CONSOLIDATED
FINANCIAL
STATEMENTS
of the CIECH GROUP for 2021
We are providing a courtesy English translation of our consolidated financial statements which were originally written in Polish. We take no responsibility for the accuracy
of our translation. For an accurate reading of our consolidated financial statements, please refer to the Polish language version of our consolidated financial statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
2
The CIECH Group – SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
in thousand PLN
in thousand EUR
12 months
ended
31.12.2021
12 months
ended
31.12.2020
12 months
ended
31.12.2021
12 months
ended
31.12.2020
Sales revenues on continued operations
3,459,915
2,975,733
755,853
665,087
Operating profit/(loss) on continued operations
355,771
249,968
77,722
55,869
Profit/(loss) before tax on continued operations
272,150
188,133
59,454
42,048
Net profit / (loss) for the period
291,637
128,030
63,711
28,615
Net profit/(loss) attributable to shareholders of the parent
company
292,418
129,277
63,882
28,894
Net profit/(loss) attributed to non-controlling interest
(781)
(1,247)
(171)
(279)
Other comprehensive income net of tax
145,885
13,702
31,870
3,062
Total comprehensive income
437,522
141,732
95,581
31,677
Cash flows from operating activities
1,278,917
767,186
279,392
171,469
Cash flows from investment activities
(707,366)
(833,999)
(154,531)
(186,402)
Cash flows from financial activities
(221,542)
211,697
(48,398)
47,315
Total net cash flows
350,009
144,884
76,463
32,382
Earnings (loss) per ordinary share (in PLN/EUR)
5.55
2.45
1.21
0.55
as at
31.12.2021
as at
31.12.2020
as at
31.12.2021
as at
31.12.2020
Total assets
7,145,820
5,915,543
1,553,642
1,281,864
Non-current liabilities
2,542,124
401,146
552,708
86,926
Current liabilities
2,206,765
3,395,859
479,794
735,863
Total equity
2,396,931
2,118,538
521,140
459,075
Equity attributable to shareholders of the parent
2,400,707
2,120,615
521,961
459,525
Non-controlling interest
(3,776)
(2,077)
(821)
(450)
Share capital
287,614
287,614
62,533
62,324
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 31.12.2021
as at 31.12.2020
12 months
ended 31.12.2021
12 months
ended 31.12.2020
EUR 1 = PLN 4.5994
EUR 1 = PLN 4.6148
EUR 1 = PLN 4.5775
EUR 1 = PLN 4.4742
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (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. REPRESENTATIONS BY THE MANAGEMENT BOARD ....................................................................................................................................... 11
1.2.2. BASIS OF PREPARATION .................................................................................................................................................................................... 11
1.3. FUNCTIONAL AND REPORTING CURRENCY ..................................................................................................................................................... 12
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 AND CHANGES IN ACCOUNTING POLICY ..................................................................................... 14
2. SEGMENT REPORTING ...................................................................................................................................................................................... 16
3. NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME ............................................................................................................................................................................................................. 23
3.1. SALES REVENUES ............................................................................................................................................................................................... 23
3.2. COST OF SALES .................................................................................................................................................................................................. 24
3.3. COSTS BY TYPE................................................................................................................................................................................................... 24
3.4. OTHER OPERATING INCOME AND EXPENSES .................................................................................................................................................. 25
3.4.1. DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES ................................................................................................................ 28
3.5. FINANCIAL INCOME AND EXPENSES ................................................................................................................................................................ 29
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME ................................................................................................................................... 30
4. INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY...................................................................................................................................... 31
4.1. MAIN COMPONENTS OF TAX EXPENSE ............................................................................................................................................................ 31
4.2. EFFECTIVE TAX RATE ......................................................................................................................................................................................... 31
4.3. DEFERRED INCOME TAX ................................................................................................................................................................................... 32
5. NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................... 36
5.1. PROPERTY, PLANT AND EQUIPMENT ............................................................................................................................................................... 36
5.2. RIGHT-OF-USE ASSETS ...................................................................................................................................................................................... 39
5.3. INTANGIBLE ASSETS – NON-CURRENT AND CURRENT ................................................................................................................................... 41
5.4. GOODWILL IMPAIRMENT TESTING .................................................................................................................................................................. 46
5.5. INVESTMENT PROPERTIES ................................................................................................................................................................................ 47
5.6. LONG-TERM RECEIVABLES ................................................................................................................................................................................ 48
5.7. LONG-TERM FINANCIAL ASSETS ....................................................................................................................................................................... 49
5.8. SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES ....................................................................................................................... 49
5.9. INVENTORIES ..................................................................................................................................................................................................... 50
5.10. SHORT-TERM RECEIVABLES .............................................................................................................................................................................. 50
5.11. SHORT-TERM FINANCIAL ASSETS ..................................................................................................................................................................... 52
5.12. CASH AND CASH EQUIVALENTS........................................................................................................................................................................ 53
5.13. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE AND LIABILITIES RELATED THERETO ... 54
6. EQUITY ............................................................................................................................................................................................................... 57
6.1. CAPITAL MANAGEMENT ................................................................................................................................................................................... 57
6.2. CONSOLIDATED EQUITY .................................................................................................................................................................................... 57
6.3. DIVIDENDS PAID OR DECLARED........................................................................................................................................................................ 60
6.4. BUSINESS COMBINATIONS ............................................................................................................................................................................... 60
6.5. SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST ................................................................................................................. 63
6.6. EARNINGS PER SHARE ....................................................................................................................................................................................... 64
7. LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS .............................................................................................................................................. 65
7.1. INFORMATION ABOUT SIGNIFICANT FINANCIAL LIABILITIES.......................................................................................................................... 65
7.2. OTHER NON-CURRENT LIABILITIES ................................................................................................................................................................... 66
7.3. CURRENT TRADE AND OTHER LIABILITIES ....................................................................................................................................................... 67
7.4. LEASES................................................................................................................................................................................................................ 68
7.5. PROVISIONS FOR EMPLOYEE BENEFITS ........................................................................................................................................................... 71
7.6. OTHER PROVISIONS .......................................................................................................................................................................................... 72
8. FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND IMPAIRMENT ......................................................................................... 75
8.1. FINANCIAL INSTRUMENTS ................................................................................................................................................................................ 75
8.2. FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING ............................................................................................................. 78
8.3. FINANCIAL RISK MANAGEMENT ....................................................................................................................................................................... 81
8.4. DETERMINATION OF FAIR VALUE ..................................................................................................................................................................... 87
9. OTHER NOTES .................................................................................................................................................................................................... 90
9.1. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS ...................................................................................................................... 90
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
4
9.2. INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS ................................................................ 91
9.3. INFORMATION ON TRANSACTIONS WITH RELATED PARTIES ....................................................................................................................... 100
9.3.1. TRANSACTIONS WITH RELATED PARTIES IN TOTAL ...................................................................................................................................... 100
9.3.2. SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED PARTIES OTHER THAN ON AN ARM’S
LENGTH BASIS.................................................................................................................................................................................................. 101
9.3.3. DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES ................................................................................................ 101
9.3.4. TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL ........................................................................................................... 101
9.4. INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE CIECH GROUP’S CONSOLIDATED
FINANCIAL STATEMENTS ................................................................................................................................................................................ 103
9.5. COMPOSITION OF THE GROUP ...................................................................................................................................................................... 103
9.6. EVENTS AFTER THE BALANCE SHEET DATE .................................................................................................................................................... 106
9.7. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE RUSSIAN INVASION ON UKRAINE ON THE
ACTIVITIES OF CIECH GROUP .......................................................................................................................................................................... 106
9.8. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS PANDEMIC ON THE
CIECH GROUP'S ACTIVITIES ............................................................................................................................................................................ 109
REPRESENTATION BY THE MANAGEMENT BOARD .................................................................................................................................................. 112
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
5
CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP
Note
01.01.-31.12.2021
01.01.-31.12.2020
CONTINUING OPERATIONS
Sales revenues
3.1
Cost of sales
3.2
(2,812,342 )
(2,345,067 )
Gross profit/(loss) on sales
Other operating income
3.4
Selling costs
(229,101 )
(173,146 )
General and administrative expenses
(243,319 )
(170,624 )
Other operating expenses
3.4
(57,777 )
(113,876 )
Operating profit/(loss)
Financial income, including:
3.5
Profit from financial instruments
3.5
Financial costs, including:
3.5
(110,362 )
(120,149 )
Loss from financial instruments
3.5
(93,178 )
(106,033 )
Net financial income/(expenses)
(83,648 )
(61,674 )
Share of profit / (loss) of equity-accounted investees
5.8
(161 )
Profit/(loss) before tax
Income tax
4.1
(42,381 )
(64,949 )
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
(781 )
(1,247 )
Earnings per share (in PLN):
Basic
6.6
Diluted
6.6
Earnings/(loss) per share (in PLN) from continuing operations:
Basic
Diluted
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 2021 (in PLN ‘000)
6
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP
Note
01.01.-31.12.2021
01.01.-31.12.2020
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
Currency translation differences (foreign companies)
(4,320 )
Profit (loss) from costs of hedging reserve
(16,672 )
(3,443 )
Profit (loss) from cash flow hedge reserve
(37,327 )
Other components of other comprehensive income
(34 )
(9 )
Other comprehensive income before tax that may not be reclassified to the
statement of profit or loss
3.6
(1,342 )
(167 )
Actuarial gains
(1,342 )
(167 )
Income tax attributable to other comprehensive income
(69,208 )
Income tax attributable to other comprehensive income that may be
reclassified to the statement of profit or loss
4.1.
(69,463 )
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
TOTAL COMPREHENSIVE INCOME
Comprehensive income including attributable to:
Shareholders of the parent company
Non-controlling interest
(669 )
(1,094 )
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 2021 (in PLN ‘000)
7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP
Note
31.12.2021
31.12.2020*
01.01.2020*
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
5.8
Deferred income tax assets
4.3
Total non-current assets
Inventory
5.9
Short-term intangible assets other than goodwill
5.3
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 )
Profit (loss) from costs of hedging reserve
(20,331 )
(3,659 )
(216 )
Actuarial gains
(1,582 )
(495 )
(360 )
Other reserve capitals
6.2
Currency translation reserve
(36,327 )
(31,737 )
(75,944 )
Retained earnings
Equity attributable to shareholders of the parent
Non-controlling interest
6.5
(3,776 )
(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 the restatement, see Note 1.5.1 to these statements.
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 2021 (in PLN ‘000)
8
CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP
note
01.01.-31.12.2021
01.01.-31.12.2020
Cash flows from operating activities
Net profit/(loss) for the period
Adjustments
Amortisation/depreciation
Recognition of impairment allowances
Foreign exchange (profit) /loss
(3,007 )
(48,186 )
Investment property revaluation
(5,127 )
(Profit) / loss on investment activities
(158,018 )
(Profit) / loss on disposal of property, plant and equipment
(4,157 )
(6,520 )
Dividends and interest
Income tax
(Profit) / loss on the settlement of construction contracts (caverns)
(22,732 )
Share of (profit) / loss on equity accounted investees
(27 )
Change in liabilities due to loan arrangement fee
(7,318 )
Valuation of derivatives
(5,083 )
Other adjustments *
Change in receivables
9.1
(189,895 )
Change in inventory
9.1
(69,836 )
Change in current liabilities
9.1
Change in provisions and employee benefits
9.1
(9,164 )
Interest paid
(43,964 )
(54,094 )
Income tax (paid)/returned
(49,114 )
(75,265 )
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)
(5,105 )
(4,848 )
Acquisition of intangible assets and property, plant and equipment
(746,627 )
(693,963 )
Development expenditures
(18,574 )
(15,960 )
Borrowings paid out
(720 )
Expenditure on the purchase of emission rights
(133,939 )
(129,222 )
Other investment inflows (outflows)
(54 )
Net cash from investment activities
(707,366 )
(833,999 )
Cash flows from financial activities
Proceeds from loans and borrowings
7.1
Dividends paid to parent company
(158,099 )
Repayment of loans and borrowings
7.1
(231,801 )
(263,041 )
Payments of lease liabilities
7.4
(27,055 )
(31,536 )
Other financial inflows (outflows)
(83 )
Net cash from financial activities
(221,542 )
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
* As at December 31, 2021 the main amount presented in Other adjustment includes PLN 216 million relating to the early settlement of
options and recognized in other comprehensive income by the SDC Group.
**The difference at the end of 2020 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 2021 (in PLN ‘000)
9
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP
Share
capital
Share
premium
Cash flow hedge
reserve
Profit (loss)
from costs of
hedging
reserve
Other
reserve
capitals
Actuarial
gains
Currency
translation
reserve
Retained
earnings
Equity
attributable to
shareholders of
the parent
Non-
controlling
interest
Total equity
01.01.2021
(9,393 )
(3,659 )
(495 )
(31,737 )
(2,077 )
Transactions with the owners
(158,099 )
(158,099 )
(1,030 )
(159,129 )
Dividend
(158,099 )
(158,099 )
(158,099 )
Change in the Group’s structure
(1,030 )
(1,030 )
Total comprehensive income for
the period
(16,672 )
(1,087 )
(4,590 )
(669 )
Net profit / (loss) for the period
(781 )
Other comprehensive income
(16,672 )
(1,087 )
(4,590 )
(34 )
31.12.2021
(20,331 )
(1,582 )
(36,327 )
(3,776 )
01.01.2020
(216 )
(360 )
(75,944 )
(1,017 )
Transactions with the owners
(346,507 )
(7 )
Reserve fund for the purchase of
own shares
(346,500 )
Change in the Group’s structure
(7 )
(7 )
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 )
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 2021 (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
Ultimate parent company
(a subsidiary of Kulczyk Investments)
Ultimate parent company
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
11
1.2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES
1.2.1. REPRESENTATIONS BY THE MANAGEMENT BOARD
These consolidated financial statements of the CIECH Group for the period from 1 January 2021 to 31 December 2021,
including comparative data, were approved by the Management Board of CIECH S.A. on 29 March 2022.
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 2021 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. The company was
liquidated on 31 August 2021.
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
12
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 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
31.12.2021
1
31.12.2020
2
EUR
4.5994
4.6148
RON
0.9293
0.9479
Average NBP rate for the reporting period
12 months ended 31.12.2021
3
12 months ended 31.12.2020
4
EUR
4.5775
4.4742
RON
0.9293
0.9239
1
NBP’s average foreign exchange rates table applicable as at 31 December 2021.
2
NBP’s average foreign exchange rates table applicable as at 31 December 2020.
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 2021 to 31 December 2021.
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 2020 to 31 December 2020.
For each of the foreign operations that prepare their financial statements in a currency other than the presentation currency,
their results and financial position must be translated into the presentation currency in accordance with the following
procedure:
• all items of revenue and expenses in the functional currency of the subsidiary are translated into the presentation
currency using the mid exchange rate calculated as the arithmetic mean of mid exchange rates quoted by the National
Bank of Poland on the last day of each month in the reporting period,
• all assets and liabilities are translated into the presentation currency at the closing rate quoted by the National Bank of
Poland for the balance sheet date,
• individual components of equity are translated at historical exchange rates, e.g. share capital at the exchange rate of
the date of accounting for the merger, revenues and expenses recognised directly in equity are translated at the
exchange rate prevailing on the transaction date, as quoted by the National Bank of Poland, or, in a simplified manner,
at the average rate for the period in question.
The difference resulting from the translation of equity at rates other than the closing rate prevailing at the balance sheet date
applied to the other items of the balance sheet is recognised in equity under "Exchange differences on translation of foreign
operations".
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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
13
Note
Title
Accounting principles
Judgements and estimates
5.6
Long-term receivables
x
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
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 on 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 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
Amendment to IFRS 16 “Leases” – Covid-19-related rent
concessions
No material impact on the financial
statements is estimated
2021
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 and approved by the European Union,
which have not yet entered into force
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
14
New Standards, amendments to Standards and Interpretations:
Amendments to IAS 1 “Presentation of financial statements” –
classification of liabilities as current or non-current
No material impact on the financial
statements is estimated
2023
Amendments to IAS 1 “Presentation of financial statements” –
disclosures of accounting policies applied
No material impact on the financial
statements is estimated
2023
Amendments to IAS 8 “Accounting policies, changes in
accounting estimates and errors” – definition of accounting
estimates
No material impact on the financial
statements is estimated
2023
Amendments to IAS “12 Income Tax” – deferred tax related to
assets and liabilities arising from a single transaction
No material impact on the financial
statements is estimated
2023
Amendments to IFRS 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 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
* The amendment to IAS 16 "Property, plant and equipment" relates to the recognition of proceeds before intended use. As at 31 December
2021, the value of fixed assets under construction includes revenues and costs related to the sale of test production of CIECH Salz Deutschland
GmbH in the amount of approximately EUR 2 million (PLN 9.4 million).
1.5.1. ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY
The following changes were made relative to the previously published comparatives as at 31 December 2020:
a) recognition of the valuation of futures transactions at CIECH Soda Romania S.A. – this concerns the statement of
financial position as at 31 December 2020
Recognition of the valuation of futures transactions for the sale of CO
2
emission allowances at CIECH Soda Romania S.A. in
the statements of financial position as at 31 December 2020 – adjustment of erroneous recognition of transactions: the cash
flow settlements with the Clearing House were recognised and the liabilities arising from the valuation of financial
instruments were adjusted.
b) change in accounting policy with respect to recognition of free CO
2
emission allowances
In 2021, the Group revised its Accounting policy in respect of recognition of emission allowances granted and the
measurement principles for the disposal of rights.
Following the revision, the emission allowances granted are recognised in the balance sheet as assets when credited to the
account at their fair value determined at that date. At the same time, the same amount is recognised in an accrued income
account (as a subsidy for production costs, regulated in IAS 20 Government Grants and Disclosure of Government Assistance).
The entity receiving the allowances accounts for them as intangible assets. When emissions covered by the allowances
received occur, the corresponding value recognised in the deferred income account is deducted from the operating expenses
related to the emission.
If there were no emissions for which the entity received the rights, then the part of the deferred income relating to them
remains in the balance until the rights are disposed of. If the rights are used to cover the emission in the following year (years),
the relevant part of the deferred income reduces the operating costs of the emission in the year in which the rights are used,
and if such rights are sold, the deferred income reduces the cost of the rights sold.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
15
In the event of a purchase of additional allowances on the market, the allowances are measured at cost and presented as
intangible assets.
The entity recognises a provision for the cost of covering CO
2
emissions into the atmosphere in the amount of the product of
the quantity of CO
2
emitted (in thousand tonnes, equivalent to one EUA) and the unit price of the emission allowances. The
emission costs are covered by allowances held in a brokerage account at the balance sheet date in accordance with the
detailed identification principle. If insufficient allowances are held, the missing portion of the provision is measured at the
allowance price of the futures contracts open on the balance sheet date, in accordance with the detailed identification
principle. If insufficient allowances have been contracted, the provision for the costs of covering emissions is measured at
the current (as at the balance sheet date) market price of the EUA.
Until 2020, emission allowances granted were not subject to recognition on the balance sheet when granted and in
subsequent periods. The entity receiving the allowances entered them in the off-balance sheet records.
The impact of the changes on the previously reported consolidated data for the period from 1 January to 31 December 2020
is presented below.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
After adjustment
as at
31 December 2020
Change in valuation
of emission
allowances granted
Recognition of
valuation of futures
Previously
presented as at
31 December 2020
ASSETS
Total non-current assets
4,251,347
-
-
4,251,347
Short-term intangible assets other than
goodwill
185,220
185,220
-
-
Trade and other receivables
478,508
-
22,590
455,918
Total current assets
1,664,196
185,220
22,590
1,456,386
Total assets
5,915,543
185,220
22,590
5,707,733
EQUITY AND LIABILITIES
Total equity
2,118,538
-
-
2,118,538
Total non-current liabilities
401,146
-
-
401,146
Trade and other liabilities
1,286,256
185,220
22,590
1,078,446
Total current liabilities
3,395,859
185,220
22,590
3,188,049
Total liabilities
3,797,005
185,220
22,590
3,589,195
Total equity and liabilities
5,915,543
185,220
22,590
5,707,733
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
After adjustment
as at
1 January 2020
Change in
valuation of
emission
allowances
granted
Previously
presented as at
1 January 2020
ASSETS
Total non-current assets
3,734,291
-
3,734,291
Short-term intangible assets other than goodwill
124,368
124,368
-
Total current assets
1,436,622
124,368
1,312,254
Total assets
5,170,913
124,368
5,046,545
EQUITY AND LIABILITIES
Total equity
1,976,779
-
1,976,779
Total non-current liabilities
1,970,287
-
1,970,287
Trade and other liabilities
971,546
124,368
847,178
Total current liabilities
1,223,847
124,368
1,099,479
Total liabilities
3,194,134
124,368
3,069,766
Total equity and liabilities
5,170,913
124,368
5,046,545
The above change in accounting policy had no impact on the consolidated statement of profit or loss, consolidated statement
of other comprehensive income or consolidated statement of cash flows.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
16
2. SEGMENT REPORTING
Note 2 to the Consolidated Financial Statements of the CIECH Group for 2020 contains a detailed description of the allocation
of operating segments to the new business structure. The change in presentation was made as of 2020 for all reporting
periods presented as comparatives.
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
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 (in the German company) also includes the business of
producing and selling electricity. 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 was a producer of a variety of organic compounds manufactured by CIECH Żywice
Sp. z o.o. In 2020 and in the first quarter of 2021, it was producing, among others, epoxy resins and polyester resins. These
products are used in the following industries: automotive, paints and electronics. On 1 March 2021, CIECH Żywice Sp. z o.o.
was sold to LERG S.A., 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 Vitro 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 Serwis 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
17
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 location.
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. No need to separate additional Segments under IFRS 8 regulations has been
identified.
EBITDA should be viewed as a supplement not as a substitute for the business performance presented in accordance with
IFRS.
EBITDA is a useful ratio of the ability to incur and service debt. EBITDA and adjusted EBITDA levels are not defined by the IFRS
and can be calculated in a different manner by other entities. The reconciliation and definitions applied by the CIECH Group
when determining these measures are presented below.
