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Separate financial statements of Grupa Azoty Spółka Akcyjna

for the 12 months ended December 31st 2020

prepared in accordance with International Financial Reporting Standards

as endorsed by the European Union


Contents

Separate statement of profit or loss and other comprehensive income

Separate statement of financial position

Separate statement of changes in equity for the period ended Dec 31 2020

Separate statement of changes in equity for the period ended Dec 31 2019

Separate statement of cash flows

Notes to the separate financial statements

1. General information

1.1. Organisation of the Company

1.2. Composition of the Management Board and Supervisory Board of the Company

2. Significant accounting policies

2.1. Compliance statement

2.2. Changes in applied accounting policies and data presentation

2.3. Basis of accounting

2.4. Functional currency and presentation currency

2.5. Professional judgement and estimates

2.6. Foreign currencies

3. Notes to the separate financial statements

Business segment reporting

Note 1 Revenue from contracts with customers

Note 2 Operating expenses

Note 2.1 Cost of sales

Note 2.2 Employee benefit expenses

Note 2.3 Reconciliation of lease costs

Note 3 Other income

Note 4 Other expenses

Note 5 Finance income

Note 6 Finance costs

Note 7 Income tax

Note 7.1 Income tax disclosed in the statement of profit or loss

Note 7.2 Effective tax rate

Note 7.3 Income tax disclosed in other comprehensive income

Note 7.4 Deferred tax assets and liabilities

Note 7.5 Change in temporary differences

Note 7.6 Unrecognised deferred tax assets and liabilities

Note 8 Discontinued operations

Note 9 Earnings per share

Note 10 Property, plant and equipment

Note 11 Right-of-use assets

Note 12 Investment property

Note 13 Intangible assets

Note 14 Financial assets

Note 14.1 Shares

Note 14.2 Impairment of investments

Note 14.3 Other financial assets

Note 15 Inventories

Note 16 Property rights

Note 16.1 CO2 emission allowances

Note 17 Trade and other receivables

Note 17.1 Prepayments

Note 18 Cash

Note 19 Other assets

Note 20 Assets held for sale

Note 21 Equity

Note 21.1 Share capital

Note 21.2 Share premium

Note 21.3 Hedging reserve

Note 21.4 Dividends

Note 22 Borrowings

Note 23 Lease liabilities

Note 24 Other financial liabilities

Note 25 Change in liabilities arising from financing activities

Note 26 Employee benefit obligations

Note 27 Trade and other payables

Note 27.1 Accrued expenses

Note 28 Provisions

Note 29 Grants

Note 30 Financial instruments

Note 30.1 Capital management

Note 30.2 Categories of financial instruments

Note 30.3 Financial risk management

Note 30.3.1 Credit risk

Note 30.3.2 Liquidity risk

Note 30.3.3 Market risk

Note 30.4 Changes in terms or classification of financial assets

Note 30.5 Fair value of financial instruments

Note 30.6 Derivatives

Note 30.7 Hedge accounting

Note 31 The Company as a lessor

Note 32 Contingent liabilities, contingent assets, sureties and guarantees

Note 33 Related-party transactions

Note 34 Investment commitments

Note 35 Notes to the statement of cash flows

Note 36 Regulatory financial information by type of activity, in accordance with Art. 44 of the Energy Law

Note 37 Events after the reporting date

Note 38 Information on the effects of the COVID-19 pandemic

 


Separate statement of profit or loss and other comprehensive income

(in PLN ‘000, except for Earnings per share)

 

Note

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 −

Dec 31 2019

Profit/loss

 

 

 

Revenue

1

1,613,109

1,987,039

Cost of sales

2

(1,314,843)

(1,588,371)

Gross profit

 

298,266

398,668

Selling and distribution expenses

2

(102,963)

(105,391)

Administrative expenses

2

(174,997)

(193,340)

Other income

3

24,822

13,705

Other expenses

4

(18,455)

(24,415)

Operating profit

 

26,673

89,227

Finance income

5

 244,284

124,961

Finance costs

6

(133,856)

(108,540)

Net finance income

 

110,428

16,421

Profit before tax

 

137,101

105,648

Income tax

7

(11,473)

(47,399)

Net profit

 

125,628

58,249

Other comprehensive income

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Actuarial losses from defined benefit plans

 

(4,609)

(12,121)

Tax on items that will not be reclassified to profit or loss

7.3

876

2,303

Total items that will not be reclassified to profit or loss

 

(3,733)

(9,818)

Items that are or may be reclassified to profit or loss

 

 

 

Cash flow hedges – effective portion of fair-value change

 

(65,875)

4,952

Income tax relating to items that are or will be reclassified to profit or loss

7.3

12,516

(941)

Total items that are or may be reclassified to profit or loss

 

(53,359)

4,011

Total other comprehensive income

 

(57,092)

(5,807)

Comprehensive income for the period

 

68,536

52,442

Earnings per share:

9

 

 

Basic (PLN)

 

1.27

0.59

Diluted (PLN)

 

1.27

0.59

The separate statement of profit or loss and other comprehensive income should be read in conjunction with the notes to these full-year separate financial statements, which form their integral part.

Separate statement of financial position

(PLN ‘000)

 

Note

as at

Dec 31 2020

as at

Dec 31 2019

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

10

1,642,695

1,661,561

Right-of-use assets

11

40,332

47,411

Investment property

12

21,911

23,049

Intangible assets

13

51,307

50,838

Shares

14.1

5,706,230

5,410,006

Other financial assets

14.3

 1,233,971

292,001

Other receivables

17

32,318

5,855

Deferred tax assets

7.4

3,959

-

Total non-current assets

 

8,732,723

7,490,721

Current assets

 

 

 

Inventories

15

201,730

251,022

Property rights

16

67,477

45,513

Derivative financial instruments

30.6

-

1,025

Other financial assets

14.3

131,432

61,409

Current tax assets

 

10,283

-

Trade and other receivables

17

237,628

232,229

Cash and cash equivalents

18

464,174

1,158,379

Assets held for sale

20

95

95

Total current assets

 

1,112,819

1,749,672

Total assets

 

9,845,542

9,240,393

The separate statement of financial position should be read in conjunction with the notes, which constitute an integral part of the full-year separate financial statements.

Separate statement of financial position (continued)

(PLN ‘000)

 

Note

as at

Dec 31 2020

as at

Dec 31 2019

Equity and liabilities

 

 

 

Equity

 

 

 

Share capital

21.1

495,977

495,977

Share premium

21.2

2,418,270

2,418,270

Hedging reserve

21.3

(47,487)

5,872

Retained earnings

 

2,042,406

1,920,511

Total equity

 

4,909,166

4,840,630

Liabilities

 

 

 

Borrowings

22

2,861,537

2,413,532

Lease liabilities

23

31,134

38,962

Other financial liabilities

24

35,141

19,042

Employee benefit obligations

26

69,917

64,080

Trade and other payables

27

-

32

Provisions

28

31,255

31,619

Government grants received

29

51,505

47,048

Deferred tax liabilities

7.4

-

1,426

Total non-current liabilities

 

3,080,489

2,615,741

Borrowings

22

1,199,668

1,118,985

Lease liabilities

23

13,497

13,199

Derivative financial instruments

30.6

1,810

-

Other financial liabilities

24

295,067

262,879

Employee benefit obligations

26

5,100

4,678

Current tax liabilities

 

-

1,168

Trade and other payables

27

328,465

378,443

Provisions

28

9,608

2,251

Government grants received

29

2,672

2,419

Total current liabilities

 

1,855,887

1,784,022

Total liabilities

 

4,936,376

4,399,763

Total equity and liabilities

 

9,845,542

9,240,393

The separate statement of financial position should be read in conjunction with the notes, which constitute an integral part of the full-year separate financial statements.

Separate statement of changes in equity

for the period ended Dec 31 2020 (PLN ‘000)

 

Share capital

Share premium

Hedging reserve

Retained earnings

Total equity

Balance as at Jan 1 2020

495,977

2,418,270

5,872

1,920,511

4,840,630

Profit or loss and other comprehensive income

 

 

 

 

 

Net profit

-

-

-

125,628

125,628

Other comprehensive income

-

-

(53,359)

(3,733)

(57,092)

Comprehensive income for the period

-

-

(53,359)

121,895

68,536

Balance as at Dec 31 2020

495,977

2,418,270

(47,487)

2,042,406

4,909,166

Separate statement of changes in equity

for the period ended Dec 31 2019 (PLN ‘000)

 

Share capital

Share premium

Hedging reserve

Retained earnings

Total equity

Balance as at Jan 1 2019

495,977

2,418,270

1,861

1,872,080

4,788,188

Profit or loss and other comprehensive income

 

 

 

 

 

Net profit

-

-

-

58,249

58,249

Other comprehensive income

-

-

4,011

(9,818)

(5,807)

Comprehensive income for the period

-

-

4,011

48,431

52,442

Balance as at December 31st 2019

495,977

2,418,270

5,872

1,920,511

4,840,630

The separate statement of changes in equity should be read in conjunction with the notes, which constitute an integral part of the full-year separate financial statements.

Separate statement of cash flows

(PLN ‘000)

 

Note

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 −

Dec 31 2019

restated*

Cash flows from operating activities

 

 

 

Profit before tax

 

137,101

105,648

Adjustments for:

 

 

 

Depreciation and amortisation

 

139,060

134,528

Impairment losses

 

1,352

33,048

Loss on investing activities

 

2,012

2,006

(Gain) on disposal of financial assets

 

(1,340)

(400)

Interest, foreign exchange gains or losses

 

99,230

38,666

Dividends

 

(182,116)

(87,267)

Fair value loss on financial assets at fair value

 

(16,968)

(592)

(Increase)/Decrease in trade and other receivables

35

(9,316)

6,083

Decrease/(Increase) in inventories and property rights

 

27,327

(14,741)

Increase in trade and other payables

35

439,805

395,753

Increase in provisions

 

6,993

1,596

Increase in employee benefit obligations

 

1,650

1,837

Increase/(Decrease) in grants

 

4,174

(52)

Other adjustments

35

(3,500)

(3,500)

Income tax paid

 

(14,918)

(33,658)

Net cash from operating activities

 

630,546

578,955

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment, intangible assets and investment property

 

4,842

1,137

Purchase of property, plant and equipment, intangible assets and investment property

 

(154,491)

(150,781)

Dividend received

 

182,116

87,267

Proceeds from sale of other financial assets

 

1,370

466

Purchase of other financial assets

14.1

(297,712)

(417,901)

Interest received

 

18,353

18,278

Loans

 

(1,016,844)

(66,160)

Repayments of loans

 

64,313

46,983

Other proceeds/disbursements

 

(1,515)

(2,984)

Net cash from investing activities

 

(1,199,568)

(483,695)

Cash flows from financing activities

 

 

 

Proceeds from borrowings

 

530,673

435,853

Repayment of borrowings

 

(140,497)

(100,396)

Interest paid

 

(54,672)

(53,953)

Commission fees on bank borrowings

 

(11,151)

(6,540)

Payment of lease liabilities

 

(12,960)

(9,654)

Other cash provided by financing activities

 

6,302

58,319

Repayment of reverse factoring

 

(442,847)

(261,707)

Net cash from financing activities

 

(125,152)

61,922

Total net cash flows

 

(694,174)

157,182

 

 

 

 

Cash and cash equivalents at beginning of period

 

1,158,379

1,000,980

Effect of exchange rate fluctuations on cash held

 

(31)

217

Cash and cash equivalents at end of period

 

464,174

1,158,379

* as described in Section 2.2.c.

The separate statement of cash flows should be read in conjunction with the notes to these full-year separate financial statements, which form their integral part.

 

 

Notes to the separate financial statements

1. General information

1.1. Organisation of the Company

Grupa Azoty Spółka Akcyjna (the “Company”), with its registered office in Tarnów, was established as Zakłady Azotowe w Tarnowie-Mościcach Spółka Akcyjna on February 21st 1991 by Notary Deed A No. 910/91. Since April 22nd 2013, when relevant amendments to the Company’s Articles of Association were registered, the Company has been trading under the name Grupa Azoty Spółka Akcyjna (abbreviated to Grupa Azoty S.A.).

The Company operates in Poland under the Polish Commercial Companies Code. The Company is entered in the Register of Businesses in the National Court Register maintained by the District Court in Kraków, 12th Commercial Division of the National Court Register, under entry No. KRS 0000075450. The Company’s REGON number for public statistics purposes is 850002268. The Company has been established for an indefinite term.

