EXTENDED CONSOLIDATED REPORT OF THE CIECH CHEMICAL GROUP FOR H1 2010

Transcription

1 EXTENDED CONSOLIDATED REPORT OF THE CIECH CHEMICAL GROUP FOR H

2 CIECH PSr adjusted FINANCIAL SUPERVISION AUTHORITY Consolidated Semi-annual Report PSr 2010 (pursuant to 82 section 2 and 83 section 3 of the Ordinance of the Minister of Finance of February 19th, 2009 Dz. U. No. 33, item 259) for the issuers of securities conducting manufacturing, building, commercial or service activity (year) for the first half of the financial year 2010 covering the period from January 1st, 2010 until June 30th, 2010 International Financial Reporting Standards including the consolidated financial statements in accordance with currency PLN and the condensed financial statements in accordance with International Financial Reporting Standards currency PLN CIECH SA CIECH (zip code) (abbreviated name of the issuer) date of submission: (full name of the issuer) Chemical (che) Warsaw (sector according to the classification of the Warsaw Stock Exchange/branch) Puławska 182 (street) (telephone) (fax) biuro.prasowe@ciech.com ( ) (city) (www) NIP (tax identification number) REGON (state statistical (entity authorised to audit) number) (number) SELECTED FIGURES Figures related to condensed consolidated financial statements EUR H H H H I. Net sales of products, goods and materials 1,950, ,893, , , II. Operating profit (loss) 81, , , , III. Profit (loss) before taxes -17, , , , IV. Total net profit (loss) -37, , , , V. Net profit (loss) attributable to controlling shareholders -33, , , , VI. Net profit (loss) attributable to minority shareholders -4, , , VII. Net cash flows from operating activities 81, , , , VIII. Net cash flows from investment activities -60, , , , IX. Net cash flows from financial activities -7, , , , X. Total net cash flows 13, , , , XI. Total assets 4,063, ,017, , , XII. Non-current liabilities 1,166, ,179, , , XIII. Current liabilities 2,081, ,984, , , XIV. Total equity 816, , , , XV. Equity attributable to controlling shareholders 783, , , , XVI. Minority interest 32, , , , XVII. Share capital 164, , , , XVIII. Earnings (loss) per share (in PLN/EUR) Figures related to condensed individual financial statements XIX. Net sales of products, goods and materials 1, 1 1 9, , , , XX. Operating profit (loss) 67, , , , XXI. Gross profit (loss) 22, , , , XXII. Net profit (loss) 10, , , , XXIII. Net cash flows from operating activities 14, , , , XXIV. Net cash flows from investment activities 39, , , , XXV. Net cash flows from financial activities -6, , , , XXVI. Total net cash flows 46, , , ,

3 CIECH PSr CIECH XXVII. Total assets 2,053, ,977, , , XXVIII. Liabilities and provisions for liabilities 1,538, ,459, , , XXIX. Non-current liabilities 457, , , , XXX. Current liabilities 1,080, , , , XXXI. Equity 515, , , , XXXII. Share capital 164, , , , Financial figures in the consolidated statement of financial position (points XI-XVII) as well as financial figures from the individual statement of financial position (points XXVII-XXXII) are presented as at June 30th, 2010 and as at December 31st, PSr In the event of presenting selected financial data from the semi-annual condensed financial statements, these data must be properly explained. Selected financial figures from the consolidated balance sheet (consolidated statement of financial position) or the balance sheet (statement of financial position) respectively are presented as at the end of the first half of the current financial year and as at the end of the previous financial year, which should be properly explained. The report should be submitted to the Financial Supervision Authority, the company managing the regulated market and presented to the public via an information agency pursuant to legal regulations. CONTENT OF THE REPORT File Description Extended consolidated report of the Ciech Group for H Extended consolidated report of the Ciech Group for H Independent certified auditor s report Independent certified auditor s report on the condensed semi-annual consolidated financial statements of the Ciech Group for the period between January 1st, 2010 and June 30th, 2010 Independent certified auditor s report Independent certified auditor s report on the condensed semi-annual financial statements of CIECH S.A. for the period between January 1st, 2010 and June 30th, 2010 SIGNATURES OF THE COMPANY S REPRESENTATIVES Date Name and surname Title/function Signature Ryszard Kunicki President of the Management Board of CIECH Spółka Akcyjna Andrzej Bąbaś Member of the Management Board of CIECH Spółka Akcyjna Marcin Dobrzański Member of the Management Board of CIECH Spółka Akcyjna Artur Osuchowski Member of the Management Board of CIECH Spółka Akcyjna Rafał Rybkowski Member of the Management Board of CIECH Spółka Akcyjna Katarzyna Rybacka Chief Accountant of CIECH Spółka Akcyjna 2

4 TABLE OF CONTENTS I. CONDENSED SEMI-ANNUAL CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP Consolidated Profit and Loss Account of the Ciech Group Consolidated Statement of Comprehensive Income of the Ciech Group Consolidated Statement of Financial Position of the Ciech Group Consolidated Statement of Cash Flows of the Ciech Group Consolidated Statement of Changes in Equity of the Ciech Group II. MANAGEMENT REPORT The most important events in the Ciech Group from January 1st, 2010 until the preparation of these statements Description of achievements of the Ciech Group in the period between January 1st and June 30th, 2010, including a description of factors and events having a significant impact on the financial result Basic financial figures Sales revenues Profit/Loss on Sales and Operating Profit/Loss Net result Assets Liabilities Cash flows Investment tasks carried out Seasonality and cyclicality of the operations of CIECH S.A. and the Ciech Group Fulfilment of profit forecasts previously published for a given year in light of the results disclosed in the quarterly report against the forecasted results Factors that influence the Ciech Group's results, with particular focus on the next half of the year External factors Internal factors Description of basic risks and threats connected with the remaining months of the financial year Changes in the shares of CIECH S.A. held by the Members of the Management Board and Supervisory Board CIECH S.A.'s shareholders holding at least 5% of shares/votes at the General Meeting of Shareholders Information about the issue, redemption and repayment of debt securities and equity securities in the Ciech Group Information about dividends paid (or declared), in total and per share, broken down into ordinary shares and preference shares Organisation description and identification of the effects of changes in the structure of the Ciech Group s business entities Procedures pending before courts, in arbitration proceedings or public administration bodies Information concerning non-standard and non-routine transaction or transactions with affiliated entities concluded by CIECH S.A. or its subsidiaries Information on loan and borrowing sureties or guarantees granted by CIECH S.A. or its subsidiaries III. INFORMATION ON THE PRESENTATION PRINCIPLES FOR THE EXTENDED CONSOLIDATED REPORT OF THE CIECH GROUP FOR H Basis for preparing the Extended Consolidated Report of the Ciech Group for H Statement of Conformity Adopted accounting principles Functional and presentation currency and conversion principles IV. NOTES TO THE CONDENSED SEMI-ANNUAL CONSOLIDATED FINANCIAL STATEMENTS OF THE CIECH GROUP Consolidated entities Effects of changes to the organisational structure of the Ciech Group s business units in H1 2010, including business mergers, acquisitions or disposals of the group's entities, long-term investments, de-mergers, restructuring and discontinuation of activity Financial figures by business segment Information about the Ciech Group s financial standing Derivative transactions Financial instruments assigned for hedge accounting Procedures pending before courts, in arbitration proceedings or public administration bodies as at June 30th, CIECH S.A Subsidiaries Information about non-standard and non-routine transaction or transactions with affiliated entities concluded by CIECH S.A. or its subsidiaries Information about loan and borrowing sureties or guarantees granted by CIECH S.A. or its subsidiaries Provisions and write-downs on assets from to Notes to the Statement of Comprehensive Income of the Ciech Group Purchase and disposal of tangible fixed assets Information about changes in contingent liabilities or contingent assets that have occurred since the end of the last financial year Sureties granted by the Ciech Group s Companies to the Organising Banks and Medium Exposure Banks 68 2

5 15. Discontinued operations and assets held for sale Information about overdue debts or other violations of debt-related agreements Information about non-consolidated subsidiaries and associates Assets and financial standing of the subsidiary Cheman S.A Programme for achieving sustainable profitability of S.C. Uzinele Sodice Govora Ciech Chemical Group S.A Reconciliation of equity presented in the statements for 2009 with the currently presented financials as comparative data Reconciliation of equity presented in the statements for H with the currently presented financials as comparative data V. CONDENSED SEPARATE FINANCIAL STATEMENT OF CIECH S.A. FOR H PREPARED IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS Separate Profit and Loss Account of CIECH S.A Separate Statement of Comprehensive Income of CIECH S.A Statement of Financial Position of CIECH S.A Statement of Cash Flows of CIECH S.A Statement of Changes in Equity of CIECH S.A Notes to the financial statements prepared for the 6-month period ending on June 30th, Basis and accounting principles (policy) Earnings per share Seasonality and cyclicality of operations Changes in accounting estimates Information about the issue, redemption and repayment of debt securities and equity securities Information about dividends paid Financial figures by business segment Information about significant events that occurred after June 30th, 2010 and have not been reflected in the presented interim report Changes in the shareholding structure of the entity Information about changes in contingent liabilities or contingent assets Sureties granted by the Ciech Group s Companies to the Organising Banks and Medium Exposure Banks Information on write-downs on assets and provisions in the reporting period, i.e. from to Notes to the Statement of Comprehensive Income of CIECH S.A Information about the reversal of all provisions for restructuring costs Information about the purchase and disposal of tangible fixed assets and commitments to purchase tangible fixed assets Court cases CIECH S.A.'s shareholders holding at least 5% of shares/votes at the General Meeting of Shareholders Changes in the shares of CIECH S.A. held by the Members of the Management Board and Supervisory Board Corrections of errors from previous periods Information about unpaid financial liabilities or breach of loan agreement provisions Information on the financial standing of CIECH SA Financial instruments assigned for hedge accounting Derivative transactions Transactions with affiliates Factors influencing CIECH s results, with particular focus on the next half of the year Assets and financial standing of the subsidiary Cheman S.A Programme for achieving sustainable profitability of S.C. Uzinele Sodice Govora Ciech Chemical Group S.A Events occurring after the balance-sheet date VI. STATEMENT OF THE MANAGEMENT BOARD

6 I. Condensed Semi-annual Consolidated Financial Statements of the Ciech Group 1. Consolidated Profit and Loss Account of the Ciech Group * * PLN 000 Continued operations Continued operations Continued operations Continued operations Net sales of products, goods and materials 1,950,075 1,893, , ,719 Cost of sales (1,665,851) (1,542,018) (841,760) (759,954) Gross profit/loss on sales 284, , , ,765 Other operating revenues 78, ,610 44, ,952 Selling costs (132,773) (126,825) (74,029) (71,441) General and administrative expenses (116,215) (127,415) (55,187) (59,040) Other operating expenses (31,851) (41,358) (21,597) (23,253) Operating profit/loss 81, ,472 40,216 95,983 Financial revenues 41,215 11,023 11,519 (60,425) Financial expenses (141,579) (151,730) (75,952) 8,379 Net financial revenues/expenses (100,364) (140,707) (64,433) (52,046) Share in net profit of subsidiaries measured under the equity method 902 1, ,154 Profit/loss before tax (17,588) 42,452 (23,831) 47,091 Income tax (20,243) (23,000) (10,852) (15,046) Net profit/loss (37,831) 19,452 (34,683) 32,045 Profit/loss on sales related to discontinued operations Net profit/loss for the financial year (37,831) 19,452 (34,683) 32,045 including: Net profit/loss attributable to controlling shareholders (33,786) 21,168 (31,003) 35,032 Net profit/loss attributable to minority shareholders (4,045) (1,716) (3,680) (2,987) Earnings (loss) per share (in PLN): Basic (1.21) 0.76 (1.11) 1.25 Diluted (1.21) 0.76 (1.11) 1.25 No discontinued operations occurred in the presented period. * Non-reviewed data.. 4

7 2. Consolidated Statement of Comprehensive Income of the Ciech Group PLN Continued operations Continued operations Continued operations Net profit for the financial year (37,831) (99,166) 19,452 Other gross comprehensive income Currency translation differences (foreign companies) 2,075 (4,826) (13,885) Revaluation of available-for-sale financial assets 10,681 23,341 23,439 Cash flow hedging (15,406) 69,232 27,457 Net currency translation differences (investments in foreign companies) 2,632 (10,206) - Other components of other comprehensive income (75) (327) (319) Income tax attributable to other components of comprehensive income 2,238 (16,672) (9,250) Other net comprehensive income 2,145 60,542 27,442 COMPREHENSIVE INCOME (35,686) (38,624) 46,894 Comprehensive income, including attributable to: (35,686) (38,624) 46,894 Controlling shareholders (32,832) (33,372) 47,800 Minority interest (2,854) (5,252) (906) Detailed information on the components of other comprehensive income has been presented in point IV.11 of this Report. 5