01.01.-31.12.2021
01.01.-31.12.2020
Net profit/(loss) on continuing operations
229,769
123,184
Income tax
42,381
64,949
Share of profit / (loss) of equity-accounted investees
(27)
161
Financial expenses
110,362
120,149
Financial income
(26,714)
(58,475)
Amortisation/depreciation
374,640
333,280
EBITDA on continued operations
730,411
583,248
EBITDA on discontinued operations
6,927
19,693
EBITDA on continued and discontinued operations
737,338
602,941
01.01.-31.12.2021
01.01.-31.12.2020
EBITDA on continued operations
730,411
583,248
One-offs including:
(3,797)
2,084
Impairment (a)
262
3,597
Cash items (b)
(4,195)
(6,324)
Non-cash items (without impairment) (c)
136
4,811
Adjusted EBITDA on continued operations
726,614
585,332
Adjusted EBITDA on discontinued operations
6,951
18,883
Adjusted EBITDA on continued and discontinued operations
733,565
604,215
The catalogue of items for adjusting adjusted EBITDA for the purposes of these financial statements is as follows:
(a) Impairment losses are associated with the recognition/reversal of impairment write-downs on property, plant and equipment and
intangible assets.
(b) Cash items:
• gain/loss on sale of property, plant and equipment,
• fees and compensations received,
• donations given,
• fortuitous events.
(c) Non-cash items:
• fair value measurement of investment properties,
• costs of liquidation of property, plant and equipment,
• costs of suspended investments,
• restructuring costs,
• environmental provisions, provisions for liabilities and compensation and other items (including extraordinary costs and other
provisions).
The above catalogue for year 2021 is complete, but adjusted EBITDA may also be adjusted for other untypical non-recurring events not listed
above.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
18
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.-31.12.2021
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
2,196,210
486,925
389,953
237,958
73,652
75,217
-
-
3,459,915
Revenue from inter-segment transactions
77,190
64
84
197
1,134
16,335
-
(95,004)
-
Total sales revenues
2,273,400
486,989
390,037
238,155
74,786
91,552
-
(95,004)
3,459,915
Cost of sales
(1,913,016)
(340,374)
(310,676)
(185,191)
(52,361)
(92,454)
-
81,730
(2,812,342)
Gross profit /(loss) on sales
360,384
146,615
79,361
52,964
22,425
(902)
-
(13,274)
647,573
Selling costs
(150,643)
(43,822)
(10,937)
(27,428)
(7,140)
(1,205)
-
12,074
(229,101)
General and administrative expenses
(89,201)
(33,876)
(6,332)
(6,412)
(3,699)
(4,094)
(103,799)
4,094
(243,319)
Result on management of receivables
(4,620)
2,536
24
(5)
(3)
1,029
-
54
(985)
Result on other operating activities
177,266
5,197
(555)
1,261
601
4,545
(1,161)
(5,551)
181,603
Operating profit /(loss)
293,186
76,650
61,561
20,380
12,184
(627)
(104,960)
(2,603)
355,771
Exchange differences and interest on trade settlements
(302)
(3,643)
190
1,013
29
(384)
179
-
(2,918)
Group borrowing costs
-
-
-
-
-
-
(44,294)
-
(44,294)
Result on financial activity (non-attributable to
segments)
-
-
-
-
-
-
(36,436)
-
(36,436)
Share of profit / (loss) of equity-accounted investees
27
-
-
-
-
-
-
-
27
Profit /(loss) before tax
292,911
73,007
61,751
21,393
12,213
(1,011)
(185,511)
(2,603)
272,150
Income tax
-
-
-
-
-
-
-
-
(42,381)
Net profit /(loss) on continuing operations
-
-
-
-
-
-
-
-
229,769
Net profit /(loss) on discontinued operations
-
-
-
-
-
-
-
-
61,868
Net profit /(loss) for the period
-
-
-
-
-
291,637
Amortization/depreciation
299,850
39,110
3,679
9,537
5,983
1,609
14,872
-
374,640
EBITDA from continuing operations
593,036
115,760
65,240
29,917
18,167
982
(90,088)
(2,603)
730,411
Adjusted EBITDA from continuing operations*
590,680
114,901
65,331
30,375
16,929
(1,016)
(87,986)
(2,600)
726,614
*Adjusted EBITDA for the 12-month period ended 31 December 2021 is calculated as EBITDA adjusted for untypical one-off events, including: change in provisions:
PLN 4.1 million; liquidation of fixed assets: PLN -1.2 million; fortuitous events: PLN -1.4 million; disposal of fixed assets: PLN 6.2 million; restructuring costs: PLN -1.8 million; costs of past operations: PLN -1.6 million,
other: PLN -0.5 million.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
19
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
266,791
29,644
3,945
9,561
7,709
778
14,852
-
333,280
EBITDA from continuing operations
506,852
37,930
37,633
26,067
20,608
(3,996)
(41,977)
131
583,248
Adjusted EBITDA from continuing 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, including: impairment losses: PLN -3.6 million; change in provisions: PLN -7.9
million; valuation of investment properties: PLN 5.1 million; fines and compensations received: PLN 4.7 million; other: PLN -0.4 million.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
20
SALES REVENUES — BUSINESS SEGMENTS
01.01.-31.12.2021
01.01.-31.12.2020
Change 2021/2020
Change %
Soda segment, including:
2,273,400
2,088,270
185,130
8.9%
Dense soda ash
1,104,737
1,159,682
(54,945)
(4.7%)
Light soda ash
357,574
269,129
88,445
32.9%
Salt
183,466
183,468
(2)
(0.0%)
Sodium bicarbonate
219,135
193,001
26,134
13.5%
Energy
210,472
146,955
63,517
43.2%
Calcium chloride
30,889
17,809
13,080
73.4%
Other products
89,937
60,999
28,938
47.4%
Revenues from inter-segment transactions
77,190
57,227
19,963
34.9%
Agro segment, including:
486,989
366,174
120,815
33.0%
Agro products
486,925
365,490
121,435
33.2%
Revenues from inter-segment transactions
64
684
(620)
(90.6%)
Foams segment, including:
390,037
267,815
122,222
45.6%
Polyurethane foams
389,953
267,733
122,220
45.6%
Revenues from inter-segment transactions
84
82
2
2.4%
Silicates segment, including:
238,155
172,081
66,074
38.4%
Sodium silicates
228,099
163,773
64,326
39.3%
Potassium silicates
9,750
8,070
1,680
20.8%
Other products
109
9
100
1111.1%
Revenues from inter-segment transactions
197
229
(32)
(14.0%)
Packaging segment, including:
74,786
67,054
7,732
11.5%
Glass packaging
73,652
67,051
6,601
9.8%
Revenues from inter-segment transactions
1,134
3
1,131
37700.0%
Other segment, including:
91,552
127,882
(36,330)
(28.4%)
Revenues from third parties
75,217
72,564
2,653
3.7%
Revenues from inter-segment transactions
16,335
55,318
(38,983)
(70.5%)
Consolidation adjustments
(95,004)
(113,543)
18,539
16.3%
TOTAL
3,459,915
2,975,733
484,182
16.3%
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
31.12.2021
31.12.2020*
31.12.2021
31.12.2020*
Soda Segment
4,130,954
3,690,113
381,282
290,786
Resins Segment
-
203,699
-
58,312
Agro Segment
783,143
755,969
138,122
93,704
Foams Segment
62,300
68,447
69,371
59,174
Silicates Segment
171,139
84,898
49,100
19,010
Packaging Segment
36,973
33,754
6,819
8,846
Other operations Segment
47,179
23,016
12,164
25,451
Corporate functions - reconciliation item
1,962,473
1,164,629
4,135,863
3,283,887
Eliminations (consolidation adjustments)
(48,341)
(108,982)
(43,832)
(42,165)
TOTAL
7,145,820
5,915,543
4,748,889
3,797,005
*Restated data. For detailed information on the restatement, see Note 1.5.1 to these statements.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
21
The value of investments in equity-accounted entities occurs only for the assets of the soda segment and amounts to
PLN 5,655 thousand as at 31 December 2021 (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:
31.12.2021
31.12.2020
Soda Segment
598,697
812,033
Agro Segment
29,579
75,094
Resins Segment
-
9,422
Foam Segment
4,133
1,497
Silicates Segment
71,145
5,854
Packaging Segment
5,194
3,515
Other operations Segment
3,728
120
Corporate functions
29,910
16,937
TOTAL
742,386
924,472
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
31.12.2021
Poland
2,489,645
64,707
2,019,215
4,573,567
European Union (excluding
Poland)
2,238,656
5,540
307,414
2,551,610
Other European countries
-
-
2,432
2,432
Africa
-
-
2,313
2,313
Asia
-
-
7,022
7,022
Other regions
-
-
8,876
8,876
TOTAL
4,728,301
70,247
2,347,272
7,145,820
31.12.2020
Poland
2,412,274
50,688
1,201,834
3,664,796
European Union (excluding
Poland)
1,787,812
-
429,455
2,217,267
Other European countries
-
-
14,788
14,788
Africa
-
-
3,923
3,923
Asia
-
-
4,493
4,493
Other regions
-
-
10,276
10,276
TOTAL
4,200,086
50,688
1,664,769
5,915,543
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
22
SALES REVENUES – GEOGRAPHICAL STRUCTURE OF MARKETS
01.01.-31.12.2021
01.01.-31.12.2020
Change 2021/2020
Poland
1,748,175
1,473,672
12.9%
European Union (excluding Poland)
1,547,920
1,354,202
(10.8%)
Germany
781,925
673,359
3.1%
Romania
53,060
34,465
54.0%
Czech Republic
166,908
161,196
3.5%
Italy
27,744
35,259
(21.3%)
The Netherlands
139,952
110,549
26.6%
Finland
50,060
55,960
(10.5%)
Sweden
23,560
21,715
8.5%
Belgium
35,435
28,192
25.7%
Denmark
42,388
38,353
10.5%
Spain
107,588
93,513
15.1%
Austria
39,737
17,717
124.3%
France
21,426
13,960
53.5%
Luxembourg
398
22,348
(98.2%)
Lithuania
16,331
13,299
22.8%
Other EU countries
41,408
34,317
20.7%
Other European Countries
77,334
78,097
(1.0%)
Switzerland
10,815
3,627
198.2%
Norway
44,375
43,486
2.0%
United Kingdom
4,896
4,568
7.2%
Russia
5,985
7,086
(15.5%)
Other European countries
11,263
19,330
(41.7%)
Africa
17,286
17,959
(3.7%)
Asia
37,855
31,741
19.3%
China
4,474
358
1149.7%
India
455
1,042
(56.3%)
Singapore
6,819
3,257
109.4%
Turkey
6,169
12,688
(51.4%)
Other Asian countries
19,938
14,396
38.5%
Other regions
26,383
32,592
(19.1%)
Cash flow hedge adjustment
4,962
(12,530)
-
TOTAL
3,459,915
2,975,733
16.3%
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
23
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 terms and conditions contained in contracts with customers. The company usually sells
using the following delivery bases: DAP, FCA, EXW, CPT, DDP, CIF.
The CIECH Group enters into agreements with counterparties concerning the provision of the Group’s products through
consignment warehouses owned by the counterparties. Control of delivered products is passed to the customer when
they are accepted for storage and at that point in time sales revenues are recognised along with the corresponding cost
of sales.
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.-31.12.2021
01.01.-31.12.2020
Revenues from sales of products and services
3,401,106
2,856,932
- products
3,328,404
2,801,552
- services
72,702
55,380
Revenues from sales of goods and materials
58,809
118,801
- goods
57,067
111,262
- materials
1,742
7,539
Net sales of products, goods and materials
3,459,915
2,975,733
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
24
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 costs of sales/general and administrative expenses/in selling expenses.
Provisions for liabilities to former key employees (compensation for termination of contracts, non-competition clauses,
etc.) are recognised in general and administrative expenses or selling expenses.
Provisions for length-of-service awards, retirement and disability benefits are recognised in other operating expenses.
Amortisation and depreciation
In this item, the 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.-31.12.2021
01.01.-31.12.2020
Cost of manufacture of products and services sold
(2,769,294)
(2,225,114)
Cost of sold goods and materials sold
(31,420)
(91,867)
Reversal of impairment losses on inventory
7,169
4,250
Recognition of impairment losses on inventory
(5,792)
(9,158)
Write off / liquidation of materials
(457)
(4,847)
Costs of idle assets and production capacity
(12,548)
(18,331)
TOTAL
(2,812,342)
(2,345,067)
3.3. COSTS BY TYPE
COST BY KIND (SELECTED)
01.01.-31.12.2021
01.01.-31.12.2020
Amortisation
(357,319)
(314,760)
Consumption of materials and energy
(1,751,117)
(1,369,661)
Employee benefits, including:
(389,886)
(357,161)
- payroll
(321,660)
(291,699)
- social security and other benefits
(63,416)
(59,383)
- expenditure on retirement benefit and jubilee awards (including provisions)
(695)
(3,282)
- expenditure on pension schemes with defined benefits
(1,069)
(824)
- other
(3,046)
(1,972)
External services
(548,528)
(297,205)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
25
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, such as 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. If the subsidy relates to an expense item, it is
recognised as a reduction in the costs that the subsidy is 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 intangible assets that have indefinite lives, goodwill or intangible assets 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
26
OTHER OPERATING INCOME
01.01.-31.12.2021
01.01.-31.12.2020
Subsidies
7,500
5,511
The right to emit greenhouse gases
145,411
1,805
Rents/lease income
4,536
2,418
Gain on disposal of non-financial non-current assets
6,210
3,419
Reversal of impairment allowances on receivables
7,381
6,530
Reversal of provisions on employee benefits
2,037
1,713
Reversal of provisions for compensation – changing the base
3,229
1,077
Reversal of provisions for environmental protection – changing the base
3,844
488
Reversal of provisions for liabilities – changing the base
5,126
2,321
Reversal of other provisions- changing the base
-
6,651
Penalty fees and compensations received
10,785
7,653
Refund of taxes and charges
18,273
13,349
Valuation of investment property in fair value
-
5,126
Other services
3,177
3,812
Settlement of inventory taking
1,331
4,596
Other
19,555
10,479
TOTAL
238,395
76,948
The main item of other operating income in 2021 was the gain on the sale of unused CO
2
emission allowances earned in the
SDC Group (PLN 96,371 thousand) and CIECH Soda Romania S.A. (PLN 49,040 thousand).
Reimbursement of costs and fees in the amount of PLN 18,273 thousand represents compensation received by CIECH Soda
Polska S.A. for the costs of purchasing emission allowances and refund of excise tax in the amount of PLN 15,773 thousand
and PLN 2,500 thousand respectively.
“Other” includes income from white certificates in CIECH Soda Polska S.A. (PLN 2,915 thousand), insurance claim in SDC Group
(PLN 4,239 thousand) and reversal of provisions for VAT corrections and potential claims in CIECH Trading Sp. z o.o.
(PLN 2,760 thousand).
Subsidies and other forms of State aid
Subsidies recognised in the statement of profit or loss in the reporting period amounted to PLN 7,500 thousand
(PLN 5,511 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 2021 amounted to PLN 110,771
thousand (compared to PLN 67,300 thousand as at 31 December 2020). 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 items of subsidies presented in the statement of financial position of the Group 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 upgrading 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
In 2021, 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 (EUR 11,250 thousand in funding awarded in 2017).
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 2021 resulted in the receipt of a refund in the amount of over PLN 80 thousand. One more
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
27
subsidy is expected to be received for the project in 2022. The company completed the implementation of the project entitled
“Establishment of a Research and Development Center of Ciech R&D Sp. z o.o.” and submitted a final payment request for a
refund amount of PLN 3,158 thousand, which is to be paid upon approval of the payment request in 2022.
In 2021, Smart Fluid S.A. continued its work on the development of technology for shear thickening fluids by carrying out a
research and development project entitled “Development and validation of real-world technology for the production of
impact-absorbing smart materials by exploiting the properties of shear thickening fluids (STF)”. The project has been
positively verified by the funding institution (National Centre for Research and Development). The company has received a
subsidy in the total amount of PLN 575 thousand for the project in 2021.
In 2021, CIECH Sarzyna S.A. received a reimbursement in the amount of PLN 1,379 thousand in connection with the completed
project “Developing and testing, on a demonstrable scale, internationally innovative agro-chemical preparations of a unique
composition and formulation” implemented under Measure 1.1: R&D projects of enterprises of the Operational Programme
Smart Growth 2014-2020, co-financed by the European Regional Development Fund.
In 2021 CIECH Soda Polska S.A. continued the implementation of the project entitled: "Development of AI / ML algorithms
for selected installation nodes in order to increase the efficiency of production resources and optimize the soda ash
production process - industry 4.0", for which she obtained funding in 2019. The amount of the awarded co-financing is
PLN 4,934 thousand.
The companies from the CIECH Group also use the corporate income tax exemption in connection with investments carried
out on the basis of permits to operate in Special Economic Zones or on the basis of decisions issued on support within the
Polish Investment Zone. In 2021, CIECH Vitrosilicon S.A. successfully completed the process of applying for a support decision,
which will allow it to benefit from income tax exemption in the following years.
OTHER OPERATING EXPENSES
01.01.-31.12.2021
01.01.-31.12.2020
Costs related to leased property
(4,442)
(4,202)
Recognition of impairment losses on receivables
(8,366)
(19,670)
Recognition of impairment losses on property, plant and equipment and
intangible assets
(577)
(3,692)
Recognition of provisions on employee benefits
(3,089)
(1,584)
Recognition of provisions for compensation
(395)
(602)
Recognition of provisions for environmental protection
(828)
(228)
Recognition of provisions for liabilities and anticipated losses
(5,538)
(16,640)
Liquidation costs of property, plant and equipment
(1,209)
(1,787)
Liquidation costs of materials
(507)
(400)
Costs of remediating the effects of fortuitous events
(1,494)
(1,534)
Valuation of investment property at fair value
(202)
-
Penalties and compensations paid
(1,252)
(1,223)
Settlement of Energy purchase costs for previous years
-
(5,016)
Other fees
-
(2,976)
Inventory differences
(1,042)
(2,034)
Costs of idle assets and production capacity
(16,718)
(24,699)
Other
(12,118)
(27,589)
TOTAL
(57,777)
(113,876)
Other operating expenses in 2021 and 2020 include an amount of PLN 16,718 thousand and PLN 24,669 thousand,
respectively, related to the costs of idle assets and production capacity in CIECH Soda Romania S.A. due to the hibernation of
the plant as of September 2019.
For the remaining CIECH Group companies engaged in production activities, these expenses are reported in the core business
and affect the level of cost of sales.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
28
3.4.1. 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 2021
include a depreciation charge that takes into account the wear and tear of these fixed assets in the amount of PLN 9,612
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 2021, 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 the 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 amount of impairment losses on fixed assets in CIECH Soda Romania S.A. did not change. The net carrying
amount of the company's fixed assets is PLN 62,270 thousand as at 31 December 2021.
At the same time, the Group 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
29
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 valuation of financial instruments not designated for hedge accounting and the ineffective portion
relating to financial instruments designated for hedge accounting.