The Company is the parent of the Grupa Azoty Group (the “Group”) and also prepares consolidated financial statements of the Group in accordance with International Financial Reporting Standards as endorsed by the European Union.

The consolidated financial statements were authorised for issue on April 12th 2021.

The Company’s business includes in particular:

Manufacture of basic chemicals,

Manufacture of fertilizers and nitrogen compounds,

Manufacture of plastics and synthetic rubber in primary forms,

Manufacture of plastics.

These financial statements were authorised for issue by the Company’s Management Board on April 12th 2021.

These financial statements cover the year ended on December 31st 2020 and include comparative data for the year ended December 31st 2019.

1.2. Composition of the Management Board and Supervisory Board of the Company

Management Board

As at January 1st 2020, the Management Board was composed of:

Wojciech Wardacki – President of the Management Board,

Witold Szczypiński – Vice President of the Management Board,

Mariusz Grab – Vice President of the Management Board,

Tomasz Hryniewicz – Vice President of the Management Board,

Grzegorz Kądzielawski – Vice President of the Management Board,

Paweł Łapiński − Vice President of the Management Board,

Artur Kopeć – Member of the Management Board.

At its meeting held on October 22nd 2020, the Company’s Supervisory Board resolved to remove the following persons from the Management Board:

Wojciech Wardacki – President of the Management Board,

Paweł Łapiński − Vice President of the Management Board.

The Supervisory Board further resolved to appoint Mariusz Grab, previously serving as Vice President of the Management Board, as acting President of the Management Board until appointment to the position of a person selected through the recruitment and selection procedure for members of the Management Board. The Supervisory Board’s resolutions concerning changes in the composition of the Company’s Management Board became effective as of their dates.

On November 13th 2020, the Supervisory Board of the Parent appointed Tomasz Hinc,

with effect from December 1st 2020, as Member of the Company’s Management Board of the 11th term of office to serve in the position of President of the Management Board. Following the appointment of Tomasz Hinc to the Management Board to serve in the position of President of the Management Board, Mariusz Grab ceased to serve in that capacity, with effect from November 30th 2020.

On December 4th 2020, the Supervisory Board appointed Filip Grzegorczyk, PhD, as Vice President of the Management Board of the 11th term of office, with effect from December 15th 2020.

As at December 31st 2020, the Management Board was composed of:

Tomasz Hinc – President of the Management Board,

Witold Szczypiński – Vice President of the Management Board,

Mariusz Grab – Vice President of the Management Board,

Filip Grzegorczyk, PhD – Vice President of the Management Board,

Tomasz Hryniewicz – Vice President of the Management Board,

Grzegorz Kądzielawski – Vice President of the Management Board,

Artur Kopeć – Member of the Management Board.

The Supervisory Board

As at January 1st 2020, the Supervisory Board was composed of:

Marcin Pawlicki – Chair of the Supervisory Board,

Michał Gabryel – Deputy Chair of the Supervisory Board,

Zbigniew Paprocki – Secretary of the Supervisory Board,

Paweł Bielski − Member of the Supervisory Board,

Piotr Czajkowski – Member of the Supervisory Board,

Monika Fill – Member of the Supervisory Board,

Robert Kapka – Member of the Supervisory Board,

Bartłomiej Litwińczuk – Member of the Supervisory Board,

Roman Romaniszyn – Member of the Supervisory Board.

On June 29th 2020, pursuant to resolutions of the Company’s Annual General Meeting, the following persons were appointed as members to the Company’s Supervisory Board of the 11th joint term of office:

Marcin Pawlicki – Chair of the Supervisory Board,

Monika Fill – Member of the Supervisory Board,

Robert Kapka – Member of the Supervisory Board,

Wojciech Krysztofik – Member of the Supervisory Board,

Bartłomiej Litwińczuk – Member of the Supervisory Board,

Michał Maziarka – Member of the Supervisory Board,

Zbigniew Paprocki – Member of the Supervisory Board,

Roman Romaniszyn – Member of the Supervisory Board.

On July 23rd 2020, the Supervisory Board appointed Wojciech Krysztofik as Deputy Chair and Zbigniew Paprocki as Secretary of the Supervisory Board of the 11th term of office.

On November 30th 2020, Marcin Pawlicki resigned as Chair and Member of the Supervisory Board.

On December 29th 2020, the Company was notified by the Minister of State Assets of the appointment of Marcin Mauer to the Supervisory Board, with effect from December 28th 2020.

As at December 31st 2020, the Supervisory Board was composed of:

Wojciech Krysztofik – Deputy Chair of the Supervisory Board,

Zbigniew Paprocki – Secretary of the Supervisory Board,

Monika Fill – Member of the Supervisory Board,

Robert Kapka – Member of the Supervisory Board,

Bartłomiej Litwińczuk – Member of the Supervisory Board,

Michał Maziarka – Member of the Supervisory Board,

Marcin Mauer – Member of the Supervisory Board,

Roman Romaniszyn – Member of the Supervisory Board.

On January 8th 2021, by resolution of the Extraordinary General Meeting, Magdalena Butrymowicz, PhD, was appointed to the Company’s Supervisory Board.

At the same time, the Extraordinary General Meeting appointed Magdalena Butrymowicz as Chair of the Company’s Supervisory Board of the 11th term of office. The resolutions became effective upon adoption.

As at the date of this report, the Supervisory Board consisted of:

Magdalena Butrymowicz – Chair of the Supervisory Board,

Wojciech Krysztofik – Deputy Chair of the Supervisory Board,

Zbigniew Paprocki – Secretary of the Supervisory Board,

Monika Fill – Member of the Supervisory Board,

Robert Kapka – Member of the Supervisory Board,

Bartłomiej Litwińczuk – Member of the Supervisory Board,

Marcin Mauer – Member of the Supervisory Board,

Michał Maziarka – Member of the Supervisory Board,

Roman Romaniszyn – Member of the Supervisory Board.

Supervisory Board’s Audit Committee

The Audit Committee was appointed on July 4th 2013 by resolution of the Supervisory Board in order to streamline the work of the Supervisory Board and improve control of the Parent and the Group.

Composition of the Audit Committee as at January 1st 2020:

Michał Gabryel – Chair,

Marcin Pawlicki – Member,

Paweł Bielski − Member.

Following the appointment of new persons to the Supervisory Board of the 11th joint term of office, which took place on June 29th 2020 by resolutions of the Company’s Annual General Meeting, the composition of the Audit Committee was changed.

Composition of the Audit Committee as at July 23rd 2020:

Marcin Pawlicki – Chair,

Zbigniew Paprocki – Member,

Michał Maziarka – Member.

The composition of the Audit Committee changed following Marcin Pawlicki’s resignation from the position of Chair of the Supervisory Board.

As at December 31st 2020, the Audit Committee was composed of:

Michał Maziarka – Member,

Zbigniew Paprocki – Member.

On December 29th 2020, the Company was notified by the Minister of State Assets of the appointment of Marcin Mauer to the Supervisory Board, with effect from December 28th 2020. On January 4th 2021, the Supervisory Board passed a resolution to appoint Marcin Mauer as Chair of the Audit Committee.

On February 1st 2021 the Supervisory Board passed resolutions on supplementing the composition of the Audit Committee, appointing Monika Fill to the Committee.

As at the date of this report, the Company’s Audit Committee consisted of:

Marcin Mauer - Chair,

Monika Fill – Member,

Michał Maziarka – Member,

Zbigniew Paprocki – Member.

Responsibilities of the Audit Committee

The Audit Committee operated pursuant to the Rules of Procedure for the Audit Committee, adopted by the Supervisory Board by way of a resolution of July 4th 2013. On March 8th 2021, the Supervisory Board passed a resolution to approve the consolidated text of the Rules of Procedure for the Audit Committee adopted by a resolution of the Supervisory Board’s Audit Committee of February 11th 2021.

The Committee’s main tasks are those provided for the Audit Committee in the Act on Statutory Auditors, Audit Firms, and Public Oversight of May 1st 2017, the Company’s Articles of Association, and resolutions of the Supervisory Board.

The Committee has the right to demand from the Company’s Management Board any information, materials and explanations required for the performance of the Committee’s tasks.

Other committees of the Supervisory Board

Within the Supervisory Board, a Strategy and Development Committee and a Nomination and Remuneration Committee were established.

As at December 31st 2020, the Strategy and Development Committee was composed of:

Robert Kapka – Chair,

Zbigniew Paprocki – Member,

Wojciech Krysztofik – Member.

As at December 31st 2020, the Nomination and Remuneration Committee was composed of:

Michał Maziarka – Chair,

Wojciech Krysztofik – Member,

Roman Romaniszyn – Member.

On February 1st 2021, the Supervisory Board passed resolutions on supplementing the composition of the Committees,

appointing Bartłomiej Litwińczuk to the Strategy and Development Committee and Wojciech Krysztofik as Chair of that Committee.

As at the date of these financial statements, the Company’s Strategy and Development Committee consisted of:

Wojciech Krysztofik – Chair,

Zbigniew Paprocki – Member,

Robert Kapka – Member,

Bartłomiej Litwińczuk – Member.

At the same time, Magdalena Butrymowicz was appointed to the Nomination and Remuneration Committee.

As at the date of these financial statements, the Company’s Nomination and Remuneration Committee consisted of:

Michał Maziarka – Chair,

Magdalena Butrymowicz – Member,

Wojciech Krysztofik – Member,

Roman Romaniszyn – Member.

2. Significant accounting policies

2.1. Compliance statement

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as endorsed by the EU (“EU IFRS”). As at the date of authorisation of these financial statements for issue, given the ongoing process of implementing IFRS in the EU, the IFRS applicable to these financial statements did not differ from the EU IFRS.

The EU IFRS comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”).

2.2. Changes in applied accounting policies and data presentation

The accounting policies applied to prepare these separate financial statements are consistent with those applied to draw up the Company’s financial statements for the year ended December 31st 2019, save for presentation changes in the statement of cash flows discussed in item c.

a)Changes in International Financial Reporting Standards

The following standards effective as of 2020 have no material impact on the Company’s operations or its financial reporting:

Amendment to IFRS 3 Business Combinations

The amendment to IFRS 3 was issued on October 22nd 2018 and is effective for annual periods beginning on or after January 1st 2020.

The purpose of the amendment was to clarify the definition of a ‘business’ and to make it easier to distinguish between acquisitions of ‘businesses’ and groups of assets for the purpose of accounting for business combinations. An optional ‘screening test’ was also added to the standard to facilitate the assessment of whether the acquired set of assets and activities constitute a business.

Amendments to IAS 1 and IAS 8: Definition of Material.

Amendments to IAS 1 and IAS 8 were issued on October 31st 2018 and are effective for annual periods beginning on or after January 1st 2020.

The purpose of the amendments was to clarify the definition of “material” and to provide guidance on its practical application.

Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7

Amendments to IFRS 9, IAS 39 and IFRS 7 were issued on September 26th 2019 and are effective for annual periods beginning on or after January 1st 2020.

The amendments modify the specific hedge accounting requirements in order to minimise (eliminate) the potential effects of the uncertainty caused by the reform of interest rate benchmarks (such as interbank offered rates). In addition, companies will be required to provide additional disclosures regarding hedging relationships directly affected by the uncertainties related to the reform.

Furthermore, as of June 1st 2020, following endorsement by the European Commission in October 2020, the Group has applied the Amendment to IFRS 16 Leases: Covid-19-Related Rent Concessions. The amendment was issued on May 28th 2020 and is effective for annual periods beginning on or after June 1st 2020, with earlier application permitted. The amendment to IFRS 16 introduces a practical expedient permitting a lease modification not to be recognised e.g. in the event of any changes in lease payments occurring as a consequence of the Covid-19 pandemic.

The implementation of the standards listed above has no material effect on the Company’s financial statements.

b)New standards and interpretations

The standards and interpretations which have been issued but are not yet effective as they have not been endorsed by the EU, or have been endorsed but the Company has not elected to apply them early:

In these financial statements, the Company has not opted to early apply any standards or interpretations which have been issued but are not yet effective.