8 3. Consolidated Statement of Financial Position of the Ciech Group PLN 000 ASSETS Fixed assets Tangible fixed assets 2,219,455 2,265,676 2,321,160 Right of perpetual usufruct 134, , ,999 Intangible assets, including: 159, , ,936 - goodwill 52,632 52,343 53,772 Investment real property 6,840 8,935 22,264 Non-current receivables 60,622 23,586 3,337 Investments in affiliates and jointly-controlled entities measured under the equity method 5,145 34,436 38,945 Other long-term investments 52,586 96, ,854 Deferred income tax assets 11,196 20,723 26,776 Total fixed assets 2,649,908 2,751,679 2,853,271 Current assets Inventory 298, , ,435 Short-term investments 1,308 2,529 4,134 Income tax receivables 10,414 16,175 11,398 Trade and other receivables 908, , ,323 Cash and cash equivalents 157, , ,517 Non-current assets held for sale 37, ,648 Total current assets 1,413,899 1,266,070 1,500,455 Total assets 4,063,807 4,017,749 4,353,726 EQUITY AND LIABILITIES Share capital 164, , ,115 Own shares Share premium 151, , ,328 Equity components related to assets held for sale Cash flow hedge 4,762 15,688 (18,149) Financial asset revaluation reserve 4,984 (3,458) (3,848) Tangible fixed assets revaluation reserve Other reserve capitals 78,521 78,521 78,521 Net currency translation differences (investments in foreign companies) (7,574) (10,206) - Currency translation differences (subsidiaries) (56,673) (57,536) (65,747) Retained profits 444, , ,156 Equity attributable to controlling shareholders 783, , ,376 Minority interest 32,504 37,232 43,634 Total equity 816, , ,010 Liabilities Loans, borrowings and other debt instruments 658, , ,028 Other non-current liabilities 264, , ,574 Employee benefits 66,246 64,254 61,752 Provisions (other long-term) 68,425 72,617 79,665 Deferred tax provision 108, , ,393 Total non-current liabilities 1,166,400 1,179,661 1,437,412 6

9 EQUITY AND LIABILITIES Overdraft facility 93,185 78,640 76,565 Loans, borrowings and other debt instruments 965, , ,326 Trade and other liabilities 975, , ,294 Income tax liabilities 21,299 33,656 35,263 Provisions (short-term provisions for employee benefits and other provisions) 25,154 31,547 27,856 Liabilities related to non-current assets held for sale Total current liabilities 2,081,160 1,984,281 1,976,304 Total liabilities 3,247,560 3,163,942 3,413,716 Total equity and liabilities 4,063,807 4,017,749 4,353,726 7

10 4. Consolidated Statement of Cash Flows of the Ciech Group PLN Cash flows from operating activities Net profit (loss) for the period (37,831) 19,452 Adjustments Amortisation/depreciation 118, ,477 Recognition / reversal of write-downs (269) (271) Foreign exchange profit / loss 19,592 (20,100) Investment real property revaluation - - Profit / loss on investment activities (5,089) (7,841) Profit / loss on disposal of tangible assets (1,191) 4,929 Dividends and interest 70,426 47,225 Input income tax 20,243 23,000 Profit / loss on construction contract settlement (voids) (27,973) (7,094) Profit / loss on shares in companies measured under the equity method (902) (1,687) Operating profit / loss before changes in working capital and provisions 155, ,090 Change in receivables (96,593) (29,545) Change in inventory 15,406 96,327 Change in current liabilities 92,936 30,966 Change in provisions and employee benefits (5,194) (100,011) Net cash generated from operating activities 162, ,827 Interest paid (56,816) (42,203) Cash flows from construction contracts (voids) - 65,684 Change in liabilities due to release commission 24,668 - Income tax paid (14,740) (3,676) Profit / loss on sales attributable to discontinued operations - - Cash flows from options - (83,300) Measurement of derivatives (34,645) 26,193 Other adjustments (including adjustments of cash flows from options) ,994 Net cash from operating activities 81, ,519 Cash flows from investment activities Inflows (in + ) 64,319 9,926 Disposal of a subsidiary Disposal of intangible and tangible fixed assets 20,054 4,548 Disposal of financial assets 41, Disposal of investment real property - - Dividends received 1,749 2,150 Interest received 425 1,357 Repayment of borrowings Other inflows Outflows (in - ) (124,518) (220,479) Acquisition of a subsidiary (after deduction of acquired cash) (7,419) (73,723) Acquisition of intangible and tangible fixed assets (116,462) (144,644) Acquisition of financial assets (190) (70) Acquisition of investment real property - - Research and development (404) (528) Equity increase and contributions - - 8

11 PLN Loans granted - (1,500) Other (43) (14) Net cash from investment activities (60,199) (210,553) Cash flows from financial activities Inflows (in + ) 87, ,166 Net inflows from issue of shares and other equity instruments, and equity contributions - - Loans and borrowings raised 86, ,166 Subsidies received - - Issue of debt securities - - Other financial inflows 1,301 - Outflows (in - ) (95,348) (254,595) Purchase of own shares - - Dividends paid and other payments to controlling shareholders (1,874) (158) Dividends paid to minority shareholders - - Repayment of loans and borrowings (87,385) (246,767) Redemption of debt securities - - Payment of financial lease liabilities (6,089) (7,640) Other financial outflows - (30) Net cash from financial activities (7,805) 4,571 Total net cash flows 13,734 10,537 Cash as at the beginning of period 52,997 45,797 Effect of foreign exchange differences (2,348) 2,618 Cash as at the end of period 64,383 58,952 9

12 5. Consolidated Statement of Changes in Equity of the Ciech Group Attributable to controlling shareholders PLN 000 Share capital Own shares Share premium Equity components related to assets held for sale Cash flow hedge Financial asset revaluation reserve Other reserve capitals Net currency translation differences (investments in foreign companies) Currency translation differences (subsidiaries) Retained profits Equity attributable to controlling shareholders Minority interest Total equity Equity as at 01/01/2010 Previously reported 164, ,328-15,688 (3,458) 78,521 (10,206) (57,876) 484, ,952 37, ,184 Changes in accounting principles Adjustments of errors from previous periods Equity (restated) as at: 01/01/ (6,717) (6,377) - (6,377) 164, ,328-15,688 (3,458) 78,521 (10,206) (57,536) 478, ,575 37, ,807 Dividends paid (1,874) (1,874) Comprehensive income in 2010 Equity as at 30/06/ (10,926) 8,442-2, (33,843) (32,832) (2,854) (35,686) 164, ,328-4,762 4,984 78,521 (7,574) (56,673) 444, ,743 32, ,247 10

13 Attributable to controlling shareholders PLN 000 Share capital Own shares Share premium Equity components related to assets held for sale Cash flow hedge Financial asset revaluation reserve Other reserve capitals Net currency translation differences (investments in foreign companies) Currency translation differences (subsidiaries) Retained profits Equity attributable to controlling shareholders Minority interest Total equity Equity as at 01/01/2009 Previously reported 164, ,328 - (111,700) (22,887) 78,521 - (50,961) 656, ,876 49, ,288 Changes in accounting principles Adjustments of errors from previous periods Equity (restated) as at: 01/01/ (15,496) (15,496) - (15,496) , (70,934) , ,328 - (40,766) (22,887) 78,521 - (50,961) 570, ,380 49, ,792 Dividends paid (6,466) (6,466) Adjustments related to negative minority interest Change in the Group's composition Comprehensive income in 2009 Equity as at 31/12/ (567) ,454 19,429 - (10,206) (6,575) (92,474) (33,372) (5,252) (38,624) 164, ,328-15,688 (3,458) 78,521 (10,206) (57,536) 478, ,575 37, ,807 11

14 Attributable to controlling shareholders PLN 000 Share capital Own shares Share premium Equity components related to assets held for sale Cash flow hedge Financial asset revaluation reserve Other reserve capitals Net currency translation differences (investments in foreign companies) Currency translation differences (subsidiaries) Retained profits Equity attributable to controlling shareholders Minority interest Total equity Equity as at 01/01/2009: Previously reported 164,115 Changes in accounting principles Adjustments of errors from previous periods Equity (restated) as at: 01/01/ ,328 - (111,700) (22,887) 78,521 - (50,961) 656, ,876 49, , (15,496) (15,496) - (15,496) , (70,934) , ,328 - (40,766) (22,887) 78,521 - (50,961) 570, ,380 49, ,792 Dividends paid (10) (10) (6,466) (6,476) Coverage for US Govora s negative capitals Change in the group's composition Comprehensive income for the period Equity as at 30/06/2009: (1,497) (1,497) 1, ,617 19, (14,786) 20,930 47,800 (906) 46, , ,328 - (18,149) (3,848) 78,521 - (65,747) 590, ,376 43, ,010 12

15 II. Management Report 1. The most important events in the Ciech Group from January 1st, 2010 until the preparation of these statements Soda Division: On March 25th, 2010, an annex to the long-term agreement of April 15th, 2008 concluded by Soda Polska Ciech Sp. z o.o., having its registered office in Inowrocław, and Kompania Węglowa S.A., having its registered office in Katowice, was signed; it regulated the deliveries and prices of power coal in The value of the agreement for 2010 is estimated at approximately PLN 175,000 thousand net. The information was announced in Current Report no. 8 of March 25th, Organic Division: On February 9th, 2010, the representatives of Ciech Chemical Group agreed the terms and conditions of supplies of amine (TDA) to the subsidiary ZACHEM S.A. in Bydgoszcz with the American Air Products Group. The amine will be used to the production of TDI. ZACHEM S.A. is the only TDI manufacturer in Poland. The total value of TDA supplies realized by Air Products is estimated at approx. USD 80,000 thousand and the total value of the agreement at USD 500,000 thousand. Due to the new terms and conditions of cooperation, supplies to ZACHEM S.A. will be realized on an on-going basis, ensuring the stability of deliveries of high quality materials to the facility in Bydgoszcz. Considering the reconstruction of the demand in the TDI market, the Company expects that the cooperation will contribute to the increase in the effectiveness of production of the main ZACHEM S product, positively affecting the Group s results in the coming years. The Agreement, which shall be effective from January 1st, 2012 until December 31st, 2018, guarantees the deliveries of the raw material at a level corresponding to the company s needs. The contract is a renegotiated version of the agreement dated October 25th, 2007 (Current Report 67/2007) concerning the cooperation with the Air Products Group in relation to TDA supplies. The information was announced in Current Report no. 4 of February 9th, Silicates and Glass Division: On March 30th, 2010, CIECH S.A. signed an annex to a long-term contract for the years , concluded on September 6th, 2002 between CIECH S.A. and a Moroccan customer, Maroc Phosphore S.A., regulating the sale terms for sulphur in The value of the contract for 2010 amounts to approx. USD 35,000 thousand (equivalent of approx. PLN 100,000 thousand). The domestic supplier is the company KiZChS Siarkopol S.A. The information was announced in Current Report no. 11 of April 2nd, Corporate Centre: On January 5th, 2010, an Agreement was signed between CIECH S.A. and the State Treasury regarding the amendment of terms of purchase of the Remaining Shares held in Z.Ch. Organika Sarzyna S.A. and ZACHEM S.A. by the State Treasury, as specified in the offering. Under the Agreement, the revaluation period was extended by another 12 months and it ends on December 20th, 2010, whereby the revaluation rate in the extended period was increased by additional 2 percentage points. On April 1st, 2010, CIECH S.A. received a letter from the District Court in Hamburg, dated March 15th, 2010, stating that its subsidiary, Chemiepetrol GmbH (in liquidation), with its registered office in Hamburg, registered under the number HRB in Commercial Register B, was cancelled from the Commercial Register by way of decision of the District Court in Hamburg of March 15th, This information was announced in Current Report no. 9 of April 1st, On April 22nd, 2010, CIECH S.A. sold in block transactions 2,560,000 B series shares in Zakłady Azotowe w Tarnowie-Mościcach S.A. The inflows from the transactions amounted to PLN 41,600 thousand. Having completed the aforesaid transactions, CIECH S.A. does not hold any shares in Zakłady Azotowe w Tarnowie- Mościcach S.A. The information was announced in Current Report no. 14 of April 22nd, On May 13th, 2010, a Letter of Intent was signed by CIECH S.A. and Zakłady Azotowe w Tarnowie-Mościcach S.A., having its registered office in Tarnów. By signing the Letter of Intent, the parties expressed their willingness to cooperate and hold talks in good faith in order to prepare an offer and realize a project related to the acquisition by Azoty Tarnów from CIECH S.A. of shares in Gdańskie Zakłady Nawozów Fosforowych Fosfory Sp. z o.o., having its registered office in Gdańsk. By signing the Letter of Intent, CIECH S.A. expressed its interest in the disposal of the said assets for the benefit of Azoty Tarnów, one of the major chemical companies in Poland, interested in increasing the scope of operations in the market of fertilizers. The information was announced in Current Report no. 20 of May 14th, On June 8th, 2010, CIECH S.A. obtained information from the German Commercial Register in Stendal about the registration of an increase in the share capital of the company Soda Deutschland Ciech GmbH by EUR 1,500 thousand. The share capital of the holding company in Germany, after the increase, amounts to EUR 16,525 thousand and CIECH S.A. holds 100% shares in its share capital. The information was announced in Current Report no. 23 of June 8th, On June 11th, 2010, the Supervisory Board of CIECH S.A. adopted a resolution on the appointment of Deloitte Audyt Sp. z o.o., with its registered office in Warsaw at ul. Piękna 18, entered into the register of entities authorised to audit financial statements, kept by the National Council of Statutory Auditors, under the number 73, as a certified auditor to audit the financial statements of CIECH S.A. and the financial statements of the Ciech 13

