ciech

CONSOLIDATED FINANCIAL

STATEMENTS

___________________

of the CIECH Group for 2022

KRS (National Court Register number) 0000011687

Statistical ID No (REGON): 011179878

Tax ID No (NIP): 118-00-19-377

Share capital: PLN 263,500,965.00 (paid up in full)

2022

ul. Wspólna 62, 00-684 Warsaw

Tel. +48 22 639 11 00

ciech@ciechgroup.com

We are providing a courtesy English translation of our 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 2022 (in PLN ‘000)

ciechgroup.com

THE CIECH GROUP – SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

in thousand PLN

in thousand EUR

12 months ended

31.12.2022

12 months ended

31.12.2021

12 months ended

31.12.2022

12 months ended

31.12.2021

Sales revenues on continued operations

5,415,459

3,483,713

1,155,101

761,051

Operating profit/(loss) on continued operations

590,177

340,504

125,883

74,386

Profit/(loss) before tax on continued operations

591,792

256,883

126,228

56,119

Net profit / (loss) for the period

564,701

281,085

120,449

61,405

Net profit/(loss) attributable to shareholders of

the parent company

566,937

281,866

120,926

61,576

Net profit/(loss) attributed to non-controlling

interest

(2,236)

(781)

(477)

(171)

Other comprehensive income net of tax

(167,670)

145,835

(35,763)

31,859

Total comprehensive income

397,031

426,920

84,686

93,264

Cash flows from operating activities

842,301

1,263,651

179,660

276,057

Cash flows from investment activities

(845,021)

(692,100)

(180,240)

(151,196)

Cash flows from financial activities

(109,590)

(221,542)

(23,375)

(48,398)

Total net cash flows

(112,310)

350,009

(23,955)

76,463

Earnings (loss) per ordinary share (in PLN/EUR)

10.76

5.35

2.30

1.17

as at 31.12.2022

as at 31.12.2021

as at 31.12.2022

as at 31.12.2021

Total assets

8,092,527

7,135,218

1,725,523

1,551,337

Non-current liabilities

2,181,430

2,542,124

465,134

552,708

Current liabilities

3,206,787

2,206,765

683,764

479,794

Total equity

2,704,310

2,386,329

576,625

518,835

Equity attributable to shareholders of the parent

2,710,221

2,390,105

577,885

519,656

Non-controlling interest

(5,911)

(3,776)

(1,260)

(821)

Share capital

287,614

61,326

62,533

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 31.12.2022

as at 31.12.2021

12 months

ended 31.12.2022

12 months

ended 31.12.2021

EUR 1 = PLN 4.6899

EUR 1 = PLN 4.5994

EUR 1 = PLN 4.6883

EUR 1 = PLN 4.5775

   CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000) 
 
ciechgroup.com 

THE CIECH GROUP – SELECTED FINANCIAL DATA ................................................................................................................................... 2 
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 
GENERAL INFORMATION ............................................................................................................................................................. 10 
1  INFORMATION ON THE GROUP’S ACTIVITIES ........................................................................................................................... 10 
2  BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING PRINCIPLES .................................................... 11 
2.1  REPRESENTATIONS BY THE MANAGEMENT BOARD ..................................................................................................... 11 
2.2  BASIS OF PREPARATION ............................................................................................................................................... 11 
3  FUNCTIONAL AND REPORTING CURRENCY ............................................................................................................................... 12 
4  ACCOUNTING POLICIES ............................................................................................................................................................. 13 
5  CHANGES IN ACCOUNTING POLICIES AND THE SCOPE OF DISCLOSURES ................................................................................. 13 
5.1  ADJUSTMENT OF PRIOR PERIOD ERRORS AND CHANGES IN ACCOUNTING POLICY .................................................... 14 
SEGMENT REPORTING ................................................................................................................................................................. 17 
NOTES  TO  THE  CONSOLIDATED  STATEMENT  OF  PROFIT  OR  LOSS  AND  CONSOLIDATED  STATEMENT  OF  OTHER 
COMPREHENSIVE INCOME ........................................................................................................................................................... 24 
1  SALES REVENUES....................................................................................................................................................................... 24 
2  COST OF SALES .......................................................................................................................................................................... 25 
3  COSTS BY TYPE .......................................................................................................................................................................... 25 
4  OTHER INCOME AND EXPENSES ............................................................................................................................................... 26 
4.1  DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES ............................................................................... 28 
5  FINANCIAL INCOME AND EXPENSES ......................................................................................................................................... 29 
6  COMPONENTS OF OTHER COMPREHENSIVE INCOME .............................................................................................................. 31 
INCOME TAX, DEFERRED TAX ASSETS AND LIABILITY.................................................................................................................... 32 
1  MAIN COMPONENTS OF TAX EXPENSE ..................................................................................................................................... 32 
2  EFFECTIVE TAX RATE ................................................................................................................................................................. 32 
3  DEFERRED INCOME TAX ............................................................................................................................................................ 33 
NOTES TO ASSETS REPORTED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ....................................................... 36 
1  PROPERTY, PLANT AND EQUIPMENT ........................................................................................................................................ 36 
2  RIGHT-OF-USE ASSETS .............................................................................................................................................................. 39 
3  INTANGIBLE ASSETS – NON-CURRENT AND CURRENT .............................................................................................................. 40 
4  GOODWILL IMPAIRMENT TESTING ........................................................................................................................................... 45 
5  INVESTMENT PROPERTIES ........................................................................................................................................................ 45 
6  LONG-TERM RECEIVABLES ........................................................................................................................................................ 46 
7  LONG-TERM FINANCIAL ASSETS................................................................................................................................................ 47 
8  SHARES IN JOINT VENTURES / INVESTMENTS IN ASSOCIATES .................................................................................................. 48 
9  INVENTORIES ............................................................................................................................................................................ 48 
10  SHORT-TERM RECEIVABLES ...................................................................................................................................................... 49 
11  SHORT-TERM FINANCIAL ASSETS .............................................................................................................................................. 51 
12  CASH AND CASH EQUIVALENTS ................................................................................................................................................ 51 
13  DISCONTINUED OPERATIONS, NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE AND LIABILITIES 
RELATED THERETO .................................................................................................................................................................... 52 
EQUITY ........................................................................................................................................................................................ 55 
1  CAPITAL MANAGEMENT ........................................................................................................................................................... 55 
2  CONSOLIDATED EQUITY ............................................................................................................................................................ 55 
3  DIVIDENDS PAID OR DECLARED ................................................................................................................................................ 58 
4  BUSINESS COMBINATIONS ........................................................................................................................................................ 59 
5  SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST ............................................................................................ 60 
6  EARNINGS PER SHARE ............................................................................................................................................................... 60 
LIABILITIES, PROVISIONS, EMPLOYEE BENEFITS ............................................................................................................................ 61 
1  INFORMATION ABOUT SIGNIFICANT FINANCIAL LIABILITIES .................................................................................................... 61 
2  OTHER NON-CURRENT LIABILITIES............................................................................................................................................ 62 
3  CURRENT TRADE AND OTHER LIABILITIES ................................................................................................................................. 63 
4  LEASES ....................................................................................................................................................................................... 64 
5  PROVISIONS FOR EMPLOYEE BENEFITS .................................................................................................................................... 67 
6  OTHER PROVISIONS .................................................................................................................................................................. 68 
FINANCIAL INSTRUMENTS, FINANCIAL RISK MANAGEMENT AND IMPAIRMENT .......................................................................... 71 
1  FINANCIAL INSTRUMENTS ........................................................................................................................................................ 71 
2  FINANCIAL INSTRUMENTS DESIGNATED FOR HEDGE ACCOUNTING ........................................................................................ 73 
3  FINANCIAL RISK MANAGEMENT ............................................................................................................................................... 76 
4  DETERMINATION OF FAIR VALUE ............................................................................................................................................. 82 
OTHER NOTES .............................................................................................................................................................................. 85 
1  NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................. 85 
2  INFORMATION ON CHANGES IN CONTINGENT ASSETS AND LIABILITIES AND OTHER MATTERS ............................................. 86 

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

9.3 INFORMATION ON TRANSACTIONS WITH RELATED PARTIES ................................................................................................... 98

9.3.1 TRANSACTIONS WITH RELATED PARTIES IN TOTAL ...................................................................................................... 98

9.3.2 SIGNIFICANT TRANSACTIONS CONCLUDED BY COMPANIES OR SUBSIDIARIES WITH RELATED PARTIES OTHER

THAN ON AN ARM’S LENGTH BASIS ............................................................................................................................. 99

9.3.3 DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES ................................................................. 99

9.3.4 TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL ............................................................................ 99

9.4 INFORMATION ABOUT AGREEMENTS CONCLUDED WITH THE ENTITY AUTHORISED TO AUDIT THE CIECH GROUP’S

CONSOLIDATED FINANCIAL STATEMENTS .............................................................................................................................. 100

9.5 COMPOSITION OF THE GROUP ............................................................................................................................................... 101

9.6 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF THE CIECH GROUP ...................................... 103

9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE RUSSIAN INVASION OF

UKRAINE ON THE CIECH GROUP'S ACTIVITIES ........................................................................................................................ 103

9.8 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE COVID-19 CORONAVIRUS

PANDEMIC ON THE CIECH GROUP'S ACTIVITIES ..................................................................................................................... 106

9.9 EVENTS AFTER THE REPORTING DATE .................................................................................................................................... 106

REPRESENTATION BY THE MANAGEMENT BOARD ................................................................................................................................. 108

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE CIECH GROUP

		01.01.-31.12.2022	01.01.-31.12.2021
	Note
CONTINUING OPERATIONS			restated
Sales revenues	3.1	5,415,459	3,483,713
Cost of sales	3.2	(4,247,230)	(2,851,407)
Gross profit/(loss) on sales		1,168,229	632,306
Other operating income	3.4	100,948	238,395
Selling costs		(294,522)	(229,101)
General and administrative expenses		(295,508)	(243,319)
Other operating expenses	3.4	(88,970)	(57,777)
Operating profit/(loss)		590,177	340,504
Financial income, including:	3.5	187,934	26,714
Profit from financial instruments	3.5	41,584	20,812
Financial costs, including:	3.5	(187,725)	(110,362)
Loss from financial instruments	3.5	(154,381)	(93,178)
Net financial income/(expenses)		209	(83,648)
Share of profit / (loss) of equity-accounted investees	5.9	1,406	27
Profit/(loss) before tax		591,792	256,883
Income tax	4.1	(27,091)	(37,666)
Net profit/(loss) on continuing operations		564,701	219,217
DISCONTINUED OPERATIONS
Net profit/(loss) on discontinued operations	5.14	-	61,868
Net profit / (loss) for the period		564,701	281,085
including:
Net profit/(loss) attributable to shareholders of the parent		566,937	281,866
company
Net profit/(loss) attributed to non-controlling interest		(2,236)	(781)
Earnings per share (in PLN):
Basic	6.6	10.76	5.35
Diluted	6.6	10.76	5.35
Earnings/(loss) per share (in PLN) from continuing operations:
Basic		10.76	4.17
Diluted		10.76	4.17

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.

For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME OF THE CIECH GROUP

	Note	01.01.-31.12.2022	01.01.-31.12.2021
			restated
Net profit/(loss) on continuing operations		564,701	219,217
Net profit/(loss) on discontinued operations		-	61,868
Net profit / (loss) for the period		564,701	281,085
Other comprehensive income before tax that may be reclassified to the statement of profit	3.6	(259,262)	216,385
or loss
Currency translation differences (foreign companies)		12,414	(4,370)
Profit (loss) from costs of hedging reserve		(57,777)	(16,672)
Profit (loss) from cash flow hedge reserve		(213,899)	237,461
Other components of other comprehensive income		-	(34)
Other comprehensive income before tax that may not be reclassified to the statement of profit or loss	3.6	745	(1,342)
Actuarial gains		745	(1,342)
Income tax attributable to other comprehensive income		90,847	(69,208)
Income tax attributable to other comprehensive income that may be reclassified to the statement of profit or loss	4.1.	90,983	(69,463)
Income tax attributable to other comprehensive income that may not be reclassified to the statement of profit or loss	4.1.	(136)	255
Other comprehensive income net of tax		(167,670)	145,835
TOTAL COMPREHENSIVE INCOME		397,031	426,920
Shareholders of the parent company		399,166	427,589
Non-controlling interest		(2,135)	(669)

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.

For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CIECH GROUP

	Note	31.12.2022	31.12.2021	31.12.2020
ASSETS			restated
Property, plant and equipment	5.1	3,933,393	3,863,321	3,366,296
Rights to use an asset	5.2	181,211	201,476	176,688
Intangible assets other than goodwill	5.3	394,545	369,067	395,193
Goodwill	5.4	151,852	149,270	149,709
Investment property	5.5	40,181	32,839	40,948
Non-current receivables	5.6	41,237	78,542	53,702
Investments in jointly-controlled entities measured under the equity	5.8	7,033	5,655	5,646
method
Long-term financial assets	5.7	18,516	12,449	12,477
Deferred income tax assets	4.3	132,774	74,984	50,688
Total non-current assets		4,900,742	4,787,603	4,251,347
Inventory	5.9	771,541	459,308	348,989
Short-term intangible assets other than goodwill	5.3	515,934	403,434	185,220
Short-term financial assets	5.11	359,634	102,382	19,863
Income tax receivables	5.10	54,334	21,004	25,760
Trade and other receivables	5.10	805,005	562,096	478,508
Cash and cash equivalents	5.12	684,969	799,023	443,886
Non-current assets and groups for disposal held for sale	5.13	368	368	161,970
Total current assets		3,191,785	2,347,615	1,664,196
Total assets		8,092,527	7,135,218	5,915,543
EQUITY AND LIABILITIES
Share capital	6.2	287,614	287,614	287,614
Share premium		470,846	470,846	470,846
Cash flow hedge reserve	8.2	35,848	158,763	(9,393)
Profit (loss) from costs of hedging reserve		(78,108)	(20,331)	(3,659)
Actuarial gains		(973)	(1,582)	(495)
Other reserve capitals	6.2	425,021	425,021	425,021
Currency translation reserve		(24,065)	(36,377)	(31,737)
Retained earnings		1,594,038	1,106,151	982,418
Equity attributable to shareholders of the parent		2,710,221	2,390,105	2,120,615
Non-controlling interest	6.4	(5,911)	(3,776)	(2,077)
Total equity		2,704,310	2,386,329	2,118,538
Non-current loans, borrowings and other debt instruments	7.1	1,671,280	1,854,154	360
Lease liabilities	7.4	104,849	121,172	103,523
Other non-current liabilities	7.2	228,645	231,752	82,028
Employee benefits reserve	7.5	14,344	15,273	12,958
Other provisions	7.6	137,189	270,649	153,261
Deferred income tax liability	4.3	25,123	49,124	49,016
Total non-current liabilities		2,181,430	2,542,124	401,146
Current loans, borrowings and other debt instruments	7.1	193,844	5,287	1,911,115
Lease liabilities	7.4	30,471	30,025	25,735
Trade and other liabilities	7.3	2,793,303	1,956,407	1,286,256
Income tax liabilities		67,224	128,592	47,918
Employee benefits reserve	7.5	2,764	2,643	3,100
Other provisions	7.6	119,181	83,811	95,237
Liabilities related to non-current assets and groups for disposal classified		-	-	26,498
as held for sale
Total current liabilities		3,206,787	2,206,765	3,395,859
Total liabilities		5,388,217	4,748,889	3,797,005
Total equity and liabilities		8,092,527	7,135,218	5,915,543

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.

For detailed information on the restatement of figures as at 31 December 2021, see Note 1.5.1 to these statements.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CONSOLIDATED STATEMENT OF CASH FLOWS OF THE CIECH GROUP

Note

		01.01.-31.12.2022	01.01.-31.12.2021
Cash flows from operating activities			restated
Net profit/(loss) for the period		564,701	281,085
Adjustments		439,282	1,088,754
Amortisation/depreciation		431,275	374,640
Recognition of impairment allowances		(6,387)	79,115
Foreign exchange (profit) /loss		(7,943)	(3,007)
Investment property revaluation		(6,891)	202
(Profit) / loss on investment activities		7,530	(158,018)
(Profit) / loss on disposal of property, plant and equipment		28,654	(4,157)
Dividends and interest		56,977	39,741
Income tax		27,091	39,190
(Profit) / loss on the settlement of construction contracts (caverns)		(2,354)	(22,732)
Share of (profit) / loss on equity accounted investees		(1,406)	(27)
Valuation of derivatives		(7,193)	285
Other adjustments	9.1	(218,193)	225,985
Change in receivables	9.1	(221,782)	(153,093)
Change in inventory	9.1	(308,704)	(106,638)
Change in current liabilities	9.1	779,874	786,432
Change in provisions and employee benefits	9.1	(111,266)	(9,164)
Interest paid		(127,884)	(43,964)
Interest cost hedging effect		62,456	(13,110)
(Profit) / loss on the settlement of construction contracts (caverns)		35,495	-
Income tax (paid)/returned		(131,749)	(49,114)
Net cash from operating activities		842,301	1,263,651
Cash flows from investment activities
Disposal of a subsidiary		50	66,954
Disposal of intangible assets and property, plant and equipment		4,244	478
Disposal of investment property		-	9,444
Interest received		6,698	651
Subsidies received		4,140	52,147
Proceeds from repaid borrowings		95	67,259
Acquisition of a subsidiary (after deduction of acquired cash)		(4,920)	(5,105)
Acquisition of intangible assets and property, plant and equipment		(447,915)	(731,361)
Development expenditures		(29,793)	(18,574)
Expenditure on the purchase of emission rights		(372,348)	(133,939)
Other investment inflows (outflows)	9.1	(5,272)	(54)
Net cash from investment activities		(845,021)	(692,100)
Cash flows from financial activities
Proceeds from loans and borrowings	7.1	2,143	195,496
Dividends paid to parent company		(79,050)	(158,099)
Repayment of loans and borrowings	7.1	-	(231,801)
Payments of lease liabilities	7.4	(32,683)	(27,055)
Other financial inflows (outflows)		-	(83)
Net cash from financial activities		(109,590)	(221,542)
Total net cash flows		(112,310)	350,009
Cash and cash equivalents as at the beginning of the period		799,023	448,799
Impact of foreign exchange differences		(1,744)	215
Cash and cash equivalents as at the end of the period	5.12	684,969	799,023

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.

For detailed information on the restatement of figures for the corresponding period, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY OF THE CIECH GROUP

				Profit (loss)			Currency		Equity	Non-
	Share capital	Share	Cash flow	from costs of	Other reserve	Actuarial	translation	Retained	attributable to	controlling	Total equity
		premium	hedge reserve	hedging	capitals	gains	reserve	earnings	shareholders	interest
				reserve					of the parent
01.01.2022 restated	287,614	470,846	158,763	(20,331)	425,021	(1,582)	(36,377)	1,106,151	2,390,105	(3,776)	2,386,329
Transactions with the owners	-	-	-	-	-	-	-	(79,050)	(79,050)	-	(79,050)
Dividend	-	-	-	-	-	-	-	(79,050)	(79,050)	-	(79,050)
Total comprehensive income for the period	-	-	(122,915)	(57,777)	-	609	12,312	566,937	399,166	(2,135)	397,031
Net profit / (loss) for the period	-	-	-	-	-	-	-	566,937	566,937	(2,236)	564,701
Other comprehensive income	-	-	(122,915)	(57,777)	-	609	12,312	-	(167,771)	101	(167,670)
31.12.2022	287,614	470,846	35,848	(78,108)	425,021	(973)	(24,065)	1,594,038	2,710,221	(5,911)	2,704,310
01.01.2021	287,614	470,846	(9,393)	(3,659)	425,021	(495)	(31,737)	982,418	2,120,615	(2,077)	2,118,538
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	-	-	168,156	(16,672)	-	(1,087)	(4,640)	281,832	427,589	(669)	426,920
Net profit / (loss) for the period	-	-	-	-	-	-	-	281,866	281,866	(781)	281,085
Other comprehensive income	-	-	168,156	(16,672)	-	(1,087)	(4,640)	(34)	145,723	112	145,835
31.12.2021	287,614	470,846	158,763	(20,331)	425,021	(1,582)	(36,377)	1,106,151	2,390,105	(3,776)	2,386,329

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.

For detailed information on the restatement of figures as at 1 January 2022, see Note 1.5.1 to these statements.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

1 GENERAL INFORMATION

1.1 INFORMATION ON THE GROUP’S ACTIVITIES

Parent company

CIECH S.A.

Legal form

Joint-stock Company

Registered office

Poland

Address

ul. Wspólna 62, 00-684 Warsaw, Poland

KRS (National Court Register number)

0000011687

(District Court for the capital city of Warsaw in Warsaw

Commercial Division of the National Court Register)

Country of registration

Poland

Statistical identification number (REGON)

011179878

Tax ID No (NIP)

118-00-19-377

BDO Registry Number

000015168

Website

www.ciechgroup.com

Branches held

CIECH S.A.’s Branch in Romania

CIECH S.A.’s Branch in Germany

Principal place of business

European Union

Ultimate parent company

KI Chemistry s. à r. l

(a subsidiary of Kulczyk Investments)

Ultimate parent company

Luglio Limited

CIECH is a diversified chemical group with a strong position on European markets. The group was founded in 1945 and currently employs

approximately

3,512 people. Since 2005, the shares of CIECH S.A. are listed on the Warsaw Stock Exchange, and from August 2016 also on the Frankfurt

Stock Exchange.

Products of the CIECH Group are manufactured in 9 production plants. The five largest production plants (2 in Poland, 2 in Germany and 1 in

Romania) operate in the Soda Segment and manufacture soda ash, soda derivatives and salt; the plant in Romania produces glassy sodium

silicate and sodium water glass. The remaining 4 plants operating in the Agro, Foams, Silicates and Packaging segments are located in Poland.

Soda production at the Romanian plant was suspended in the third quarter of 2019 (for more information, see current report No 40/2019).

In addition, Proplan outsources product formulation and packaging services to two plants.

CIECH Vitrosilicon

CIECH Vitro

CIECH Soda Romania

CIECH Sarzyna

Proplan

CIECH Soda Deutschland

Ciech Agro Romania

CIECH Soda Polska

CIECH Salz Deutschland

CIECH Pianki

Production

Distribution

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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The CIECH Group consists of domestic and foreign manufacturing, distribution and trade companies operating in the chemical industry. The

CIECH Group comprises CIECH S.A. as the parent company, and related companies located, inter alia, in Poland, Germany, Romania and

Spain.

The Parent company of the Group is CIECH S.A. It is a holding company that manages domestic and foreign manufacturing, trade and service

companies of the Group. CIECH S.A. also provides support services to key subsidiaries. Key products manufactured by the CIECH Group

include: soda ash, sodium bicarbonate, evaporated salt, agrochemical products, polyurethane foams, lanterns and jars, sodium and

potassium silicates.

The core sales market for the CIECH Group is the European Union, including mainly Poland, Germany and Central Eastern European countries.

Products manufactured by the CIECH Group are also exported to overseas markets.

The parent company of CIECH S.A. has a branch in Romania, a branch in Germany, and operates through its offices in Inowrocław and

Janikowo. CIECH Trading Sp. z o.o. subsidiary has a branch in Bydgoszcz.

A detailed description of the CIECH Group entities is provided in note 9.5 to these financial statements.

There have been no changes in the name of the reporting unit or other identification data since the end of the previous reporting period.

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 2022 to 31 December 2022, including comparative

data, were approved by the Management Board of CIECH S.A. on 23 March 2023.

The Management Board of CIECH S.A. represents that these 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 2022 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 BDO Spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered

office in Warsaw, entered into the list of entities authorised to audit financial statements under the registry No 3 355 kept by the National

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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All entities belonging to the CIECH Group operate according to the financial year corresponding to the calendar year.

These consolidated financial statements, except for the consolidated statement of cash flows, have been prepared on the accrual basis. The

consolidated statement of profit or loss of the CIECH Group is prepared in the cost by function format. The Group’s consolidated statement

of cash flows is prepared under the indirect method.

Preparation of the financial statement in accordance with IFRS requires the Management Board to make own assessments and apply certain

assumptions and accounting estimates as part of the application of accounting principles adopted by the Group. Issues which require

significant assessments or areas where the assumptions and estimates made have a significant impact on these consolidated financial

statements have been described in Note 1.4.

1.3 FUNCTIONAL AND REPORTING CURRENCY

The Polish zloty (PLN) is the functional currency of the parent company, CIECH S.A., and the reporting currency of these consolidated financial

statements. Unless stated otherwise, all financial data in these consolidated financial statements have been presented in thousands of Polish

zlotys (PLN ’000).

