CIECH : Soda Romania forced to temporarily stop its production

The suspension of process steam supplies, due to the termination of the contract by its supplier, forced CIECH Soda Romania ('CSR') to temporarily stop its production. The company will use this forced outage to maintain its equipment. CIECH is ready to continue talks with the only available steam supplier, the CET Govora CHP plant ('CET'), however, in the face of the current disagreement as to the price of this raw material, it is conducting analyses of potential follow-up steps regarding the future of the plant. Further directional decisions related to this matter will be taken by the end of the year. The possible permanent discontinuation of production in Romania should not jeopardise the achievement of the CIECH Group (Adj.) EBITDA goal of more than PLN 900 million in 2021, as defined in the current strategy of the Group.

In June this year, the CET CHP plant, the only available supplier of process steam, terminated the contract for steam supply with CSR, while offering a 135 percent increase in its price, as compared to 2018 (including the cost of CO2 certificates). In the absence of agreement, despite CIECH's open attitude, in August the Group announced its preparations for the possible stoppage of the plant in Romania. The subsequent rounds of talks conducted in recent weeks proved to be ineffective, and the proposed price of steam continued to be approx. 120 percent higher than in 2018 (including CO2 costs). CIECH is not able to accept any increase in relation to the current price level as it would result in permanent unprofitability of its business operations.

Despite the temporary suspension of production, CIECH is still open to talks with CET concerning the resumption of steam supply, however, at the same time it conducts advanced analyses of available options, including obtaining a new source of steam at a reasonable cost. The Group is carrying out an analysis of the possibility of resuming production after such a long outage, which may last until the emergence of an economically reasonable solution. In order to ensure that CSR is able to generate future profits, long-term contracts with all strategic suppliers (limestone, brine), guaranteeing cost predictability in the coming years, need to be concluded.

- The temporary production stoppage gives us the opportunity to analyse the available options - we give each of them our careful consideration. Unfortunately, until we are able obtain a cost-effective source of steam, we do not see the possibility of conducting profitable operations in Romania as we cannot afford the losses incurred by CSR to burden the result of the entire Group. Any increase in the price of process steam, in excess of the price prevailing until 18 September, would result in losses to the Romanian factory. In this situation, the only reasonable solution is to temporarily stop production - says Dawid Jakubowicz, President of the Management Board of CIECH S.A.

CIECH has prepared an optimal protective package for employees, taking into account the voluntary redundancy programme, outplacement measures and possible relocation of some of the employees to other factories of the Group.

The possible long-term outage of the plant in Romania should not jeopardise the achievement of the CIECH Group (Adj.) EBITDA goal of more than PLN 900 million in 2021, as defined in the current strategy of the Group. Over the past several years, CIECH has rescued the Romanian plant from bankruptcy and made enormous efforts to develop it. In 2006-2018, the CIECH Group invested over EUR 100 million in Romania, which enabled it to thoroughly modernise the production process and expand the factory's production capacity. Thanks to completed investments, CIECH Soda Romania products reach, among others, Europe, Asia or Africa.

CONTACT DETAILS

Mirosław Kuk, Press Spokesperson of the CIECH Group

CIECH is an international, expanding chemical group, with a strong standing on European and global markets and with a stable strategic investor (Kulczyk Investments). The company exports its products to over 100 countries around the world, including soda ash, purified soda, salt, plant protection agents, epoxy and polyester resins, polyurethane foams, silicates, and glass packaging. CIECH manufactures products of the highest, world-class quality, which are further used to produce articles which are essential in the everyday life of people all over the world. At the same time, it combines a modern approach to business with the tradition of production which dates back to 1882. Since 2005, the company has been listed on the Warsaw Stock Exchange and, since 2016, on one of the largest stock exchanges in Europe: Börse Frankfurt. More information is available at www.ciechgroup.com