16 Capital Group for the financial year The information was announced in Current Report no. 24 of June 11th, On June 21st, 2010, in conjunction with the expiry of the term of office of CIECH S.A. s Management Board, the Ordinary General Meeting of Shareholders of CIECH S.A. appointed for the next common term of office the following members of the Management Board: Ryszard Kunicki President of the Management Board Artur Osuchowski Member of the Management Board Marcin Dobrzański Member of the Management Board Rafał Piotr Rybkowski Member of the Management Board Andrzej Bąbaś Member of the Management Board. On June 21st, 2010, the Ordinary General Meeting of Shareholders of CIECH S.A. dismissed from the Supervisory Board of CIECH S.A.: Grzegorz Kłoczko, Marzena Okła-Anuszewska, At the same time appointing as Members of CIECH S.A. s Supervisory Board: Przemysław Cieszyński, Arkadiusz Grabarski, Waldemar Tadeusz Maj. On June 24th, 2010, CIECH S.A. concluded with Sotronic Sp. z o.o. a conditional sales agreement concerning the shares in Ciech-Service Sp. z o.o. The basic scope of activity of Ciech-Service Sp. z o.o. is the provision of services related to property guarding and maintenance. The major customers of Ciech-Service Sp. z o.o. are entities forming the Ciech Group. The agreement was made conditional on: the release of Ciech-Service of any collaterals established in conjunction with concluding the loan agreement discussed in Current Report no. 16/2010 of April 26th, 2010 within 120 days from the date of signing the agreement for the sale of shares in Ciech-Service. the conclusion by Ciech-Service and the Ciech Group s companies of annexes to service agreements based on which the said agreements may be terminated in compliance with the notice period stipulated in a given agreement, provided that the notice period may not expire prior to the day ending the five-year period from the transfer of shares in the Company onto the Buyer. The total value of shares sold amounts to PLN 3,102 thousand. The amount shall be paid within 10 days from the submission of statement on satisfying contractual provisions by the Issuer. The sale of Ciech- Service is a stage of the Ciech Group s restructuring process that started in The information was announced in Current Report no. 31 of June 24th, On July 9th, 2010, CIECH S.A. and Marvipol S.A. signed a Letter of Intent. Pursuant to the provisions included in the Letter, CIECH S.A. will conduct, on the basis of exclusivity during the term of the Letter, negotiations with Marvipol S.A., aimed at, in particular, determining the conditions of the acquisition by Marvipol S.A. from CIECH S.A. of the right of perpetual usufruct of real property being a plot of land located in Warsaw. The final expiry date of the Letter, prior to which a final real property sales agreement should be concluded, was set at August 27th, The information was announced in Current Report no. 33 of July 9th, On July 13th, 2010, CIECH S.A. s subsidiary Polsin Private Limited, having its registered office in Singapore, concluded with NOVITUS SA, having its registered office in Nowy Sącz, an agreement stipulating the terms and conditions of sale of its block of 2,036,570 shares in Zakłady Urządzeń Komputerowych Elzab S.A., constituting 12.62% of the share capital. The shares represent 19.54% of the total number of votes at the General Shareholders Meeting. The selling price was PLN 6,069 thousand, i.e. PLN 2.98 per share. The shares will be transferred in blocks within 120 days from signing the agreement. The information was announced in Current Report no. 34 of July 13th, On July 28th, 2010, an asset sale agreement of significant value was concluded. The parties to the agreement are CIECH S.A. s subsidiaries: JANIKOSODA S.A. and SODA MĄTWY S.A., and Gothaer Finanzholding AG, a joint-stock company established under the German law, having its registered office in Cologne. The subject of this agreement are 15,003,180 shares in the share capital of Polskie Towarzystwo Ubezpieczeń Spółka Akcyjna, constituting in total 45.42% of the share capital and 46.12% of the total number of votes at the general meeting. The carrying value of the long-term financial investment in PTU S.A. amounts to PLN 34.4 million as at December 31st, 2009 (as at June 30th, 2010: PLN 27.5 million). The nominal value of one PTU share is PLN 2. Detailed information about blocks of PTU S.A. shares held by the Subsidiaries: Janikowskie Zakłady Sodowe JANIKOSODA S.A. Number of shares: 7,500,012 Share in share capital: % Share in number of votes at the General Meeting: % Share nominal value: PLN 15,000,024 Inowrocławskie Zakłady Chemiczne SODA MĄTWY S.A.: Number of shares: 7,503,168 Share in share capital: % 14

17 Share in number of votes at the General Meeting: % Share nominal value: 15,006,336 Initial selling price: PLN 136,270,000. The share sale agreement was concluded on conditions precedent, whose satisfaction will lead to the transfer of shares onto the Buyer within the Closing Date (conditional dispositive effect). Maximum term of the agreement until June 30th, Conditions precedent: 1. Obtaining permits from relevant Competition Protection bodies (if necessary), the European Committee, the German Supervision Authority; 2. Filing no objections against the Transaction to the Financial Supervision Authority; 3. Notifying the Financial Supervision Authority of the intention to dispose of shares by the Sellers; 4. Obtaining consent of the Supervisory Board of Polskie Towarzystwo Ubezpieczeń for the disposal of shares; 5. Obtaining by Polskie Towarzystwo Ubezpieczeń S.A. of tax certificates and presenting them to the Buyer; 6. Approving the conclusion of the share sale agreement and the conditions of the agreement by the Buyer s Supervisory Board. Within the Closing Date the shares will be transferred onto the Buyer (Delivery report and delivery) and the amount resulting from the adjustment of the price made based on the contractual terms will be paid by the Buyer. In accordance with the standards established for such transactions, the agreement includes statements and declarations of the Sellers concerning their status, their title to shares and the condition of the enterprise Polskie Towarzystwo Ubezpieczeń S.A. (responsibility does not cover disclosed information). The agreement contains contractual penalties: Every party may pay a maximum contractual penalty of PLN 13,630,000 for its intentional act, in particular, influencing the satisfaction of conditions precedent. Moreover, in the event of any significant intentional breach by the Sellers, influencing the condition of the company Polskie Towarzystwo Ubezpieczeń S.A., in the period between signing the agreement and the Closing Date, the Buyer may terminate the agreement and demand payment of a contractual penalty in the amount of PLN 13,630,000 by the Sellers. The conditions of concluding the agreement are compliant with market practice and doe no differ from the conditions commonly applied to such agreements. The information was announced in Current Report no. 35 of July 28th, In comparison with the information presented in the annual report, the following steps were taken with regard to the action against PTU instituted by FSO: On July 12th, 2010, FSO S.A. lodged a last resort appeal, which was not dismissed. On August 5th, 2010, a response to the last resort appeal was filed. The last resort appeal by FSO S.A. discusses three legal issues: 1) violation of Art. 309 of the Commercial Companies Code, i.e. passing the resolution of the Compulsory Administration, allowing the acquisition of shares in PTU S.A. below their nominal value, 2) too broad interpretation of Art. 14 section 2 of the Commercial Companies Code, allowing so-called compensatory claim of the company towards a shareholder but only if in-kind contribution is found defective, not overstated, 3) violation of Art. 433 section 2 of the Commercial Companies Code with the exclusion of the pre-emptive right of FSO S.A., making the increase invalid. In response to the last resort appeal, a motion for dismissal of the appeal due to lack of material legal grounds was lodged; however, the Supreme Court may decide that such legal grounds are present in point 2 above and accept the appeal for consideration. It is estimated that the appeal may be accepted for consideration but its dismissal is more probable than reversal of the decision of the Appeals Court and reconsideration of the case. The case may be settled within 7-12 months. Financing: On January 22nd, 2010, a group of 8 banks (Bank DNB Nord Polska S.A., Bank Handlowy w Warszawie S.A., Bank Millennium S.A., Bank Polska Kasa Opieki SA, BRE Bank SA, ING Bank Śląski SA, Powszechna Kasa Oszczędności Bank Polski S.A. and Citibank Europe Plc. Dublin Romania Branch being parties to the Status Quo Agreement) concluded a settlement extending the said agreement until February 28th, By this date, also the separate statements, discussed in Current Report no. 31/2009, were made by the banks: Calyon S.A. Branch in Poland, BNP Paribas S.A. Branch in Poland and Fortis Bank Polska S.A. The maturity date of the financing obtained by CIECH S.A. and the Ciech Group s companies from Bank Ochrony Środowiska S.A., HSBC Bank Polska S.A., Kredyt Bank S.A. and Bank BPH S.A. has been kept to February 28th, 2010 at the earliest. On January 20th, 2010, CIECH S.A. provided 15 banks with a statement of analogous wording as the statement described in Current Report no. 31/2009 dated August 14th, The submitted statement was valid until: (i) March 1st, 2010, or (ii) the expiry date of the Status Quo Agreement, whichever is earlier. The extension of the Statement and of the Status Quo Agreement allowed the continuation and completion of works related to establishing a new financing structure. The information was announced in Current Report no. 3 of January 22nd, On February 25th, 2010, it was reported that all conditions precedent to implementing the agreement changing the loan agreement of January 23rd, 2008 by and between Soda Deutschland Ciech GmbH ( SDC ), Sodawerk Staßfurt GmbH &Co. KG (hereinafter referred to as: SWS KG, Company ) and Sodawerk Staßfurt Holding 15