The functional currencies for the significant foreign subsidiaries are as follows: SDC Group, Ciech Group Financing AB, Proplan Plant

Protection Company S.L. and CIECH Salz Deutschland GmbH – EUR, CIECH Soda Romania S.A. – RON. For the purpose of 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	31.12.20221	31.12.20212
EUR	4.6899	4.5994
RON	0.9475	0.9293

	Average NBP rate for the reporting period	12 months ended	12 months ended
		31.12.2022 3	31.12.2021 4
EUR		4.6883	4.5775
RON		0.9501	0.9293

NBP’s average foreign exchange rates table applicable as at 31 December 2022.

NBP’s average foreign exchange rates table applicable as at 31 December 2021.

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 2022 to 31 December 2022.

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.

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 statement of financial position is recognised in equity under "Exchange differences on translation of foreign operations" .

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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1.4 ACCOUNTING POLICIES

To ensure more legible presentation and better understanding of the information disclosed in the consolidated financial statements, key

accounting policies applicable in the CIECH Group as well as judgements and estimates made have been presented in separate notes.

Note	Title	Accounting principles	Judgements and
			estimates
3.1	Sales revenues	X
3.2	Cost of sales	X
3.4	Other operating income and expenses	X	X
3.5	Financial income and expenses	X	X
4.1	Main components of tax expense	X
4.3	Deferred income tax	X	X
5.1	Property, plant and equipment	X	X
5.2	Right-of-use assets	X	X
5.3	Intangible assets	X	X
5.5	Investment properties	X	X
5.6	Long-term receivables	X	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-	X	X
	current assets classified as held for sale
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:	Impact on the financial	Effective year in the EU
	statements
Approved by the IASB for application as as at the balance sheet date
Amendments to IFRS 3 “Business Combinations” – amendments to references in	No material impact on the
the Conceptual Framework along with amendments to IFRS 3	financial statements is	2022
	estimated
Amendments to IFRS 16 “Property, plant and equipment”	The effect of the amendment	2022
proceeds before intended use	presented in Note 1.5.1
Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” –	No material impact on the
onerous contracts – cost of fulfilling the contract	financial statements is	2022
	estimated
Annual Improvements to IFRSs, 2018–2020 Cycle – amendments in respect of	No material impact on the
recognition and measurement: IFRS 1, IFRS 9, IAS 41	financial statements is	2022
	estimated

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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New Standards, amendments to Standards and Interpretations:	Impact on the financial	Effective year in the EU
	statements
New standards and interpretations entering into force after the balance sheet
date	No material impact on the
IFRS 17 “Insurance Contracts”	financial statements is	2023
	estimated
Amendments to IAS 1 “Presentation of financial statements” – disclosures of	No material impact on the
accounting policies used in practice – the issue of materiality in relation to	financial statements is	2023
accounting policies	estimated
Amendments to IAS 8 “Accounting policies, changes in accounting estimates and	No material impact on the
errors” – definition of accounting estimates	financial statements is	2023
	estimated
Amendments to IAS “12 Income Tax” – deferred tax related to assets and liabilities	No material impact on the
arising from a single transaction	financial statements is	2023
	estimated
Amendments to IFRS 17 “Insurance contracts” – Initial Application of IFRS 17 and	No material impact on the
IFRS 9 Financial Instruments – comparative information	financial statements is	2023
	estimated
Approved by the IASB for application after 1 January 2024
Amendments to IFRS 16 “Leases” - lease obligations in sale and leaseback	No material impact on the
transactions	financial statements is	Not endorsed
	estimated
Amendments to IAS 1 “Presentation of financial statements” – classification of	No material impact on the
liabilities as current or non-current	financial statements is	Not endorsed
	estimated
New standards and interpretations pending endorsement by the European Union	Impact on the financial	Effective year in the EU
	statements
	No material impact on the	The effective date has been
IFRS 14 “Regulatory deferral accounts”	financial statements is	postponed
	estimated
Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28	No material impact on the	The effective date has been
“Investments in Associates and Joint Ventures” – sale or contribution of assets	financial statements is	postponed
between an investor and its associate or joint venture, and further amendments	estimated

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 2021:

of
comparable data as at 31
December 2021 due to the	The change relates to the reclassification of part of the amounts advanced in one of the subsidiaries previously
reclassification of some amounts	presented as receivables to inventories of material in transit to conform to the presentation applied in 2022.
relating to materials in transit
between receivables and inventories
Change in the presentation of	In order to improve the presentation and ensure better information content for the recipient, the presentation of
comparable data on commissions	interest was changed (separating the interest cost hedging effect) and changes in liabilities due to the arrangement
and interest on loans in the Statement of cash flows	commission (moving to other adjustments).
	Until 31 December 2021, the value of fixed assets under construction included revenues and costs related to the
Amendments to IAS 16 “Property,	sale of test production of CIECH Salz Deutschland GmbH. Following the amendment to IAS 16 effective from
Plant and Equipment” – proceeds	1 January 2022, proceeds and related expenses earned before a non-current asset is placed in service are
before intended use	recognised in profit or loss. The above change had no impact on other presented periods and comparatives.

The impact of the changes on the previously reported consolidated data as at 31 December 2021 is presented below:

	After adjustment as	Impact of	Presentation	Previously presented
	at 31.12.2021	amendments	adjustment of	31.12.2021
		to IAS 16	materials in transit
ASSETS
Property, plant and equipment	3,863,321	(15,339)	-	3,878,660
Deferred tax assets	74,984	4,737	-	70,247
Total non-current assets	4,787,603	(10,602)		4,798,205

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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	After adjustment as	Impact of	Presentation	Previously presented
	at 31.12.2021	amendments	adjustment of	31.12.2021
		to IAS 16	materials in transit
Inventories	459,308	-	36,802	422,506
Trade and other receivables	562,096	-	(36,802)	598,898
Total current assets	2,347,615	-	-	2,347,615
Total assets	7,135,218	(10,602)	-	7,145,820
EQUITY AND LIABILITIES
Currency translation differences (foreign	(36,377)	(50)	-	(36,327)
companies)
Retained earnings	1,106,151	(10,552)	-	1,116,703
Equity attributable to shareholders of the parent	2,390,105	(10,602)	-	2,400,707
Non-controlling interest	(3,776)	-	-	(3,776)
Total equity	2,386,329	(10,602)	-	2,396,931
Total non-current liabilities	2,542,124	-	-	2,542,124
Total current liabilities	2,206,765	-	-	2,206,765
Total liabilities	4,748,889	-	-	4,748,889
Total equity and liabilities	7,135,218	(10,602)	-	7,145,820

	as at	Impact of amendments to	Previously presented
	31.12.2021	IAS 16	31.12.2021
Net sales revenues	3,483,713	23,798	3,459,915
Cost of sales	(2,851,407)	(39,065)	(2,812,342)
Gross profit/(loss) on sales	632,306	(15,267)	647,573
Other operating income	238,395	-	238,395
Selling costs	(229,101)	-	(229,101)
General and administrative expenses	(243,319)	-	(243,319)
Other operating expenses	(57,777)	-	(57,777)
Operating profit/(loss)	340,504	(15,267)	355,771
Net financial income/(expenses)	(83,648)	-	(83,648)
Share in net profit of subordinated entities accounted for with equity method	27	-	27
Profit/(loss) before tax	256,883	(15,267)	272,150
Income tax	(37,666)	4,715	(42,381)
Net profit/(loss) from continuing operations	219,217	(10,552)	229,769
DISCONTINUED OPERATIONS
Net profit/(loss) on discontinued operations	61,868	-	61,868
Net profit/(loss) for the period	281,085	(10,552)	291,637
including:		-
Net profit/(loss) attributable to shareholders of the parent	281,866	(10,552)	292,418
Net profit/(loss) attributable to non-controlling interest	(781)	-	(781)
Earnings/(loss) per share (in PLN):		-
Basic	5.35	(0.2)	5.55
Diluted	5.35	(0.2)	5.55
Earnings/(loss) per share (in PLN) from continuing operations:		-
Basic	4.17	(0.2)	4.37
Diluted	4.17	(0.2)	4.37

	Share capital	Currency		Equity
	and other	translation	Retained	attributable	Non-
	components	differences	earnings	to	controlling	Total equity
	of equity	(foreign		shareholders	interest
		(unchanged) companies)		of the parent
31.12.2021	1,320,331	(36,327)	1,116,703	2,400,707	(3,776)	2,396,931
(previously presented)
Change in accounting principles – IAS 16	-	(50)	(10,552)	(10,602)	-	(10,602)
31.12.2021 (after adjustments)	1,320,331	(36,377)	1,106,151	2,390,105	(3,776)	2,386,329

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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		Impact of	Presentation	Presentation	Previously
		amendments to	adjustment of	adjustment of	presented
	After adjustment as at 31.12.2021	IAS 16	interest and loan	materials in transit	31.12.2021
			arrangement fee
Net profit/(loss) for the period	281,085	(10,552)	-	-	291,637
Adjustments	1,088,754	(4,715)	13,110	-	1,080,358
Dividends and interest	39,741	-	13,110		26,631
Income tax	39,190	(4,715)	-	-	43,905
Change in liabilities due to loan	-	-	7,318	-	(7,318)
arrangement fee
Other adjustments	225,985	-	(7,318)	-	233,302
Change in receivables	(153,093)	-	-	36,802	(189,895)
Change in inventory	(106,638)	-	-	(36,802)	(69,836)
Interest cost hedging effect	(13,110)	-	(13,110)	-	-
Net cash from investment activities	1,263,651	(15,266)	-	-	1,278,917
Acquisition of intangible assets and property, plant and equipment	(731,361)	15,266	-	-	(746,627)
Net cash from investment activities	(692,100)	15,266	-	-	(707,366)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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2 SEGMENT REPORTING

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)

The most important products manufactured in this Segment are: light and dense soda ash, evaporated salt, sodium bicarbonate and

calcium chloride. The products of this area are sold mainly by the parent company CIECH S.A. The Segment’s goods are produced in CIECH

Soda Polska S.A., the Romanian company CIECH Soda Romania S.A. (until September 2019) and in the German companies CIECH Soda

Deutschland GmbH&Co. KG and CIECH Salz Deutschland GmbH (the German companies also sell their products on their own). 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.

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

S.A. For this reason, it is not possible to allocate direct costs in an unambiguous way (mainly: coal, electricity, CO

, 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 inappropriate. Decisions on the above matters are made at

the level of the Management Board of CIECH S.A.

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 (comparable figures)

The CIECH Group was a producer of a variety of organic compounds manufactured by CIECH Żywice Sp. z o.o. In the first quarter of 2021,

it produced, among other things, 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Silicates Segment

It 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

It 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 Segment

It covers mainly services rendered outside the Group and goods sold mainly by CIECH S.A., and within the Group, Ciech Serwis i Remonty

Sp. z o.o. 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 provides

support services in various areas.

As of 1 January 2022 (along with restatement of comparative data broken down by operating segments, as presented below), other

activities include the operations of CIECH Cargo Sp. z o.o. which renders rail transport services, mainly to companies within the CIECH

Group.

The Group financing is managed (including finance expenses and income with the exception of interest and exchange differences on trade

receivables and liabilities) and income tax is calculated on the Group level and they are not allocated to particular Segments.

The CIECH Group has been divided into the following geographical areas: Poland, European Union, Other European countries, Africa, Asia,

Other regions. Information on the Group geographical areas is established based on the Group’s assets 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.

For discontinued operations, EBITDA and adjusted EBITDA figures are as follows:

	01.01.-31.12.2022	01.01.-31.12.2021 1
Net profit/(loss) on continuing operations	564,701	219,217
Income tax	27,091	37,666
Share of profit / (loss) of equity-accounted investees	(1,406)	(27)
Financial expenses	187,725	110,362
Financial income	(187,934)	(26,714)
Amortisation/depreciation	431,275	374,640
EBITDA on continued operations	1,021,452	715,144
EBITDA on discontinued operations	-	6,928
EBITDA on continued and discontinued operations	1,021,452	722,072

Restated data. For detailed information on the restatement, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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	01.01.-31.12.2022	01.01.-31.12.2021
EBITDA on continued operations	1,021,452	715,144
One-offs including:	11,739	(3,796)
Impairment (a)	2,821	262
Cash items (b)	7,476	(4,195)
Non-cash items (without impairment) (c)	1,442	137
Adjusted EBITDA on continued operations	1,033,191	711,348
Adjusted EBITDA on discontinued operations	-	6,951
Adjusted EBITDA on continued and discontinued operations	1,033,191	718,299

	01.01.-31.12.2022	01.01.-31.12.2021
Operating profit/(loss)	-	6,928
Amortisation and depreciation	-	-
One-offs		23
EBITDA from discontinued operations	-	6,928
Adjusted EBITDA on discontinued operations	-	6,951

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 losses on property, plant and equipment and intangible assets.

(b) Cash items: gain/loss of the sale of property, plant and equipment, fines and compensations received or paid, donations given, fortuitous events.

(c) Non-cash items: fair value measurement of investment properties, costs of liquidation of property, plant and equipment, the costs of suspended investments,

restructuring costs, environmental provisions, provisions for liabilities and compensation and other items (including extraordinary costs and other provisions).

Adjusted EBITDA may be adjusted for other untypical non-recurring events not listed above.

Additional information on adjustments has been presented under tables presenting the consolidated statement of profit or loss by operating

segments.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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:

			Foams	Silicates	Packaging	Other	Corporate	Eliminations
OPERATING SEGMENTS 01.01.-31.12.2022	Soda Segment	Agro Segment	Segment	Segment	Segment	operations	functions	(consolidation	TOTAL
						Segment		adjustments)
Revenues from third parties	3,869,009	560,126	336,660	528,998	104,584	16,082	-	-	5,415,459
Revenue from inter-segment transactions	168,835	-	369	528	1,589	131,392	-	(302,713)	-
Total sales revenues	4,037,844	560,126	337,029	529,526	106,173	147,474	-	(302,713)	5,415,459
Cost of sales	(3,208,034)	(366,470)	(268,308)	(408,380)	(85,072)	(136,444)	-	225,478	(4,247,230)
Gross profit /(loss) on sales	829,810	193,656	68,721	121,146	21,101	11,030	-	(77,235)	1,168,229
Selling costs	(230,393)	(58,229)	(12,541)	(39,357)	(9,233)	(246)	-	55,477	(294,522)
General and administrative expenses	(136,992)	(38,515)	(5,551)	(7,450)	(4,510)	(13,183)	(107,307)	18,000	(295,508)
Result on management of receivables	8,545	(610)	69	(1)	(482)	(690)	188	(332)	6,687
Result on other operating activities	4,675	(3,002)	909	(2,559)	112	10,448	(899)	(4,393)	5,291
Operating profit /(loss)	475,645	93,300	51,607	71,779	6,988	7,359	(108,018)	(8,483)	590,177
Exchange differences and interest on trade settlements	(7,674)	(15,148)	7,869	112	81	(50)	1,827	-	(12,983)
Group borrowing costs	-	-	-	-	-	-	(35,131)	-	(35,131)
Result on financial activity (non-attributable to segments)	-	-	-	-	-	-	48,323	-	48,323
Share of profit / (loss) of equity-accounted investees	1,406	-	-	-	-	-	-	-	1,406
Profit /(loss) before tax	469,377	78,152	59,476	71,891	7,069	7,309	(92,999)	(8,483)	591,792
Income tax	-	-	-	-	-	-	-	-	(27,091)
Net profit /(loss) on continuing operations	-	-	-	-	-	-	-	-	564,701
Net profit /(loss) for the period	-	-	-				-	-	564,701
Amortization/depreciation	313,259	45,057	4,653	17,714	4,270	27,971	18,351	-	431,275
EBITDA from continuing operations	788,904	138,357	56,260	89,493	11,258	35,330	(89,667)	(8,482)	1,021,452
Adjusted EBITDA from continuing operations 1	795,545	144,422	55,492	92,618	12,386	30,794	(89,281)	(8,785)	1,033,191
ASSETS	4,885,306	897,548	74,655	239,292	66,748	156,980	1,881,428	(109,430)	8,092,527
LIABILITES	785,819	123,615	65,372	69,328	13,910	32,330	4,395,189	(97,346)	5,388,217
Investment outlays	299,988	36,165	5,741	45,046	7,741	16,996	19,754	-	431,431

Adjusted EBITDA for the 12-month period ended 31 December 2022 is calculated as EBITDA adjusted for untypical one-off events, including: impairment losses: PLN -2.8 million; change in provisions: PLN -6.4 million; liquidation of fixed

assets: PLN -2.0 million; disposal of fixed assets: PLN 1.7 million; fines and compensation: PLN 2 million; other: PLN -0.2 million.

The value of investments in equity-accounted entities occurs only for the assets of the soda segment and amounts to PLN 7,033 thousand as at 31 December 2022 (PLN 5,655 thousand as at

31 December 2021).

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

OPERATING SEGMENTS			Foams	Silicates	Packaging	Other	Corporate	Eliminations
01.01.-31.12.2021	Soda Segment	Agro Segment	Segment	Segment	Segment	operations	functions	(consolidation	TOTAL 1
						Segment		adjustments)
Revenues from third parties	2,210,325	486,925	389,953	237,958	73,652	84,900	-	-	3,483,713
Revenue from inter-segment transactions	76,926	64	84	197	1,134	108,626	-	(187,031)	-
Total sales revenues	2,287,251	486,989	390,037	238,155	74,786	193,526	-	(187,031)	3,483,713
Cost of sales	(1,925,127)	(340,374)	(310,676)	(185,191)	(52,361)	(181,214)	-	143,536	(2,851,407)
Gross profit /(loss) on sales	362,124	146,615	79,361	52,964	22,425	12,312	-	(43,495)	632,306
Selling costs	(180,863)	(43,822)	(10,937)	(27,428)	(7,140)	(1,205)	-	42,294	(229,101)
General and administrative expenses	(84,201)	(33,876)	(6,332)	(6,412)	(3,699)	(9,094)	(103,799)	4,096	(243,317)
Result on management of receivables	(4,587)	2,536	24	(5)	(3)	996	-	54	(985)
Result on other operating activities	176,914	5,197	(555)	1,261	601	4,897	(1,161)	(5,553)	181,601
Operating profit /(loss)	269,387	76,650	61,561	20,380	12,184	7,906	(104,960)	(2,604)	340,504
Exchange differences and interest on trade settlements	(48)	(3,643)	190	1,013	29	(638)	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	269,366	73,007	61,751	21,393	12,213	7,268	(185,511)	(2,604)	256,883
Income tax	-	-	-	-	-	-	-	-	(37,666)
Net profit /(loss) on continuing operations	-	-	-	-	-	-	-	-	219,217
Net profit /(loss) on discontinued operations	-	-	-	-	-	-	-	-	61,868
Net profit /(loss) for the period	-	-	-				-	-	281,085
Amortization/depreciation	278,628	39,110	3,679	9,537	5,983	22,831	14,872	-	374,640
EBITDA from continuing operations	548,015	115,760	65,240	29,917	18,167	30,737	(90,088)	(2,604)	715,144
Adjusted EBITDA from continuing operations 2	546,084	114,901	65,331	30,375	16,929	28,314	(87,986)	(2,600)	711,348
ASSETS 3	4,120,352	783,143	62,300	171,139	36,973	47,179	1,962,473	(48,341)	7,135,218
LIABILITES 3	381,282	138,122	69,371	49,100	6,819	12,164	4,135,863	(43,832)	4,748,889
Investment outlays	598,697	29,579	4,133	71,145	5,194	3,728	29,910	-	742,386

Restated data. For information on the restatement of comparative data by segment, see Note 2 and Note 1.5.1 above.

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.

Restated data. For detailed information on the restatement, see Note 1.5.1 to these statements. Also, short-term intangible assets have been allocated to individual segments accordingly. They were presented as unallocated items in

the Consolidated Financial Statements for 2021.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

SALES REVENUES — BUSINESS SEGMENTS

	01.01.-31.12.2022	01.01.-31.12.2021 1	Change 2022/2021	Change %
Soda segment, including:	4,037,844	2,287,251	1,750,593	76.5%
Dense soda ash	2,122,815	1,104,737	1,018,078	92.2%
Light soda ash	504,104	357,574	146,530	41.0%
Salt	385,302	207,265	178,037	85.9%
Sodium bicarbonate	329,135	219,135	110,000	50.2%
Energy	462,360	210,472	251,888	119.7%
Calcium chloride	24,171	30,889	(6,718)	(21.7%)
Other products	41,122	80,253	(39,131)	(48.8%)
Revenues from inter-segment transactions	168,835	76,926	91,909	119.5%
Agro segment, including:	560,126	486,989	73,137	15.0%
Agro products	560,126	486,925	73,201	15.0%
Revenues from inter-segment transactions	-	64	(64)	-
Foams segment, including:	337,029	390,037	(53,008)	(13.6%)
Polyurethane foams	336,660	389,953	(53,293)	(13.7%)
Revenues from inter-segment transactions	369	84	285	339.3%
Silicates segment, including:	529,526	238,155	291,371	122.3%
Sodium silicates	511,313	228,099	283,214	124.2%
Potassium silicates	17,405	9,750	7,655	78.5%
Other products	280	109	171	156.9%
Revenues from inter-segment transactions	528	197	331	168.0%
Packaging segment, including:	106,173	74,786	31,387	42.0%
Glass packaging	104,584	73,652	30,932	42.0%
Revenues from inter-segment transactions	1,589	1,134	455	40.1%
Other segment, including:	147,474	193,526	(46,052)	(23.8%)
Revenues from third parties	16,082	84,900	(68,818)	(81.1%)
Revenues from inter-segment transactions	131,392	108,626	22,766	21.0%
Consolidation adjustments	(302,713)	(187,031)	(115,682)	(61.9%)
TOTAL	5,415,459	3,483,713	1,931,746	55.5%

Restated data. For information on the restatement of comparative data by segment, see Note 1.5.1 to the report.

For detailed information on the recognition of sales revenue, please refer to Note 3.1 to these financial statements.

INFORMATION ON GEOGRAPHICAL AREAS

Information on the CIECH Group geographical areas is established based on the Group’s assets location.

	Non-current assets	Deferred income tax
ASSETS DIVIDED ON GEOGRAPHICAL REGIONS	other than financial	assets	Other assets	Total assets
	instruments
31.12.2022
Poland	2,566,831	56,923	2,129,152	4,752,906
European Union (excluding Poland)	2,196,909	75,851	1,056,375	3,329,135
Other European countries	-	-	180	180
Africa	-	-	1,693	1,693
Asia	-	-	6,257	6,257
Other regions	-	-	2,356	2,356
TOTAL	4,763,740	132,774	3,196,013	8,092,527
31.12.2021 1
Poland	2,489,645	64,707	2,019,215	4,573,567
European Union (excluding Poland)	2,223,317	10,277	307,415	2,541,009
Other European countries	-	-	2,432	2,432
Africa	-	-	2,313	2,313
Asia	-	-	7,022	7,022
Other regions	-	-	8,875	8,875
TOTAL	4,712,962	74,984	2,347,272	7,135,218

Restated data. For detailed information, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

SALES REVENUES – GEOGRAPHICAL STRUCTURE OF MARKETS

	01.01.-31.12.2022	01.01.-31.12.2021 1	Change 2022/2021
Poland	2,588,860	1,748,175	48.1%
European Union (excluding Poland)	2,542,937	1,571,718	61.8%
Germany	1,365,964	805,723	69.5%
Romania	40,002	53,060	(24.6%)
Czech Republic	288,933	166,908	73.1%
Italy	42,181	27,744	52.0%
The Netherlands	258,219	139,952	84.5%
Finland	110,537	50,060	120.8%
Sweden	3,289	23,560	(86.0%)
Belgium	36,479	35,435	2.9%
Denmark	72,546	42,388	71.1%
Spain	128,772	107,588	19.7%
Austria	29,953	39,737	(24.6%)
France	21,301	21,426	(0.6%)
Luxembourg	61,730	398	15410.1%
Lithuania	19,683	16,331	20.5%
Other EU countries	63,348	41,408	53.0%
Other European Countries	166,073	77,334	114.7%
Switzerland	20,948	10,815	93.7%
Norway	78,033	44,375	75.8%
United Kingdom	4,776	4,896	(2.5%)
Russia 2	1,177	5,985	(80.3%)
Other European countries	60,848	11,263	440.2%
Africa	16,671	17,286	(3.6%)
Asia	58,375	37,855	54.2%
China	762	4,474	(83.0%)
Singapore	1,368	6,819	(79.9%)
Turkey	39,828	6,169	545.6%
Other Asian countries	16,417	20,393	(19.5%)
Other regions	13,503	26,383	(48.8%)
Cash flow hedge adjustment	29,040	4,962	-
TOTAL	5,415,459	3,483,713	55.5%

Restated data. For detailed information, see Note 1.5.1 to this report.