The following standards and interpretations have been issued by the International Accounting Standards Board or the International Financial Reporting Interpretations Committee but are not effective as at the reporting date:

IFRS 17 Insurance Contracts

The new standard was issued on May 18th 2017 and subsequently amended on June 25th 2020, and is effective for annual periods beginning on or after January 1st 2023. Early application is permitted as long as IFRS 15 and IFRS 9 are also applied. The standard supersedes earlier regulations on insurance contracts (IFRS 4). On June 25th 2020, IFRS 4 was also amended to defer the effective date of IFRS 9 Financial Instruments for insurers until January 1st 2023.

The Company will apply the new standard as of January 1st 2023. As at the date of these financial statements, it is not possible to reliably estimate the effects of the application of the new standard.

Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

Amendments to IAS 1 were issued on January 23rd 2020 with its effective date subsequently modified in July 2020, and are effective for annual periods beginning on or after January 1st 2023.

The amendment redefines the criteria for classifying liabilities as current. The amendment may affect the presentation of liabilities and their reclassification between current and non-current.

The Company will apply the amended standard as of January 1st 2023. As at the date of these financial statements, it is not possible to reliably estimate the effects of the application of the new standard.

Amendments to IFRS 3, IAS 16, IAS 37 and Annual Improvements to IFRS Standards 2018–2020.

The amendments were issued on May 14th 2020, and are effective for annual periods beginning on or after January 1st 2022. One of the amendments prohibits deducting from the cost of property, plant and equipment ofany proceeds from selling items produced while the entity is developing/preparing the asset for its intended use.

The Company will apply the amended standards as of January 1st 2022. As at the date of these financial statements, it is not possible to reliably estimate the effects of the application of the amended standards.

Interest Rate Benchmark Reform Phase II – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

The amendments to these standards were issued on August 27th 2020 to complement the first phase of reporting amendments resulting from the reform of interbank reference rates of September 2019. The amendments are effective for annual periods beginning on or after January 1st 2021. Phase II amendments address issues that might affect financial reporting, e.g. relating to valuation of financial instruments and lease liabilities, when an existing interest rate benchmark is replaced with a new benchmark (i.e. replacement issues).

Amendments to IAS 1 Disclosure of Accounting Policies and IAS 8 Definition of Accounting Estimates

The amendments were issued on February 12th 2021, and are effective for annual periods beginning on or after January 1st 2023. The purpose of these amendments is to place greater emphasis on the disclosure of material accounting policies and to clarify how companies should distinguish between changes in accounting policies and changes in accounting estimates.

The Company will apply the amended standards as of January 1st 2023. As at the date of these financial statements, it is not possible to reliably estimate the effects of the application of the amended standards. 

The IFRSs as endorsed by the EU do not differ materially fromthe regulations adopted by the International Accounting Standards Board (IASB), save for the following standards, interpretations and amendments thereto, which were not yet adopted by EU Member States as at the date of authorisation of these financial statements for issue. 

IFRS 17 Insurance Contracts issued on May 18th 2017, as amended on June 25th 2020, 

Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current and non-current, issued on January 23rd 2020, as amended on July 15th 2020,

Amendments to IFRS 3, IAS 16, IAS 37 and Annual Improvements to IFRS Standards 2018–2020, issued on May 14th 2020,

Amendments to IAS 1 Disclosure Initiative and IAS 8 Definition of Accounting Estimates, issued on February 12th 2021.

The Company will apply the amended standards as of their effective dates. As at the date of these financial statements, it is not possible to reliably estimate the effects of the application of the amended standards.

c)Presentation changes

In order to improve the clarity of presentation of the effects of amendments/adjustments, the Company changed the presentation of its statement of cash flows. The restated comparative data for 2019 is presented below.

Additionally, the item ‘Net profit for the period’ was deleted from the statement of financial position. Previously presented under equity attributable to owners of the parent, the item could be misleading.

Retained earnings, including:

Net profit for the period

 

 

 

 

for the period

Jan 1 −

Dec 31 2019

Change

for the period

Jan 1 −

Dec 31 2019

restated*

Cash flows from operating activities

 

 

 

Profit before tax

105,648

-

105,648

Adjustments, including

 

 

 

Depreciation and amortisation

134,528

-

134,528

Impairment losses

33,048

-

33,048

Loss on investing activities

2,006

-

2,006

(Gain) on disposal of financial assets

(400)

-

(400)

Interest, foreign exchange gains or losses

38,666

-

38,666

Dividends

(87,267)

-

(87,267)

Fair value (gain) on financial assets at fair value

(592)

-

(592)

Decrease in trade and other receivables

5,671

412

6,083

(Increase) in inventories and property rights

(14,741)

-

(14,741)

Increase in trade and other payables

350,315

45,438

395,753

Increase in provisions, accruals and government grants

49,231

(49,231)

-

Increase in provisions

-

1,596

1,596

Increase in employee benefit obligations

-

1,837

1,837

(Decrease) in grants

-

(52)

(52)

Other adjustments

(3,500)

-

(3,500)

Income tax paid

(33,658)

-

(33,658)

Net cash from operating activities

578,955

-

578,955

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment, intangible assets and investment property

1,137

-

1,137

Purchase of property, plant and equipment, intangible assets and investment property

(150,781)

-

(150,781)

Dividend received

87,267

-

87,267

Proceeds from sale of other financial assets

466

-

466

Purchase of other financial assets

(417,901)

-

(417,901)

Interest received

18,278

-

18,278

Loans

(66,160)

-

(66,160)

Repayments of loans

46,983

-

46,983

Other disbursements

(2,984)

-

(2,984)

Net cash from investing activities

(483,695)

-

(483,695)

Cash flows from financing activities

 

 

 

Proceeds from borrowings

435,853

-

435,853

Repayment of borrowings

(100,396)

-

(100,396)

Interest paid

(53,953)

-

(53,953)

Commission fees on bank borrowings

(6,540)

-

(6,540)

Payment of lease liabilities

(9,654)

-

(9,654)

Other cash provided by financing activities

58,319

-

58,319

Repayment of reverse factoring

(261,707)

-

(261,707)

Net cash from financing activities

61,922

-

61,922

Total net cash flows

157,182

-

157,182

Cash and cash equivalents at beginning of period

1,000,980

-

1,000,980

Effect of exchange rate fluctuations on cash held

217

-

217

Cash and cash equivalents at end of period

1,158,379

-

1,158,379

 

2.3. Basis of accounting

These separate financial statements have been prepared on the historical cost basis except for assets and liabilities measured at fair value, i.e.:

derivatives measured at fair value through profit or loss,

financial instruments at fair value through profit or loss,

financial instruments measured at fair value through other comprehensive income.

2.4. Functional currency and presentation currency

These separate financial statements are presented in the Polish złoty, rounded off to the nearest thousand, unless stated otherwise. The Polish złoty is the Company’s functional currency.

2.5. Professional judgement and estimates

The preparation of the financial statements in conformity with IFRS EU requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and the related assumptions are based on historical experience and other factors that are considered reasonable under the circumstances, and their results provide the basis for judgement as to the carrying amount of the assets and liabilities that does not arise directly from other sources. The actual values of the assets and liabilities may differ from the estimates.

Estimates and the underlying assumptions are subject to ongoing verification. A change in accounting estimates is recognised in the period in which the change is made or in current and future periods if the change in estimates affects both the current period and the future periods.

The main accounting estimates and assumptions are presented in the relevant notes to the financial statements:

estimates of impairment losses on shares are presented in Note 14.1,

estimates and assumptions concerning the feasibility of realising deferred tax assets, in particular with respect to the change in recognition of assets arising from the activities conducted in the Special Economic Zone, are presented in Note 7.4,

estimates concerning recognition of lease contracts and the lessee’s incremental borrowing rate are presented in Note 11,

estimates concerning useful lives of property, plant and equipment, usufruct right, intangible assets and investment property are presented in Notes 10, 11, 12, 13,

estimates of impairment losses on property, plant and equipment are presented in Note 10,

estimates of write-downs of inventories to net realisable value are presented in Note 15,

estimates and assumptions regarding impairment losses on receivables are presented in Note 17,

judgement regarding reclassification of a trade liability to financial liabilities with respect to liabilities settled through reverse factoring are presented in Note 24;

estimates of employee benefits are presented in Note 26,

estimates of recognised provisions for liabilities are presented in Notes 27–28.

estimates of recognised compensation under the Act on the Compensation Scheme for Energy-Intensive Sectors and Subsectors are presented in Note 3,

estimates of the measurement of derivative instruments are presented in Note 30.6.

Uncertainty related to tax settlements

The regulations on value added tax, corporate income tax, and social security contributions are subject to frequent changes and amendments, Furthermore, the applicable tax laws lack clarity, which leads to differing opinions and diverse interpretations, both between various public authorities and between public authorities and businesses.

Tax settlements and other regulated areas of activity (e.g. customs or foreign exchange control) are subject to inspection by administrative bodies, which are authorised to impose high penalties and fines, and any additional tax liabilities arising from such inspections must be paid with high interest. Consequently, the tax risk in Poland is higher than in countries with more mature tax systems.

The amounts presented and disclosed in the financial statements may therefore change in the future as a result of a decision by an inspection authority.

On July 15th 2016, the tax legislation was amended to reflect the provisions of the General Anti-Abuse Rule (“GAAR”). GAAR is intended to prevent the creation and use of artificial legal structures designed to avoid paying taxes in Poland. GAAR defines tax avoidance as an act performed primarily for the purpose of obtaining a tax advantage which, in given circumstances, is contrary to the objective and purpose of the tax law. Under GAAR, such an activity does not result in a tax advantage if the legal structure used was artificial. Any arrangements involving (i) separation of transactions or operations without sufficient rationale, (ii) engaging intermediaries where no business or economic rationale exists, (iii) any offsetting elements, and (iv) any arrangements operating in a similar way, may be viewed as an indication of the existence of an artificial scheme subject to GAAR. The new regulations will require much more judgement when assessing the tax consequences of particular transactions.

The GAAR clause should be applied with respect to arrangements made after its effective date as well as arrangements that were made before its effective date but the benefit of the tax advantage obtained through the arrangement continued or still continues after that date. Implementation of the above regulations will provide Polish tax inspection authorities with grounds to challenge certain legal arrangements made by taxpayers, including restructuring or reorganisation of corporate groups.

The Management Board is aware of the obligations to report MDR tax schedules under the Tax Law of August 29th 1997.

The Company recognises and measures current and deferred tax assets or liabilities in accordance with IAS 12 Income Taxes and IFRIC 23 Uncertainty over Income Tax Treatments based on tax profit (loss), tax base, unused tax losses, unused tax credits and tax rates, taking into account the assessment of uncertainties related to tax settlements.

The Company treats all tax settlements with a high degree of care, in particular with respect to classification of expenses as tax-deductible costs and with respect to deduction of VAT. For further information, see Note 7 Income Tax

Going concern assumption

These full-year separate financial statements have been prepared on the assumption that the Company will continue as a going concern in the foreseeable future.

For information on changes in working capital and the financing structure as at December 31st 2020, see Note 30 Financial instruments. For information on the impact of the COVID-19 pandemic on the Company’s situation, see Note 38 Information on the effects of the COVID-19 pandemic. In view of the above, the Company’s Management Board concludes that these circumstances do not indicate any threat to the Company continuing as a going concern.

2.6. Foreign currencies

Transactions denominated in foreign currencies are translated into the Polish złoty using the exchange rate from the transaction date.

At the reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the Polish złoty at the average exchange rate published for a given currency on the reporting date by the National Bank of Poland. Non-monetary assets and liabilities measured at historical cost in a foreign currency are translated at the exchange rate from the transaction date. Non-monetary items measured at fair value in a foreign currency are translated at the exchange rate from the date on which the fair value was determined.

Foreign exchange gains/(losses) are recognised in the statement of profit or loss as finance income or costs, except for differences arising on translation of equity instruments and qualifying cash flow hedges, which are recognised as other comprehensive income.

The following exchange rates were used for measurement purposes:

 

Dec 31 2020

Dec 31 2019

EUR

4.6148

4.2585

USD

3.7584

3.7977

3. Notes to the separate financial statements

Accounting policy

The Company identifies operating segments based on internal reports. Operating results of each segment are reviewed on a regular basis by the Company’s chief operating decision maker, who decides about the allocation of resources to different segments and analyses their results. Separate information prepared for each segment is available.

The Company identifies the following operating segments:

Agro Fertilizers

Plastics

Energy

Other Activities segment, comprising other activities, such as laboratory services, property rental and other activities that cannot be allocated to other segments.

None of the Company’s operating segments has been combined with another segment to create reportable segments.