FINANCIAL INCOME
01.01.-31.12.2021
01.01.-31.12.2020
Interest
1,204
1,870
Dividends and shares in profit
-
114
Net foreign exchange gains
-
45,172
Balance sheet valuation of derivative financial instruments
18,064
1,285
Other
7,446
10,034
TOTAL
26,714
58,475
FINANCIAL EXPENSES
01.01.-31.12.2021
01.01.-31.12.2020
Total interest
(37,482)
(55,991)
Net foreign exchange losses
(1,870)
-
Recognition of other impairment losses
(448)
(853)
Factoring commissions
(2,364)
(1,593)
Bank fees and commissions
(8,569)
(3,744)
Recognised provisions
(973)
(3,703)
Costs of discounting of liabilities
(427)
-
Losses on financial instruments
(55,696)
(48,175)
Other
(2,533)
(6,090)
TOTAL
(110,362)
(120,149)
The item in the statement of profit or loss “Gains/losses on financial instruments” comprises the following values:
01.10.-31.12.2021
01.01.-31.12.2020
Profits on financial instruments
20,812
4,980
Interets
1,203
1,870
Profits on derivatives
19,404
2,856
Reversal of write-offs
204
254
Losses on financial instruments
(93,178)
(106,033)
Interets
(37,483)
(55,990)
Losses on derivatives
(55,695)
(50,043)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
30
3.6. COMPONENTS OF OTHER COMPREHENSIVE INCOME
Tax effect of each component of other comprehensive income of the CIECH Group
01.01.-31.12.2021
01.01.-31.12.2020
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
(4,320)
(226)
(4,546)
42,397
2,031
44,428
Cash flow hedge reserve
237,461
(69,237)
168,224
(37,327)
10,188
(27,139)
Profit (loss) from costs of hedging reserve
(16,672)
-
(16,672)
(3,443)
-
(3,443)
Valuation of actuarial provisions
(1,342)
255
(1,087)
(167)
32
(135)
Other components of other comprehensive income
(34)
-
(34)
(9)
-
(9)
TOTAL
215,093
(69,208)
145,885
1,451
12,251
13,702
Income tax and reclassification adjustments in other comprehensive income
Other comprehensive income before tax
01.01.-31.12.2021
01.01.-31.12.2020
Currency translation differences (foreign companies)
(4,320)
42,397
remeasurement for the current period
(4,320)
42,397
Profit (loss) from cash flow hedge reserve
237,461
(37,327)
fair value remeasurement in the period
237,529
(53,129)
reclassification to profit or loss
(68)
15,802
Profit (loss) from costs of hedging reserve
(16,672)
(3,443)
fair value remeasurement in the period
(20,345)
(4,407)
reclassification to profit or loss
3,673
964
Valuation of actuarial provisions
(1,342)
(167)
remeasurement for the current period
(1,342)
(167)
Other components of other comprehensive income
(34)
(9)
remeasurement for the current period
(34)
(9)
Income tax attributable to other components of other comprehensive income
(69,208)
12,251
accrued for the current period
(67,285)
15,318
reclassification to profit or loss
(1,923)
(3,067)
Other comprehensive income net of tax
145,885
13,702
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
31
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.-31.12.2021
01.01.-31.12.2020
Current income tax
(69,257)
(70,219)
Income tax for the reporting period
(72,496)
(66,089)
Adjustment to tax for previous years
3,239
(4,130)
Deferred tax
26,876
5,270
Origination/reversal of temporary differences
40,463
1,651
Unrecognized deferred tax assets
(33,445)
3,619
Recognition of tax credits not included in previous years
19,858
-
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS
(42,381)
(64,949)
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.-31.12.2021
01.01.-31.12.2020
Net currency at translation differences
(226)
2,031
Cash flow hedge
(69,237)
10,188
Valuation of actuarial provisions
255
32
TOTAL
(69,208)
12,251
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.-31.12.2021
01.01.-31.12.2020
Profit/(loss) before tax
272,150
188,133
Tax calculated at the applicable tax rate
(51,708)
(35,745)
Difference resulting from the application of tax rates applicable in other countries
(4,683)
(7,695)
Tax effect of revenues adjusting profit (loss) before tax (permanent difference)
(4,830)
21,740
Effect of interest in entities accounted for using the equity method
(27)
192
Tax effect of expenses adjusting profit (loss) before tax (permanent difference)
14,937
(16,736)
Adjustment of current income tax for previous years
(2,796)
(17,504)
Reversal of deferred tax asset for tax losses carried forward
(1,197)
1,470
Tax losses for the reporting period for which a deferred tax asset has not been
recognised
(11,446)
(27,656)
Special economic zone
23,170
19,040
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
32
EFFECTIVE TAX RATE
01.01.-31.12.2021
01.01.-31.12.2020
Tax credits
1,151
491
Settlement of deferred tax asset
(1,048)
(1,048)
Other
(3,904)
(1,498)
Income tax recognised in statement of profit or loss
(42,381)
(64,949)
EFFECTIVE TAX RATE
15.6%
34.5%
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 2021 (in PLN ‘000)
33
Deferred income tax is attributable to the following items:
DEFERRED INCOME TAX ASSETS AND DEFERRED
INCOME TAX LIABILITY
31.12.2021
31.12.2020
Total asset
Total
liability
Net value
Total asset
Total
liability
Net value
Property, plant and equipment
3,129
172,484
(169,355)
1,221
136,672
(135,451)
Intangible assets
2,237
20,945
(18,708)
5,032
22,982
(17,950)
Rights to use an asset*
-
4,619
(4,619)
-
4,686
(4,686)
Investment property
1,507
1,106
401
1,133
1,099
34
Long term receivables
796
3,551
(2,755)
-
-
-
Financial assets
768
7,401
(6,633)
6,795
3,340
3,455
Inventory
1,840
331
1,509
2,590
426
2,164
Trade and other receivables
3,480
2
3,478
9,152
-
9,152
Provisions for employee benefits
3,618
-
3,618
2,523
-
2,523
Other provisions
68,407
-
68,407
18,210
-
18,210
Tax losses carried forward
78,457
-
78,457
38,413
-
38,413
Foreign exchange differences
400
1,665
(1,265)
471
4,312
(3,841)
Liabilities
48,171
2,813
45,358
32,600
47
32,553
Special economic zone
101,341
-
101,341
95,369
-
95,369
Other
(978)
8,275
(9,253)
369
43
326
Deferred tax assets/liability
313,173
223,192
89,981
213,878
173,607
40,271
Set - off of deferred tax assets/ liability
(174,068)
(174,068)
-
(124,591)
(124,591)
-
Unrecognized deferred tax assets
(68,858)
-
(68,858)
(38,599)
-
(38,599)
Deferred tax assets/liability recognised in the
statement of financial position
70,247
49,124
21,123
50,688
49,016
1,672
*The value relates to the measurement of the right of use in one of the Group companies, which was recognised at the time of acquisition
of the company and measured at the 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 248,964 thousand (the amount does not include the unrecognized
value of the deferred tax asset). In the same period, the estimated amount of settlement of the deferred tax liability will be
PLN 185,212 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.
CHANGE IN TEMPORARY DIFFERENCES IN THE
PERIOD
01.01.2021
Change in
temporary
differences
recognised in
the statement
of profit or
loss
Change in
temporary
differences
recognised in
other
comprehensive
income
Currency
translation
differences
31.12.2021
Property, plant and equipment
(618,665)
(130,073)
-
7
(748,732)
Intangible assets
(84,357)
(3,594)
-
292
(87,659)
Rights to use an asset
(24,667)
357
-
-
(24,310)
Investment property
9,687
1,960
-
-
11,647
Long-term receivables
-
(7,253)
-
(55)
(7,308)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
34
CHANGE IN TEMPORARY DIFFERENCES IN THE
PERIOD
01.01.2021
Change in
temporary
differences
recognised in
the statement
of profit or
loss
Change in
temporary
differences
recognised in
other
comprehensive
income
Currency
translation
differences
31.12.2021
Financial assets
(70,966)
3,320
(74,450)
-
(124,189)
Inventory
11,490
(3,442)
-
-
8,048
Trade and other receivables
35,311
(18,897)
-
(140)
16,273
Provisions for employee benefits
12,108
4,318
1,341
(5)
17,762
Other provisions
57,686
161,414
-
605
219,705
Tax losses carried forward
210,070
202,092
-
85
412,246
Foreign exchange differences
(13,861)
14,754
(1,188)
-
(295)
Liabilities
147,456
68,377
-
-
215,832
Other
827
13,641
-
(86)
(2,955)
TOTAL
(327,881)
306,974
(74,297)
703
(93,935)
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
(658,208)
52,185
-
(12,642)
(618,665)
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
(12,354)
23,844
-
-
11,490
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)
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.
The CIECH Group companies did not recognize the deferred tax asset in the amount of PLN 68,858 thousand as it determined
that recovery of this asset over the next 5 years is less than more probable. The larges item on which the deferred tax asset
was not recognized relates to tax loss on the capital source in 2019-2021 (PLN 146,376 thousand) in CIECH S.A.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
35
In August 2016, the employment condition was fulfilled in accordance with the Zone Permit No. 126 / PSSE of May 23, 2014
(amended by the Decision of the Minister of Economy No. 252 / IW / 15 of July 21, 2015) for running a business in the
Pomeranian Special Economic Zone. Hereby, CIECH Soda Polska S.A. met all the conditions of the Permit and, on
1 September 2016, began to benefit from the tax exemption in the corporate income tax for operating in the Pomeranian
Special Economic Zone. In view of the above, CIECH Soda Polska S.A. in 2016, it recognized a deferred income tax asset in the
amount of PLN 95,422 thousand. In 2017, as a result of obtaining explanations from the European Commission through the
Office of Competition and Consumer Protection regarding the definition and calculation of the value of a unit investment
project, the value of available public aid determined for the Company increased by PLN 44,911 thousand. The company
prudently analyzed the possibility of using the available public aid, calculating the amount of the exemption in accordance
with the methodology adopted in this respect and decided to finally recognize in the financial statements for 2017 an
additional amount of deferred tax asset in the amount of PLN 10,457 thousand. On the other hand, in 2018, an additional
deferred tax asset for operating in a special economic zone worth PLN 20,939 thousand and not to recognize deferred income
tax assets in the amount of PLN 13 515 thousand. At the end of 2019, the net asset (after taking into account the unrecognized
asset in the amount of PLN 16,020 thousand) due to operating in the Special Economic Zone amounted to
PLN 93,850 thousand.
At the end of 2020, after taking into account the update and based on the estimated level of aid utilization in the following
years, the net asset for operating in the Special Economic Zone amounted to PLN 95,369 thousand.
At the end of the current reporting period, the net asset related to operating in the Special Economic Zone amounted to
PLN 81,483 thousand.
In total, CIECH Soda Polska S.A. as a result of obtaining the above-mentioned permits are recognized in the total amount of
the available maximum public aid on this account in the amount of PLN 156,038 thousand. The amount of available public
aid is limited by the maximum amount of aid for a large investment project that CIECH Soda Polska S.A. and related entities
may receive in connection with the implementation of projects forming the so-called Single Investment Project. The deferred
income tax asset was also 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
2021, the Company used PLN 58,850 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 2021, CIECH Vitrosilicon S.A. obtained the Support Decision No. 11/2021 of 23/02/2021 issued by the Kostrzyn -Słubice
Special Economic Zone for conducting business in the special economic zone. From 1 December 2021, the Company started
recognizing the corporate income tax exemption pursuant to Art. 17 sec. 1 paragraph 34a in connection with incurring eligible
costs entitling to the application of the exemption. As at 1 December 2021, the company determined that the amount of
public aid available under the above tax relief is PLN 19,890.3 thousand and in this amount it recognized a deferred tax asset.
In 2021, the Company used PLN 31.8 thousand asset 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 2021 (in PLN ‘000)
36
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 costs
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, except for brine caverns, which are depreciated using units of
production method (the amount of salt extracted, or the volume used, depending on the way of use).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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
37
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.
Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in
accounting policies, in note 3.4.
01.01.-31.12.2021
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
90,702
1,320,662
3,583,262
83,462
62,701
898,999
6,039,788
Purchase
-
24,138
102,633
9,307
850
814,356
951,284
Reclassification
-
78,464
302,315
6,347
4,722
(528,777)
(136,929)
Capitalised borrowing costs
-
-
-
-
-
18,538
18,538
Exchange differences
(549)
(2,095)
(7,884)
(332)
(111)
(996)
(11,967)
Sales
-
(1,812)
(5,585)
(265)
(276)
(80)
(8,018)
Liquidation
-
-
(7,939)
(1,531)
(178)
(1,326)
(10,974)
Change in the Group’s structure
-
-
537
-
-
-
537
Other
-
(6,601)
(4,998)
(98)
32
(315)
(11,980)
Gross value of property, plant and
equipment at the end of the period
90,153
1,412,756
3,962,341
96,890
67,740
1,200,399
6,830,279
Accumulated depreciation at the
beginning of the period
(16,488)
(624,806)
(1,848,559)
(63,902)
(40,730)
-
(2,594,485)
Depreciation for the period
(490)
(50,096)
(218,330)
(4,341)
(6,518)
-
(279,775)
Annual depreciation charge
(542)
(64,247)
(237,055)
(6,163)
(7,046)
-
(315,053)
Sales
-
6,297
879
86
273
-
7,535
Liquidation
-
-
7,629
1,401
174
-
9,204
Change in the Group’s structure
-
1
(368)
-
-
-
(367)
Exchange differences
52
1,189
5,102
252
81
-
6,676
Reclassification
-
-
16
-
-
-
16
Other
-
6,664
5,467
83
-
-
12,214
Accumulated depreciation at the end of
the period
(16,978)
(674,902)
(2,066,889)
(68,243)
(47,248)
-
(2,874,260)
Impairment losses at the beginning of
the period
-
(43,972)
(16,304)
-
101
(18,832)
(79,007)
Reversal
-
-
-
-
-
105
105
Exchange differences
-
863
320
-
(3)
358
1,538
Change in the Group’s structure
-
-
(6)
-
-
-
(6)
Other
-
-
11
-
-
-
11
Impairment losses at the end of the
period
-
(43,109)
(15,979)
-
98
(18,369)
(77,359)
Carrying amount of property, plant and
equipment at the beginning of period
74,214
651,884
1,718,399
19,560
22,072
880,167
3,366,296
Carrying amount of property, plant and
equipment at the end of the period
73,175
694,745
1,879,473
28,647
20,590
1,182,030
3,878,660
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
38
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)
(1,679,546)
(60,283)
(40,467)
-
(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)
(1,848,559)
(63,902)
(40,730)
-
(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
1,452,654
19,344
20,762
682,741
2,891,207
Carrying amount of property, plant and
equipment at the end of the period
74,214
651,884
1,718,399
19,560
22,072
880,167
3,366,296
In 2021, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 2.4%,
whereas in 2020 it amounted to approx. 2.5%.
In 2021, there were no significant impairment losses on property, plant and equipment.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
39
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.-31.12.2021
01.01.-31.12.2020
Cost of sales
(286,423)
(261,334)
Selling costs
(102)
(147)
General and administrative expenses
(6,235)
(7,215)
Other operating expenses
(22,293)
(18,599)
TOTAL
(315,053)
(287,295)
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 1,574 thousand (PLN 304 thousand in the comparable period).
As at 31 December 2021, 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 171,655 thousand in 2021 (in the comparable period: PLN 120,509 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 2021 (in PLN ‘000)
40
Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2021 are as follows:
01.01.-31.12.2021
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
71,428
50,404
35,110
104,199
874
262,015
Reclassifications
-
-
(1,076)
-
-
(1,076)
Adopted on the basis of a finance lease
agreement
-
-
483
1,654
-
2,137
Modifications to lease contracts
1,158
1,206
-
375
99
2,838
New lease agreements
-
4,960
-
40,206
246
45,412
Closing the contract
(417)
(713)
-
(576)
-
(1,706)
Exchange differences
(16)
(71)
(109)
6
(9)
(199)
Other
313
713
(1,439)
1,918
-
1,505
Gross value at the end of the period
72,466
56,499
32,969
147,782
1,210
310,926
Accumulated amortisation at the beginning of
the period
(11,665)
(7,998)
(22,697)
(42,182)
(785)
(85,327)
Amortisation for the period
(1,027)
(4,423)
(1,216)
(19,877)
(276)
(26,819)
Reclassifications
-
-
422
-
-
422
Exchange differences
-
1
61
2
9
73
Closing the contract
28
321
368
32
-
749
Other
(11)
(320)
1,609
174
-
1,452
Accumulated depreciation at the end of the
period
(12,675)
(12,419)
(21,453)
(61,851)
(1,052)
(109,450)
Net value of rights to use an asset at the
beginning of the period
59,763
42,406
12,413
62,017
89
176,688
Net value of rights to use an asset at the end
of the period
59,791
44,080
11,516
85,931
158
201,476
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 after adjustments
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 lease contracts
-
(542)
-
(50)
-
(592)
New lease 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)
Wartość brutto praw do użytkowania
składników aktywów na koniec okresu
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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
41
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
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 depreciation 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
In 2019, the CIECH Group implemented IFRS 16 “Leases”. Under this standard, leases and rentals, leases of passenger cars,
railcars and 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 accumulated depreciation 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 – NON-CURRENT AND CURRENT
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
42
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.
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.
In 2021, the Group revised its Accounting policy in respect of recognition of emission allowances granted and the
measurement principles for the disposal of rights.
Following the revision, the emission allowances granted are recognised in the balance sheet as assets when credited to
the account at their fair value determined at that date. At the same time, the same amount is recognised in an accrued
income account (as a subsidy for production costs, regulated in IAS 20 Government Grants and Disclosure of
Government Assistance). The entity receiving the allowances accounts for them as intangible assets. When emissions
covered by the allowances received occur, the corresponding value recognised in the deferred income account is
deducted from the operating expenses related to the emission.
If there were no emissions for which the entity received the rights, then the part of the deferred income relating to
them remains in the balance until the rights are disposed of. If the rights are used to cover the emission in the following
year (years), the relevant part of the deferred income reduces the operating costs of the emission in the year in which
the rights are used, and if such rights are sold, the deferred income reduces the cost of the rights sold.
In the event of a purchase of additional allowances on the market, the allowances are measured at cost and presented
as intangible assets.
The entity recognises a provision for the cost of covering CO
2
emissions into the atmosphere in the amount of the
product of the quantity of CO
2
emitted (in thousand tonnes, equivalent to one EUA) and the unit price of the emission
allowances. The emission costs are covered by allowances held in a brokerage account at the balance sheet date in
accordance with the detailed identification principle. If insufficient allowances are held, the missing portion of the
provision is measured at the allowance price of the futures contracts open on the balance sheet date, in accordance
with the detailed identification principle. If insufficient allowances have been contracted, the provision for the costs of
covering emissions is measured at the current (as at the balance sheet date) market price of the EUA.
Until 2020, emission allowances granted were not subject to recognition on the balance sheet when granted and in
subsequent periods. The entity receiving the allowances entered them in the off-balance sheet records.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
43
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 (i.e., 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,
✓ 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.
Development costs
2-5 years
Patents and licences
2–10 years
Other
2-12 years
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
44
01.01.-31.12.2021
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
19,855
589,940
273,617
143,783
173,821
1,201,016
Purchase
-
-
5,651
-
5,651
11,302
Investment outlays
-
-
-
-
43,882
43,882
Reclassifications
57,286
-
17,261
(31,312)
(80,248)
(37,013)
Exchange differences
-
(3,072)
(538)
(409)
1
(4,018)
Sales
-
-
-
(9,728)
(194)
(9,922)
Liquidation
-
-
(46)
-
-
(46)
Other
-
-
-
-
(875)
(875)
Gross value of intangible assets at the end
of the period
77,141
586,868
295,945
102,334
142,038
1,204,326
Accumulated amortisation at the beginning
of the period
(12,867)
-
(94,388)
(57,498)
-
(164,753)
Amortisation for the period
(11,773)
-
(20,434)
(84)
-
(32,291)
Annual amortisation charge
(11,773)
-
(20,532)
(264)
-
(32,569)
Exchange differences
-
-
52
180
-
232
Liquidation
-
-
46
-
-
46
Accumulated amortisation at the end of the
period
(24,640)
-
(114,822)
(57,582)
-
(197,044)
Impairment losses at the beginning of the
period
-
(440,231)
(3,258)
(44,452)
(3,420)
(491,361)
Recognition
-
-
-
(572)
-
(572)
Exchange differences
-
2,633
-
145
-
2,778
Other
-
-
-
210
-
210
Impairment losses at the end of the period
-
(437,598)
(3,258)
(44,669)
(3,420)
(488,945)
Net value of intangible assets at the
beginning of the period
6,988
149,709
175,971
41,833
170,401
544,902
Net value of intangible assets at the end of
the period
52,501
149,270
177,865
83
138,618
518,337
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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
45
01.01.-31.12.2020
Development
costs
Goodwill
Licences,patents,
permits, etc.
obtained
Other
intangible
assets
Intangible
assets under
development
TOTAL
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
The largest item in the Company’s intangible assets is the SAP accounting system with the gross carrying amount of
PLN 52,789 thousand (net carrying amount: PLN 42,421 thousand).
In CIECH Sarzyna S.A., the most significant intangible assets under development concern product registrations (including
Chwastox, Halvetic, Nikosar, Azoxar, Labrador, Faworyt), which will allow further manufacture of crop protection chemicals
(PLN 101,062 thousand).
In CIECH R&D Sp. z o.o., the most significant intangible assets under development concern research and development projects
on optimisation of soda production and innovative technology for carbonation of brine. As at 31 December 2021, the value
of these projects is PLN 16,353 thousand.
In CIECH S.A., intangible assets under development concern work related to the implementation of IT systems in the amount
of PLN 20,048 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.
Short-term intangible assets
01.01.-31.12.2021
01.01.-31.12.2020
Gross value of intangible assets at the beginning of the period
185,220
124,368
Purchase
124,212
-
Reclassifications
31,362
-
Exchange differences
(935)
3,275
Sales
(105,051)
-
Cancellation of CO
2
emission rights
(240,382)
-
Received emission rights
409,008
57,577
Gross value of intangible assets at the end of the period
403,434
185,220
Current intangible assets represent CO
2
emission allowances received and purchased to cover gas emissions for 2021. Until
2020, emission allowances granted were not subject to recognition on the balance sheet when granted and in subsequent
periods. The entity receiving the allowances entered them in the off-balance sheet records. Below are the amounts
recognised in the statement of financial position. Details of the revision of the accounting policy are described in Note 1.5.1
hereto.
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.-31.12.2021
01.01.-31.12.2020
Cost of sales
(18,564)
(15,724)
Selling costs
(6,495)
(422)
General and administrative expenses
(7,510)
(6,521)
Other operating expenses
-
(2,282)
TOTAL
(32,569)
(24,949)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
46
As at 31 December 2021, 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 2021 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 2021, future commitments arising from agreements concerning acquisition of intangible assets amounted
to PLN 4,598 thousand (in the comparable period: PLN 411 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 1,488 thousand (PLN 933 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, impairment tests were carried out for goodwill
recognised in the consolidated financial statements in relation to:
• CIECH Sarzyna S.A.,
• SDC Group,
• Proplan Plant Protection Company, S.L.,
• Smart Fluid Sp. z o.o.
The recoverable amount was calculated based on the value in use. The value in use of the cash-generating units to which
goodwill has been allocated has been calculated based on the Group's five-year plans. In 2021, 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: 8.4% – 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 5.3% – for cash flows in EUR and
6.9% – 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 2021 amounted to
PLN 149,270 thousand:
• Soda Segment PLN 51,203 thousand: SDC Group – PLN 51,017 thousand, CIECH Salz Deutschland GmbH:
PLN 16 thousand,
• Silicates Segment: PLN 39 thousand – CIECH Vitrosilicon S.A.,
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
47
• Agro Segment PLN 95,512 thousand; CIECH Sarzyna S.A. – PLN 15,070 thousand; Proplan Plant Protection Company SL –
PLN 80,174 thousand,
• Other Segment: PLN 2,954 thousand – Smart Fluid Sp. z o.o.
As compared to 2020, goodwill decreased by PLN 438 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 2021 – a decrease by PLN 268 thousand.
• change in the EUR exchange rate used to translate the goodwill recognised in the statements of the lower tier group,
the SDC Group, in 2021 – a decrease by PLN 170 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 the 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.-31.12.2021
01.01.-31.12.2020
Carrying amount at the beginning of period
40,948
36,717
Sales
(7,907)
(686)
Liquidation
-
(10)
Goodwill valuation
(202)
5,126
Transferred from/to assets classified as held for sale
-
(199)
Gross value at the end of the period
32,839
40,948
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 2021, the CIECH Group held the following investment property:
• CIECH Nieruchomości Sp. z o.o. – As at 31 December 2021, 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.
• 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. – 23 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.
