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
76
Carrying amount of financial instruments
Classes of financial instruments
note
31.12.2020
31.12.2019
Categories of financial instruments
Cash and cash equivalents
5.12
443,886
299,580
Financial assets at amortised cost
Loans granted
5.11
146
1,800
Financial assets at amortised cost
Trade receivables
5.10
175,697
293,895
Financial assets at amortised cost
Factoring receivables
5.10
47,425
43,590
Financial assets at amortised cost
Hedging derivatives with positive value
5.7;5.11
18,427
15,118
Financial assets valued at fair value thru other
comprehensive income
Derivatives with positive value
5.7;5.11
1,835
2,997
Financial assets valued at fair value thru profit
or loss account
Embedded instruments with positive value
5.7;5.11
-
2,206
Financial assets valued at fair value thru other
comprehensive income
ASSETS
687,416
659,187
Trade liabilities
7.3
(490,611)
(393,794)
Financial liabilities at amortised cost
Loans and borrowings
7.1
(1,911,475)
(1,645,400)
Financial liabilities at amortised cost
Factoring liabilities
7.3
(16,174)
(25,536)
Financial liabilities at amortised cost
Lease liabilities
7.4
(129,258)
(143,934)
Financial liabilities excluded from IFRS 9
Hedging derivatives with negative value
7.2;7.3
(42,952)
(22,233)
Financial liabilities valued at fair value thru
other comprehensive income
Derivatives with negative value
7.2;7.3
(16,494)
(2,787)
Financial liabilities valued at fair value thru
profit or loss account
LIABILITIES
(2,606,964)
(2,233,684)
In the CIECH Group selected trade receivables 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.
The CIECH Group also has reverse factoring. Due to the conditions included in the contracts, these liabilities are disclosed as
trade or investment liabilities, depending on which liabilities this factoring applies to.
Revenues, costs, profit and loss recognised in the income statement by the category of financial instruments for continued
operations.
Revenues, costs, profit and loss recognised in
the statement of profit or loss
01.01.-31.12.2019
01.01.-31.12.2019
Categories of financial instruments
Interest income /(costs) including income /
costs calculated using the effective interest
rate method
(54,183)
(52,059)
1,807
1,335
Financial assets at amortised cost
(51,678)
(48,600)
Financial liabilities at amortised cost
(4,313)
(4,7947)
Financial liabilities excluded from IFRS 9
Profits/(losses) due to exchange differences
45,172
(648)
43,464
(1,189)
Financial liabilities at amortised cost
1,708
541
Financial liabilities excluded from IFRS 9
Recognition of impairment losses
(20,120)
(2,346)
Financial assets at amortised cost
Reversal of impairment losses
6,992
3,200
Financial assets at amortised cost
Income/expenses due to the use of derivative
financial instruments
(68,561)
5,388
(47,594)
(2,931)
Financial assets/liabilities at fair value
through profit or loss
(20,967)
8,319
Hedging instruments
TOTAL
(90,701)
(46,465)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
77
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 Group may apply hedge accounting if, and only if, all the following conditions are met:
✓ the hedging relationship consists only of eligible hedging instruments and eligible hedged items.
✓ at the inception of the hedging relationship there is formal designation and documentation of the hedging
relationship and the entity's risk management objective and strategy for entity the hedge. That documentation
shall include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and
how the entity will assess whether the hedging relationship meets the hedge effectiveness requirements (including
its analysis of the sources of hedge ineffectiveness and how it determines the hedge ratio).
✓ the hedging relationship meets all of the following hedge effectiveness requirements:
a) there is an economic relationship between the hedged item and the hedging instrument;
b) the effect of credit risk does not dominate the value changes that result from that economic relationship;
and
c) the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
item that the entity actually hedges and the quantity of the hedging instrument that the entity actually
uses to hedge that quantity of hedged item. However, that designation shall not reflect an imbalance
between the weightings of the hedged item and the hedging instrument that would create hedge
ineffectiveness (irrespective of whether recognised or not) that could result in an accounting outcome
that would be inconsistent with the purpose of hedge accounting.
Cash flow hedge:
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated
with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate
debt) or a highly probable forecast transaction, and could affect profit or loss.
Cash flow hedge shall be accounted for as follows:
a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted
to the lower of the following (in absolute amounts):
i. the cumulative gain or loss on the hedging instrument from inception of the hedge; and
ii. the cumulative change in fair value (present value) of the hedged item (ie the present value of the
cumulative change in the hedged expected future cash flows) from inception of the hedge.
b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (ie
the portion that is offset by the change in the cash flow hedge reserve calculated in accordance with (a))
shall be recognised in other comprehensive income.
c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change
in the cash flow hedge reserve calculated in accordance with (a)) is hedge ineffectiveness that shall be
recognised in profit or loss.
The effective portion of the hedge is transferred to profit or loss as a reclassification adjustment in the period or periods
when the hedged expected future cash flows affect profit or loss.
Hedges of a net investment in a foreign operation
Hedges of a net investments in a foreign operation shall be accounted for as follows:
✓ It is a hedge of a net investment in foreign operations with functional currency different than the one of the
parent entity, by foreign currency liabilities.
✓ revaluation of foreign currency liabilities designated for hedge accounting is recognised in other
comprehensive income and offset with the opposite revaluation of net investments in foreign operation in
consolidated financial statements.
Accumulated amount in other comprehensive income is transferred to the profit or loss statement in the case of partial
or overall sale of shares in a foreign entity.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
78
The table below presents a summary of specific groups of relationships existing in 2020, designated for hedge accounting:
Type of instrument
Hedged
item
Nominal
value/Volu
me (as at
31.12.2020)
Average price
obtained on
the contract
(not settled
transactions
as at
31.12.2020)
Maturity
31.12.2020
31.12.2019
Derivative instruments – cash flow hedge
Assets
Liability
Assets
Liability
Currency risk and
interest rate risk
CIRS transaction
Interest and principal
payments on term
loan contracted by
CIECH S.A. with initial
nominal amount of
PLN 1,212 thousand
Future cash flows
from realisation of
sales revenues
denominated in EUR
or indexed to EUR
exchange rate
-
-
-
-
-
11,381
(17,217)
Currency risk
Currency forwards
EUR/PLN
Future cash flows
from realisation of
sales revenues
denominated in EUR
or indexed to EUR
exchange rate
EUR 173
million
EUR/PLN
selling rate:
4.50
2021
-
(11,208)
167
-
Interest rate risk
Interest rate swap
6M EURIBOR to fixed
rate
Interest payments on
term loan contracted
by CIECH S.A. with
initial nominal
amount of EUR
30,000 thousand
30,000
EUR
thousand
Interest rate
paid:
-0.25% p.a.
2022
-
(618)
118
(489)
Interest rate swaps –
6M WIBOR to fixed
rate
Interest payments on
term loan contracted
by CIECH S.A. with
initial nominal
amount of
PLN 1,212,520
thousand
PLN
1,212,520
thousand
Interest rate
paid: 1.8%
p.a.
2022
-
(31,126)
3,453
(4,526)
Raw material price risk
Futures contracts for
the sale of CO
2
certificates (CIECH
Soda Romania S.A.)
Planed revenue from
sale of EUA
367,000 EUA
EUR 19/EUA
(designation
rate 29.43
EUR/EUA)
2021 (March)
(22,590)
-
-
-
Acquired call options
embedded in gas
supply contracts
(closed at the end of
2020)
Cost of gas purchased
in 2016-2020
-
-
2020
-
-
2,206
-
Collar optional
structures for gas
Gas supplied
according to the
option contract after
elimination of the
intrinsic value of the
option or gas
purchased at the
month-ahead market
832,200
Mwh
Corridor of
EUR 10-
13/MWh
2021
18,427
-
-
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
79
Type of instrument
Hedged
item
Nominal
value/Volu
me (as at
31.12.2020)
Average price
obtained on
the contract
(not settled
transactions
as at
31.12.2020)
Maturity
31.12.2020
31.12.2019
Derivative instruments – cash flow hedge
Assets
Liability
Assets
Liability
price if the option is
not exercised
Financial instruments – hedge of net investments
Currency risk
Liability on account of
bonds
The hedged item is a
portion of the net
investment in a
subsidiary
69,697
EUR
thousand
n.a.
Upon the sale
of shares
-
-
-
-
Term loan liabilities
The hedged item is a
portion of the net
investment in a
subsidiary
30,000
EUR
thousand
n.a.
Upon the sale
of shares
-
(138,444)
-
(127,755)
Amounts recognised in the cash flow hedge reserve are presented below:
01.01.-31.12.2019
01.01.-31.12.2019
Opening balance
17,678
3,115
Adjustment of errors from previous periods
-
14,438
Adjusted opening balance
17,678
17,553
Change in fair value of the hedging instrument recognised in other comprehensive
income
(53,061)
4,761
Income tax on the effective portion
13,255
(3,863)
Reclassification to profit or loss
17,087
(623)
Income tax
(3,067)
290
Hedge Ineffectiveness
(1,285)
(440)
Closing balance
(9,393)
17,678
The aim of the Group when taking the decision concerning the implementation of the principles of cash flow hedging was to
reduce the influence of interest rate movements, exchange rates differences due to incurred liabilities, (e.g. loans, bonds)
and the impact of changes in raw material prices (gas) on the statement of profit or loss by reflecting their hedging nature in
the financial statements.
The result of the settlement of the effective portion of hedging instruments is reclassified from equity to the statement of
profit or loss upon the realisation of the hedged item and recognition of its effect in the statement of profit or loss.
In the reporting period, there were no instances of identifying the inability to realise a future transaction in respect of which
the cash flow hedge accounting was applied.
However, in the third quarter of 2019, due to the discontinuation of production at CIECH Soda Romania S.A. and the absence
of any further USD/RON exposure, part of the transaction was closed with a negative valuation, which was reflected in the
consolidated financial statements.
Other relationships (not listed in the table above) were cancelled and settled in the previous reporting period in connection
with the occurrence of the hedged position.
Sales revenues designated to hedge accounting are considered as highly probable. Their occurrence is anticipated in the
Group’s long-term financial forecast. Additionally, to a large extent, these transactions are concluded with regular customers
of the Group Companies, which supports the probability of their occurrence. The effect of the cash flow hedge accounting
and the net investment hedges in foreign entities was presented in the consolidated statement of other comprehensive
income of the CIECH Group.
In IRS transactions, in order to identify the sources of hedge ineffectiveness, the key parameters of the hedged loan and IRS
transactions were compared (nominal value, interest rate, interest periods). Credit risk is considered negligible. No sources
of ineffectiveness have been identified.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
80
In the CIRS transaction, in order to identify the sources of hedge ineffectiveness, the key parameters of the hedged currency
flows and the hedging transaction were compared: nominal, cash flow execution dates.
The ineffectiveness of the hedge was influenced by:
- differences in the dates of settlement of forward hedging transactions and the dates of execution of hedged currency flows
- differences of individual foward rates within the series of forward vs. hypothetical forward transactions in which individual
transactions are at market levels at the time the transaction is designated. Credit risk is considered negligible, taking into
account the financial standing of the contractor.
8.3. FINANCIAL RISK MANAGEMENT
Risk management principles
The CIECH Group actively manages operational and financial risk, striving to reduce the fluctuation of cash flows and maximise
the companies’ market value.
The CIECH Group’s policy assumes natural hedging of imports and exports and hedging of up to 90% of the projected annual
net exposure to risk of changes in exchange rates, CO2 emission allowance prices, natural gas prices and electricity prices by
using derivatives and 100% exposure to interest rate risk.
The following types of transactions were concluded (or continued but concluded in previous years) in the Group in 2020 :
contracts to hedge currency risk and interest rate risk (IRSs and CIRSs), contracts to hedge the risk of prices of CO
2
emission
certificates (forwards, futures), contracts to hedge the risk of gas prices (forwards, options), and contracts to hedge the risk
of electricity prices (forwards).
Cash management
The CIECH Group cooperates with bank service providers of high credit rating and with substantial experience in the cash
management area. Allocation of financial resources to the Group companies is performed through the use of intra-group
loans, dividends payout by subsidiaries, participation in a cash management system (cashpooling) and increase of share
capital in the subsidiaries.
Quantitative and qualitative information on financial risks
The CIECH Group manages financial risks based on, among others, the developed and adopted market risk hedging strategy.
The aim of the financial risk management policy is to identify areas requiring risk analysis to determine methods to identify
and measure it, to determine activities undertaken in relation to identified risk areas and to define organisational solutions
in the risk management process.
In fulfilling its main goals, the Group 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 CIECH Group debt. When assessing risk, the Group
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.
Financial risk management covers processes of identifying, measuring and establishing the manner of responding to that risk,
including processes related to currency exchange rates and interest rate fluctuations. The Group monitors risk areas which
are most important for its activities.
Interest rate risk
The Group finances its activity mainly through term loans and bonds. The amount of the costs of interest-bearing debt held
by the Group depends on the reference rate. This refers to term loans made available under a facilities agreement dated
9 January 2018 in the amount of PLN 1,212 million and EUR 30 million, a revolving credit facility made available under a
facilities agreement dated 9 January 2015 in the amount of PLN 250 million (as at the end of 2020, the debt amounted to
PLN 0), overdraft facilities (as at the end of 2020, the debt amounted to PLN 551,253 thousand) and a part of lease and
factoring contracts.