Sales carried out until 24 February 2022, after 24 February 2022 the contracts have been discontinued.

Sales revenues

01.01.-31.12.2022

Sales revenues

01.01.-31.12.2021

Poland

47,80%

European

Union

(excluding

Poland)

46,96%

Other European

countries

3,07%

Africa

0,31%

Asia

1,08%

Other regions and

adjustments

0,79%

Poland

50,18%

European

Union

(excluding

Poland)

45,12%

Other European

countries

2,22%

Africa

0,50%

Asia

1,09%

Other regions

0,90%

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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.-31.12.2022	01.01.-31.12.2021 1
Revenues from sales of products and services	5,329,436	3,424,904
- products	5,286,420	3,352,202
- services	43,016	72,702
Revenues from sales of goods and materials	86,023	58,809
- goods	83,347	57,067
- materials	2,676	1,742
Net sales of products, goods and materials	5,415,459	3,483,713

Restated data. For detailed information, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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.-31.12.2022	01.01.-31.12.2021 1
Cost of manufacture of products and services sold	(4,163,334)	(2,808,359)
Cost of sold goods and materials sold	(57,356)	(31,420)
Reversal of impairment losses on inventory	8,364	7,169
Recognition of impairment losses on inventory	(14,830)	(5,792)
Write off / liquidation of materials	(199)	(457)
Costs of idle assets and production capacity	(19,875)	(12,548)
TOTAL	(4,247,230)	(2,851,407)

Restated data. For detailed information, see Note 1.5.1 to this report.

3.3 COSTS BY TYPE

COST BY KIND (SELECTED)	01.01.-31.12.2022	01.01.-31.12.2021 1
Amortisation	(416,508)	(357,319)
Consumption of materials and energy	(3,069,495)	(1,785,929)
Employee benefits, including:	(540,649)	(391,895)
- payroll	(447,153)	(323,669)
- social security and other benefits	(87,168)	(63,416)
- expenditure on retirement benefit and jubilee awards (including provisions)	(462)	(695)
- expenditure on pension schemes with defined benefits	(1,073)	(1,069)
- other	(4,794)	(3,046)
External services	(561,165)	(550,771)

Restated data. For detailed information, see Note 1.5.1 to this report .

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

3.4 OTHER 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 2022 (in PLN ‘000)

OTHER OPERATING INCOME

01.01.-31.12.2022

		01.01.-31.12.2021
Subsidies	14,095	7,500
The right to emit greenhouse gases	-	145,411
Rents/lease income	4,238	4,536
Gain on disposal of non-financial non-current assets	1,605	6,210
Reversal of impairment allowances on receivables	13,601	7,381
Reversal of impairment losses on property, plant and equipment and intangible assets	7,506	315
Reversal of provisions on employee benefits	1,210	2,037
Reversal of provisions for compensation – changing the base	772	3,229
Reversal of provisions for environmental protection – changing the base	-	3,844
Reversal of provisions for liabilities – changing the base	6,168	5,126
Penalty fees and compensations received	2,598	10,785
Refund of taxes and charges	23,128	18,273
Valuation of investment property in fair value	6,891	-
Other services	5,120	3,177
Settlement of inventory taking	4,111	1,331
Other	9,905	19,240
TOTAL	100,948	238,395

Reimbursement of costs and fees in the amount of PLN 23,128 thousand results, among others, from compensation received by CIECH Soda

Polska S.A. for the costs of purchase of emission allowances in the amount of PLN 15,653 thousand (in the comparable period it was PLN

15,773 thousand), a correction of the real estate tax for the years 2017-2021 made by CIECH Soda Polska S.A. in 2022 in the amount of 3,647

thousand PLN and a reimbursement of VAT sanction in the amount of 2,632 thousand PLN received by CIECH Trading.

The main item of other operating income in the corresponding period was the gain on the sale of unused CO2

emission allowances earned in

the SDC Group (PLN 96,371 thousand) and CIECH Soda Romania (PLN 49,040 thousand).

Subsidies and other forms of State aid

Subsidies recognised in the statement of profit or loss in the reporting period amounted to PLN 14,095 thousand (PLN 7,500 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 2022 amounted to PLN 120,969 thousand (compared to PLN 113,181 thousand as at 31 December

2021). 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.

In 2022, the CIECH Group companies continued publicly subsidised projects launched in previous years, which made it possible to receive

subsidies in the amount of:

• PLN 798 thousand by CIECH Sarzyna S.A. for the implementation of the project entitled: “Development and field verification of a more

efficient and energy-saving manufacturing technology for a novel herbicide with reduced active ingredient content”.

• PLN 455 thousand by Smart Fluid S.A. as part of the 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)”.

• PLN 3,158 thousand by CIECH R&D Sp. z o.o. as part of the completed project entitled: Establishment of a Research and Development

Center of Ciech R&D Sp. z o.o.

• PLN 526 thousand by CIECH R&D Sp. z o.o. as part of the completed project entitled: “Optimisation of the production of soda ash and

soda-based products by using concentrated CO2

waste streams, together with carbon dioxide chemisorption in the post-distillation

suspension, to improve the properties of lime”.

In 2022, CIECH Group companies also received de minimis aid for training and aid in the form of greenhouse gas emission allowance schemes.

The CIECH Group companies also benefit from the corporate income tax exemption for projects implemented on the basis of permits to

operate in Special Economic Zones or on the basis of support decisions issued within the Polish Investment Zone.

ciechgroup.com

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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OTHER OPERATING EXPENSES	01.01.-31.12.2022	01.01.-31.12.2021
Costs related to investment property	(5,113)	(4,442)
Recognition of impairment losses on receivables	(6,913)	(8,366)
Recognition of impairment losses on property, plant and equipment and intangible assets	(10,327)	(577)
Recognition of provisions on employee benefits	(1,774)	(3,089)
Recognition of provisions for compensation – changing the base	-	(395)
Recognition of provisions for environmental protection – changing the base	(1,608)	(828)
Recognition of provisions for liabilities and anticipated losses	(9,113)	(5,538)
Liquidation costs of property, plant and equipment	(2,047)	(1,209)
Costs of remediating the effects of fortuitous events	(1,743)	(1,494)
Valuation of investment property at fair value	-	(202)
Penalties and compensations paid	(3,216)	(1,252)
Fortuitous events	(4,355)	(5)
Inventory differences	(6,993)	(1,042)
Costs of idle assets and production capacity	(14,666)	(16,718)
Other	(21,102)	(12,620)
TOTAL	(88,970)	(57,777)

Other operating expenses in 2022 and 2021 include an amount of PLN 14,666 thousand and PLN 16,718 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.

3.4.1 DETAILED INFORMATION ON SIGNIFICANT IMPAIRMENT LOSSES

In connection with the suspension of production by a subsidiary, CIECH Soda Romania S.A. in 2019, 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:

• 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,

• 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:

• Soda Segment: PLN 70,986 thousand,

• Silicates Segment: PLN 2,500 thousand.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 2022 include a depreciation charge that

takes into account the wear and tear of these fixed assets in the amount of PLN 7,364 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 2022, the Group continues to identify the

reasons for the decision to recognise an impairment loss. At the end of 2022, the fixed assets held were measured at fair value 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 46,100 thousand as at 31 December 2022.

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.

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.-31.12.2022	01.01.-31.12.2021
Interest	36,884	1,204
Dividends and shares in profit	216	-
Net foreign exchange gains	13,105	-
Reversal of impairment losses	3,000	1,397
Decrease in provisions due to change in discount rate	99,588	1,685
Profits on financial instruments	34,969	18,064
Other	172	4,364
TOTAL	187,934	26,714

The interest item shows interest in the amount of PLN 30,797 thousand in connection with the received judgments of the Supreme

Administrative Court (a detailed description of tax audits and the status of cases is presented in note 9.2.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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FINANCIAL EXPENSES	01.01.-31.12.2022	01.01.-31.12.2021
Total interest	(76,363)	(37,482)
Net foreign exchange losses	-	(1,870)
Recognition of other impairment losses	(203)	(448)
Factoring commissions	(17,582)	(2,364)
Bank fees and commissions	(5,536)	(8,569)
Recognised provisions	-	(903)
Costs of discounting of liabilities	(1,400)	(427)
Losses on financial instruments	(80,694)	(55,696)
Increase in provisions due to change in discount rates	(2,558)	(70)
Other	(3,389)	(2,533)
TOTAL	(187,725)	(110,362)

The item in the statement of profit or loss “Gains/losses on financial instruments” comprises the following values:

Finance income

	01.10.-31.12.2022	01.01.-31.12.2021
Profit on financial instruments	41,584	20,812
Interest	6,087	1,203
Profit on derivatives	34,969	19,404
Odpisy aktualizujące	528	204
Net profit/(loss) attributable to shareholders of the parent company	01.10.-31.12.2022	01.01.-31.12.2021
Loss on financial instruments	(154,381)	(93,178)
Interest	(73,687)	(37,482)
Loss on derivatives	(80,694)	(55,696)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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3.6 COMPONENTS OF OTHER COMPREHENSIVE INCOME

Tax effect of each component of other comprehensive income of the CIECH Group

Tax effect of each component of other comprehensive income of	01.01.-31.12.2022			01.01.-31.12.2021 1
the CIECH Group	Before tax	Tax	After tax	Before tax	Tax	After tax
Net currency at translation differences	12,414	-	12,414	(4,370)	(226)	(4,596)
Cash flow hedge reserve	(213,899)	90,983	(122,916)	237,461	(69,237)	168,224
Profit (loss) from costs of hedging reserve	(57,777)	-	(57,777)	(16,672)	-	(16,672)
Valuation of actuarial provisions	745	(136)	609	(1,342)	255	(1,087)
Other components of other comprehensive income	-	-	-	(34)	-	(34)
TOTAL	(258,517)	90,847	(167,670)	215,043	(69,208)	145,835

Restated data. For detailed information, see Note 1.5.1 to this report.

Income tax and reclassification adjustments in other comprehensive income

Other comprehensive income before tax	01.01.-31.12.2022	01.01.-31.12.2021 1
Currency translation differences (foreign companies)	12,414	(4,370)
remeasurement for the current period	12,414	(4,370)
reclassification to profit or loss	-	-
Profit (loss) from cash flow hedge reserve	(213,899)	237,461
fair value remeasurement in the period	6,032	237,529
reclassification to profit or loss	(219,931)	(68)
Profit (loss) from costs of hedging reserve	(57,777)	(16,672)
fair value remeasurement in the period	(57,777)	(20,345)
reclassification to profit or loss	-	3,673
Valuation of actuarial provisions	745	(1,342)
remeasurement for the current period	745	(1,342)
reclassification to profit or loss	-	-
Other components of other comprehensive income	-	(34)
remeasurement for the current period	-	(34)
reclassification to profit or loss	-	-
Income tax attributable to other components of other comprehensive income	90,847	(69,208)
accrued for the current period	25,628	(67,285)
reclassification to profit or loss	65,219	(1,923)
Other comprehensive income net of tax	(167,670)	145,835

Restated data. For detailed information, see Note 1.5.1 to this report.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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.-31.12.2022	01.01.-31.12.2021 1
Current income tax	(76,401)	(69,257)
Income tax for the reporting period	(136,458)	(72,496)
Adjustment to tax for previous years	60,057	3,239
Deferred income tax	53,068	31,591
Origination/reversal of temporary differences	36,876	45,178
Recognition of tax losses not recognized in previous years	16,192	(33,445)
Unrecognized deferred tax assets	-	19,858
INCOME TAX RECOGNISED IN STATEMENT OF PROFIT OR LOSS	(27,091)	(37,666)

Restated data. For detailed information, see Note 1.5.1 to this report.

For a detailed description of proceedings concerning tax settlements, see Note 9.2 to these financial statements.

INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME	01.01.-31.12.2022	01.01.-31.12.2021
Current income tax	58,992	(61,540)
Cash flow hedge	58,992	(61,540)
Deferred income tax	31,855	(7,668)
Cash flow hedge	31,991	(7,697)
Valuation of actuarial provisions	(136)	255
Net currency at translation differences	-	(226)
TOTAL	90,847	(69,208)

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.-31.12.2022	01.01.-31.12.2021
Profit/(loss) before tax	591,792	256,883
Tax calculated at the applicable tax rate	(112,440)	(48,808)
Difference resulting from the application of tax rates applicable in other countries	(4,174)	(2,868)
Tax effect of revenues adjusting profit (loss) before tax (permanent difference)	15,282	(4,830)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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EFFECTIVE TAX RATE	01.01.-31.12.2022	01.01.-31.12.2021
Effect of interest in entities accounted for using the equity method	(267)	(27)
Tax effect of expenses adjusting profit (loss) before tax (permanent difference)	(25,769)	14,937
Adjustment of current income tax for previous years	60,057	(2,796)
Reversal impairment losses on deferred tax asset for tax losses carried forward	21,208	(1,197)
Tax losses for the reporting period for which a deferred tax asset has not been recognised	(3,866)	(11,446)
Special economic zone	20,831	23,170
Tax credits	401	1,151
Settlement of deferred tax asset	-	(1,048)
Other	1,646	(3,904)
Income tax recognised in statement of profit or loss	(27,091)	(37,666)
EFFECTIVE TAX RATE	4.6%	15.6%

The CIECH Group's effective tax rate in 2022 was largely driven by:

• adjustment (reduction) of current income tax for previous years in the total amount of PLN 60,057 thousand (including PLN 36,559

thousand in CIECH S.A.), comprising in particular the expected refund of overpaid income tax in connection with the judgments of the

Supreme Administrative Court (for a detailed description of tax audits and the status of cases, see Note 9.2),

• inclusion of costs listed in Articles 15c and 15e of the Corporate Income Tax Act in the total amount of PLN 99,249 thousand that were

not accounted for in previous years and for which no deferred tax asset was recognised in the amount of PLN 18,857 thousand in

tax-deductible expenses in 2022 in CIECH S.A.,

• increase in the amounts of relief for operating in the Special Economic Zone.

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Accounting policy

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.

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.

Deferred income tax is attributable to the following items:

DEFERRED INCOME TAX ASSETS AND DEFERRED		31.12.2022			31.12.2021
INCOME TAX LIABILITY
	Total asset	Total liability	Net value	Total asset	Total liability	Net value
Property, plant and equipment	9,053	174,229	(165,176)	3,129	172,484	(169,355)
Intangible assets	1,451	21,541	(20,090)	2,237	20,945	(18,708)
Rights to use an asset	-	4,551	(4,551)	-	4,619	(4,619)
Investment property	2,861	1,106	1,755	1,507	1,106	401
Long term receivables	796	1,928	(1,132)	796	3,551	(2,755)
Financial assets	437	83,497	(83,060)	768	7,401	(6,633)
Inventory	4,516	116	4,400	1,840	331	1,509
Trade and other receivables	4,837	387	4,450	3,480	2	3,478
Provisions for employee benefits	3,881	-	3,881	3,618	-	3,618
Other provisions	40,373	2	40,371	68,407	-	68,407
Tax losses carried forward	130,881	-	130,881	83,194	-	83,194
Foreign exchange differences	-	2,183	(2,183)	400	1,665	(1,265)
Liabilities	197,808	5,427	192,381	48,171	2,812	45,359
Special economic zone	56,864	-	56,864	101,341	-	101,341
Other	2,657	1,130	1,527	(978)	8,276	(9,254)
Deferred tax assets/liability	456,415	296,097	160,318	317,910	223,192	94,718
Set - off of deferred tax assets/ liability	(270,974)	(270,974)	-	(174,068)	(174,068)	-
Unrecognized deferred tax assets	(52,667)	-	(52,667)	(68,858)	-	(68,858)
Deferred tax assets/liability recognised in the statement of financial position	132,774	25,123	107,651	74,984	49,124	25,860

	01.01.-31.12.2022	01.01.-31.12.2021
Change recognized in the statement of profit or	49,310	31,590
loss
Change recognized in other comprehensive income	31,855	(7,668)
Foreign exchange differences	626	266
Total change of deferred tax	81,791	24,188

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 146,901 thousand (this amount does not include the unrecognised amount of the deferred tax

asset). In the same period, the estimated amount of settlement of the deferred tax liability will be PLN 214,962 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:

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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• 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.

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 recognise a deferred tax asset of PLN 52,667 thousand as they assessed that recovery of this asset over

the next five years was less than likely. The largest item related to the non-recognition of a deferred tax asset in respect of a tax loss on a

capital source in 2019-2022 (total loss of PLN 161,966 thousand) at CIECH S.A.

In the CIECH Group, CIECH Soda Polska S.A. and CIECH Vitrosilicon S.A. benefit from income tax exemptions for conducting business in Special

Economic Zones. At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone

was PLN 56,864 thousand.

As of 1 September 2016, CIECH Soda Polska S.A. started to take advantage of its exemption from the corporate income tax on account of

operations carried out in the Pomeranian Special Economic Zone in accordance with the Zone Permit No 126/PSSE dated 23 May 2014

(as amended by the Decision of the Minister of Economy No 252/IW/15 dated 21 July 2015).

At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone at CIECH Soda

Polska S.A. was PLN 38,968 thousand.

In 2021, CIECH Vitrosilicon S.A. obtained Support Decision No 11/2021 of 23 February 2021 issued by the Kostrzyn-Słubice Special Economic

Zone to conduct business in the special economic zone.

As of 1 December 2021, the Company began to recognise the exemption from corporate income tax under Article 17(1)(34a) in connection

with the incurring eligible costs to qualify for the exemption.

As at 1 December 2021, the Company has determined that the amount of state aid available in respect of the above tax credit is

PLN 19,890 thousand, and recognised a deferred tax asset in this amount. In 2022, the value of the exemption was increased by

PLN 6,445 thousand. In the same period, PLN 8,408 thousand was used (in 2021, a tax relief of PLN 31.8 thousand was used).

At the end of the current reporting period, the net asset resulting from operations carried out in the Special Economic Zone at

CIECH Vitrosilicon S.A. was PLN 17,896 thousand.

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 2022 (in PLN ‘000)

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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 statement of financial position as

right-of-use assets.

Subsequent expenditure

The cost of replacing a part of an item of property, plant and equipment are capitalised. Other costs are capitalised only to the extent that

it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably.

Other subsequent costs are recognised in the profit or loss statement as incurred expenses.

A separate component of an item of property, plant and equipment, requiring replacement at regular intervals, is depreciated over its

economic useful life.

The Group increases the value of property, plant and equipment by the value of outlays for periodic major overhauls, necessary for the

functioning of a given item of property, plant and equipment. These expenditures are treated as a separate item of property, plant and

equipment and depreciated through the anticipated period to the next planned overhaul. Upon capitalisation of new costs of overhauls,

the non-depreciated value of previous repairs is allocated to operating expenses.

Upon the acquisition or creation of an item of property, plant and equipment, the Group separates from the cost a value equal to the

expenditures that need to be made during the next overhaul of a given item of property, plant and equipment and depreciates it through

the anticipated period left until the next planned overhaul.

Amortisation and depreciation

Items of property, plant and equipment, and also their significant and separate components, are depreciated on a straight-line basis over

their respective estimated useful lives, with the exception of the salt caverns, which are depreciated using the method based on the

quantity of products manufactured (the amount of salt extracted or the volume used, depending on their use). Land is not depreciated.

The estimated useful lives are as follows:

Fixed assets	Useful lives
Buildings	2-50 years
Machinery and equipment	2-20 years
Means of transport	2-20 years
Other	1-15 years

Borrowing costs

For qualifying assets, the borrowing costs that otherwise would have been avoided if the expenditure on the qualifying asset has not been

made are included in purchase price of these assets. The amount of borrowing costs eligible for capitalisation is defined as the appropriate

portion of loan interest, the cost of arranging financing and respectively foreign exchange differences on foreign currency loans.

Judgements and estimates

Amortisation rates. These are determined on the basis of the expected useful lives of property, plant and equipment and are subject to

annual verification. Any adjustments resulting from the verification are made prospectively as a change in estimate.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Accounting policy

Impairment losses on non-financial assets — detailed principles of estimation of impairment losses are described in accounting policies,

in note 3.4.

		Buildings
		offices and	Machinery		Other	Tangible
01.01.-31.12.2022	Land	land and	and	Means of	tangible	fixed assets	TOTAL
		water	equipment	transport	fixed assets	under
		engineering				construction
Gross value of property, plant and equipment at the		facilities
beginning of the period	90,153	1,412,756	3,962,341	96,890	67,740	1,185,058	6,814,938
Purchase	-	-	-	-	-	388,436	388,436
Reclassification	-	350,621	719,021	13,330	9,695	(1,081,221)	11,446
Capitalised borrowing costs	-	-	-	-	-	11,575	11,575
Exchange differences	1,746	7,520	28,433	422	313	18,948	57,382
Sales	-	(78)	(7,157)	(1,491)	(1,540)	-	(10,266)
Liquidation	-	(991)	(20,606)	(853)	(367)	(1,027)	(23,844)
Transfer to intangible assets	-	-	-	-	-	(7,400)	(7,400)
Other	-	139	(1,152)	(43)	(245)	(1,837)	(3,138)
Gross value of property, plant and equipment at the end of the period	91,899	1,769,967	4,680,880	108,255	75,596	512,532	7,239,129
Accumulated depreciation at the beginning of the period	(16,977)	(674,901)	(2,066,890)	(68,243)	(47,247)	-	(2,874,258)
Depreciation for the period	(889)	(69,642)	(266,153)	(6,408)	(4,836)	-	(347,928)
Annual depreciation charge	(555)	(67,038)	(276,385)	(8,424)	(5,588)	-	(357,990)
Sales	-	276	3,964	1,548	278	-	6,066
Liquidation	-	590	20,397	749	356	-	22,092
Exchange differences	(334)	(3,484)	(15,099)	(325)	(229)	-	(19,471)
Reclassification	-	(58)	-	-	58	-	-
Other	-	72	970	44	289	-	1,375
Accumulated depreciation at the end of the period	(17,866)	(744,543)	(2,333,043)	(74,651)	(52,083)	-	(3,222,186)
Impairment losses at the beginning of the period	-	(43,109)	(15,979)	-	98	(18,369)	(77,359)
Recognition	-	-	-	-	-	(4,686)	(4,686)
Exchange differences	-	(845)	(315)	-	1	(346)	(1,505)
Other	-	-	99	-	(99)	-	-
Impairment losses at the end of the period	-	(43,954)	(16,195)	-	-	(23,401)	(83,550)
Carrying amount of property, plant and equipment	73,176	694,746	1,879,472	28,647	20,591	1,166,689	3,863,321
at the beginning of period
Carrying amount of property, plant and equipment	74,033	981,470	2,331,642	33,604	23,513	489,131	3,933,393
at the end of the period

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

		Buildings
		offices and	Machinery		Other	Tangible
01.01.-31.12.2021	Land	land and	and	Means of	tangible	fixed assets	TOTAL
		water	equipment	transport	fixed assets	under
		engineering				construction
Gross value of property, plant and equipment at the		facilities
beginning of the period	90,702	1,320,662	3,583,261	83,462	62,698	898,999	6,039,784
Purchase	-	24,138	102,633	9,307	850	799,090	936,018
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)	(7,883)	(332)	(108)	(1,069)	(12,036)
Sales	-	(1,812)	(5,585)	(265)	(276)	(80)	(8,018)
Liquidation	-	-	(7,939)	(1,531)	(178)	(1,326)	(10,974)
Other	-	(6,601)	(4,998)	(98)	32	(317)	(11,982)
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	1,185,058	6,814,938
Accumulated depreciation at the beginning of the period	(16,487)	(624,805)	(1,848,560)	(63,902)	(40,727)	-	(2,594,481)
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
Exchange differences	52	1,189	5,102	252	81	-	6,676
Reclassification	-	-	16	-	-	-	16
Other	-	6,664	5,467	83	(2)	-	12,212
Accumulated depreciation at the end of the period	(16,977)	(674,901)	(2,066,890)	(68,243)	(47,247)	-	(2,874,258)
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
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	74,215	651,885	1,718,397	19,560	22,072	880,167	3,366,296
at the beginning of period
Carrying amount of property, plant and equipment	73,176	694,746	1,879,472	28,647	20,591	1,166,689	3,863,321
at the end of the period

In 2022, the capitalisation rate applied to determine the amount of borrowing costs to be capitalised was approx. 3.0%, whereas in 2021 it

amounted to approx. 2.4%. In 2022, there were no significant impairment losses on property, plant and equipment.

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.-31.12.2022	01.01.-31.12.2021
Cost of sales	(331,870)	(286,423)
Selling costs	(4,949)	(102)
General and administrative expenses	(6,363)	(6,235)
Other operating expenses	(14,808)	(22,293)
TOTAL	(357,990)	(315,053)

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 statement of financial

position 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 11 thousand (PLN 1,574 thousand in the comparable period).