18 GmbH, and the bank COMMERZBANK Aktiengesellschaft were satisfied. The amended agreement was concluded on December 10 th, 2009 and it comes into force as of February 26 th, The value of the loan agreement currently in force amounts to EUR 63 million. In order to secure a portion of the loan, CIECH S.A. issued a corporate guarantee up to EUR 25 million and signed a Sponsor s Letter of Undertaking, containing its obligations, i.a.: obligation to cover any cash deficiencies of SWS KG and Sodawerk Staßfurt Holding GmbH through the entire term of the loan, obligation to convert EUR 70 million of the subordinate loan granted to SDC by CIECH S.A. into capital within 6 months from signing the Sponsor s Letter of Undertaking (the obligation may be cancelled, if CIECH S.A. demonstrates negative tax effects of the conversion for the SDC Group). The final maturity date was extended from December 31st, 2012 until September 30th, SWS KG is CIECH S.A. s subsidiary, controlled by a special-purpose company, Soda Deutschland Ciech GmbH, in which CIECH S.A. holds 100% of the capital. SWS KG manufactures light and dense soda ash and baking soda. The information was announced in Current Report no. 5 of February 25th, With regard to Current Reports no. 31/2009 of August 14th, 2009, no. 42/2009 of November 2nd, 2009 and no. 44/2009 of December 16th, 2009 and no. 3/2010 of January 22nd, 2010, the Management Board of CIECH S.A. informs that on March 5th, 2010 it was informed about the signing by a group of 8 banks (Bank DNB Nord Polska S.A., Bank Handlowy w Warszawie S.A., Bank Millennium S.A., Bank Polska Kasa Opieki S.A., BRE Bank S.A., ING Bank Śląski S.A., Powszechna Kasa Oszczędności Bank Polski S.A. and Citibank Europe plc Dublin Romania Branch) of an extension of the Status Quo Agreement until March 15th, By this date, also the separate statements discussed in Current Report no. 31/2009 and made by the banks: Calyon S.A. Branch in Poland, BNP Paribas S.A. Branch in Poland and Fortis Bank Polska S.A. were extended. The maturity date of the financing obtained by CIECH S.A. and the Ciech Group s companies from Bank Ochrony Środowiska S.A., HSBC Bank Polska S.A., Kredyt Bank S.A. and Bank BPH S.A. has been sustained at least until March 15th, On March 4th, 2010, CIECH S.A. made a statement to 15 banks of analogous wording to the statement discussed in Current Report no. 31/2009 of August 14th, The submitted statement was valid until: (i) March 16th, 2010, or (ii) the expiry date of the Status Quo Agreement, whichever was earlier. The submission of the Statement and signing of the Status Quo Agreement by the banks allowed the completion of works related to establishing a new financing structure in the Group. Correspondingly, on March 16th, 2010, the Status Quo Agreement was extended until March 31st, 2010, on April 1st until April 16th, 2010 and on April 20th, 2010 until April 26th, The information was presented in Current Reports no. 6 of March 5th, 2010, no.7 of March 16th, 2010, no. 10 of April 1st, 2010 and no. 13 of April 20th, On April 26th, 2010, a loan agreement was signed between CIECH S.A., being the borrower, and its subsidiaries, being the guarantors (Agrochem Sp. z o.o., with its registered office in Człuchów, Agrochem Sp. z o.o., with its registered office in Dobre Miasto, JZS Janikosoda S.A., IZCh Soda Mątwy S.A., Soda Polska CIECH Sp. z o.o., ZCh Alwernia S.A., Przedsiębiorstwo Chemiczne Cheman S.A., GZNF Fosfory Sp. z o.o., ZCh Organika Sarzyna S.A., Polfa Sp. z o.o., CIECH Service Sp. z o.o., Vitrosilicon S.A., Transclean Sp. z o.o. and ZCh Zachem S.A. hereinafter referred to as the Companies ), and a bank consortium (Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A., BRE Bank S.A., Powszechna Kasa Oszczędności Bank Polski S.A., ING Bank Śląski S.A., Bank Millennium S.A. and DNB Nord Polska S.A. hereinafter referred to as Organising Banks ). The agreement provides that S.C. US Govora CIECH Chemical Group S.A. shall join the agreement as a guarantor and borrower hereinafter referred to as the Company. Terms of the agreement Loan tranches: The total maximum loan amount equals PLN 1,340,000 thousand; The loans will be granted in four tranches: A tranche to be disbursed in EUR and PLN, intended for refinancing CIECH S.A. s existing obligations and the Companies obligations under loan agreements concluded with Organising Banks (overdraft facilities, working capital facilities and investment loans), B tranche (multipurpose facility, made available as a revolving renewable loan or guarantees and letters of credit) and an auxiliary guarantee loan; (total amount of A tranche, B tranche and auxiliary guarantee loan amounts to the Organising Bank s commitment due to refinancing loans and will amount to a maximum of PLN 1,100,000 thousand), C tranche to be disbursed in PLN, intended for the repayment of CIECH S.A. s obligations due to option transactions concluded with Bank Handlowy w Warszawie S.A. and ING Bank Śląski S.A. (C tranche depends on the valuation of options in the case of earlier termination of option transactions; as at December 31st, 2009, refinanced options were valued at PLN 140,401 thousand (as at June 30th, 2010 at PLN 132,229 thousand)), D tranche to be disbursed in PLN, intended for refinancing CIECH S.A. s existing obligations and the Companies obligations under loan agreements concluded with banks other than the Organising Banks (maximum amount of D tranche amounts to PLN 100,000 thousand). Interest rate conditions Variable interest, established based on WIBOR/EURIBOR plus margin, whose level differs for specific tranches, changes over time and depends on the net debt ratio. 16

19 Main terms of loan repayment quarterly amortization of loans amounting to minimum PLN 10,000 thousand, starting from the date of granting the loans until March 1st, 2011, reduction of loans by PLN 400,000 thousand in total (taking into account the quarterly amortization and earlier repayments) by March 31st, 2011, provided that non-collection of resources amounting to at least PLN 400,000 thousand on CIECH S.A. s escrow account in Bank Handlowy w Warszawie S.A. by December 30th, 2010 is considered a violation of the agreement that may be revoked by the Organising Banks by the majority of votes stipulated in the agreement, obligatory early repayment of loans is required under the following circumstances: o change of control, occurring in the following circumstances: (i) State Treasury no longer holds at least 10,270,800 of CIECH S.A. s shares, (ii) party other than State Treasury becomes CIECH S.A. s largest shareholder and holds at least 50% of the issued share capital of CIECH S.A., or (iii) party other than State Treasury or a group of parties acting jointly gain control over CIECH S.A., subject that a change in control approved by a majority of Organising Banks laid down in the agreement or the fulfilment of additional conditions, such as the required level of debt, do not incur the obligation to repay the loans earlier, o share capital increase earlier repayment of loans amounting to funds obtained from public offering or other share capital increase in CIECH S.A. or in other Material Members of the Ciech Group (i.e. guarantors, selected Ciech Group s companies and fully consolidated Ciech Group s companies with a net asset value exceeding PLN 25,000 thousand), provided that after the repayment of PLN 400,000 thousand this obligation depends on the net debt ratio and, depending on the individual circumstances, may pertain to 100%, 50% or 0% of the funds obtained in the manner described above, o surplus of cash flows if any quarterly financial statements of CIECH S.A., beginning from statements for the period ending on March 31st, 2011, discloses a surplus of cash flows (i.e. surplus of consolidated cash flows over cash flow linked to debt service), an earlier repayment of loans shall be due, amounting to at least 75% of such surplus; the first earlier repayment under such circumstances shall be made on June 30th, 2011, o disposal of assets, sale of stock or shares by CIECH S.A. and Material Members of the Ciech Group allocation of 100% of the total net inflows from sales in a given quarter to earlier repayment of loans (except for specific circumstances laid down in the agreement), o significant inflows under any insurance policy due to loss or damage of assets or business property, o disposal and sale and lease back of assets of CIECH S.A. and of Material Members of the Ciech Group, depending on the circumstances, may pertain to 100% or 75% of the funds obtained in such a manner, o illegality on part of the lenders. total one-off repayment of due loan amounts made on December 31st, 2011 at the latest or after 20 months from signing the agreement. Loan collaterals: mortgages established on the Companies and CIECH S.A. s real property, a pledge established on the Companies and CIECH S.A. s business, assignment of rights under insurance policies issued for assets which are the collateral, financial pledges on the Companies and CIECH S.A. s bank accounts, financial pledges on certain blocked bank accounts of Material Members of the Group (except Soda Deutschland CIECH Group), a financial pledge and registered pledge on the Companies shares and stock and on Soda Deutschland CIECH GmbH s shares, sureties granted by the Companies and CIECH S.A., Companies and CIECH S.A. s declaration on submission to enforcement, conditional assignments of rights under material commercial contracts of the Companies and CIECH S.A., conditional transfer of ownership of all Companies and CIECH S.A. s movable assets, conditional assignments of rights under intragroup borrowings or other types of loan instruments which will be used to distribute the funds obtained from the loans to the Companies, power of attorney to access the Companies and CIECH S.A. s bank accounts, once S.C. US Govora CIECH Chemical Group S.A. has joined the loan agreement, some of the abovementioned collaterals will be established according to terms and dates provided for by the agreement (the Company signed the loan agreement on June 15th, 2010 Current Report no. 42/2010). 17

20 Other terms under the agreement: CIECH S.A. and the Companies made the following obligations: to maintain their financial ratios at levels laid down in the agreement; the ratios are measured for the Ciech Group, excluding Soda Deutschland CIECH Group, and tested quarterly: o debt to operating results ratio (total consolidated net debt to consolidated EBITDA), o balance sheet debt ratio (consolidated total net debt to consolidated net tangible assets), o interest coverage ratio (consolidated EBITDA to consolidated net financial costs), o guarantors coverage ratio (guarantors gross turnover and assets to Ciech Group s gross turnover and assets, except Soda Deutschland CIECH Group), not to establish new collateral, except for those specified in the agreement of authorised collateral, not to make use of the assets, except for allowed dispositions specified in the agreement (including the sale of a specific catalogue of assets held for sale and dispositions provided for in the Group s business plan and restructuring plan), not to announce or perform any dividend payout, except for the companies in which CIECH S.A. holds at least 75% direct or indirect control and ZCh Alwernia S.A., not to incur financial debt, except for the allowed financial debt, to limit capital expenditures to the level and extent provided in the agreement, to establish registered pledges on individual items of CIECH S.A. s and the Companies movables whose value exceeds PLN 5,000 thousand according to the dates and circumstances provided in the agreement, not to conclude derivative transactions, except for the transactions approved by the agreement of hedge transactions, and to appoint a restructuring adviser and present a restructuring plan for the Ciech Group within 10 weeks from signing the loan agreement. Conditions precedent: The Organising Banks shall make the loans available, if the Loan Agent informs CIECH S.A. that they have received all documents and proofs listed in an appendix to the agreement (or cancelled the obligation to deliver them). At that time, CIECH S.A. s and the Companies declarations under the agreement shall be true and no violation of the contractual provisions shall occur (or last). Conditions precedent for the disbursement of loans include: obtaining all required corporate permits by CIECH S.A. and by the Companies, S.C. US Govora CIECH Chemical Group S.A. s joining of the loan agreement and conclusion (within 14 days from signing the loan agreement) an agreement between the creditors; the parties to the agreement shall be CIECH S.A., the Companies (except S.C. US Govora CIECH Chemical Group S.A., which shall join the agreement later), Organising Banks, BNP Paribas S.A. Branch in Poland, Fortis Bank Polska S.A. and Credit Agricole Corporate and Investment Bank S.A. Branch in Poland. At the earliest, the loans shall be made available after 2 months from signing documents which establish collateral and submission of applications for the registration of collateral with the respective records and land and mortgage registers. Criteria for considering an agreement to be a significant agreement: An agreement is considered significant, if the total maximum amount of loans exceeds 10% of CIECH S.A. s equity. Moreover, with regard to Current Reports no. 31/2009 of August 14th, 2009, no. 42/2009 of November 2nd, 2009, no. 44/2009 of December 16th, 2009, no. 3/2010 of January 22nd, 2010, no. 6/2010 of March 5th, 2010, no. 7/2010 of March 16th, 2010, no. 10/2010 of April 1st, 2010 and no. 13/2010 of April 20th, 2010, the Management Board of CIECH S.A. informs that on April 26th, 2010 it was informed about the signing by a group of 8 banks (Bank DNB Nord Polska S.A., Bank Handlowy w Warszawie S.A., Bank Millennium S.A., Bank Polska Kasa Opieki S.A., BRE Bank S.A., ING Bank Śląski S.A., Powszechna Kasa Oszczędności Bank Polski S.A. and Citibank Europe plc. Dublin Romania Branch) of an extension of the Status Quo Agreement until April 30th, By this date, also the separate statements discussed in Current Report no. 31/2009 and made by the banks: Calyon S.A. Branch in Poland, BNP Paribas S.A. Branch in Poland and Fortis Bank Polska S.A. were extended. The maturity of the funding granted to CIECH S.A. and to the Ciech Group companies by Bank Ochrony Środowiska S.A., HSBC Bank Polska S.A., Kredyt Bank S.A. and Bank BPH S.A. has been maintained until April 30th, 2010 at the earliest. On April 26th, 2010, CIECH S.A. provided 15 banks with a statement of analogous wording as the statement described in Current Report no. 31/2009 dated August 14th, The Statement is effective until one of the following dates, whichever is earlier: (i) May 4th, 2010, or (ii) the expiry date of the Status Quo Agreement. On April 29th, 2010, all active option transaction concluded by the Issuer and Bank Handlowy w Warszawie S.A. with maturity dates between April 29th, 2010 and August 5th, 2010 were prematurely terminated. As at the date of termination, liability due to negative valuation of the said collaterals amounted to approx. PLN 17 million. Moreover, between August 14th, 2009 and April 20th, 2010, i.e. during the term of the Status Quo Agreement, mentioned in Report no. 31/2009, all option transactions to be executed during the term of the Status Quo Agreement were settled. Pursuant to the provisions of the Status Quo Agreement, the amount due to Bank Handlowy as a result of the settled transactions was postponed. The debt resulting from settling the said options amounts to approx. PLN 43.5 million. Currently, the Issuer is not a party to any active option transactions with Bank Handlowy. Refinancing of the debt established as a result of these transactions is discussed in the Agreement on Refinancing the Ciech Group s Debt, described in Current Report no. 16/2010 of April 26th,