Therefore, the Group 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 Group financial result. The risk is partially reduced
by:
✓ assets owned by the CIECH Group companies (bank deposits), earning interest at variable interest rate,
✓ hedging transactions concluded.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
81
In 2020, the CIECH Group used the following interest rate hedging transactions:
• interest rate swap transaction to hedge the variable interest rate levels applicable to the calculation of interest on the
term loan made available in November 2015 and annexed on 9 January 2018. The transaction hedges indebtedness in
the amount of EUR 30 million, amortised in accordance with the schedule of the IRS transaction;
• currency and interest rate swap transactions to hedge the variable interest rate levels applicable to the calculation of
interest on the term loan made available in November 2015 and annexed on 9 January 2018. The transaction hedges
indebtedness in the initial nominal amount of 1,212 million, amortised in accordance with the schedule of the CIRS
transaction.
The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to
interest rate risk:
Total carrying amount
31.12.2020
31.12.2019
Floating interest rate instruments
(1,596,436)
(1,489,754)
Interest rate swap transactions*
443,525
299,580
Cash flows sensitivity (net)
2,039,961
1,789,334
*including EUR 30 million hedged by IRS, PLN 1,045 million hedged by CIRS – IRS transaction isolated as part of decomposition of CIRS.
The table below shows the effects of a change in the interest rate by 100 basis points in relation to the floating interest rate
instruments presented in the statement of financial position.
Statement of profit or loss
Equity*
Increase
by 100 bp
Decrease
by 100 bp
Increase
by 100 bp
Decrease
by 100 bp
31.12.2020
Floating interest rate instruments
(15,964)
15,964
-
-
Interest rate swap transactions*
2,617
(2,690)
15,878
(16,409)
Cash flows sensitivity (net)
(13,347)
13,275
15,878
(16,409)
31.12.2019
Floating interest rate instruments
(14,898)
14,898
-
-
Interest rate swap transactions*
1,315
(1,361)
31,103
(32,329)
Cash flows sensitivity (net)
(13,583)
13,536
31,103
(32,329)
* Do not include the impact of profit/loss on equity.
Currency risk
Currency risk is an inevitable component of commercial activity denominated in foreign currencies. Due to the nature of
conducted import and export operations, the CIECH Group is subject to currency exposure related to the significant lead of
export over import. The exposure value is also affected by investment projects implemented in foreign currencies and the
structure of external financing. Sources of currency risk which exposed companies within the CIECH Group in 2020 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 CIECH Group's financial results.
Foreign exchange risk analysis is focused on the level of operating cash flows. The SDC Group, CIECH Salz Deutschland GmbH
were excluded from the analysis since their functional currency is EUR and all reported operating cash flows of these
companies are performed in this currency.
In 2020, the CIECH Group used hedging contracts, such as forward options, to partially cover currency risk. The CIECH Group
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 the CIECH Group in EUR (excluding figures concerning the SDC
Group, CIECH Salz Deutschland GmbH) and in USD as at 31 December 2019 and 2020 due to financial instruments:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
82
Exposure to currency risk in EUR ('000)
31.12.2020
31.12.2019
Impact on the
statement of
profit or loss
Impact on the
statement of other
comprehensive
income*
Assets
Loans granted sensitive to FX rate changes
215,955
102,400
x
Trade and other receivables
16,092
29,410
x
Cash including bank deposits
14,668
24,195
x
Liabilities
Trade and other liabilities
(15,340)
(16,886)
x
Term loan liabilities
(30,000)
(30,000)
x
Working capital facility liabilities
(25,000)
(25,000)
x
Other liabilities in respect of credits and loans
(13,030)
(9,441)
x
Hedging instruments: Forward
(173,025)
(36,784)
x
Forward (not designated to hedge accounting)
(41,000)
-
x
CIRS (not designated to hedge accounting)
(60,000)
(14,000)
x
Hedging instruments: CIRS (forward transactions isolated as
part of decomposition of CIRS)
-
(172,880)
x
Total exposure
(110,680)
(148,986)
* Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is
recognised in the profit or loss statement.
Exposure to currency risk in USD ('000)
31.12.2020
31.12.2019
Impact on the
statement of
profit or loss
Impact on the
statement of other
comprehensive
income*
Assets
Trade and other receivables
2,420
2,378
x
Cash including bank deposits
1,182
6,969
x
Liabilities
Trade and other liabilities
(992)
(6,534)
x
Hedging instruments: Forward
-
(5,363)
x
Total exposure
2,610
(2,550)
* Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is
recognised in the profit or loss statement.
The table contains an analysis of the sensitivity of individual statement of financial position items to exchange rate changes
as at 31 December 2020.
Analysis of sensitivity to currency risk – EUR
('000 EUR)*
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive
income
31.12.2020
Foreign-currency balance sheet items
623
923
(300)
Hedging instruments: Forward and CIRS
(1,730)
-
(1,730)
31.12.2019
Foreign-currency balance sheet items
607
607
-
Hedging instruments: Forward and CIRS
(2,097)
-
(2,097)
* Increase of EUR/PLN exchange rate by 1 grosz.
Analysis of sensitivity to currency risk USD
('000 USD)*
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive income
31.12.2020
Foreign-currency balance sheet items
26
26
-
Hedging instruments: Forward
-
-
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
83
Analysis of sensitivity to currency risk USD
('000 USD)*
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive income
31.12.2019
Foreign-currency balance sheet items
28
28
-
Hedging instruments: Forward
(54)
-
(54)
* Increase of USD/PLN exchange rate by 1 grosz.
Raw material price risk
In the course of its operations, the CIECH Group is exposed to the risk of changes in prices of energy commodities (e.g. coal,
natural gas, CO
2
emission certificates) and the risk of changes in electricity prices.
The CIECH Group reduces market risk related to raw materials through concluding agreements with suppliers containing an
appropriate price formula or through forward transactions.
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 Group's point of view, credit risk is linked to:
• trade receivables from customers,
• cash and bank deposits.
The CIECH Group 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 Group uses securities in the form of a letter of credit, bank guarantees, mortgages, receivables
insurance and non-recourse factoring; approx 14% of receivables is not insured). Customers’ creditworthiness is assessed and
appropriate collateral is obtained from the customers, allowing for a reduction of potential losses in the case of failure to
repay the debt. Credit risk assessment for customers is performed prior to concluding an agreement and periodically at
subsequent deliveries of goods in accordance with the binding procedures. On selected markets, where more risky payment
deadlines are applied, the Group’s companies make use of services provided by companies specialising in insuring receivables.
Credit risk connected with cash in bank and bank deposits is low as the CIECH Group enters into transactions with high-rating
banks with stable market position.
The table below presents the maximum exposure of financial assets to credit risk as at the end of reporting period.
31.12.2020
31.12.2019
Cash and cash equivalents
443,886
299,580
Trade receivables and factoring receivables
223,268
339,285
Financial assets from valuation of derivatives
20,262
18,115
Financial assets from valuation of embedded derivatives
-
2,206
TOTAL
687,416
659,186
The CIECH Group has no material items which would be uncollectible as at the reporting date and not covered by an
impairment allowance.
Trade receivables
Loans advanced
31.12.2020
31.12.2019
31.12.2020
31.12.2019
Soda Segment
126,640
178,907
-
-
Agro Segment
55,411
66,437
-
-
Foams Segment
7,106
26,136
-
-
Silicates Segment
11,471
12,929
-
-
Packaging Segment
19
2,876
-
-
Other Segment
18,757
17,755
146
1,800
Resins Segment*
65,204
22,570
-
-
Consolidation adjustments
(108,769)
(33,715)
-
-
TOTAL
175,840
293,895
146
1,800
* Assets related to discontinued operations. Detailed information on discontinued operations is provided in Note 5.13 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
84
Below is a reconciliation of impairment allowances for trade receivables in accordance with IFRS 9.
Stage 2
Stage 3
Lifetime ECL – not
impaired
Lifetime ECL –
impaired
Total
Trade receivables, gross, as at 1 January 2020
294,233
39,332
333,565
Recognised
2,082,132
19,519
2,101,651
Repaid
(2,200,957)
(10,047)
(2,211,005)
Trade receivables, gross, as at 31 December 2020
175,408
48,804
224,212
01.01.2020
3,889
35,781
39,670
Recognition of impairment losses
1,790
13,876
15,666
Reversal of unused allowances
(818)
(2,911)
(3,729)
Utilisation
(527)
(527)
Foreign exchange differences
519
519
Transfer to fixed assets and assets groups for sale
(2,578)
(2,578)
Other
(506)
(506)
31.12.2020
4,861
43,654
48,515
Trade receivables, net, as at 31 December 2020
170,547
5,150
175,697
Stage 2
Stage 3
Lifetime ECL – not
impaired
Lifetime ECL –
impaired
Total
Trade receivables, gross, as at 1 January 2019
376,494
38,192
414,685
Recognised
2,738,812
4,209
2,743,021
Repaid
(2,821,291)
(2,850)
(2,824,141)
Trade receivables, gross, as at 31 December 2019
294,015
39,550
333,565
01.01.2019
5,138
33,219
38,357
Recognition of impairment losses
441
2,680
3,121
Reversal of unused allowances
(1,690)
(879)
(2,569)
Utilisation
-
(1,173)
(1,173)
Foreign exchange differences
-
1,934
1,934
31.12.2019
3,889
35,781
39,670
Trade receivables, net, as at 31 December 2019
290,126
3,769
293,895
Calculation of impairment allowances for trade receivables
The following tables present the reconciliation of impairment allowances for financial assets in accordance with IFRS 9.
Default rates and calculation of impairment allowances as at 31 December 2020 and 31 December 2019 are presented in the
following tables.
Total
Non past due
Not past due, 0-30
days
30-90 days
90-180
days
> 180
days
Trade receivables, gross, as at 31.12.2020
224,212
170,588
4,047
456
502
48,619
Default rate
0.45%
0.62%
18.27%
35.89%
97.96%
Expected credit losses in accordance with
IFRS 9
4,861
775
25
83
180
3,796
Total expected losses
48,713
776
26
85
199
47,626
from collective analysis
4,861
775
25
83
180
3,796
from case-by-case analysis
43,852
1
1
2
19
43,829
Total
Non past due
Not past due, 0-30
days
30-90 days
90-180
days
> 180
days
Trade receivables, gross, as at 31.12.2019
333,565
267,520
18,596
4,827
5,329
37,292
Default rate
0.39%
0.43%
0.84%
18.69%
100.00%
Expected credit losses in accordance with
IFRS 9
3,889
1,038
80
41
996
1,734
Total expected losses
39,449
1,038
80
42
997
37,292
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
85
Total
Non past due
Not past due, 0-30
days
30-90 days
90-180
days
> 180
days
from collective analysis
3,889
1,038
80
41
996
1,734
from case-by-case analysis
35,560
-
-
1
1
35,558
Liquidity risk
The CIECH Group is exposed to risk connected with maintaining liquidity due to the considerable share of external financing
(due to the term loan, working capital facilities 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 the CIECH Group’s companies,
• monitoring and optimisation of the level of working capital,
• adjusting the level and schedule of capital expenditure,
• intragroup borrowings and sureties for the liabilities of the Group’s companies,
• current monitoring of the settlement of liabilities under the loan agreements conditions.
The Group’s debt financing is ensured primarily by the term loan. In addition, a revolving credit facility in the amount of PLN
250 million, constituting an additional source of current liquidity and working capital financing (as at 31 December 2020, the
facility was drawn down in the amount of PLN 0 million), and overdraft facilities (as at the end of 2020, they were drown
down in the amount of PLN 551,253 thousand) have been made available to the Group.
As at 31 December 2020, one of the ratios included in the loan agreement was not met: the share of subsidiaries in the
consolidated EBITDA value, which are guarantors in the loan agreement, did not exceed the required threshold of 80%.
Therefore, the total value of loans made available on the basis of the above-mentioned contracts has been reclassified into
short-term loan liabilities.
The table below presents financial liabilities at face value grouped by maturity.
31.12.2020
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5
years
Other financial liabiliies:
(2,418,260)
(2,457,822)
(2,449,432)
-
(8,390)
-
-
Trade liabilities
(490,611)
(490,611)
(490,611)
-
-
-
-
Loans and borrowings
(1,911,475)
(1,951,037)
(1,942,647)
-
(8,390)
-
-
Factoring liabilities
(16,174)
(16,174)
(16,174)
-
-
-
-
Lease liabilities
(129,258)
(253,223)
(14,242)
(11,878)
(32,086)
(22,908)
(172,109)
Derivative instruments with negative
value
(42,952)
(45,061)
(17,744)
(15,124)
(10,397)
(1,796)
-
Hedging derivatives with negative
value
(16,494)
(14,364)
-
-
(14,364)
-
-
Total financial liabilities
(2,606,964)
(2,770,470)
(2,481,418)
(27,002)
(65,237)
(24,704)
(172,109)
31.12.2019
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5
years
Other financial liabiliies:
(2,064,730)
(2,160,014)
(489,486)
(22,246)
(387,450)
(1,260,832)
-
Trade liabilities
(393,794)
(393,794)
(393,794)
-
-
-
-
Loans and borrowings
(1,645,400)
(1,740,684)
(70,156)
(22,246)
(387,450)
(1,260,832)
-
Factoring liabilities
(25,536)
(25,536)
(25,536)
-
-
-
-
Lease liabilities
(143,934)
(270,628)
(16,160)
(13,177)
(37,276)
(36,471)
(167,544)
Derivative instruments with negative
value
(22,233)
(25,168)
(97)
(18,357)
(6,714)
-
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
86
31.12.2019
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5
years
Hedging derivatives with negative
value
(2,787)
(41)
(40)
(1)
-
-
-
Total financial liabilities
(2,233,684)
(2,455,851)
(505,783)
(53,781)
(431,440)
(1,297,303)
(167,544)
Detailed information concerning revenues and costs pertaining to financial instruments, recognised in the statement of profit
or loss has been presented in note 8.1.