As at 31 December 2022, all items of property, plant and equipment at CIECH S.A. were pledged as collateral for financial liabilities on account

of the term loan, revolving facility and overdraft facilities.

Future commitments arising from agreements concerning acquisition of property, plant and equipment amounted to PLN 134,638 thousand

in 2022 (in the comparable period: PLN 171,655 thousand).

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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:

• the amount of the initial measurement of the lease liability,

• any lease payments made at or before the commencement date, less any lease incentives received;

• any initial direct costs incurred by the lessee; and

• an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is

located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are

incurred to produce inventories.

Subsequent measurement of right-of-use assets

After initial recognition, the 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.

Changes in carrying amounts of right-of-use assets in the period of 12 months ended 31 December 2022 are as follows:

		Buildings
		offices and	Machinery		Other
01.01.-31.12.2022	Land	land and	and	Means of	tangible	TOTAL
		water	equipment	transport	fixed assets
		engineering
Gross value of rights to use an asset at the beginning of the		facilities
period	72,466	56,499	32,970	147,781	1,210	310,926
Reclassifications	-	-	1,472	(1,472)	-	-
Adopted on the basis of a finance lease agreement	-	170	-	3,342	-	3,512
Modifications to leasing contracts	(26)	4,352	-	(4,174)	-	152
New leasing agreements	-	-	-	5,705	-	5,705
Closing the contract	-	-	-	(42)	-	(42)
Exchange differences	98	409	640	109	7	1,263
Other	(91)	1,383	-	(2,528)	98	(1,138)
Gross value at the end of the period	72,447	62,813	35,082	148,721	1,315	320,378
Accumulated amortisation at the beginning of the period	(12,675)	(12,419)	(21,453)	(61,851)	(1,052)	(109,450)
Amortisation for the period	(995)	(4,308)	(1,619)	(24,323)	(344)	(31,589)
Exchange differences	-	(34)	(421)	(41)	(8)	(504)
Other	17	451	-	1,819	89	2,376
Accumulated depreciation at the end of the period	(13,653)	(16,310)	(23,493)	(84,396)	(1,315)	(139,167)
Net value of rights to use an asset at the beginning of the period	59,791	44,080	11,517	85,930	158	201,476
Net value of rights to use an asset at the end of the period	58,794	46,503	11,589	64,325	-	181,211

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

		Buildings
		offices and	Machinery		Other
01.01.-31.12.2021	Land	land and	and	Means of	tangible	TOTAL
		water	equipment	transport	fixed assets
		engineering
Gross value of rights to use an asset at the beginning of the		facilities
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 leasing contracts	1,158	1,206	-	375	99	2,838
New leasing 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

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

) 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.

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

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

business combination achieved in stages, the acquirer’s previously held equity interest in the acquiree. The purpose of the reassessment

is to ensure that the measurements appropriately reflect consideration of all available information as of the acquisition date. Any

remaining gain from a bargain purchase after completing the reassessment is recognised in profit or loss at the acquisition date (as other

operating income).

At the date of an acquisition, any goodwill acquired in a business combination is allocated to the cash-generating units that are expected

to benefit from the synergies of the combination. Each cash-generating unit or a group of units to which the goodwill was allocated:

• is the lowest level within the Group at which goodwill is monitored for internal management purposes,

• is not larger than an operating segment as defined in IFRS 8 “Operating Segments”.

Goodwill represents an asset with indefinite useful life and as such is subject to annual impairment tests. Goodwill is tested at a minimum

at the operating segment level.

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.

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 statement of financial position 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 allowances, then the part of the deferred income relating to them remains

in the balance until the allowances are disposed of. If the allowances 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 allowances are used, and if such

allowances are sold, the deferred income reduces the cost of the allowances 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

emissions into the atmosphere in the amount of the product of the quantity

of CO

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 statement of financial position 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 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

Subsequent expenditure

Subsequent expenditure on existing intangible assets is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other subsequent expenditure is expensed as incurred.

Amortisation and depreciation

Intangible assets are amortised on a straight-line basis over their estimated useful lives. The estimated useful lives of intangible assets are

as follows:

Intangible assets	Useful lives
Development costs	2-5 years
Patents and licences	2–10 years
Other	2-12 years

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.They 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		Licences,patents,	Other	Intangible
01.01.-31.12.2022	costs	Goodwill	permits, etc.		intangible assets under	TOTAL
			obtained	assets	development
Gross value of intangible assets at the beginning of the period	77,141	586,868	295,945	102,334	142,038	1,204,326
Investment outlays	-	-	-	-	51,392	51,392
Reclassifications	5,571	-	23,290	846	(20,258)	9,449

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

	Development		Licences,patents,	Other	Intangible
01.01.-31.12.2022	costs	Goodwill	permits, etc.		intangible assets under	TOTAL
			obtained	assets	development
Exchange differences	-	10,880	3,335	1,939	6	16,160
Sales	-	-	-	-	(146)	(146)
Liquidation	-	-	(270)	-	(313)	(583)
Other	-	-	-	-	(339)	(339)
Gross value of intangible assets at the end of the period	82,712	597,748	322,300	105,119	172,380	1,280,259
Accumulated amortisation at the beginning of the period	(24,640)	-	(114,822)	(57,582)	-	(197,044)
Amortisation for the period	(15,037)	-	(25,733)	(1,287)	-	(42,057)
Annual amortisation charge	(15,037)	-	(25,160)	(230)	-	(40,427)
Exchange differences	-	-	(843)	(1,057)	-	(1,900)
Liquidation	-	-	270	-	-	270
Accumulated amortisation at the end of the period	(39,677)	-	(140,555)	(58,869)	-	(239,101)
Impairment losses at the beginning of the period	-	(437,598)	(3,258)	(44,669)	(3,420)	(488,945)
Recognition	-	-	911	-	(5,641)	(4,730)
Reversal	-	-	-	7,478	28	7,506
Exchange differences	-	(8,298)	-	(880)	-	(9,178)
Other	-	-	-	376	210	586
Impairment losses at the end of the period	-	(445,897)	(2,347)	(37,696)	(8,823)	(494,761)
Net value of intangible assets at the beginning of the period	52,501	149,270	177,865	83	138,618	518,337
Net value of intangible assets at the end of the period	43,035	151,852	179,398	8,555	163,557	546,397

	Development		Licences,patents,	Other	Intangible
01.01.-31.12.2021	costs	Goodwill	permits, etc.		intangible assets under	TOTAL
			obtained	assets	development
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)
Transferred from/to assets classified as held for sale	-	-	-	-	-	-
Exchange differences	-	(3,072)	(538)	(409)	1	(4,018)
Sales	-	-	-	(9,728)	(194)	(9,922)
Liquidation	-	-	(46)	-	-	(46)
Cancellation of CO 2 emission rights	-	-	-	-	-	-
Change in the Group’s structure	-	-	-	-	-	-
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)
Transferred from/to assets classified as held for sale	-	-	-	-	-	-
Exchange differences	-	-	52	180	-	232
Sales	-	-	-	-	-	-
Liquidation	-	-	46	-	-	46
Other	-	-	-	-	-	-
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

The largest item in the Company’s intangible assets is the SAP accounting system with the gross carrying amount of PLN 58,968 thousand

(net carrying amount: PLN 40,826 thousand).

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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 113,565 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 2022, the value of these projects is

PLN 16,615 thousand.

In CIECH S.A., intangible assets under development concern work related to the implementation of IT systems in the amount of

PLN 31,475 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.

Current intangible assets represent CO

emission allowances received and purchased to cover gas emissions for 2022. Until 2020, emission

allowances granted were not subject to recognition on the statement of financial position 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.

Short-term intangible assets	01.01.-31.12.2022	01.01.-31.12.2021
Gross value of intangible assets at the beginning of the period	403,434	185,220
Purchase	357,734	124,212
Reclassifications	-	31,362
Exchange differences	958	(935)
Sales	(188,691)	(105,051)
Cancellation of CO 2 emission rights	(615,284)	(240,382)
Received emission rights	557,783	409,008
Gross value of intangible assets at the end of the period	515,934	403,434

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.-31.12.2022	01.01.-31.12.2021
Cost of sales	(22,302)	(18,564)
Selling costs	(7,782)	(6,495)
General and administrative expenses	(10,343)	(7,510)
TOTAL	(40,427)	(32,569)

As at 31 December 2022, all intangible assets at CIECH S.A. were pledged as collateral for financial liabilities on account of the term loan,

revolving facility and overdraft facilities.

An increase in capital expenditure in 2022 was driven by expenditure related to the implementation of the SAP system.

In the current period changes in accounting estimates did not have a material impact and it is not expected that they will have a material

impact in future periods.

As at 31 December 2022, future commitments arising from agreements concerning acquisition of intangible assets amounted to

PLN 443 thousand (in the comparable period: PLN 4,598 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 1,821 thousand (PLN 1,488 thousand in the comparable period). Research and development work in progress charged to profit or loss

as impairment losses amounted to PLN 3,442 thousand.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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, CIECH Salz Deutschland GmbH,

• 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 2022, 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: 11.9% – for cash flows in PLN, 8.8% – for cash flows in EUR and 9.8% –

for cash flows in USD;

• the weighted average cost of capital for the SDC Group and CIECH Salz Deutschland GmbH for cash flows in EUR was 7.5%;

• the weighted average cost of capital for Proplan Plant Protection Company, S.L. was 8.6% – for cash flows in EUR and 9.9% – for cash

flows in USD;

• the weighted average cost of capital for Smart Fluid Sp. z o.o. for cash flows in PLN was 18.5%;

• the assumed growth rate for the residual period was 2.0% for all companies.

According to the Management Board's estimates, 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 2022 amounted to PLN 151,852 thousand:

• Soda Segment PLN 52,038 thousand: SDC Group – PLN 52,022 thousand, CIECH Salz Deutschland GmbH: PLN 16 thousand,

• Silicates Segment: PLN 39 thousand – CIECH Vitrosilicon S.A.,

• Agro Segment PLN 96,821 thousand; CIECH Sarzyna S.A. – PLN 15,070 thousand; Proplan Plant Protection Company SL –

PLN 81,751 thousand,

• Other Segment: PLN 2,954 thousand – Smart Fluid Sp. z o.o.

As compared to 2021, goodwill increased by PLN 2,582 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 2022 – an increase by PLN 1,578 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 2022 – an increase by PLN 1,004 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,

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

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.-31.12.2022	01.01.-31.12.2021
Carrying amount at the beginning of period	32,839	40,948
Sales	-	(7,907)
Goodwill valuation	6,891	(202)
Modernisation	451	-
Gross value at the end of the period	40,181	32,839

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 2022, the CIECH Group held the following investment property:

CIECH Nieruchomości

Sp. z o.o.

At CIECH Nieruchomości Sp. z o.o., as at 31 December 2022, 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.-31.12.2022	01.01.-31.12.2021
Rental income from investment property	3,827	3,175
Operating expenses relating to investment property that generated rental income during the period	3,264	2,758
in question

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

NON-CURRENT RECEIVABLES	31.12.2022	31.12.2021
Receivables in relation to caverns	41,103	76,222
Other	134	2,320
Net non-current receivables	41,237	78,542
Write-down on receivables	(66)	(198)
Gross non-current receivables	41,303	78,740

CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM RECEIVABLES	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	(198)	(1,015)
Reversed	136	810
Exchange differences	(4)	7
Closing balance	(66)	(198)

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 (S113 to

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 2022, the Group’s revenues

from the cavern desalination contract amounted to PLN 2,354 thousand (EUR 502 thousand). In the corresponding period, the income

amounted to PLN 19,267 thousand (EUR 4,209 thousand).

The receivables relating to the cavern desalination contracts (Project 2) recognised in assets as long-term receivables amounted to

PLN 41,103 thousand (EUR 8,764 thousand) as at the end of 2022. As at 31 December 2021, it amounted to PLN 76,222 thousand

(EUR 16,572 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 301,042 thousand.

Due to the nature of the transaction, the long-term receivable reported in the statement of financial position will not be fully 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	31.12.2022	31.12.2021
Shares	14,194	11,684
Derivatives	4,233	662
Other	89	103
TOTAL	18,516	12,449

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CHANGE IN IMPAIRMENT ALLOWANCES ON LONG-TERM FINANCIAL ASSETS	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	(2,420)	(2,415)
Recognized	-	(115)
Reversed / released	2,200	-
Used	214	110
Other	(496)	-
Closing balance	(502)	(2,420)

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 the m .

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	31.12.2022	31.12.2021
Investments in associates and jointly-controlled entities	7,033	5,655
	01.01.-31.12.2022	01.01.-31.12.2021
Share in net profit of associated entities measured under the equity method	1,406	27

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

INVENTORY	31.12.2022	31.12.2021
Materials	394,839	296,124
Semi-finished products and work in progress	73,954	40,515
Finished products	291,321	114,572
Goods	11,427	8,097
TOTAL	771,541	459,308

CHANGE OF INVENTORY IMPAIRMENT WRITE-DOWNS	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	(34,932)	(38,303)
Recognized	(16,971)	(5,595)
Reversed / released	9,700	6,948
Used	-	1,856
Exchange differences	(140)	162
Closing balance	(42,343)	(34,932)

As at 31 December 2022, all inventories at CIECH S.A. were pledged as collateral for financial liabilities on account of the term loan, revolving

facility and overdraft facilities.

5.10 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. 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).

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

In addition, regardless of the foregoing, the Group recognises impairment allowances in respect of receivables:

• from debtors in liquidation or bankruptcy, up to the amount not guaranteed or secured in another manner, as reported to a receiver

or judge-commissioner during bankruptcy proceedings;

• from debtors where a bankruptcy petition has been dismissed, if the debtor's assets are not sufficient to cover the cost of bankruptcy

proceedings – in full;

• contested by debtors (disputed receivables) and where payments due are delayed and either the debtor’s financial standing makes

the collection no longer probable – up to the amount of receivables not guaranteed or secured in another manner;

• receivables claimed in court.

Moreover, allowances in the full amount of receivables are recognised in relation to receivables that are more than 180 days past their

maturity as at the balance sheet date.

The amount established as a result of the abovementioned allowances may be decreased if the Management Board is in possession of

reliable documents, indicating that the receivables were secured and their payment is highly probable.

Impairment allowances on receivables are charged to other operating expenses.

TRADE AND OTHER RECEIVABLES	31.12.2022	31.12.2021
Trade receivables, including:	376,319	218,284
- up to 12 months	370,982	208,603
- over 12 months	303	628
- prepayments for inventory	5,034	9,053
Prepayments for non-current assets	5,664	5,142
Public and legal receivables (excluding income tax)	215,562	163,345
Factoring receivables	55,872	33,660
Należności z tytułu instrumentów finansowych	104,116	-
Other receivables	47,472	141,665
NET TRADE AND OTHER RECEIVABLES	805,005	562,096
Impairment allowances with respect to trade receivables including	(43,700)	(46,614)
- impairment allowance recognized in the current reporting period	(5,924)	(3,844)
Impairment allowances with respect to other current receivables including	(20,852)	(22,664)
- impairment allowance recognized in the current reporting period	(1,159)	(4,592)
GROSS TRADE AND OTHER RECEIVABLES	869,557	631,374

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 2022, the asset from continuing involvement amounted to PLN 13,514 thousand

(presented under other receivables). As at 31 December 2022, trade receivables assigned to the factor (and financed) amounted to

PLN 675,158 thousand (PLN 454,816 thousand as at 31 December 2021).

At the end of 2022, receivables from financial instruments represent SDC Group's receivables in the total amount of EUR 22,200 thousand

(PLN 104,116 thousand) for deposits for the future settlement of hedging transactions.

The other receivables item at the end of the comparable period represents SDC Group's receivables in the total amount of EUR 24,437

thousand (PLN 112,396 thousand) from the settlement of the gas supply option for 2022 in December 2021.

CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM RECEIVABLES	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	(69,278)	(66,632)
Recognized	(7,083)	(8,436)
Reversed	13,559	6,997
Used	464	456
Exchange differences	(2,221)	(1,071)
Change in the Group’s structure	-	(11)
Other	7	(581)
Closing balance	(64,552)	(69,278)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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 2022, 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.

Income tax receivables related to the proceedings described in note 9.2 were estimated in accordance with IFRIC 23.

5.11 SHORT-TERM FINANCIAL ASSETS

Accounting policy

Accounting policy concerning financial instruments is presented in note 8.1.

SHORT-TERM FINANCIAL ASSETS	31.12.2022	31.12.2021
Derivatives	359,359	102,220
Loans granted	246	133
Other	29	29
Total (net) short-term financial assets	359,634	102,382
Impairment of short-term financial assets	(28,354)	(28,354)
Total (gross) short-term financial assets	387,988	130,736

	CHANGE IN IMPAIRMENT ALLOWANCES ON SHORT-TERM FINANCIAL ASSETS	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance		(28,354)	(28,343)
Recognized		-	(12)
Reversed		-	1
Closing balance		(28,354)	(28,354)

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CASH AND CASH EQUIVALENTS	31.12.2022	31.12.2021
Bank accounts	492,284	541,146
Short-term deposits	192,833	258,304
Cash in hand	63	23
Impairment of cash and cash equivalents	(211)	(450)
Cash and cash equivalents	684,969	799,023
Cash and cash equivalents – presented in the cash flow statement	684,969	799,023

CHANGE IN IMPAIRMENT CASH AND CASH EQUIVALENTS	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	(450)	(316)
Recognized	(43)	(316)
Reversed	331	182
Exchange differences	(2)	-
Other	(47)
Closing balance	(211)	(450)

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.

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 2022, 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 2022, 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

certificates) amounted to PLN 92 thousand (EUR 20 thousand) (as at 31 December 2021:

PLN 36,179 thousand (EUR 7,866 thousand)).

In addition, restricted cash represented the funds in the VAT account due to the introduction of "split payment" procedures.

As at 31 December 2022 and 31 December 2021, it amounted to PLN 36,706 thousand and PLN 16,205 thousand, respectively.

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 2022 and 31 December 2021, 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Discontinued operations

In 2022, there were no discontinued operations at the CIECH Group. In the corresponding period, there was a discontinued operation

concerning the sale of shares in CIECH Żywice Sp. z o.o,

On 1 March 2021, CIECH S.A. entered into an agreement for the sale of 74,677 shares in CIECH Żywice Sp. z o.o. with LERG S.A. with its

registered office in Pustków-Osiedle, accounting for 100% of shares in the share capital of CIECH Żywice Sp. z o.o. The value of the Agreement

(equal to the enterprise value being sold) is PLN 157,410 thousand. The final price of the Shares being sold was determined in accordance

with the rule arising from the Agreement and amounted to PLN 74,289 thousand. For details of the transaction, see current reports

No 27/2020 and 4/2021.

Cash received from sale of shares	74,289
Cash received from repayment of debt (including loans repaid 1 )	83,121
TOTAL Value of the Agreement	157,410

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):

• 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.

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
Net sales revenues	69,898
Cost of sales	(56,858)
Gross profit/(loss) on sales	13,040
Other operating income	385
Selling costs	(1,130)
General and administrative expenses	(4,945)
Other operating expenses	(422)
Operating profit/(loss)	6,928
Financial income	1,864
Financial expenses	(319)
Net financial income/(expenses)	1,545
Profit/(loss) before tax	8,473
Income tax	(1,524)
Net profit/(loss) (1)	6,949
Income form 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)	61,86 8

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 2022 (in PLN ‘000)

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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 2021-2022 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.

	31.12.2022	31.12.2021
Loans, borrowings and other debt instruments	1,865,124	1,859,441
Lease liabilities	135,320	151,197
Factoring liabilities	28,769	23,078
Net measurement of derivative financial liabilities	20,597	66,093
Gross financial liabilities	2,049,810	2,099,809
Cash and cash equivalents	684,969	799,023
Net financial liabilities	1,364,841	1,300,786
	01.01.- 31.12.2022	01.01. - 31.12.2021
Operating profit for continuing operations	590,177	340,504
Depreciation and amortisation for continuing operations	431,275	374,640
EBITDA for continuing operations	1,021,452	715,144
Debt ratio	1.3	1.8

As at 31 December 2022, net debt to EBITDA stood at 1.3 and was lower than as at the end of 2021 by 0.5. The improvement in this ratio

was driven by a significant increase in operating profit. Detailed information on the operating results achieved presented in the Directors’

Report for the CIECH Group and CIECH S.A. for 2022 published on 23 March 2023 in Section 4.

6.2 CONSOLIDATED EQUITY

Accounting policy

The total consolidated shareholders’ equity includes equity attributable to shareholders of the parent company and non-controlling

interest.

The Group’s share capital is represented by the share capital of the parent company and is accounted for at its nominal value adjusted by

the effects of hyperinflation in the years 1989–1996.

Post-acquisition changes in the equity of subsidiaries are recognised in the Group’s equity to the extent of the parent company’s interest

in those subsidiaries. The remaining equity of the consolidated entities is recognised in non-controlling interest, described below.

When a foreign operation is disposed of, the relevant amounts in the currency translation differences are transferred to profit or loss.

When shares are repurchased by the parent company or a consolidated subsidiary, the amount of the consideration paid, which includes

directly attributable costs, is recognised as a change in equity. The purchased shares are presented as a deduction from total equity.

A liability for a dividend payable is recognised when authorised.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Accounting policy

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 2022, 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 2022 (in PLN ‘000)

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Shareholder structure of CIECH S.A. as at the date of approval of the report (according to the best knowledge of the Company):

To the best knowledge of the Company, as at the day of approving this report, entities holding significant blocks of shares (at least 5%) are

the entities listed below:

Shareholder

			Number of	Share in the
			votes at the	total number of
	Type of shares	Number of	General	votes at the	Stake in share
		shares	Meeting of	General	capital (%)
			Shareholders	Meeting of
				Shareholders
KI Chemistry s. à r. l. with its registered office in Luxembourg 1	Ordinary bearer	26,952,052	26,952,052	51.14%	51.14%
Nationale-Nederlanden Otwarty Fundusz	Ordinary bearer	2,729,507	2,729,507	5.18%	5.18%
Emerytalny 2
Drugi Allianz Polska Otwarty Fundusz	Ordinary bearer	3,389,024	3,389,024	6.43%	6.43%
Emerytalny 3
Other	Ordinary bearer	19,629,326	19,629,326	37.25%	37.25%

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 Annual General Meeting of Shareholders of CIECH S.A. on 28 April 2022, Current

Report 16/2022 prepared and published pursuant to Article 70(3) of the Act of 29 July 2005 on public offering and conditions governing the introduction of

financial instruments to organised trading, and on public companies (Journal of Laws of 2009, No 185, item 1439).

In accordance with information provided by Shareholder (CR 1/2023).

On 10 January 2023, CIECH S.A. announced that it had received notification of the merger of Polskie Towarzystwo Emerytalne Allianz Polska

S.A. with Aviva Powszechne Towarzystwo Emerytalne Aviva Santander S.A., as a result of which the total shareholding in the Allianz OFE,

Allianz DFE and Drugi Allianz OFE managed by them increased to 3,389,024 shares representing 6.43% of the Company's share capital.

Other reserve capital

The table below presents the balances of other reserve capital, consisting of the following items:

OTHER RESERVE CAPITAL BY PURPOSE	31.12.2022	31.12.2021
Commercial risk fund	3,330	3,330
Fund for purchasing soda companies	15,200	15,200
Development fund	57,669	57,669
Fund for the purchase of treasury shares	346,500	346,500
Other	2,322	2,322
TOTAL	425,021	425,021

KI Chemistry s. a r.l.

51,14%

PTE Allianz Polska

6,43%

Nationale-Nederlanden OFE

5,18%

Other

37,25%

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Treasury shares

In 2022 and in the comparable period, CIECH S.A. did not purchase 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.

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.

Hedge cost reserve

The hedge cost reserve includes the value of the basis currency spread for the CIRS transaction (PLN 78,108 thousand as at the end of 2022

and PLN 5,475 thousand as at the end of 2021) which was excluded from hedge accounting.

As at the end of 2021, this item also comprises the time value of the gas and energy purchase option which, in accordance with IFRS 9,

has been left outside hedge accounting by the Group (PLN 14,856 thousand).

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 and

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 2022.

The Management Board of CIECH S.A. decided on the distribution an interim dividend for 2022, in accordance with Article 349 § 1 of the

Commercial Companies Code, out of the net profit reported for the period from 1 January to 30 September 2022. The interim dividend for

2022 amounted to a total of PLN 79,050 thousand, representing an amount of PLN 1.50 per share. The Interim dividend record date was

22 December 2022, and the interim dividend was paid on 29 December 2022. For details, see current reports No 32/2022 and 40/2022.