21 On May 6th, 2010, CIECH S.A. was informed about the signing by the consortium of Organising Banks (composed of: Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A., BRE Bank S.A., Powszechna Kasa Oszczędności Bank Polski S.A., ING Bank Śląski S.A., Bank Millennium S.A. and DNB Nord Polska S.A.) and Citibank Europe plc. Dublin Romania Branch of the renewed Status Quo Agreement, discussed in Current Report no. 31/2009 of August 14th, 2009, extended until May 17th, 2010 and enabling the completion of all formalities connected with the concluded Debt Refinancing Agreement, mentioned in Report no. 16/2010. Also the separate statements described in Current Report no. 31/2009 of August 14th, 2009 and made by the banks: Calyon S.A. Branch in Poland, BNP Paribas S.A. Branch in Poland and Fortis Bank Polska S.A. were extended. The maturity date of the financing obtained by CIECH S.A. and the Ciech Group s companies from Bank Ochrony Środowiska S.A., HSBC Bank Polska S.A., Kredyt Bank S.A. and Bank BPH S.A. has been kept to May 17th, 2010 at the earliest. These arrangements make it possible to complete all formalities connected with the Agreement on Refinancing CIECH S.A. s Debt, described in Report no. 16/2010 of April 26th, On May 17th, 2010, one condition precedent described in the Loan Agreement, mentioned in Current Report 16/2010 of April 26th, 2010 was satisfied, i.e. an agreement was signed between the creditors, including CIECH S.A. and its subsidiaries (Agrochem Sp. z o.o., with its registered office in Człuchów, Agrochem Sp. z o.o., with its registered office in Dobre Miasto, JZS Janikosoda S.A., IZCh Soda Mątwy S.A., Soda Polska CIECH Sp. z o.o., ZCh Alwernia S.A., Przedsiębiorstwo Chemiczne Cheman S.A., GZNF Fosfory Sp. z o.o., ZCh Organika Sarzyna S.A., Polfa Sp. z o.o., CIECH Service Sp. z o.o., Vitrosilicon S.A., Transclean Sp. z o.o. and ZCh Zachem S.A.), a bank consortium (Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A., BRE Bank S.A., Powszechna Kasa Oszczędności Bank Polski S.A., ING Bank Śląski S.A., Bank Millennium S.A. and DNB Nord Polska S.A.) and BNP Paribas S.A. Branch in Poland, Crédit Agricole Corporate and Investment Bank S.A. Branch in Poland and Fortis Bank Polska S.A. The agreement anticipates its signing by S.C. US Govora Ciech Chemical Group S.A. The agreement between the creditors was concluded as one of conditions precedent stipulated in the loan agreement concluded by the Companies and Organising Banks on April 26th, 2010, mentioned in Current Report no. 16/2010. Pursuant to the provisions of the agreement between the creditors: the Organising Banks, BNP Paribas S.A. Branch in Poland, Crédit Agricole Corporate and Investment Bank S.A. Branch in Poland and Fortis Bank Polska S.A. obliged to extend the maturity of financing offered to the Companies based on the existing loan agreements until one of the following dates, whichever is earlier: (i) August 24th, 2010, or (ii) the date of using the loans allocated for refinancing the existing debt, granted based on the loan agreement described in Current Report no. 16/2010. CIECH S.A. and, if applicable, the Companies obliged, inter alia, to extend the financing offered by such banks as: HSBC Bank Polska S.A., Bank Ochrony Środowiska S.A., Bank BPH S.A., and Kredyt Bank S.A. until August 24th, A repayment schedule was established for banks participating in the agreement between the creditors. Ciech S.A. and BNP Paribas S.A. Branch in Poland, Crédit Agricole Corporate and Investment Bank S.A. Branch in Poland and Fortis Bank Polska S.A. obliged to apply best efforts in order to conclude bilateral loan agreements within 5 working days to refinance the existing debt. The Companies (except for Ciech S.A.) guaranteed Ciech S.A. s liabilities due to bilateral loan agreements to be concluded on conditions analogous to the guarantees granted by these Companies based on the loan agreement described in Report no. 16/2010. The principles of establishing collaterals for the benefit of BNP Paribas S.A. Branch in Poland, Crédit Agricole Corporate and Investment Bank S.A. Branch in Poland and Fortis Bank Polska S.A. were determined (in principle, the conditions of establishing the said collaterals are to be the same as the conditions of establishing collaterals based on the loan agreement described in Report 16/2010, subject to the relevant provisions discussing the order of claim satisfaction against a collateral). The information was announced in Current Report no. 21 of May 18th, Between June 15th and June 17th, 2010, CIECH S.A. and the following of its subsidiaries: Agrochem Sp. z o.o., with its registered office in Człuchów, Agrochem Sp. z o.o., with its registered office in Dobre Miasto, JZS Janikosoda S.A., IZCh Soda Mątwy S.A., Soda Polska CIECH Sp. z o.o., ZCh Alwernia S.A., Przedsiębiorstwo Chemiczne Cheman S.A., GZNF Fosfory Sp. z o.o., ZCh Organika Sarzyna S.A., Polfa Sp. z o.o., Ciech Service Sp. z o.o., Vitrosilicon S.A., Transclean Sp. z o.o. and ZCh Zachem S.A., and some other of its subsidiaries signed the following collateral documents, which constitute one of conditions precedent stipulated in the loan agreement dated April 26th, 2010 and mentioned in Report no. 16/2010, and stipulated in the agreement between the creditors dated May 17th, 2010 and mentioned in Report no. 21/2010: declaration of mortgage establishment on the Companies and Ciech S.A. s real property (ownership title and right of perpetual usufruct) for the benefit of the following banks: Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A., BRE Bank S.A., Powszechna Kasa Oszczędności Bank Polski S.A., ING Bank Śląski S.A., Bank Millennium S.A. and DNB Nord Polska S.A. hereinafter referred to as Organising Banks and BNP Paribas S.A. Branch in Poland, Crédit Agricole Corporate and Investment Bank S.A. Branch in Poland and Fortis Bank Polska S.A. - hereinafter with the Organising Banks jointly referred to as Creditors. The total accounting value of real property subject to mortgage amounts to approx. PLN 558 million and these are assets of significant value, for their value exceeds 10% of Ciech S.A. s equity. The 19

22 mortgages secure liabilities up to PLN 1,340,000,000. The mortgaged real property is the entire significant real property of Ciech S.A. and the Companies; registered pledge agreements between every Company or Ciech S.A. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) regarding a set of movables and titles of variable composition, including: o registered pledge agreements between Ciech S.A. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) dated June 15th, 2010 regarding a set of movables and titles of variable composition and accounting value amounting to PLN 1,970,261,000, constituting assets of significant value, for their value exceeds 10% of Ciech S.A. s equity, and securing liabilities up to PLN 2,010,000,000. In accordance with Art. 393 point 3) of the Commercial Companies Code, a resolution must be passed by Ciech S.A. s shareholders for this agreement to be valid; o registered pledge agreements between ZCh Zachem S.A. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) dated June 15th, 2010 regarding a set of movables and titles of variable composition and accounting value amounting to PLN 173,557,000, constituting assets of significant value, for their value exceeds 10% of Ciech S.A. s equity, and securing liabilities up to PLN 1,340,000,000; o registered pledge agreements between GZNF Fosfory Sp. z o.o. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) dated June 15th, 2010 regarding a set of movables and titles of variable composition and accounting value amounting to PLN 175,157,383.34, constituting assets of significant value, for their value exceeds 10% of Ciech S.A. s equity, and securing liabilities up to PLN 1,340,000,000; o registered pledge agreements between ZCh Organika Sarzyna S.A. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) dated June 15th, 2010 regarding a set of movables and titles of variable composition and accounting value amounting to PLN 342,746,000, constituting assets of significant value, for their value exceeds 10% of Ciech S.A. s equity, and securing liabilities up to PLN 1,340,000,000; o registered pledge agreements between Soda Polska Ciech Sp. z o.o. (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee) dated June 15th, 2010 regarding a set of movables and titles of variable composition and accounting value amounting to PLN 323,077,978, constituting assets of significant value, for their value exceeds 10% of Ciech S.A. s equity, and securing liabilities up to PLN 1,340,000,000. agreements on assignment of rights arising from insurance policies issued in relation to assets which are the collateral and on conditional assignment of rights from significant commercial contracts of the Companies and Ciech S.A. and of rights from intragroup borrowings or credit instruments of other type to be used for the distribution of loan resources to the Companies between every Company and Ciech S.A. (as the assignor) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the assignee); financial pledge agreements regarding the Companies and Ciech S.A. s bank accounts, between every Company and Ciech S.A. (as the pledger) and the Creditors (as the pledgees); financial pledge agreements regarding selected blocked bank accounts of the Companies and Ciech S.A. as well as of the companies Zachem UCR Sp. z o.o., Boruta Zachem Kolor Sp. z o.o. and Transoda Sp. z o.o., and S.C. US Govora Ciech Chemical Group S.A. between every of the above companies (as the pledger) and the Creditors (as the pledgees); financial pledge agreements regarding stock and shares in the Companies between Ciech S.A. or a relevant Company holding stock/shares in a given Company (as the pledger) and the Creditors (as the pledgees). The pledges do not concern shares in ZCh Organika Sarzyna S.A. and ZCh Zachem S.A.; registered pledge agreements regarding stock and shares in the Companies between Ciech S.A. or a relevant Company holding stock/shares in a given Company (as the pledger) and the bank Powszechna Kasa Oszczędności Bank Polski S.A. (as the pledgee). The pledges do not concern shares in ZCh Organika Sarzyna S.A. and ZCh Zachem S.A.; pledge agreement regarding shares in Soda Deutschland Ciech GmbH (subject to the German law) between Ciech S.A. (as the pledger) and the Creditors (as the pledgees); declarations on submission to enforcement made by the Companies, Ciech S.A. and S.C. US Govora Ciech Chemical Group S.A. for the benefit of every Creditor; agreements on conditional fiduciary transfer of title to the Companies and Ciech S.A. s movables by way of security between (respectively) every Company or Ciech S.A. and the bank Powszechna Kasa Oszczędności Bank Polski S.A.; power of attorney to the Companies and Ciech S.A. s bank accounts granted for the benefit of the bank Powszechna Kasa Oszczędności Bank Polski S.A. On August 4th, 2010, CIECH S.A. decided to adopt the plan of restructuring CIECH S.A. and the key equity related companies for the years , arising from analyses and recommendations on conducting restructuring activities, published in a relevant document prepared by PwC Polska S.A. The adoption of the Restructuring Plan results from the execution of CIECH S.A. s obligations pertaining to the loan agreement dated April 26th, 2010 and to the agreement with the creditors dated May 17th, The Restructuring Plan received positive opinion of the Company s Supervisory Board by way of the resolution passed on August 4th,

23 The Restructuring Plan anticipates the implementation in of restructuring initiatives (activities) aimed at improving the Ciech Group s financial standing and increasing its debt repayment potential and growth potential. The initiatives were divided into quantified, whose effect was included in a relevant financial model, and other, whose effect could not be quantified in a reliable manner (and whose implementation may constitute an additional source of inflows and savings). As far as the initiatives included in the financial model are concerned, the Restructuring Plan anticipates: 1) the sale of all shares/stock in the Group s basic companies, i.e. VITROSILICON Spółka Akcyjna, Alwernia S.A., GZNF FOSFORY Sp. z o.o. in order to obtain cash and exit non-strategic markets from the point of view of the Group (within 32 months); 2) the sale of shares/stock in 8 major non-basic companies, i.e. PTU S.A., Zakłady Azotowe Tarnów, S.A. Transoda Sp. z o. o., Transclean Sp. z o.o., Polfa Sp. z o.o. (and Polfa Hungaria), ELZAB S.A., Ciech Service Sp. z o.o. and Polskie Konsorcjum Chemiczne Sp. z o.o., in order to obtain cash, decrease resources involved in owner supervision and increase the Group s transparency for investors (within 12 months); 3) the sale of selected organised parts of the enterprise ZACHEM S.A. after the analysis of future production profitability and economic effect of the decision, in order to obtain cash and exit non-strategic markets from the point of view of the Group (within 18 months); 4) closing selected manufacturing lines in ZACHEM S.A., GZNF Fosfory Sp. z o.o. and Soda Polska Ciech Sp. z o.o. after the analysis of future production profitability and economic effect of the decision, in order to eliminate unprofitable manufacturing lines and limit operating loss connected with their functioning (within 14 months); 5) the sale of several major operating real property assets, not used in the Group s basic activity, including the real property located at ul. Powązkowska 46/50 in Warsaw, in order to obtain cash and decrease real property maintenance costs, including personnel costs involved in property supervision, and achieving real property cost effectiveness as a result of adjusting the structure of assets held to the basic activity (between 8 and 30 months); 6) employment restructuring in the companies GZNF Fosfory Sp. z o.o., ZACHEM S.A., Soda Polska Ciech Sp. z o.o., VITROSILICON Spółka Akcyjna and Uzinele Sodice Govora and at the Group s level, in order to limit and adjust the level of employment to the new organization and to optimize operating expenses (between 8 and 32 months); 7) the sale of other insignificant assets and titles in the companies Soda Polska Ciech Sp. z o.o., Uzinele Sodice Govora and VITROSILICON Spółka Akcyjna, in order to obtain cash (between 12 and 24 months); 8) tax optimisation connected mainly with the recovery of tax on civil law transactions and VAT settlement in the companies Soda Polska Ciech Sp. z o.o., VITROSILICON Spółka Akcyjna and Z.Ch. Organika Sarzyna S.A.; 9) optimising capital expenditure, including: a) verification of investment schedule regarding the MCPA manufacturing system in the company Z.Ch. Organika-Sarzyna S.A., in order to spread over time capital expenditure on non-manufacturing components of the system (within 36 months); b) delay of investment schedule regarding the project of electrolysis conversion from diaphragm into membrane by 2010 in the company ZACHEM S.A., in order to release cash and at the same time maintain investment liabilities and continuity of production (within 60 months). As far as the initiatives not included in the financial model are concerned, the Restructuring Plan anticipates: 1) preparation and realization of stock/share sale in small non-basic companies owned by ZACHEM S.A. (8 companies), Z.Ch. Organika-Sarzyna S.A. (9 companies) and Cheman S.A. owned by Ciech Finance Sp. z o.o., in order to obtain cash, decrease resources involved in owner supervision, decrease risk of necessary allocation of financial resources and increase the Group s transparency for investors (within 14 months); 2) withdrawal from 48 companies, i.e. starting six and intensely continuing 30 liquidation processes as well as monitoring bankruptcy proceedings and disposing of marginal blocks of stock/shares in 12 companies, in order to decrease risk of necessary allocation of financial resources, increase the Group s transparency for investors and decrease resources involved in owner supervision (within 60 months); 3) preparation and realization of sale of other operating real property deemed insignificant as a result of the detailed review of the portfolio of real property of ZACHEM S.A., Alwernia S.A., Z.Ch. Organika-Sarzyna S.A., Soda Deutschland Ciech, Uzinele Sodice Govora and Ciech Finance Sp. z o.o., in order to obtain cash, decrease real property maintenance costs, including personnel costs involved in property supervision, and achieve real property cost effectiveness as a result of adjusting the structure of assets held to the basic activity (between 8 and 60 months); 4) preparation and implementation of short-term recovery plans for the companies Uzinele Sodice Govora and ZACHEM S.A. (due to the financial standing of these companies and their long-lasting restructuring), in order to obtain permanent positive EBITDA, including through maximizing cost reduction and property management effectiveness (within 12 months); 5) optimisation and adjustment of employment in the Group, including employment optimisation in the support sector, after conducting restructuring initiatives and determining the target organisational structure of the Group (within 36 months); 6) decrease of net working capital, i.e. improvement of working capital management in selected companies of the Group, in order to improve the Group s liquidity and obtain funds for supporting the companies (between 6 and 9 months); 7) optimisation of purchase conditions, i.e. price and contract terms with the Group s key suppliers and in key purchase categories, in order to decrease costs through consolidation of contracts with particular 21