01.01.-31.12.2021
01.01.-31.12.2020
Rental income from investment property
3,175
5,609
Operating expenses relating to investment property,
that generated rental income during the period in question
2,758
2,693
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
48
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
31.12.2021
31.12.2020
Receivables in relation to caverns
76,222
53,564
Other
2,320
138
Net non-current receivables
78,542
53,702
Write-down on receivables
(198)
(1,015)
Gross non-current receivables
78,740
54,717
CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM RECEIVABLES
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(1,015)
(975)
Reversed
810
40
Exchange differences
7
(80)
Closing balance
(198)
(1,015)
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
Pursuant to IFRS 15 Revenue from Contracts with Customers, the SDC Group recognises revenue from cavern desalination
contracts over time according to the stage of completion of the 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 amount of revenue recognised in prior years. In
2021, the Group’s revenues from the cavern desalination contract amounted to PLN 19,267 thousand (EUR 4,209 thousand).
In the corresponding period, the Group did not earn any revenues on this account.
In the comparable period, other operating expenses also included costs of PLN 9,181 thousand (EUR 2,052 thousand), which
adjusted previously recognised gains related to the contract for the construction of caverns in the SDC Group, as the contract
was extended (the volume of the caverns was increased and therefore their construction has not yet been completed).
The receivables relating to the cavern desalination contracts (Project 2) recognised in assets as long-term receivables
amounted to PLN 76,222 thousand (EUR 16,572 thousand) as at the end of 2021. As at 31 December 2020, they amounted
to PLN 53,564 thousand (EUR 11,607 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 175,199 thousand
(in the previous year: PLN 155,932 thousand).
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
49
Due to the nature of the transaction, the long-term receivable reported in the balance sheet will not be repaid until Innogy
Gas Storage NWE GmbH actually fills the caverns with gas to test the density of the gas, which is planned for no earlier than
2023.
5.7. LONG-TERM FINANCIAL ASSETS
Accounting policy
Shares are stated at purchase price less any impairment losses.
Accounting policy concerning derivative financial instruments is presented in Note 8.1.
NON-CURRENT FINANCIAL ASSETS
31.12.2021
31.12.2020
Shares
11,684
11,800
Derivatives
662
574
Other
103
103
TOTAL
12,449
12,477
CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM FINANCIAL ASSETS
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(2,415)
(1,342)
Recognized
(115)
(2,085)
Used
110
-
Other
-
1,012
Closing balance
(2,420)
(2,415)
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 equity-accounted jointly-controlled entities:
INVESTMENTS IN ASSOCIATES AND JOINTLY-CONTROLLED ENTITIES
31.12.2021
31.12.2020
Investments in associates and jointly-controlled entities
5,655
5,646
01.01.-31.12.2021
01.01.-31.12.2020
Share in net profit of associated entities measured under the equity method
27
(161)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
50
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.
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
31.12.2021
31.12.2020
Materials
259,576
195,706
Semi-finished products and work in progress
40,515
43,237
Finished products
114,572
92,692
Goods
7,843
17,354
TOTAL
422,506
348,989
CHANGE OF INVENTORY IMPAIRMENT WRITE-DOWNS
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(38,303)
(33,327)
Recognized
(5,595)
(9,933)
Reversed / released
6,948
5,169
Used
1,856
-
Exchange differences
162
(547)
Transferred from/to assets classified as held for sale
-
335
Closing balance
(34,932)
(38,303)
As at 31 December 2021, 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 receivable less allowance 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
51
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.
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 long-term expected credit losses, regardless of whether there
is an evidence of a material increase in credit risk.
At each balance sheet date, the Entity estimates allowances for all receivables regardless of their repayment status.
The 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
31.12.2021
31.12.2020
Trade receivables, including:
255,086
203,249
- up to 12 months
208,603
175,697
- over 12 months
628
-
- prepayments for inventory
45,855
27,552
Prepayments for non-current assets
5,142
4,137
Public and legal receivables (excluding income tax)
163,345
167,150
Receivables from sales of energy
-
8,164
Factoring receivables
33,660
47,425
Other receivables
141,665
48,383
NET TRADE AND OTHER RECEIVABLES
598,898
478,508
Impairment allowances with respect to trade receivables including
(46,614)
(48,515)
- impairment allowance recognized in the current reporting period
(3,844)
(15,666)
Impairment allowances with respect to other current receivables including
(22,664)
(18,117)
- impairment allowance recognized in the current reporting period
(4,592)
(5,024)
GROSS TRADE AND OTHER RECEIVABLES
668,176
545,140
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 2021, the asset from continuing involvement
amounted to PLN 2,370 thousand (presented under other receivables). As at 31 December 2021, trade receivables assigned
to the factor amounted to PLN 454,816 thousand (PLN 307,509 thousand as at 31 December 2020).
The largest item of other receivables is SDC Group's receivables in the amount of EUR 24,437 thousand
(PLN 112,396 thousand) from the settlement of the gas supply option for 2022 in December 2021.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
52
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(66,632)
(56,879)
Recognized
(8,436)
(20,690)
Reversed
6,997
7,762
Used
456
527
Exchange differences
(1,071)
(436)
Change in the Group’s structure
(11)
-
Other
(581)
3,084
Closing balance
(69,278)
(66,632)
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 2021, 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
31.12.2021
31.12.2020
Derivatives
102,220
19,688
Loans granted
133
146
Other
29
29
Total (net) short-term financial assets
102,382
19,863
Impairment of short-term financial assets
(28,354)
(28,343)
Total (gross) short-term financial assets
130,736
48,206
CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM FINANCIAL ASSETS
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(28,343)
(27,942)
Recognized
(12)
(401)
Reversed
1
-
Closing balance
(28,354)
(28,343)
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. In 2021, an impairment loss of
PLN 12 thousand was recognised for the remaining balance.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
53
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
31.12.2021
31.12.2020
Bank accounts
541,146
440,543
Short-term deposits
258,304
3,612
Cash in hand
23
47
Impairment of cash and cash equivalents
(450)
(316)
Cash and cash equivalents
799,023
443,886
Cash reclassified to non-current assets held for sale *
-
4,913
Cash and cash equivalents – presented in the cash flow statement
799,023
448,799
*Cash held by CIECH Żywice Sp. z o.o. was presented as non-current assets and groups held for sale.
CHANGE IN IMPAIRMENT CASH AND CASH EQUIVALENTS
31.12.2021
31.12.2020
Opening balance
(316)
(200)
Recognized
(316)
(252)
Reversed
182
139
Exchange differences
-
(3)
Closing balance
(450)
(316)
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 2021, 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.
As at 31 December 2021, all cash and cash equivalents in Polish companies (CIECH S.A., CIECH Soda Polska S.A.,
CIECH Sarzyna S.A., CIECH Pianki Sp. z o.o, CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A., CIECH Vitro Sp. z o.o.), German
companies (CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy Deutschland GmbH, CIECH Salz Deutschland GmbH), who
are guarantors of the term loan, revolving credit facilities and overdraft facilities, were pledged as collateral for financial
liabilities on account of the term loan, revolving facility and overdraft facilities
As at 31 December 2021, 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 36,179 thousand
(EUR 7,866 thousand) (as at 31 December 2020: PLN 21,265 thousand (EUR 4,608 thousand)).
In addition, restricted cash represented the funds in the VAT account due to the introduction of "split payment" procedures.
As at 31 December 2021 and 31 December 2020, it amounted to PLN 16,205 thousand and PLN 9,809 thousand, respectively.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
54
5.13. DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE
AND LIABILITIES RELATED THERETO
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 2021 and 31 December 2020, the CIECH Group presented the following assets under the item
“Non-current assets and groups 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.
Moreover, as at 31 December 2020, the largest item of “Non-current assets and groups held for sale” were the assets of
CIECH Żywice Sp. z o.o., which was classified in that period as a 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). The
company was sold on 1 March 2021.
Discontinued operations
On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with
LERG S.A. with its registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice
Sp. z o.o. The value of the Agreement (equal to the enterprise value being sold) is PLN 157,410 thousand. The final price of
the Shares being sold was determined in accordance with the rule arising from the Agreement and amounted to
PLN 74,289 thousand. For details of the transaction, see current reports No 27/2020 and 4/2021.
Cash received from sale of shares
74,289
Cash received from repayment of debt (including loans repaid*)
83,121
TOTAL Value of the Agreement
157,410
*Loan previously disclosed as intercompany loan and eliminated at the level of the consolidated statements; following the sale, disclosed in
the consolidated figures as a loan to a third party. The loan of PLN 27 million was repaid on 30 July 2021.
The accounting principles applied in the preparation of the statement of profit or loss for discontinued operations are
consistent with the Group's accounting policy. The results of discontinued operations include:
For the period from 1 January to 31 December 2021 and for the period from 1 January to 31 December 2020:
• 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 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
55
Below is the consolidated result on discontinued operations ( in the resins area) for 2021, which includes the figures of
CIECH Żywice Sp. z o.o. and CIECH S.A.
CIECH Group
01.01.-31.12.2021
01.01.-31.12.2020
Net sales revenues
69,898
274,358
Cost of sales
(56,858)
(244,462)
Gross profit/(loss) on sales
13,040
29,896
Other operating income
385
3,613
Selling costs
(1,130)
(7,882)
General and administrative expenses
(4,945)
(9,473)
Other operating expenses
(422)
(1,790)
Operating profit/(loss)
6,928
14,364
Financial income
1,864
39
Financial expenses
(319)
(7,488)
Net financial income/(expenses)
1,545
(7,449)
Profit/(loss) before tax
8,473
6,915
Income tax
(1,524)
(2,069)
Net profit/(loss) (1)
6,949
4,846
Income from the sale of CIECH Żywice Sp. z o.o.
74,289
-
Net assets
(19,370)
-
Tax
-
-
Gain on the sale of CIECH Żywice Sp. z o.o. (2)
54,919
-
Total net profit/(loss) on discontinued operations (1+2)
61,868
4,846
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
56
Analysis of assets and liabilities over which control was lost – CIECH Żywice Sp. z o.o.*:
in thousand PLN
01.03.2021
ASSETS
Property, plant and equipment
62,787
Right-of-use assets
894
Intangible assets
14,611
Investment properties
199
Deferred tax assets
1,508
Total non-current assets
79,999
Inventories
30,174
Trade and other receivables
54,392
Cash and cash equivalents
7,335
Total current assets
91,901
Total assets
171,900
LIABILITIES
Lease liabilities
47
Provisions for employee benefits
457
Total non-current liabilities
504
Loans, borrowings and other debt instruments
57,373
Lease liabilities
72
Trade and other liabilities
91,356
Income tax liabilities
1,575
Provisions for employee benefits
1,620
Other provisions
30
Total short-term liabilities
152,026
Total liabilities
152,530
NET ASSETS
19,370
*Assets and liabilities of the company prior to the date of sale were reported under assets held for sale.
Cash flows from discontinued operations for CIECH Żywice Sp. z o.o.:
01.01.-01.03.2021
Cash as at 01.01.2021
4,913
Net cash from operating activities
1,445
Net cash from investing activities
(704)
Net cash from financing activities
1,681
Total net cash flows
2,422
Cash over which control was lost at the time of sale
7,335
The following table presents information about the consideration received for the sale of discontinued operations
(in PLN ‘000):
Cash received from sale of shares
74,289
Cash over which control was lost
(7,335)
Consideration received (value reported in cash flows as “Disposal of a subsidiary”)
66,954
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (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 2020-2021 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.
31.12.2021
31.12.2020
Loans, borrowings and other debt instruments
1,859,441
1,911,475
Lease liabilities
151,197
129,258
Factoring liabilities
23,078
16,174
Net measurement of derivative financial liabilities
66,093
80,201
Gross financial liabilities
2,099,809
2,137,108
Cash and cash equivalents
799,023
443,886
Net financial liabilities
1,300,786
1,693,222
01.01.- 31.12.2021
01.01. - 31.12.2020
Operating profit for continuing operations
355,771
249,968
Depreciation and amortisation for continuing operations
374,640
333,280
EBITDA for continuing operations
730,411
583,248
Debt ratio
1.8
2.9
As at 31 December 2021, net debt to EBITDA stood at 1.8 and was lower than as at the end of 2020 by 1.1. The ratio has
improved due to a decrease in debt from revolving and overdraft facilities contracted by CIECH S.A., higher levels of cash in
the companies and an improved operating result.
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
58
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.
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 2021, 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
59
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
2,729,000
2,729,000
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
19,934,387
19,934,387
37.83%
37.83%
* In accordance with information dated 9 June 2014 provided by Shareholder under Article 77(7) and Article 69(1)(1) of the Act of 29 July 2005
on Public Offering and Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (CR
26/2014).
** on the basis of the list of shareholders holding at least 5% of votes at the Extraordinary General Meeting of Shareholders of CIECH S.A.
on 26 October 2021, CR 36/2021 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 26 October 2021, CR 36/2021 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.
Since the date of the Extraordinary Shareholders' Meeting of CIECH S.A., i.e. 26 October 2021, CIECH S.A. has not received
any information about a change in interests held by shareholders in the total number of shares.
Treasury shares
In 2021 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
31.12.2021
31.12.2020
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
346,500
Other
2,322
2,322
TOTAL
425,021
425,021
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
60
Hedge cost reserve
The hedge cost 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 (PLN 14,856 thousand) and the value of the basis currency spread for the CIRS
transaction (PLN 5,475 thousand) which was excluded from hedge accounting.
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.
Currency translation differences (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, CIECH Agro Romania S.R.L.
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 financial statements for publication, the Management Board of CIECH SA has not adopted a
resolution on the proposed distribution of net profit for 2021.
On 22 June 2021, the Annual General Meeting of CIECH S.A. resolved to:
1. allocate the entire net profit of CIECH S.A. for 2020 in the amount of PLN 155,287 thousand to the payment of a
dividend;
2. transfer PLN 2,812 thousand from profit capital reserves, which may be allocated to dividend payments, to dividend
payments;
3. pay out a dividend of PLN 158,099 thousand, i.e. PLN 3 per share, from the net profit of CIECH S.A. for 2020, increased
by the amount transferred from the capital reserves created from profits.
At the same time, the Annual General Meeting of CIECH S.A. set the dividend record date for 30 June 2021 and the dividend
payment date for 8 July 2021.
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 combinations in the presented periods.
In 2021, 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
61
• CIECH Żywice Sp. z o.o.
On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with LERG
S.A. with its registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice Sp. z o.o.
The value of the Agreement (equal to the enterprise value being sold) is PLN 157,410 thousand. The final price of the Shares
being sold was determined in accordance with the rule arising from the Agreement. For details of the transaction, see current
reports No 27/2020 and 4/2021.
• CIECH Vitro Sp. o.o. – demerger of the company
On 25 February 2021, the Extraordinary General Meeting was held to resolve on the demerger of the Company by transferring
a part of the assets of the Demerged Company, CIECH Vitrosilicon S.A., to the Acquiring Company, CIECH Vitro Sp. z o.o., in
exchange for the shares to be received by the shareholders of the Demerged Company in the increased share capital of the
Acquiring Company – demerger by spin-off. An organised part of the business (OPB) was spun off from CIECH Vitrosilicon S.A.
The OPB may constitute an independent enterprise independently performing the tasks of production and sales, in particular
of glass packaging in the form of lanterns and utility jars (the "Packaging Business").
The Extraordinary Shareholders’ Meeting of CIECH Vitro sp. z o.o., in connection with the demerger of CIECH Vitrosilicon S.A.
(the “Demerged Company”), increased the share capital of the Company from PLN 5 thousand to PLN 1,135.5 thousand, i.e.
by the amount of PLN 1,130.5 thousand, through the creation of 22,610 new shares in CIECH Vitro sp. z o.o. with a nominal
value of PLN 50 per share and a total nominal value of PLN 1,135.5 thousand, which were granted to shareholders of the
Demerged Company using the following share exchange ratio: 6,679,109 shares in the Demerged Company entitled to the
receipt of 22,610 shares in CIECH Vitro sp. z o.o. (the “Acquirer”) (i.e. 295.4 shares in the Demerged Company entitled to the
receipt of 1 share in the Acquirer) in the following manner:
• CIECH Soda Polska S.A., in exchange for 1,133,246 shares in the Demerged Company (constituting all shares in the
Demerged Company held by CIECH Soda Polska S.A.), took up 13,759 shares in CIECH Vitro sp. z o.o., which were covered
by a part of the OPB acquired from CIECH Vitrosilicon S.A,
• CIECH S.A., in exchange for 728,982 shares in the Demerged Company (representing a part of shares in the Demerged
Company held by CIECH S.A.), took up 8,851 shares in CIECH Vitro sp. z o.o., which were covered by a part of the OPB
acquired from CIECH Vitrosilicon S.A.
As of the date of registration of the share capital increase by the court, the capital structure was as follows:
• CIECH Soda Polska S.A. holds 13,759 shares, representing 60.59% of the share capital,
• CIECH S.A. holds 8,951 shares, representing 39.41% of the share capital.
On 1 April 2021, the Court registered the demerger of CIECH Vitrosilicon S.A., the reduction of the share capital of
CIECH Vitrosilicon S.A. and the increase of the share capital of CIECH Vitro Sp. z o.o.
As of 1 April 2021, CIECH S.A. is the sole shareholder of CIECH Vitrosilicon S.A.
• CIECH Trading Sp. z o.o.
On 2 March 2021, the Extraordinary Shareholders’ Meeting of CIECH Trading Sp. z o.o. approved the decision of the
Company's Management Board to discontinue the business activity specified in the Company's Articles of Association, and
obliged the Company's Management Board to take all necessary actions to cease and wind up the business activity, and upon
completion of the above measures to take a decision to dissolve the Company pursuant to Article 270 of the Code of
Commercial Companies.
On 25 May 2021, two Extraordinary General Meetings of CIECH Trading sp. z o.o. were held regarding cancellation of shares,
i.e: EGM - cancellation against consideration and amendment to the Company's Articles of Association:
1)
• cancellation of 1,524,390 shares in the Company's share capital with a total nominal value of PLN 76,219.5 thousand
in exchange for consideration of PLN 9.84 per canceled share, i.e. for total consideration amounting to
PLN 15,000 thousand by way of purchase of the above shares on the basis of an agreement to sell the shares by the
Company against the above consideration,
• The Management Board of the Company was authorised to purchase the shares (conclude an agreement) in order
to cancel them,
• the share capital will be reduced from PLN 107,455.4 thousand (by PLN 76,219.5 thousand) to PLN 31,235.9
thousand through the cancellation of 1,524,390 shares with a total value of PLN 76,219.5 thousand. Following the
reduction of the Company's share capital, it will be divided into 624,718 shares,
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
62
• the Company's Articles of Association will be amended.
2) EGM – cancellation without consideration and amendment to the Company's Articles of Association:
• cancellation of 504,000 shares in the Company's share capital with a total nominal value of PLN 25,200 thousand
(with the shareholder's consent), by way of purchase of the above shares on the basis of an agreement to sell the
shares by the Company without consideration for CIECH S.A.
• The Management Board of the Company was authorised to purchase the shares in order to cancel them
(with the shareholder's consent),
• the Company’s share capital will be reduced from PLN 31,235.9 thousand (by PLN 25,200 thousand) to
PLN 6,035.9 thousand through the cancellation of 504,000 shares with a total value of PLN 25,200 thousand.
Following the reduction of the Company's share capital, it will be divided into 120,718 shares,
• the Company's Articles of Association will be amended.
CIECH S.A. is and will remain the sole shareholder of the Company.
The reduction of the share capital of CIECH Trading Sp. z o.o. described above took place after both reductions of the share
capital have been registered by the Court on 28 December 2021.
• CIECH VENTURES Sp. z o.o.
On 25 February 2021, the Deed of Incorporation of CIECH VENTURES sp. z o.o., of which CIECH S.A. is the sole shareholder,
was drawn up. The company was established with the share capital of PLN 1,000 thousand, divided into 20 thousand shares
with a nominal value of PLN 50 each. The shares were acquired by CIECH S.A. in exchange for cash. The Company was
registered by the court on 23 June 2021. CIECH S.A. is the sole shareholder of the Company.
• CIECH Soda Romania S.A.
On 24 May 2021, an Extraordinary Shareholders' Meeting of CIECH Soda Romania S.A. was held to resolve to reduce the
Company's share capital against consideration by reducing the value of shares by RON 0.11, i.e. from RON 0.25 to RON 0.14
per share. Following the reduction of the share value, the Company's share capital was reduced from RON 199,244,501.75 to
RON 111,576,920.98 and is divided into 796,978,007 shares with a nominal value of RON 0.14 each. The number of shares
and shareholders remains unchanged. On 17 August 2021, the reduction of the share capital of CIECH Soda Romania S.A.
became final. The consideration for the capital reduction payable to CIECH S.A. amounted to RON 86,560 thousand
(PLN 80,449 thousand).
• CIECH Agro Romania S.R.L.
CIECH Sarzyna S.A. established a new company – Ciech Agro Romania S.R.L. with its registered office in Ramnicu Valcea
(Romania).
The Articles of Incorporation were drawn up on 26 March 2021, and the company was registered on 6 April 2021. The
Company's share capital amounts to RON 4.87 thousand and is divided into 487 shares with a value of RON 10 per share. The
sole shareholder of the Company is CIECH Sarzyna S.A.
• CIECH Transclean Sp. z o.o.
On 21 July 2021, the Extraordinary Shareholders’ Meeting of CIECH Transclean Sp. z o.o. was held regarding cancellation of
shares against consideration and reduction of the share capital:
• cancellation of 8,548 shares in the Company's share capital with a total nominal value of PLN 4,274 thousand in exchange
for consideration of PLN 506.56 per canceled share, i.e. for total consideration amounting to PLN 4,330 thousand by way
of purchase of the above shares on the basis of an agreement to sell the shares by the Company against the above
consideration,
• The Management Board of the Company was authorised to purchase the shares (conclude an agreement) in order to
cancel them,
• following the cancellation of shares, the share capital will be reduced from PLN 4,322 thousand (by PLN 4,274 thousand)
to PLN 48 thousand through the cancellation of 8,548 shares with a total value of PLN 4,274 thousand. Following the
reduction of the Company's share capital, it will be divided into 96 shares,
• the Company's Articles of Association will be amended.