The Company presents administrative, selling and distribution expenses and other income and expenses allocated to the segments. Performance of each segment is measured based on its revenue, EBIT and EBITDA. The Company’s financing (including finance costs and finance income) and income tax are monitored at the level of the Company and are not allocated to the segments.

Transaction prices applied in transactions between operating segments are established on an arm’s length basis, similarly as in transactions with unrelated parties.

The Company identifies the following geographical areas:

Poland

Germany

Other EU countries

Asia

South America

Business segment reporting

Operating segments

The Company pursues its business objectives through three reportable segments, which offer different products and services, and are managed separately because they require different technologies and marketing strategies. For each segment, the Management Board reviews internal management reports on a monthly basis.

The operations of each of the Company’s reportable segments comprise:

Agro Fertilizers segment comprises the manufacturing and marketing of the following products:

nitrogen fertilizers (nitro-chalk, ammonium nitrate),

nitrogen fertilizers with sulfur (ammonium sulfate, ammonium sulfonitrite),

ammonia,

concentrated nitric acid;

Plastics segment comprises the manufacturing and marketing of the following products and goods:

Caprolactam,

Engineering plastics (PA 6, POM) and their modifications,

modified plastics (PPC, PPH, PBT, PA66),

Plastic products (PA pipes, PE pipes, polyamide casings);

Energy segment includes the production of energy carriers (electricity, heat, water, process and instrument air, nitrogen) for the purposes of chemical units and, to a lesser extent, for resale (mainly of electricity) to external customers. As part of its operations, the segment also purchases and distributes natural gas for process needs;

Other Activities segment comprises the remaining activities:

laboratory services,

catalyst production (iron-chromium catalyst, copper catalysts, iron catalysts),

rental of real estate, and

property rental, and other activities not allocated to any of the segments specified above.

Key financial results and performance of each of the segments are discussed below. The key performance metrics for each segment are revenue, EBIT and EBITDA.

 

 

Operating segments’ income, expenses and net profit (loss) for the 12 months ended December 31st 2020

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

External revenue

729,804

808,187

27,483

47,635

1,613,109

Intersegment revenue

211,591

254,585

506,227

37,451

1,009,854

Total revenue

941,395

1,062,772

533,710

85,086

2,622,963

Operating expenses, including: (-)

(893,783)

(1,099,573)

(535,390)

(73,911)

(2,602,657)

selling and distribution expenses (-)

(76,739)

(25,350)

(132)

(742)

(102,963)

administrative expenses (-)

(81,031)

(87,806)

(2,209)

(3,951)

(174,997)

Other income

8,482

6,755

1,131

8,454

24,822

Other expenses (-)

(2,144)

(2,947)

(4,113)

(9,251)

(18,455)

Segment’s EBIT

53,950

(32,993)

(4,662)

10,378

26,673

Finance income

-

-

-

-

244,284

Finance costs (-)

-

-

-

-

(133,856)

Profit before tax

-

-

-

-

137,101

Income tax

-

-

-

-

(11,473)

Net profit

-

-

-

-

125,628

EBIT*

53,950

(32,993)

(4,662)

10,378

26,673

Depreciation and amortisation

56,444

42,767

14,421

12,517

126,149

Unallocated depreciation and amortisation

-

-

-

-

12,911

EBITDA**

110,394

9,774

9,759

22,895

165,733

* EBIT is calculated as operating profit (loss) as disclosed in the statement of profit or loss.

** EBITDA is calculated as operating profit (loss) before depreciation and amortisation.


Operating segments’ income, expenses and net profit (loss) for the 12 months ended December 31st 2019

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

External revenue

816,828

1,105,273

26,811

38,127

1,987,039

Intersegment revenue

241,013

278,195

514,467

38,846

1,072,521

Total revenue

1,057,841

1,383,468

541,278

76,973

3,059,560

Operating expenses, including: (-)

(985,629)

(1,358,495)

(543,702)

(71,797)

(2,959,623)

selling and distribution expenses (-)

(74,308)

(29,919)

(362)

(802)

(105,391)

administrative expenses (-)

(82,632)

(104,815)

(2,150)

(3,743)

(193,340)

Other income

2,500

1,555

1,408

8,242

13,705

Other expenses (-)

(2,954)

(6,684)

(4,831)

(9,946)

(24,415)

Segment’s EBIT

71,758

19,844

(5,847)

3,472

89,227

Finance income

-

-

-

-

124,961

Finance costs (-)

-

-

-

-

(108,540)

Profit before tax

-

-

-

-

105,648

Income tax

-

-

-

-

(47,399)

Net profit

-

-

-

-

58,249

EBIT*

71,758

19,844

(5,847)

3,472

89,227

Depreciation and amortisation

53,772

43,209

14,326

12,394

123,701

Unallocated depreciation and amortisation

-

-

-

-

10,827

EBITDA**

125,530

63,053

8,479

15,866

223,755

* EBIT is calculated as operating profit (loss) as disclosed in the statement of profit or loss.

** EBITDA is calculated as operating profit (loss) before depreciation and amortisation.

Revenues from intersegment transactions are eliminated. Segments’ operating profit excludes finance income of PLN 244,284 thousand (2019: PLN 124,961 thousand) and finance costs of PLN 133,856 thousand (2019: PLN 108,540 thousand).


Operating segments’ assets and liabilities as at December 31st 2020

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Segment’s assets

708,101

851,894

357,515

208,354

2,125,864

Unallocated assets

-

-

-

-

7,719,678

Total assets

708,101

851,894

357,515

208,354

9,845,542

Segment’s liabilities

121,124

205,521

162,857

90,419

579,921

Unallocated liabilities

-

-

-

-

4,356,455

Total liabilities

121,124

205,521

162,857

90,419

 4,936,376

Operating segments’ assets and liabilities as at December 31st 2019

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Segment’s assets

722,591

905,828

309,273

207,781

2,145,473

Unallocated assets

-

-

-

-

7,094,920

Total assets

722,591

905,828

309,273

207,781

9,240,393

Segment’s liabilities

124,896

226,021

154,980

99,753

605,650

Unallocated liabilities

-

-

-

-

3,794,113

Total liabilities

124,896

226,021

154,980

99,753

4,399,763

As at December 31st 2020, unallocated assets include deferred tax assets of PLN 3,959 thousand (December 31st 2019: none), loans of PLN 1,321,478 thousand (December 31st 2019: PLN 352,438 thousand), shares of PLN 5,706,230 thousand (December 31st 2019: PLN 5,410,006 thousand), measurement of foreign exchange derivatives – none (December 31st 2019: PLN 1,025 thousand), and cash and cash equivalents of PLN 464,174 thousand (December 31st 2019: PLN 1,158,379 thousand), current tax assets of PLN 10,283 thousand (December 31st 2019: none), as the assets are managed at the Company level.

As at December 31st 2020, the segment’s unallocated liabilities included income tax liabilities – none (December 31st 2019: PLN 1,168 thousand), liabilities under borrowings of PLN 4,061,205 thousand (December 31st 2019: PLN 3,532,517 thousand), deferred tax liabilities – none (December 31st 2019: PLN 1,426 thousand), as these liabilities are managed at the Company level.


Other segmental information for the 12 months ended December 31st 2020

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Expenditure on property, plant and equipment

35,715

32,843

23,782

7,787

100,127

Expenditure on investment property

-

-

-

463

463

Expenditure on intangible assets

-

-

63

228

291

Unallocated expenditure

-

-

-

-

13,617

Total expenditure

35,715

32,843

23,845

8,478

114,498

Segment’s depreciation and amortisation

56,444

42,767

14,421

12,517

126,149

Unallocated depreciation and amortisation

-

-

-

-

12,911

Total depreciation and amortisation

56,444

42,767

14,421

12,517

139,060

Other segmental information for the 12 months ended December 31st 2019

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Expenditure on property, plant and equipment

30,565

31,468

12,821

11,147

86,001

Expenditure on intangible assets

214

-

1

244

459

Unallocated expenditure

-

-

-

-

52,333

Total expenditure

30,779

31,468

12,822

11,391

138,793

Segment’s depreciation and amortisation

53,772

43,209

14,326

12,394

123,701

Unallocated depreciation and amortisation

-

-

-

-

10,827

Total depreciation and amortisation

53,772

43,209

14,326

12,394

134,528

Capital expenditure is made to purchase property, plant and equipment and intangible assets.

 

 

Geographical areas

Revenue split by geographical areas is determined based on the location of customers. Assets allocated to a geographical area are identified on the basis of their geographical location.

Revenue

 

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Poland

681,151

790,146

Germany

355,795

535,677

Other EU countries

379,375

463,076

Asia

49,118

38,151

South America

30,395

42,914

Other countries

117,275

117,075

Total

1,613,109

1,987,039

Non-current assets

The Company’s non-current assets, totalling PLN 6,445,883 thousand (December 31st 2019: PLN 6,174,813 thousand) are located in Poland.

The non-current assets include property, plant and equipment, intangible assets, investment property, right-of-use assets and shares.

The non-current assets do not include other financial assets, other receivables or deferred tax assets.

Material customers

In the Plastics segment revenue from the subsidiary Grupa Azoty ATT Polymers GmbH of Guben, Germany, was PLN 571,577 thousand (2019: PLN 688,990 thousand). The company plays an important role in the manufacturing and trading chain of the Plastics segment. No other trading partner accounts for a separately significant part of the Company’s revenue.

Note 1 Revenue from contracts with customers

Accounting policy

Revenue comprises revenue under contracts with customers. Recognition of revenue represents a transfer of goods or services to a customer in the amount that reflects the amount of consideration the Company expects to receive in exchange for those goods or services. A key criterion for revenue recognition is the time when the Entity satisfies the performance obligation, that is the time when the control of the asset is transferred to the customer.

Identifying the contract

Revenue from sale of products, services, merchandise and materials

The key categories of products, services, merchandise and materials sold by the Company are listed in the Operating segments section.

Revenue from sale of products, services, merchandise and materials is recognised in accordance with IFRS 15 Revenue from Contracts with Customers in a manner that reflects transfer of control to the customer. As a rule, revenue from sale of products, merchandise and materials is recognised by the Company at a specific point in time, in accordance with the Incoterms rules set forth in the agreement (usually upon release from the warehouse or upon delivery to the point indicated by the customer). In the case of deliveries effected in accordance with selected Incoterms (CIF, CIP, CFR, CPT), the Company identifies the transport service or the transport and insurance service as a separate performance obligation towards a customer after passing control of the good / product to the customer. Revenue from sale of services is recognised at a specific point in time when the performance of the service is completed.

When recognising revenue, the Company takes into account specific issues, such as: determination whether the Company is acting as the principal or an agent in the transaction, product return rights, recognition of discounts being part of variable consideration, recognition of discounts representing a material right, bill-and-hold arrangements, and recognition of revenue from take-or-pay contracts. For most of the contracts containing discounts that are part of variable consideration, the estimated amount of the discount is fully recognised in liabilities under bonuses, a component of trade and other payables.

As a rule, the customary payment terms for this revenue stream are 30 days.

The Company enters into comprehensive contracts with customers for sale of electricity (supplied by third parties) and electricity distribution services provided over its own network. The Company believes that it acts as the principal under such contracts, and identifies two separate performance obligations: for the sale of electricity, which is recognised under revenue from sale of merchandise and materials, and for the distribution service, which is recognised under revenue from sale of products and services.

The Company also enters into comprehensive contracts with customers for the sale of electricity and electricity distribution services, where the Group purchases high-voltage electricity and sells it after conversion over medium and low-voltage grids. Also in this case the Company believes that under such contracts, which contain two performance obligations, the Group acts as the principal, and recognises both the sale of electricity and the distribution service under revenue from sale of products and services.

In the case of electricity sale contracts, the payment terms average 17 days.

Contract costs

Incremental costs of obtaining a contract

The Company incurs incremental costs of obtaining a contract, i.e. costs it would not have incurred if the contract had not been obtained. The incremental costs of obtaining a contract are recognised by the Company as an asset in trade and other receivables if the Group expects to recover those costs. As a practical expedient, the Company recognises incremental costs to obtain a contract as an expense when they are incurred if the amortisation period of the asset that the Company otherwise would have recognised is one year or less.

Costs to fulfil a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of a standard other than IFRS 15, the Company recognises an asset (in trade and other receivables) from the costs incurred to fulfil the contract only if those costs meet all of the following criteria:

the costs relate directly to a contract or to an anticipated contract that the Company can specifically identify;

the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and

The costs are expected to be recovered.