24 suppliers within the Group, volume consolidation within the main purchase categories in the Group, and optimisation of commercial conditions of selected agreements (between 6 and 21 months). The total net amount of inflows and savings possible to generate as a result of implementing the restructuring initiatives discussed in the Restructuring Plan is estimated at approx. PLN 600 million. On August 9th and August 10th, 2010, CIECH S.A. was notified about the establishment of joint capped mortgages on the assets of its subsidiary Zakłady Chemiczne Organika-Sarzyna S.A. According to the International Financial Reporting Standards, the total net value of assets subject to joint capped mortgages amounts to approx. PLN 54,868 thousand (as at July 31st, 2010). Detailed information about the mortgaged assets and a list of banks for the benefit of which mortgages were established was presented in Current Report no. 38/2010 of August 10th, 2010 and Current Report no. 39/2010 of August 11th, The establishment of joint capped mortgages results from the Agreement on Refinancing the Ciech Group s Debts, signed on April 26th, 2010, the Agreement between the Creditors and signing of documents presented by the Management Board of CIECH S.A. in Current Report no. 29/2010 of June 21st, The information was announced in Current Reports no. 38 and 39 of August 10th and August 11th, On August 12th, 2010, all active option transactions concluded by CIECH S.A. and ING Bank Śląski with maturity dates between January 27th, 2011 and May 19th, 2011 were prematurely terminated. Moreover, between July 16th, 2009 and August 5th, 2010, all option transactions with maturity dates between July 16th, 2010 and January 20th, 2011 were settled. The total amount of liabilities created as a result of the said transactions is PLN 64 million. In conjunction with the aforesaid transactions and premature termination of all active option transactions with Bank Handlowy w Warszawie S.A., CIECH S.A. is no longer a party to any active option transaction. The Agreement on Refinancing the Ciech Group s Debts anticipates refinancing of liabilities that have arisen as a result of the said transactions. The information was announced in Current Report no. 40 of August 12th, On August 12th, 2010, the European Bank for Reconstruction and Development, the Ministry of Treasury and CIECH S.A. signed a mandate letter. The document confirms EBRD s interest in the project aimed at granting the Issuer long-term financing amounting to PLN 300 million in the form of a proper instrument. The project received positive opinion at the initial stage of EBRD s assessment procedure. The financing conditions will be subject to further negotiations and will depend on further project evaluation, type of instrument and expected transaction structure as well as on relevant consents given by Ciech and EBRD. The information was announced in Current Report no. 41 of August 13th, On August 17th, 2010, all conditions precedent to the release of loans for the benefit of CIECH S.A. and S.C. Uzinele Sodice Govora Ciech Chemical Group S.A., described in the loan agreement of April 26th, 2010, presented in the report no. 16/2010 and concluded by and between CIECH S.A. and its subsidiaries (Agrochem Sp. z o.o., with its registered office in Człuchów, Agrochem Sp. z o.o., with its registered office in Dobre Miasto, JZS Janikosoda S.A., IZCh Soda Mątwy S.A., Soda Polska CIECH Sp. z o.o., ZCh Alwernia S.A., Przedsiębiorstwo Chemiczne Cheman S.A., GZNF Fosfory Sp. z o.o., ZCh Organika Sarzyna S.A., Polfa Sp. z o.o., CIECH Service Sp. z o.o., Vitrosilicon S.A., Transclean Sp. z o.o. and ZCh Zachem S.A.), and a bank consortium (Bank Polska Kasa Opieki S.A., Bank Handlowy w Warszawie S.A., BRE Bank S.A., Powszechna Kasa Oszczędności Bank Polski S.A., ING Bank Śląski S.A., Bank Millennium S.A. and DNB Nord Polska S.A.), signed by S.C. Uzinele Sodice Govora Ciech Chemical Group S.A. on June 15th, 2010, were satisfied. The release of loans based on the loan agreement discussed in the report no. 16/2010 was conditional on informing CIECH S.A. by Bank Handlowy w Warszawie S.A. (acting as the loan agent) about the receipt of all documents and proofs listed in the appendix to the loan agreement or about the cancellation of the obligation to deliver some of them, whereby the statements of CIECH S.A. and its subsidiaries stipulated in the loan agreement would have to be true at that time and no breach of the provisions of the loan agreement could occur (and last). Since all conditions precedent to the release of loans for the benefit of CIECH S.A. and S.C. Uzinele Sodice Govora Ciech Chemical Group S.A. were satisfied, on August 17th, 2010, the companies filed a motion for the release of a fixed-term loan on August 24th, 2010 and of a revolving loan on August 24th, 2010 and August 25th, The information was announced in Current Report no. 42 of August 18th, With regard to the previous information (Current Reports no. 33/2010 and 37/2010 published on July 9th, 2010 and August 6th, 2010 respectively), CIECH S.A. informs that it intends to conclude a preliminary agreement for the sale of right of perpetual usufruct of real property being a plot of land located in Warsaw until August 27th, 2010 after considering its terms and conditions. On August 24th and August 25th, 2010, pursuant to the lodged motion, fixed-term loans and revolving loans allocated for refinancing the existing indebtedness were released. The total released and used amount of loans equals PLN 1,285 million. The loan was released in the form of a fixed-term tranche amounting to PLN 1,210 million, revolving loans amounting to PLN 30 million and guarantees and letters of credits. 22

25 2. Description of achievements of the Ciech Group in the period between January 1st and June 30th, 2010, including a description of factors and events having a significant impact on the financial result 2.1 Basic financial figures In H1 2010, the Ciech Group generated net result amounting to PLN -37,831 thousand, the balance sheet total amounted to PLN 4,063,807 thousand and net cash increased by PLN 13,734 thousand. The table below presents selected financial figures and basic financial ratios for H and H Selected figures PLN Change 2010/2009 Net sales of products, goods and materials 1,950,075 1,893, % Cost of sales 1,665,851 1,542, % Gross profit from sales 284, ,460 (19.1%) Selling costs 132, , % General and administrative expenses 116, ,415 (8.8%) Other operating revenue / expenses 46,638 84,252 (44.6%) Profit on operating activities 81, ,472 (54.9%) Financial revenue/expenses (100,364) (140,707) 28.7% Share in net profit of subordinates measured under the equity method 902 1,687 (46.5%) Income tax (20,243) (23,000) 12.0% Net profit (37,831) 19,452 - Net profit attributable to minority shareholders (4,045) (1,716) (135.7%) Net profit attributable to controlling shareholders (33,786) 21,168 - EBITDA 200, ,949 (32.0%) PLN Assets 4,063,807 4,017,749 4,353,726 Fixed assets 2,649,908 2,751,679 2,853,271 Current assets, including: 1,413,899 1,266,070 1,500,455 - inventory 298, , ,435 - current receivables 919, , ,721 - cash and cash equivalents 157, , ,517 - short-term investments 1,308 2,529 4,134 - non-current assets held for sale 37, ,648 Total equity 816, , ,010 Equity attributable to controlling shareholders 783, , ,376 Minority interest 32,504 37,232 43,634 Non-current liabilities 1,166,400 1,179,661 1,437,412 Current liabilities 2,081,160 1,984,281 1,976,304 PLN Change 2010/2009 Net cash flows from operating activities 81, ,519 (62.2%) Net cash flows from investment activities (60,199) (210,553) 71.4% Net cash flows from financial activities (7,805) 4,571 - Total net cash flows 13,734 10,537 (30.3%) including free cash flows 21,539 5, % change / Net earnings per share (1.21) (3.29) Net return (1.9%) (2.5%) 1.0% - EBIT % 4.2% 3.7% 9.6% (5.4 p.p) 23

26 EBITDA % 10.3% 9.9% 15.6% (5.3 p.p.) Current ratio (10.5%) Quick ratio (8.6%) Debt ratio 79.9% 78.6% 78.4% 1.5 p.p. Equity to assets ratio 20.1% 21.4% 21.6% (1.5 p.p.) Source: CIECH S.A. Calculation principles: net earnings per share net earnings / weighted average number of ordinary shares in the given period (pursuant to the definition of IAS 33 Earnings per share ) net return net profit for a given period / net revenues from sales of products, services, goods and materials in a given period, EBIT % operating profit for a given period / net revenues from sales of products, services, goods and materials in a given period, EBITDA % (operating profit + depreciation for a given period) / net revenues from sales of products, services, goods and materials in a given period, current ratio current assets at the end of a given period / current liabilities at the end of a given period, quick ratio current assets less inventory at the end of a given period / current liabilities at the end of a given period, total debt ratio current and non-current liabilities at the end of a given period / total assets at the end of a given period, equity to assets ratio total equity at the end of a given period / total assets at the end of a given period. 2.2 Sales revenues Consolidated net sales of the Ciech Group in H amounted to PLN 1,950,075 thousand. In comparison with 2009, net sales increased by PLN 56,597 thousand, i.e. 3%. The main factor responsible for the increase was higher sales of TDI and resins (in total by PLN 149,236 thousand), which had a significant impact on the increase in the revenues reported by the organic segment. Moreover, also the silicates and glass segment generated higher revenues than in 2009, which results mainly from converting the commissioned sales agreement into a commercial operator agreement with regard to sulphur trading. The activity of the Ciech Group concentrates on four main segments: soda, organic, agrochemical, silicates and glass. These segments generated in total 95% of the Group s sales revenues. The structure of revenues has not changed in comparison with the same period of the previous year. The greatest share in the revenues for H is attributed to the sales of soda segment products, similarly to the same period in However, a significant improvement in the result of the organic segment could be observed. The segment increased its share in the Ciech Group s revenues from 28.2% to 35.9%. Sales revenues by business segment PLN 000 H H change change % % share in total revenue H % share in total revenue H Soda segment, including: 703, ,669 (95,284) (11.9%) 36.1% 42.2% Dense soda ash 414, ,950 (51,854) (11.1%) 21.2% 24.6% Light soda ash 122, ,992 (23,149) (15.9%) 6.3% 7.7% Salt 71,490 60,940 10, % 3.7% 3.2% Baking soda 47,433 49,192 (1,759) (3.6%) 2.4% 2.6% Calcium chloride 14,508 14, % 0.7% 0.7% Organic segment, including: 700, , , % 35.9% 28.2% TDI 299, ,848 86, % 15.4% 11.2% Resins 174, ,811 62, % 8.9% 5.9% Polyurethane foams 91,811 70,552 21, % 4.7% 3.7% Plastics 47,068 35,666 11, % 2.4% 1.9% EPI 23,235 19,440 3, % 1.2% 1.0% Agrochemical segment, including: 299, ,667 (46,028) (13.3%) 15.4% 18.3% Fertilisers 99, ,323 (39,152) (28.3%) 5.1% 7.3% Plant protection chemicals 93,261 93,638 ( 377) (0.4%) 4.8% 4.9% Phosphoric acid 1,035 29,485 (28,450) (96.5%) 0.1% 1.6% Sodium tripolyphosphate 1,251 10,036 (8,785) (87.5%) 0.1% 0.5% Feed 1,818 10,102 (8,284) (82.0%) 0.1% 0.5% Grain 3,566 6,699 (3,133) (46.8%) 0.2% 0.4% Silicates and glass segment, including: 151, ,541 49, % 7.8% 5.4% Sulphur 65,285 8,572 56, % 3.3% 0.5% Glass blocks and packaging 45,573 48,379 (2,806) (5.8%) 2.3% 2.6% Sodium glass 25,792 21,117 4, % 1.3% 1.1% 24