Liquidity of the CIECH Group
The liquidity ratios as at December 31, 2020 decreased compared to the level on December 31, 2019. As at 31 December
2020, the current ratio, calculated as the quotient of total current assets and total short-term liabilities, was 0.46. As at 31
December 2020, the quick ratio, calculated as the quotient of total current assets less inventories and total short-term
liabilities, was 0.35. It is related to the failure to meet the level of the ratio under the loan agreement, described in note 7.1
of this report.
31.12.2020
31.12.2019
Current ratio
0.46
1.17
Quick ratio
0.35
0.76
8.4. DETERMINATION OF FAIR VALUE
The following list presents the fair value of financial instruments
31.12.2020
31.12.2019
Carrying
amount
Fair value
Carrying amount
Fair value
Cash and cash equivalents
443,886
443,886
299,580
299,580
Loans granted
146
146
1,800
1,800
Trade receivables
175,697
175,697
293,895
293,895
Derivatives with positive value
20,262
20,262
18,115
18,115
Embedded instruments with positive value
-
-
2,206
2,206
Factoring receivables
47,425
47,425
43,590
43,590
ASSETS
687,417
687,417
659,187
659,187
Loans and borrowings
(1,911,475)
(1,925,603)
(1,645,400)
(1,647,439)
Trade liabilities
(490,611)
(490,611)
(393,794)
(393,794)
Derivatives with negative value
(59,446)
(59,446)
(25,020)
(25,020)
Factoring liabilities
(16,174)
(16,174)
(25,536)
(25,536)
LIABILITIES
(2,477,706)
(2,477,198)
(2,089,750)
(2,091,789)
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.
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.
• Level 2 – the CIECH Group values 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 evaluation techniques which are not based on observable market
inputs.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
87
Assets and liabilities measured at fair value
31.12.2020
31.12.2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets
(22,590)
20,262
40,948
-
20,433
36,717
Investment property
-
-
40,948
-
-
36,717
Hedging instruments
-
18,427
-
-
18,115
-
Derivatives with positive value
-
1,835
-
-
112
-
Futures contracts for sale of CO
2
emission rights*
(22,590)
-
-
-
-
-
Financial assets from the valuation of embedded derivatives
-
-
-
-
2,206
-
Liabilities
(34,495)
(59,446)
-
(10,092)
(25,020)
-
Hedging instruments
-
(42,952)
-
-
(22,233)
-
Futures contracts for purchase of CO
2
emission rights**
(34,495)
-
-
(10,092)
-
-
Derivatives with negative value
-
(16,494)
-
-
(2,787)
-
TOTAL
(57,085)
(39,184)
40,948
(10,092)
(4,587)
36,717
* Valuation of the instrument as at the balance sheet date reduces the value of cash.
** Settlement with the Clearing House at fair value.
As at 31 December 2020, the CIECH Group held the following types of financial instruments measured at fair value:
• concluded by the parent company, CIECH S.A.: interest rate swap contracts, CIRS (currency and interest rate swap)
contract EUR/PLN — Level 2, according to the fair value hierarchy,
• currency forwards concluded by CIECH S.A. — Level 2, according to the fair value hierarchy,
• gas forward contracts concluded by the SDC Group – Level 2, according to the fair value hierarchy,
• futures contracts for the sale of CO
2
certificates concluded by CIECH Soda Romania S.A. — Level 1, according to the fair
value hierarchy,
• optional structures for the supply of gas collar type in CIECH Energy Deutschland GmbH – Level 2, according to the fair
value hierarchy.
In 2020, there were no transfers within the fair value hierarchy of instruments measured at fair value. There were no changes
in the classification of financial instruments, or in business conditions that could affect the fair value of financial assets or
liabilities.
The fair value of instruments concluded is determined in the following manner:
• 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.
• Futures contracts for the purchases of CO
2
certificates are settled on a daily basis according to quotations published on
ICE and EEX’s stock exchange,
• the value of natural gas commodity options is determined using the Black-Scholes option pricing model. Inputs include
implied gas price volatility and forward gas prices at European gas delivery points.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
88
Fair value of financial instruments
Cash and cash
equivalents
Long-term
financial
assets
Short-term
financial
assets
Other long-
term
liabilities
Trade and
other
liabilities
TOTAL
31.12.2020
IRS EUR*
-
-
-
-
(618)
(618)
IRS PLN*
-
-
-
-
(31,126)
(31,126)
CIRS
-
574
1,261
(14,327)
-
(12,492)
Forward EUR/PLN
-
-
-
-
(13,375)
(13,375)
Options
-
-
18,427
-
-
18,427
Futures contracts for the sale of CO
2
certificates
(22,590)
-
-
-
-
(22,590)
TOTAL
(22,590)
574
19,688
(14,327)
(45,119)
(61,774)
31.12.2019
IRS EUR
-
118
-
(29)
(460)
(371)
IRS PLN
-
3,048
405
(3,711)
(815)
(1,073)
CIRS
-
1,713
12,664
(2,747)
(17,217)
(5,587)
Forward EUR/PLN
-
-
167
-
-
167
Forward RON/PLN
-
-
-
-
(6)
(6)
Forward USD /RON
-
-
-
-
(35)
(35)
Embedded derivatives
-
-
2,206
-
-
2,206
TOTAL
-
4,879
15,442
(6,487)
(18,533)
(4,699)
* At the end of 2020, we do not report the long-term portion of IRS transactions designated for hedge accounting. These transactions hedge
the interest rate on loans that were recognized as short-term liabilities due to the breach of one of the covenants as at the balance sheet
date. Details are described in point 7.1.
Investment properties are also measured at the fair value in the financial statements. According to the fair value hierarchy,
it is Level 3. Investment real estate portfolio is evaluated by an external, independent property appraiser or based on a
preliminary sale agreement. In measuring the fair value of land used under the perpetual usufruct in Bydgoszcz, a comparative
method was applied. The comparative approach means measuring the value through an analysis of recent sales or listings of
comparable assets. These transactions or offers are adjusted in order to take into account differences of the valuated assets
and comparable assets on the day of their sale, for example date of sale, location, area, technical status and other. According
to the method of average price adjustments, estimating the property value that is the subject of valuation is based on the
average price adjustment of similar properties, that form the base for the comparison creating adjustment coefficients
corresponding to different characteristics of these properties. The calculations are based on comparative properties,
described by attributes influencing the level of properties prices and transaction prices of these properties.
Valuation of buildings located in Bydgoszcz and tangible assets identified as technical infrastructure (including assets that are
necessary to keep properties operational but which are not traded on the secondary market) is synthetically included in the
total value of land valuated under the comparative approach method. Buildings and structures located on plots of land in
Bydgoszcz have no impact on the market value of this land, therefore, for accounting purposes, the value of this group of
assets was determined based on their book value. In the final balance sheet, the value of buildings and structures was
deducted from the value of land.
The measurement of the fair value of investment property does not include transaction costs, which the entity might
additionally bear, future capital expenditures regarding development or improvement of the investment property, as well as
future benefits regarding those expenditures.
The verification of the fair value of investment properties is conducted at least once a year at the balance sheet date ending
the financial year.
Financial instruments not measured at fair value
The CIECH Group has taken out term and revolving credit facilities whose book value, as at 31 December 2020, was
PLN 1,911,475 thousand, and whose fair value amounted to PLN 1,910,967 thousand (Level 2 of fair value hierarchy). In the
case of the remaining financial instruments held by the CIECH Group (classified mainly as cash and cash equivalents, financial
assets and liabilities measured at amortised cost), the fair value is close to the book value.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
89
9. OTHER NOTES
9.1. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The tables below present the reasons for the differences between the changes of particular items of the consolidated
statement of financial position and changes resulting from the consolidated cash flows statement:
01.01 - 31.12.2020
01.01 -31.12.2019
Inventory change presented in consolidated statement of financial position
(106,715)
17,186
Reclassification to assets held for sale
34,795
-
Currency translation reserve
(7,534)
(2,164)
Inventory change in consolidated statement of cash flows
79,454
(19,350)
01.01 - 31.12.2020
01.01 -31.12.2019
Provision change presented in consolidated statement of financial position
34,421
(34,697)
Reclassification of provisions from / to liabilities related to assets held for sale
1,123
-
Change in the provision for income tax and late payment interest for 2012
(14,317)
69,992
Currency translation reserve
(10,111)
824
Change in reserves related to caverns
(9,897)
-
Other
709
(475)
Provisions change in consolidated statement of cash flows
1,928
35,643
01.01 - 31.12.2020
01.01 -31.12.2019
Receivables change presented in consolidated statement of financial position
(61,143)
(79,360)
Change in investment receivables
(3,945)
363
Change in income tax receivables
(22,561)
4,300
Change in receivables from caverns
3,922
6,979
Change in Group’s composition
(1,571)
-
Currency translation reserve
(7,463)
4,726
Reclassification of receivables from / to assets held for sale
42,701
-
Other
-
(4,277)
Receivables change presented in consolidated statement of cash flows
50,059
67,269
01.01 - 31.12.2020
01.01 -31.12.2019
Change of liabilities presented in consolidated statement of financial position
467,916
197,331
Change in investment liabilities
12,975
(122,725)
Change in financial liabilities
(34,426)
8,713
Change in income tax liabilities
(2,249)
5,540
Currency translation reserve
6,193
8,335
Reclassification of liabilities to / from liabilities related to assets held for sale
25,375
-
Change in lease liabilities and loans
(251,530)
(120,395)
Clearance of white certificates
-
13,534
Other
-
17,588
Liabilities change presented in consolidated statement of cash flows
224,254
7,921
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
90
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 Group. An example is a claim that the Group is pursuing through legal processes, where the
outcome is uncertain. Contingent assets are not recognised in the statement of financial position since this could 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 Group’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 the CIECH Group
As at 31 December 2020, the CIECH Group did not have any significant disputed liabilities of CIECH S.A. and CIECH S.A.’s
subsidiaries, pursued in all types of proceedings before court, body appropriate for arbitration proceedings or public
administration bodies, except for the cases described below, in “Audits of tax settlements at the CIECH Group”.
Significant disputed receivables of the CIECH Group
As at 31 December 2020, the CIECH Group did not hold any significant disputed receivables of CIECH S.A. and CIECH S.A.’s
subsidiaries, pursued in all types of proceedings before court, body appropriate for arbitration proceedings or public
administration bodies, apart from the case disclosed below in section “Contingent assets and contingent liabilities including
guarantees and sureties”.
Contingent assets and contingent liabilities including guarantees and sureties
31.12.2020
31.12.2019
Contingent assets
31,077
31,077
Other contingent receivables*
31,077
31,077
Contingent liabilities
645,699
661,580
Guarantees and sureties granted**
551,318
545,528
Other***
94,381
116,052
* Including:
• 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.
• As at 31 December 2020, a contingent asset recognised by CIECH Soda Polska S.A. amounted to PLN 12,213 thousand – it is the value of
energy efficiency certificates received from the President of the Energy Regulatory Office in 2019 that have not been recorded yet in the
account kept by the Polish Power Exchange.
** Including:
• guarantee granted up to the amount of 125% of liability related to term loan in the amount of PLN 1,212,520 thousand and revolving
loan in the amount of PLN 250,000 thousand – contingent liability in the amount of PLN 365,630 thousand,
• guarantee granted up to the amount of 125% of liability related to term loan in the amount of EUR 30,000 thousand – contingent liability
in the amount of PLN 34,611 thousand,
• guarantee granted up to the amount of 125% of liability related to short-term loan in the amount of EUR 50,000 thousand – contingent
liability in the amount of PLN 12,500 thousand,
• guarantee granted up to the amount of 125% of liability related to short-term loan in the amount of EUR 10,000 thousand – contingent
liability in the amount of PLN 11,537 thousand.
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of EUR 25,000 thousand – contingent
liability in the amount of PLN 28,843 thousand,
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of PLN 300,000 thousand – contingent
liability in the amount of PLN 75,000 thousand,
• guarantee granted up to the amount of 125% of liability related to revolving loan in the amount of PLN 92,788 thousand – contingent
liability in the amount of PLN 23,197 thousand.
*** Including:
• contingent liability in the SDC Group relating to environmental protection in the amount of PLN 16,807 thousand (EUR 3,642 thousand),
• contingent liability in CIECH Soda Polska S.A. regarding environmental penalty fees in the amount of PLN 8,755 thousand,
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
91
• contingent liabilities in CIECH Soda Polska S.A. resulting from blank promissory notes for the National Fund for Environmental Protection
and Water Management relating to grants received in the amount of PLN 21,861 thousand,
• contingent liabilities in CIECH Sarzyna S.A. resulting from a grant received for developing and testing a group of agro-chemical
preparations in the amount of PLN 14,645 thousand,
• contingent liabilities in CIECH R&D Sp. z o.o. resulting from promissory notes relating to subsidies received for investment projects aimed
at developing and optimising production processes in the amount of PLN 11,991 thousand.
• contingent liabilities in CIECH R&D Sp. z o.o. resulting from promissory notes relating to subsidies received for the purchase of rolling
stock the amount of PLN 14,200 thousand,
• contingent liabilities in Smart Fluid Sp. z o.o. resulting from promissory notes relating to subsidies received for research and development
projects in the amount of PLN 5,015 thousand,
• • other contingent liabilities in CIECH Soda Polska S.A. for the amount of PLN 1,107 thousand PLN in connection with the payment order
in the writ proceedings against which the objection was filed.