Receivables and liabilities under contracts with customers are presented as follows:

receivables – Note 17 Trade and other receivables,

liabilities – Note 27 Trade and other payables.

 

 

For the period Jan 1 – Dec 31 2020

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Main product lines

 

 

 

 

 

Revenue from sale of products and services

729,798

770,916

23,602

45,257

1,569,573

Revenue from sale of merchandise and materials

6

30,270

3,881

2,378

36,535

Revenue from sale of property rights

-

7,001

-

-

7,001

Total

729,804

808,187

27,483

47,635

1,613,109

Geographical regions

 

 

 

 

 

Poland

493,832

119,269

27,483

40,567

681,151

Germany

73,889

281,895

-

11

355,795

Other EU countries

71,341

301,364

-

6,670

379,375

Asia

-

49,118

-

-

49,118

South America

19,789

10,606

-

-

30,395

Other countries

70,953

45,935

-

387

117,275

Total

729,804

808,187

27,483

47,635

1,613,109

Customer type

 

 

 

 

 

Legal persons

729,055

808,187

26,726

47,625

1,611,593

Individuals

749

-

757

10

1,516

Total

729,804

808,187

27,483

47,635

1,613,109

Agreement type

 

 

 

 

 

Fixed-price contracts

729,804

801,186

24,478

47,635

1,603,103

Other

-

7,001

3,005

-

10,006

Total

729,804

808,187

27,483

47,635

1,613,109

Customer relations

 

 

 

 

 

Long-term

610,240

713,271

15,267

27,363

1,366,141

Short-term

119,564

94,916

12,216

20,272

246,968

Total

729,804

808,187

27,483

47,635

1,613,109

Revenue recognition timing

 

 

 

 

 

Revenue recognised at a point in time

729,804

808,187

27,483

47,635

1,613,109

Total

729,804

808,187

27,483

47,635

1,613,109

Sale channels

 

 

 

 

 

Direct sales

82,725

748,330

24,478

47,635

903,168

Intermediated sales

647,079

59,857

3,005

-

709,941

Total

729,804

808,187

27,483

47,635

1,613,109


For the period Jan 1 – Dec 31 2019

 

Agro Fertilizers

Plastics

Energy

Other Activities

Total

Main product lines

 

 

 

 

 

Revenue from sale of products and services

816,828

1,024,606

21,991

35,781

1,899,206

Revenue from sale of merchandise and materials

-

78,912

4,814

2,346

86,072

Revenue from sale of property rights

-

1,755

6

-

1,761

Total

816,828

1,105,273

26,811

38,127

1,987,039

Geographical regions

 

 

 

 

 

Poland

556,275

177,405

26,811

29,655

790,146

Germany

74,185

461,141

-

351

535,677

Other EU countries

86,546

376,528

-

2

463,076

Asia

-

35,264

-

2,887

38,151

South America

33,393

9,521

-

-

42,914

Other countries

66,429

45,414

-

5,232

117,075

Total

816,828

1,105,273

26,811

38,127

1,987,039

Customer type

 

 

 

 

 

Legal persons

815,766

1,105,273

26,162

38,093

1,985,294

Individuals

1,062

-

649

34

1,745

Total

816,828

1,105,273

26,811

38,127

1,987,039

Agreement type

 

 

 

 

 

Fixed-price contracts

816,828

1,103,518

25,586

38,127

1,984,059

Other

-

1,755

1,225

-

2,980

Total

816,828

1,105,273

26,811

38,127

1,987,039

Customer relations

 

 

 

 

 

Long-term

697,448

939,751

13,016

19,122

1,669,337

Short-term

119,380

165,522

13,795

19,005

317,702

Total

816,828

1,105,273

26,811

38,127

1,987,039

Revenue recognition timing

 

 

 

 

 

Revenue recognised at a point in time

816,828

1,105,273

26,811

38,127

1,987,039

Total

816,828

1,105,273

26,811

38,127

1,987,039

Sale channels

 

 

 

 

 

Direct sales

78,062

1,054,239

25,586

38,127

1,196,014

Intermediated sales

738,766

51,034

1,225

-

791,025

Total

816,828

1,105,273

26,811

38,127

1,987,039

 

 

Fixed-price contracts include revenue from contracts where prices are not determined on a time-and-materials basis.

The breakdown of customers into short- and long-term accounts is based on the duration of contract.

Note 2 Operating expenses

Accounting policy

Cost of sales

Cost of sales includes all expenses related to the Company’s principal business, except for selling and distribution expenses, administrative expenses, other expenses and finance costs. Production cost includes direct costs and an appropriate share of production overheads based on normal operating capacity.

Selling and distribution expenses

Selling and distribution expenses comprise recognised costs related to sales, such as:

cost of packaging,

transport, loading and unloading costs,

customs duties and trade fees,

carriage insurance cost,

recognition/reversal of impairment losses on trade receivables, excluding impairment losses on receivables under lease of investment property (presented in other income/expenses) and interest on receivables (presented in finance income/costs).

Administrative expenses

Administrative expenses comprise:

general and administration expenses associated with the management of the Group,

general production overheads (related to the production, including maintenance and functioning of general departments, not associated with the direct production).

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Depreciation and amortisation

137,451

133,120

Raw materials and consumables used

823,673

1,067,488

Services

242,008

258,071

Taxes and charges

70,298

72,547

Salaries and wages

167,541

185,391

Social security and other employee benefits

45,618

46,781

Other expenses

23,115

27,841

Costs by nature of expense

1,509,704

1,791,239

Change in inventories of finished goods (+/-)

49,773

17,916

Work performed by the entity and capitalised (-)

(1,905)

(2,022)

Selling and distribution expenses (-)

(102,963)

(105,391)

Administrative expenses (-)

(174,997)

(193,340)

Cost of merchandise and materials sold

35,231

79,969

Cost of sales

1,314,843

1,588,371

including excise duty

513

1,291

Raw materials and consumables used fell by as much as PLN 243,815 thousand mainly as a result of a drop in consumption of key raw materials, attributable to lower prices and consumption volumes, and recognition of compensation of PLN 21,828 thousand under the Act on the Compensation Scheme for Energy-Intensive Sectors and Subsectors.

The PLN 16,063 thousand decrease in services was mainly attributable to lower spending on advisory, legal and IT services.

Salaries and wages fell by PLN 17,850 thousand mainly in connection with the financial support received under the anti-crisis shield legislative package introduced in connection with the COVID-19 pandemic.

The PLN 31,857 thousand increase in change in inventories of finished goods was related to a drop in inventories.

The PLN 18,343 thousand decrease in administrative expenses was attributable to a drop in costs of (consultancy) services and advertising expenses and to secondary settlement as part of IT transformation.

Cost of merchandise and materials sold fell by PLN 44,738 thousand as a result of lower sales of caprolactam and lower sales of materials held in inventory.

Depreciation and amortisation are presented in the following proportions in particular items of the statement of profit or loss and other comprehensive income:

 

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Cost of sales

116,851

114,395

Selling and distribution expenses

6,104

5,644

Administrative expenses

14,496

13,081

Total depreciation and amortisation

137,451

133,120

Note 2.1 Cost of sales

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Cost of products and services

1,272,962

1,506,566

Cost of merchandise and materials sold

35,231

79,969

Cost of property rights

6,650

1,836

Total cost of sales

1,314,843

1,588,371

Note 2.2 Employee benefit expenses

 

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Salaries and wages paid and due

182,185

182,549

Social security

32,899

33,270

Social benefits fund

7,472

5,979

Training

354

661

Change in defined benefit obligation

314

110

Change in long-term employee benefit obligation

(64)

101

Change in provision for accrued holiday entitlements

(571)

358

Change in provision for annual and incentive bonuses

(15,919)

2,734

Other

6,489

6,410

 

213,159

232,172

Average employment

2,215

2,214

Note 2.3 Reconciliation of lease costs

 

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 −

Dec 31 2019

Depreciation/amortisation of right-of-use assets (-)

 

(11,481)

 

(11,535)

Interest expense on lease liabilities (-)

(1,944)

 

(2,166)

Costs associated with short-term leases exempted from the   scope of application of IFRS 16 (-)

(5,163)

 

(6,505)

Costs associated with variable lease payments not accounted for in the measurement of lease liabilities (-)

(86)

(162)

Other (+/-)

1,250

547

Total

(17,424)

(19,821)

Depreciation and amortisation costs, short-term lease costs, and costs related to variable lease payments are recognised mainly in cost of products and services. Interest expense is recognised in finance costs.

Note 3 Other income

Accounting policy

Other income includes income that has not been classified as operating income or finance income.

 

 

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Reversed impairment losses on:

 

 

Other receivables

15

67

 

15

67

Other income:

 

 

Income from lease of investment property

6,856

7,255

Received compensation

802

3,557

Government grants received

2,307

2,050

Energy compensation received for 2019

13,993

-

Other

849

776

 

24,807

13,638

 

24,822

13,705


Note 4 Other expenses

Accounting policy

Other expenses include costs that are not classified as operating expenses and finance costs.

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Loss on disposal of assets:

 

 

Loss on disposal of property, plant and equipment, intangible assets, and investment property

2,203

2,092

 

2,203

2,092

Recognised impairment losses on:

 

 

Property, plant and equipment

1,353

735

Investment property

3

81

Intangible assets

-

2

Other receivables

47

1,989

 

1,403

2,807

Other expenses:

 

 

Investment property maintenance costs

5,412

5,136

Fines and compensations

308

341

Downtime costs

563

586

Failure recovery costs

7,342

11,407

Recognised provisions

-

1,606

Other expenses

1,224

440

 

14,849

19,516

 

18,455

24,415

Investment property maintenance costs include depreciation of investment property, which amounted to PLN 1,609 thousand in 2020 (2019: PLN 1,408 thousand).

The amount of PLN 7,342 thousand comprises in particular costs of remedying the consequences of the following technical failures:

failure of general-purpose industrial pipe bridges in the Energy segment (PLN 2,298 thousand),

failure of the central water unit supplying water to the cooling tower in the Plastics segment (PLN 1,343 thousand).


Note 5 Finance income

Accounting policy

Finance income comprises the interest on funds invested by the Company, loans and other interest-bearing instruments, dividends receivable, gains on disposal of available-for-sale financial assets, fair value gains on financial instruments at fair value through profit or loss, foreign exchange gains and such gains on derivatives which are recognised in the statement of profit or loss.

Interest income is recognised as it accrues in the statement of profit or loss, using the effective interest rate method. Dividend income is recognised in the statement of profit or loss on the date that the Company’s right to receive the dividend is established.

 

for the period

Jan 1 −

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Interest income:

 

 

Interest on cash pooling, bank deposits

8,767

8,505

Interest on non-bank borrowings

19,856

9,930

Other interest income

128

229

 

28,751

18,664

Profit from sale of financial investments:

 

 

Gains on sale of financial investments

1,340

363

 

1,340

363

Gains on measurement of financial assets and liabilities:

 

 

Gains on measurement of financial assets and liabilities at fair value through profit or loss

25,903

655

 

25,903

655

Other finance income:

 

 

Foreign exchange gains

-

10,787

Dividends received

182,116

87,267

Other

6,174

7,225

 

188,290

105,279

 

244,284

124,961

Gains on measurement of financial assets and liabilities include the effect of valuation of the call and put options over shares in Grupa Azoty POLYOLEFINS, totalling PLN 24,304 thousand. For detailed information on these financial instruments, see Note 30.6.

Note 6 Finance costs

Accounting policy

Finance costs comprise interest expense on borrowings, leases, unwinding of the discount on provisions, net foreign exchange losses, fair value losses on financial instruments through profit or loss and impairment losses recognised on financial assets. Interest expense is recognised using the effective interest rate method.

Finance costs that are directly attributable to acquisition, construction or production of a qualifying asset are capitalised. Other borrowing costs that are not directly attributable to acquisition, construction or production of a qualifying asset are recognised in profit or loss when incurred.