27 PLN 000 H H change change % % share in total revenue H % share in total revenue H Sodium water glass 9,369 8, % 0.5% 0.5% Other operations segment 95, ,581 (19,071) (16.6%) 4.9% 6.1% TOTAL 1,950,075 1,893,478 56, % 100.0% 100.0% 2.3 Profit/Loss on Sales and Operating Profit/Loss In H1 2010, gross profit on sales amounted to PLN 284,224 thousand and in the same period of 2009 PLN 351,460 thousand, whereas operating profit amounted to PLN 81,874 thousand and PLN 181,472 thousand respectively. The positive contributors to the presented result were as follows: improvement of margins and volumes recorded on the sale of TDI in comparison with a rather low level in the same period of the previous year, improvement of sales volumes and margins in the sector of polyester and epoxy resins in comparison with H1 2009, visible increase in the sales of domestic chemical products between January 2010 and June 2010 in comparison with the same period of the previous year (according to fixed prices; by 19.6% for chemicals and chemical products and by 16.9% for rubber and plastic products), significant increase in the domestic production of chemical fertilizers (by 91% in terms of quantity between January 2010 and June 2010 in comparison with a narrow range in the same period of the previous year), downward trend in relation to oil prices in Q that enabled stabilization or minor drops in the prices of raw materials for the organic industry, higher soda ash sales volumes in comparison with H The presented results also take into account one-off events, i.e.: sale by Soda Polska Ciech Sp. z o.o. and VITROSILICON Spółka Akcyjna of excessive greenhouse gas emission allowances, sale of fixed assets in ZACHEM S.A. The negative contributors to the presented result were as follows: very low prices of soda ash in the European markets in the last 4 years (lower by approx. 30% in comparison with the record-breaking prices in Q1 2009), accompanied by growing manufacturing costs, excessive supply in the European soda ash market (a new supplier from Turkey) at relatively slow restoration of demand (against 15% to 20% drop in use in 2009), dropping sales of plant protection chemicals due to unfavourable weather conditions (long winter and flood in Q2) and difficult situation in the agricultural sector, significant decrease in the domestic sales of construction and assembly production during 6 months of 2010; by 6.1% in comparison with the same period of the previous year (chemical industry generates many raw materials and semi-finished products meant for this production), stabilization and minor price decrease in the global and European markets of phosphorus-based chemical fertilisers (as compared with the increase in Q1 2010) at simultaneous increase of raw material prices especially, phosphorites, lower margins generated on the sales of epoxy resins in comparison with the same period of the previous year. The EBIT margin at the end of H was 4.2% (9.6% the year before), while the EBITDA margin was 10.3% (15.6% the year before). 2.4 Net result Consolidated net result for H amounted to PLN -37,831 thousand, whereby PLN -33,786 thousand was the controlling shareholders net result. Net return reached -1.9%. Apart from the lower operating result, the net result in H was negatively affected by the costs of debt service and negative balance of exchange differences. Also the sale by CIECH S.A. of its shares in Zakłady Azotowe Tarnów had a negative impact on the financial result. Financial result by type of business 25

28 PLN Change 2010/ Profit on operating activities 81, ,472 (54,9%) 2. Net financial revenues/expenses (100,364) (140,707) (28,7%) 3. Share in net profit of subsidiaries measured under the equity method 902 1,687 (46,5%) 4. Income tax (20,243) (23,000) (12,0%) 5. Profit on sales attributable to discontinued operations Net profit ( ) (37,831) 19,452 (294,5%) 7. Profit attributable to minority shareholders (4,045) (1,716) 135,7% 8. Profit attributable to controlling shareholders (6-7) (33,786) 21,168 (259,6%) Source: CIECH S.A. 2.5 Assets As at the end of June 2010, the Group s non-current assets amounted to PLN 2,649,908 thousand. In comparison with the balance as at December 31st, 2009, the value of non-current assets decreased by PLN 101,771 thousand. The greatest drop was recorded by tangible non-current assets by PLN 46,221 thousand in comparison with the end of The decrease in the carrying value of tangible non-current assets is, inter alia, the result of sale and liquidation of assets in the companies. The drop in the value of other long-term investments was connected with the sale of shares in Zakłady Azotowe Tarnów, held by CIECH S.A. The Group's current assets amounted to PLN 1,413,899 thousand as at June 30th, The following items dominated among the current assets: trade and other receivables 64.3% of current assets, and inventory 21.1%. As compared with the end of December 2009, the value of current assets increased by PLN 147,829 thousand (the highest increase was observed under trade and other receivables by PLN 107,685 thousand, mainly in CIECH S.A.). Moreover, assets held for sale included, inter alia, the shares in PTU S.A., previously recorded under investments in affiliates and jointly-controlled entities measured under the equity method, the shares in CIECH S.A. s subsidiary Ciech Service Sp. z o.o. and the shares of Polsin Pte. Ltd. in the company ELZAB S.A. 2.6 Liabilities The Ciech Group s liabilities (non-current and current) as at June 30th, 2010 amounted to PLN 3,247,560 thousand, which signifies an increase in comparison with the balance as at the end of December 2009 by PLN 83,618 thousand (i.e. 2.6%). In comparison with the balance as at December 31st, 2009, the value of liabilities pertaining to loans and borrowings (plus overdraft facility) increased by PLN 51,620 thousand, which is connected with growing loan commitment in CIECH S.A. and Soda Deutschland Ciech. The decrease in other non-current liabilities in comparison with the balance as at the end of December 2009 is connected mainly with the partial repayment of liabilities pertaining to claim assignment and with the drop in liabilities pertaining to financial instruments. The total debt ratio (current and non-current liabilities / total assets) was 79.9% as at June 30th, 2010 (78.6% at the end of December 2009). Consolidated net debt of the Group, covering non-current and current liabilities due to loans, borrowings plus overdraft facility and other debt instruments (bonds + finance lease + option liabilities), decreased by cash and cash equivalents amounted to PLN 1,725,569 thousand as at June 30th, 2010 and increased in comparison with the balance as at the end of December 2009 by PLN 14,156 thousand. Liquidity ratios remained unchanged in comparison with the end of The current ratio, calculated as the ratio of total current assets to total current liabilities, amounted to 0.68 as at June 30th, 2010 (0.64 at the end of 2009), while the quick ratio amounted to 0.54 (0.48 at the end of 2009). 2.7 Cash flows Net cash flows in H were positive and amounted to PLN 13,734 thousand. As compared with the same period in the previous year, the Group generated cash flows higher by PLN 3,197 thousand. Cash flows from operating activities amounted to PLN 81,738 thousand and were lower than the ones generated in the period between January and June 2009 by PLN 134,781 thousand. The surplus of investment expenditure over inflows amounted to PLN 60,199 thousand and was lower in relation to the same period in 2009 by PLN 150,354 thousand. The balance of cash flows from investment activities was influenced mainly by transactions of purchase of intangible assets and tangible non-current assets in SODA MĄTWY Group, ZACHEM Group and Z.Ch. Organika-Sarzyna S.A., connected with development projects. 26

29 Net cash from financial activities was negative and amounted to PLN 7,805 thousand, i.e. decreased by PLN 12,376 thousand in comparison with H The main reason for the drop was lower balance of cash flows due to the change in loans and borrowings. 2.8 Investment tasks carried out In the Ciech Group the outflows for the acquisition of tangible non-current assets and intangible assets for H amounted to PLN 116,462 thousand. The most significant investment tasks are related to soda and organic segment companies. The main investment tasks carried out in the presented period are as follows: SODA MĄTWY Group investments connected with the modernisation of the power plant (steam boilers) and modernisation of the power supply system (modernisation of the boiler ash disposal system, establishment of the combustion gas desulphurisation system), ZACHEM Group development projects related to converting electrolysis from diaphragm into membrane and to changing the technology of epichlorohydrin production, Z.Ch Organika-Sarzyna S.A. construction of active MCPA system together with infrastructure, and development of a concept of brine waste purification, Soda Deutschland Ciech Group investment connected with the construction of a band filter). 3. Seasonality and cyclicality of the operations of CIECH S.A. and the Ciech Group Seasonality resulting from periodic demand and supply fluctuations has a certain impact on the general sales trends in Ciech Group. Products clearly influenced by seasonality are agro-chemical products: chemical fertilisers, raw materials for the production of fertilisers, plant protection chemicals. Fertilisers are sold mainly at the turn of Q1 and Q2 and in Q3 of a year. This is due to intensive field fertilisation in spring and autumn. Similarly, most plant protection chemicals are used in the first half of the year, i.e. the period of intensive plant growth, when approx. 90% of the total sale of these products is realised. Furthermore, in the soda segment, a seasonal relationship between the volume of some products sold and the progress of winter can be observed. A mild winter is reflected in a decrease in the sale of calcium chloride and other products (anti-ice, salt and chloride mix, waste salt), while the influence on the sale of salt is indirect. In the case of other products, the Group's revenues and results are not influenced by any significant seasonal fluctuations during the business year. On that account, seasonality plays a relatively small role in the Group s overall sales. 27

30 4. Fulfilment of profit forecasts previously published for a given year in light of the results disclosed in the quarterly report against the forecasted results In 2010, the Ciech Group has not published any forecasts for Factors that influence the Ciech Group's results, with particular focus on the next half of the year 5.1 External factors Situation in industries being the Ciech Group s recipients in Poland Poland is the biggest selling market for the Ciech Group. The largest domestic recipients of the Ciech Group s products include: chemical industry, plastics industry, glass industry and agriculture. Development in these economic sectors depends on the economic situation in Poland. As compared with the previous year, industrial production in fixed price terms increased by 10.6% within the first 6 months of 2010 (in the analogous period of 2009 decreased by 8.3%). Respectively, the dynamics of the chemical industry amounted to: in the production of chemicals and chemical products (excluding pharmacy) plus 19.6% and in the production of rubber products and plastics plus16.9%. In the same period, pharmaceutical production grew by 5.2%. The year 2009 was characterised by a slowdown in Poland s economic development to 1.8% GDP (against 5.1% in 2008, according to the Central Statistical Office). However, the sale in the chemical sector, which usually develops similarly to the entire economy, decreased significantly (by c. 3%). Economic boost and GDP growth at the level of 2.7%-3.0% are expected in the entire Economic situation in Europe and around the world The activity of the Ciech Group is based to a great extent on the sales of chemical products on foreign markets. The volume and profitability of sales depend on the global economic situation in Europe and around the world. A global economic slump usually affects the demand for raw materials on international markets, thus reducing the export turnover of the Group. The economy in particular parts of the world is recovering after the crisis in 2008 and 2009 at a various pace. In 2010, the fastest development has been observed in the emerging markets and in the United States of America. According to the report by the International Monetary Fund of April 2010, the global GDP will grow by 4.2% in the current year ( Emerging Asia by 8.7%; USA by 3.1%; Central and Eastern Europe by 2.8%). In 2011, the current GDP growth is expected to remain unchanged on a global scale. In 2010, according to the report by the American Chemistry Council (ACC) of June this year, the global chemical production has been developing much faster than industrial production in general and GDP: by 7.2%, 6.2% and 3.3% respectively. However, the production dynamics of the global chemical industry is expected to drop to 5% in According to the report by CEFIC (European Chemical Industry Council) of June this year, in the critical 2009, the greatest drops in EU (27) chemical production concerned basic inorganic chemicals, plastics and rubber. In 2010, the aforesaid branches of industry (plus petrochemicals) has been recording the highest 10% growth pace. Unfortunately, the very high increase in EU chemical production by 9.5% forecasted for the entire 2010 will not compensate for the drops in 2008 and 2009 (by 4.5% and 11.3% respectively). According to CEFIC, in 2011, the EU is supposed to record a typical growth of several percent (only between 1% and 2.5% depending on the branch). Generally, return to the production levels recorded prior to the last crisis may be expected not earlier than in According to CEFIC, consolidation activities in the production area that need to be taken immediately are of great importance for the further success of the European chemical industry. To a considerable degree, this results from stronger competition on the part of Asian suppliers (including in terms of petrochemicals from the Middle East). Financial situation of agriculture A part of the Ciech Group s revenues covering mineral fertilizers and plant protection chemicals is realized within the framework of sales to the agricultural sector. In the opinion of CIECH S.A., in the long-term, the volume of demand for mineral fertilisers in Poland and Central and Eastern Europe should continue to grow. The material factors favouring an increase in the consumption of agrochemicals in Poland and thus the demand for products manufactured by the Ciech Group are processes improving the financial situation and profitability of agricultural production, including: production quoting and direct subsidies. It should translate into the growth of the Ciech Group s revenues. On the other hand, the lack of significant improvement in the purchasing capacity of the agricultural sector may equal stagnation in the demand for fertilisers and plant protection chemicals and as a result stagnation in the Ciech Group s revenues related to agrochemical products. According to the data of the Institute of Agricultural and Food Economics, the market conditions of domestic agriculture in 2010/2009 improved in comparison with the previous year. The main reason for this improvement were dropping prices of means of production (in particular, fertilisers). However, these circumstances have not yet translated into any improvement of profitability for the farmers, which visibly deteriorated in From the beginning of the current year, the conditions of conducting agricultural activity have not changed significantly. The synthetic index of economic situation in agriculture (SWKR) in June 2010 was slightly lower than the year before (a decrease 28

