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 spółka komandytowa, 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. The value of
equity contribution is PLN 10,037,500. BDO offices in Poland: ul. Uniwersytecka 13, 40-007 Katowice, phone: +48 32 661 06 00,
Pokoju 1, 31-548 Kraków, phone: +48 12 378 69 00,
Ul. Powstańców Śląskich 7a, 53-332 Wrocław, phone: +48 71 734 28 00,
BDO spółka z ograniczoną odpowiedzialnością spółka komandytowa 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 financial statements
Opinion
We have audited the full-year financial statements of Grupa Azoty S.A. (the “Company”), containing the
separate statement of financial position as at December 31st 2020, the separate statement of profit or
loss and other comprehensive income, separate statement of changes in equity and separate 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 “financial statements”, the “Full-Year Report”).
In our opinion, the financial statements:
give a true and fair view of the Company’s assets and financial position as at December 31st 2020,
aswellasofitsfinancialresult and cashflowsforthe year thenended,inaccordancewithapplicable
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 Company and its Articles of Association;
were prepared on the basis of properly maintained accounting records in accordance with Chapter
2 of the Accounting Act of September 29th 1994 (the “Accounting Act” – consolidated text: Dz.U. of
2021, item 217).
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 financial statements for the relevant reporting period. 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 financial 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.
In accordance with the Company’s accounting policies, shares in subsidiaries are recognised at cost less
impairment losses.
Estimates of impairment of investments in subsidiaries are largely dependent on assessment of future
events and as such are subject to a significant risk of change due to changing market conditions. Given
the embedded uncertainty as to the future realisation of material assumptions and the materiality of
those assets, we considered the analysis of impairment of investments in subsidiaries to be a key audit
matter.
1.
Analysis of impairment of investments in subsidiaries
In the financial statements as at December 31st 2020,the Company presented shares held in subsidiaries,
with a value of PLN 5,699,604 thousand, representing 57.9% of the Company’s total assets.
Disclosures in the financial statements
In addition, in Note 14.1 and Note 14.2 to the separate financial statements, the Company disclosed
figures concerning the identified key audit matter.
Details of the Company’s accounting policy for the valuation of shares in subsidiaries, including the
principles applied in recognising impairment losses, are presented in Note 14 to the separate financial
statements.
Audit procedures conducted in response to the identified risk
assessment of the consistency of the Company’s accounting policy for measurement of investments
in subsidiaries with the principles set out in the relevant financial reporting standards;
identification, understanding and assessment of the process of impairment testing of shares in
subsidiaries and the related internal control;
analysis of the financial statements of the subsidiaries, including their financial results, comparison
of the net exposure in the Company’s accounting books to the net asset value of the subsidiaries to
identify possible indications of impairment of shares;
assessment of the Management Board’s analysis of indications of impairment of investments in
subsidiaries;
with the support of our valuation specialists – assessment of the macroeconomic assumptions used in
the model by the Company’s Management Board, including the discount rate, by comparing them
with publicly available information, and verification of key assumptions and rationality of business
Our audit procedures in relation to the described key audit matter included:
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verification of previous years’ budgets against actual performance;
analysis of the sensitivity of the model to changes in assumptions;
assessment of the analysis submitted by the Company’s Management Board of the effect of COVID-
19 and events after the reporting date on prudent valuation;
assessment of the adequacy of disclosures regarding impairment testing on shares in subsidiaries.
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;
As indications of impairment, related mainly to market conditions, were identified as at December 31st
2020, the Company’s Management Board performed an impairment test and estimated the recoverable
amount of cash-generating units.
Impairment testing of property, plant and equipment largely relies on estimates made by the Company’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 to be a key
audit matter.
2.
Analysis of impairment of property, plant and equipment
In the financial statements as at December 31st 2020, the Company presented property, plant and
equipment with a value of PLN 1,642,695 thousand, representing 16.7% of the Company’s total assets.
Disclosures in the financial statements
In addition, in Note 10 to the separate financial statements, the Company 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 Company to measure property, plant and equipment are
presented in Note 10 to the separate financial statements.
Audit procedures conducted in response to the identified risk
assessment of compliance of the Company’s accounting policies for measurement of property, plant
and equipment 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 Company’s Management Board’s analysis of indications of impairment;
obtainingimpairment tests forcash-generatingunitswith impairment risk,conductedasat 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
Our audit procedures in relation to this key audit matter included:
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assessment of the analysis submitted by the Company’s Management Board of the effect of COVID-
19 and events after the reporting date on prudent valuation;
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.
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;
In the financial statements as at December 31st 2020, the Company presented the following derivative
instruments: financial assets – a call option of PLN 43,342 thousand, and financial liabilities – a put option
of PLN 19,038 thousand. The effect on profit or loss was PLN 24,304 thousand.