As at 31 December 2020, contingent liabilities amounted to PLN 645,699 thousand and decreased
as compared to 31 December 2019 by PLN 15,881 thousand. The change resulted primarily from the receipt of decisions
concerning the reduction of environmental penalty fees at CIECH Soda Polska S.A.
The values of contingent liabilities related to proceedings before administrative bodies and their changes in 2020 are
described below in the item: " Audits of tax settlements at the CIECH Group and related contingent liabilities".
Sureties and guarantees granted as at 31 December 2020- total value of balance sheet and off-balance sheet liabilities that
have been guaranteed
Beneficiary’s name
Total amount of liabilities covered by
guarantee/surety in whole or in specific part
Financial terms, including guarantee fee due to the
company; guarantee period
Principal
currency
PLN
CIECH S.A.
Landesamt fuer
Geologie und
Bergwesen Sachsen-
Anhalt
7,101
thousand
EUR
32,769 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to liability; no time limit
CIECH Soda
Deutschland
GmbH&Co. KG.
(subsidiary)
MECALUX
Sp. z o.o.
4,000
thousand
EUR
18,459 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims related to the
subsidy; until 2 July 2021
CIECH Salz
Deutschland
GmbH
(subsidiary)
Evatherm AG
21,900
thousand
EUR
101,064 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to liability; until the liabilities
arising from the agreement between Evatherm AG
and CIECH Salz Deutschland GmbH have been
settled
CIECH Salz
Deutschland
GmbH
(subsidiary)
IP System
Manufacturing Sp. z
o.o
6,325
thousand
EUR
29,187 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims related to the
agreement; until 30 April 2021
CIECH Salz
Deutschland
GmbH
(subsidiary)
BNP Paribas S.A.
PLN 62,500
thousand
62,500 thousand
Commission of 0.55% p.a. of the guaranteed
liability; supplier financing agreement; until all
obligations have been repaid no later than 36
months after the date of termination
CIECH Soda
Deutschland
GmbH & Co. KG;
Ciech Energy
Deutschland
GmbH
BNP Paribas
Faktoring Sp. z o.o.
PLN 150,000
thousand
150,000 thousand
Commission of 0.55% p.a. of the guaranteed
liability; supplier financing agreement; indefinite
term
CIECH S.A., CIECH
Sarzyna S.A.,
CIECH Pianki Sp. z
o.o., CIECH Soda
Polska S.A., CIECH
Vitrosilicon S.A.
mFaktoring S.A.
PLN 150,000
thousand
150,000 thousand
Commission of 1.5% p.a. of the guaranteed liability;
supplier financing agreement – security for
repayment of claims; until 31 December 2021
CIECH Sarzyna
S.A., CIECH Żywice
Sp. z o.o.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
92
Beneficiary’s name
Total amount of liabilities covered by
guarantee/surety in whole or in specific part
Financial terms, including guarantee fee due to the
company; guarantee period
Principal
currency
PLN
mBank S.A.
3,000
thousand
PLN
3,000 thousand
Commission of 1.5% p.a. of the guaranteed liability;
collateral pertaining to claims under the Guarantee
agreement; until 30 June 2023
CIECH Salz
Deutschland
GmbH
(subsidiary)
Total amount of liabilities for which guarantees and sureties were granted
PLN 546,978 thousand
Selected subsidiaries in Poland, Germany and Romania
Banks:
Bank Handlowy
w Warszawie S.A.,
Bank Millennium
S.A., Santander Bank
Polska S.A., BOŚ
S.A., Bank PKO BP
S.A., Credit Agricole
Bank Polska S.A.,
HSBC Bank Polska
S.A., ICBC (Europe)
S.A. Branch in
Poland, mBank S.A.,
BGŻ BNP Paribas
S.A.; Bank Pekao
S.A., Banko de
Sabadell
PLN 1,828,150 thousand
(guarantee granted up to
the amount of 125% of
liability related to term loan
in the amount of
PLN 1,212,520 thousand
and to a revolving credit
facility in the amount of
PLN 250,000 thousand)
EUR 37,500 thousand
(guarantee granted up to
the amount of 125% of
liability related to term loan
in the amount of
EUR 30,000 thousand)
PLN 62,500 thousand
(guarantee granted up to
the amount of 125% of
liability related to
overdraft facility granted
by Bank Millennium S.A. in
the amount of PLN 50,000
thousand
and
EUR 12,500 thousand
(guarantee granted up to
the amount of 125% of
liability related to overdraft
facility in the amount of
EUR 10,000 thousand)
and
PLN 375,000 thousand
(guarantee granted up
to the amount of
125% of liability
related to a revolving
credit facility granted
by Bank Pekao S.A. in
the amount of PLN
300,000 thousand)
and
PLN 115,984 thousand
(guarantee granted up
to the amount of
125% of liability
related to a revolving
credit facility granted
by Bank BNP Paribas
S.A. in the amount of
PLN 92,788 thousand)
and
EUR 31,250 thousand
(guarantee granted up
to the amount of
125% of liability
related to a revolving
credit facility granted
by Banko de Sabadell
S.A. in the amount of
EUR 25,000
thousand).
2,756,588
thousand
Commission of 0.55% p.a of the difference between
the limit of the guarantee collateralised by assets
and a surplus of the guarantee limit;
Period for which the surety was granted –
31 December 2023 – term loan and revolving credit
facility
and
31 December 2021 – overdraft facilities in PLN and
EUR
30 June 2022 – revolving credit facility in PLN and
EUR
CIECH S.A.
(parent company)
Total amount of liabilities for which guarantees and sureties were granted
PLN 2,205,270 thousand
Total amount of guarantees granted
PLN 551,318 thousand
In 2020, the CIECH Group companies did not receive any guarantees from third parties.
Letters of support
As at 31 December 2020, CIECH S.A. was the obliged party in the letter of support (Patronatserklärung) regarding CIECH Soda
Deutschland GmbH&Co. KG seated in Staßfurt (CSD) granted to Innogy Gas Storage NWE GmbH (“Innogy”) relating to
liabilities of CSD resulting from the agreement dated 5 May 2009 on salt caverns construction for the purpose of natural gas
storage on the Staßfurt mining field according to which CSD received payments of EUR 45.8 million from Innogy by 31
December 2020. In the letter of support, CIECH S.A. has committed, among other things, to ensure that CSD will have
sufficient funds to fulfil its financial commitments against Innogy resulting from the above-mentioned agreement.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
93
Audits of tax settlements at the CIECH Group and related contingent liabilities
In 2020, the CIECH Group companies were at various stages of proceedings, including inspections, tax proceedings or
administrative court cases concerning the settlement of corporate income tax (CIT) and value added tax (VAT).
The CIECH Group companies were subject to CIT proceedings concerning the following years:
a) 2012 – at CIECH S.A.
b) 2013 – at CIECH S.A.
c) 2014 – at CIECH S.A.
d) 2015 – at CIECH Soda Polska S.A.
- at CIECH Pianki Sp. z o.o.
- at CIECH Cargo Sp. z o.o.
- at CIECH Sarzyna S.A.
- at CIECH Vitrosilicon S.A.
e) 2016 – at CIECH Sarzyna S.A.
f) 2018 – at CIECH R&D Sp. z o.o.
- at CIECH Soda Polska S.A.
CIT audit for 2012 at CIECH S.A. was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków on
5 April 2018. CIECH S.A. received the outcome of the audit on 4 July 2018. The tax authority challenged the transaction
concerning the capital increase in a 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 in Cracow. On 9 October 2019, the Provincial Administrative Court
issued a ruling in which it confirmed the approach presented by the authority. The court indicated that the company was
obliged to recognise the income and did not have the right to recognise the tax deductible cost. After receipt of a written
statement of reasons, the company lodged a cassation complaint with the Supreme Administrative Court on 23 December
2019. At present, the company is waiting for the date of the hearing to be set.
CIT audit for 2013 at CIECH S.A. was initiated by the Tax Audit Office in Warsaw on 30 November 2016. The tax audit report
was issued on 16 May 2017. The authority claims that the Company has overestimated the tax deductible cost of interest on
cash obtained as a result of the issue of bonds and allocated to the reserve capital of CIECH Soda Deutschland GmbH & Co.
KG. Moreover, the authority is of the opinion that the fee for the “CIECH” trademark should not be recognised by CIECH S.A.
as a tax deductible cost.
The tax base challenged by the authority is PLN 9.4 million (after taking into account the tax loss incurred in the audited year),
which translates into a tax of PLN 1.8 million.
The company and its advisors did not agree with the findings of the auditors and as a result of the tax proceedings, the
Decision of the First Instance was issued, against which the company filed an appeal in 2017. On 14 March 2018 CIECH S.A.
received the decision of the Second Instance in which the auditors upheld their findings contained in the Decision of the First
Instance.
The company appealed to the Provincial Administrative Court against this decision. Despite this, the company decided to pay
tax in the amount of PLN 1.8 million and interest (PLN 0.3 million) on 10 April 2018. The Court made its decision on 6 June
2019. The Court complied with the CIECH S.A. appeal as regards the costs of trademark fees, repealing the decision of the
second instance. However, as regards the costs of consulting and financing of Soda Deutschland, the Court adjudicated that
said costs could not constitute tax costs. After receipt of a written statement of reasons, the company lodged a cassation
complaint with the Supreme Administrative Court in September 2019. At present, the company is waiting for the date of the
hearing to be set.
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CIT audit for 2014 at CIECH S.A. was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków
(hereinafter: Head of the Małopolskie Province Customs and Tax Office in Kraków) on 13 November 2019. The Company
received the outcome of the audit on 22 May 2020. The authority claims that the Company has overestimated the tax
deductible cost by including interest on external financing contributed to the capital reserves of Soda Deutschland Ciech
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 leaved only the charge that the
company overestimated the tax deductible cost by including interest on external financing contributed to the capital reserves
of SDC and the costs of obtaining this financing in tax deductible costs (the taxable amount is PLN 22.7 million which translates
into a potential tax liability of PLN 4.3 million). Thus, the office has refrained from questioning the expenses incurred for trade
mark fees as a tax deductible cost. In the same month, the company submitted objections to the report on the audit of the
books. Tax proceedings are currently underway.
In addition, on 6 October 2020 the company received from the Head of the Małopolskie Province Customs and Tax Office a
notice of suspension, as of 1 September 2020, of the statute of limitations for tax liabilities for 2014 due to initiation of
proceedings for fiscal offences.
CIT audit for 2015 at CIECH Soda Polska S.A. was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in
Bydgoszcz on 10 October 2016. On 7 March 2017, the tax office issued the tax audit report. The irregularities found result
primarily from the fact that the auditors challenged the company's right to settle the loss from participation in a partnership
– as was the case for CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A., CIECH Sarzyna S.A.
The Company and its tax advisors do not agree with the position of the auditors. In June 2019, CIECH Soda Polska S.A. received
a decision of the Kujawsko-Pomorskie Tax Office Head in Bydgoszcz (decision of the First instance), according to which the
company had understated - due to its participation in a partnership - its tax obligations in the amount of PLN 3.9 million. The
Company appealed against said decision. On 9 September 2019, the company received a decision (decision of the Second
instance) issued by the Head of the Tax Administration Chamber in Bydgoszcz, in which the latter upheld the findings of the
decision of the First instance. The decision issued by the second instance authority is enforceable. Therefore, the company
was obliged to pay the overdue tax (as per the tax auditors) in the amount of PLN 3.9 million (the tax base challenged by the
tax authorities was PLN 20.4 million) plus the interest due in the amount of PLN 1 million. On 9 October 2019, the company
appealed to the Provincial Administrative Court in Bydgoszcz against the decision of the Second Instance. At a hearing on
11 December 2019, after considering the appeal filed by the Company, the Provincial Administrative Court issued a ruling
annulling the decision issued by the Head of the Tax Administration Chamber in Bydgoszcz in its entirety. In February 2020,
Head of the Tax Administration Chamber in Bydgoszcz lodged a cassation complaint with the Supreme Administrative Court.
CIT audit for 2015 at CIECH Pianki Sp. z o.o. was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in
Bydgoszcz on 22 November 2016. On 3 March 2017, the tax office issued the tax audit report. As was the case for CIECH Soda
Polska S.A., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A., CIECH Sarzyna S.A., the authority challenged the company's right
to settle the loss from participation in a partnership.
The Company and its tax advisors do not agree with the position of the auditors. In June 2019, CIECH Pianki S.A. received a
decision of the Kujawsko-Pomorskie Tax Office Head in Bydgoszcz (decision of the First instance), according to which the
company had understated - due to its participation in a partnership - its tax obligations in the amount of PLN 2.6 million.
The Company appealed against said decision. On 9 September 2019, the company received a decision (decision of the Second
instance) issued by the Head of the Tax Administration Chamber in Bydgoszcz, in which the latter upheld the findings of the
decision of the First instance. The decision issued by the second instance authority is enforceable. Therefore, the company
was obliged to pay the overdue tax (as per the tax auditors) in the amount of PLN 2.6 million (the tax base challenged by the
tax authorities was PLN 13.8 million) plus the interest due in the amount of PLN 0.7 million. On 9 October 2019, the company
appealed to the Provincial Administrative Court in Bydgoszcz against the decision of the Second Instance. At a hearing on
11 December 2019, after considering the appeal filed by the Company, the Provincial Administrative Court issued a ruling
annulling the decision issued by the Head of the Tax Administration Chamber in Bydgoszcz in its entirety. In February 2020,
Head of the Tax Administration Chamber in Bydgoszcz lodged a cassation complaint with the Supreme Administrative Court.