The reduction of the share capital of CIECH Trasclean Sp. z o.o. described above took place the reduction has been registered
by the Court on 3 February 2022.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
63
• CIECH Services Sp. z o.o.
On 15 July 2021, the Extraordinary Shareholders’ Meeting of CIECH Services Sp. z o.o. increased the Company's share capital
by PLN 1,995 thousand, i.e. from PLN 5 thousand to PLN 2,000 thousand through creation of 39,900 new, equal and indivisible
shares with a nominal value of PLN 50 per share. The right to subscribe for all 39,900 newly created shares in the Company's
share capital was granted to the existing shareholder, CIECH S.A. The newly created shares were subscribed in exchange for
a cash contribution of PLN 1,995 thousand. The court registered the increase in the share capital of CIECH Services Sp. z o.o.
on 25 August 2021. As a result of the increase, the share capital of CIECH Services Sp. z o.o. is divided into 4 thousand shares,
with a total nominal value of PLN 2,000 thousand (the nominal value for 1 share is PLN 500). CIECH S.A. was and remained
the sole shareholder of the Company.
• Smart Fluid S.A. (former name: Smart Fluid Sp. z o.o.)
On 7 June 2021, an Extraordinary Shareholders' Meeting was held concerning the transformation of a limited liability
company (spółka z ograniczoną odpowiedzialnością) into a joint stock company (spółka akcyjna). Following the
transformation, the share capital of Smart Fluid S.A. amounts to PLN 106 thousand and is divided into 1,060,000 series A
registered shares of the value of PLN 0.10 each, which were acquired by:
a) CIECH R&D Sp. z o.o. with its registered office in Warsaw (a subsidiary of CIECH S.A.) – 560,000 series A registered shares
with a total nominal value of PLN 56 thousand, representing 52.83% of the share capital,
b) Others – 500,000 series A registered shares with a total value of PLN 50 thousand, representing 47.17% of the share
capital.
On 9 September 2021, the court registered the transformation of Smart Fluid Sp. z o.o. into Smart Fluid S.A.
The share capital of the Joint Stock Company, in order to bring its amount in line with the minimum amount of share capital
of a joint stock company specified in Article 308 § 1 of the Code of Commercial Companies, was determined and covered as
follows:
• the amount of PLN 10.6 thousand represents the amount of the share capital of the limited liability company;
• the amount of PLN 95.4 thousand was covered from the supplementary capital of the limited liability company.
• Cerium Sp. z o.o. w likwidacji (in liquidation)
On 31 August 2021, the court struck Cerium Sp. z o.o. in liquidation from the Register of Entrepreneurs.
• CIECH Salz Deutschland GmbH
On 26 October 2021, the Shareholders' Meeting of CIECH Salz Deutschland GmbH resolved to increase the Company's share
capital by EUR 5,975 thousand by establishing one new share with a nominal value of EUR 5,975 thousand, which was taken
up by CIECH S.A. in exchange for cash. As a result of the increase, the share capital increased from EUR 3,025 thousand to
EUR 9,000 thousand. The court registered the share capital increase on 18 November 2021. CIECH S.A. was and remained the
sole shareholder of the Company.
• CIECH Sól Sp. z o.o.
On 13 December 2021, the Deed of Incorporation of CIECH Sól Sp. z o.o., with a share capital of PLN 5 thousand, divided into
100 shares with a nominal value of PLN 50 each, was drawn up. The share capital was fully covered with cash, all shares were
taken up by CIECH S.A. The court, by decision of 7 February 2022, registered CIECH Sól Sp. z o.o. CIECH S.A. is the sole
shareholder of the Company.
6.5. SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST
In 2021 and 2020, there was no significant non-controlling interest in any of the significant subsidiaries of the CIECH Group.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
64
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.-31.12.2021
01.01.-31.12.2020
Basic and diluted earnings per share (continuing operations)
4.37
2.36
Basic and diluted earnings per share (discontinuing operations)
1.18
0.09
01.01.-31.12.2021
01.01.-31.12.2020
Net profit (loss) from continuing operations attributable to the shareholders of the
parent
230,550
124,431
Net profit (loss) from discontinued operations attributable to the shareholders of the
parent
61,868
4,846
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 2021 (in PLN ‘000)
65
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
31.12.2021
31.12.2020
LONG-TERM
1,854,154
360
Loans and borrowings
1,854,154
360
SHORT-TERM
5,287
1,911,115
Loans and borrowings
5,287
1,911,115
TOTAL
1,859,441
1,911,475
Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans:
01.01.- 31.12.2021
01.01.- 31.12.2020
Opening balance
1,911,475
1,645,400
Proceeds from debt incurred
195,493
506,313
Accrual of interest
32,771
43,064
Repayment of debt, including:
(268,829)
(306,233)
repayment of principal
(231,801)
(263,300)
interest paid
(37,028)
(42,933)
Realised exchange differences
18,998
-
Foreign exchange differences on measurement of liabilities
(22,927)
20,677
Other
(7,540)
2,254
Closing balance
1,859,441
1,911,475
Debt financing of the Group
As at the end of 2021, the CIECH Group's debt financing was secured mainly through facilities made available to CIECH S.A.
under facilities agreements:
1. the Facilities Agreement signed with a consortium of banks dated 16 March 2021 with the total value of approx.
PLN 2,115,000 thousand:
• amortised term facility in tranches in PLN and EUR in the amount of PLN 540,700 thousand and EUR 4,231 thousand
(the facility is fully drawn down),
• non-amortised term facility in tranches in PLN and EUR in the amount of PLN 1,260,100 thousand and EUR 9,844
thousand (the facility is fully drawn down),
• revolving credit facility in the amount of up to PLN 250,000 thousand (the amount of used credit as at 31 December
2021 was PLN 0),
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 2021, the amount used was PLN 0 thousand).
The total value of facilities available under the aforesaid agreements is PLN 2,261,531 thousand; the limits are drown down
in the amount of PLN 1,865,537 thousand.
In addition, Proplan Plant Protection Company, S.L. has external debt on account of loans.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
66
Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2021
published on 29 March 2022 in Section 4.6.
Interest rate:
The Loans bear interest at a floating rate determined on the basis of the WIBOR / EURIBOR base rate, plus margin, the level
of which depends on the level of the net debt to EBITDA, such that if the level of the ratio is lower, the margin applied will
also be lower. The financial terms of the Facilities Agreement do not differ from those commonly used for this type of
agreements.
Information about the financial covenants included in loan agreements
During the period covered by these financial statements, no loan agreement was called to maturity and there were no
violations of payment terms for repayment of principal or interest due in relation to financial liabilities recognised in the
balance sheet. Under the Facilities Agreement dated 16 March 2021, CIECH S.A. and its selected subsidiaries were obliged to,
among others, maintain a certain level of:
• net leverage ratio for the Group specified in the Facilities Agreement (the ratio of the CIECH Group’s consolidated net
debt to consolidated EBITDA of the CIECH Group calculated according to the guidelines) in the amount of at least 4.0x,,
measured at the end of a year and first six months of a year. As at the balance sheet date, i.e. 31 December 2021, this
ratio was maintained and amounted to 1.6,
• the guarantor coverage ratio (share of subsidiaries being guarantors in the consolidated EBITDA of the CIECH Group,
calculated according to the guidelines) at a level of at least 80%; this ratio was met as at the balance sheet date and
amounted to 89.6%.
7.2. OTHER NON-CURRENT 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
31.12.2021
31.12.2020
Subsidies
108,525
62,372
Derivatives
91,857
14,327
Liabilities due to the purchase of shares and other financial assets
-
3,871
Other
31,370
1,458
TOTAL
231,752
82,028
*As at the end of 2020, the long-term portion of IRS transactions designated for hedge accounting is not reported. These transactions hedge
the interest rate on loans that have been recognised as short-term liabilities due to a breach of one of the covenants at the balance sheet
date.
In the corresponding period, long-term 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).
At the end of 2021, these liabilities are presented as current liabilities in Note 7.3.
The item of other long-term liabilities includes the 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 intention of introducing the Plan was to harmonize
the activities of the key managers of the CIECH Group with the achievement of the goals set out in the Strategy of the CIECH
Group for 2019-2021.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
67
The main criterion authorizing the implementation of the Plan was the development by the CIECH Group in the years 2019-
2021 of an increase in value at the level of at least 11% of the base year, i.e. 2018. The generated value was calculated as the
difference of the value of the CIECH Group generated at the end of 2021 compared to this value at the end of 2018. The value
of the CIECH Group, for the purposes of the Long-Term Incentive Plan, is measured by the so-called TSR (Total Shareholder
Return) ratio taking into account, among others: the normalized EBITDA of the CIECH Group, the assumed multiplier for the
EBITDA of the normalized CIECH Group, the consolidated net debt of the CIECH Group, the value of dividends paid and cash
inflows / outflows resulting from the issue / redemption of the Company's shares. The TSR ratio for the CIECH Group is
calculated on the basis of the financial data contained in the audited consolidated financial statements of the CIECH Group.
Due to the achievement of the Earned Value at the level of at least 11% of the base year (2018), the bonus pool amounted
to 12% of the Earned Value and was adjusted by the effective number of units allocated to the Plan participants. The bonus
pool will be paid out in the years 2022-2024, in equal parts each year. As at 31 December 2021, 749 units out of 1,000 issued
were granted, while the discounted value of the program attributable at the end of the entire Program, amounted to
PLN 51,428 thousand. To measure the liability, the Group used a discount rates of 2.94% -3.47% (depending on the date of
the planned liability repayment).
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
31.12.2021
31.12.2020
Trade liabilities and advances taken
615,770
492,998
- in up to 12 months
612,643
490,430
- above 12 months
1,953
181
- prepayments received for supplies
1,174
2,387
Public and legal liabilities (excluding income tax)
52,936
44,931
Liabilities for purchase of property, plant and equipment
143,427
185,505
Financial instruments liabilities
59,843
67,709
Liabilities from the settlement of futures contracts
138,861
34,495
Liabilities to employees
21,145
17,990
Payroll liabilities
45,634
28,952
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
68
CURRENT TRADE AND OTHER LIABILITIES
31.12.2021
31.12.2020
Holiday leave accrual
12,920
8,852
Taxes and charges
647,621
268,065
Materials and energy consumption
34,327
32,945
Subsidies
4,656
4,928
Factoring liabilites
23,078
16,174
Received CO
2
emission rights
50,940
32,617
Other
105,249
50,095
TOTAL
1,956,407
1,286,256
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 standard payment
term is 60 days.
The largest year-on-year increases in current liabilities were recorded in the following items:
• trade liabilities due to an increase in the level of reverse factoring and higher purchase costs for raw materials, mainly
gas and raw materials for the production of crop protection chemicals,
• liabilities on account of settlements of futures contracts for CO
2
emission allowances, as a result of a significant increase
in the difference between the contractual price and the current price of the allowances,
• taxes and fees in connection with the presentation under this item of provisions for CO
2
emission costs, also in the part
covered by allowances received in connection with the change in Accounting Policy described in Section 1.5.1. b).
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;
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
69
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
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. 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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
70
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 largest leased asset in the CIECH Group is the right of perpetual usufruct of land obtained by administrative decision. No
conditions for extending lease agreements or purchasing the subject 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 report
liabilities under property lease agreements (office and warehouse space).
The CIECH Group also uses property, plant and equipment (mainly means of transport, including railcars and locomotives,
and various types of machinery and equipment) pursuant to lease agreements. Some of 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.
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 0.97%, to 7.99% (for PLN 5.75-6.49%; for EUR 0.97%-4.54%, for
USD 2.80%-4.60%; for RON 6.52%-7.99%). 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
31.12.2021
0–6 months
16,371
393
15,978
Up to 1 year
14,416
369
14,047
1–2 years
45,177
1,887
43,290
2–5 years
29,363
2,751
26,612
More than 5 years
166,914
115,644
51,270
TOTAL
272,241
121,044
151,197
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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
71
Reconciliation of changes in liabilities resulting from financing activities – lease liabilities
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
129,258
143,934
Modifications of agreements
6,165
1,563
Signing new agreements
40,820
6,515
Early termination of agreement
-
(1,047)
Interest accrued
3,951
4,591
Repayment of liability
(29,633)
(30,139)
Foreign exchange differences
634
5,687
Other
2
(1,846)
Closing balance
151,197
129,258
The total outflow of funds related to lease liabilities is respectively:
01.01-31.12.2021
01.01.-31.12.2020
Payment of liabilities, including:
40,693
44,005
Principal amount
25,669
25,500
Interest
4,192
4,639
Variable payments other than those linked to an index/rate
8,153
10,522
Short-term leases
1,801
2,348
Low-value leases
879
996
The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for
the period:
01.01-31.12.2021
01.01-31.12.2020
Costs of short-term leases (concluded for a period of up to 12 months),
1,411
1,398
Costs of lease of low-value assets
832
938
Costs related to variable lease payments not included in the measurement of lease
liabilities
8,123
10,609
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
72
The increase in the provision for employment costs is recognised respectively in other operating expenses. Changes in
provisions resulting from the passage of time (i.e. the unwinding of the discount) and the effect resulting from changes in
discount rates are always presented in financing activities.
The Company recognises in other comprehensive income actuarial gains and losses – changes in provisions for retirement
benefits resulting differences between the previous actuarial assumptions and what has actually occurred and the effects
of changes in actuarial assumptions and change in discount rate.
Judgements and estimates
The amount of the provision for employee benefits is determined based on actuarial valuations performed by independent
professional firms. By actuarial valuation estimates are made regarding the rotation in employment, wage growth,
discount rates and inflation.
PROVISIONS FOR EMPLOYEE BENEFITS
LONG-TERM
SHORT-TERM
01.01.-31.12.2021
01.01.-31.12.2020
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
12,958
12,848
3,100
15,465
Recognition
2,832
1,200
1,117
1,151
Use and reversal
(1,635)
(1,975)
(1,473)
(14,070)
Foreign exchange differences
(18)
381
(27)
513
Other
1,136
504
(74)
41
Closing balance
15,273
12,958
2,643
3,100
In 2021, a change in provision for retirement benefits in the amount of PLN -1,342 thousand was recognised in other
comprehensive income (PLN -167 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 3.3% 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 3.5% and 5.0% were applied for 2022 and subsequent
years, respectively. Staff turnover ratio is established based on historic data, adjusted for employment restructuring plans.
According to the Company’s estimations, a change in actuarial assumptions will not have a significant impact on financial
results.
7.6. OTHER PROVISIONS
Accounting policy
A provision is recognised if, as a result of a past event, the 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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
73
CHANGE IN OTHER LONG-TERM PROVISIONS
Provision for
liabilities
(costs)
Provision for
environmental
protection
Provision for
bonuses
TOTAL
01.01.-31.12.2021
Opening balance
40,776
112,485
-
153,261
Recognition
2,029
-
1,271
3,300
Use and reversal
(2,030)
(3,696)
-
(5,726)
Foreign exchange differences
-
225
-
225
Change in discount rate
-
(1,685)
-
(1,685)
Reclassification from (to) long-term provisions
1,631
(1,838)
-
(207)
Update of the amount of the provision for environmental
protection*
-
121,481
-
121,481
Closing balance
42,406
226,972
1,271
270,649
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
Reclassification from (to) long-term provisions
29,291
(889)
-
28,402
Other
-
9,899
-
9,899
Closing balance
40,776
112,485
-
153,261
* Relates to the provision for environmental protection in the SDC Group. The value of the provision was included in the value of fixed assets.
CHANGE IN OTHER SHORT-TERM PROVISIONS
Provision for
restructuring
Provision for
liabilities (costs)
Provision for
environmental
protection
Provision
for
bonuses
TOTAL
01.01.-31.12.2021
Opening balance
111
94,199
889
38
95,237
Recognition
-
7,207
827
-
8,034
Use and reversal
-
(17,642)
(1,891)
(4)
(19,537)
Foreign exchange differences
-
(130)
-
-
(130)
Reclassification from (to) long-term provisions
-
(1,631)
1,838
-
207
Closing balance
111
82,003
1,663
34
83,811
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)
Transfer to liabilities held for sale
-
(614)
-
-
(614)
Other
-
8,517
-
38
8,555
Closing balance
111
94,199
889
38
95,237
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
74
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.
CIECH Sarzyna S.A. – provision for potential tax liability and related interest in the amount of PLN 10,765 thousand.
In 2021, PLN 6,054 thousand of the provision was utilised through payment of the liability.
CIECH Vitrosilicon S.A. – recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 1,114 thousand (the total balance of provisions for tax liabilities is PLN 18,221 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 532 thousand (the total balance of provisions for tax liabilities is PLN 8,904 thousand).
CIECH Cargo Sp. z o.o. – recognition of a provision for interest in relation to a potential tax liability in the amount of
PLN 591 thousand (the total balance of provisions for tax liabilities is PLN 9,751 thousand).
SDC Group – short-term provision of PLN 9,291 thousand (EUR 2,020 thousand) related to a potential claim from the water
management authority and a provision of PLN 14,718 thousand (EUR 3,200 thousand) related to a potential tax liability.
CIECH Trading Sp. z o.o. – a provision for VAT and interest in relation to a potential tax liability in the amount of
PLN 3,952 thousand. In 2021, the provision was reversed in the amount of PLN 5,068 thousand.
CIECH Soda Polska S.A. – long-term provision in the amount of PLN 727 thousand for potential environmental fees resulting
from exceeded emission limits. In addition, provisions of PLN 482 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.
The value of the provision has not changed at the end of 2021.
Provisions for environmental protection
SDC Group – a long-term provision for environmental protection in the amount of PLN 221,921 thousand, i.e.
EUR 48,250 thousand, including:
• reclamation of tailing ponds in Unseburg – provision of EUR 8,379 thousand (PLN 38,538 thousand) as at 31 December
2021 and EUR 3,017 thousand (PLN 13,923 thousand) as at 31 December 2020 – 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 2,995 thousand (PLN 13,775 thousand) at 31 December
2021 and EUR 3,690 thousand (PLN 17,029 thousand) at 31 December 2020 – the schedule provides for work until 2052
starting in 2015,
• restoration of the remains of old limestone quarries – provision of EUR 3,278 thousand (PLN 15,077 thousand) as at
31 December 2021 and EUR 975 thousand (PLN 4,499 thousand) as at 31 December 2020 – the schedule provides for
work over a period of 4 years,
• closure of caverns - provision of EUR 29,453 thousand (PLN 135,466 thousand) as at 31 December 2021 and EUR 11,659
thousand (PLN 58,803 thousand) as at 31 December 2020 – the schedule provides for work in the period from 10 to 75
years.
The provisions were calculated based on reports from independent environmental engineering advisors. In 2021, provisions
were increased by EUR 25,941 thousand (PLN 121,481 thousand) due to new reports. The same amount was recognised in
the value of fixed assets.
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: 6.0% in 2022, 3.45% in 2023 and 2.5% thereafter, adjusted by a discount factor,
calculated as the average of the discount factor at the beginning and end of every annual period. The amount of the respective
provision recognised in the statements amounts to PLN 5,815 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 2022-2026
of expenses to be incurred.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
75
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
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
76
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, as it believes that the risk of default by
counterparties increases significantly after that date.
The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in
possession of reliable documents, indicating that the receivables were secured and their payment is highly probable.
Impairment allowances are estimated using individual parameters determined on the basis of benchmarks (using
information on bank ratings) or values provided by experts.
For trade receivables and contract assets arising from transactions that fall within the scope of IFRS 15, the Group has
opted for 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 2021
include:
Financial assets:
• loans granted,
• financial 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,
• financial instruments with negative valuation.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
77
Carrying amount of financial instruments
Classes of financial instruments
note
31.12.2021
31.12.2020
Categories of financial instruments
Cash and cash equivalents
5.12
799,023
443,886
Financial assets at amortised cost
Loans granted
5.11
133
146
Financial assets at amortised cost
Trade receivables
5.10
209,231
175,697
Financial assets at amortised cost
Factoring receivables
5.10
33,660
47,425
Financial assets at amortised cost
Hedging derivatives with positive value
5.7;5.11
101,672
18,427
Financial assets valued at fair value thru other
comprehensive income
Derivatives with positive value
5.7;5.11
1,210
1,835
Financial assets valued at fair value thru profit
or loss account
Embedded instruments with positive value
1,144,929
687,416
Trade liabilities
7.3
(614,596)
(490,611)
Financial liabilities at amortised cost
Loans and borrowings
7.1
(1,859,441)
(1,911,475)
Financial liabilities at amortised cost
Factoring liabilities
7.3
(23,078)
(16,174)
Financial liabilities at amortised cost
Lease liabilities
7.4
(151,197)
(129,258)
Financial liabilities excluded from IFRS 9
Hedging derivatives with negative value
7.2;7.3
(138,485)
(65,542)
Financial liabilities valued at fair value thru
other comprehensive income
Derivatives with negative value
7.2;7.3
(13,215)
(16,494)
Financial liabilities valued at fair value thru
profit or loss account
LIABILITIES
(2,800,012)
(2,629,554)
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 uses reverse factoring. Due to the terms of the agreements, these liabilities are reported as trade
liabilities or investment liabilities, depending on which liabilities the factoring relates to.
