phone: +48 22 543 16 00
fax: +48 22 543 16 01
email: office@bdo.pl
www.bdo.pl
BDO spółka z ograniczoną
odpowiedzialnością sp.k.
ul. Postępu 12
02-676 Warsaw,
Poland
BDO spółka z ograniczoną odpowiedzialnością sp.k., District Court for the Capital City of Warsaw, 13th Commercial Division, National Court Register
(KRS): 0000729684, Industry Identification Number (REGON): 141222257, Tax Identification Number (NIP): 108-000-42-12. BDO offices in Poland: ul.
Uniwersytecka 13, 40-007 Katowice, phone: +48 32 661 06 00, katowice@bdo.pl; al. Pokoju 1, 31-548 Kraków, phone: +48 12 378 69 00,
+48 71 734 28 00, wroclaw@bdo.pl
BDO spółka z ograniczoną odpowiedzialnością sp.k. is a member of BDO International Limited, a UK company, and forms part of the worldwide
network of independent legal entities
Auditor’s Report
for the General Meeting and Supervisory Board
of Grupa Azoty S.A.
Auditor’s report on the full-year consolidated financial statements
Opinion
We have audited the full-year consolidated financial statements of a group whose parent is Grupa Azoty
S.A. (the “Parent” or the “Company”) (the “Group”), containing the consolidated statement of financial
position as at December 31st 2020, the consolidated statement of profit or loss and other comprehensive
income, consolidated statement of changes in equity, and consolidated statement of cash flows for the
financial year January 1st–December 31st 2020, and notes to the financial statements, comprising a
description of adopted accounting policies and other explanatory information (the “consolidated
financial statements”) (the “Full-Year Report”).
In our opinion, the accompanying consolidated financial statements:
− give a true and fair view of the Group’s assets and financial position as at December 31st 2020, as
well as of its financial result and cash flows for the year then ended, in accordance with applicable
International Financial Reporting Standards as endorsed by the European Union and the adopted
accounting policies;
− comply with the form and content requirements laid down in the laws and regulations applicable to
the Group and the Parent’s Articles of Association;
This opinion is consistent with the additional report for the Audit Committee, which we issued on April
12th 2021.
Basis for opinion
We conducted our audit in accordance with National Standards on Auditing compliant with International
Standards on Auditing, adopted by resolution of the National Council of Statutory Auditors (the “NSA”)
and pursuant to the Act on Statutory Auditors, Audit Firms and Public Oversight of May 11th 2017 (the
“Act on Statutory Auditors” – consolidated text: Dz.U. of 2020, item 1415) and EU Regulation No.
537/2014 of April 16th 2014 on specific requirements regarding statutory audit of public-interest entities
(the “EU Regulation” – OJEU L158). Our responsibility under these standards is further described in the
Auditor’s responsibility for audit of the financial statements
section of our report.
We are independent of the Company in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) of the International Ethics Standards
Board for Accountants (the “IESBA Code”) adopted by resolution of the National Council of Statutory
Auditors and with other ethical requirements applicable to the audit of financial statements in Poland.
We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code. During the audit, the lead auditor and the audit firm were independent of the Company in
accordance with the independence criteria set out in the Act on Statutory Auditors and in the EU
Regulation.
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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Key audit matters
Key audit matters are those which, according to our professional judgement, were the most significant
during our audit of the consolidated financial statements for the reporting period under analysis. They
cover the most significant assessed risks of material misstatement, including material misstatement due
to fraud.We addressed those matters in the context of our audit of the consolidatedfinancial statements
as a whole and when formulating our opinion, and we also summarised our response to those risks. Where
we considered it relevant, we included key observations arising with respect to the particular risks. We
do not express a separate opinion on those matters.
1.
Analysis of impairment of property, plant and equipment, intangible assets and goodwill
property, plant and equipment of PLN 11,407,794 thousand (including right-of-use assets),
representing 62.7% of the total assets,
intangible assets of PLN 1,027,310 thousand, including intangible assets with indefinite useful lives
of PLN 412,115 thousand, representing 5.6% of the total assets,
goodwill of PLN 332,456 thousand, representing 1.8% of the total assets,
with a total value of PLN 12,766,787 thousand, representing 70.1% of the total assets.
In accordance with IAS 36
Impairment of Assets
, goodwill and intangible assets with indefinite useful
lives are tested annually for impairment.
The other assets are tested for impairment if there are
indications of impairment. As indications of impairment, related mainly to market conditions, were
identified as at December 31st 2020, the Parent’s Management Board performed an impairment test and
estimated the recoverable amount of cash-generating units.