On 28 April 2022, the Ordinary General Meeting resolved to distribute CIECH S.A.’s net profit for the financial year 2021, amounting to

PLN 133,206 thousand, and to allocate the entire profit to CIECH S.A.’s supplementary capital.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 2022, the following changes occurred in relation to the companies in which CIECH S.A. held shares, either directly or indirectly.

These changes translated into changes in the structure of the CIECH Group.

CIECH Transclean Sp. z o.o.

The Court, in its decision of 3 February 2022, registered the reduction in the share capital of CIECH

Transclean Sp. z o.o. resulting from the cancellation of shares, which was carried out on 21 July 2021 at the

Extraordinary Shareholders' Meeting of CIECH Transclean Sp. z o.o. by deciding on the cancellation of

shares against consideration and amending the Articles of Association of the Company:

• 8,548 shares in the Company's share capital with a total nominal value of PLN 4,274 thousand were

cancelled in exchange for consideration of PLN 506.56 per canceled share, i.e. for total consideration

amounting to PLN 4,330 thousand by way of purchase of the above shares on the basis of an

agreement to sell the shares by the Company against the above consideration,

• The Management Board of the Company was authorised to purchase the shares (conclude an

agreement) in order to cancel them, The agreement for the purchase of shares for cancellation against

consideration was concluded on 10 November 2021; according to this agreement, the consideration

was transferred within 14 days from the date on which the reduction of capital was registered by the

court,

• following the cancellation of shares, the share capital was reduced from PLN 4,322 thousand (by PLN

4,274 thousand) to PLN 48 thousand through the cancellation of 8,548 shares with a total value of

PLN 4,274 thousand.

As a result of the decrease, the share capital of CIECH Transclean Sp. z o.o. is divided into 96 shares,

with a total nominal value of PLN 48 thousand (the nominal value for 1 share is PLN 500).

CIECH Sól Sp. z o.o.

On 13 December 2021, the Deed of Incorporation of CIECH Sól sp. z o.o., with a share capital of PLN 5

thousand, divided into 100 shares with a nominal value of PLN 50 each, was drawn up. The share capital

was fully covered with cash, all shares were taken up by CIECH S.A. The court, by decision of 7 February

2022, registered CIECH Sól Sp. z o.o. CIECH S.A. is the sole shareholder of the Company.

CIECH Soda Romania S.A.

As of 1 March 2022, a reduction in the share capital resulting from the cancellation of 26,819 treasury

shares of CIECH Soda Romania S.A. effected by resolution of the General Meeting held on 7 December

2021 became effective.

Following the cancellation, the share capital amounts to RON 111,573 thousand and is divided into

796,951,188 shares with a nominal value of RON 0.14 each. The number of shares held by CIECH S.A.

remains unchanged - 786,912,905 shares; their proportion in the share capital changes from 98.737% to

98.740%.

CIECH Nieruchomości

Rolne Sp. z o.o.

The court, in its decision of 22 August 2022, registered CIECH Nieruchomości Rolne Sp. z o.o., established

on 26 May 2022 with a share capital of PLN 5 thousand, which is divided into 100 shares, with a nominal

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

value of PLN 50 each. The Company’s share capital was paid in full in cash. CIECH S.A. is the sole shareholder

of the Company.

CIECH Ventures Sp. z o.o.

On 27 October 2022 and 23 November 2022, the Extraordinary Shareholders' Meeting of CIECH Ventures

Sp. z o.o. adopted resolutions to make additional contributions to the share capital by the sole shareholder

of the company, i.e. CIECH S.A., in the total amount of PLN 4,500 thousand.

6.5 SIGNIFICANT SUBSIDIARIES WITH NON-CONTROLLING INTEREST

In 2022 and 2021, there was no significant non-controlling interest in any of the significant subsidiaries of the CIECH Group.

6.6 EARNINGS PER SHARE

Accounting policy

Basic earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided by the weighted

average number of ordinary shares outstanding during the year.

Diluted earnings per share is the net profit for the year attributable to ordinary shareholders of the parent entity divided by the weighted

average number of ordinary shares outstanding during the year adjusted for the effects of all dilutive potential ordinary shares.

The table below presents profit and shares data used in the calculation of the basic and diluted earnings per share:

in PLN	01.01.-31.12.2022	01.01.-31.12.2021
Basic and diluted earnings per share (continuing operations)	10.76	4.17
Basic and diluted earnings per share (discontinuing operations)	0.00	1.18

	01.01.-31.12.2022	01.01.-31.12.2021
Net profit (loss) from continuing operations attributable to the shareholders of the parent	566,937	219,998
Net profit (loss) from discontinued operations attributable to the shareholders of the parent	-	61,868
Weighted average number of issued ordinary shares used in calculation of basic and diluted earnings	52,699,909	52,699,909
per share
Dividends recognised as distributions to owners per share	1.5	3.0

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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	31.12.2022	31.12.2021
LONG-TERM	1,671,280	1,854,154
Loans and borrowings	1,671,280	1,854,154
SHORT-TERM	193,844	5,287
Loans and borrowings	193,844	5,287
TOTAL	1,865,124	1,859,441

Reconciliation of changes in liabilities resulting from financing activities – liabilities in respect of credits and loans:

	01.01.- 31.12.2022	01.01.- 31.12.2021
Opening balance	1,859,441	1,911,475
Proceeds from debt incurred	2,143	195,493
Accrual of interest	119,916	32,771
Repayment of debt, including:	(120,236)	(268,829)
repayment of principal	-	(231,801)
interest paid	(120,236)	(37,028)
Realised exchange differences	3	18,998
Foreign exchange differences on measurement of liabilities	1,374	(22,927)
Other	2,483	(7,540)
Closing balance	1,865,124	1,859,441

Debt financing of the Group

As at the end of 2022, the CIECH Group's debt financing was secured mainly through facilities made available to CIECH S.A. under facilities

agreements:

• The Facilities Agreement signed with a banking syndicate dated 16 March 2021 with the total value of approx. PLN 2,116,810 thousand:

o 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),

o 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),

o revolving credit facility in the amount of up to PLN 250,000 thousand (the amount of used credit as at 31 December 2022 was

PLN 0),

• Overdraft facilities up to PLN 100,000 thousand and EUR 10,000 thousand granted under agreements dated 28 and 29 August 2018

(as at 31 December 2022, the amount used was PLN 0 thousand).

The total value of facilities available under the aforesaid agreements is PLN 2,236,709 thousand; the limits are drown down in the amount

of PLN 1,866,810 thousand. at CIECH S.A. (PLN 1,874,009 thousand at the CIECH Group – Proplan Plant Protection Company, S.L. has also

external debt on account of loans).

Detailed information about loan liabilities is disclosed in the Directors’ Report for the CIECH Group and CIECH S.A. for 2022 published on

23 March 2023 in Section 4.6.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Interest rate:

The Loans bear interest at a floating rate determined on the basis of the WIBOR / EURIBOR base rate, plus margin, the level of which depends

on the level of the net debt to EBITDA, such that if the level of the ratio is lower, the margin applied will also be lower. The financial terms of

the Facilities Agreement do not differ from those commonly used for this type of agreements.

Information about the financial covenants included in loan agreements

During the period covered by these financial statements, no loan agreement was called to maturity and there were no violations of payment

terms for repayment of principal or interest due in relation to financial liabilities recognised in the statement of financial position. Under the

Facilities Agreement dated 16 March 2021, CIECH S.A. and its selected subsidiaries were obliged to, among others, maintain a certain level

of:

• net leverage ratio for the Group specified in the Facilities Agreement (the ratio of the CIECH Group’s consolidated net debt to

consolidated EBITDA of the CIECH Group calculated according to the guidelines) in the amount of at least 4.0x,, measured at the end of

a year and first six months of a year. As at the balance sheet date, i.e. 31 December 2022, this ratio was maintained and amounted to

1.2.

• the guarantor coverage ratio (share of subsidiaries being guarantors in the consolidated EBITDA of the CIECH Group, calculated

according to the guidelines) at a level of at least 80%; this ratio was met as at the balance sheet date and amounted to 93.0%.

7.2 OTHER NON-CURRENT LIABILITIES

Accounting policy

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	31.12.2022	31.12.2021
Subsidies	116,496	108,525
Derivatives	86,207	91,857
Other	25,942	31,370
TOTAL	228,645	231,752

Other long-term liabilities primarily include the value of liabilities under the CIECH Group's three-year Long-Term Incentive Plans for 2019-

2021 and 2022-2024 for the key management personnel of the CIECH Group (the short-term portion of the Plans is presented in Note 7.3

under other short-term liabilities). The intention behind the introduction of the Plans is to harmonise the activities of key managers of the

CIECH Group with the achievement of the objectives set out in the CIECH Group Strategy. The main criterion is the achievement by the CIECH

Group in a given three-year period of the specified increase in value in relation to the reference year (for the 2019-2021 Programme at the

level of not less than 11% in relation to 2018 - this has been met and for the 2022-2024 Programme at the level of not less than 20.5% in

relation to 2021). The increase in value is measured using the TSR (Total Shareholder Return) ratio, with an additional 10% of the pool for

the 2022-2024 Plan subject to meeting 4 ESG targets.

The discounted value of the liabilities of the 2019-2021 Plan amounted to PLN 15,318 thousand for the long-term portion and

PLN 18,205 thousand for the short-term portion, while for the 2022-2024 Plan the long-term portion stood at PLN 10,636 thousand.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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7.3 CURRENT TRADE AND OTHER LIABILITIES

Accounting policy

Trade and other liabilities are classified as current or non-current based on the following principles:

• trade liabilities are reported as current liabilities, regardless of maturity,

• other liabilities due to be settled within 12 months of the balance sheet date are classified as current liabilities,

• other payables, which do not meet the current liability conditions, are classified as non-current liabilities.

Liabilities denominated in foreign currencies are recognised at the NBP’s average exchange rate effective on the last working day before

the date of transaction.

At the reporting date foreign currency denominated liabilities are translated at the average exchange rate announced for that day by the

NBP except for received prepayments. Currency translation differences arising upon the repayment of a liability (realised) or its valuation

(unrealised) are presented within financial income or expense. Prepayments for deliveries denominated in foreign currencies are

recognised at the exchange rate applicable as at the transaction day.

Judgements and estimates

At the reporting date trade payables are measured at amortised cost (i.e. they are discounted using the effective interest method) and

increased by any applicable late interest accrued.

Late interest is not accrued when a formal waiver is received from the counterparty. In all other cases such interest is accrued and

recognised in accordance with the following principles:

• on an ongoing basis, based on interest notes received;

• in estimated amounts, with such estimates based on comparison of interest charged in the past by a counterparty to the related

amounts owed.

CURRENT TRADE AND OTHER LIABILITIES	31.12.2022	31.12.2021
Trade liabilities and advances taken	993,942	615,770
- in up to 12 months	992,968	612,643
- above 12 months	747	1,953
- prepayments received for supplies	227	1,174
Public and legal liabilities (excluding income tax)	47,807	52,936
Liabilities for purchase of property, plant and equipment	102,573	143,427
Financial instruments liabilities	375,890	59,843
Liabilities due to settlement of futures contracts	-	138,861
Liabilities to employees	20,779	21,145
Payroll liabilities	46,251	45,634
Holiday leave accrual	13,400	12,920
Taxes and charges	925,301	647,621
Materials and energy consumption	69,650	34,327
Subsidies	4,473	4,656
Environmental charges	9,054	-
Factoring liabilites	28,769	23,078
Liabilities due to the purchase of CO 2 emission rights	21,635	35,553
Received CO 2 emission rights	53,830	50,940
Other	79,949	69,696
TOTAL	2,793,303	1,956,407

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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,

• taxes and fees in connection with the presentation under this item of provisions for CO2 emission costs,

• valuations of financial instruments, mainly on account of gas and electricity price index swaps in the SDC Group.

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:

• the contracts are negotiated as a package with an overall commercial objective that cannot be understood without considering the

contracts together;

• the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or

• the rights to use underlying assets conveyed in the contracts (or some rights to use underlying assets conveyed in each of the

contracts) form a single lease component.

A contract contains a lease if:

• it concerns an identified asset that is explicitly specified in the contract (e.g. using an inventory number, address (for premises), etc.))

or implicitly specified at the time that the asset is made available for use by the customer, and the supplier does not have the

substantive right to substitute the asset throughout the period of use and

• the lessee receives essential all of the economic benefits from such assets during the period of use, i.e. both basic benefits and the

benefits derived from it (if any); and

• the lessee has the right to specify the method in which it uses the identified asset.

Initial measurement of the lease liability

The lease payments included in the measurement of the lease liability comprise the following payments that are not paid:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable by the lessee under residual value guarantees;

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease and

it is highly likely that this option will be exercised.

Subsequent measurement of the lease liability

After the commencement date, the Group measures the lease liability by:

• increasing the carrying amount to reflect interest on the lease liability;

• reducing the carrying amount to reflect the lease payments made; and

• remeasuring the carrying amount to reflect any reassessment or lease modifications.

The Group, as a lessee, recognises in profit or loss of the current period both:

• interest on the lease liability; and

• variable lease payments not included in the measurement of the lease liability in the period in which the event or condition that

triggers those payments occurs, unless these costs are included in the carrying amount of another asset in accordance with the

accounting policy for property, plant and equipment.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

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:

• 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,

• there is more than one set of payments that a lessee could make, but only one of those sets of payments is realistic. In this case, an

entity considers the realistic set of payments to be lease payments.

• there is more than one realistic set of payments that a lessee could make, but it must make at least one of those sets of payments.

In this case, an entity considers the set of payments that aggregates to the lowest amount (on a discounted basis) to be lease

payments.

Variable lease payments

Variable lease payments that depend on an index or a rate include, for example, payments linked to a consumer price index, payments

linked to a benchmark interest rate (such as WIBOR) or payments that vary to reflect changes in market rental rates (e.g. periodical

changes in perpetual usufruct rates, in connection with the revision of a valuation report).

Variable lease payments that do not depend on an index or a rate, i.e. depend on the use, are not included in the measurement of lease

liabilities (e.g. fees for exceeding the mileage limit).

Exemptions/ simplifications applied

The 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 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, that is:

• 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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

0.81% to 9.39% (for PLN 2.34%-9.39%; for EUR 0.81%-5.48% for RON 4.00%-5.00%). 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
31.12.2022
0–6 months	17,944	612	17,332
Up to 1 year	13,796	657	13,139
1–2 years	34,454	2,755	31,699
2–5 years	24,003	3,377	20,626
More than 5 years	169,199	116,675	52,524
TOTAL	259,396	124,076	135,320
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

Reconciliation of changes in liabilities resulting from financing activities – lease liabilities

	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	151,197	129,258
Modifications of agreements	(416)	6,165
Signing new agreements	10,062	40,820
Interest accrued	5,248	3,951
Repayment of liability	(32,542)	(29,633)
Foreign exchange differences	-	634
Other	1,771	2
Closing balance	135,320	151,197

The total outflow of funds related to lease liabilities is respectively:

	01.01-31.12.2022	01.01.-31.12.2021
Payment of liabilities, including:	38,287	40,693
Principal amount	27,412	25,669
Interest	5,129	4,192
Variable payments other than those linked to an index/rate	2,248	8,153
Short-term leases	2,552	1,801
Low-value leases	945	879

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

The following table presents lease costs not included in the calculation of carrying amounts in accordance with IFRS 16 for the period:

	01.01-31.12.2022	01.01-31.12.2021
Costs of short-term leases (concluded for a period of up to 12 months),	1,857	1,411
Costs of lease of low-value assets	829	832
Costs related to variable lease payments not included in the measurement of lease liabilities	2,248	8,123

For details of the right-of-use assets resulting from leases see Note 5.2.

7.5 PROVISIONS FOR EMPLOYEE BENEFITS

Accounting policy

Jubilee awards, retirement benefits pays and disability pay

Based on the Group’s remuneration plan, the employees of its companies are entitled to retirement benefits. The Group’s obligations in

respect of the above benefits is the amount of benefit entitlement that employees have earned as a result of their service in the current

and prior years.

Net defined benefit liabilities are calculated separately for each plan by estimation of future payments required to settle the obligation

resulting from employee service in the current and prior periods (discounted to its present value). The discount rate is the rate of return

for low-risk debt securities with similar maturity date as the Group’s liabilities as at the end of the reporting period. An appropriate

estimation is made by an authorised actuary with the application of forecast discounted unit right method.

The use of such provisions results in a decrease in the provision, while the reversal of the said provision increases other operating income.

The increase in the provision for employment costs is recognised respectively in other operating expenses. Changes in provisions resulting

from the passage of time (i.e. the unwinding of the discount) and the effect resulting from changes in discount rates are always presented

in financing activities.

The Company recognises in other comprehensive income actuarial gains and losses – changes in provisions for retirement benefits

resulting differences between the previous actuarial assumptions and what has actually occurred and the effects of changes in actuarial

assumptions and change in discount rate.

Judgements and estimates

The amount of the provision for employee benefits is determined based on actuarial valuations performed by independent professional

firms. By actuarial valuation estimates are made regarding the rotation in employment, wage growth, discount rates and inflation.

PROVISIONS FOR EMPLOYEE BENEFITS

	LONG-TERM	LONG-TERM	SHORT-TERM	SHORT-TERM
	01.01.-31.12.2022	01.01.-31.12.2021	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	15,273	12,958	2,643	3,100
Recognition	1,886	2,832	636	1,117
Use and reversal	(1,352)	(1,635)	(1,040)	(1,473)
Foreign exchange differences	100	(18)	35	(27)
Other	(1,563)	1,136	490	(74)
Closing balance	14,344	15,273	2,764	2,643

In 2022, a change in provision for retirement benefits in the amount of PLN 745 thousand was recognised in other comprehensive income

(PLN -1,342 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 6.61% p.a. was applied in order to determine the current value of future liabilities due to employee benefits. The discount rate applied

is established in nominal value. The remuneration growth rates of 5.0% were applied for 2023 and subsequent years. Staff turnover ratio is

established based on historic data, adjusted for employment restructuring plans. According to the Company’s estimations, a change in

actuarial assumptions will not have a significant impact on financial results.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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.

	Provision for liabilities	Provision for
CHANGE IN OTHER LONG-TERM PROVISIONS	(costs)	environmental	Provision for bonuses	TOTAL
		protection
01.01.-31.12.2022
Opening balance	42,406	226,972	1,271	270,649
Recognition	3,497	185	52	3,734
Use and reversal	(21,113)	-	(14)	(21,127)
Foreign exchange differences	-	4,334	-	4,334
Change in discount rate	-	(97,848)	-	(97,848)
Reclassification to) short-term provisions	(25,632)	-	(49)	(25,681)
Other	1,084	2,018	26	3,128
Closing balance	242	135,661	1,286	137,189
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 1	-	121,481	-	121,481
Closing balance	42,406	226,972	1,271	270,649

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	Provision for		Provision for	Provision for	Provision for
PROVISIONS	restructuring		liabilities (costs)	environmental	bonuses		TOTAL
				protection
01.01.-31.12.2022
Opening balance		111	82,003	1,663		34	83,811
Recognition		-	20,914	1,529		-	22,443
Use and reversal		-	(11,456)	(2,361)		(59)	(13,876)
Foreign exchange differences		-	566	(2)		-	564
Reclassification from (to) long-term		-	25,632	-		49	25,681
provisions
Other		-	773	(215)		-	558
Closing balance		111	118,432	614		24	119,181
01.01.-31.12.2021
Opening balance		111	94,199	889		38	95,237

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

CHANGE IN OTHER SHORT-TERM	Provision for		Provision for	Provision for	Provision for
PROVISIONS	restructuring		liabilities (costs)	environmental	bonuses		TOTAL
				protection
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		-	(1,631)	1,838		-	207
provisions
Closing balance		111	82,003	1,663		34	83,811

Material items of provisions for expected losses and liabilities in the CIECH Group

CIECH S.A.

Short-term provisions of PLN 48,073 thousand are related to potential claims (principal liability plus

interest payable) resulting from litigation. The increase in provisions during 2022 is mainly associated with

the tax settlement audits pending at the company.

CIECH Sarzyna S.A.

Provision for potential tax liability and related interest in the amount of PLN 9,879 thousand. In 2022,

PLN 4,971 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 1,896 thousand (the total balance of provisions for tax liabilities is PLN 20,117 thousand).

CIECH Pianki Sp. z o.o.

Reversal of a provision in relation to a potential tax liability in the amount of PLN 9,809 thousand (the total

balance of provisions for tax liabilities is PLN 0 thousand).

CIECH Cargo Sp. z o.o.

Reversal of a provision in relation to a potential tax liability in the amount of PLN 10,780 thousand

(the total balance of provisions for tax liabilities is PLN 0 thousand).

SDC Group

Short-term provision of PLN 14,895 thousand (EUR 3,176 thousand) related to a potential claim from the

water management authority and a provision of PLN 15,008 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 3,906 thousand.

CIECH Soda Polska S.A.

Long-term provision in the amount of PLN 242 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. In 2022, a cross-claims agreement was signed and at the

end of 2022 a provision of PLN 3,985 thousand was reversed.

CIECH Soda Romania S.A.

Short-term provision in the amount of PLN 7,477 thousand. PLN, are related to potential claims

(principal amount plus interest liabilities) due to disputes with employees.

Detailed information on pending tax proceedings in CIECH Group companies is provided in note 9.2 to this report, Section “Audits of tax

settlements at the CIECH Group and related contingent liabilities”.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Provisions for environmental protection

SDC Group

A long-term provision for environmental protection in the amount of PLN 130,340 thousand

(EUR 27,804 thousand), covering, among others:

• reclamation of tailing ponds in Unseburg – provision of EUR 5,980 thousand (PLN 28,046 thousand)

as at 31 December 2022 and EUR 8,379 thousand (PLN 35,538 thousand) as at 31 December 2021 –

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 2,079 thousand (PLN 9,748 thousand)

at 31 December 2022 and EUR 2,995 thousand (PLN 13,775 thousand) at 31 December 2021 – the

schedule provides for work until 2052 starting in 2015,

• restoration of the remains of old limestone quarries – provision of EUR 1,534 thousand

(PLN 7,194 thousand) as at 31 December 2022 and EUR 3,278 thousand (PLN 15,077 thousand) as at

31 December 2021 – the schedule provides for work over a period of 4 years,

• closure of caverns – provision of EUR 17,493 thousand (PLN 82,040 thousand) as at 31 December 2022

and EUR 29,453 thousand (PLN 135,466 thousand) as at 31 December 2021 – 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.

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: 10.2% in 2023, 5.7% in 2024 and 5.3% 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 4,847 thousand;

CIECH Sarzyna S.A.

A provision for the costs of water and soil reclamation in the amount of PLN 1,027 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 2022 (in PLN ‘000)

ciechgroup.com

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
		Remeasurement changes adjust the
Assets at fair value through profit or loss	At fair value	carrying amount of the asset and are
		recognised in current period profit or loss.
Financial assets measured at amortised	At amortised cost using the effective	Remeasurement changes adjust the
cost	interest rate (EIR)	carrying amount of the asset and are
		recognised in current period profit or loss.
		Changes from remeasurement at fair value
Financial assets at fair value through other		are recognised in other comprehensive
comprehensive income	At fair value	income. For debt instruments interest is
		recognised directly in profit or loss under
		finance income.
Liabilities at fair value through profit or		Remeasurement changes adjust the
loss	At fair value	carrying amount of the asset and are
		recognised in current period profit or loss.
	At amortised cost using the effective	Remeasurement changes adjust the
Liabilities measured at amortised cost	interest rate (EIR)	carrying amount of the liability and are
		recognised in current period profit or loss.
Financial liabilities at fair value through		Changes from remeasurement at fair value
other comprehensive income	At fair value	are recognised in other comprehensive
		income.

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:

• the financial instrument has a low risk of default,

• the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and

• adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the

borrower to fulfil its contractual cash flow obligations.

The 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.

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that

financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

• significant financial difficulty of the issuer or the borrower;

• a breach of contract, such as a default or past due event;

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Accounting policy

• the lender(s) of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to

the borrower a concession(s) that the lender(s) would not otherwise consider;

• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

• the disappearance of an active market for that financial asset because of financial difficulties; or

• the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets

to become credit-impaired. Regardless of the above criteria, the 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 2022 include:

Financial assets:

• 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.