CIT audit for 2015 at CIECH Cargo Sp. z o.o. was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in
Bydgoszcz on 23 January 2017. On 14 June 2017, the tax office issued the tax audit report. As was the case for CIECH Pianki
Sp. z o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon S.A., CIECH Sarzyna S.A., the authority challenged the company's right to
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settle the loss from participation in a partnership. The Company and its tax advisors do not agree with the position of the
auditors. In June 2019, CIECH Cargo Sp. o.o. received a decision of the Kujawsko-Pomorskie Tax Office Head in Bydgoszcz
(decision of the First instance), according to which the company had understated - due to its participation in a partnership -
its tax obligations in the amount of PLN 1.7 million. The Company appealed against said decision. On 9 September 2019, the
company received a decision (decision of the Second instance) issued by the Head of the Tax Administration Chamber in
Bydgoszcz, in which the latter upheld the findings of the decision of the First instance. The decision issued by the second
instance authority is enforceable. Therefore, the company was obliged to pay the overdue tax (as per the tax auditors) in the
amount of PLN 1.7 million (the tax base challenged by the tax authorities was PLN 8.8 million) plus the interest due in the
amount of PLN 0.5 million. On 9 October 2019, the Company appealed to the Provincial Administrative Court in Bydgoszcz
against the decision of the Second Instance. At a hearing on 11 December 2019, after considering the appeal filed by the
Company, the Provincial Administrative Court issued a ruling annulling the decision issued by the Head of the Tax
Administration Chamber in Bydgoszcz in its entirety. In February 2020, Head of the Tax Administration Chamber in Bydgoszcz
lodged a cassation complaint with the Supreme Administrative Court.
CIT audit for 2015 at CIECH Vitrosilicon S.A. was initiated by the Head of the Lubuskie Province Customs and Tax Office in
Gorzów Wielkopolski on 19 April 2018. The company received the outcome of the audit on 4 January 2019. As was the case
for CIECH Soda Polska S.A., CIECH Cargo Sp. z o.o., CIECH Pianki Sp. z o.o., CIECH Sarzyna S.A., the authority challenged the
company's right to settle the loss from participation in a partnership. The Company and its tax advisors do not agree with the
position of the auditors. If the unfavourable position of the authority is upheld, an obligation may arise to pay tax arrears in
the amount of PLN 2.7 million (the tax base challenged by the authority is PLN 14.4 million) plus with interest due. Tax
proceedings are currently underway.
CIT audit for 2015 at CIECH Sarzyna S.A. was initiated by the Head of the Podkarpackie Province Tax Office in Reszów on
6 February 2017. On 7 November 2017, the tax office issued the audit report. As was the case for CIECH Pianki Sp. z o.o.,
CIECH Soda Polska S.A., CIECH Vitrosilicon S.A., CIECH Cargo Sp. z o.o., the authority challenged the company's right to settle
the loss from participation in a partnership. In addition, the authority challenged the company's right to include the fee for
the trademark and interest on loans paid in advance in tax deductible costs. The Company and its tax advisors do not agree
with the position of the auditors.
If the unfavourable position of the authority is upheld, an obligation may arise to pay tax arrears in the amount of
PLN 6.9 million (the tax base challenged by the authority is PLN 36.4 million) plus with interest due. Tax proceedings are
currently underway.
CIT audit for 2016 at CIECH Sarzyna S.A. was initiated by the Head of the Podkarpackie Province Tax Office in Reszów on
26 February 2018. On 11 January 2019, the tax office issued the audit report. According to the authority, the expenses
incurred by the company in 2016 for the use of Chwastox trademarks cannot be classified as tax deductible costs. In addition,
the company should have included interest on loans paid in advance in 2015 in its tax deductible costs in 2016. Additionally,
the authority claims that the company may not offset the loss for 2015 in the annual return for 2016. The Company and its
tax advisors do not agree with the position of the auditors. If the unfavourable position of the authority is upheld, an
obligation may arise to pay tax arrears in the amount of PLN 4.3 million (the tax base challenged by the authority is
PLN 22.4 million) plus with interest due. Tax proceedings are currently underway.
Tax proceedings concerning CIT for 2018 at CIECH R&D Sp. z o.o. were initiated by the Head of the First Mazowieckie Province
Tax Office in Warsaw. On 20 July 2020, the Company received a letter dated 15 July 2020 informing about tax proceedings
conducted with respect to determination of overpayment in corporate income tax for 2018. The proceedings were initiated
as a result of the Company's submission of a correction to the CIT return for 2018 (the Company applied for a tax refund of
PLN 0.09 million). On 10 September 2020, the office returned the entire amount of tax to the company and thus the
proceedings were concluded.
CIT audit for 2018 at CIECH Soda Polska S.A. was initiated on 1 December 2020 by the Head of the Kujawsko-Pomorskie
Province Customs and Tax Office in Toruń. The audit concerns the correctness of settlements with the state budget in respect
of corporate income tax. Customs and tax audit is ongoing.
The Group estimated that the potential impact on income tax expense (in the form of additional tax liabilities or inability to
recover a deferred income tax asset calculated for tax losses), in connection with the above events which are or may continue
to be challenged, would amount to PLN 136.3 million if it were no longer probable that the Group would be able to uphold
its tax interpretations before the tax authorities. From the above-mentioned amount of PLN 136.3 million, following the
decisions of the second instance, regarding CIT (2012 and 2013) in CIECH S.A., and CIT (2015) in CIECH Soda Polska S.A.,
CIECH Pianki Sp. z o.o. and CIECH Cargo Sp. z o.o., despite further dispute before court, the total tax amount of
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
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PLN 53.7 million was paid, a provision was recognised for potential tax liabilities in the amount of PLN 38.4 million , and it
was decided not to recognize the asset in the amount of PLN 26.7 million, and an impairment loss on receivables from the
tax office in the amount of PLN 1.8 million. The remaining amount, ie PLN 15.7 million, is not covered by a provision and
constitutes a contingent liability. The Group also paid interest in the total amount of PLN 26.9 million.
The CIECH Group companies were subject to VAT audits/proceedings concerning the following years:
a) Fourth quarter of 2013
-at Verbis Kappa Sp. z o.o. S.K.A.
- at Verbis ETA Sp. z o.o. S.K.A.
b) December 2014 – at Cerium Finance Sp. z o.o.
c) January–June 2018 – at CIECH Trading Sp. z o.o.
VAT audit for the fourth quarter of 2013 at Verbis Kappa Sp. z o.o. S.K.A. was initiated by the Head of the Małopolskie
Province Customs and Tax Office in Kraków on 6 April 2018. The company received the outcome of the audit on 11 June 2018.
The authority challenged the right to deduct VAT on part of the contribution in kind made to the share premium. According
to the authority, the taxable amount of the contribution received is the amount equal to the nominal value of the shares
acquired. The market value of the in-kind contribution less the amount of VAT was recognised as the taxable amount in the
invoice received by the company. Consequently, according to the authority, the company deducted the input tax in the
amount to which it was not entitled. The taxable amount challenged by the authority is PLN 35.7 million which translates into
a tax of PLN 8.2 million.
The Company and the other party to the transaction, i.e. CIECH Sarzyna S.A., filed motions for tax rulings. The Director of the
National Revenue Information agreed with the position of CIECH Sarzyna S.A. presented in the motion that the taxable
amount of the in-kind contribution made in 2013 was the value of the contribution, i.e. the market value of the in-kind
contribution less the amount of VAT. Taking into account the positive interpretation (interpretation obtained after the event
that is the subject of the dispute) concerning the taxable amount and the case-law line that existed until the end of 2013, the
issuer of the invoice, i.e. CIECH Sarzyna S.A., and its advisors believe that the taxable amount should be the market value of
the in-kind contribution less the amount of VAT. Therefore, the company did not make a VAT correction, considering that the
tax treatment of the in-kind contribution made in 2013 was correct. On 7 August 2019, the company received the decision of
the Head of the Małopolskie Province Customs and Tax Office in Kraków, upholding the previous position of the authority,
that the company had no right to deduct VAT in the amount of PLN 8.2 million. The Company and its advisors do not agree
with the findings set forth in the Decision and have appealed against it. On 14 November 2019, the company received the
Decision of the second instance, where the Head of the Małopolskie Province Customs and Tax Office upheld the decision of
the first instance in its entirety. The decision issued by the second instance authority is enforceable. Therefore, the company
was obliged to pay the overdue VAT (as per the tax auditors) in the amount of PLN 8.2 million plus the interest due in the
amount of approx. PLN 3.9 million. On 13 December 2019, the Company appealed against the decision of the second instance
to the Provincial Administrative Court in Cracow. At a hearing on 22 July 2020, after considering the appeal filed by the
Company, the Provincial Administrative Court issued a ruling dismissing the complaint filed by the Company, accepting the
position of the Małopolskie Province Customs and Tax Office in Kraków. The company received a written statement of reasons
for the judgment and lodged a cassation complaint with the Supreme Administrative Court in November 2020.
VAT audit for the fourth quarter of 2013 at Verbis ETA Sp. z o.o. S.K.A. was initiated by the Head of the Małopolskie Province
Customs and Tax Office in Kraków on 5 April 2018. The company received the outcome of the audit on 16 June 2018. The
authority challenged the right to deduct VAT on part of the contribution in kind made to the share premium. According to
the authority, the taxable amount of the contribution received is the amount equal to the nominal value of the shares
acquired. The market value of the in-kind contribution less the amount of VAT was recognised as the taxable amount in the
invoice received by the company. Consequently, according to the authority, the company deducted the input tax in the
amount to which it was not entitled. The taxable amount challenged by the authority is PLN 133.5 million which translates
into a tax of PLN 30.8 million.
The Company and the other party to the transaction, i.e. CIECH S.A., filed motions for tax rulings. The Director of the National
Revenue Information agreed with the CIECH S.A.’s position that the company had determined the taxable amount in a correct
manner, i.e. the taxable amount of the in-kind contribution made in 2013 should have been the value of the contribution, i.e.
the market value of the in-kind contribution less the amount of VAT. Taking into account the positive interpretation
(interpretation obtained after the event that is the subject of the dispute) concerning the taxable amount and the case-law
line that existed until the end of 2013, the Company and its advisors believe that the taxable amount should be the market
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value of the in-kind contribution less the amount of VAT. Therefore, the company and, accordingly, the other party to the
transaction complied with the ruling.
On 17 July 2019, the company received the decision of the Head of the Małopolskie Province Customs and Tax Office in
Kraków, upholding the previous position of the authority, that the Company had no right to deduct VAT in the amount of
PLN 30.8 million. The Company and its advisors do not agree with the findings set forth in the Decision and have appealed
against it. On 6 August 2019, the company received an order of the Head of the Third Tax Office for Warszawa-Śródmieście
to make the Decision of the Head of the Małopolskie Province Customs and Tax Office in Krakow, issued in connection with
the tax proceedings conducted against the company, immediately enforceable. The Company filed a complaint against said
decision. Irrespective of the complaint, the company applied to the Head of the Third Tax Office for crediting the overpaid
VAT in the amount of PLN 30.8 million resulting from the correction of the VAT settlement for July 2018 towards the arrears
indicated in the Decision of the Małopolskie Province Customs and Tax Office in Krakow, and repaid interest in the amount
of PLN 12.4 million. In its decision, the Head of the Third Tax Office agreed to the company's request. Thus, no enforcement
proceedings were initiated. On 24 October 2019, the company received the Decision of the second instance, where the Head
of the Małopolskie Province Customs and Tax Office upheld the decision of the first instance in its entirety. On 13 November
2019, the company received the decision issued by the Head of the Tax Administration Chamber in Warsaw concerning the
upholding of the decision of the Third Tax Office to make the non-final decision of the first-instance authority immediately
enforceable Due to the fact that the company had received the decision of the second instance earlier, it did not file a
complaint to the Provincial Administrative Court in Warsaw against the decision received. On 25 November 2019, however,
the Company appealed against the decision of the second instance to the Provincial Administrative Court in Cracow.
At a hearing on 29 July 2020, after considering the appeal filed by the Company, the Provincial Administrative Court issued a
ruling dismissing the complaint filed by the Company, accepting the position of the Małopolskie Province Customs and Tax
Office in Kraków. The company received a written statement of reasons for the judgment and lodged a cassation complaint
with the Supreme Administrative Court on 20 January 2021.
In total, in the case of the two above-described VAT disputes in Verbis Kappa Sp. z o.o. S.K.A. and Verbis ETA Sp. z o.o. S.K.A.
despite the continuation of the dispute, after the decisions of the second instance, PLN 39 million in VAT and PLN 16.3 million
in interest were paid. These amounts are disclosed in the financial statements as public and legal receivables due to the fact
that the companies and their tax advisors assess the chances of winning these disputes above 50%. At the same time, due to
the always existing uncertainty as to the direction of dispute resolution by the Supreme Administrative Court, these amounts
are also shown as contingent liabilities.
VAT audit for December 2014 at Cerium Finance Sp. z o.o. was initiated by the Head of the Małopolskie Province Customs
and Tax Office in Kraków on 5 April 2018. The company received the outcome of the audit on 19 June 2018. The authority
challenged the right to deduct VAT on part of the contribution in kind made to the share premium. According to the authority,
the taxable amount of the contribution received is the amount equal to the nominal value of the shares acquired. The market
value of the in-kind contribution less the amount of VAT was recognised as the taxable amount in the invoice received by the
company. Consequently, according to the authority, the company deducted the input tax in the amount to which it was not
entitled. The taxable amount challenged by the authority is PLN 110 million which translates into a tax of PLN 25.3 million.