Impairment testing of property, plant and equipment, intangible assets and goodwill largely relies on
estimates made by the Parent’s Management Board, including those relating to the strategy, revenue
and cost forecasts, planned capital expenditure, weighted average cost of capital and the marginal
growth rate. The estimates are largely forward-looking and therefore subject to a significant risk of
change due to changing market conditions. Given the inherent uncertainty as to the future realisation of
material assumptions and the materiality of those assets, we considered the analysis of impairment of
property, plant and equipment and goodwill to be a key audit matter.
In the consolidated financial statements prepared as at December 31st 2020, the Parent presented:
Disclosures in the financial statements
in Note 10 with respect to property, plant and equipment,
in Note 11 with respect to the right-of-use assets, and
in Note 12 with respect to intangible assets and goodwill.
In addition, in the notes specified above, the Parent disclosed the figures relating to the identified key
audit matter and the key assumptions underlying the impairment test.
Details of the accounting policy applied by the Group with respect to measurement of property, plant
and equipment, right-of-use assets, intangible assets and goodwill are disclosed in the notes to the
consolidated financial statements:
Audit procedures conducted in response to the identified risk
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assessment of compliance of the Group’s accounting policies for measurement of property, plant
and equipment, rights-of-use assets, intangible assets, including goodwill, with the applicable
financial reporting standards;
obtaining an understanding and making a critical assessment of the principles and process of
recognising impairment losses;
assessment of the Parent’s Management Board’s analysis of indications of impairment;
obtaining impairment tests for identified cash-generating units with impairment risk, conducted as
at December 31st 2020;
with the support of our valuation specialists – assessment of the macroeconomic assumptions used
in the model by the Parent’s Management Board, including the discount rate, by comparing them
with publicly available information, and verification of key assumptions and rationality of business
projections, regarding in particular sales, production and operating expenses, by comparing them
with historical data, and in the case of forecast prices – with publicly available external projections;
assessment of the analysis submitted by the Parent’s Management Board of the effect of COVID-19
and events after the reporting date on prudent valuation;
discussion of material components with the auditors, analysis of their audit files and reporting for
group audit purposes.
assessment of the adequacy of impairment testing disclosures in light of the requirements of IAS 36
Impairment of Assets
and IAS 1
Presentation of Financial Statements
.
Our audit procedures in relation to the described key audit matter included:
In the consolidated financial statements prepared as at December 31st 2020, the Parent presented the
following financial instruments as a consequence of accounting for the exit mechanisms:
the share of non-controlling interests on account of the shares covered by the put option was
reduced by PLN 212,426 thousand, other financial liabilities were increased by PLN 229,521
thousand, and PLN 17,700 thousand was charged to other capital reserves,
the share of non-controlling interests on account of the shares to be repurchased and cancelled was
reduced by PLN 333,890 thousand.
The valuation of rights and obligations under the Shareholders’ Agreement was considered a key audit
matter given the significant effect of management’s judgments on the amounts disclosed in the financial
statements and the significant complexity of the economic transaction.
2.
Investment agreement executed under the Polimery Police project by subsidiary Grupa
Azoty Polyolefins S.A.
Grupa Azoty S.A. is a shareholder in Grupa Azoty Polyolefins S.A. (“GA Polyolefins”), which is
implementing the Polimery Police project. The Shareholders’ Agreement (the “Agreement”) concluded
by the original sponsors (Grupa Azoty S.A. and Grupa Azoty Zakłady Chemiczne Police S.A.) and GA
Polyolefins with Co-Sponsors (Lotos, Hyundai and KIND), setting out the terms and conditions of financing
the project, provides for mechanisms enabling the Co-Sponsors to exit the investment in GA Polyolefins.
Given their legal and economic character, the mechanisms are treated as financial instruments (put/call
options and the obligation to repurchase and cancel shares).
Disclosures in the financial statements
4
In addition, in Notes 21.6, 21.7 and 24 to the consolidated financial statements, the Parent disclosed
figures relating to the identified key audit matter.
Details of the accounting policies applied by the Group with respect to the financial instruments
identified in the Agreement are presented in Notes 21.6 and 21.7 to the consolidated financial
statements.