Carrying amount of financial instruments

Classes of financial instruments	note	31.12.2022	31.12.2021	Categories of financial instruments
Cash and cash equivalents	5.12	684,969	799,023	Financial assets measured at amortised cost
Loans granted	5.11	246	133	Financial assets measured at amortised cost
Trade receivables	5.10	371,285	209,231	Financial assets measured at amortised cost
Factoring receivables	5.10	55,872	33,660	Financial assets measured at amortised cost
Hedging derivatives with positive value	5.7;5.11	354,070	101,672	Hedging instruments
Derivatives with positive value	5.7;5.11	9,522	1,210	Financial assets measured at fair value through profit
				or loss
ASSETS		1,475,964	1 144 929
Trade liabilities	7.3	(993,715)	(614,596)	Financial assets measured at amortised cost
Credits and loans	7.1	(1,865,124)	(1,859,441)	Financial assets measured at amortised cost
Factoring liabilities	7.3	(28,769)	(23,078)	Financial assets measured at amortised cost
Lease liabilities	7.4	(135,320)	(151,197)	Financial liabilities excluded from IFRS 9
Hedging derivatives with negative value	7.2;7.3	(462,097)	(138,485)	Hedging instruments
Derivatives with negative value	7.2;7.3	-	(13,215)	Financial liabilities measured at fair value through
				profit or loss.
LIABILITIES		(3,485,025)	(2,800,012)

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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	01.01.-31.12.2022	01.01.- 31.12.2021	Categories of financial instruments
the income statement
Interest income/(expenses), including
calculated using the effective interest rate	(130,057)	(22,026)
method	6,087	1,203	Financial assets measured at amortised cost
	(131,079)	(19,774)	Financial liabilities measured at amortised cost
	(5,064)	(3,456)	Financial liabilities excluded from IFRS 9
Foreign exchange gains/(losses)	13,105	(1,870)
	13,612	(1,823)	Financial assets /(liabilities) measured at amortised cost
	(507)	(47)	Financial liabilities excluded from IFRS 9
Recognition of impairment losses	(7,065)	(8,804)	Financial assets measured at amortised cost
Reversal of impairment losses	14,390	7,802	Financial assets measured at amortised cost
Income/expenses from use of derivative	45,771	(44,439)
financial instruments	(45,725)	(36,291)	Financial assets/liabilities measured at fair value through
			profit or loss
	91,496	(8,148)	Hedging instruments
TOTAL	(63,856)	(69,337)

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:

• there is an economic relationship between the hedged item and the hedging instrument;

• the effect of credit risk does not dominate the value changes that result from that economic relationship; and

• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity

actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.

However, that designation shall not reflect an imbalance between the weightings of the hedged item and the hedging

instrument that would create hedge ineffectiveness (irrespective of whether recognised or not) that could result in an

accounting outcome that would be inconsistent with the purpose of hedge accounting.

Cash flow hedge:

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a

component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable

forecast transaction, and could affect profit or loss. Cash flow hedge shall be accounted for as follows:

a) the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted to the lower of the

following (in absolute amounts):

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Accounting policy

o the cumulative gain or loss on the hedging instrument from inception of the hedge; and

o the cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in

the hedged expected future cash flows) from inception of the hedge.

b) the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge (i.e. the portion that is

offset by the change in the cash flow hedge reserve calculated in accordance with (a)) shall be recognised in other

comprehensive income.

c) any remaining gain or loss on the hedging instrument (or any gain or loss required to balance the change in the cash flow hedge

reserve calculated in accordance with (a)) is hedge ineffectiveness that shall be recognised in profit or loss.

The effective portion of the hedge is transferred to profit or loss as a reclassification adjustment in the period or periods when the hedged

expected future cash flows affect profit or loss.

Hedges of a net investment in a foreign operation

Hedges of a net investments in a foreign operation shall be accounted for as follows:

• It is a hedge of a net investment in foreign operations with functional currency different than the one of the parent entity, by

foreign currency liabilities.

• revaluation of foreign currency liabilities designated for hedge accounting is recognised in other comprehensive income and

offset with the opposite revaluation of net investments in foreign operation in consolidated financial statements.

Accumulated amount in other comprehensive income is transferred to the profit or loss statement in the case of partial or overall sale of

shares in a foreign entity.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

The table below presents a summary of specific groups of relationships existing in 2022, designated for hedge accounting:

			Nominal value/	Average price obtained on the			31.12.2022		31.12.2021
Type of instrument	Hedged item		Volume	contract (outstanding	Maturity
			(as at 31.12.2022)	transactions as at 31.12.2022)		Assets	Liability	Assets	Liability
Derivative instruments – cash flow hedge
Currency risk and interest rate risk	Interest payments on debt in PLN bearing			Average EURPLN CIRS exchange
	interest at WIBOR 6M with semi-annual			rate: 4.49
Currency and interest swap (CIRS)	interest periods until March 2026.		EUR 343 million	Weighted average (by initial	2026	96,376	(86,207)	85,607	(138,350)
	Sales revenues of the CIECH Group in EUR in			nominal weighting) conversion
	the years			rate of WIBOR 6M to a fixed rate
	2023 – 2027
				in EUR: -0.09%
Currency risk	Future cash flows from realisation of sales
Currency forwards EUR/PLN	revenues denominated in EUR or indexed to		-	n.a.	2022	-	-	1,966	-
	EUR exchange rate
				Weighted average hedged
Currency forwards EUR/PLN	Exchange rate for purchase of EUA units in EUR		EUR 14 million	EURPLN purchase rate (spot	2023	-	(2,832)	-	-
				without forward points): 4.66
Interest rate risk
Interest rate swaps – 6M WIBOR	Interest payments on term loan contracted by			n.a.	2022
to fixed rate	CIECH S.A. with initial nominal amount of		-			-	-	13,437	-
	PLN 1,212,520 thousand
	Interest payments on debt in EUR with a
Interest rate swap – 6M EURIBOR	maximum nominal amount of EUR 14,075		EUR 14 million	Fixed rate paid in EUR for	2026	6,494	-	526	-
to fixed rate	thousand			EURIBOR 6M: -0.28%
Raw material price risk	Natural gas purchased at the spot market price
Gas and electricity price index	by CIECH Energy Deutschland GmbH	985	GWh of natural gas	n.a.	2023	251,200	(373,058)	-	-
swaps	Electricity sold at the spot market price by	187	GWh of electricity
	CIECH Energy Deutschland GmbH
	Gas supplied according to the option contract
Collar option structures for gas	after elimination of the intrinsic value of the		-	n.a.	2021	-	-	18,427	-
supply	option or gas purchased at the month-ahead
	market price if the option is not exercised

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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Amounts recognised in the cash flow hedge reserve are presented below:

	01.01.-31.12.2022	01.01.-31.12.2021
Opening balance	158,763	(9,393)
Change in fair value of the hedging instrument recognised in other comprehensive income	5,995	237,529
Income tax on the effective portion	25,764	(67,314)
Reclassification of hedge effect to profit or loss	(219,930)	(135)
Transfer to income tax result	65,219	(1,923)
Ineffectiveness	37	-
Closing balance	35,848	158,763

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

, energy) 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.

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 is 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.

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

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 2022 : contracts to hedge

currency risk and interest rate risk (IRSs and CIRSs), contracts to hedge the risk of prices of CO

emission certificates (forwards, futures),

contracts to hedge the risk of gas prices (forwards, options, commodity swap), and contracts to hedge the risk of electricity prices (forwards,

commodity swap).

Cash management

The CIECH Group cooperates with bank service providers of high credit rating. Surplus cash is held in the form of deposits with short maturities

with banks with investment grade credit ratings. Allocation of financial resources 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 strategic 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.

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 2022, the debt

amounted to PLN 0), overdraft facilities (as at the end: PLN 0 thousand) and a part of lease and factoring contracts.

Therefore, the 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 2022, 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 (as as at 31 December 2022), amortised

in accordance with the schedule of the IRS transaction;

• currency and interest rate swap transactions to hedge the variable interest rate levels applicable to the calculation of interest on the

term loan made available in March 2021. The transaction hedges indebtedness in the nominal amount of 1,538 million

(as as at 31 December 2022), amortised in accordance with the schedule of the CIRS transaction.

The table below presents the consolidated statement of financial position items (without derivative instruments) exposed to interest rate

risk:

Total carrying amount 31.12.2022		31.12.2021
Fixed interest rate instruments	-	-
Floating interest rate instruments	(1,344,244)	(1,234,693)
Financial assets	684,969	799,023
Financial liabilities	(2,029,213)	(2,033,716)

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	Statement of	Equity	Equity
	profit or loss	profit or loss	(impact of profit/loss on	(impact of profit/loss on
			equity is not included)	equity is not included)
	Increase by 100 bp	Decrease by 100 bp	Increase by 100 bp	Decrease by 100 bp
31.12.2022
Floating interest rate instruments	13,442	(13,442)	-	-
Interest rate swaps			45,794	(47,697)
Sensitivity of cash flows (net)	13,442	(13,442)	45,794	(47,697)
31.12.2021
Floating interest rate instruments	12,347	(12,347)	-	-
Interest rate swaps	1,166	(1,182)	56,358	(59,597)
Sensitivity of cash flows (net)	13,513	(13,529)	56,358	(59,597)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Currency risk

Currency risk is an inevitable component of commercial activity denominated in foreign currencies. Due to the nature of conducted trading

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 2022 included: sales of products, purchases (raw materials, expenditure related to investment

projects), loans taken out and cash in foreign currencies. Unfavourable changes in currency exchange rates may worsen the 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 2022, 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 2022 and 2021 due to financial instruments:

			Impact on the	Impact on the
Exposure to currency risk in EUR	31.12.2022	31.12.2021	statement of profit or	statement of other
(figures in '000 EUR)			loss	comprehensive
				income
Assets
Loans granted sensitive to FX rate changes	297,700	224,000	x
Trade and other receivables	4,307	3,168	x
Cash including bank deposits	43,829	12,076	x
Liabilities
Trade and other liabilities	(22,078)	(18,568)	x
Term loan liabilities	(14,075)	(14,075)		x
Hedging instruments: Forward	-	(73,900)		x
Forward (not designated to hedge accounting)	(257,713)	(119,013)	x
CIRS (not designated to hedge accounting)	-	(60,000)	x
Hedging instruments: CIRS (forward transactions	(342,249)	(343,590)		x
isolated as part of decomposition of CIRS)
Total exposure	(290,278)	(389,902)

			Impact on the	Impact on the
Exposure to currency risk in USD	31.12.2022	31.12.2021	statement of profit or	statement of other
(figures in '000 USD)			loss	comprehensive
				income
Assets
Trade and other receivables	1,175	1,426	x
Cash including bank deposits	2,285	1,957	x
Liabilities
Trade and other liabilities	(11,098)	(1,916)	x
Total exposure	(7,638)	1,467

Measurement of financial instruments designated for hedge accounting is referred to other comprehensive income while ineffectiveness is

recognised in the profit or loss statement.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

The table contains an analysis of the sensitivity of individual statement of financial position items to exchange rate changes as at

31 December 2022.

			Impact on the	Impact on the
Analysis of sensitivity to currency risk – EUR	('000	EUR)	statement of profit or	statement of other
(Increase of EUR/PLN exchange rate by 1 grosz)			loss	comprehensive
				income
31.12.2022
Foreign-currency balance sheet items		3,097	3,097	-
Hedging instruments: Forward and CIRS		(6,000)	-	(6,000)
31.12.2021
Foreign-currency balance sheet items		2,066	2,066	-
Hedging instruments: Forward and CIRS		(5,965)	(1,790)	(4,175)

Analysis of sensitivity to currency risk – USD

(Increase of USD/PLN exchange rate by 1 grosz)

		Impact on the	Impact on the
	'000 USD)	statement of profit or	statement of other
		loss	comprehensive
			income
31.12.2022
Foreign-currency balance sheet items	(76)	(76)	-
31.12.2021
Foreign-currency balance sheet items	15	15	-

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

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 and customers containing

appropriate price formulas or through forward transactions. In addition, due to the occurrence of significant changes in the prices of energy

raw materials, resulting in significant changes in manufacturing costs, the Group actively reacted to fluctuating raw material prices and

renegotiated sales prices with its customers as they increased.

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. 8% 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.

	31.12.2022	31.12.2021
Cash and cash equivalents	684,969	799,023
Loans and receivables	427,403	243,024
Financial assets from valuation of derivatives	363,592	102,882
TOTAL	1,475,964	1,144,929

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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
	31.12.2022	31.12.2021	31.12.2022		31.12.2021
Soda segment	360,237	187,203		-	-
Agro Segment	45,558	38,118		-	-
Foams Segment	3,300	3,635		-	-
Silicates Segment	20,897	19,923		-	-
Packaging Segment	940	2145		-	-
Other Segment	39,039	21 496		246	133
Consolidation adjustments	(98,686)	(63,289)		-	-
TOTAL	371,285	209,231		246	133

Below is a reconciliation of impairment allowances for trade receivables in accordance with IFRS 9.

	ECL – not	Lifetime ECL –	TOTAL
	impaired	impaired
Trade receivables, gross, as at 01.01.2022	209,501	46,344	255,845
Recognised	2,658,302	13,978	2,672,280
Repaid	(2,503,150)	(9,990)	(2,513,140)
Gross carrying amount as at 31.12.2022	364,653	50,332	414,985
01.01.2022	6,622	39,992	46,614
Recognition of impairment losses	1,385	4,539	5,924
Reversal of unused allowances	(3,717)	(6,543)	(10,260)
Utilisation	(36)	(9)	(45)
Foreign exchange differences	507	964	1,471
Other	-	(4)	(4)
31.12.2022	4,761	38,939	43,700
Trade receivables, net, as at 31.12.2022	359,892	11,392	371,285

	ECL – not	Lifetime ECL –	TOTAL
	impaired	impaired
Trade receivables, gross, as at 01.01.2021	175,408	48,804	224,212
Recognised	2,688,465	4,465	2,692,930
Repaid	(2,654,372)	(6,925)	(2,661,297)
Gross carrying amount as at 31.12.2021	209,501	46,344	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	39,992	46,614
Trade receivables, net, as at 31.12.2021	202,879	6,352	209,231

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 2021 are presented in the following tables.

	Total	Non past due	Not past due,	30-90 days	90-180 days	> 180 days
			0-30 days
Trade receivables, gross, as at 31.12.2022	414,985	367,800	7,077	634	1,020	38,454
Default rate		0.28%	0.59%	40.06%	46.86%	97.21%
Expected credit losses in accordance with IFRS 9	4,761	1,045	42	254	478	2,942
Total expected losses	43,700	5,542	42	254	478	37,384
from collective analysis	4,761	1,045	42	254	478	2,942
from case-by-case analysis	38,939	4,497	-	-	-	34,442

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Total

		Non past due	Not past due,	30-90 days	90-180 days	> 180 days
			0-30 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

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 and factoring 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 and net debt of the CIECH Group,

• cash flow planning in the short and medium term, taking into account debt maturities

• diversification of external funding sources

• 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 2022, the facility was drawn down in

the amount of PLN 0 million), and overdraft facilities in the total amount of PLN 159 million (as at the end of 2022, they were drown down

in the amount of PLN 7 million) have been made available to the Group.

The table below presents financial liabilities at face value grouped by maturity.

31.12.2022	Carrying	Contractual	Less than	up to 12	1-2 years	3-5 years	More than
	amount	cash flows		months			5 years
Other financial liabilities:	(2,887,608)	(3,330,761)	(1,194,766)	(169,245)	(326,012)	(1,640,739)	-
Trade liabilities	(993,715)	(993,715)	(993,715)	-	-	-	-
Credits and loans	(1,865,124)	(2,308,277)	(172,282)	(169,245)	(326,012)	(1,640,739)
Factoring	(28,769)	(28,769)	(28,769)	-	-	-	-
Lease liabilities	(135,320)	(259,396)	(17,944)	(13,796)	(34,454)	(24,003)	(169,199)
Hedging derivatives with negative value	(462,097)	(630,567)	(291,429)	(84,463)	-	(254,675)	-
TOTAL	(3,485,025)	(3,025,958)	(1,504,139)	(267,504)	(360,466)	(1,919,416)	(169,199)

31.12.2021	Carrying	Contractual	Less than	up to 12	1-2 years	3-5 years	More than
	amount	cash flows		months			5 years
			6 months
Other financial liabilities:	(2,497,115)	(2,428,894)	(657,082)	(19,623)	(112,782)	(1,639,406)	-
Trade liabilities	(614,596)	(614,596)	(614,596)	-	-	-	-
Credits and loans	(1,859,441)	(1,791,220)	(19,408)	(19,623)	(112,782)	(1,639,406)	-
Factoring	(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)
Derivatives with negative value	(13,215)	(16,215)	(16,215)	-	-	-	-
TOTAL	(2,800,012)	(2,972,748)	(689,707)	(34,069)	(157,974)	(1,924,084)	(166,914)

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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 2022 decreased slightly as compared to their level as at 31 December 2021. The current ratio, calculated

as the ratio of total current assets to total current liabilities, amounted to 1.00 as at 31 December 2022, while the quick liquidity ratio

amounted to 0,76.

	31.12.2022	31.12.2021
Current ratio	1,00	1,06
Quick ratio	0,76	0,86

8.4 DETERMINATION OF FAIR VALUE

The following list presents the fair value of financial instruments.

	31.12.2022	31.12.2022	31.12.2021	31.12.2021
	Carrying amount	Fair value	Carrying amount	Fair value
Cash and cash equivalents	684,969	684,969	799,023	799,023
Loans granted	246	246	133	133
Trade receivables	371,285	371,285	209,231	209,231
Hedging derivatives with positive value	354,070	354,070	101,672	101,672
Derivatives with positive value	9,522	9,522	1,210	1,210
Factoring receivables	55,872	55,872	33,660	33,660
ASSETS	1,475,964	1,475,964	1,144,929	1,144,929
Credits and loans	(1,865,124)	(1,873,993)	(1,859,441)	(1,870,822)
Trade liabilities	(993,715)	(993,715)	(614,596)	(614,596)
Hedging derivatives with negative value	(462,097)	(462,097)	(138,485)	(138,485)
Derivatives with negative value	-	-	(13,215)	(13,215)
Factoring liabilities	(28,769)	(28,769)	(23,078)	(23,078)
LIABILITIES	(3,349,705)	(3,358,574)	(2,648,815)	(2,660,196)

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 and adjusting for estimated own credit risk.

• Level 3 – fair value estimated on the basis of various evaluation techniques which are not based on observable market inputs.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Assets and liabilities measured at fair value

Assets and liabilities measured at fair value	31.12.2022	31.12.2022	31.12.2021	31.12.2021
	Level 2	Level 3	Level 2	Level 3
ASSETS	363,592	40,181	102,882	32,839
Investment properties	-	40,181	-	32,839
Hedging instruments	354,070	-	101,672	-
Derivative instruments with positive valuation	9,522	-	1,210	-
LIABILITIES	(462,097)	-	(151,700)	-
Hedging instruments	(462,097)	-	(138,485)	-
Derivative instruments with negative valuation	-	-	(13,215)	-
TOTAL	(98,505)	40,181	(48,818)	32,839

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

emission allowances purchased for own use (surrender in connection with

the release of CO

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 2022, the balance of settlements on this account amounted to PLN 4.4 million (receivable), which resulted from negative

market valuation of the contracts and debiting the account of CIECH Soda Polska S.A.; as at 31 December 2021, the balance amounted to

PLN 138.9 million (liability).

As at 31 December 2022, 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, currency and interest rate swaps EUR/PLN — Level 2,

according to the fair value hierarchy,

• currency forwards concluded by CIECH S.A. — Level 2, according to the fair value hierarchy,

• gas and electricity price index swaps concluded by CIECH Energy Deutschland GmbH to hedge the risk of rising gas and energy prices –

Level 2, according to the fair value hierarchy,

• EUR/PLN currency forwards concluded by CIECH Soda Polska S.A. to hedge changes in the purchase value ofCO2 emission allowances

depending on the EUR/PLN exchange rate - Level 2, according to the fair value hierarchy,

In 2022, 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

certificates are settled on a daily basis according to quotations published on ICE Endex and

EEX’s stock exchange.

• the fair value of commodity swaps for natural gas and electricity is determined as the difference between the fixed transaction price in

the exchange period and the forward market price for a given exchange period, as at the valuation date, multiplied by the commodity

swap volume and the appropriate discount factor. The input data for the valuation are market data on forward prices of natural gas and

electricity from Reuters.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

value of	Long-term financial	Short-term financial	Other long-term	Trade and other
derivative	assets	assets	liabilities	liabilities	TOTAL
instruments
31.12.2022
IRS EUR	4,233	2,261	-	-	6,494
CIRS	-	96,376	(86,207)	-	10,169
Forward EUR/PLN	-	9,522	-	(2,832)	6,690
Gas/energy SWAP	-	251,200	-	(373,058)	(121,858)
TOTAL	4,233	359,359	(86,207)	(375,890)	(98,505)
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)

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. Finally, in the

statement of financial position, 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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.-31.12.2022	01.01.-31.12.2021
Other adjustments to operating activities	(218,193)	225,985
Change in liabilities due to the arrangement fee	2,514	(7,318)
Early settlement in 2021 of financial instruments (options)	(221,522)	216,287
securing revenues in 2022
Other	815	17,016

	01.01.-31.12.2022	01.01.-31.12.2021
Inventory change presented in consolidated statement of financial position	312,233	110,319
Currency translation reserve	(2,582)	940
Change in Group’s composition	-	(4,621)
Other	(947)	-
Inventory change in consolidated statement of cash flows	(308,704)	(106,638)

	01.01.-31.12.2022	01.01.-31.12.2021
Provision change presented in consolidated statement of financial position	(98,908)	107,820
Income tax provision	(7,196)	-
Currency translation reserve	(5,060)	(48)
Change in Group’s composition	-	985
Change in reserves related to caverns	-	(118,745)
Other	(102)	824
Provisions change in consolidated statement of cash flows	(111,266)	(9,164)

	01.01.-31.12.2022	01.01.-31.12.2021
Receivables change presented in consolidated statement of financial position	238,395	71,381
Change in investment receivables	(3,200)	4,046
Change in income tax receivables	(33,329)	15,165
Change in receivables from caverns	35,119	(4,965)
Change in Group’s composition	-	62,762
Currency translation reserve	(15,160)	(3,928)
Other	582	8,633
Receivables change presented in consolidated statement of cash flows	(221,782)	(153,093)

	01.01.-31.12.2022	01.01.-31.12.2021
Change of liabilities presented in consolidated statement of financial position	762,225	845,080
Change in investment liabilities	45,767	84,894
Change in financial liabilities	(310,397)	(69,994)
Change in income tax liabilities	61,368	(80,673)
Currency translation reserve	2,383	(8,838)
Change in Group’s composition	-	88,817
Change in lease liabilities and loans	10,192	30,097
Donations	(2,505)	(51,751)
Emission rights	210,841	(51,531)
Liabilities change presented in consolidated statement of cash flows	779,874	786,432

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

	01.01.-31.12.2022	01.01.-31.12.2021
Other investment inflows (outflows)	(5,272)	(54)
Acquisition of financial assets	(4,785)	-
Acquisition of investment properties	(605)	-
Borrowings paid out	(239)	-
Disposal of financial assets	-	86
Dividends received	357	-
Other	-	(140)

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 2022, 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 2022, 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” .

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Contingent assets and liabilities including guarantees and sureties, excluding liabilities related to proceedings

before administrative authorities

The amounts of contingent liabilities related to proceedings before administrative authorities and changes therein in 2022 are described in

the note below under the heading: “Audits of tax settlements at the CIECH Group and related contingent liabilities”.

	31.12.2022	31.12.2021
Contingent assets	38,283	21,933
Other contingent receivables	38,283	21,933
Contingent liabilities	428,823	427,034
Tax liabilities (including interest)	68,822	89,299
Letters of support	254,662	214,792
Emission allowances	50,000	48,905
Promissory notes	22,610	42,859
Other	32,730	31,179

The value of contingent assets comprises:

• contingent asset in the amount of PLN 18,864 thousand related to the action against GZNF “FOSFORY” Sp. z o.o. for the payment of

compensation for making an alleged untrue declaration by GZNF “FOSFORY” Sp. z o.o. to CIECH S.A. about the condition of Agrochem

Człuchów Sp. z o.o. with its registered office in Człuchów.

• contingent asset in the amount of PLN 17,914 thousand related to the value of potential interest to be returned from the tax office in

relation to the payment by CIECH S.A., CIECH Soda Polska S.A, CIECH Cargo Sp. z o.o. and CIECH Pianki Sp. z o.o. of the additional income

tax liability with interest for 2012 and 2015 following the decision of the 2

instance authority. The contingent asset relates to interest

for the period from the date of payment of tax plus interest to 31 December 2022.

• a contingent asset in the amount of PLN 1,504 thousand – it is the value of energy efficiency certificates received by CIECH Soda Polska

S.A. 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.