Guided by the outcome of the audit, the other party to the in-kind contribution transaction, i.e. CIECH Soda Polska S.A., issued
a correction to the invoice, specifying the taxable amount of the in-kind contribution as the nominal value of the shares
acquired. Cerium Finance Sp. z o.o. included the correction of the invoice in the current tax return and paid the tax.
CIECH Soda Polska S.A. received a refund of overpaid VAT.
The Company and CIECH Soda Polska S.A. filed motions for tax rulings. The Director of the National Revenue Information
agreed with the position of the companies with respect to the recognition of a VAT correction in the current period - the
companies received the interpretation after the event that is the subject of the dispute. In turn, CIECH Soda Polska S.A.
received a reply that the taxable amount of the in-kind contribution made in 2014 was the nominal value of the shares
acquired. Taking into account the ruling concerning the taxable amount and the regulations, as amended in 2014, according
to which the taxable amount should be the value contributed to the share capital, the company is of the opinion that the
correction made (included in the current period) is correct.
On 17 July 2019, CIECH Soda Polska S.A. (CSP), as the legal successor of Cerium Finance Sp. z o.o., received the Accounting
Books’ Audit Report, in which the auditors upheld their position, that the Company had no right to deduct VAT in the amount
of PLN 25.3 million, without referring to the correcition of VAT submitted by the Company in the current period and payment
of this tax.
On 11 July 2019, the CSP received the decision of the Head of the Małopolskie Province Customs and Tax Office in Kraków,
upholding the previous position of the authority, that Cerium Finance Sp. z o.o. had no right to deduct VAT in the amount of
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98
PLN 25.3 million. CSP appealed against the decision of the first instance. On 7 January 2020, the company received the
Decision of the second instance, where the Head of the Małopolskie Province Customs and Tax Office in Kraków upheld the
decision of the first instance in its entirety. The decision issued by the second instance authority was enforceable. Therefore,
despite the fact that the amount of VAT has already been paid to the relevant tax office in connection with the correction of
VAT settlement submitted in the current period, according to the received individual ruling, the company decided to pay
again the same amount of VAT of PLN 25.3 million and interest of PLN 10 million. The VAT paid again will be recovered by
CSP at the latest after the completion of the court and administrative proceedings (for December 2014), if any, or after the
completion of the overpayment proceedings for July 2018. On 6 February 2020, the Company appealed against the decision
of the second instance to the Provincial Administrative Court in Cracow. At a hearing on 22 September 2020, after considering
the appeal filed by the Company, the Provincial Administrative Court issued a ruling dismissing the complaint filed by the
Company, accepting the position of the Małopolskie Province Customs and Tax Office in Kraków. The company received a
written statement of reasons for the judgment and lodged a cassation complaint with the Supreme Administrative Court on
13 January 2021.
The amount of interest paid, ie PLN 10 million, is disclosed in the financial statements as public-law receivables due to the
fact that the companies and their tax advisors assess the chances of winning the dispute above 50%. At the same time, due
to the always existing uncertainty as to the direction of the dispute resolution by the Supreme Administrative Court, this
amount is also shown as contingent liabilities.
VAT audit for the period from January to June 2018 at CIECH Trading Sp. z o.o. was commenced by the Head of the Kujawsko-
Pomorskie Province Customs and Tax Office in Toruń (for the period from January to April 2018) – commenced on 20 June
2018, and by the Head of the Śląskie Province Customs and Tax Office in Katowice (for the period from May to June 2018) –
commenced on 19 September 2018. On 13 September 2019, the Company received a report on the audit of the books and
the outcome of the audit from the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń. According to the auditors,
the company overstated the input tax by PLN 1.4 million, deducting the tax resulting from invoices issued by two contractors
who, according to the authority, committed tax fraud at an earlier stage of trade. According to the authority, the company
failed to exercise due diligence when entering into transactions with these entities. The Company does not agree with the
position of the auditors. However, given the lack of clear legal guidelines as to the scope of due diligence and following the
prudence principle, the company decided to correct the VAT return for the period from January to April 2018 in the amount
indicated by the authority, i.e. PLN 1.4 million. In addition, following the prudence principle in order to prevent a possible
additional tax liability in the form of VAT sanctions, the company corrected its VAT settlements for 2017 and for the period
from July to November 2018, excluding from its settlements the input VAT on invoices issued by the same two counterparties
for whom the authority refuses to deduct input VAT for the period from January to June 2018. The amount of the corrected
VAT is PLN 7.5 million. As a result of corrections made to VAT returns and their settlement with the tax office, the company
paid PLN 0.5 million in interest. On 10 February 2020, the Company received the decision of the Head of the Kujawsko-
Pomorskie Province Customs and Tax Office in Toruń concerning the determination of an additional VAT liability in relation
to the audit for the period from January to April 2018. The amount of sanctions indicated in the Decision is PLN 1.4 million.
The Company lodged an appeal against the Decision received with the Head of the Kujawsko-Pomorskie Province Customs
and Tax Office. Regardless of the appeal filed, in order to avoid further accrual of interest, on 5 June 2020 the Company paid
the amount of this additional tax liability together with interest. On 21 July 2020, the Company received the decision of the
Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń (appeal body). The decision upholds the decision
of the first instance authority to set the additional VAT liability in CIECH Trading Sp. z o.o. at 100%, i.e. in the amount of PLN
1.4 million. This Decision is final. On 19 August 2020, the Company appealed against the decision of the second instance to
the Provincial Administrative Court in Bydgoszcz. At a hearing on 18 July 2020, after considering the appeal filed by the
Company, the Provincial Administrative Court issued a ruling dismissing the complaint filed by the Company, accepting the
position of the Head of the Kujawsko-Pomorskie Province Customs and Tax Office. The company received a written statement
of reasons for the judgment and lodged a cassation complaint with the Supreme Administrative Court on 28 January 2021.
In case of the audit of VAT settlements for the period of May and June 2018 carried out by the Head of the Silesian Customs
and Tax Office in Katowice, in September 2020 the company received the results of the audit relating to each of the months
audited, in which the office refused the company the right to deduct input tax in the amount of PLN 1.5 million.
In October 2020, the company paid the disputed amount of tax plus interest. The company recognised a provision for possible
VAT arrears, interest and a sanction for the period of May-June 2018 in the amount of PLN 3.8 million. In December 2020,
the Company received two Decisions issued by the Head of the Silesian Customs and Tax Office on the transformation of the
customs and fiscal audit into tax proceedings on the determination of the additional VAT tax liability for May and June 2018.
On 13 January 2021, the Head of the Silesian Customs and Tax Office in Katowice issued a decision on determining the
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
99
additional VAT liability in the amount of PLN 1.5 million. The Company lodged an appeal against the Decision received with
the Head of the Silesian Customs and Tax Office. Regardless of the appeal filed, in order to avoid further accrual of interest,
on 11 February 2021 the Company paid the amount of this additional tax liability together with interest.
The audit in the CIECH Group in Germany concerns settlements in income taxes and VAT. The following companies are
subject to control: Sodawerk Staßfurt Verwaltungs GmbH, CIECH Soda Deutschland GmbH & Co. KG, Sodawerk Holding
Staßfurt GmbH, SDC GmbH, CIECH Energy Deutschland GmbH. The audits concern the accounts for the years 2007-2009 and
2010-2015 and concern various factual and legal issues.
On March 22, 2021, the proxy of CIECH Soda Deutschland GmbH & Co. KG has received a preliminary tax audit result issued
by the Tax Office in Staßfurt. The decision was issued in connection with the control of VAT settlements for 2012-2013 in
Ciech Energy Deutschland GmbH. The decision was delivered to CIECH Soda Deutschland GmbH & Co. KG, because in the VAT
group to which CIECH Soda Deutschland GmbH & Co. KG and Ciech Energy Deutschland GmbH, CIECH Soda Deutschland
GmbH & Co. KG is responsible for settlements with the tax office. In the Decision, the Tax Office questioned the right to
deduct VAT in the amount of EUR 5.0 million on invoices received in 2012-2013 by Ciech Energy Deutschland GmbH in
connection with the lease of the heat and power plant, and due to the neutrality principle, the amount of VAT deducted by
Ciech Energy Deutschland GmbH it can be settled with the VAT paid by the lessor. The amount in dispute would be interest
in the amount of approx. EUR 1.9 million (approx. PLN 8.8 million). Ciech Energy Deutschland GmbH and tax advisors do not
agree with the issued Decision and intend to appeal against the Decision and request that its execution be suspended until
the decision is issued by the court.
Ciech Energy Deutschland GmbH, after analyzing the Decision and the position of the tax advisor on the chances of a positive
conclusion for Ciech Energy Deutschland GmbH, decided not to create a provision for interest.
With regard to the remaining years and issues being the subject of ongoing inspections, the result of the inspection as at the
balance sheet date is unknown - the companies did not receive protocols / decisions from tax authorities. In the event of a
different assessment of economic events by the controlling authorities, an obligation may arise to recalculate and potentially
increase the tax liability and to pay interest on tax arrears. However, following the precautionary principle, the companies in
previous years created provisions for potential tax liabilities and interest, which in total amount to EUR 14.4 million
(converted into PLN according to the exchange rate from the balance sheet date - approx. PLN 66.5 million), the amount of
PLN 1.5 million EUR (after conversion of PLN 6.9 million) is a contingent liability.
9.3. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES
9.3.1. TRANSACTIONS WITH RELATED PARTIES IN TOTAL
Transactions between the parent, CIECH S.A., and its subsidiaries were eliminated during consolidation and have not been
presented in this note.
Detailed information about transactions between the CIECH Group and other related entities (i.e. companies controlled by
the parent company at the highest level in relation to CIECH S.A. — Kulczyk Investments S.A. and non-consolidated companies
of the CIECH Group) is presented below:
TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES
01.01.-31.12.2020
01.01.-31.12.2019
Revenues from sales of products and services, including:
6,353
4,192
associates
3,378
1,580
Revenues from sales of goods and materials, including:
41,006
80,753
associates
25,602
48,781
Other operating income, including:
14
14
associates
14
14
Financial income, including:
117
166
associates
117
153
Purchase of services, including:
48,878
40,086
KI One S.A.
242
210
associates
17,891
10,761
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
100
TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES
01.01.-31.12.2020
01.01.-31.12.2019
Other operating expenses
3
-
Financial expenses, including:
3
479
associates
3
208
31.12.2020
31.12.2019
Trade receivables, including:
7,488
15,813
associates
591
5,665
Trade liabilities, including:
7,501
4,452
associates
2,530
1,313
Terms of transactions with related entities
CIECH Group‘s companies, to the best of their knowledge and belief, did not conclude significant transactions on the terms
other than market ones. Sales to and purchases from related entities are realised at market prices that reflect market
conditions. Overdue liabilities and receivables are not secured and are settled through bank transfers. Receivables from
related entities have not been secured by any guarantees granted or received besides those described in note 9.2.
In the presented period, the key management personnel of CIECH S.A. did not conclude any material transactions with related
parties within the CIECH Group.
9.3.2. SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED
PARTIES OTHER THAN ON AN ARM’S LENGTH BASIS
To the best of the Group’s judgement, there were no transactions with related entities in the CIECH Group on other than
market conditions in 2020.
9.3.3. DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES
Information on significant transactions with related parties is provided in note 6.4 to these financial statements.
9.3.4. TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL
Key managerial personnel comprises persons who are authorised to and are responsible for direct and indirect planning,
managing
and controlling the activities of CIECH S.A.
Remuneration of the Management Board of CIECH S.A.
The following table presents the amount of remuneration and additional benefits paid or payable to particular Members of
the Management Board in 2020 and in the comparable period. In the years 2019-2020, members of the Management Board
of CIECH S.A. did not receive any remuneration for holding a position in the Supervisory Boards or any other functions
performed in the subsidiaries of the CIECH Group.
31.12.2020
Short-term employee
benefits
Post-employment
benefits
Termination benefits
TOTAL
Management Board
6,231
-
-
6,231
Former members of the
Management Board
1,361
1,202
1,258
3,821
TOTAL
7,592
1,202
1,258
10,052
31.12.2019
TOTAL
Management Board
3,900
-
-
3,900
Former members of the
Management Board
2,324
1,280
2,660
6,264
TOTAL
6,224
1,280
2,660
10,164
Members of the Management Board are employed based on employment contracts. Remuneration of the Management
Board Members are set out in individual employment contracts. Members of the Management Board are also entitled to:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
101
• discretionary bonus in the amount determined by the Supervisory Board of CIECH S.A.;
• annual bonus determined in individual employment contracts.
Remuneration of the Managing Director
The following table presents the amount of remuneration and additional benefits paid or payable to the Managing Director
in 2020.
During this period, the Managing Director received remuneration for serving on the Supervisory Boards of:
Polsin Overseas Shipping Ltd. Sp. z o.o. and Proplan Plant Protection Company S.L.