Revenues, costs, profit and loss recognised in the income statement by the category of financial instruments for continuing
operations
Revenues, costs, profit and loss recognised in
the statement of profit or loss
01.01.-31.12.2021
01.01.- 31.12.2020
Categories of financial instruments
Interest income /(costs) including income /
costs calculated using the effective interest
rate method
(36,365)
(54,183)
1,117
1,807
Financial assets at amortised cost
(34,026)
(51,678)
Financial liabilities at amortised cost
(3,456)
(4,313)
Financial liabilities excluded from IFRS 9
Profits/(losses) due to exchange differences
(1,869)
45,172
(1,822)
46,880
Financial liabilities at amortised cost
(47)
(1,708)
Financial liabilities excluded from IFRS 9
Recognition of impairment losses
(8,804)
(20,120)
Financial assets at amortised cost
Reversal of impairment losses
7,802
6,992
Financial assets at amortised cost
Income/expenses due to the use of derivative
financial instruments
(44,439)
(68,561)
(36,291)
(47,594)
Financial assets/liabilities at fair value
through profit or loss
(8,148)
(20,967)
Hedging instruments
TOTAL
(83,675)
(90,701)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
78
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 (i.e. the present value of the
cumulative change in the hedged expected future cash flows) from inception of the hedge.
b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e.
the portion that is offset by the change in the cash flow hedge reserve calculated in accordance with (a))
shall be recognised in other comprehensive income.
c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change
in the cash flow hedge reserve calculated in accordance with (a)) is hedge ineffectiveness that shall be
recognised in profit or loss.
The effective portion of the hedge is transferred to profit or loss as a reclassification adjustment in the period or periods
when the hedged expected future cash flows affect profit or loss.
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.
The table below presents a summary of specific groups of relationships existing in 2021, designated for hedge accounting:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
79
Type of instrument
Hedged
item
Nominal
value/Volu
me (as at
31.12.2021)
Average price
obtained on
the contract
(not settled
transactions
as at
31.12.2021)
Maturity
31.12.2021
31.12.2020
Derivative instruments – cash flow hedge
Assets
Liability
Assets
Liability
Currency risk and
interest rate risk
Currency and
interest swap (CIRS)
Interest payments on
debt in PLN bearing
interest at WIBOR 6M
with semi-annual
interest periods until
March 2026.
Sales revenues of the
CIECH Group in EUR
in the years 2023–
2027
EUR 344
million
Average
EURPLN CIRS
exchange
rate: 4.49
Weighted
average (by
initial nominal
weighting)
conversion
rate of WIBOR
6M to a fixed
rate in EUR: -
0.09%
2026
85,607
(138,350)
-
-
Currency risk
Currency forwards
EUR/PLN
Future cash flows
from realisation of
sales revenues
denominated in EUR
or indexed to EUR
exchange rate
EUR 74
million
Weighted
average
EURPLN
selling rate:
4.68
2022
1,966
-
-
(11,208)
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
0
n.a.
2022 (early
close-out
in 2021)
-
-
-
(618)
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
13,437
-
-
(31 126)
Interest rate swap –
6M EURIBOR to fixed
rate
Interest payments on
debt in EUR with a
maximum nominal
amount of EUR
14,075 thousand
EUR 14,075
thousand
Fixed rate
paid in EUR
for EURIBOR
6M: -0.28%
2026
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
-
n.a.
2021
(March)
-
-
-
(22,590)
Collar option
structures for gas
supply
Gas supplied
according to the
option contract after
elimination of the
intrinsic value of the
option or gas
purchased at the
month-ahead market
price if the option is
not exercised
n.a.
2021
-
-
18,427
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
80
Type of instrument
Hedged
item
Nominal
value/Volu
me (as at
31.12.2021)
Average price
obtained on
the contract
(not settled
transactions
as at
31.12.2021)
Maturity
31.12.2021
31.12.2020
Derivative instruments – cash flow hedge
Assets
Liability
Assets
Liability
Financial instruments – hedge of net investments
Currency risk
Term loan liabilities
The hedged item is a
portion of the net
investment in a
subsidiary
EUR 30,000
thousand
n.a.
2022 (early
close-out
in 2021)
-
-
-
(138,444)
Amounts recognised in the cash flow hedge reserve are presented below:
01.01.-31.12.2021
01.01.-31.12.2020
Opening balance
(9,393)
17,678
Change in fair value of the hedging instrument recognised in other comprehensive
income
237,529
(53,061)
Income tax on the effective portion
(67,314)
13,255
The hedging effect that was transferred to the profit or loss
(135)
17,087
Income tax transferred to the profit or loss
(1,923)
(3,067)
Ineffectiveness
-
(1,285)
Closing balance
158,763
(9,393)
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 and exchange rate movements, exchange rates differences due to incurred liabilities,
(e.g. loans, bonds) and the impact of changes in raw material prices (gas, CO
2
) 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 was an instance of identifying the inability to realise a future transaction in respect of which
the cash flow hedge accounting was applied. In connection with the refinancing of the syndicated credit facility, the PLN IRS
and EUR IRS designated for hedge accounting at the level of CIECH S.A.'s separate financial statements were settled early in
May 2021 and the value of the instrument as at the settlement date was transferred to the current result.
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 Group.
In IRS transactions, in order to identify sources of ineffectiveness of the hedge, key parameters of the hedged credit and IRS
transactions (nominal amount, interest rate, interest periods) were compared. Credit risk is considered negligible. No sources
of ineffectiveness were identified.
In the CIRS transaction, in order to identify sources of ineffectiveness of the hedge, key parameters of the hedged currency
cash flows and the hedging transaction were compared: nominal amount, timing of cash flows.
The ineffectiveness of the hedge was influenced by:
- differences in the settlement dates of forward hedges and the timing of realisation of the hedged currency cash flows
- differences in individual forward rates within a forward series vs. hypothetical forward transactions in which the individual
transactions have market levels at the time the transaction is designated. Credit risk is considered negligible given the
financial status of the counterparty.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
81
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 is to use natural hedging (net exposure is taken into account) and to hedge of up to 90% of the
projected annual net exposure to risk of changes in exchange rates, CO
2
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 2021 :
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 16
March 2021 in the amount of PLN 1,801 million and EUR 14 million, a revolving credit facility in the amount of up to PLN 250
million (as at the end of 2021, the debt amounted to PLN 0), overdraft facilities (as at the end: PLN 0 thousand) and a part of
lease and factoring contracts.
Therefore, the 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.
In 2021, 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 March 2021. The transaction hedges indebtedness in the amount of EUR 14 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 March 2021. The transaction hedges indebtedness in the initial nominal
amount of 1,212 million, amortised in accordance with the schedule of the CIRS transaction.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
82
The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to
interest rate risk:
Total carrying amount
31.12.2021
31.12.2020
Fixed interest rate instruments
-
-
Financial assets
-
-
Financial liabilities
-
-
Floating interest rate instruments
(1,211,615)
(1,596,847)
Financial assets (cash)
799,023
443,886
Financial liabilities*
2,010,638
2,040,733
* PLN 1,213 million and EUR 14 million hedged by IRS, PLN 326 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
31.12.2021
Floating interest rate instruments
(12,116)
12,116
-
-
Interest rate swaps*
1,166
(1,182)
56,358
(59,597)
Sensitivity of cash flows (net)
(10,950)
10,934
56,358
(59,597)
31.12.2020
Floating interest rate instruments
(15,968)
15,968
-
-
Interest rate swaps*
2,617
(2,690)
15,878
(16,409)
Sensitivity of cash flows (net)
(13,351)
13,278
15,878
(16,409)
* 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 2021 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
and Proplan 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 2021, 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 Proplan) and in USD as at 31 December 2021 and 2020 due to financial instruments:
Exposure to currency risk in EUR ('000)
31.12.2021
31.12.2020
Impact on the
statement of
profit or loss
Impact on the
statement of other
comprehensive
income*
Assets
Loans granted sensitive to FX rate changes
224,000
215,955
x
Trade and other receivables
3,168
16,092
x
Cash including bank deposits
12,076
14,668
x
Liabilities
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
83
Exposure to currency risk in EUR ('000)
31.12.2021
31.12.2020
Impact on the
statement of
profit or loss
Impact on the
statement of other
comprehensive
income*
Trade and other liabilities
(18,568)
(15,340)
x
Term loan liabilities
(14,075)
(30,000)
x
Working capital facility liabilities
-
(25,000)
x
Other liabilities in respect of credits and loans
-
(13,030)
x
Hedging instruments: Forward
(73,900)
(173,025)
x
Forward (not designated to hedge accounting)
(119,013)
(41,000)
x
CIRS (not designated to hedge accounting)
(60,000)
(60,000)
x
Hedging instruments: CIRS (forward transactions isolated as
part of decomposition of CIRS)
(343,590)
-
x
Total exposure
(389,902)
(110,680)
* 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)
31.12.2021
31.12.2020
Impact on the
statement of
profit or loss
Impact on the
statement of other
comprehensive
income*
Assets
Trade and other receivables
1,426
2,420
x
Cash including bank deposits
1,957
1,182
x
Liabilities
Trade and other liabilities
(1,916)
(992)
x
Total exposure
1,467
2,610
* 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 2021.
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
31.12.2021
Foreign-currency balance sheet items
2,066
2,066
-
Hedging instruments: Forward and CIRS
(5,965)
(1,790)
(4,175)
31.12.2020
Foreign-currency balance sheet items
623
923
(300)
Hedging instruments: Forward and CIRS
(1,730)
-
(1,730)
* Increase of EUR/PLN exchange rate by 1 grosz.
Analysis of sensitivity to currency risk – USD
(USD '000)*
Impact on the statement of
profit or loss
Impact on the statement of
other comprehensive income
31.12.2021
Foreign-currency balance sheet items
15
15
-
31.12.2020
Foreign-currency balance sheet items
26
26
-
* Increase of USD/PLN exchange rate by 1 grosz.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
84
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. 9% 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.
31.12.2021
31.12.2020
Cash and cash equivalents
799,023
443,886
Trade receivables and factoring receivables
243,024
223,268
Financial assets from valuation of derivatives
102,882
20,262
TOTAL
1,144,929
687,416
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
31.12.2021
31.12.2020
31.12.2021
31.12.2020
Soda Segment
187,203
126,497
-
-
Agro Segment
38,118
55,411
-
-
Foams Segment
3,635
7,106
-
-
Silicates Segment
19,923
11,471
-
-
Packaging Segment
2145
19
-
-
Other Segment
21,496
18,757
133
146
Resins Segment*
-
65,204
-
-
Consolidation adjustments
(63,289)
(108,768)
-
-
TOTAL
209,231
175,697
133
146
*Assets associated with discontinued operations. For detailed information on discontinued operations, see Note 5.13 to these financial
statements.
Below is a reconciliation of impairment allowances for trade receivables in accordance with IFRS 9.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
85
Stage 2
Stage 3
Lifetime ECL – not
impaired
Lifetime ECL –
impaired
Total
Trade receivables, gross, as at 1 January 2021
175,408
48,804
224,212
Recognised
2,688,465
4,465
2,692,930
Repaid
(2,654,372)
(6,925)
(2,661,297)
Trade receivables, gross, as at 31 December 2021
209,501
46,345
255,845
01.01.2021
4,861
43,654
48,515
Recognition of impairment losses
1,902
1,942
3,844
Reversal of unused allowances
(141)
(6,583)
(6,724)
Utilisation
-
(26)
(26)
Foreign exchange differences
-
413
413
Other
-
592
592
31.12.2021
6,622
39,993
46,614
Trade receivables, net, as at 31 December 2021
202,879
6,352
209,231
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
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 2021 and 31 December 2020 are presented in the
following tables.
Total
Non past due
0-30 days
30-90 days
90-180 days
> 180 days
Trade receivables, gross, as at 31.12.2021
255,845
183,260
11,096
4,239
702
56,548
Default rate
0.35%
0.27%
9.17%
82.89%
79.47%
Expected credit losses in accordance with
IFRS 9
6,622
634
29
389
582
4,988
Total expected losses
46,613
664
38
389
582
44,941
from collective analysis
6,622
634
29
389
582
4,988
from case-by-case analysis
39,992
30
9
-
-
39,953
Total
Non 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
3,798
Total expected losses
48,713
776
26
85
199
47,627
from collective analysis
4,861
775
25
83
180
3,798
from case-by-case analysis
43,852
1
1
2
19
43,829
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
86
Liquidity risk
The CIECH Group is exposed to risk connected with maintaining liquidity due to the considerable value of external financing
(due to the term loans, working capital facilities and lease agreements), the limited ability to obtain new financing in the
event of a deterioration in market conditions and 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 loans. 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 2021,
the facility was drawn down in the amount of PLN 0 million), and overdraft facilities (as at the end of 2021, they were drown
down in the amount of PLN 0 thousand) have been made available to the Group.
The table below presents financial liabilities at face value grouped by maturity.
31.12.2021
Carrying
amount
Contractual
cash flows
Below 6
months
up to 12
months
1–2 years
3–5 years
Over 5
years
Other financial liabiliies:
(2,497,115)
(2,428,894)
(657,082)
(19,623)
(112,782)
(1,639,406)
-
Trade liabilities
(614,596)
(614,596)
(614,596)
-
-
-
-
Loans and borrowings
(1,859,441)
(1,791,220)
(19,408)
(19,623)
(112,782)
(1,639,406)
-
Factoring liabilities
(23,078)
(23,078)
(23,078)
-
-
-
-
Lease liabilities
(151,197)
(272,241)
(16,371)
(14,416)
(45,177)
(29,363)
(166,914)
Hedging derivatives with
negative value
(138,485)
(255,399)
(39)
(30)
(15)
(255,315)
-
Derivative instruments with
negative value
(13,215)
(16,215)
(16,215)
-
-
-
-
Total financial liabilities
(2,800,012)
(2,972,748)
(689,707)
(34,069)
(157,974)
(1,924,084)
(166,914)
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)
Hedging derivatives with
negative value
(65,542)
(67,651)
(40,334)
(15,124)
(10,397)
(1,796)
-
Derivative instruments with
negative value
(16,494)
(14,364)
-
-
(14,364)
-
-
Total financial liabilities
(2,629,554)
(2,793,060)
(2,504,008)
(27,002)
(65,237)
(24,704)
(172,109)
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
Liquidity ratios as at 31 December 2021 increased significantly as compared to their level as at 31 December 2020. The current
ratio, calculated as the ratio of total current assets to total current liabilities, amounted to 1.03 as at 31 December 2021,
while the quick liquidity ratio amounted to 0.84. The changes in the level of these ratios follow the non-fulfilment of the ratio
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
87
set out in the loan agreement at the end of 2020, as described in Note 7.1 to the Consolidated Financial Statements of the
CIECH Group for 2020.
31.12.2021
31.12.2020
Current ratio
1.06
0.46
Quick ratio
0.87
0.35
8.4. DETERMINATION OF FAIR VALUE
The following list presents the fair value of financial instruments.
31.12.2021
31.12.2020
Carrying amount
Fair value
Carrying amount
Fair value
Cash and cash equivalents
799,023
799,023
443,886
443,886
Loans granted
133
133
146
146
Trade receivables
209,231
209,231
175,697
175,697
Hedging instruments with positive value
101,672
101,672
18,427
18,427
Derivatives with positive value
1,210
1,210
1,835
1,835
Factoring receivables
33,660
33,660
47,425
47,425
ASSETS
1,144,929
1,144,929
687,416
687,416
Loans and borrowings
(1,859,441)
(1,870,822)
(1,911,475)
(1,910,967)
Trade liabilities
(614,596)
(614,596)
(490,611)
(490,611)
Hedging instruments with negative value
(138,485)
(138,485)
(65,542)
(65,542)
Derivatives with negative value
(13,215)
(13,215)
(16,494)
(16,494)
Factoring liabilities
(23,078)
(23,078)
(16,174)
(16,174)
LIABILITIES
(2,648,815)
(2,660,196)
(2,500,296)
(2,499,788)
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.
Assets and liabilities measured at fair value
31.12.2021
31.12.2020*
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets
-
102,882
32,839
-
20,262
40,948
Investment property
-
-
32,839
-
-
40,948
Hedging instruments
-
101,672
-
-
18,427
-
Derivatives with positive value
-
1,210
-
-
1,835
-
Liabilities
-
(151,700)
-
(22,590)
(59,446)
-
Hedging instruments
-
(138,485)
-
(22,590)
(42,952)
-
Derivatives with negative value
-
(13,215)
-
-
(16,494)
-
TOTAL
-
(48,818)
32,839
(22,590)
(39,184)
40,948
*Restated data. For detailed information, see Note 1.5.1 to this report.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
88
CIECH Soda Polska S.A. holds futures contracts for the purchase of emission allowances, which represent a financial
instruments but are not measured at fair value. This is because futures contracts on CO
2
emission allowances purchased for
own use (surrender in connection with the release of CO
2
into the atmosphere) are excluded from the scope of IFRS 9.
Due to the specific nature of futures contracts (transactions concluded on regulated markets), cash flows are generated from
the current market valuation. Notwithstanding the exclusion or inclusion of the instrument within the scope of IFRS 9, these
cash flows are accounted for, in corresponding records, as settlement with the Clearing House.
As at 31 December 2021, the balance of settlements on this account amounted to PLN 138,9 million (liability), which resulted
from positive market valuation of the contracts and crediting the account of CIECH Soda Polska S.A.; as at 31 December 2020,
the balance amounted to PLN 11.9 million (liability), which resulted from positive market valuation of the contracts and
crediting the account of CIECH Soda Polska S.A. with PLN 34.5 million and negative market valuation of the contract and
debiting the account of CIECH Soda Romania S.A. with PLN 22.6 million
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,
• collar option structures for gas supply at CIECH Energy Deutschland GmbH – Level 2, according to the fair value hierarchy,
• collar option structures for supply of CO
2
emission allowances at CIECH Energy Deutschland GmbH – Level 2, according
to the fair value hierarchy.
In 2021, 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 Endex 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.
• the value of commodity options for CO
2
emission allowances is determined on the basis of option price quotations on
the ICE Endex exchange.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
89
Long-term financial
assets
Short-term financial
assets
Other long-term
liabilities
Trade and other
liabilities
TOTAL
31.12.2021
IRS EUR
662
-
-
(136)
526
IRS PLN
-
13,437
-
-
13,437
CIRS
-
85,607
(91,857)
(59,707)
(65,957)
Forward EUR/PLN
-
3,176
-
-
3,176
TOTAL
662
102,220
(91,857)
(59,843)
(48,818)
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)
Collar options
-
18,427
-
-
18,427
Futures contracts for the sale
of CO
2
certificates
-
-
-
(22,590)
(22,590)
TOTAL
574
19,688
(14,327)
(67,709)
(61,774)
*Restated data. For detailed information, see Note 1.5.1 to this report.
**As at the end of 2020, the long-term portion of IRS transactions designated for hedge accounting is not reported. These transactions hedge
the interest rate on loans that have been recognised as short-term liabilities due to a breach of one of the covenants at the balance sheet
date.
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 2021, was
PLN 1,859,441 thousand, and whose fair value amounted to PLN 1,870,822 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 2021 (in PLN ‘000)
90
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.- 31.12.2021
01.01.- 31.12.2020
Inventory change presented in consolidated statement of financial position
73,517
(106,715)
Reclassification to assets held for sale
-
34,795
Currency translation reserve
940
(7,534)
Change in Group’s composition
(4,621)
-
Inventory change in consolidated statement of cash flows
(69,836)
79,454
01.01.- 31.12.2021
01.01.- 31.12.2020
Provision change presented in consolidated statement of financial position
107,820
34,421
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)
Change in Group’s composition
985
-
Currency translation reserve
(48)
(10,111)
Change in reserves related to caverns
(118,745)
(9,897)
Other
824
709
Provisions change in consolidated statement of cash flows
(9,164)
1,928
01.01.- 31.12.2021
01.01.- 31.12.2020
Receivables change presented in consolidated statement of financial position
108,183
(61,143)
Change in investment receivables
4,046
(3,945)
Change in income tax receivables
15,165
(22,561)
Change in receivables from caverns
(4,965)
3,922
Change in Group’s composition
62,762
(1,571)
Currency translation reserve
(3,928)
(7,463)
Reclassification of receivables from / to assets held for sale
-
42,701
Other
8,632
-
Receivables change presented in consolidated statement of cash flows
(189,895)
50,059
01.01.- 31.12.2021
01.01.- 31.12.2020
Change of liabilities presented in consolidated statement of financial position
845,080
467,916
Change in investment liabilities
84,894
12,975
Change in financial liabilities
(69,664)
(34,426)
Change in income tax liabilities
(80,673)
(2,249)
Currency translation reserve
(8,837)
6,193
Reclassification of liabilities to / from liabilities related to assets held for sale
-
25,375
Change in Group’s composition
88,817
Change in lease liabilities and loans
30,097
(251,530)
Donations
(51,751)
-
Emission rights
(51,331)
-
Liabilities change presented in consolidated statement of cash flows
786,432
224,254
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
91
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 2021, 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 and related
contingent liabilities”.
Significant disputed receivables of the CIECH Group
As at 31 December 2021, 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, except for the case described in “Contingent assets and liabilities including guarantees and sureties,
excluding liabilities related to proceedings before administrative authorities”.
Contingent assets and liabilities including guarantees and sureties, excluding liabilities related to proceedings before
administrative authorities
The amounts of contingent liabilities related to proceedings before administrative authorities and changes therein in 2021
are described in the note below under the heading: “Audits of tax settlements at the CIECH Group and related contingent
liabilities”.
31.12.2021
31.12.2020
Contingent assets
21,933
31,077
Other contingent receivables*
21,933
31,077
Contingent liabilities
427,034
983,785
Guarantees and sureties granted
-
551,318
Tax liabilities (including interests)
89,299
126,728
Letters of support
214,792
211,358
Emission allowances**
48,905
-
Promissory notes***
42,859
50,786
Other****
31,179
43,595
* 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 2021, a contingent asset recognised by CIECH Soda Polska S.A. amounted to PLN 3,069 thousand – it is the value of
energy efficiency certificates received from the President of the Energy Regulatory Office in previous years that have not been recorded
yet in the account kept by the Polish Power Exchange.
** Relates to emission allowances received in CIECH Soda Romania S.A. related to the risk of their return due to the suspension of production
at CIECH Soda Romania S.A.
*** Including mainly:
• 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 11,286 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,
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
92
• contingent liabilities in CIECH Sarzyna S.A. resulting from promissory notes relating to subsidies received for developing and testing a
group of agro-chemical preparations and for the development and verification of herbicide production technology for the total amount
of PLN 7,423 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 5,016 thousand.