As at 31 December 2022, contingent liabilities amounted to PLN 428,823 thousand and increased by PLN 1,789 thousand compared to the

level recorded on 31 December 2021. The change was mainly as a result of payments received for the caverns covered by the Letter of

support.

Other contingent liabilities mainly include the amount of potential environmental penalties in CIECH Soda Polska S.A. in the amount of

PLN 26,605 thousand.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Sureties granted as at 31 December 2022

			Total amount of	Total amount of
	Principal		liabilities covered by	liabilities covered by
Beneficiary’s name		Financial terms, including surety fee due to the company; surety period	surety in whole or in	surety in whole or in
			specific part	specific part (PLN)
			(currency)
CIECH S.A.
Landesamt fuer Geologie und	CIECH Soda Deutschland GmbH&Co. KG.	Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to	EUR 8,403 thousand	39,411 thousand
Bergwesen Sachsen-Anhalt	(subsidiary)	liability; no time limit
Axpo Solutions AG	CIECH Energy Deutschland GmbH	Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to	EUR 46,000	215,735 thousand
	(subsidiary)	claims related to the agreement; until 31 December 2023	thousand
Investitionsbank_Sachsen-Anhalt	CIECH Salz Deutschland GmbH	Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to	EUR 11,250	52,761 thousand
(IBSA)	(subsidiary)	claims related to the subsidy;	thousand
	CIECH Salz Deutschland GmbH	Commission of 0.97% p.a. of the guaranteed liability; collateral pertaining to	EUR 21,900
Evatherm AG		liability; until the liabilities arising from the agreement between Evatherm	(subsidiary) thousand	102,709 thousand
		AG and CIECH Salz Deutschland GmbH have been settled
BNP Paribas S.A.	CIECH Soda Deutschland GmbH & Co. KG; CIECH	Commission of 0.97% p.a. of the guaranteed liability; ISDA agreement –	EUR 200,000	937,980 thousand
	Energy Deutschland GmbH (subsidiaries)	liabilities under the agreement; indefinite term	thousand
	CIECH Soda Deutschland GmbH & Co. KG;	Commission of 0.55% p.a. of the guaranteed liability; supplier financing	PLN 62,500
BNP Paribas S.A.	CIECH Energy Deutschland GmbH (subsidiaries)	agreement; until all obligations have been repaid no later than 36 months	thousand	62,500 thousand
		after the date of termination
	CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z
BNP Paribas Faktoring Sp. z o.o.	o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon	Commission of 0.55% p.a. of the guaranteed liability; supplier financing	PLN 150,000	150,000 thousand
	S.A. (subsidiaries)	agreement; indefinite term	thousand
		Commission of 0.57% p.a. of the guaranteed liability; collateral pertaining to
mBank S.A.	CIECH Sarzyna S.A. (subsidiary)	claims under the Guarantee agreement; until 30 June 2023	PLN 3,000 thousand	3,000 thousand
	CIECH S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z
CITI Handlowy (reverse factoring)	o.o., CIECH Soda Polska S.A., CIECH Vitrosilicon	Commission of 0.55% p.a. of the guaranteed liability; 12 March 2022	PLN 162,422	162,422 thousand
	S.A. (subsidiaries)	(automatically extended)	thousand
SEFE Marketing & Trading Ltd.	CIECH Energy Deutschland GmbH
(formerly: Gazprom Marketing &	(subsidiary)	Commission 0.97%p.a. of the average outstanding balance; open-ended	EUR 9,475 thousand	44,435 thousand
Trading Limited)
Vitol S.A.	CIECH Soda Polska S.A. (subsidiary)	Commission of 0.18% p.a. of the guaranteed liability; until 31 May 2023	PLN 20,000	20,000 thousand
			thousand
IKS Solino S.A.	CIECH Soda Polska S.A. (subsidiary)	Commission of 0.57% p.a. of the guaranteed liability; until 31 December	PLN 220,000	220,000 thousand
		2028	thousand
PGNiG Obrót Detaliczny Sp. z o.o.	CIECH Vitro Sp. z o.o. (subsidiary)	Commission of 0.57% p.a. of the guaranteed liability; until 30 June 2024	PLN 10,176	10,176 thousand
			thousand
Total nominal amount of contractual				PLN 2,021,130
commitments for which sureties were granted				thousand

In 2022, the CIECH Group companies did not receive any guarantees from third parties.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

Letters of support

As at 31 December 2022, CIECH S.A. was the obliged party in the letter of support (Patronatserklärung) regarding CIECH Soda Deutschland

GmbH&Co. KG seated in Staßfurt (CSD) granted to Innogy Gas Storage NWE GmbH (“Innogy”) relating to liabilities of CSD resulting from the

agreement dated 5 May 2009 on salt caverns construction for the purpose of natural gas storage on the Staßfurt mining field according to

which CSD received payments of EUR 54.3 million from Innogy by 31 December 2022. In the letter of support, CIECH S.A. has committed,

among other things, to ensure that CSD will have sufficient funds to fulfil its financial commitments against Innogy resulting from the above-

mentioned agreement.

Audits of tax settlements at the CIECH Group and related contingent liabilities

In 2022, 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:

Year	Company
2012	CIECH S.A.
2013	CIECH S.A.
2014	CIECH S.A.
2015	CIECH Soda Polska S.A., CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Sarzyna S.A., CIECH Vitrosilicon S.A.
2016	CIECH Sarzyna S.A., CIECH 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 provision recognised in 2018, which was used as

a result of their payment. CIECH S.A. appealed against the decision of the second instance to the Provincial

Administrative Court (“PAC”) in Kraków. On 9 October 2019, the Provincial Administrative Court issued a

ruling in which it confirmed the approach presented by the authority. The court indicated that the company

was obliged to recognise the income and did not have the right to recognise the tax deductible cost. After

receipt of a written statement of reasons, the company lodged a cassation complaint with the Supreme

Administrative Court on 23 December 2019. On 8 December 2022, the Supreme Administrative Court

issued a judgement in which it overturned the judgment of the Provincial Administrative Court. The

Supreme Administrative Court also overturned the decision of the Second Instance Authority and the case

was referred back to that Authority for reconsideration. On 8 February 2023, the Company received a

written statement of reasons for the SAC's judgement. In its statement of reasons, the Supreme

Administrative Court indicated that the Authority, when re-examining the case, would be obliged to follow

the court's interpretation of the law. The attached ruling is final and not subject to appeal. Currently,

the Company is waiting for the decision of the tax authorities in accordance with the judgment of the

Supreme Administrative Court, after which it should receive a refund of the overpaid tax liability, interest

paid for late payment, interest for the period when the paid funds were at the disposal of the tax authority

and reimbursement of court costs.

CIT audit for 2013 at CIECH

S.A.

It was initiated by the Tax Audit Office in Warsaw on 30 November 2016. The tax audit report was issued

on 16 May 2017. The authority claims that the Company has overestimated the tax deductible cost of

interest on cash obtained as a result of the issue of bonds and allocated to the reserve capital of CIECH

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

ciechgroup.com

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 (hereinafter referred to as the “SAC”) in September

2019. On 6 July 2022, the SAC rendered a judgement in which it dismissed the Company's cassation

complaint. The court upheld the auditors’ position and denied the Company the right to recognise interest

on external financing earmarked for the reserve capital in CIECH Soda Deutschland GmbH & Co. KG and

the expense in relation to tax consultancy as tax costs. As far as the fee for the use of the CIECH trademark

is concerned, the SAC found that the office that had carried out the audit did not clarify the matter in depth

and, therefore, the SAC referred the matter for reconsideration by the office. On 26 July 2022, the

Company received a written statement of reasons for the SAC's judgement. In view of the content of the

aforementioned statement of reasons, the Company intends to reiterate and expand on the arguments

supporting its position. The case was returned to the Director of the Tax Administration Chamber in

Warsaw. On 27 February 2023, the Company received the Decision of DIAS in Warsaw of February 14,

2023. In the decision, DIAS will determine the amount of the tax liability at PLN 1.4 million. The Office

refrained from questioning trademark fees as tax deductible costs. The Office, however, did not take into

account the additional evidence submitted by the Company regarding interest on external financing

allocated to the reserve capital of CIECH Soda Deutschland GmbH & Co. KG. and expenses related to tax

consultancy and refused to recognize them as tax costs. The Company and its advisors do not agree with

the issued Decision and intend to sue it in court.

CIT audit for 2014 at CIECH

S.A.

It was initiated by the Head of the Małopolskie Province Customs and Tax Office in Kraków (hereinafter:

Head of the Małopolskie Province Customs and Tax Office in Kraków) on 13 November 2019. The Company

received the outcome of the audit on 22 May 2020. The authority claims that the Company has

overestimated the tax deductible cost by including interest on external financing contributed to the capital

reserves of Soda Deutschland CIECH GmbH (hereinafter: SDC) and the costs of obtaining this financing in

tax deductible costs. Moreover, the authority is of the opinion that expenses incurred on account of trade

mark fees paid to the CIECH Group company should not be recognised by CIECH S.A. as a tax deductible

cost. The taxable amount challenged by the authority is PLN 32.5 million which translates into a potential

tax liability of PLN 6.2 million. The Company does not agree with the findings made by the auditors As a

result, the customs and fiscal audit was converted into tax proceedings.

On 15 October 2020, the Company received a report on the audit of the books in which the Head of the

Małopolskie Province Customs and Tax Office leaves only the charge that the company overestimated the

tax deductible cost by including interest on external financing contributed to the capital reserves of SDC

and the costs of obtaining this financing in tax deductible costs (the taxable amount is PLN 22.6 million

which translates into a potential tax liability of PLN 4.3 million). Thus, the office has refrained from

questioning the expenses incurred for trade mark fees as a tax deductible cost. In the same month, the

company submitted objections to the report on the audit of the books.

In addition, on 6 October 2020 the company received from the Head of the Małopolskie Province Customs

and Tax Office a notice of suspension, as of 1 September 2020, of the statute of limitations for tax liabilities

for 2014 due to initiation of proceedings for fiscal offences.

On 28 February 2022, the Company received the Order of the Head of the Małopolskie Province Customs

and Tax Office to suspend the Tax proceedings, in which the Auditing Authority indicates that the

consideration of the case and the issue of the decision depends on the resolution of the preliminary issue

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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 corporate income tax for 2014.

CIT audit for 2015 at CIECH

Soda Polska S.A.

It was initiated by the Head of the Kujawsko-Pomorskie Province Tax Office in Bydgoszcz on 10 October

2016. On 7 March 2017, the tax office issued the tax audit report. The irregularities found result primarily

from the fact that the auditors challenged the company's right to settle the loss from participation in a

partnership – as was the case for CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon S.A.,

CIECH Sarzyna S.A. The Company and its tax advisors do not agree with the position of the auditors. In June

2019, CIECH Soda Polska S.A. received a decision of the Kujawsko-Pomorskie Tax Office Head in Bydgoszcz

(decision of the First instance), according to which the company had understated - due to its participation

in a partnership - its tax obligations in the amount of PLN 3.9 million. The Company appealed against said

decision. On 9 September 2019, the company received a decision (decision of the Second instance) issued

by the Head of the Tax Administration Chamber in Bydgoszcz, in which the latter upheld the findings of the

decision of the First instance. The decision issued by the second instance authority is enforceable.

Therefore, the company was obliged to pay the overdue tax (as per the tax auditors) in the amount of PLN

3.9 million (the tax base challenged by the tax authorities was PLN 20.4 million) plus the interest due in the

amount of PLN 1 million. On 9 October 2019, the company appealed to the Provincial Administrative Court

in Bydgoszcz against the decision of the Second Instance. At a hearing on 11 December 2019, after

considering the appeal filed by the Company, the Provincial Administrative Court issued a ruling annulling

the decision issued by the Head of the Tax Administration Chamber in Bydgoszcz in its entirety. In February

2020, Head of the Tax Administration Chamber in Bydgoszcz lodged a cassation complaint with the

Supreme Administrative Court in Warsaw. On 14 December 2022, the Supreme Administrative Court

announced a judgment dismissing the cassation complaint of the Head of the Tax Administration Chamber

and thus, upheld the judgment of the Provincial Administrative Court. The ruling is final and not subject to

appeal. On 30 January 2023, the Company received a written statement of reasons for the judgment of

the Supreme Administrative Court. The Company is currently awaiting a decision from the Head of the Tax

Administration Chamber in line with the ruling of the Supreme Administrative Court, after which it should

receive a refund of the overpaid tax liability, interest paid on arrears, interest for the period when the

funds paid were at the disposal of the tax authority and reimbursement of court costs.

CIT audit for 2015 at CIECH

Pianki Sp. z o.o.

It 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

Sp. z o.o. received a decision of the Head of the Kujawsko-Pomorskie Tax Office in Bydgoszcz (decision of

the first instance), according to which the company had understated - due to its participation in a

partnership - its tax liabilities by 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 appeal with the Supreme

Administrative Court. On 14 December 2022, the Supreme Administrative Court announced a judgment

dismissing the cassation complaint of the Head of the Tax Administration Chamber and thus, upheld the

judgment of the Provincial Administrative Court. The ruling is final and not subject to appeal. On 30 January

2023, the Company received a written statement of reasons for the judgment of the Supreme

Administrative Court. The Company is currently awaiting a decision from the Head of the Tax

Administration Chamber in line with the ruling of the Supreme Administrative Court, after which it should

receive a refund of the overpaid tax liability, interest paid on arrears, interest for the period when the

funds paid were at the disposal of the tax authority and reimbursement of court costs.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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CIT audit for 2015 at CIECH

Cargo Sp. z o.o.

It 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 appeal with the Supreme Administrative Court. On 14 December

2022, the Supreme Administrative Court announced a judgment dismissing the cassation complaint of the

Head of the Tax Administration Chamber and thus, upheld the judgment of the Provincial Administrative

Court. The ruling is final and not subject to appeal. On 30 January 2023, the Company received a written

statement of reasons for the judgment of the Supreme Administrative Court. The Company is currently

awaiting a decision from the Head of the Tax Administration Chamber in line with the ruling of the Supreme

Administrative Court, after which it should receive a refund of the overpaid tax liability, interest paid on

arrears, interest for the period when the funds paid were at the disposal of the tax authority and

reimbursement of court costs.

CIT audit for 2015 at CIECH

Vitrosilicon S.A.

It 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.

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 01 February 2021, of the statute of limitations for tax liabilities for

2015 due to the initiation of proceedings for a fiscal offence.

On 1 June 2022, the Company received a Decision of the Head of the Lubuskie Province Customs and Tax

Office in Gorzów Wielkopolski dated 31 May 2022, in which the authority determined the amount of

corporate income tax liability for 2015, namely PLN 2.7 million. On 15 June 2022, the Company sent an

appeal against the decision of the Head of the Lubuskie Province Customs and Tax Office. The company is

currently awaiting the decision of the second instance authority.

CIT audit for 2015 at CIECH

Sarzyna S.A.

It 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 ,

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 Rzeszów a notice of suspension, as of 3 December 2021, of the statute of limitations for tax

liabilities for 2015 due to the initiation of penal-fiscal proceedings (Penal Fiscal Code).

CIT audit for 2016 at CIECH

Sarzyna S.A.

It 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. On 17 November 2022, the Company received the Decision of the Head of the Podkarpackie

Province Tax Office in Reszów of 4 November 2022. In the Decision, the Office questioned the settlements

concerning the Chwastox trademark between Algete Sp. z o.o. and Ciech Sarzyna, the settlement of the

loss on the sale of shares in Ciech Cerium Sp. z o.o. SK and the inclusion of the settlement of the tax loss

arising in 2015 in connection with the Decision of the Head of the Podkarpackie Province Tax Office in

Rzeszów issued on 19 November 2021. Although the Decision is not due, on 18 November 2022 the

company paid tax and interest (tax in the amount of PLN 4.7 million, interest of PLN 0.8 million). The

Company and its tax advisors do not agree with the position of the auditors and appealed against the

Decision received. The company is currently awaiting the decision of the second instance authority.

In addition, on 7 December 2022 the company received from the Head of the Podkarpackie Province Tax

Office in Rzeszów a notice of 23 November 2022 of suspension, as of 26 October 2022, of the statute of

limitations for CIT 2016 due to the initiation of penal-fiscal proceedings (Penal Fiscal Code).

CIT audit for 2016 at CIECH

S.A.

On 25 May 2021, CIECH S.A. received an authorisation from the Head of the Małopolskie Province Customs

and Tax Office in Kraków to carry out a customs and fiscal audit with regard to corporate income tax (CIT)

for 2016. On 25 July 2022, the Company received a decision of the Head of the Małopolskie Province

Customs and Tax Office to suspend the tax proceedings, in which the Auditing Authority indicates that the

dispute between CIECH S.A. and the Head of the Tax Administration Chamber in Warsaw regarding the

settlement of corporate income tax for 2013 is directly related to the correct settlement of corporate

income tax for 2016. In view of the above, the Head of the Małopolskie Province Customs and Tax Office

in Kraków suspended the customs and fiscal audit. In addition, on 2 September 2022 the company received

from the Head of the Małopolskie Province Customs and Tax Office a notice of suspension, as of 19 August

2022, of the statute of limitations for tax liabilities for 2016 due to the initiation of proceedings for a fiscal

offence.

The total amount of possible tax burden is PLN 41.9 million. From which, following the decision of the second instance regarding CIT 2013 in

CIECH S.A., as well as in the case of CIECH Sarzyna S.A. following the decision of the first instance regarding CIT 2015 and CIT 2016, a total tax

amount of PLN 12.8 million was paid despite further litigation (of which an amount of PLN -0.4 million should be returned by the Tax Office

after issuing a new decision in which a smaller tax liability was determined) and interest in the total amount of PLN 2.1 million.

A provision has been recognised to cover a potential tax liability in the amount of PLN 28.4 million. The remaining amount, i.e. PLN 1.1 million

and potential interest thereon is not covered by a provision and constitutes a contingent liability.

On the other hand, of the PLN 12.8 million paid, PLN 1.8 million is reported as a receivable from the Tax Office, an impairment loss was

recognised for the entire amount.

After the case is won before the Supreme Administrative Court by CIECH S.A. (in the CIT 2012 case) and CIECH Soda Polska S.A, CIECH Cargo

Sp. o.o. and CIECH Pianki Sp. z o.o. (in the CIT 2015 case), the companies should receive a refund of the overpaid tax liability in the amount

of PLN 51.9 million and a refund of the interest paid in the amount of PLN 24.9 million.

The CIECH Group companies were subject to VAT audits/proceedings concerning the following years:

Year	Company
Fourth quarter of 2013	Verbis KAPPA Sp. z o.o. S.K.A.
Fourth quarter of 2013	Verbis ETA Sp. z o.o. S.K.A.
December 2014	Cerium Finance Sp. z o.o.
January-June 2018	CIECH Trading Sp. z o.o.
September 2022	CIECH Cargo Sp. z o.o.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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VAT audit for the fourth

quarter of 2013 at Verbis

Kappa Sp. z o.o. S.K.A.

It 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.

It 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

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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deduct VAT in the amount of PLN 30.8 million. The Company and its advisors do not agree with the findings

set forth in the Decision and have appealed against it. On 6 August 2019, the company received an order

of the Head of the Third Tax Office for Warszawa-Śródmieście to make the Decision of the Head of the

Małopolskie Province Customs and Tax Office in Krakow, issued in connection with the tax proceedings

conducted against the company, immediately enforceable. The Company filed a complaint against said

decision. Irrespective of the complaint, the company applied to the Head of the Third Tax Office for

crediting the overpaid VAT in the amount of PLN 30.8 million resulting from the correction of the VAT

settlement for July 2018 towards the arrears indicated in the Decision of the Małopolskie Province Customs

and Tax Office in Krakow, and repaid interest in the amount of PLN 12.4 million. In its decision, the Head

of the Third Tax Office agreed to the company's request. Thus, no enforcement proceedings were initiated.

On 24 October 2019, the company received the Decision of the second instance, where the Head of the

Małopolskie Province Customs and Tax Office upheld the decision of the first instance in its entirety. On 13

November 2019, the company received the decision issued by the Head of the Tax Administration Chamber

in Warsaw concerning the upholding of the decision of the Third Tax Office to make the non-final decision

of the first-instance authority immediately enforceable. Due to the fact that the company had received the

decision of the second instance earlier, it did not file a complaint to the Provincial Administrative Court in

Warsaw against the decision received. On 25 November 2019, however, the Company appealed against

the decision of the second instance to the Provincial Administrative Court in 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.

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. The companies did not create provisions for the above tax cases, because the

companies and their tax advisors estimate the chances of final winning these disputes at over 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.

It 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. Additionally, 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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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, 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. The company did not create provisions for above mentioned vale of interests as company and

its tax advisors estimate the chances of final 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 S.A.

It 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

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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

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. On 29 March 2022, the Company's attorney received the decision of the

Head of the Kujawsko-Pomorskie Province Customs and Tax Office in Toruń concluding once again the

appeal proceedings for the period from January to April 2018 (after CIECH Trading Sp. z o.o. won before

the Supreme Administrative Court). The decision in question revokes the previous decision in its entirety

(both in the part concerning the determination of the sanction of 100% and 15%) and determines a new

amount of additional VAT liability for this period, i.e. 20% (instead of 100%) in the amount of PLN 0.29

million and additional VAT liability for the period from January to February 2018 and April 04.2018 at the

rate of 15% in the same amount as in the previous decision, i.e. PLN thousand (the appeal filed did not

cover this part of the decision). Thus, the case was closed and the company received a refund of PLN 1.1

million (80% of the 100% sanction amount) together with interest accrued over nearly 2 years.

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 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%, it

was eligible for a refund of PLN 1.2 million, which it received (80% of the amount paid) together with

interest. 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.

VAT audit for September

2022 at CIECH Cargo Sp. z

o.o.

It was initiated by the Kujawsko-Pomorskie Province Tax Office on 28 October 2022.

The audit is pending. On 9 December 2022, the Company received the Tax Audit Report. The Kujawsko-

Pomorskie Tax Office in Bydgoszcz stated in the Report that CIECH Cargo Sp. z.o.o. fulfilled its obligation

under the VAT Act and submitted its tax return on time, and paid the amount in respect of the liability

resulting from the return on 25 October 2022. Therefore, despite the error made in the return submitted,

in the auditors' opinion, this cannot be treated as a deliberate fraud resulting in the loss of a budget

receivable. In the opinion of the auditors, the accounts were kept fairly and without defect and were

therefore accepted as evidence.

Audit at the Ciech Group in

Germany

It concerns income tax and VAT settlements at the following companies: Sodawerk Staßfurt Verwaltungs

GmbH (hereinafter: “SWS”), CIECH Soda Deutschland GmbH & Co. KG, Sodawerk Holding Staßfurt GmbH,

SDC GmbH (hereinafter: “SDC”), CIECH Energy Deutschland GmbH, Kaverngesellschaft Stassfurt mbH and

a branch of CIECH SA, Zweigniederlassung Deutschland. 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.

As regards the audit for 2007-2009, the Staßfurt Tax Office issued decisions for SWS on 9 September 2022

and for SDC on 12 January 2023 following a tax audit carried out against the German companies of the

CIECH Group with regard to the audit of corporate income tax settlements. In the decisions, the Office

questioned, among other things, the manner in which the shareholding in the capital of the SWS subsidiary

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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was reduced, which took place in 2007, and, in the case of SDC, the possibility of including financial costs

exceeding the so-called thin capitalisation limits in tax costs. Decisions in respect of the amount of the tax

liability plus interest of EUR 8.8 million (PLN 41.3 million) are not final. SWS, SDC and their advisers do not

agree with the decisions made – the appeals are pending. Both companies requested a deferral of payment

of the amount of the tax liability pending a final ruling and received a positive decision in this regard.

As at the balance sheet date, the outcome of the audit for 2010-2019 is not known.

In case of a different assessment of economic events (occurring during the aforementioned periods for

which audits are pending) by audit authorities, an obligation may arise to recalculate and potentially

increase the tax liability and to pay interest on tax arrears. Guided by the prudence principle, the

companies recognised provisions for potential tax liabilities and interest in the total amount of EUR 15.5

million (after conversion into PLN according to the exchange rate quoted on the balance sheet date – about

PLN 72.6 million) Of the reported EUR 15.5 million, the provision recognised in previous years is EUR 14.1

million (about PLN 66.1 million).