The valuation of rights and obligations to repurchase shares in GA Polyolefins from the non-controlling
shareholders – the call option and the put option under the Shareholders’ Agreement – was considered a
key audit matter due to the significant effect of management’s judgments on the adopted assumptions
providing the basis for the valuations and the significant complexity of the economic transaction.
3.
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
option and the obligation to repurchase and cancel shares).
Disclosures in the financial statements
In addition, in Note 30.6 to the separate financial statements, the Company disclosed figures concerning
the identified key audit matter.
Details of the accounting policy applied by the Company to measure the derivative instruments, including
with respect to the Agreement, are presented in Note 30.6 to the separate 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 Company’s Management Board of financial
instruments embedded in the Agreement;
assessing thecorrectness 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,
Our audit procedures in relation to this key audit matter included:
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verifying the completeness of disclosures required to be made in the financial statements for
compliance with IFRS 7
Financial Instruments: Disclosures
and IAS 1
Presentation of Financial
Statements.
Other matter
The financial statements of the Company 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 for the financial statements
The Management Board of the Company is responsible for the preparation, on the basis of properly
maintained accounting records, of financial statements which give a true and fair view of the Company’s
assets, financial position and financial performance in accordance with International Financial Reporting
Standards as endorsed by the European Union, the adopted accounting policies, the laws applicable to
the Company and its Articles of Association, as well as for the internal control that the Management
Board deems necessary to enable the preparation of financial statements that are free of any material
misstatement, whether due to fraud or error.
When preparing financial statements, the Management Board of the Company is responsible for assessing
the Company’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, except
where the Management Board intends either to liquidate the Company or to discontinue its business, or
if there is no viable alternative to such liquidation or discontinuation.
The Company’s Management Board and members of the Supervisory Board are responsible for ensuring
that the financial statements meet the requirements stipulated in the Accounting Act. Members of the
Supervisory Board are responsible for supervising the Company’s financial reporting process.
Auditor’s responsibility for audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the 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 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 Company or on the
efficiency or effectiveness with which the Company’s Management Board has conducted or will conduct
the affairs of the Company.
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 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,
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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 Company’s internal control;
-
evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Company’s Management Board;
-
draw a conclusion as to the appropriateness of application of the going concern basis of accounting
by the Company’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 on the Company’s ability to continue as a going concern. If we conclude that such
materialuncertainty exists,we are required todraw attentioninourauditor’sreport totherelated
disclosures in the financial statements 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 Company to cease to continue as a
going concern;
-
evaluate the overall presentation, structure and content of the financial statements, including the
disclosures,and whetherthe financialstatementsrepresent the underlyingtransactionsand events
in a manner that achieves fair presentation;
We communicate with the Supervisory Board of the Company 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 Company 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 to the Supervisory Board, we determined those matters that were of
most significance in the audit of the financial statements for the relevant reporting period 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 operations of Company and the Grupa Azoty
Group (the “Group”), whose parent is the Company, for 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.
Pursuant to Art. 55.2a of the Accounting Act and Par. 71.8 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-member state, dated
March 29th 2018 (Dz.U. of 2018, item 757), the Company’s Management Board prepared, in the form of
a single document, a consolidated Directors’ Report on the operations of the Grupa Azoty Group, to
which we referred to in the auditor’s report on the consolidated financial statements of the Grupa Azoty
Group.
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Report on other legal and regulatory requirements
Opinion on the requirements of Art. 44 of the Energy Law
Our opinion from the audit of the financial statements includes an opinion on regulatory financial
information (“Regulatory Information”) prepared in accordance with the requirements of Art. 44 of the
Energy Law of April 10th 1997 (the “Energy Law” – consolidated text: Dz.U. of 2020, item 833, as
amended).
In accordance with applicable laws, preparation of the Regulatory Information is the responsibility of the
Company’s Management Board. In addition, the Company’s Management Board is required to ensure that
the Regulatory Information is prepared in accordance with the requirements of Art. 44 of the Energy
Law.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion on compliance of the Regulatory Information with the requirements of Art. 44 of the Energy
Law.
In our opinion, the Regulatory Information presented in Note 36
Regulatory financial information by type
of activity in accordance with Art. 44 of the Energy Law
to the separate financial statements, prepared
for the period January 1st-December 31st 2020 is consistent, in all material respects, with the provisions
of Art. 44 of the Energy Law.
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 have
provided to the Company and its subsidiaries are compliant with the applicable laws and regulations in
Poland and we have not provided 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 Company and its subsidiaries in the audited period are
specified in the Directors’ Report on the operations of the Company and the Group.
Selection of audit firm
We were selected to audit the Company’s financial statements by resolution of the Company’s
Supervisory Board of September 12th 2019.
It is our first audit of the Company’s financial statements.
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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 has audited the financial statements
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