 

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Interest expense:

 

 

Interest on bank borrowings

56,260

53,959

Interest on cash pooling

7,936

8,140

Interest on factoring, receivables discounting and leases

4,230

3,592

Other interest expense

1,457

1,665

 

69,883

67,356

Loss on sale of financial investments

 

 

Impairment loss on equity instruments

-

32,230

 

-

32,230

Loss on measurement of financial assets and liabilities:

 

 

Loss on measurement of financial assets at fair value through profit or loss

7,343

781

 

7,343

781

Other finance costs:

 

 

Foreign exchange losses

48,997

-

Other

7,633

8,173

 

56,630

8,173

 

133,856

108,540

Foreign exchange losses of PLN 48,997 thousand (2019: PLN 10,787 thousand of foreign exchange gains) comprised:

net realised foreign exchange losses of PLN 323 thousand (2019: net realised foreign exchange gains of PLN 6,626 thousand),

net foreign exchange losses on realised transactions in currency derivatives of PLN 815 thousand (2019: net foreign exchange gains of PLN 1,533 thousand),

net foreign exchange losses on measurement of receivables and liabilities denominated in foreign currencies as at the reporting date of PLN 47,833 thousand (2019: net foreign exchange gains of PLN 2,309 thousand),

net foreign exchange losses on measurement of other items as at the reporting date of PLN 26 thousand (2019: net foreign exchange gains of PLN 319 thousand).

Interest capitalised as initial cost of property, plant and equipment and intangible assets in 2020 was PLN 489 thousand (2019: PLN 1,196 thousand).

Note 7 Income tax

Note 7.1 Income tax disclosed in the statement of profit or loss

Accounting policies

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in the statement of profit or loss for the current period except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable is calculated based on taxable profit (tax base) for the period. Taxable profit differs from profit (loss) before tax because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes. Deferred tax is not recognised for: 1) temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, 2) temporary differences related to investments in subsidiaries and jointly controlled entities to the extent it is probable that they will not be realised in the foreseeable future, 3) temporary differences arising on initial recognition of goodwill.

Taxable income on activities in special economic zones may be tax exempt up to the amount determined in the applicable rules governing the operation of special economic zones. Future benefits resulting from tax exemption are treated as investment tax credits and recognised, by analogy, as deferred tax assets, in accordance with IAS 12.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets are recognised only to the extent that it is probable that future taxable income will be available against which the temporary differences can be utilised. Deferred tax assets are not recognised to the extent it is not probable that taxable income will be available to utilise all temporary differences or their part. Such assets are subsequently recognised if it becomes probable that sufficient taxable income will be available.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to taxes levied by the same tax authority. Deferred tax assets and liabilities are not discounted and are presented in the statement of financial position as non-current assets or liabilities.

In accordance with IAS 12 Income taxes, the Company recognises a deferred tax asset for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. When assessing whether any available future taxable income is likely to be sufficient, the Company considers the nature, origin, schedule and probability of such income.

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Current income tax:

 

 

Current income tax expense

4,649

34,334

Adjustments to current income tax for previous years

(1,183)

-

 

3,466

34,334

Deferred income tax:

 

 

Deferred income tax associated with origination and reversal of temporary differences

8,007

13,065

 

8,007

13,065

Income tax disclosed in the statement of profit or loss

11,473

47,399

Note 7.2 Effective tax rate

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Profit before tax

 137,101

105,648

Tax calculated at the applicable tax rate

26,049

20,073

Effect of tax-exempt income (+/-)

(27,024)

(12,285)

Effect of non tax-deductible expenses (+/-)

(10,199)

6,544

Tax effect of inclusion of property, plant and equipment into operations in Special Economic Zone (+/-)

1,896

2,165

Decrease in asset recognised on operations in Special Economic Zone deductible in future periods (+/-)

-

25,894

Other (+/-)

20,751

5,008

Income tax disclosed in the statement of profit or loss

11,473

47,399

Effective tax rate

8.37%

44.86%

The effective tax rate of 8.37% in 2020 is mainly attributable to the tax effect of dividends received, which are exempt from tax.

The effective tax rate of 44.86% in 2019 was mainly due to the decrease in the tax asset recognised in previous periods on the activities conducted in the Special Economic Zone, as it is not certain that the tax asset would be offset against future income due to the loss incurred on the activities in 2019.

In connection with a project involving construction of Polyamide Plant II, the Company obtained a permit to operate in the Krakowski Park Technologiczny Special Economic Zone (“SEZ”). Pursuant to the terms of the licence, the Company was obliged to incur a minimum expenditure of PLN 203,000 thousand, to increase employment by 34 staff, and to maintain the headcount at least until June 30th 2020. The conditions specified in the licence were satisfied in the course of 2017 and, in line with the current plans, the Company has satisfied the condition concerning the staffing level until June 30th 2020.

Upon completion of the project, the Company’s eligible capital expenditure totalled PLN 222,603 thousand, which may allow it to realise tax savings on its operations in the zone of ca. PLN 107m (net of the discount).

As at December 31st 2019, due to the losses incurred in the Special Economic Zone in recent periods and the resulting uncertainty as to the possibility of realizing tax benefits on this account, the Company decided to discontinue recognition of the deferred tax asset. As at December 31st 2020, the Company continues not to recognise the deferred tax asset.

 

 

Note 7.3 Income tax disclosed in other comprehensive income

 

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Tax on items that will not be reclassified to profit or loss (+/-)

(876)

(2,303)

Actuarial (losses)/gains from defined benefit plans

(876)

(2,303)

Tax on items that are or may be reclassified to profit or loss (+/-)

(12,516)

941

Measurement of hedging instruments through hedge accounting

(12,516)

941

Income tax disclosed in other comprehensive income

(13,392)

(1,362)

 

Note 7.4 Deferred tax assets and liabilities

 

Assets (-)

Liabilities (+)

Dec 31 2020

Dec 31 2019

Dec 31 2020

Dec 31 2019

Property, plant and equipment

(10,921)

(9,558)

44,266

44,542

Right-of-use assets

-

-

8,363

9,730

Investment property

-

-

-

1,153

Intangible assets

-

(1,363)

7,360

7,354

Financial assets

(1,057)

(1,057)

105

105

Inventories and property rights

(1,661)

(2,103)

12,821

8,647

Trade and other receivables

(326)

(1,169)

4,173

45

Trade and other payables

(20,757)

(20,241)

370

350

Employee benefits

(18,036)

(20,105)

 

-

Provisions

(7,763)

(6,368)

1,213

102

Borrowings

(2,172)

(729)

110

157

Lease liabilities

(8,130)

(9,556)

-

-

Derivative financial instruments

-

-

-

195

Measurement of hedging instruments through hedge accounting

(11,483)

-

-

1,377

State aid deductible in future periods

-

-

-

-

Other

(487)

(162)

53

80

Deferred tax assets (-)/liabilities (+)

(82,793)

(72,411)

78,834

73,837

Offset

78,834

72,411

(78,834)

(72,411)

Deferred tax assets (-)/liabilities (+) recognised in the statement of financial position

(3,959)

-

-

1,426

 

 

Note 7.5 Change in temporary differences

As at

Jan 1 2020

Statement of profit or loss

Other comprehensive income

As at

Dec 31 2020

Property, plant and equipment

34,984

(1,639)

-

33,345

Right-of-use assets

9,730

(1,367)

-

8,363

Investment property

1,153

(1,153)

-

-

Intangible assets

5,991

1,369

-

7,360

Financial assets

(952)

-

-

(952)

Inventories and property rights

6,544

4,616

-

11,160

Trade and other receivables

(1,124)

4,971

-

3,847

Trade and other payables

(19,891)

(496)

-

(20,387)

Employee benefits

(20,105)

2,945

(876)

(18,036)

Provisions

(6,266)

(284)

-

(6,550)

Borrowings

(572)

(1,490)

-

(2,062)

Lease liabilities

(9,556)

1,426

-

(8,130)

Derivative financial instruments

195

(195)

-

-

Measurement of hedging instruments through hedge accounting

1,377

(344)

(12,516)

(11,483)

Other

(82)

(352)

-

(434)

Deferred tax assets (-)

1,426

8,007

(13,392)

(3,959)


 

As at

Jan 1 2019

Statement of profit or loss

Other comprehensive income

As at

Dec 31 2019

Property, plant and equipment

36,411

(1,427)

-

34,984

Right-of-use assets

-

9,730

-

9,730

Investment property

2,119

(966)

-

1,153

Intangible assets

6,116

(125)

-

5,991

Financial assets

(952)

-

-

(952)

Inventories and property rights

4,940

1,604

-

6,544

Trade and other receivables

(321)

(803)

-

(1,124)

Trade and other payables

(10,483)

(9,408)

 

(19,891)

Employee benefits

(16,867)

(935)

(2,303)

(20,105)

Provisions

(5,613)

(653)

-

(6,266)

Borrowings

(182)

(390)

-

(572)

Lease liabilities

-

(9,556)

-

(9,556)

Derivative financial instruments

137

58

-

195

Measurement of hedging instruments through hedge accounting

436

-

941

1,377

State aid deductible in future periods

(25,894)

25,894

-

-

Other

(124)

42

-

(82)

Deferred tax liability (+)

(10,277)

13,065

(1,362)

1,426

 

 

Note 7.6 Unrecognised deferred tax assets and liabilities

As at December 31st 2020 and December 31st 2019, the Company did not recognise any deferred tax liability related to the difference between the tax base and the carrying amount of the Company’s holding of Grupa Azoty PUŁAWY shares.

As at December 31st 2020 and December 31st 2019, the unrecognised temporary differences were PLN 1,775,995 thousand. The Company does not recognise any deferred tax liability as it does not expect that the temporary difference will reverse.

In addition, as described in Note 7.4, given the limited time horizon of its tax budgets, the Company does not recognise deferred tax assets related to its operations in the Special Economic Zone. As at December 31st 2020, the amount of the unrecognised asset was approximately PLN 94.6m (December 31st 2019: approximately PLN 101m). Activities in the Special Economic Zone are expected to be conducted until 2026.

Note 8 Discontinued operations

There were no discontinued operations in 2019 or 2020.

Note 9 Earnings per share

Basic earnings per share were calculated based on net profit and the weighted average number of shares outstanding in the reporting period. The amounts were determined as follows:

for the period

Jan 1 –

Dec 31 2020

for the period

Jan 1 –

Dec 31 2019

Net profit

 125,628

58,249

Number of shares at beginning of period

99,195,484

99,195,484

Number of shares at end of period

99,195,484

99,195,484

Weighted average number of shares in the period

99,195,484

99,195,484

Earnings per share:

 

 

Basic (PLN)

1.27

0.59

Diluted (PLN)

1.27

0.59

Diluted earnings per share

There are no potentially dilutive shares which would cause dilution of earnings per share.

Note 10 Property, plant and equipment

Accounting policy

Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes purchase price of an asset and costs directly attributable to bringing the asset to a condition necessary for it to be capable of use, including expenses relating to transport, loading, unloading, and storage. Discounts, rebates and other similar reductions and recoveries reduce the cost of an asset. The cost of an item of property, plant and equipment under construction comprises all costs incurred by the Group during its construction, installation, adaptation and improvement until the date of its acceptance for use (or, if the item has not yet been commissioned for use, until the reporting date). The cost also includes, where required, a preliminary estimate of the costs of dismantling and removing items of property, plant and equipment and restoring them to their original condition. Purchased software which is necessary for the proper functioning of the related equipment is capitalised as part of the equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (significant parts) of property, plant and equipment.

An item of property, plant and equipment may be derecognised from the statement of financial position upon its disposal or when no economic benefits are expected from further use of the asset. Gains or losses arising from the derecognition of property, plant and equipment are determined as the difference between the net proceeds from disposal and the carrying amount of the item and are recognised as other income or other expenses in the statement of profit or loss.

Property, plant and equipment under construction are tangible assets under construction or in the course of assembly, and are stated at cost less impairment losses. Property, plant and equipment under construction are not depreciated until their construction is completed and they are available for use.

Prepayments for property, plant and equipment are presented under other receivables in non-current assets.

Subsequent expenditure is capitalised only when it can be measured reliably and it is probable that the future economic benefits associated with the expenditure will flow to the Company. Other expenditure are recognised in the statement of profit or loss as an expense.

Depreciation is calculated on a straight-line basis over the estimated useful life of an item of property, plant and equipment or its major components. The estimated useful lives are as follows:

Type

Depreciation rate

Period

Land

none

-

Buildings and structures

1% - 33%

3−100 years

Plant and equipment

2% - 100%

1−50 years

Office equipment

10% - 100%

1−10 years

Vehicles

7% - 100%

1−7 years

Computers

20% - 100%

1−5 years

Depreciation commences when an item of property, plant and equipment is at the location and in condition necessary for it to be capable of operating in the manner intended by the entity’s management. Depreciation ends no later than when accumulated depreciation equals the cost of the asset, or the asset is derecognised following its liquidation or sale, or when the asset is found to be deficient. The depreciable amount is determined after deducting its residual value.