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 high level in relation to CIECH S.A. — Kulczyk Investments S.A. and non-consolidated companies of the CIECH Group, and

with the Polenergia Group companies - linked via a personal relationship with the ultimate parent company of CIECH S.A.) is presented below:

TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES	01.01.-31.12.2022	01.01.-31.12.2021
Revenues from sales of products and services, including:	730	3,125
associates	-	2,291
Revenues from sales of goods and materials, including:	47,910	34,729
associates	42,599	16,976
Other operating income, including:	-	15
associates	-	15
Financial income, including:	254	-
associates	246	-
Purchase of services, including:	44,891	49,353
KI One S.A.	200	199
associates	26,708	32,465
Purchases of products, goods and materials, including:	155,410	58,202
associates	-	-
Other operating expenses	-	-
Financial expenses, including:	2,532	223
associates	139	2
TRANSACTIONS BETWEEN CONSOLIDATED ENTITIES AND OTHER RELATED PARTIES	31.12.2022	31.12.2021
Trade receivables, including:	14,428	5,834
associates	13,481	1,206
Trade liabilities, including:	36,294	45,919
associates	4,930	3,094

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.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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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 2022.

9.3.3 DESCRIPTION OF NON-ROUTINE TRANSACTIONS WITH RELATED PARTIES

Information on significant transactions with related parties is provided in note 6.4 to these financial statements.

9.3.4 TRANSACTIONS CONCLUDED WITH KEY MANAGERIAL PERSONNEL

Key managerial personnel comprises persons who are authorised to and are responsible for direct and indirect planning, managing and

controlling the activities of CIECH S.A.

Remuneration of the Management Board of CIECH S.A.

The following table presents the amount of remuneration and additional benefits payable to particular Members of the Management Board

in 2022 and in the comparable period. In the years 2021-2022, members of the Management Board of CIECH S.A. did not receive any

remuneration for holding a position in the Supervisory Boards or any other functions performed in the subsidiaries of the CIECH Group,

except for Mr Mirosław Skowron, who served on the Management Board of Ciech Salz Deutchland Gmbh, and Mr Kamil Majczak, who serves

on the Management Board of CIECH Ventures Sp. z o.o.

	Short-term	Long-term	Post-employment	Termination	TOTAL
	employee benefits	Incentive Plan	benefits	benefits
31.12.2022
Management Board	13,485	8,808	-	-	22,293
Former members of the Management	-	-	-	-	-
Board
TOTAL	13,485	8,808	-	-	22,293
31.12.2021
Management Board	9,368	-	-	-	9,368
Former members of the Management	-	-	524	-	524
Board
TOTAL	9,368	-	524	-	9,892

Members of the Management Board are employed based on employment contracts. Remuneration of the Management Board Members are

set out in individual employment contracts. Members of the Management Board are also entitled to:

• discretionary bonus in the amount determined by the Supervisory Board of CIECH S.A.;

• annual bonus determined in individual employment contracts

• payments from the Long-Term Incentive Plan for three subsequent years, adopted on the basis of a decision of the Supervisory Board,

with payments in three consecutive years after the end of the reference period.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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100

Remuneration of the Managing Director

The following table presents the amount of remuneration and additional benefits payable to the Managing Director in 2022.

During this period, the Managing Director received remuneration for serving on the Supervisory Boards of: Polsin Overseas Shipping Ltd.

Sp. z o.o. and Proplan Plant Protection Company S.L.

Managing Director	01.01 – 31.12.2022	01.06 – 31.12.2021
Short-term employee benefits	817	1,019
Long-term Incentive Plan	1,807	-
TOTAL	2,624	1,019

The Managing Director is employed under an employment contract which specifies the basic remuneration and the applicable rules of the

bonus system.

Remuneration of the Supervisory Board of CIECH S.A.

Short-term employee benefits	Remuneration due from	Remuneration due from
	CIECH S.A. in 2022	CIECH S.A. in 2021
Sebastian Kulczyk	- 1	- 1
Natalia Scherbakoff 2	510	39
Artur Olech	1,607	447
Marek Kośnik	1,554	476
Łukasz Rędziniak	1,168	368
Martin Laudenbach	1,003	209
Piotr Augustyniak 3	-	108
TOTAL	5,842	1,647

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.

Appointed to the Supervisory Board on 26 October 2021.

On 16 March 2021, Mr Piotr Augustyniak resigned as Member of the Supervisory Board of CIECH S.A.

Members of the Supervisory Board are entitled to the gross monthly remuneration specified in the Resolution of the Annual General Meeting

of CIECH S.A. of 28 April 2022.

The Chairman of the Supervisory Board Committee is entitled to an additional gross monthly remuneration of 10% of the amount set out in

the aforementioned Resolution. Members of the Supervisory Board committee are entitled to an additional gross monthly remuneration of

5% of the amount set out in the aforementioned Resolution.

In 2022, the Supervisory Board Members additionally received individual awards based on the Resolution of the Annual General Meeting of

CIECH S.A. of 28 April 2022.

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 2022 to 31 December 2022 was BDO Spółka z ograniczoną

odpowiedzialnością Sp. k. with its registered office in Warsaw. On 8 June 2022, CIECH S.A. signed an agreement with BDO Spółka

z ograniczoną odpowiedzialnością sp. k. on the review of semi-annual and audit of annual financial statements for the years 2022 and 2023.

In 2022, BDO z ograniczoną odpowiedzialnością Sp. k. with its registered office in Warsaw and foreign members of the BDO 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.

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.

Value of agreements concluded with BDO Spółka z ograniczoną odpowiedzialnością Sp. k (2022) and Deloitte Audyt Spółka z ograniczoną

odpowiedzialnością Sp. k. (corresponding period) is presented below:

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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101

	31.12.2022 1	31.12.2021 1/2
CIECH S.A.
Audit of the annual financial statements and review of the semi-annual financial statements	682	623
Audit of the financial statements as at 30 September 2022	185	-
Other attestation services	20	45
TOTAL	887	668
Consolidated subsidiaries of the CIECH Group
Audit of the annual financial statements and review of the semi-annual financial statements	1,848	2,347
Audit of the annual financial statements for 2021	281	-
Other attestation services	6	158
TOTAL	2,167	2,505

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.

The figures for the comparable period refer to agreements with Deloitte Audyt Sp. z o.o. Sp. k. who provided audit services in 2020-2021.

9.5 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.

The total share of data of subsidiaries not covered by consolidation under the full method, due to their irrelevance, in relation to the total

values of the CIECH Group for the period from 1 January 2022 to 31 December 2022 does not exceed 1% of total consolidated assets of the

Group and 0.5% of consolidated net revenues from sales of goods and products and financial operations. The non-consolidated subsidiary is

Nordiska Unipol AB.

Aggregated data of associates and jointly-controlled companies which were not measured under the equity method for the period from 1

January 2022 to 31 December 2022 did not exceed 1% of the total consolidated equity of the CIECH Group.

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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102

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

31.12.2022 /

% of votes at

the GMS

Share in

equity as at

31.12.2021 /

% 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

Other

The company is preparing for the liquidation process,

operations are being phased out.

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%

CIECH Vitrosilicon

S.A.

Iłowa

Silicates

Manufacture of other basic inorganic chemicals, manufacture

of other chemical products.

100%

CIECH Vitro

Sp. z o.o.

Iłowa

Packaging

Manufacture of hollow glass, manufacture and processing of

other glass.

100%

CIECH

Transclean Sp. z o.o.

Bydgoszcz

Other

Since 2017, the Company has not carried out any operating

activities.

100%

CIECH Pianki

Sp. z o.o.

Bydgoszcz

Foams

Manufacture of plastics in primary forms and other plastic

products.

100%

Ciech Group

Financing AB

Stockholm,

Sweden

Other

Financing activities.

100%

Verbis ETA Sp. z o.o.

Warsaw

Other

General partner of Verbis ETA Sp. z o.o. SKA.

100%

Verbis ETA

Sp. z o.o. SKA

Warsaw

Other

Financing activities, direct lending to the CIECH Group

companies.

100%

CIECH Serwis i

Remonty Sp. z o.o.

Warsaw

Other

Provision of repair and maintenance services, repair and

maintenance of machinery.

100%

CIECH

Nieruchomości

Sp. z o.o.

Warsaw

Other

Buying and selling of own real estate, estate agency, real

estate management.

100%

Proplan Plant

Protection Company

S.L.

Madrid,

Spain

Agro

Production of crop protection chemicals.

100%

CIECH Salz

Deutschland GmbH

Stassfurt,

Germany

Soda

Production and sales of salt products.

100%

CIECH SERVICES

Sp. z o.o.

Bydgoszcz

Soda, Agro,

Foams,

Silicates,

Packaging,

Other

Provision of support services for companies of the CIECH

Group.

100%

CIECH Ventures

Sp. z o.o.

Warsaw

Other

Holding activities, other financial activities.

100%

CIECH Sól Sp. z o.o.

Warsaw

Soda

Production and sales of salt products.

100%

CIECH

Nieruchomości

Rolne Sp. z o.o.

Warsaw

Other

Support activities for crop production, property management.

100%

CIECH Finance

Sp. z o.o.

Warsaw

Other

Implementing divestment projects concerning obsolete fixed

assets (property) and financial assets (shares in companies).

100%

CIECH R&D Group

CIECH R&D Sp. z o.o.

Warsaw

Soda, Agro,

Foams,

Silicates,

Packaging,

Other

Research and developments activities, granting licenses to

the CIECH Group companies to use the trademarks: “Ciech”,

“Ciech Trading” and “Sól Kujawska naturalna czysta”.

100%

Smart Fluid S.A.

Warsaw

Other

Research & Development.

52.83%

CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP FOR 2022 (in PLN ‘000)

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103

Company name

Registered

office

Segment

Business

Share in

equity as at

31.12.2022 /

% of votes at

the GMS

Share in

equity as at

31.12.2021 /

% of votes at

the GMS

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%

CIECH Cargo

Sp. z o.o.

Inowrocław

Soda

Freight transport services.

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%

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%

Verbis KAPPA

Sp. z o.o.

Nowa

Sarzyna

Agro

General partner of Verbis KAPPA Sp. z o.o. SKA, other financial

intermediation.

100%

Verbis KAPPA

Sp. z o.o. SKA

Nowa

Sarzyna

Agro

Other financial intermediation.

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%

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%

CIECH Soda

Deutschland

GmbH&Co. KG

Stassfurt,

Germany

Soda

Manufacture of other basic inorganic chemicals, wholesale of

chemical products.

100%

Sodawerk Holding

Stassfurt GmbH

Stassfurt,

Germany

Soda

Holding activities.

100%

Sodawerk Stassfurt

Verwaltungs GmbH

Stassfurt,

Germany

Soda

Management and financial activities.

100%

CIECH Energy

Deutschland GmbH

Stassfurt,

Germany

Soda

Power generation and distribution.

100%

Kaverngesellschaft

Stassfurt GbmH

Stassfurt,

Germany

Soda

Management and maintenance of gas caverns.

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.

As at 31 December 2022, shares in CIECH Soda Polska S.A., CIECH Sarzyna S.A., CIECH Pianki Sp. z o.o., CIECH Cargo Sp. z o.o., CIECH Vitrosilicon

S.A., CIECH Vitro Sp. z o.o., CIECH Soda Deutschland GmbH & Co. KG, CIECH Energy Deutschland GmbH and CIECH Salz Deutschland Gmbh,

who are guarantors of the term loan, revolving credit facilities and overdraft facilities, were pledged as collateral for financial liabilities on

account of the term loan, revolving facility and overdraft facilities.

9.6 INFORMATION ON THE IMPACT OF CLIMATE ISSUES ON THE OPERATIONS OF THE CIECH

GROUP

The impact of climate issues has been determined in accordance with management's current, obtainable and best estimates of the economic

conditions likely to occur in the foreseeable future. These estimates take into account the current knowledge of the potential wide-ranging

impacts of climate change (risks described in, amongst others, the Directors’ Report for the CIECH Group and CIECH S.A. for 2022, in Section

3.4). Operational plans and impairment tests take into account mitigating measures. Mitigating the threats associated with the effects of

climate change includes, among others Initiatives aimed at geographical and product diversification in the Agro segment, especially exposed

to the effects of drought. In addition, the Ciech Group invests in energy transformation, both in terms of improving the effectiveness of

currently used technologies and diversification of sources of energy acquisition in low and zero-emission solutions. These expenditures fall

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within the Group's and the Company's long-term strategy of, among other things, achieving climate neutrality by 2040. The first stage

assumes a 33% reduction in CO

emissions from Scopes 1 and 2 by the end of 2026 compared to the baseline year of 2019

(https://ciechgroup.com/relacje-inwestorskie/o-ciech/strategia-grupy/). There were no significant impairment losses on non-

current/operating assets during 2022 (see Section 5 of these financial statements for details). There was also no need to recognise additional

provisions other than allowances and provisions which are recognised in the course of the Company's ordinary activities.

9.7 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE

RUSSIAN INVASION OF UKRAINE ON THE CIECH GROUP'S ACTIVITIES

The Russian invasion of Ukraine in February 2022 was an event that shattered the existing order of life in Europe known up to the outbreak

of the conflict. Russia's aggression against Ukraine has led to a collapse in Europe's energy order and stability and to previously unplanned

measures aimed at making European Union countries independent of the monopoly of Russian energy supplies. The conflict in Ukraine

resulted in a worsening of the adverse phenomena related to fluctuations and availability of raw materials.

In the first weeks after the outbreak of the conflict, the CIECH Group was confronted with unprecedented and unpredictable risks that had

a high impact on ensuring the operational continuity of individual production plants due to supply chain disruptions and the availability of

energy raw materials. In particular, this risk affected the Soda segment. Over time, the Group, through the crisis measures taken, has

contained the risk of shock and uncertainty due to the deterioration of availability and the increase in raw material prices. Looking ahead to

the past 2022, it became apparent that the armed conflict in Ukraine had an impact on all business segments of the Group, but that the

effects of the conflict on each segment varied.

Before a detailed analysis of the impact of the conflict in Ukraine on the individual segments is presented, it should be noted that, from the

very beginning of the conflict, the Management Board of CIECH S.A. has been monitoring the situation in detail and on an ongoing basis and

analysing various scenarios for the markets' reactions and administrative decisions and their impact on the Group. The Group seeks to

respond to developments on an ongoing basis.

The impact of Russia's invasion of Ukraine from the perspective of the operations of individual business segments of the CIECH Group is

presented below:

Soda Segment

Soda segment suffered the greatest impact of the conflict in the Group, through an increase in the price of energy inputs and a

deterioration in their availability. The inability to import anthracite from Russia, as a result of the economic sanctions in place since April

2022, resulted in the soda plants switching to the use of more expensive coke from Polish manufacturers. Coal deliveries continue and

are sourced from the existing suppliers, PGG and Węglokoks, however the terms of cooperation and deliveries have been renegotiated

due to the unprecedented increase in global market prices. The price of coal purchased has increased, but in view of the need to secure

the continuity of production of soda plants and ensure the availability of soda products to customers, the aspect of increased coal costs

has faded into the background. For gas, the level of risk increased to high for the Stassfurt plant. It was assumed that there would be

limitations in gas supply or even a stoppage of supply, which could have resulted in the soda plant and salt brewing plants in Stassfurt

halting production. However, by the end of 2022, the situation with raw materials had stabilised slightly and the risk of reduced gas

supplies and thus the need for the Stassfurt plant to reduce or suspend production had not materialised. Following significant increases

in the prices of energy inputs, resulting in an increase in production costs, the Group decided to react proactively to the fluctuating prices

of raw materials and renegotiated the prices of soda products with its customers along with the increase in the prices of these raw

materials (despite the fact that contracts were binding for the whole of 2022 and the commercial terms were set). Owing to the favourable

situation in demand, the Group was able to pass on to its customers the rising costs of soda products. As a result, the Soda Segment

delivered the highest revenues in the Group's history.

Agro Segment

For the Agro Segment, the impact of the Russian invasion of Ukraine was significantly lower than for the soda segment. The countries

involved in the ongoing conflict, i.e. Russia, Belarus and Ukraine, did not represent large markets for the products of the Nowa Sarzyna

plant. Also, raw materials (mainly active substances) and inputs necessary for the production of CIECH Sarzyna's crop protection products

were not sourced from these countries (the main purchase market for raw materials is Asia and manufacturers from India and China). The

unfavourable impact of the conflict in Ukraine for the company materialised due to the occurrence of an oversupply of cereals on the

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Agro Segment

Polish market in 2022. Large quantities of cereals from Ukraine entered the market, resulting in Polish farmers reducing the acreage of

their own crops and thus decreasing the demand for crop protection products from Nowa Sarzyna. An additional risk factor that weakened

the demand for crop protection products in the Agro Segment was unfavourable weather conditions (prolonged drought in the spring in

Poland and drought in Spain at the turn of spring and summer). However, the segment met its targets, owing to high demand at the

beginning of the year, even before the onset of Russia's invasion of Ukraine, and later at the end of the year when weather conditions

improved.

Foams Segment

The impact of the armed conflict in Ukraine on the Foams segment materialised in the form of uncertainty and fear of economic recession

for individual upholstered furniture manufacturers' customers. The segment experienced a decline in demand for upholstered furniture

and lower than expected demand for foams during 2022. The challenging demand situation was further exacerbated by high price pressure

from other foam manufacturers and price reductions. The Bydgoszcz plant took measures to maintain the level of margins earned and

meet the financial targets set for the segment.

Silicates Segment and Packaging Segment

For both of these segments, the detrimental phenomenon caused by Russia's invasion of Ukraine was a significant and unpredictable

increase in gas prices. In addition, both segments also saw increases in soda prices. As a result of increased prices for two key raw

materials, both segments experienced significant increases in production costs. The Silicates Segment was in a better position than the

Packaging Segment in the realities that occurred, as it was possible to raise prices for silicate customers in response to rising production

costs. Owing to such measures, CIECH Vitrosilicon has minimised the effects of rising production costs and passed them on to its

customers. Such measures were also supported by the level of demand in the silicate market. For the Packaging Segment, the ability to

pass the effects of rising raw material prices on to customers was very limited. The purchasing capacity of individual customers has also

been further reduced by the high level of inflation in 2022 - a decline in purchases of headstone lamps and lanterns by end customers,

which had already been ongoing in previous years, was observed. Given the situation, the Packaging Segment focused its efforts on the

most efficient use of raw materials and sought to optimise their use at every stage of the production process. The segment was unable to

avoid, like other segments, price increases for its products, which offset, to a limited extent, the effects of rising raw material prices.

Strengthening IT infrastructure

Another threat that has emerged following the outbreak of conflict in Ukraine has been the increase in the risk of cyber-attacks. In this area,

the Group has, since the beginning of the conflict, when increased activity of hacker groups and attacks on information systems and resources

was observed, strengthened the security measures in place and performs continuous monitoring of unusual events, logs and operations.

These measures have been implemented as part of the IT security policy and information security policy.

Addressing financial risks

Another significant issue that affected the Group in connection with Russia's invasion of Ukraine is that prices in the financial markets,

including commodity prices, exchange rates and interest rates, become highly volatile.

In the wake of the ongoing conflict, prices of assets perceived as more risky also weakened, which translated into the depreciation of PLN

against, among others, EUR and USD. The Group has a significant exposure to the EUR/PLN exchange rate (total position of EUR -290.3

million) and a relatively low exposure to USD/PLN (total position of USD -7.6 million). In the short term, the weakening of the PLN against

the EUR led to an increase in negative valuations of derivatives contracted that are sensitive to the EUR/PLN exchange rate (forward and

CCIRS transactions), foreign currency credit facilities in EUR and trade payables in EUR, which was offset by an increase in the valuation of

loans granted in foreign currency, receivables and cash held in foreign currency and an increase in the expected value of future revenues in

foreign currency. Taking into account the hedging relationships regarding future revenues in foreign currencies, the impact of changes in the

EUR/PLN rate on the Group’s profit/loss is limited (the position affecting the current profit/loss is EUR 52.0 million). The valuation of

derivatives contracted did not involve any cash margin and an increase in the negative valuation of transactions did not have a negative

impact on the Group's current liquidity.

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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 had a limited impact on the Group's cash

flows. The increase in interest rates drove up the cost of servicing short-term working capital funding (factoring and credit facilities) and lease

funding.

In addition, the CIECH Group enters into derivative transactions to hedge commodity risks, including regarding the sale of electricity, the

purchase of natural gas and CO

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. Due to the very high volatility in the pricing of commodity contracts for

gas and electricity and CO

, resulting in exceeding transaction limits, it was necessary to use cash collateral for some of the transactions,

which had a negative impact on the Group's current liquidity in the short term – at the end of December 2022, the amount of margin provided

in connection with open derivatives amounted to PLN 104.1 million.

Maintaining a secure financial position

The CIECH Group's liquidity situation was and continues to be 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 2022, the Group held cash of PLN 685 million and limits available under committed credit facilities of

PLN 402 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. The 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 has not materialised.

In the case of the syndicated facility agreement, the majority of the debt is of a long-term nature, with the short-term portion representing

principal repayment due on the end of June and December 2023 in the amount of PLN 187 million.

No indication of impairment

As at the date of these statements, the Group's analyses did not reveal any indications of a materially higher risk of impairment of property,

plant and equipment and intangible assets in use or investments in progress was found. However, due to the uncertainty associated with the

conflict and its further development and subsequent impact on the global economy, the measurement of individual balance sheet items,

including: fixed assets and intangible assets, inventories, receivables, measurement of financial instruments, provisions and liabilities, will be

closely monitored and it is not excluded that they may change in subsequent reporting periods.

It should be reiterated that the Management Board of CIECH S.A. monitors the situation related to the conflict on an ongoing basis and takes

measures to ensure the continuity of the Group's and its individual companies' operations and to maintain the assumed margin levels.

9.8 INFORMATION ON THE CURRENT SITUATION IN CONNECTION WITH THE IMPACT OF THE

COVID-19 CORONAVIRUS PANDEMIC ON THE CIECH GROUP'S ACTIVITIES

Throughout 2022, the CIECH Group did not experience any negative impact of the COVID-19 coronavirus on its ongoing operating activity.

The CIECH Group, individual Group companies and production plants operated smoothly.

None of the CIECH Group's business segments recorded negative events or incidents caused by the ongoing pandemic.

There were no instances of reduced or lost business continuity due to infections or employee absence at any of the CIECH Group’s production

plants.

As far as other areas of the CIECH Group's operations are concerned, also no adverse effects of the ongoing COVID-19 pandemic were

recorded during 2022.

9.9 EVENTS AFTER THE REPORTING DATE

• On 19 January 2023, the Extraordinary Shareholders’ Meeting of CIECH Nieruchomości Rolne Sp. z o.o. increased the Company's share

capital by PLN 200 thousand, i.e. from PLN 5 thousand to PLN 205 thousand through creation of 40,000 new, equal and indivisible shares

with a nominal value of PLN 50 per share. The right to subscribe for all 40,000 shares was granted to CIECH S.A., the sole shareholder of

the Company. Registration of the increase of the share capital by the court is pending.

• On 31 January 2023, Mr Mirosław Skowron tendered his resignation as Member of the Management Board of CIECH S.A.

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• On 31 January 2023, CIECH Salz Deutschland GmbH filed a lawsuit against EVATHERM AG at the Magdeburg District Court for the

payment of approximately EUR 20 million (including interest and legal costs). The lawsuit was filed due to improper performance of the

contract, delayed commissioning of the installation and problems with the operation of the installation and the production process at

the CSD evaporated salt plant located in Staßfurt, launched in 2021. For details, see current report No 4/2023.

• On 13 February 2023, a notice of intention to announce a tender offer to subscribe for the shares in CIECH S.A. issued by Santander

Bank Polska S.A. – Santander Brokerage Office on behalf of KI Chemistry SARL, the main shareholder of CIECH S.A., was published.

• On 9 March 2023, a notice was published on the announcement of a tender offer for the sale of shares in CIECH S.A. The acceptance of

subscriptions for shares under the Tender Offer will start on 10 March 2023 and will last until 12 April 2023. The expected date of

settlement of the share purchase transaction in the Tender Offer is 19 April 2023.

• On 10 March 2023 public aid in the amount of PLN 18,734.4 thousand PLN was granted to CIECH Soda Polska S.A. under the program

"Aid for energy-intensive sectors related to sudden increases in natural gas and electricity prices in 2022".

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REPRESENTATION BY THE MANAGEMENT BOARD

These consolidated financial statements of the CIECH Group for the financial year ended 31 December 2022 were approved by the Company’s

Management Board on 23 March 2023.

Warsaw, 23 March 2023

(signed on the polish original) (signed on the polish original)

Dawid Jakubowicz

President of the Management Board of CIECH Spółka

Akcyjna

Kamil Majczak

Member of the Management Board of CIECH Spółka

Akcyjna

(signed on the polish original)

Jarosław Romanowski

Member of the Management Board of CIECH Spółka

Akcyjna

Signature of person responsible for the preparation

of the financial statements

(signed on the polish original)

Katarzyna Rybacka

Chief Accountant of CIECH Spółka Akcyjna