**** Including:
• contingent liability in CIECH Soda Polska S.A.: regarding environmental penalty fees in the amount of PLN 17,176 thousand, received
subsidies PLN 11,200 thousand, extension fees PLN 1,696 thousand, other PLN 1,107 thousand.
As at 31 December 2021, contingent liabilities amounted to PLN 427,034 thousand and decreased as compared to
31 December 2020 by PLN 556,751 thousand. The change was mainly due to the expiry of the guarantees granted under the
term credit facility and revolving credit facilities agreement, which were repaid on 5 May 2021.
Sureties and guarantees granted as at 31 December 2021
Beneficiary’s name
Total amount of the surety and guarantee
granted
Financial terms, including guarantee fee due to
the company; guarantee period
Principal
currency
PLN
CIECH S.A.
Landesamt fuer Geologie
und Bergwesen Sachsen-
Anhalt
EUR 8,403
thousand
38,650 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)
Axpo Solutions AG
EUR
34,000
thousand
156,380 thousand
Commission of 1.5% p.a. of the guaranteed
liability; collateral pertaining to claims related to
the agreement; until 31 December 2023
Ciech Energy
Deutschland
GmbH
(subsidiary)
Investitionsbank_Sachsen-
Anhalt (IBSA)
EUR
11,250
thousand
51,743 thousand
Commission of 1.5% p.a. of the guaranteed
liability; collateral pertaining to claims related to
the subsidy;
CIECH Salz
Deutschland
GmbH
(subsidiary)
Evatherm AG
EUR
21,900
thousand
100,727 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)
BNP Paribas S.A.
EUR
200,000
thousand
919,880 thousand
Commission of 1.5% p.a. of the guaranteed
liability; ISDA agreement – liabilities under the
agreement; indefinite term
CIECH Soda
Deutschland
GmbH & Co. KG;
Ciech Energy
Deutschland
GmbH
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.
mBank S.A.
PLN 3,000
thousand
3,000 thousand
Commission of 1.5% p.a. of the guaranteed
liability; collateral pertaining to claims under the
Guarantee agreement; until 30 June 2023
CIECH Sarzyna
S.A. (subsidiary)
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
93
Beneficiary’s name
Total amount of the surety and guarantee
granted
Financial terms, including guarantee fee due to
the company; guarantee period
Principal
currency
PLN
CITI Handlowy (reverse
faktoring)*
PLN 56,675
thousand
56,675 thousand
Commission 0.55% p.a. of the guaranteed
liability; 12.03.2022
(automatically extended)
CIECH S.A.,
CIECH Sarzyna
S.A., CIECH
Pianki Sp. z o.o.,
CIECH Soda
Polska S.A.,
CIECH
Vitrosilicon S.A.
Total nominal amount of guarantees and sureties granted
PLN 1,539,555 thousand
*The contract does not specify the amount of the surety, the value of guaranteed liabilities as at the balance sheet date was
PLN 56,675 thousand.
In 2021, the CIECH Group companies did not receive any guarantees from third parties.
Letters of support
As at 31 December 2021, 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 46.7 million from Innogy by 31
December 2021. In the letter of support, CIECH S.A. has committed, among other things, to ensure that CSD will have
sufficient funds to fulfil its financial commitments against Innogy resulting from the above-mentioned agreement.
Audits of tax settlements at the CIECH Group and related contingent liabilities
In 2021, 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.
- at CIECH S.A.
f) 2018 – 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 the former subsidiary. In the opinion of the authority, making a cash contribution by means
of a contractual set-off of mutual receivables gives rise to income on the part of the Company for which, according to the
auditors, the company cannot recognise a cost. The company's management board and its tax advisors do not agree with the
findings made by the auditors.
In December 2018, the company received a decision of the Head of the Małopolskie Province Customs and Tax Office in
Kraków, upholding the previous position of the authority. The Company contested the position and filed an appeal.
In April 2019, the Company received a decision of the second instance, upholding the decision of the first instance. In April
and May 2019, the Company paid up the outstanding tax along with interest in three tranches in the total amount of PLN
66.4 million (tax: PLN 43.7 million, interest: PLN 22.7 million). The disputed amount of tax and interest were covered by the
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
94
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 Kraków. On 9 October 2019, the Provincial Administrative Court
issued a ruling in which it confirmed the approach presented by the authority. The court indicated that the company was
obliged to recognise the income and did not have the right to recognise the tax deductible cost. After receipt of a written
statement of reasons, the company lodged a cassation complaint with the Supreme Administrative Court on 23 December
2019. 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.
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 leaves only the charge that the
company overestimated the tax deductible cost by including interest on external financing contributed to the capital reserves
of SDC and the costs of obtaining this financing in tax deductible costs (the taxable amount is PLN 22.6 million which translates
into a potential tax liability of PLN 4.3 million). Thus, the office has refrained from questioning the expenses incurred for trade
mark fees as a tax deductible cost. In the same month, the company submitted objections to the report on the audit of the
books. On 28 February 2022, the Company received the Order of the Head of the Małopolskie Province Customs and Tax
Office to suspend the Tax proceedings, in which the Auditing Authority indicates that the consideration of the case and the
issue of the decision depends on the resolution of the preliminary issue by another authority or court, and the proceedings
before the Supreme Administrative Court regarding the dispute on the settlement of the corporate income tax for 2013 is
directly related to the correct settlement of the corporate income tax for 2014.
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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
95
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.
At present, the company is waiting for the date of the hearing to be set.
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.
At present, the company is waiting for the date of the hearing to be set.
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
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. At present, the company is waiting for the date of the
hearing to be set.
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.
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In addition, on 12 March 2021 the company received from the Head of the Lubuskie Province Customs and Tax Office a notice
of suspension, as of 1 February 2021, of the statute of limitations for tax liabilities for 2015 due to initiation of proceedings
for fiscal offences.
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. On 2 December 2021, the Company received the Decision of the Head of the Podkarpackie
Province Tax Office in Reszów of 19 November 2021. In the Decision issued, the Office further questions the company's right
to settle the loss from participation in a partnership and the right to include the trademark fee as a tax deductible cost. The
Office, on the other hand, upheld the Company's arguments and abandoned the questioning of loan interest as a tax
deductible cost. Although the Decision is not due, on 2 December 2021 the company paid tax and interest (tax in the amount
of PLN 6.4 million, interest of PLN 1 million). On 16 December 2021, the Company filed an appeal against the Decision of the
Head of the Podkarpackie Province Tax Office in Reszów. The company is currently awaiting the decision of the second
instance authority.
In addition, on 21 December 2021 the company received from the Head of the Podkarpackie Province Tax Office in Reszów a
notice of suspension, as of 3 December 2021, of the statute of limitations for tax liabilities for 2015 due to initiation of
proceedings for fiscal offences.
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. 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 4.8 million (the tax base challenged by the authority is PLN 25.1 million)
plus with interest due. Tax proceedings are currently underway.
CIT audit for 2016 at CIECH S.A. On 25 May 2021, CIECH S.A. received an authorisation from the Head of the Małopolskie
Province Customs and Tax Office in Kraków to carry out a customs and fiscal audit with regard to corporate income tax (CIT)
for 2016. Tax audit is currently underway.
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. On 27 April 2021, the Head of the Customs and Tax Office issued a Notice of Consideration of the
CIT correction filed by the company resulting in an overpayment of CIT in the amount of PLN 0.9 thousand due to the transfer
of proceeds from excise tax refunds (for 2016 - PLN 1.4 million and for 2017 - PLN 3.8 million) from taxable activities to
activities within the Special Economic Zone (hereinafter: SEZ) and, as a consequence, a change in the allocation of shared
costs between these activities (PLN 0.5 million transferred to SEZ). Therefore, the audit was terminated.
The Group estimated that the potential impact on income tax expense (in the form of additional tax liabilities), in connection
with the above events which are or may continue to be challenged, would amount to PLN 108.7 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 108.7 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, and also following the decision of the first instance in the case of CIECH Sarzyna S.A. despite
further litigation, a total tax amount of PLN 60.1 million was paid (PLN 1.8 million of this amount is reported as receivables
from the Tax Office, all of which was covered by an impairment loss), and a provision is recognised for a potential tax liability
of PLN 39.1 million. The remaining amount, i.e. PLN 9.5 million, is not covered by a provision and represents a contingent
liability. The Group also paid interest in the total amount of PLN 27.9 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.
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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 concerning the taxable amount (an
interpretation received after the event that is the subject of the dispute) 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 Kraków. 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. At present, the company is waiting for the date of the hearing to be set.
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
concerning the taxable amount (an interpretation received after the event that is the subject of the dispute) 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 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
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
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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 Kraków. 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. At present, the company is waiting for the date of the hearing to be
set.
In total, in the two aforementioned disputes concerning VAT in Verbis Kappa Sp. z o.o. and Verbis ETA Sp. S.K.A. and Verbis
ETA Sp. z o.o. S.K.A., despite the continuation of the dispute, PLN 39 million of VAT and PLN 16.3 million of interest were paid
after the decisions of the second instance. These amounts are reported as public-law receivables in the financial statements
due to the fact that the companies and its tax advisors estimate the chances of winning these disputes to be above 50%. At
the same time, due to the continuing uncertainty as to the direction of the dispute resolution by the Supreme Administrative
Court, these amounts are also reported 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 had already received the interpretations 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 correction of VAT submitted by the Company in the current period and payment
of this tax.
On 11 September 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 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 Kraków. At a hearing on 22 September 2020,
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99
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. At present, the company is waiting for the date of the hearing to be set.
The amount of interest paid, i.e. PLN 10 million, is reported in the financial statements as public-law receivables due to the
fact that the company and its tax advisors estimate the chances of winning the dispute to be above 50%. At the same time,
due to the continuing uncertainty as to the direction of the dispute resolution by the Supreme Administrative Court, this
amount is also reported as a contingent liability.
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 November 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. On 22 October 2021 the Supreme Administrative Court overturned the appealed verdict of the Provincial
Administrative Court in its entirety and overturned the appealed decision of the Head of the Kujawsko-Pomorskie Province
Customs and Tax Office in Toruń (2
nd
instance authority) on the additional tax liability in VAT at the rate of 100%.
The case will now be referred back to the Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń who
will reconsider it, taking into account the statement of reasons of the Supreme Administrative Court. In the statement of
reasons for the judgment, the Supreme Administrative Court ruled on the non-applicability of the sanction at the 100% rate
in the present case. However, there is no guidance on setting the sanction at a different amount or not setting it at all. Ciech
Trading Sp. z o.o. will be entitled to appeal against the new decision of the Customs and Tax Office.
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
additional VAT liability in the amount of PLN 1.5 million. The Company lodged an appeal against the Decision received with
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100
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. On 25 February 2022,
the Company received two Decisions of the Head of the Silesian Customs and Tax Office in Katowice concluding the appeal
proceedings for May and June 2018. The decisions in question revoke previous decisions setting a sanction of 100% and set
a new sanction of 20%. As Ciech Trading Sp. z o.o. made a sanction payment of 100% on 11 February 2021, a return of PLN
1.2 million (80% of the amount paid) together with interest is expected in the near future. Ciech Trading Sp. z o.o. will not
appeal against the decisions issued. This concluded the dispute concerning the period from May to June 2018.
The audit at CIECH the Ciech Group in Germany concerns income tax and VAT settlements. The audit concerns the following
companies: Sodawerk Staßfurt Verwaltungs GmbH, CIECH Soda Deutschland GmbH & Co. KG, Sodawerk Holding Staßfurt
GmbH, SDC GmbH, CIECH Energy Deutschland GmbH. The audits, initiated in previous years, cover settlements for 2007-2009
and 2010-2015 and concern various factual and legal matters. In addition, on 28 October 2021, the the audit for the period
2016-2019 was initiated.
On 22 March 2021, the proxy of CIECH Soda Deutschland GmbH & Co. KG received the preliminary result of the tax audit
issued by the Tax Office in Staßfurt. The decision was issued in connection with an audit of the VAT settlements for 2012-
2013 at Ciech Energy Deutschland GmbH. The decision was delivered to CIECH Soda Deutschland GmbH & Co. KG, as in the
VAT group to which CIECH Soda Deutschland GmbH & Co. KG and Ciech Energy Deutschland GmbH belong, CIECH Soda
Deutschland GmbH & Co.KG is responsible for settlements with the tax authorities. 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 leasing of the CHP plant, whereby, due to the principle of neutrality, the amount of VAT
deducted by Ciech Energy Deutschland GmbH can be offset against the VAT paid by the lessor. The amount in dispute would
be interest of approximately EUR 1.9 million (approximately PLN 8.8 million). Ciech Energy Deutschland GmbH and the tax
advisors do not agree with the Decision issued and have therefore filed an appeal against the Decision and requested that it
be suspended until the pending case is finally resolved.
Ciech Energy Deutschland GmbH, having analysed the Decision and the tax advisor's position on the chances of a positive
outcome of the proceedings for Ciech Energy Deutschland GmbH, has decided not to recognise a provision for interest. In
August 2021, the Company received notice that the Tax Office had fully withdrawn its Decision. Thus, the dispute concerning
the right to deduct VAT on invoices received by Ciech Energy Deutschland GmbH in connection with the lease of the CHP
plant has been concluded.
With regard to the other years and issues subject to ongoing audits, the outcome of the audit as at the balance sheet date is
not known – the companies did not receive any reports/decisions from the tax authorities. In case of a different assessment
of economic events by audit authorities, an obligation may arise to recalculate and potentially increase the tax liability and
to pay interest on tax arrears. Under the prudence principle, the companies have, however, recognized provisions for
potential tax liabilities and interest in the total amount of EUR 15.8 million (after conversion into PLN according to the
exchange rate quoted on the balance sheet date – about PLN 72.5 million) Of the reported EUR 15.8 million, the provision
recognised in previous years is EUR 14.4 million (about PLN 66.2 million). In addition, an amount of EUR 2.4 million (PLN 11.1
million after translation) represents 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., non-consolidated companies of
the CIECH Group and with companies from the Polenergia Group - personally related to the parent company of the highest
level in relation to CIECH S.A.) is presented below:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
101
TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES
01.01.-31.12.2021
01.01.-31.12.2020
Revenues from sales of products and services, including:
3,125
6,353
associates
2,291
3,378
Revenues from sales of goods and materials, including:
34,729
41,006
associates
16,976
25,602
Other operating income, including:
15
14
associates
15
14
Financial income, including:
-
117
associates
-
117
Purchase of services, including:
49,353
48,997
KI One S.A.
199
242
associates
32,465
18,010
Purchase of products, goods and materials
58,202
44,247
associates
-
174
Other operating expenses
-
3
Financial expenses, including:
223
2,088
associates
2
2,088
31.12.2021
31.12.2020
Trade receivables, including:
5,834
7,488
associates
1,206
591
Trade liabilities, including:
45,919
27,901
associates
3,094
2,530
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 carried out on terms which do not differ from arm’s
length terms. Overdue liabilities and receivables are not secured and are settled through bank transfers. 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 2021.
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 2021 and in the comparable period. In the years 2020-2021, members of the Management Board
of CIECH S.A. did not receive any remuneration for holding a position in the Supervisory Boards or any other functions
performed in the subsidiaries of the CIECH Group, except for Mr Mirosław Skowron, who served on the Supervisory Board of
Ciech Salz Deutchland GmbH.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
102
31.12.2021
Short-term employee
benefits
Post-employment
benefits
Termination benefits
TOTAL
Management Board
9,230
-
-
9,230
Former members of the
Management Board
-
524
-
524
TOTAL
9,230
524
-
9,754
31.12.2020
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
1258
10,052
Members of the Management Board are employed based on employment contracts. Remuneration of the Management
Board Members are set out in individual employment contracts. Members of the Management Board are also entitled to:
• discretionary bonus in the amount determined by the Supervisory Board of CIECH S.A.;
• annual bonus determined in individual employment contracts,
• payments from the Long-Term Incentive Plan for the years 2019-2021, adopted on the basis of a decision of the
Supervisory Board, with payments in three consecutive years after the end of the reference period.
Remuneration of the Managing Director
The following table presents the amount of remuneration and additional benefits paid or payable to the Managing Director
in 2021.
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 – 31.12.2021
01.06 – 31.12.2020
Rafał Czubiński
1,019
1,096
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 2021
Remuneration received from
CIECH S.A. in 2020
Sebastian Kulczyk
-*
-*
Natalia Scherbakoff***
-
-
Artur Olech
447
387
Marek Kośnik
476
372
Łukasz Rędziniak
368
181
Martin Laudenbach
209
118
Piotr Augustyniak**
108
483
Tomasz Mikołajczak
-
88
Mariusz Nowak
-
24
TOTAL
1,609
1,653
*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 as Member of the Supervisory Board of CIECH S.A.
*** Appointed to the Supervisory Board on 26 October 2021.
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:
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
103
• 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 2021 to 31 December 2021 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 2021, 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
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.
2021*
2020*
Audit of the annual financial statements and review of the semi-annual financial
statements
623
529
Other attestation services
45
45
TOTAL
668
574
Consolidated subsidiaries of the CIECH Group
2021*
2020*
Audit of the annual financial statements and review of the semi-annual financial
statements
2,347
1,673
Other attestation services
158
113
TOTAL
2,505
1,786
* The above amounts do not include additional costs, such as travel, accommodation and nourishment costs – additional costs may amount
to a maximum of approx. 10% of the agreement value.
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.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
104
A list of fully consolidated companies and companies accounted for under the equity method is provided below:
Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2021 /
% of votes at
the GMS
Share in equity
as at
31.12.2020 / %
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 by the
CIECH Group companies, sales of chemical
products and semi-finished products purchased
from third-party producers, holding activities,
managing a portfolio of the Group's subsidiaries,
provision of support services (including in the
area of sales, purchases, finance, HR and the
legal area) for the Group's companies, financial
service activities not elsewhere classified (so-
called intercompany loans) for the benefit of the
Group's companies.
-
-
Fully consolidated direct and indirect subsidiaries
CIECH Trading
Sp. z o.o.
Warsaw
Soda, Other
The company is preparing for the liquidation
process, operations are being phased out.
100%
100%
CIECH Soda Romania S.A.
Ramnicu
Valcea,
Romania
Soda, Silicates
Manufacture of other basic inorganic chemicals,
wholesale of chemical products. Production
suspended in the Soda Segment.
98.74%
98.74%
CIECH Vitrosilicon S.A.
Iłowa
Silicates,
Packaging
Manufacture of other basic inorganic chemicals,
manufacture of other chemical products.
100%
100%
CIECH Vitro Sp. z o.o.*
Iłowa
Packaging
Manufacture of hollow glass, manufacture and
processing of other glass.
100%
100%
CIECH
Transclean Sp. z o.o.
Bydgoszcz
Other
Since 2017, the Company has been dormant.
100%
100%
CIECH Pianki Sp. z o.o.
Bydgoszcz
Foams
Manufacture of plastics in primary forms and
other plastic products.
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. The
company was sold
on 1 March 2021.
-
100%
CIECH Serwis i Remonty
Sp. z o.o.
Warsaw
Other
Provision of repair and maintenance services,
repair and maintenance of machinery.
100%
100%
CIECH Nieruchomości
Sp. z o.o.**
Warsaw
Other
Buying and selling of own real estate, estate
agency, real estate 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
–
discontinued
operations)
Provision of support services for companies
of the CIECH Group.
100%
100%
CIECH Ventures Sp. z o.o.
Warsaw
Other
Holding activities, other financial activities.
100%
-
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
105
Company name
Registered
office
Segment
Business
Share in
equity as at
31.12.2021 /
% of votes at
the GMS
Share in equity
as at
31.12.2020 / %
of votes at the
GMS
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 S.A.
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).
100%
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
The company was liquidated
on 31 August 2021.
-
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.
94.23%
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%
CIECH Agro Romania
S.R.L.
Ramnicu
Valcea,
Romania
Agro
Wholesale of chemical products.
100%
-
SDC Group
SDC GmbH
Stassfurt,
Germany
Soda
Holding company for all SDC Group entities.
100%
100%
CIECH Soda Deutschland
GmbH&Co. KG
Stassfurt,
Germany
Soda
Manufacture of other basic inorganic chemicals,
wholesale of chemical products.
100%
100%
Sodawerk Holding
Stassfurt GmbH
Stassfurt,
Germany
Soda
Holding activities.
100%
100%
Sodawerk Stassfurt
Verwaltungs GmbH
Stassfurt,
Germany
Soda
Management and financial activities.
100%
100%
CIECH Energy
Deutschland GmbH
Stassfurt,
Germany
Soda
Power generation and distribution.
100%
100%
Kaverngesellschaft
Stassfurt GbmH****
Stassfurt,
Germany
Soda
Management and maintenance
of gas caverns.
50%
50%
*Number of shares / votes at the GMS attributable directly to CIECH S.A. — 39.41%, indirect share through CIECH Soda Polska S.A. — the
remaining 60.59%.
**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 2021 (in PLN ‘000)
106
9.6. EVENTS AFTER THE BALANCE SHEET DATE
• On 3 February 2022, the District Court in Bydgoszcz registered a reduction of the capital of the subsidiary CIECH
Transclean Sp. z o.o. as a result of the cancellation of shares made at the Extraordinary Shareholders' Meeting on 21 July
2021, according to which 8,548 shares with a total nominal value of PLN 4,274 thousand were cancelled in exchange for
a total consideration of PLN 4,330 thousand, by way of the purchase of the above shares by the Company from the
shareholder under the agreement on the purchase of shares against consideration, concluded on 10 November 2021.
Following the cancellation of shares, the share capital of CIECH Transclean Sp. z o.o. was reduced from PLN 4,322
thousand (by PLN 4,274 thousand) to PLN 48 thousand.
• On 23 February 2022, a letter of intent was signed between the 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 City of Inowrocław, on their
cooperation in the preparation of conditions for making a decision on the investment consisting in the construction by
EEW, EEW Polska and FBSerwis, on the property owned by CIECH Soda Polska S.A., a thermal waste treatment
installation. For details on the letter, see current report No 2/2022.