Audit procedures conducted in response to the identified risk
analysis of the Shareholders’ Agreement and the rights and obligations of each of its parties in the
context of the exit mechanisms;
obtaining an understanding of the Agreement’s business objectives;
assessing the correctness of identification by the Parent’s Management Board of financial
instruments embedded in the Agreement;
assessing the correctness of recognising the accounting effects of the performance of the
Agreement;
engaging a specialist in measurement of financial instruments and:
analysing the pricing model of the options embedded in the Agreement, provided by the
Company,
verifying the correctness of the model and the calculation,
verifying the completeness of disclosures required to be made in the consolidated financial
statements for compliance with IFRS 7
Financial Instruments: Disclosures
and IAS 1
Presentation of
Financial Statements.
Our audit procedures in relation to the described key audit matter included:
Other matter
The consolidated financial statements of the Group for the year ended December 31st 2019 were audited
by an auditor acting on behalf of another audit firm. The auditor issued an unqualified opinion on those
financial statements on April 7th 2020.
Responsibility of the Management Board and Supervisory Board of the parent for the consolidated
financial statements
The Management Board of the Parent is responsible for the preparation of consolidated financial
statements which give a true and fair view of the Group’s assets, financial position and financial
performanceinaccordance with InternationalFinancialReporting Standards as endorsedby the European
Union, the adopted accounting policies, the laws applicable to the Group and the Articles of Association,
as well as for the internal control that the Management Board of the Parent deems necessary to enable
thepreparationofconsolidatedfinancialstatementsthat are freeofany materialmisstatement,whether
due to fraud or error.
When preparing the consolidated financial statements, the Management Board of the Parent is
responsible for assessing the Group’s ability to continue as a going concern, for disclosing, if applicable,
any issues pertaining to its continuation as a going concern, and for adoption of the going concern basis
of accounting, unless theManagement Board intends eitherto liquidate the Group orto cease operations,
or has no realistic alternative but to do so.
The Management Board of the Parent and members of its Supervisory Board are also required to ensure
that the consolidated financial statements comply with the requirements set forth in the Accounting Act
5
of September 29th 1994 (the “Accounting Act” – consolidated text: Dz.U. of 2021, item 217). Members
of the Parent’s Supervisory Board are responsible for supervising the financial reporting process.
Auditor’s responsibility for audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the NSA will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
The concept of materiality is applied by the auditor both in planning and performing the audit, and in
evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any,
onthefinancialstatements and informing theauditor’s opinion.Accordingly,allopinions and statements
contained in the audit report are made taking into account the qualitative and quantitative materiality
levels determined in accordance with the auditing standards and the auditor’s professional judgement.
The scope of the audit does not include assurance on the future viability of the Group or on the efficiency
or effectiveness with which the Parent’s Management Board has conducted or will conduct the affairs of
the Group.
In auditing financial statements in accordance with the NSA, we apply professional judgement and
maintain professional scepticism, as well as:
− identify and assess risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, plan and perform audit procedures adequate to the identified risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control;
− obtain understanding of internal controls relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control;
− evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Parent’s Management Board;
− draw a conclusion as to the appropriateness of application of the going concern basis of accounting
by the Parent’s Management Board and, based on the audit evidence obtained, a conclusion as to
whether any material uncertainty exists related to any events or conditions which may cast significant
doubt onthe Group’s ability to continue as a going concern.If we conclude that a materialuncertainty
exists, we are required to draw attention in the auditor’s report to the disclosures in the consolidated
financial statements about the material uncertainty or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern;
− evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financialstatements represent the underlying
transactions and events in a manner that achieves fair presentation;
− obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
6
We communicate with the Supervisory Board of the Parent regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Supervisory Board of the Parent with a statement that we have complied with
relevant ethical requirements regarding independence and that we will communicate with the
Supervisory Board all relationships and other matters that may reasonably be thought to bear on our
independence and, where applicable, related safeguards.
From the matters communicated with the Supervisory Board of the Parent, we determined those matters
that were of most significance in the audit of the consolidated financial statements for the reporting
period under analysis and were therefore considered key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Other Information, including the Directors’ Report
Other Information includes the Directors’ Report on the Company’s and the Group’s operations in the
financial year ended December 31st 2020 (the “Directors’ Report”), together with the statement of
compliance with corporate governance standards and the non-financial statement referred to in Art.
49b.1 of the Accounting Act, which are separate sections of the Directors’ Report.
Responsibility of the Management Board and the Supervisory Board
The Management Board of the Parent is responsible for preparing Other Information in accordance with
the law.
The Management Board of the Parent and members of its Supervisory Board are also required to ensure
that the Directors’ Report and its separate sections as well as the separate non-financial statement
comply with the requirements of the Accounting Act.