Short-term employee benefits
01.01 – 31.12.2020
01.06 – 31.12.2019
Rafał Czubiński
1,096
396
The Managing Director is employed 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 received from
CIECH S.A. in 2020
Remuneration received from
CIECH S.A. in 2019
Sebastian Kulczyk
-*
-*
Piotr Augustyniak**
483
461
Artur Olech
387
369
Marek Kośnik
372
171
Łukasz Rędziniak
181
-
Martin Laudenbach
118
-
Tomasz Mikołajczak
88
215
Mariusz Nowak
24
369
TOTAL
1,653
1,585
*From 1 April 2016, Chairman of the Supervisory Board, Mr. Sebastian Kulczyk does not receive any remuneration due to the waiver of the
claim for remuneration for the position of the Chairman of the Supervisory Board.
** On 16 March 2021, Mr. Piotr Augustyniak resigned from the position of a member of the Supervisory Board of CIECH S.A.
In accordance with a Resolution of the Extraordinary General Shareholders’ Meeting, as of 1 November 2017 Members of the
Supervisory Board are entitled to a monthly gross remuneration computed as a percentage of the calculation base. The
calculation base is the average monthly remuneration in the sector of enterprises with profit distributions for the month
preceding the calculation, announced by the President of the Central Statistical Office. This remuneration is paid in the
following amount:
• to the Chairman of the Supervisory Board – 400% of the calculation base,
• to the Deputy Chairman – 350% of the calculation base,
• to a Board Member – 300% of the calculation base.
The Chairman of the Audit Committee is entitled to an additional gross monthly remuneration amounting to 150% of the
remuneration payable to a Member of the Supervisory Board. Members of the Audit Committee are entitled to an additional
gross monthly remuneration amounting to 100% of the remuneration payable to a Member of the Supervisory Board.
9.4. INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT
THE CIECH GROUP’S CONSOLIDATED FINANCIAL STATEMENTS
The entity authorised to audit financial statements for the period from 1 January 2020 to 31 December 2020 was
Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw.
On 14 May 2020, CIECH S.A. signed an agreement with Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. on the
review of semi-annual and audit of annual financial statements for the years 2020 and 2021.
In 2020, Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. and foreign members of the Deloitte network were
also the auditors of the largest consolidated companies/subsidiaries of CIECH S.A., including CIECH Soda Polska S.A., SDC
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
102
Group, Ciech Salz Deutschland GmbH, CIECH Soda Romania S.A., CIECH Sarzyna S.A., CIECH Vitrosilicon S.A.,
CIECH Pianki Sp. z o.o.
Value of agreements concluded with Deloitte Audyt Spółka z ograniczoną odpowiedzialnością Sp. k. is presented below:
CIECH S.A.
2020*
2019*/**
Audit of the annual financial statements and review of the semi-annual financial
statements
529
662
Other attestation services
45
1
TOTAL
574
663
Consolidated subsidiaries of the CIECH Group
2020*
2019*/**
Audit of the annual financial statements and review of the semi-annual financial
statements
1,673
1,182
Other attestation services
113
-
TOTAL
1,786
1,182
* The remuneration includes additional costs, such as travel, accommodation and nourishment costs – additional costs may amount to a
maximum of approx. 10% of the agreement value.
** The figures for the comparable period refer to agreements with PricewaterhouseCoopers Sp. z o.o. Sp. k. who provided audit services in
2015-2019.
9.5. COMPOSITION OF THE GROUP
Accounting policy – Basis of consolidation
Subsidiaries are entities controlled by the Parent Company.
An investor, regardless of the nature of its involvement with an entity (the investee), determines whether it is a parent
by assessing whether it controls the investee.
An investor controls an investee if and only if the investor has all the following:
a) power over the investee;
b) exposure, or rights, to variable returns from its involvement with the investee, and
c) the ability to use its power over the investee to affect the amount of the investor’s returns.
An investor considers all facts and circumstances when assessing whether it controls an investee. The investor
reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of
the aforesaid elements.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
When selecting entities for consolidation, the Management Board was guided by the criteria of significance of their financial
data (according to the concept assumptions of IFRS), for executing the obligation of an actual and reliable image of the
material and financial situation, and the financial result of the Group.
A list of fully consolidated companies and companies accounted for under the equity method is provided below:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
103
Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2020 /
% of votes at
the GMS
Share in equity
as at
31.12.2019 / %
of votes at the
GMS
Parent company
CIECH S.A.
Warsaw
Soda, Agro,
Foams,
Silicates,
Packaging,
Other, (Resins
–
discontinued
operations)
Sales of chemical products manufactured within
the CIECH Group, sales of chemical products
purchased from third-party producers, holding
activities, managing a portfolio of subsidiaries,
provision of support services (in the area of
sales, manufacturing, purchases, finance, IT, HR
and in the legal area) for selected companies in
the Group, financial activities in the form of
direct lending to the companies in the Group.
-
-
Fully consolidated direct and indirect subsidiaries
CIECH Trading
Sp. z o.o.
Warsaw
Soda, Other
Wholesale and distribution of solid inorganic and
organic chemicals, wholesale and distribution of
raw materials for household chemicals,
wholesale and distribution of raw materials for
cosmetic and pharmaceutical products,
wholesale and distribution of fillers, pigments,
raw materials for paints and varnishes,
wholesale and distribution of feed additives and
fodder, wholesale and distribution of acids,
bases and other liquid chemicals.
100%
100%
CIECH Soda Romania S.A.
Ramnicu
Valcea,
Romania
Soda, Silicates
Manufacture of other basic inorganic chemicals,
wholesale of chemical products.
98.74%
98.74%
CIECH Vitrosilicon S.A.*
Iłowa
Silicates,
Packaging
Production of other basic inorganic chemicals,
manufacture of hollow glass and technical
glassware, manufacture of plastic packaging
goods, manufacture of other plastic products.
100%
100%
CIECH Vitro Sp. z o.o.
Iłowa
Other
Production of other basic inorganic chemicals,
manufacture of hollow glass and technical
glassware, manufacture of plastic packaging
goods, manufacture of other plastic products.
100%
-
CIECH
Transclean Sp. z o.o.
Bydgoszcz
Other
Since 2017, the Company has not carried out any
operating activities.
100%
100%
CIECH Pianki Sp. z o.o.
Bydgoszcz
Foams
Manufacture of organic and other inorganic
chemicals.
100%
100%
Ciech Group Financing AB
Stockholm,
Sweden
Other
Financing activities.
100%
100%
Verbis ETA Sp. z o.o.
Warsaw
Other
General partner of Verbis ETA Sp. z o.o. SKA.
100%
100%
Verbis ETA Sp. z o.o. SKA
Warsaw
Other
Financing activities, direct lending to the CIECH
Group companies.
100%
100%
CIECH
Żywice Sp. z o.o.
Nowa
Sarzyna
(Resins –
discontinued
operations)
Manufacture of plastics in primary forms.
100%
100%
CIECH Serwis i Remonty
Sp. z o.o. (former name:
Bosten S.A.)
Warsaw
Other
Provision of repair and maintenance services.
100%
100%
CIECH Nieruchomości
Sp. z o.o.**
Warsaw
Other
Real property agency, real property
management.
100%
100%
Proplan Plant Protection
Company S.L.
Madrid,
Spain
Agro
Production of crop protection chemicals.
100%
100%
CIECH Salz Deutschland
GmbH
Stassfurt,
Germany
Soda
Production and sales of salt products.
100%
100%
CIECH Services Sp. z o.o.
Bydgoszcz
Soda, Agro,
Foams,
Silicates,
Packaging,
Other, (Resins
Provision of support services for companies
of the CIECH Group.
100%
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
104
Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2020 /
% of votes at
the GMS
Share in equity
as at
31.12.2019 / %
of votes at the
GMS
–
discontinued
operations)
CIECH R&D Group
CIECH R&D Sp. z o.o.
Warsaw
Soda, Agro,
Foams,
Silicates,
Packaging,
Other, (Resins
–
discontinued
operations)
Research and developments activities, granting
licenses to the CIECH Group companies to use
the trademarks: “Ciech”, “Ciech Trading” and
“Sól Kujawska naturalna czysta”.
100%
100%
Smart Fluid Sp. z o.o.
Warsaw
Other
Research & Development
52.83%
52.83%
CIECH Finance Group
CIECH Finance
Sp. z o.o.
Warsaw
Other
Implementing divestment projects concerning
obsolete fixed assets (property) and financial
assets (shares in companies), carrying out
purchases of selected raw materials.
100%
100%
JANIKOSODA Sp. z o.o.
Warsaw
Other
The company was sold on 31 December 2020.
-
100%
CIECH Soda Polska Group
CIECH Soda Polska S.A.
Inowrocław
Soda
Manufacture of other basic inorganic chemicals,
wholesale of chemical products, power
generation and distribution.
100%
100%
CIECH Cargo Sp. z o.o.
Inowrocław
Soda
Freight transport services.
100%
100%
Cerium Sp. z o.o. w
likwidacji (in liquidation)
Warsaw
Other
Dormant. Company in the process of liquidation.
100%
100%
Gamma Finanse
Sp. z o.o.***
Warsaw
Other
Financing activities.
100%
100%
El-Pomiar Sp. z o.o.
Inowrocław
Other
Repair and maintenance of electrical equipment.
92.31%
-
CIECH Sarzyna Group
CIECH Sarzyna S.A.
Nowa
Sarzyna
Agro
Manufacture of resins, manufacture of
pesticides and other chemical products.
100%
100%
Verbis KAPPA
Sp. z o.o.
Nowa
Sarzyna
Agro
General partner of Verbis KAPPA Sp. z o.o. SKA,
other financial intermediation.
100%
100%
Verbis KAPPA
Sp. z o.o. SKA
Nowa
Sarzyna
Agro
Other financial intermediation.
100%
100%
Algete Sp. z o.o.
Nowa
Sarzyna
Agro
Granting CIECH Sarzyna Group companies the
license for using the trademark of “Chwastox”
for the purpose of business.
100%
100%
SDC Group
SDC GmbH
Stassfurt,
Germany
Soda
Manufacture of other basic inorganic chemicals,
wholesale of chemical products, power
generation and distribution.
100%
100%
CIECH Soda Deutschland
GmbH&Co. KG
Stassfurt,
Germany
Soda
100%
100%
Sodawerk Holding
Stassfurt GmbH
Stassfurt,
Germany
Soda
100%
100%
Sodawerk Stassfurt
Verwaltungs GmbH
Stassfurt,
Germany
Soda
100%
100%
CIECH Energy
Deutschland GmbH
Stassfurt,
Germany
Soda
100%
100%
Kaverngesellschaft
Stassfurt GbmH****
Stassfurt,
Germany
Soda
50%
50%
*Number of shares / votes at the GMS attributable directly to CIECH S.A. — 83.03%, indirect share through CIECH Soda Polska S.A. — the
remaining 16.97%.
**Shares in the share capital acquired by CIECH S.A. – 99.18% and CIECH Soda Polska S.A. – 0.82%.
***Shares in the share capital acquired by CIECH S.A. – 1.4% and CIECH Soda Polska S.A. – 98.6%.
****Jointly-controlled company accounted for under the equity method.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
105
9.6. EVENTS AFTER THE BALANCE SHEET DATE
Closing of the transaction for the sale of 100% shares in CIECH Żywice Sp. z o.o.
On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with LERG S.A.
with its registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice Sp. z o.o. The
value of the Agreement (equal to the enterprise value being sold), taking into account, among others, the share disposal price,
is approximately PLN 160 million. The final price of the Shares being sold will be determined in accordance with the rule arising
from the Agreement. For details of the transaction, see current reports No 27/2020 and 4/2021.
Conclusion of a loan agreement
On 16 March 2021, a Loan Facility Agreement was concluded between, inter alia, CIECH S.A. (as the borrower and guarantor),
its selected subsidiaries: CIECH Soda Polska S.A., CIECH Sarzyna S.A., CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy
Deutschland GmbH and CIECH Salz Deutschland GmbH (as borrowers and guarantors), BNP Paribas Bank Polska S.A. (as an
agent), Powszechna Kasa Oszczędności Bank Polski S.A. (as a security agent) and banks: Powszechna Kasa Oszczędności Bank
Polski S.A., mBank S.A., BNP Paribas Bank Polska S.A., Industrial and Commercial Bank of China (Europe) S.A. Branch in Poland,
Bank Polska Kasa Opieki S.A., Bank Millennium S.A., Credit Agricole Bank Polska S.A., Société Générale S.A., Bank Handlowy w
Warszawie S.A., Bank Ochrony Środowiska S.A. and Intesa Sanpaolo S.P.A. ARE. Branch in Poland (as lenders). The Facility
Agreement provides for loans in PLN and EUR up to the total amount (expressed in PLN) of PLN 2,115,000 thousand. The
agreement provides for an over 2-year grace period for the repayment of the term loan (the first repayment is required on 30
June 2023), during which the repayment of the loan principal will not be required. Detailed information on the agreement was
included in the current report 7/2021.
Resignation of the supervisor
On 16 March 2021, Mr. Piotr Augustyniak resigned from the function of a member of the Supervisory Board of CIECH S.A.
Termination of the subsidiary's operations
Extraorginary meeting of shareholders of CIECH Trading Sp. z o.o. on 2 March 2021, approved the decision of the Management
Board of the Company to cease conducting business activities specified in the Company's agreement and obliged the
Management Board of the Company to take all necessary actions aimed at ceasing and extinguishing business activities, and
after completing the above-mentioned actions to decide on the dissolution of the Company pursuant to Art. 270 of the
Commercial Companies Code.
A new company of the CIECH Group
On 25 February 2021, the Founding Act of CIECH VENTURES Sp.z o.o. was signed, the sole shareholder of which is CIECH S.A.