Assets under construction are not depreciated.

The Group allocates the amount initially recognised in respect of an item of property, plant and equipment to its significant components (if the component’s value is significant compared to the total cost of the asset) and depreciates separately each such component over its useful life.

Impairment of non-financial assets

The carrying amounts of the Company’s assets other than inventories, deferred tax assets and financial instruments, measured under different principles, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the Company estimates the recoverable amount of the asset or cash-generating unit (CGU). The recoverable amount of CGUs including goodwill and intangible assets not yet put into use and with an indefinite useful life is estimated at each reporting date.

Impairment losses are recognised when the carrying amount of an asset or its related CGU exceeds the recoverable amount.

The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. 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 assessments of the time value of money and the risks specific to the asset or the CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The Company’s common (corporate) assets do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to the CGU based on consistent and reasonable basis and are tested for impairment as part of the CGU.

Carrying amount

 

as at

Dec 31 2020

as at

Dec 31 2019

Land

572

572

Buildings and structures

484,094

471,589

Plant and equipment

998,570

1,037,254

Vehicles

594

876

Other property, plant and equipment

47,270

48,708

 

1,531,100

1,558,999

Property, plant and equipment under construction

111,595

102,562

 

1,642,695

1,661,561

 

 

Net property, plant and equipment, by type

 

Land

Buildings and structures

Plant and equipment

 

Vehicles

 

Other property, plant and equipment

 

Property, plant and equipment under construction

Total

Net carrying amount as at Jan 1 2020

572

471,589

1,037,254

876

48,708

102,562

1,661,561

Increase, including:

-

38,730

51,409

-

4,549

102,445

197,133

Purchase, production, commissioning

-

38,708

49,520

-

4,545

102,445

195,218

Reversal and use of impairment losses

-

22

1,010

-

4

-

1,036

Other increase

-

-

879

-

-

-

879

Decrease, including: (-)

-

(26,225)

(90,093)

(282)

(5,987)

(93,412)

(215,999)

Depreciation

-

(25,234)

(88,036)

(269)

(5,980)

-

(119,519)

Disposal or retirement

-

(22)

(1,005)

(13)

(4)

-

(1,044)

Commissioning

-

-

-

-

-

(93,192)

(93,192)

Recognition of impairment loss

-

(90)

(1,040)

-

(3)

(220)

(1,353)

Other decrease

-

(879)

(12)

-

-

-

(891)

Net carrying amount as at Dec 31 2020

572

484,094

998,570

594

47,270

111,595

1,642,695


 

Land

Buildings and structures

Plant and equipment

 

Vehicles

Other property, plant and equipment

Property, plant and equipment under construction

Total

Net carrying amount as at Jan 1 2019

572

439,219

1,019,909

938

27,478

158,628

1,646,744

Increase, including:

-

61,906

115,280

402

27,589

134,682

339,859

Purchase, production, commissioning

-

61,233

114,854

271

27,562

134,682

338,602

Reversal and use of impairment losses

-

658

426

-

23

-

1,107

Reclassification from investment property

-

15

-

-

-

-

15

Other increase

-

-

-

131

4

-

135

Decrease, including: (-)

-

(29,536)

(97,935)

(464)

(6,359)

(190,748)

(325,042)

Depreciation

-

(23,862)

(86,175)

(363)

(6,308)

-

(116,708)

Contribution in kind

-

(344)

(10,923)

(101)

(24)

(102)

(11,494)

Disposal or retirement

-

(658)

(264)

-

(23)

-

(945)

Commissioning

-

-

-

-

-

(190,646)

(190,646)

Recognition of impairment loss

-

(509)

(222)

-

(4)

-

(735)

Reclassification to investment property

-

(4,163)

(182)

-

-

-

(4,345)

Other decrease

-

-

(169)

-

-

-

(169)

Net carrying amount as at Dec 31 2019

572

471,589

1,037,254

876

48,708

102,562

1,661,561


Property, plant and equipment by type

 

Land

Buildings and structures

Plant and equipment

Vehicles

Other property, plant and equipment

Property, plant and equipment under construction

Total

As at Dec 31 2020

 

 

 

 

 

 

 

Gross carrying amount

572

1,024,933

2,444,293

10,423

106,766

165,508

3,752,495

Accumulated depreciation (-)

-

(534,272)

(1,387,587)

(9,829)

(59,463)

-

(1,991,151)

Impairment (-)

-

(6,567)

(58,136)

-

(33)

(53,913)

(118,649)

Net carrying amount as at Dec 31 2020

572

484,094

998,570

594

47,270

111,595

1,642,695

As at Dec 31 2019

 

 

 

 

 

 

 

Gross carrying amount

572

988,585

2,396,449

11,265

102,569

156,255

3,655,695

Accumulated depreciation (-)

-

(510,497)

(1,301,089)

(10,389)

(53,827)

-

(1,875,802)

Impairment (-)

-

(6,499)

(58,106)

-

(34)

(53,693)

(118,332)

Net carrying amount as at Dec 31 2019

572

471,589

1,037,254

876

48,708

102,562

1,661,561

Impairment losses and their use

 

Buildings and structures

Plant and equipment

Other property, plant and equipment

Property, plant and equipment under construction

Total

Impairment losses as at Jan 1 2020

6,499

58,106

34

53,693

118,332

Impairment loss recognised in the statement of profit or loss

90

1,040

3

220

1,353

Reversal and use of impairment losses recognised in the statement of profit or loss (-)

(22)

(1,010)

(4)

-

(1,036)

Impairment losses as at Dec 31 2020

6,567

58,136

33

53,913

118,649

Impairment losses as at Jan 1 2019

6,648

58,310

53

53,693

118,704

Impairment loss recognised in the statement of profit or loss

509

222

4

-

735

Reversal and use of impairment losses recognised in the statement of profit or loss (-)

(658)

(426)

(23)

-

(1,107)

Impairment losses as at Dec 31 2019

6,499

58,106

34

53,693

118,332

 

As at December 31st 2020, the trigger referred to in paragraph 12d of IAS 36 Impairment occurred (the carrying amount of the Company’s net assets was more than the market capitalisation). Therefore the Company tested

assets of cash generating units (Fertilizers CGU and Plastics CGU) for impairment. Other Segments’ assets (Energy, Other) were not tested separately as the segments operate to support the tested CGU. Other Segments’ expenses (cost of energy utilities, general overheads) were charged to operating profit/loss of the tested CGUs, while the segments’ assets were fully allocated to the tested CGUs based on:

Energy – energy consumption,

Other – share of CGU’s assets in the tested CGUs’ total assets.

The test did not identify any impairment.

Item

Description

CGU

Fertilizers

Plastics

Recognition of impairment loss

None

Reversal of impairment loss

None

Nominal weighted average cost of capital (WACC) (%)

5.78% for the Fertilizers CGU

6.36% for the Plastics CGU

Key assumptions

Unlimited duration of the CGU.

Prices of key raw materials were assumed based on market prices in the forecast period.

 

The EBITDA margins for the Fertilizers CGU and the Plastics CGU were assumed at market levels close to those observed in the past, based on forecast price trends.

 

The growth rate during the residual period was assumed at the level of the long-term inflation target of the National Bank of Poland.

 

Value in use

Fertilizers – PLN 1,406,529 thousand

Plastics – PLN 1,051,848 thousand

Excess of value in use over carrying amount of assets

Fertilizers – PLN 434,382 thousand

Plastics – PLN 197,414 thousand

Sensitivity analyses of the tests show no need to recognise impairment losses if EBIT falls by no more than 18.76% for the Plastics CGU and 32.48% for the Fertilizers CGU, or if WACC increases to no more than 7.29% for the Plastics CGU and 7.20% for the Fertilizers CGU.

In determining the carrying amount of a cash-generating unit, the right-of-use asset disclosed under IFRS 16 was also taken into account, while negative cash flows related to the right-of-use assets were not taken into account in determining the value in use of the CGU to service the recognised lease liabilities. Thus, the carrying amount and the value in use of the CGU was subsequently reduced by the carrying amount of the liabilities related to the right-of-use assets as at the reporting date.

Cash flow projections in the tests reflect the impact of the COVID-19 pandemic, to the extent possible based on past experience and available forecasts. For more information, see Note 38 Information on the effects of the COVID-19 pandemic.

Property, plant and equipment under construction

As at December 31st 2020, outstanding expenditure related in particular to:

construction of a humic acid pilot unit – PLN 18,621 thousand (December 31st 2019: PLN 18,200 thousand),

construction of a turbo generator set using steam from the Sulfuric Acid Department and the Dual-Pressure Nitric Acid Unit – PLN 10,023 thousand (December 31st 2019: PLN 247 thousand),

construction of a concentrated nitric acid unit (with annual capacity of 40,000 tonnes) – PLN 8,585 thousand (December 31st 2019: PLN 548 thousand),

construction of an FGD unit – PLN 6,255 thousand (December 31st 2019: PLN 3,758 thousand),

collection of slag from the EC II CHP plant boilers – PLN 8,618 thousand (December 31st 2019: PLN 5,800 thousand),

The gross carrying amount of all fully depreciated or impaired items of property, plant and equipment as at December 31st 2020 was PLN 322,204 thousand (December 31st 2019: PLN 313,678 thousand), including retired property, plant and equipment of PLN 39,281 thousand (December 31st 2019: PLN 33,655 thousand) and impaired property, plant and equipment of PLN 173,603 thousand (December 31st 2019: PLN 174,204 thousand). As at December 31st 2020, the largest item in this category was machinery and equipment, its gross carrying amount at PLN 246,302 thousand (December 31st 2019: PLN 222,740 thousand).

Collateral

As at December 31st 2020 and December 31st 2019, no property, plant and equipment was pledged as collateral for the Company’s liabilities.

Note 11 Right-of-use assets

Accounting policy

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When assessing whether a contract conveys the rights to use an identified asset, the Company assesses:

Identifiability of an asset that can be identified unambiguously in the contract or that can be implicitly identified when the asset is available for use (e.g. a delivery report). An asset must be physically distinct or represent substantially all of the capacity of the asset and thereby provides the customer with the right to obtain substantially all of the economic benefits from use of the asset If the supplier has a significant right to replace the asset throughout its useful life, the asset is not identifiable.

The right to obtain substantially all of the economic benefits from the use of the asset over the lease term.

Right to direct the use of an asset – the Company has the right to decide how and for what purpose the asset is used throughout its useful life. In rare cases when decisions have been made taken in advance on how and for what purpose an asset is to be used, the Group has the right to direct the use when:

othe Group has the right to use the asset (or to direct others to use the asset in a manner determined by the Company) throughout its useful life and the supplier has no right to change the Company’s instructions for the use of the asset, or

othe Company has designed the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use.

The Company determines a non-cancellable period of a lease taking into account:

periods covered by an option to extend if the lessee is reasonably certain to exercise the option to extend the lease, and

periods covered by the option to terminate the lease is reasonably certain not to exercise the option to terminate the lease.

The Company updates the lease term when there has been a change in the non-cancellable period of the lease.

Lease contracts for definite term

In the case of definite-term contracts and with a termination option available only to the lessee, the Company determines if the exercise of the option and the date of the exercise are sufficiently certain.

Lease contracts for indefinite term

Indefinite-term contract in which the lessee has a termination option are recognised as leases during their expected term, taking into account the possibility of material future modification of the terms of such contracts. Based on the Company’s judgement, for most indefinite-term contracts a material modification of terms may occur over a period of three to five years, depending on the group of assets, with the proviso that for real estate contracts the Company assumes a period of five years, unless the Company has a reason to assume a longer period (i.e. for real estate – period of depreciation of the asset by the lessor). The Group reviews the estimate at least once a year at the end of each financial year. In determining the lease term, the Company determines the enforceability period of a contract. A lease ceases to be enforceable when both the lessee and the lessor have the right to terminate the contract without the need to obtain the other party’s authorisation without incurring penalties greater than insignificant. The Company assesses the materiality of such penalties, i.e. in addition to matters arising directly from contractual provisions, any other material economic factors that would discourage termination of the contract (e.g. significant investments in leased assets, availability of alternative solutions, relocation costs) are taken into account. If neither the Company as a lessee nor a lessor incurs a substantial termination penalty (generally understood), the lease ceases to be enforceable and its term is the notice period. On the other hand, if any of the parties, in accordance with professional judgement, incurs a material penalty for termination (generally defined), the Company determines the lease term as sufficiently certain (i.e. the period for which it can reasonably be assumed that the contract will continue).