Auditor’s responsibility
Our opinion on the audited consolidated financial statements does not cover Other Information.
In connection with our audit of the consolidated financial statements, it is our responsibility to read
Other Information and consider whether it is not materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material misstatement of Other Information, we
are required to report that fact. In accordance with the Act on Statutory Auditors, our responsibility is
also to issue an opinion on whether the Directors’ Report was prepared in accordance with applicable
laws and whether it is consistent with the information appearing in the financial statements. We are also
required to issue an opinion on whether the Group has included the required information in its statement
of compliance with corporate governance standards.
We received the Directors’ Report prior to the date of this audit report, and the Full-Year Report will be
available after that date. Should we identify a material misstatement in the Full-Year Report, we are
required to report this fact to the Company’s Supervisory Board.
Opinion on the Directors’ Report
Based on the work we performed as part of our audit, we believe that the Directors’ Report:
− was prepared in accordance with Art. 49 of the Accounting Act and Par. 70 of the Minister of Finance’s
Regulation on current and periodic information to be published by issuers of securities and conditions
for recognition as equivalent of information whose disclosure is required under the laws of a non-
7
member state, dated March 29th 2018 (the ‘Regulation on Current Information’ – Dz.U. of 2018, item
757);
− contains information consistent with information disclosed in the consolidated financial statements.
We further represent that, based on our knowledge of the Company, the Group and their environment
obtained during the audit, we did not identify any material misstatements in the Directors’ Report.
Opinion on the statement of compliance with corporate governance standards
In our opinion, in the statement of compliance with corporate governance standards, the Company
included the information specified in Par. 70.6.5 of the Regulation on Current Information. Furthermore,
in our opinion, the information specified in Par. 70.6.5.c–f, h and i of the Regulation on Current
Information, contained in the statement of compliance with corporate governance standards, complies
with the applicable regulations and is consistent with the information contained in the financial
statements.
Non-financial statement
In accordance with the requirements of the Act on Statutory Auditors, we confirm that the Company has
prepared a non-financialstatement, referred to in Art.49b.1 of the Accounting Act,as a separate section
of the Directors’ Report.
We did not perform any assurance work regarding the non-financial statement and we do not give any
assurance about it.
Report on other legal and regulatory requirements
Opinion about compliance of the consolidated financial statements prepared in a single electronic
reporting format with the requirements of the Regulation on regulatory technical standards on the
specification of a single electronic reporting format
In connection with the audit of the consolidated financial statements, we have been engaged to provide
an assurance service giving reasonable assurance in order to express an opinion on whether the Group’s
consolidated financial statements for the year ended December 31st 2020, prepared
using a single
electronic reporting format, contained in the ESEF_grupaazoty-2020-12-31.zip file (the ‘ESEF
consolidated financial statements’), have been marked up in accordance with the requirements laid
down in Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive
2004/109/ECofthe EuropeanParliament andofthe Councilwithregardtoregulatory technicalstandards
on the specification of a single electronic reporting format and other Commission Delegated Regulations
(EU) with regard to the update of taxonomy to be used for the purposes of a single electronic reporting
format, hereinafter jointly referred to as the “ESEF Regulation”, and comply with the technical
requirements for the specification of a single electronic reporting format set out in those regulations.
Identification of the criteria and description of the service
The ESEF consolidated financial statements have been prepared by the Parent’s Management Board to
meet the mark-up requirements and technical requirements for the specification of a single electronic
reporting format as set out in the ESEF Regulation.
Thepurpose ofourassuranceengagement wasto check the complianceoftheESEFconsolidated financial
statements with the requirements of the ESEF Regulation, and we believe that the requirements set out
in those regulations represent appropriate criteria to form our opinion.
Responsibility of the Management Board and the Supervisory Board of the Parent
The Management Board is responsible for the preparation of the ESEF consolidated financial statements
inaccordance with the mark-up requirements and technical requirements forthe specificationof a single
8
electronic reporting format as set out in the ESEF Regulation. This responsibility includes the selection
and application of appropriate XBRL tags, using the taxonomy specified in those regulations.
The Management Board’s responsibility also includes the design, implementation and maintenance of
internal control to ensure the preparation of the ESEF consolidated financial statements that are free
from any significant non-compliance with the ESEF requirements.
Membersofthe Parent’sSupervisory Board are responsibleforsupervisingthefinancialreporting process,
including also the preparation of financial statements in accordance with the format required under
applicable laws.