The company was established with the share capital of PLN 1,000 thousand which is divided into 20 thousand shares with a
nominal value of PLN 50 each. The shares are acquired by CIECH S.A. in return for cash. The company is being organized, we
are waiting for registration in the National Court Register.
Signing a letter of intent
On 26 March 2021, between CIECH S.A., CIECH Soda Polska S.A., Budimex S.A., EEW Energy from Waste GmbH, EEW Energy
from Waste Polska sp.z o.o., FBSerwis S.A. and the Janikowo Commune was signed:
• letter of intent regarding the continuation of cooperation in the implementation of the investment consisting in the
construction by EEW, EEW Polska and FBSerwis on real estate belonging to CIECH Soda Polska S.A. installations for thermal
treatment of waste and
• Memorandum of Understanding.
Detailed information on the cooperation was included in the current report 9/2021.
Division of the company
On 25 February 2021, the Extraordinary General Meeting was held on the division of the Company by transferring part of the
assets of the Divided Company, CIECH Vitrosilicon S.A. on the Acquiring Company CIECH Vitro Sp. z o.o. in return for the shares
that the shareholders of the Divided Company will receive in the increased share capital of the Acquiring Company - division by
spin-off. Separated from the company CIECH Vitrosilicon S.A. an organized part of the enterprise, which may be an independent
enterprise that independently performs production and sales tasks, in particular glass packaging in the form of lanterns and
utility jars ("Packaging Activity").
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
106
The Extraordinary Meeting of Shareholders of CIECH Vitro sp.z o.o., which due to the division of CIECH Vitrosilicon S.A. ("Divided
Company"), increases the share capital of the Company from the amount of PLN 5 thousand up to the amount of PLN 1,135.5
thousand, that is by the amount of PLN 1 130.5 thousand by creating 22,610 new shares in CIECH Vitro sp.z o.o. with a nominal
value of PLN 50 each share and a total nominal value of PLN 1,135.5 thousand, which will be granted to the shareholders of the
Divided Company using the following share exchange ratio: 6,679,109 shares of the Divided Company entitles to receive 22,610
shares of CIECH Vitro sp.z o.o. ("Acquiring Company") (ie 295.4 shares of the Divided Company entitle to receive 1 share of the
Acquiring Company), as follows:
• CIECH Soda Polska S.A., in exchange for 1,133,246 shares in the Divided Company (constituting all shares in the Divided
Company owned by CIECH Soda Polska S.A.), will take up 13,759 shares in CIECH Vitro Sp. z o.o., which will be covered by
the acquired organized part of the enterprise from CIECH Vitrosilicon S.A.,
• CIECH S.A., in exchange for 728,982 shares of the Divided Company (constituting part of the shares in the Divided Company
owned by CIECH S.A.), will take up 8,851 shares in CIECH Vitro Sp. z o.o., which will be covered with part of the organized
part of the enterprise acquired from CIECH Vitrosilicon S.A.
As of the date of registration by the court of the share capital increase, the capital structure will be as follows:
• CIECH Soda Polska S.A. will own 13,759 shares, representing 60.59% of the share capital,
• CIECH S.A. will own 8,951 shares, constituting 39.41% of the share capital.
On 1 April 2021, the Court registered the division of CIECH Vitrosilicon S.A., a decrease in the share capital of CIECH Vitrosilicon
S.A. and an increase in the share capital of CIECH Vitro Sp.z o.o.
9.7. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
COVID-19 CORONAVIRUS PANDEMIC ON THE CIECH GROUP'S ACTIVITIES
Due to the outbreak of the global COVID-19 pandemic, the year 2020 was a particular year whose effects will also be
experienced in the years to come. The COVID-19 pandemic caused an economic downturn unprecedented in recent years.
The CIECH Group was also adversely affected by the pandemic, which had an impact on the Group's objectives for 2020.
The outbreak of the COVID-19 coronavirus pandemic and the resulting decisions and recommendations of the state
authorities affected the operations of the CIECH Group, causing temporary disruptions to the Group's day-to-day operations,
limited to individual Segments.
Since the onset of the COVID-19 pandemic, the CIECH Group has taken the necessary measures to prepare and implement
solutions to protect the health and lives of employees, third-party employees and business partners.
When making decisions related to counteracting the effects of the pandemic, the Management Board was guided by concern
for the health of employees and care for the long-term value of the Group.
The primary objective for the Group was to protect the health and lives of employees. As of March 2020 the Group enabled
employees to work remotely (where possible). With the introduction of the possibility of remote working, the Group has
adapted its internal procedures governing the new solutions. In the case of a broad group of employees where it was not
possible to work in a remote manner (production workers), the Group, in individual production plants, developed and
implemented the necessary changes in work regulations and schedules that reduced direct contact between shifts to the
strict minimum and provided the necessary required protective measures to minimise the risk of infection and outbreaks. As
a result of the measures implemented, there were only isolated cases of infection among employees during 2020. There were
no outbreaks of infections in plants that would result in the closure of the respective area or plant.
In addition to ensuring the health and safety of employees, a key objective for Group Management was to ensure the
continuity of operations at the Group's individual production plants and avoid disruption to the supply chain. As a result of
the solutions introduced, during the period in which the most severe restrictions announced by the government were in
force, the Company conducted its operations on an ongoing basis and did not record any interruptions in production (there
was only a reduction in production at one of the production plants due to the weakening of demand caused by the freezing
of the economy). There were also no cases of supply chain disruptions due to interruptions in transport, availability of raw
materials or for other reasons.
However, the economic slowdown caused by the pandemic resulted in a decrease in sales and production in the main
business segment of the CIECH Group, i.e. the Soda Segment. This deterioration was particularly severe in the second quarter
of 2020. The second half of the year brought an improvement, with the return to normality in individual countries and the
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
107
unfreezing of economies in Poland and Europe. Key customers resumed operations, but losses suffered in the second quarter
could not be recovered. Despite the decline in demand for soda products, the Group continued its deliveries at predetermined
prices under contracts concluded back in 2019. Strong price competition, caused by an oversupply of soda products in the
market, was observed in spot transactions. Industries that were badly affected by the pandemic were the hotel and restaurant
sector (HoReCa) and the automotive sector, which are of key importance to the Soda Segment. While the situation in the
automotive industry has stabilised and begun to return to balance (car manufacturers have resumed production and restored
previously limited capacity), the HoReCa sector remained frozen or operated on a limited basis in many European countries
until the end of 2020, making it impossible to fulfil previous contractual obligations. The expected collapse in demand and
rapid V-shaped rebound did not take place. Ultimately, 2020 turned out to be a weaker year than 2019. In the whole of 2020,
revenues in the Soda Segment, compared to 2019, decreased by PLN 349 million to PLN 2 088 million, with the decrease of
approximately PLN 290 million due to the hibernation of the plant in Romania. Detailed information on the results of
individual segments can be found in note 2 of this report and in point 4.2.2. Management Board Report on the activities of
the CIECH Group and CIECH S.A. for 2020.
The Silicates Segment was also affected by the decline in demand caused by the freezing of economies, particularly in the
automotive sector. However, in the case of silicate production, the pandemic and decline in demand was temporary and V-
shaped, with demand returning to pre-pandemic levels once the major players in the European automotive market restored
their production capacity. Ultimately, there was no decline in production and sales in the silicates area in 2020.
The Foams Segment was affected by the temporary freeze in the upholstered furniture manufacturing industry. The
temporary shutdown of furniture factories due to the pandemic also coincided with a lack of availability of key raw materials
for foam production, i.e. TDI and polyols. These events forced the Group to significantly reduce production capacity in April
and May 2020. Following the unfreezing of the upholstered furniture manufacturing industry, the Group began to restore its
standard production capacity. With the unfreezing of the industry, the availability of key raw materials has returned, however
their price has increased by 90% by the end of 2020 compared to prices recorded in 2019. However, given the specific nature
of the industry, furniture manufacturers had to accept new, higher prices for the foams produced, so that the Group, despite
a reduction in production capacity in the second quarter of 2020, was able to meet its revenue targets by the end of the year.
For the Foams Segment, the slowdown caused by the pandemic followed a classic V-shaped pattern.
The Packaging Segment was also adversely affected by the pandemic with a year-on-year decline in the volume of glass
packaging sales. The decline in sales was caused by the freezing of social life, including the closure of cemeteries. In addition,
competition in the glass packaging market has increased. In view of the unfavourable developments observed, the Company
focused its sales efforts on high-margin products.
In the Agro Segment, the broadly defined agricultural sector, which is the recipient of the products, was not affected by the
COVID-19 pandemic, while being exposed to other threats faced by the Group in the course of its day-to-day operations,
unrelated to the outbreak of the pandemic. These threats mainly include the strong impact of weather conditions and climate
change on the demand for crop protection products. However, these factors are independent and unrelated to the pandemic.
The COVID-19 pandemic also had a direct impact on the implementation of the Group's investment plan. The risk of a decline
in volumes and revenues, caused by the pandemic, required the CIECH Group to make a decision to secure, in financial terms,
the ability to continue the key projects that had been started or scheduled. The Group has made every effort to ensure that
the planned and necessary projects are carried out in accordance with the original plans. Therefore, starting from the end of
the first quarter of 2020, when the first information about the freezing of the economy in the country appeared, the Group
reviewed the projects it had planned and decided to proceed with key projects. With regard to projects that were not defined
as critical, their scope and implementation schedule were revised, so as to postpone their implementation to a later period.
The outbreak of the COVID-19 pandemic and analyses carried out by the Group did not show any evidence indicating a higher
risk of impairment of property, plant and equipment and intangible assets in use or investments in progress was found.
Detailed information is provided in Note 5 to these financial statements.
The liquidity situation of the CIECH Group in 2020 remained stable and the companies from the CIECH Group had sufficient
cash and available sources of financing to enable timely fulfillment of liabilities. In 2020, the CIECH Group generated net cash
flows from operating activities in the amount of PLN 767 million. Due to capital expenditures, the net cash flow from investing
activities was negative (-PLN 834 million). As at 31 December 2020, the Group had cash in the amount of PLN 444 million and
available limits under the granted credit lines in the amount of PLN 353 million. In 2020, the Group had access to funds
provided under promised credit agreements (syndicated loan agreement and bilateral revolving loan agreements, with a total
value of PLN 2,109 million) and additional sources of financing in the form of factoring agreements, reverse factoring and
loans under current account.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2020 (in PLN ‘000)
108
On 28 December 2020, taking into account the favorable conditions on the banking market regarding the availability of debt
financing, the Management Board of CIECH S.A. decided to start negotiations on the conclusion of a new loan agreement
with a value of PLN 2,115 million and a 5-year repayment period, in order to refinance the existing debt. The new loan
agreement was signed on 16 March 2021. Under the new loan agreement, the following loans will be made available: a term
loan amortized (PLN 560 million), a term loan without amortization (PLN 1,305 million) and a revolving loan with the value of
PLN 250 million. The agreement provides for an over 2-year grace period for the repayment of the term loan (the first
repayment is required on 30 June 2023), during which the repayment of the principal amount will not be required.
At present, the Group does not identify the risk of default on debt repayment under loan agreements or the risk of maturity
due to failure to meet the level of ratios tested under loan agreements. The Group's consolidated net debt to consolidated
EBITDA (adjusted) ratio tested under loan agreements amounted to [2.45x] at the end of 2020 against the maximum level of
4.0x specified in the agreement. At the end of 2020, there was a breach of the guarantor coverage ratio tested under the
existing loan agreements, but lenders agreed to waive the effects of the breach, taking into account, inter alia, refinancing of
the existing debt through a new loan agreement.
No significant deterioration of receivables repayment dates was found. The share of receivables overdue by more than 7 days
in total receivables remained at the end of the year at a level similar to that of the end of the previous calendar year. The
vast majority of the Group’s receivables were insured and financed through non-recourse factoring. It should be noted that
the pandemic did not have an adverse impact on the Group's liquidity and working capital or on the Group's accessibility to
capital.
In addition, as a result of the outbreak of the COVID-19 pandemic, the Group has not experienced a risk of non-performance
of contracts at a higher level than that associated with its day-to-day operations in the absence of the pandemic.
In 2020, a negative impact of the pandemic on the Group's operations was observed, however, the Management Board
believes that the impact on the Group's results was not significant.
As a result of the pandemic, no additional revaluation write-offs were made for fixed assets or current assets, and there was
no need to recognize additional provisions apart from write-offs and provisions which are recognized in the regular operations
of the Group.
The Management Board estimates that in 2021 both the parent company and its subsidiaries will continue their operations
in a substantially unchanged scope for a period of at least 12 months from the date of preparation of the report, except for
CIECH Trading, for which a liquidation plan has been implemented.
Nevertheless, it should be stated that the pandemic situation causes economic uncertainty and therefore it is not possible to
fully predict its effects, including the impact of the pandemic on the financial statements, including the results and the
valuation of individual items in the statement of financial position in subsequent reporting periods.
REPRESENTATION BY THE MANAGEMENT BOARD
REPRESENTATION BY THE MANAGEMENT BOARD
These consolidated financial statements of the CIECH Group for the financial year ended 31 December 2020 were approved
by the Company’s Management Board on 22 April 2021.
Warsaw, 22 April 2021.
(signed on the polish original)
……………………………................................................
Dawid Jakubowicz — President of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
………………………………………………………………………………
Jarosław Romanowski — Member of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
………………………………………………………………………………
Mirosław Skowron — Member of the Management Board of CIECH Spółka Akcyjna
(signed on the polish original)
…………………………………………………………………..…………..
Katarzyna Rybacka — Chief Accountant of CIECH Spółka Akcyjna