9.7. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE RUSSIAN
INVASION ON UKRAINE ON THE ACTIVITIES OF CIECH GROUP
From the perspective of the CIECH Group and its individual business segments, the Russian invasion of Ukraine has brought
about unprecedented risks. These risks have a potentially high impact on ensuring the operational continuity of individual
production plants due to potential disruption to the supply chain and availability of raw materials. The Group's Management
Board has been monitoring the situation on an ongoing basis and analysing various scenarios for market reactions and
administrative decisions.
A description of the potential impact of the invasion of Ukraine on operations of individual business segments of the CIECH
Group is presented below
• Soda Segment – supplies of brine, power coal, limestone and anthracite are critical for maintaining operational
continuity of the soda plants located in Inowrocław and Janikowo. Coal is supplied to the production plants from Polish
suppliers and the raw material comes from Polish mines. The CIECH Group purchases power coal based on annual
contracts. There is a potential risk of problems with the availability of coal from Polish mines in a situation where
domestic demand for coal is redirected, as a priority, towards securing raw materials for the production of electricity
and heat for the public and for production facilities of strategic importance to national security.
From a long-term perspective, it should be emphasized that the Soda Segment is an important part of the Polish energy
and fuel ecosystem and is of strategic importance for the entire economy due to satisfying the demand for soda in many
industries. In addition, the segment is a key recipient of brine from caverns, which are used as reservoirs for the state's
strategic oil and gas reserves. The supply of brine as well as the maintenance of the operational continuity of soda plants
in Poland is crucial for maintaining the storage capacity of crude oil and gas in Poland. In connection with the above, it
can be concluded that the Soda Segment is high in the hierarchy of security of coal supplies from Polish mines, and thus
- the Management Board assesses the risk of interrupting supplies as low. In turn, in the short term, it should be assumed
that with the end of the heating season, the demand for heat will decline, hence the Management Board assesses the
risk as even lower in the coming quarters. The second important raw material necessary for the production of soda is
anthracite, which the Group, like its competitors producing soda using the Solvay method in Europe, imports from
Russia. Anthracite, which is used as a furnace fuel in the limestone firing process, can be replaced by coke, which is
currently available from Polish suppliers, but its price is significantly higher than that of the anthracite used to date.
Therefore, relying solely on coke would result in increased costs for soda plants. At present, the Group's plants hold
several weeks' worth of stocks of power resources.
For the soda segment plants located in Stassfurt, the key power resource is gas, 40% of which is imported into the Federal
Republic of Germany from Russia.
Additionally, about 1/3 of the gas consumed by the Stassfurt plant comes from a local source, which significantly reduces
the risk of interrupting the continuity of gas supplies. As in the case of Poland, the Soda Segment plays a very important
role in the country's energy system. The caverns from which the brine is obtained are used as natural gas storage
facilities. If Germany diversifies its gas sources and moves from Russian gas pipelines to gas terminals supplied to the
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
107
gas network, it may be important, as the demand for the use of storage capacity should increase. The Soda Segment and
the related glass industry, especially in the eastern federal states of Germany, is very important both in economic and
social terms, therefore the risk of interrupting gas supplies to the Stassfurt plant is assessed as very low. A potential
threat to continuity of brine supply should also be indicated. In the case of brine supplies - for Polish soda plants, a
hypothetical situation may arise in case of a threat to state security when a decision could be taken by the Polish
government to release fuel reserves stored in caverns, and then the brine will be used by the state-owned operator of
liquid fuel storage facilities to pumping them out. In the opinion of the Management Board, the risk of such a situation
is not high, however, if it did, it could (depending on the level of strategic reserves activation) have an impact on the
stability and continuity of production.
Furthermore, in addition to possible limitations in the availability of raw materials, the segment has already been
affected by increases in the prices of the listed power resources, and the increase in fuel prices also translates into
increased prices for transport services. The CIECH Group assumes that it will manage to pass on most of the increase in
costs of power resources to customers through higher product prices.
In terms of sales, the Soda Segment has not concluded any significant contracts with customers in the Ukrainian, Russian
and Belarusian markets, hence the Group does not recognise any risk of decreased revenues in this area caused by the
inability to supply these markets.
In turn, some risks and difficulties can be observed with respect to the availability of transport services - due to the fact
that before the conflict, a large proportion of truck drivers were from Ukraine, now, following the invasion of this
country, they stayed in their homeland due to the general military mobilisation or left Poland. The resulting shortage of
drivers on the market has reduced the availability of transport services.
• Agro Segment – there were no companies from the markets affected by the ongoing war among the suppliers of raw
materials and consumables for the production plant in Nowa Sarzyna, hence the situation does not have a significant
impact on the supply of raw materials. Also the increase in the cost of power resources will not significantly affect the
segment. However, the shortage of drivers in transport operators and difficulties in accessing these services are likely to
be experienced. At present, the segment does not sell to Belarusian, Ukrainian and Russian markets. Even before the
outbreak of war, the sale of technical MCPA to a Russian customer was suspended – this decision, however, was dictated
by reduced production at the plant in Nowa Sarzyna due to the shortage of raw material for its production. Also for this
reason, the segment does not supply technical MCPA to customers in the Ukrainian and Belarusian markets. In the
current situation, it has been assumed that this product will not be sold to eastern markets in 2022. The associated loss
of margin will not be material at the segment level, as margins earned from these customers are low.
• Foams Segment – Sales to Russia, Ukraine and Belarus were marginal; however, the conflict will have an impact on
furniture manufacturers in the domestic market. There is a risk of problems with the availability of furniture boards
manufactured from wood originating in Belarus and Ukraine. Thus, there is a risk of a decrease in furniture production
and thus demand for foams manufactured by the Bydgoszcz plant. Given the increased prices of power resources, the
segment expects an increase in the prices of raw materials required for the manufacture of foams. Like other segments,
the plant in Bydgoszcz will also experience an increase in the cost of transport services due to rising fuel prices and a
shortage of drivers on the market.
• Silicates Segment and Packaging Segment – as long as the Soda Segment continues to supply the soda necessary for the
production of silicates and packaging, these segments do not anticipate any problems with continuity of production.
The segments may experience a significant increase in the price of gas, while it should be noted that nitrogenous gas
extracted in Poland is used locally as a power resource, so there is no risk of suspension of its supply (the use of this gas
is strictly limited and in the event of a suspension of gas supplies from Russia, it cannot be fed into the pipelines of the
country's main gas pipeline network). The Silicates and Packaging Segments have already been affected by the rising
costs of transport services and the shortage of drivers, and thus the unavailability of transport services. Both segments
made no sales and had no customers in eastern markets; instead, they experienced increased competition from that
direction. At present, the competitive pressure from this direction is negligible and will most likely remain so until the
conflict is over.
It should be mentioned that the Group has already observed an increase in the risk of cyberattacks. Accordingly, appropriate
security updates were implemented, prevention measures were strengthened and monitoring of unusual events, logs and
operations was enhanced. All these measures have been implemented as part of the IT security policy and information
security policy. An intensive information campaign is also underway to build staff awareness of any unusual operations or
incidents.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
108
Another significant issue affecting the Group in connection with Russia's invasion of Ukraine, having an impact on all segments
and the Group as a whole, is that prices in the financial markets, including commodity prices, exchange rates and interest
rates, become highly volatile.
In the wake of the war between Russia and Ukraine, prices of assets perceived as more risky weakened considerably, which
translated into the depreciation of PLN against, among others, EUR and USD. The Group has a significant exposure to the
EUR/PLN exchange rate (total position of EUR 389.9 million) and a relatively low exposure to USD/PLN (total position of USD
1.5 million). In the short term, the weakening of the PLN against the EUR leads to an increase in negative valuations of
derivatives contracted that are sensitive to the EUR/PLN exchange rate (forward and CCIRS transactions), foreign currency
credit facilities in EUR and trade payables in EUR, which is offset by an increase in the valuation of loans granted in foreign
currency, receivables and cash held in foreign currency and an increase in the expected value of future revenues in foreign
currency. Taking into account the hedging relationships regarding future revenues in foreign currencies, the impact of
changes in the EUR/PLN rate on the current profit/loss is limited (the position affecting the current profit/loss is
EUR 27.5 million). The valuation of derivatives contracted does not involve any cash margin and an increase in the negative
valuation of transactions does not have a negative impact on the Group's current liquidity.
The conflict has led to an increase in inflationary expectations globally and in the Polish market, associated in particular with
an increase in the prices of oil derivatives, which may lead to an increase in the Group's operating expenses and also have
implications in terms of further increases in market interest rates. Market interest rate risk in respect of the Group's term
loans has been fully hedged with PLN IRS and CCIRS transactions entered into in May 2021 following the refinancing of the
loan, therefore an increase in market interest rates would have a limited impact on the Group's cash flows.
The CIECH Group enters into derivative transactions to hedge commodity risks, including regarding the sale of electricity, the
purchase of natural gas and CO
2
emission allowance units (EUAs). Due to significant changes in the prices of these raw
materials, there were significant changes in valuations of hedging transactions concluded (increase in positive valuation of
gas futures contracts, increase in negative valuation of energy futures contracts, decrease in positive valuation of EUA futures
contracts). Excluding transactions for the purchase of CO
2
emission allowance units, some of which are entered into on an
exchange, day-to-day changes in the valuation of the derivatives contracted do not involve cash margin and have no impact
on the Group's current liquidity.
The CIECH Group's liquidity situation is stable, and the CIECH Group companies have sufficient cash and available sources of
financing to be able to meet their obligations on time, even if current cash flows deteriorate and access to new sources of
financing becomes limited. As at 31 December 2021, the Group held cash of (PLN 799 million) and limits available under
committed credit facilities of (PLN 396 million). The Group had access to funds made available under committed facility
agreements (syndicated facility agreement with a total value of PLN 2,115 million) and additional sources of financing in the
form of receivables factoring agreements, reverse factoring agreements and overdraft facilities. At present, the Group also
does not identify any risk of default on repayment liabilities under the loan agreements or risk of loans being called in due to
failure to meet the level of ratios tested under the loan agreements. The ratio of the Group's consolidated net debt to
consolidated EBITDA tested under the loan agreements was 1.6x at the end of 2021, compared to the maximum level of 4.0x,
as set out in the agreement. The entire debt on account of the syndicated facility agreement is of a long-term nature, and no
principal payments are due until 30 June 2023.
The CIECH Group has not reported any negative impact of the sanctions imposed following the outbreak of war on its ability
to execute and settle transactions.
As at the date of these statements, the Group's analyses did not reveal any indications of significantly higher risk of
impairment of property, plant and equipment and intangible assets in use or investments in progress.
Nevertheless, due to the uncertainty related to the conflict its further development and in consequence the impact on the
global economy, the valuation of individual balance sheet items, including: fixed assets and intangible assets, inventories,
receivables, valuations of financial instruments as well as provisions and liabilities will be closely monitored and may change
in subsequent reporting periods.
It should be emphasized once again that the Group's Management Board monitors the situation related to the conflict on an
ongoing basis and takes steps to ensure the continuity of the Group, its individual companies as well as maintaining the
assumed margin levels.
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
109
9.8. INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE
COVID-19 CORONAVIRUS PANDEMIC ON THE CIECH GROUP'S ACTIVITIES
During 2021, the CIECH Group continued to operate under an ongoing pandemic, hence the current situation was strongly
affected by various restrictions. For this reason, the priority for the CIECH Group in 2021 was to protect the health and lives
of the Group's employees and third parties, to comply with the applicable safety restrictions and measures and to ensure the
continuity of operations of individual manufacturing plants of the CIECH Group.
In the period under review, the CIECH Group was adversely affected by the pandemic, which translated in many different
ways into the achievement of the Group's objectives and those of its individual business segments. When describing the
impact of the COVID-19 pandemic on the CIECH Group in 2021, it should be noted that the first half of last year was marked
by continuing restrictions and lockdowns of the economies in Poland and Europe, which translated into market problems for
key sectors that are customers of individual segments of the CIECH Group. In particular, these problems were experienced
by the automotive, HoReCa and construction industries. Still during the first half of the year, with the gradual unfreezing of
economies in Europe, signs of economic recovery began to appear, which the Group observed to their full extent during the
second half of the year. The second half of the year saw a full recovery, where customers of the CIECH Group and individual
segments fully restored their production capacities and began to make up for the losses incurred due to the restrictions and
lockdowns experienced in the first half of the year. However, this has resulted in a significant increase in the price of raw
materials and utilities, and a shortage of raw materials on the markets, which is difficult to predict. For the CIECH Group and
individual raw materials, shortages and increases in the prices of raw materials and utilities translated directly into an
unplanned increase in the cost of products manufactured.
Apart from the external factors caused by the pandemic in 2021, throughout the year the CIECH Group continued to comply
with the measures taken back in 2020 to protect the health and lives of employees, third-party employees and business
partners. Procedures were in place throughout the year under which direct interpersonal contact was limited and employees
were able to work remotely (where possible). In the case of groups of employees where it was not possible to work in a
remote manner (production workers), procedures were in place at individual plants to keep direct contact between shifts to
a necessary minimum, and the necessary required protective measures were still in place to minimise the risk of infection
and disease outbreaks. Owing to the vaccination process launched at the beginning of 2021, there were no outbreaks of
infections in the CIECH Group throughout 2021, which would result in the suspension of operations, in any of the production
plants. Throughout 2021, none of the Group's business areas was affected by the need to close or curtail operations. Owing
to the measures taken and procedures implemented, the Group's Management Board achieved its key objectives, which were
to ensure the health and safety of employees, to ensure the continuity of operations at the Group's production plants and to
avoid disruption to the supply chain.
On the other hand, from the point of view of achieving the Group's business objectives, the adverse impact of the COVID-19
pandemic and its effects was experienced by the Group in the second half of 2021 due to the onset of problems with the
availability of raw materials and an unforeseeable significant increase in the prices of raw materials and utilities.
This phenomenon affected, to a greater or lesser extent, most of the Group's business segments.
In 2021, the situation in the individual business segments of the CIECH Group was as follows:
• The Soda Segment, which is key to the CIECH Group in terms of maintaining business continuity in a pandemic situation,
did not record any negative events or incidents. The safety measures and procedures in place, as well as the vaccination
process, resulted in the only isolated cases of virus infection and quarantine of employees in the soda segment
production plants, without affecting the continuity of the plants' operations. On the demand side, the first half of the
year was marked by lower-than-expected demand for products manufactured, which can be explained by the prevailing
restrictions in the economy and a slowdown in such sectors as the construction, automotive and HoReCa industries.
Around the mid-year point, with the improvement of the epidemic situation in Europe and the opening up of individual
economies, economic recovery and increased demand for soda segment products came into view. As mentioned above,
the economic recovery was accompanied by a previously unanticipated increase in raw material prices, which directly
translated into an increase in the costs of operation of the soda segment plants. In addition, in the case of automotive
customers, the previously communicated interruptions in the operations of car manufacturing plants began to
materialise in the third quarter, due to the lack of availability of car electronics from Asia, necessary for the production
of new cars. Other sectors that are customers of the soda segment operated smoothly and continuously from the second
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
110
half of 2021, increasing the demand for soda. As a result, the soda segment met its sales targets, fulfilling its obligations
under the contacts signed for 2021. With regard to salt products, the first half of the year performed below expectations,
mainly in the HoReCa sector, as a result of long-term restrictions. From the second half of the year onwards, there was
an increase in demand due to the opening up of the economies. Unfortunately, there were technical failures in the
power generation area at the production plants, which led to the segment not being able to manufacture the targeted
volumes and thus failing to meet its sales targets at the end of 2021. It should also be mentioned that in 2021 the
construction of the new saltworks in Germany was completed and works began on the commissioning of the new plant.
The process of reaching full production capacity of the new salt works in Germany was not completed by the end of
2021.
• The Silicates Segment was unaffected by the pandemic throughout 2021 and operated in a smooth and uninterrupted
manner. Both production and sales levels were in line with plans. At the Żary plant, the Group completed an investment
project to build a new furnace, which enabled the segment to increase its silicate production capacity by 30%. The
increased capacity of the Iłowa plant was immediately placed on the market. In the second half of the year, the segment
was adversely affected by the increase in gas prices, which resulted in higher production costs; however, the materialised
risk of gas price increases was largely mitigated by the hedging policy in place. However, it should be emphasized that
the vast majority of the volume is sold on the basis of variable price formulas, which to a large extent allows to maintain
a constant margin.
• The Packaging Segment also proved resilient to COVID-19 in 2021. The segment managed to meet its targets for the
year, although at the end of the third quarter there were still some concerns that the situation seen in 2020 would
reoccur, when cemeteries were closed for the 1 November holiday by government decision and the segment's customers
entered 2021 with a high stock of unsold lanterns. This situation was experienced by the segment through weaker
demand for its products in early 2021. Last year, in 2021, the cemeteries were not closed on the November holiday,
allowing the Ilowa plant to meet its volume and value targets. Among unfavourable events, it should be mentioned that
the packaging segment was adversely affected by rising gas prices and increased production costs in the second half of
2021.
• The Foams Segment – in the first half of last year, the Bydgoszcz plant struggled with two main risks, i.e. the lack of raw
materials necessary for foam production (in particular, the lack of polyols and TDI) and rising prices of raw materials (an
increase in raw material prices by over 90% compared to the previous year, 2020). This resulted in the need to ration
foams to customers and to raise prices. In the second half of 2021, the availability of key raw materials (polyols and TDI)
improved, whereas, as a result of the economic recovery, demand for other raw materials that are also used by other
industries increased. This situation resulted in problems with the availability of raw materials, such as melamine, which
is necessary for the plant in Bydgoszcz to manufacture non-flammable foams. Problems with the availability of raw
materials were also associated with an increase in their prices. At the same time, the market has seen a weakening in
customer demand for new furniture. This has led to an oversupply of foams on the market. Price competition and
customer pressure to reduce foam prices has increased among foam manufacturers. Despite these adverse
developments, the segment met its targets for 2021.
• In 2021, the Agro Segment proved to be resilient to COVID-19 and did not experience any reduction in production due
to infections among employees and decline in demand from customers. The problems that the segment had to face in
2021 included a significant increase in the price of materials and raw materials and an increase in the cost of logistics
services. Despite these adverse developments, the Agro segment increased year-on-year, posting higher sales results
and increasing its market share. In 2021, a new herbicide, Halvetic, based on the innovative BGT (Better Glyphosate
Technology) that halves the amount of the active ingredient – glyphosate – while maintaining herbicide efficacy like
standard products on the market, was added to the Agro segment's product portfolio. Owing to the application of this
state-of-the-art technology, the new product has proved to be a sales hit for the segment and has ideally fitted in with
the segment's activities as part of the implementation of the EU strategy "From field to table" by promoting and
implementing environmentally friendly and safe solutions.
In other areas of the CIECH Group's operations, no adverse effects of the ongoing COVID-19 pandemic were recorded in 2021,
and:
• In the area of investment projects, in 2021, the CIECH Group continued and completed the projects started, including
work on the construction and commissioning of the new saltworks in Stassfurt, Germany. Other projects planned and
necessary for the Group's operations were also completed without any obstacles. An unfavourable development
experienced by the Group, which was triggered by the COVID-19 pandemic and the rapid economic recovery, was a
CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2021 (in PLN ‘000)
111
higher than expected increase in prices of materials, particularly the increase in steel prices. The Group's analyses did
not reveal any indications of an increased risk of impairment of property, plant and equipment and intangible assets in
use or investments in progress was found.
• The Group's liquidity situation in 2021 remained stable, and the CIECH Group Companies had sufficient cash and
available sources of financing to be able to meet their obligations on time. In the past year, the CIECH Group increased
its liquidity security by signing in March 2021 a new Facilities Agreement of PLN 2,115 million with a 5-year repayment
period, in order to refinance the existing debt. The facilities agreement was signed on 16 March 2021. Under the new
facilities agreement, the following loans were made available: an amortised term loan (PLN 560 million), an unamortised
term loan (PLN 1,305 million) and a revolving credit facility of PLN 250 million. The agreement signed provides for a grace
period of over 2 years for the repayment of the term loan (the first repayment is required on 30 June 2023), during which
no principal repayment of the loan will be required.
• During 2021, net cash flow from operating activities of PLN 1,279 million. Net cash flows from investing activities were
negative (PLN -707 million) due to ongoing capital expenditure. As at 31 December 2021, the Group held cash of
PLN 799 million and limits available under committed credit facilities of PLN 396 million. In 2021, the Group had access
to funds made available under committed facility agreements (syndicated facility agreement with a total value of approx.
PLN 2,115 million as at 31 December 2021) and additional sources of financing in the form of receivables factoring
agreements, reverse factoring agreements and overdraft facilities. The Group's liquidity security was largely supported
by the fact that in March 2021 the Management Board of CIECH S.A. signed a new Facilities Agreement with a value (on
the date of signing) of PLN 2,115 million and a 5-year repayment period, in order to refinance the existing debt.
• Moreover, in 2021 the CIECH Group also did not identify any risk of default on repayment liabilities under the loan
agreements or risk of loans being called in due to failure to meet the level of ratios tested under the loan agreements.
• Moreover, no deterioration of receivables repayment dates was found. The share of receivables overdue by more than
7 days in total receivables as at 31 December 2021 decreased compared to the level on 31 December 2020. The vast
majority of the Company's receivables were insured and financed through non-recourse factoring.
• The pandemic also did not have a negative impact on the Group's working capital. In 2021, during the COVID-19
pandemic, the Group did not experience any risk of non-performance of contracts at a higher level than in the course of
its day-to-day operations in the absence of the pandemic.
• In 2021, no additional impairment losses on non-current or current assets were recognised. There was also no need to
recognise additional provisions other than allowances and provisions which are recognised in the course of the Group's
ordinary activities.
• The Management Board estimates that in 2022 both the Parent Company and the subsidiaries will continue as going
concerns to a materially unchanged extent for at least 12 months from the date of the financial statements, with the
exception of CIECH Trading, in relation to which a liquidation plan has been implemented. However, it should be stated
that the pandemic situation creates 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 performance and measurement 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 2021 were approved
by the Company’s Management Board on 29 March 2022.
Warsaw, 29 March 2022
(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