Auditor’s responsibility
Our objective was to express an opinion based on our assurance service that would provide reasonable
assurance as to whether the ESEF consolidated financial statements have been marked up in accordance
with the requirements of the ESEF Regulation and whether they comply with the technical standards for
the specification of a single electronic reporting format as set out in those regulations.
We performed our service in accordance with National Standard on Assurance Engagements Other than
Audits and Reviews 3000 (Z) compliant with International Standard on Assurance Engagements 3000
(Revised) – “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”
(“NSAE 3000 (Z)”). The Standard requires the auditor to plan and perform the procedures to obtain
reasonable assurance that the ESEF consolidated financial statements have been prepared in accordance
with certain criteria.
Reasonable assurance is a high level of assurance, but is not a guarantee that an assurance engagement
conducted in accordance with NSAE 3000 (Z) will always detect a material misstatement when it exists.
The selection of procedures depends on the auditor’s judgement, including the auditor’s assessment of
the risk of material misstatement due to fraud or error. In making the risk assessment, the auditor
considers internal control relevant to the preparation of the ESEF consolidated financial statements in
order to design appropriate procedures to provide the auditor with sufficient and appropriate evidence
in the circumstances. The assessment of internal control was not performed to issue an opinion on its
effectiveness.
Summary of work performed
The procedures we designed and performed included:
-
obtaining an understanding of the process of preparation of the ESEF consolidated financial
statements including the process of selection and application of XBRL tags by the Company and
ensuring compliance with the ESEF Regulation, including an understanding of the internal control
mechanisms relevant to that process;
-
reconciliation of the marked-up information contained in the ESEF consolidated financial statements
with the audited consolidated financial statements;
-
assessment, with the use of specialist IT tools, of compliance with the technical standards for the
specification of a single electronic reporting format, including the use of the XHTML format;
-
assessment of completeness of marking up the information contained in the ESEF consolidated
financial statements with XBRL tags;
-
assessment of whether the applied XBRL tags from the taxonomy specified in the ESEF Regulation
were applied properly and that taxonomy extensions were used in situations where no appropriate
elements were identified in the core taxonomy specified in the ESEF Regulation;
-
assessment of the correctness of anchoring the applied taxonomy extensions in the core taxonomy
specified in the ESEF Regulation.
9
We believe that the evidence we obtained is sufficient and appropriate to provide a basis for our
assurance service opinion.
Ethical requirements, including independence
In performing the service, the auditor and the audit firm complied with the independence requirements
and other ethical requirements set forth in the IFAC Code. The IFAC Code is based on the fundamental
principles of integrity, objectivity, professional competence, due care, confidentiality and professional
behaviour. We also complied with other independence and ethical requirements applicable to this
assurance service in Poland.
Quality control requirements. The audit firm applies national standards on quality control (the “NSQC”)
complaint with International Quality Control Standard 1 – “Quality Control for Firms that Perform Audits
and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” as
adopted by resolution of the National Council of Statutory Auditors.
In accordance with the requirements of the NSQC, the audit firm maintains a comprehensive quality
control system including documented policies and procedures for compliance with ethical requirements,
professional standards and the applicable laws and regulations.
Opinion
The auditor’s opinion is formed on the basis of the matters described above and should therefore be read
considering those matters.
In our opinion, the ESEF consolidated financial statements have been prepared in all material respects
in accordance with the requirements of the ESEF Regulation.
Representation on the provided non-audit services
To the best of our knowledge and belief, we hereby represent that the non-audit services that we
provided to the Group are compliant with the laws and regulations applicable in Poland and we did not
provide any non-audit services that are prohibited under Article 5(1) of the EU Regulation or Art. 136 of
the Act on Statutory Auditors.
The non-audit services we provided to the Parent and its subsidiaries in the audited period are specified
in Note 9.1. of the Directors’ Report.
Selection of audit firm
We were selected to audit the Group’s financial statements by resolution of the Company’s Supervisory
Board of September 12th 2019.
It is our first audit of the Group’s financial statements.
10
The lead auditor responsible for the audit the outcome of which is this auditor’s report is Marcin Krupa.
BDO spółka z ograniczoną odpowiedzialnością sp.k. of Warsaw
entered in the list of audit firms under Reg. No.
3355
on behalf of which the lead auditor acts
Signed with qualified electronic signature
Marcin Krupa
Auditor registered under No. 11142
Signed with qualified electronic signature
André Helin, PhD
President of the General
Partner’s Management Board Auditor registered
under No. 90004
Kraków, April 12th 2021