Short-term leases and leases of low-value underlying asset

The Company decided not to recognise the right to use financial assets and liabilities for short-term leases with a non-cancellable period of 12 months or less and leases where the value of underlying assets as at the date of initial recognition is low, i.e. no more than PLN 10,000. The Company recognises lease payments for such leases as costs on a straight-line basis during the lease term.

Initial measurement

At the lease 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.

Subsequent measurement

After the lease commencement date, the Group measures the right-of-use asset at cost less any accumulated depreciation (amortisation) calculated on a straight-line-basis. The right-of-use asset is depreciated (amortised) from the commencement date of the lease to the end of the useful life of the asset or until the end of the lease term, whichever is earlier. The estimated useful life of an asset is determined on the same basis as the estimated useful life of property, plant and equipment taking into account the lease term. In addition, the right-of-use asset is tested for impairment and adjusted for impairment losses, if any, and adjusted for remeasurement of the lease liability.

Presentation

Right-of-use assets are presented separately from other assets in the statement of financial position, i.e. as right-of-use assets.

 

 

Net carrying amount of right-of-use assets

 

Perpetual usufruct of land

Land

Buildings

and structures

Plant and equipment

Vehicles

Right-of-use assets

under construction

Total

Net carrying amount as at Jan 1 2020

22,273

19

962

535

23,606

16

47,411

Increase, including:

-

1

-

-

5,672

5,498

11,171

Increases due to execution of new agreements

-

-

-

-

-

5,498

5,498

Increases due to new lease contracts (from settlement of right-of-use assets under construction)

-

-

-

-

5,672

-

5,672

Other increase

-

1

-

-

-

-

1

Decrease, including: (-)

(325)

(20)

(908)

(278)

(11,282)

(5,437)

(18,250)

Depreciation

(317)

(20)

(665)

(278)

(11,282)

-

(12,562)

Reclassification to investment property

-

-

-

-

-

(5,421)

(5,421)

Other decrease

(8)

-

(243)

-

-

(16)

(267)

Net carrying amount as at Dec 31 2020

21,948

-

54

257

17,996

77

40,332

 

Net carrying amount as at Dec 31 2018

-

-

-

-

-

-

-

Effect of implementation of IFRS 16, including:

26,828

39

1,849

814

11,371

-

40,901

Value of assets disclosed as at Dec 31 2018 as finance leases in accordance with IAS 17

-

-

-

-

3,488

-

3,488

On-balance-sheet perpetual usufruct of land as at Dec 31 2018

365

-

-

-

 

-

365

Increases due to the implementation of IFRS 16

26,463

39

1,849

814

7,883

-

37,048

Net carrying amount as at Jan 1 2019

26,828

39

1,849

814

11,371

-

40,901

Increase, including:

-

-

-

-

22,342

16

22,358

Increases due to execution of new agreements

-

-

-

-

22,342

-

22,342

Other increase

-

-

-

-

-

16

16

Decrease, including: (-)

(4,555)

(20)

(887)

(279)

(10,107)

-

(15,848)

Depreciation

(318)

(20)

(887)

(279)

(9,976)

-

(11,480)

Reclassification to investment property

(4,237)

-

-

-

-

-

(4,237)

Other decrease

-

-

-

-

(131)

-

(131)

Net carrying amount as at Dec 31 2019

22,273

19

962

535

23,606

16

47,411

 

The Company applies the following depreciation periods:

perpetual usufruct right to land – a definite period determined based on the statutory period of use, i.e. 71 years;

other groups of assets with definite-term contracts – a period equal to the contract term, i.e. between 3 and 5 years;

other groups of assets with indefinite-term contracts – the Company assumes that for the majority of contracts their terms may be amended within three years.

Note 12 Investment property

Accounting policy

Investment property is land, structures and buildings held by the Group for capital appreciation or other benefits, e.g. to earn rental income.

Investment property is measured in accordance with the measurement policies applicable to property, plant and equipment.

Income from leases of investment property is presented in other income and related expenses are presented in other expenses.

 

as at

Dec 31 2020

as at

Dec 31 2019

Carrying amount at the beginning of the period

23,049

15,885

Increase, including:

532

8,699

Purchase, production, subsequent expenditure

463

86

Reversal of impairment losses

58

32

Reclassification from another asset category

11

8,581

Decrease, including: (-)

(1,670)

(1,535)

Depreciation (-)

(1,609)

(1,408)

Sale, liquidation

(58)

(32)

Recognition of impairment loss

(3)

(81)

Reclassification to another asset category

-

(14)

Carrying amount at the end of the period

21,911

23,049

In 2020, revenue from lease of investment property was PLN 6,856 thousand (2019: PLN 7,255 thousand). As the revenue is derived from the Company’s non-core business, it is presented under other income.

As at December 31st 2020, the gross carrying amount of investment property was PLN 68,326 thousand (December 31st 2019: PLN 68,616 thousand).

As at December 31st 2020, fair value of investment property was PLN 25,142 thousand (December 31st 2019: PLN 27,787 thousand).

Note 13 Intangible assets

Accounting policy

Research and development

Research costs are recognised as an expense in the statement of profit or loss when incurred.

Development costs whose effects are used in design or production of new or substantially improved products and processes are capitalised only if the product or process is technically and commercially feasible and the Company has sufficient technical, financial and other resources to complete the development.

Expenditure on development activities is measured at cost less accumulated amortisation and impairment losses, if any. Completed development work is amortised over the expected period when the benefits from the development project will be obtained.

Capitalised development costs are tested for impairment at each reporting date if the asset has not yet been brought into use or if the impairment indicators have been identified and indicate that the carrying amount may not be recoverable.

Other intangible assets

Other intangible assets acquired in a separate transaction are recognised in the statement of financial position at cost.

Subsequent to initial recognition, intangible assets with a finite useful life are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Intangible assets with an indefinite useful life are measured at cost less accumulated impairment losses, if any.

Except for development costs, internally generated intangible assets are not recognised in the statement of financial position and the related expenditure is disclosed in the statement of profit or loss when incurred.

Subsequent expenditure

Subsequent expenditure on existing intangible assets is capitalised only when it increases future economic benefits associated with the given asset. Other expenditure is recognised in the statement of profit or loss as an expense when incurred.

Amortisation

Intangible assets are amortised on a straight-line basis over their estimated useful lives, unless such useful life is indefinite. Intangible assets with indefinite useful lives and those not yet in use are tested for impairment annually in relation to individual assets or at the level of a cash-generating unit. Other intangible assets are assessed for any impairment indication annually.

The Company assumes the following useful lives for each category of intangible assets:

Type

Amortisation rate

Period

Licences

5% - 100%

1−20 years

Software

16% - 100%

1−6 years

Technology licences

2% - 100%

1−50 years

REACH

2% - 100%

1−50 years

Development work

2% - 100%

1−50 years

Carrying amount

 

as at

Dec 31 2020

as at

Dec 31 2019

Patents and licences

32,408

33,385

Software

6,251

5,492

Development costs

208

242

Other intangible assets

1,987

2,248

 

40,854

41,367

Intangible assets under development

10,453

9,471

 

51,307

50,838

As at the reporting date, intangible assets comprised mainly licences, including the SAP licence of PLN 25,473 thousand (December 31st 2019: PLN 23,112 thousand). The Company does not hold any intangible assets with indefinite useful lives.

Amortisation of intangible assets is generally allocated to administrative expenses. The Company does not carry any intangible assets with restricted legal title or intangible assets pledged as collateral.

The carrying amount of research work recognised as cost in 2020 was PLN 11,672 thousand (2019: 11,496 thousand).

 

 

Intangible assets, net

 

Patents and licences

Software

Development costs

Other intangible assets

Intangible assets

under development

Total

Net carrying amount as at Jan 1 2020

33,385

5,492

242

2,248

9,471

50,838

Increase, including:

3,355

1,505

-

-

5,840

10,700

Purchase, production, commissioning

3,355

1,503

-

-

5,612

10,470

Reversal of impairment losses

-

2

-

-

-

2

Other increase

-

-

-

-

228

228

Decrease, including: (-)

(4,332)

(746)

(34)

(261)

(4,858)

(10,231)

Amortisation

(4,332)

(744)

(34)

(260)

-

(5,370)

Decreases due to placement in service, decommissioning

-

(2)

-

-

(4,858)

(4,860)

Other decrease

-

-

-

(1)

-

(1)

Net carrying amount as at Dec 31 2020

32,408

6,251

208

1,987

10,453

51,307

 

 

Patents and licences

Software

Development costs

Other intangible assets

Intangible assets

under development

Total

Net carrying amount as at Jan 1 2019

35,266

5,199

276

2,100

6,267

49,108

Increase, including:

2,197

875

-

388

10,125

13,585

Purchase, production, commissioning

2,197

875

-

388

6,664

10,124

Other increase

-

-

-

-

3,461

3,461

Decrease, including: (-)

(4,078)

(582)

(34)

(240)

(6,921)

(11,855)

Amortisation

(4,078)

(580)

(34)

(240)

-

(4,932)

Commissioning

-

-

-

-

(3,460)

(3,460)

Recognition of impairment loss

-

(2)

-

-

(3,461)

(3,463)

Net carrying amount as at Dec 31 2019

33,385

5,492

242

2,248

9,471

50,838

Intangible assets

 

Patents and licences

Software

Development costs

Other intangible assets

Intangible assets

under development

Total

 

As at Dec 31 2020

 

 

 

 

 

 

Gross carrying amount

79,996

14,134

686

4,298

13,914

113,028

Accumulated amortisation (-)

(40,888)

(7,883)

(478)

(1,837)

-

(51,086)

Impairment (-)

(6,700)

-

-

(474)

(3,461)

(10,635)

Net carrying amount as at Dec 31 2020

32,408

6,251

208

1,987

10,453

51,307

 

As at Dec 31 2019

 

 

 

 

 

 

Gross carrying amount

76,662

12,656

686

4,298

12,932

107,234

Accumulated amortisation (-)

(36,577)

(7,162)

(444)

(1,576)

-

(45,759)

Impairment (-)

(6,700)

(2)

-

(474)

(3,461)

(10,637)

Net carrying amount as at Dec 31 2019

33,385

5,492

242

2,248

9,471

50,838

Impairment losses and their use

As at December 31st 2020, the amount of impairment losses was PLN 10,635 thousand (December 31st 2019: PLN 10,637 thousand) and included in particular patents and licences (PLN 6,700 thousand) and development costs (intangible assets under development) (PLN 3,461 thousand).

Expenditure on significant intangible assets under development

The largest item of expenditure on intangible assets under development is the cost of unfinished development work, including in particular research on polyphthalateamide production technology, of PLN 7,145 thousand (December 31st 2019: PLN 7,045 thousand).

 

 

Note 14 Financial assets

Shares include shares in subsidiaries and other entities.

Shares in subsidiaries are recognised in the statement of financial position at cost less impairment losses recognised in accordance with IAS 36 Impairment

Note 14.1 Shares

 

as at

Dec 31 2020

as at

Dec 31 2019

Shares in subsidiaries

5,699,604

5,403,351

Shares in other entities

6,626

6,655

 

5,706,230

5,410,006

including

 

 

Long-term

5,706,230

5,410,006

 

As at December 31st 2020, asset impairment tests were carried out at Grupa Azoty POLICE, Grupa Azoty PUŁAWY, Grupa Azoty KĘDZIERZYN, Grupa Azoty SIARKOPOL, COMPO EXPERT, Grupa Azoty KOLTAR and Grupa Azoty POLYOLEFINS.

As the tests did not identify any need to recognise impairment losses on non-current assets at the level of these companies, no impairment losses on their shares need to be recognised in the Company’s separate financial statements.

 

The value of shares in each of the companies, attributable to the Company, was measured based on an estimate of the recoverable amount of non-current assets for each identified CGU. As a result of the tests, it was concluded that the recoverable amounts of the shares held by the Company in each of the companies under analysis were higher than their carrying amounts, as shown in detail in the table below:

 

Investee

Ownership interest

 

Carrying amount

Recoverable amount

 

COMPO EXPERT Holding

100.00

1,000,535

1,985,240

Grupa Azoty SIARKOPOL