Ciech S A : After three quarters of 2023, CIECH’s results under pressure of the global economic situation challenges. The Group’s salt business boosts revenues

After three quarters of 2023, CIECH's results under pressure of the global economic situation challenges. The Group's salt business boosts revenues

17/11/2023

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After nine months of 2023, the CIECH Group generated PLN 34 million in net profit on continuing operations, i.e. 85% less than in the same period of 2022. Adjusted EBITDA decreased by 17% - to PLN 551 million year on year. The Group is achieving the best possible financial results in the continuing difficult conditions of weakened global economic situation. Due to, among others, the growing importance of the modern evaporated salt plant in Stassfurt, Germany, the Salt business improved its revenues by almost half - to PLN 376 million (from PLN 255 million, an increase of 47% year on year). Thanks to this, the Group maintained the results of the key Soda segment (Soda and Salt businesses), which generated PLN 457 million of EBITDA compared to PLN 476 million in the same period last year. Compared to last year, the economic situation in the markets where the CIECH Group operates remains unfavourable. However, the Group actively responds to any market challenges, focusing on generating cash flows and optimising its investment expenses. The Group's individual businesses are reducing their fixed costs while continuing key investments to ensure their development and competitiveness as well as the implementation of the ESG Strategy goals.

• (adj.) EBITDA remains under the pressure of the economic slowdown. After three quarters of this year, it remains at a higher level (PLN 551 million) compared to investment expenditure of PLN 323 million.
• Net profit stands at PLN 34 million. The lower non-cash financial result is due mainly to exchange rate differences and created provisions. Its overall positive impact was due to the results of proceedings related to tax disputes, favourable for CIECH.
• Revenues, which amount to PLN 4,078 million (growth dynamics of 5% year-on-year), are still under the pressure of weaker global economic conditions.
• The Group maintains its forecast for 2023, assuming PLN 860 million - PLN 920 million in (adj.) EBITDA. The condition for achieving this goal is to recognise the subsidy received in 2023 for the energy-intensive industry in Germany in the results.
• As at the end of September 2023, the Group accumulated PLN 359 million of cash in its accounts.

- After three quarters of 2023, we remain under pressure resulting from the economic slowdown affecting volume and prices, fierce competition on the soda market, and persisting challenges in agriculture and the furniture industry, i.e. in which our customers operate. However, in the demanding environment, we manage to maintain the scenario of implementing the full-year forecast. We are well aware of the fact that we operate in cyclical businesses. We respond to market challenges while maintaining a long-term development perspective. Product- and geographically diversified businesses with increasing efficiency adapt to changing conditions, limiting, among others, fixed costs and making the necessary investment selection. At the same time, we focus on the energy transformation, investments in research and development and expansion of our product portfolio - says Kamil Majczak, President of the Management Board of CIECH S.A.

SODA, SALT

In the third quarter, a distinct slowdown in the market is still being observed. The entire soda industry operates in conditions of lower demand on a global scale. This is related to the deterioration of the economic situation and the reduction of production by the main recipients of soda - including: flat glass manufacturers. Another challenge is the relatively high costs of raw materials due to previous hedging, as well as increased competition due to the economic slowdown in China and the European market. After three quarters of 2023, CIECH managed to defend the level of revenues of the Soda segment (PLN 3,229 million; compared to PLN 2,849 million in the same period last year; an increase of 13% year-on-year) with an increase in the share of the Salt business in revenues. Our ability to maintain the EBITDA result after three quarters of 2023 for the entire soda segment at the level of PLN 457 million, i.e. only 4% lower than in the same period of the record year 2022, is the result of optimisation of the segment's operations and the growing contribution of the new salt plant in Stassfurt, Germany.

AGRO, FOAMS

The Agro business still operates in the conditions of the collapse of the European herbicide market and the persistently high level of inventories. At the same time, the profitability of agricultural production remains low. In this situation, demand from farmers for Plant Protection Products remains low and manufacturers strive to minimise stock levels. High competition from Chinese manufacturers also remains a challenge. After the third quarter of 2023, CIECH's revenues in the Agro business shrunk by 30% to PLN 295 million. However, the CIECH Agro segment shows long-term potential, continuing international development - among others - by registering the innovative Halvetic herbicide on subsequent markets, already available in 18 countries. At the same time, intensive work is underway on new formulations, as well as the launch of a modern R&D laboratory to accelerate research on our proprietary products. The long-term goal of the Agro business is to increase the share of its own formulations at the expense of generic products.

During these nine months of 2023, the Foams business achieved (adj.) EBITDA of PLN 22 million, generating revenues of PLN 196 million (compared to PLN 249 million in the same period a year earlier), despite the weakening economic situation in Poland and Germany, a sharp decline in demand from furniture manufacturers and intensifying competition. The Bydgoszcz company maintains a leading position on the market, developing sustainable production of mattresses and limiting the use of petroleum-derived raw materials (ISCC Plus Certificate), and is also opening up to B2C sales - in the third quarter, CIECH Pianki introduced Snoovio mattresses made from raw materials obtained from sustainable sources.

SILICATES, PACKAGING

Despite the economic slowdown in the industries to which the Group's products are supplied and numerous challenges, the results of the Silicates segment compared to the industry as a whole remain stable. The Group's (adj.) EBITDA result for the period January - September 2023 was PLN 61 million (a decrease of 5% year-on-year) and revenues amounted to PLN 330 million. The segment is facing a reduction in orders for sodium silicates related to the decline in demand for precipitated silica in Europe. Against this background, effective and sustainable production in CIECH plants allows for relatively positive financial results.

In the Packaging business, we observed a strong upward rebound after three quarters of 2023, with (adj.) EBITDA of PLN 48 million and revenues of PLN 122 million. These results demonstrate the effectiveness of optimisation of the production process and a competitive position on a demanding market characterised by the increasingly common use of candle inserts.

OUTLOOK

Plans for CIECH's businesses are based on the assumption of development and investments with a view to improving competitiveness and striving for sustainable production, in line with the goals adopted in the ESG Strategy. CIECH is implementing a strategy to reduce CO2 emissions, which - apart from the environmental aspect - will also translates into reduced production expenses and improved market position. In the Soda business, CIECH is implementing a project to use waste as a raw material for the production of thermal energy and a project to convert boilers to biomass, and is analysing, among others, the use of gas and renewable energy sources from wind and sun. The product portfolio in specific segments is also being developed.

On 17 November 2023, there will be a compulsory buyout of 4.57% of CIECH S.A. shares. Thus, KI Chemistry will obtain 100% of the company's shareholding. According to the announcements of the main shareholder, the company is to withdraw from public trading. Following the withdrawal of the shares of CIECH S.A. from trading, the Group's Management Board intends to maintain its ambitious plans with regard to sustainable development and corporate governance of the Group.

Contact:

Żaneta Przybylska, CIECH Group's PR Department

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CIECH is an international developing chemical group with a strong position on global markets. It is the second largest manufacturer of sodium carbonate and sodium bicarbonate in the European Union, the largest manufacturer of evaporated salt in Poland, the largest supplier of sodium silicates in Europe, the largest Polish manufacturer of plant protection products, and a leading producer of polyurethane foams in Poland. Its factories are located in Poland, Germany and Romania, and it employs over 3,000 people throughout the EU.

Since 2005, CIECH S.A. has been listed on the Warsaw Stock Exchange, and since 2016, simultaneously, on one of the largest stock exchanges in Europe - Börse Frankfurt. The development of the Group is supported by its strategic investor - Kulczyk Investments.

As one of the largest Polish exporters, CIECH ships its goods to almost each continent. They are used to manufacture products necessary in the everyday life of millions of people around the world. That is why the Group is a crucial element of numerous sectors of the economy - construction, automotive, agriculture, chemical, food and pharmaceutical industries.

CIECH combines a modern business approach and care for sustainable development. Since 2020, it has been a member of the United Nations Global Compact - the world's largest initiative that brings together socially, environmentally, and economically responsible businesses.

More information about the CIECH Group can be found at www.ciechgroup.com.