31 from to 100.2). In the following quarters, no rapid improvement of agricultural production conditions is expected in Poland. Economic situation on the market of raw materials The import of chemical raw materials to Poland constitutes a significant part of turnover within the framework of the Ciech Group s activity. The markets of raw materials are characterised by cyclical nature connected with fluctuations of the global economy. The growing prices of raw materials cause a decrease in margins of sales intermediaries and a decrease in demand from customers. On the other hand, falling prices are usually a symptom of decreasing demand and the beginning of an economic downturn. The maintenance of a stable pace of economic growth and stable prices of chemical raw materials will have a positive effect on CIECH S.A. s import of raw materials. Considerable fluctuations of demand and prices caused either by a fast economic growth or economic stagnation will have a negative influence on the trade in chemical raw materials by CIECH S.A. REACH implementation In accordance with the REACH regulation, the Ciech Group s Companies which market substances in quantities exceeding 1,000 tons per year will complete full registration of these substances by December 2010, which will allow them to continue their activity in its previous scope. The companies perform preparatory tasks connected with this project, participate in forums for the exchange of information about substances, set up by entities that register the same substance, and take part in consortia established for the purposes of common submission of registration data. CIECH S.A. keeps track of the progress of those actions. Emission trading system All companies of the Ciech Group participating in the emission trading system verified their annual reports and amortized emission rights in a quantity corresponding to the actual volume of carbon dioxide emission in The companies Vitrosilicon and Soda Polska Ciech conducted sales transactions regarding a portion of excessive rights generated in the previous year. Furthermore, in May 2010, EUA entitlements were exchanged for CER certificates based on the emission rights allocated to Soda Mątwy Group the exchange covered 390 thousand units. PLN/EUR exchange rate The Ciech Group's export sales are settled mostly in Euro. A strong Euro means higher profitability for exports, both for the Ciech Group and other chemical industry players in Poland. Furthermore, it increases the value of CIECH S.A. s sales to other manufacturers. As a result, the PLN/EUR exchange rate influences profitability of sales revenues in the Ciech Group. If the Polish zloty becomes stronger against the Euro, the profitability of exports will probably decline, and the Ciech Group's export volumes will decrease. 5.2 Internal factors Maintaining cost and quality competitiveness The competitiveness of the Ciech Group results from the basic market factors, i.e. costs, quality, their direct source, marketing activity, market position. The most important factors are: cost competitiveness based on the effects of the large scale of manufacturing, specialisation, standardisation and effects of experience, quality leadership and quality control systems, competition based on the enterprise's market force (market leader), cost leadership and differentiation. Competitiveness of companies is to a great extent connected with innovations. Therefore, the basis for competition is innovative product and process technologies. Within the framework of the adopted investment strategy, Ciech Group s companies implement a number of innovative process and product solutions. Investment projects, optimisation projects and actions connected with obtaining funding from available aid funds In Q1 2010, the optimum real investment plans were finally determined for particular Companies of the Group. In 2010, the Ciech Group s Companies will allocate more than PLN 238 million for investment projects, including more than PLN 110 million for innovative and pro-ecological undertakings, aimed at improving manufacturing effectiveness, product quality and environment indices. In H1 2010, the terms of key investment projects in the Group and the level of expenditures in particular years of their realization were finally optimised and agreed within the restructuring activities taken in order to reduce the Ciech Group s indebtedness. In H1 2010, the projects realized in cooperation with specialist consulting companies and aimed at optimising operating expenses in the area of maintenance and power supply were continued in the Ciech Group. Until the end of H1 2010, subsequent three projects realized in the Ciech Group were approved for co-financing: Comprehensive Arrangement of Water and Sewage Management in Zachem Chemical Plant cofinancing amounting to PLN 6.3 million (30% of eligible costs) Measure 4.4 OP Infrastructure and Environment; Change of Toluene Diisocyanate (TDI) Production Technology co-financing amounting to PLN 15 million (50% of eligible costs) undertaking of the Ministry of Science and Higher Education IniTech ; 29

32 BarvaGlass Packaging Glass Vitrosilicon Turns Vision into Reality co-financing amounting to PLN 7.8 million (49.67% of eligible costs) Measure OP Innovative Economy (research and development projects and their implementation). In total, the Ciech Group obtained co-financing for the implementation of nine projects from the area of its activity, whereby co-financing agreements were signed for seven of them and the process of signing another two is in progress. The co-financed projects cover investment undertakings in the area of environment protection, implementation of new innovative technologies of producing key products of the Group as well as research and development projects. Also a training and consulting project for the Ciech Group s employees is being realized. The total amount of subsidies granted exceeds PLN 140 million. Liabilities connected with the purchase of ZACHEM S.A., Z.Ch. Organika-Sarzyna S.A. and S.C. Uzinele Sodice Govora - Ciech Chemical Group S.A. Pursuant to the privatization agreements regarding ZACHEM S.A. and Z.Ch. Organika-Sarzyna S.A., CIECH S.A. is charged with obligations connected mainly with the implementation of investment packages, employee guarantees and minority interest buyout options. The sales agreement concerning ZACHEM S.A. s shares contains a restricting condition. The restricting condition is calculated as the ratio of long-term capital to fixed assets on the basis of the Separate Financial Statements of ZACHEM S.A., prepared according to PAS. Pursuant to the agreement, this ratio is to grow as follows: in 2007 by 20 pp in relation to the ratio calculated as at the date of sales, i.e. on December 20th, 2006, and in every subsequent year by another 10 pp until 2010 (a total increase in by 50 pp). Ciech shall pay NAFTA POLSKA S.A. a penalty amounting to PLN 150 thousand for every full percentage point below the required ratio. Every full percentage point in excess of 10 pp deviation from the required ratio shall be followed by a penalty of PLN 500 thousand. Annex no. 1, concluded on December 23rd, 2009, stipulates that fulfilment date of the restricting condition, which was set in the previous Agreement at December 31st, 2009 (+40 p.p.), shall be December 31st, 2010, save that if CIECH S.A. fails to meet the new date, Nafta Polska S.A. shall be entitled to receive a contractual penalty due to non-compliance by CIECH S.A. with the restricting condition at the end of 2010, as well as a contractual penalty to which it would be entitled due to non-compliance by CIECH S.A. with the condition at the end of Additionally, it was agreed that the fulfilment date of the restricting condition, which was set in the previous Agreement at December 31st, 2010, shall be December 31st, If the restricting condition is fulfilled by December 31st, 2010, as stipulated in the provisions of the original Agreement (i.e. +50 pp), the restricting condition for December 31st, 2011 will not be examined anymore and no contractual penalty for non-fulfilment of the restricting condition in 2009 will be charged. When necessary, CIECH S.A. will provide ZACHEM S.A. with financial support to ensure that the restricting condition is fulfilled. Moreover, Soda Deutschland Ciech Group has shown in its balance sheet the obligation to repurchase Elektrociepłownia. Elektrociepłownia was sold on September 1st, 1999 by KWG GmbH (a subsidiary of Soda Deutschland Ciech) for the benefit of VASA Kraftwerke Pool for EUR million. KWG's contractual obligation is to repurchase the power plant until December 31st, KWG also retains the possibility to acquire the power plant. This possibility may be realised on January 1st of every year of the term, i.e. until December 31st, As at June 30th, 2010, the respective obligation amounts to PLN 152,342 thousand. 6. Description of basic risks and threats connected with the remaining months of the financial year Risk of positive trends reversal with respect to the economic growth in Poland The activity of the Ciech Group is connected with many segments of widely understood chemical industry, whose development is directly correlated to the economic situation. In the last few years, Poland s economic growth was at the level of several percent GDP annually. The forecasts for the following years anticipate a decrease in the previous high growth rate resulting from the slow recovery after the global economic crisis (internal demand slowdown, export slowdown and investment slowdown). The deterioration of the economic situation will definitely affect the chemical industry. Risk management in the Ciech Group consists mainly in enhancing the effectiveness in terms of finance, operating activity and direct cost reduction. Risk of a long-term economic stagnation/recession in Europe and around the world The activity of the Ciech Group relies to a great extent on the export of chemical products, whose level and profitability depend on the global economic situation in Europe and in the world. The long-term economic downturn may lead to considerably lower foreign turnover in export and at the same time lower revenues from particular segments of the Ciech Group s activity. Risk management in the Ciech Group consists mainly in enhancing the effectiveness in terms of operating activity and developing new or more profitable selling markets. Risk of a significant drop in demand in the toluene diisocyanate (TDI) segment The Ciech Group owns the sole domestic producer of TDI a semi-finished product for the production of polyurethane foam applied mainly in the furniture and automotive industry. The TDI market is a global market but in the European practice the turnover is realised mostly within the continent. Taking into account the target recipients, the situation in the sector of TDI producers is strongly dependent on the overall economic situation. Risk 30

33 management in the Ciech Group (economic downturn prevention) consists mainly in the permanent presence on numerous geographic markets (on different continents). Risk of significant oversupply of toluene diisocyanate (TDI) on the global markets In the next years, it is planned to considerably increase TDI production capacities in the whole world (by c. 1/3 or more). In the event of scheduled realization of the planned investments and taking into account the forecasted pace of demand growth at the level of several percent per annum, global TDI oversupply may be expected in the first half of the second decade of this century. This could lead to a significant decrease in TDI prices and lower use of manufacturing facilities. Risk management in the Ciech Group consists mainly in: modernization activities concerning relevant production lines, reduction of manufacturing costs and increase in own manufacturing capacities with regard to polyurethane foam (enabling the use of a portion of TDI manufactured by the Group). Risk of oversupply of soda ash in Europe At the turn of the first and second decades of this century, new soda ash production capacities are or will be created in Europe and the neighbouring countries. In the event of scheduled realisation of all investments (and major growth of supplies to the market within a relatively short period of time), significant periodic product oversupply and price decrease could occur in the region. Risk management in the Ciech Group consists mainly in improving the effectiveness and profitability of soda manufacturing facilities. 7. Changes in the shares of CIECH S.A. held by the Members of the Management Board and Supervisory Board According to the statements submitted by the managerial and supervisory personnel, in H1 2010, there were no changes in the shares of CIECH S.A. held by the Members of the Management Board and Supervisory Board. As at June 30th, 2010: Mr. Artur Osuchowski Member of the Management Board holds 2,100 shares in CIECH S.A. Other persons holding managerial and supervisory positions do not hold any shares in CIECH S.A. nor shares or stock in associated entities. 8. CIECH S.A.'s shareholders holding at least 5% of shares/votes at the General Meeting of Shareholders According to the notifications received pursuant to Art. 69 of the Act of July 29th, 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading and Public Companies Dz.U. No. 184, item 1539, as amended, the following Shareholders hold at least 5% of the total number of votes at the general meetings of the company: State Treasury 10,270,800 shares amounting to 36.68% of CIECH S.A. s share capital; number of votes: 10,270,800, making up a 36.68% share in the overall number of votes at the General Meeting of Shareholders; Otwarty Fundusz Emerytalny (Open Pension Fund) PZU Złota Jesień 1,712,732 shares amounting to 6.12% of CIECH S.A. s share capital; number of votes: 1,712,732, making up a 6.12% share in the overall number of votes at the General Meeting of Shareholders; Pioneer Pekao Investment Management S.A. (PPIM) 5,498,875 shares amounting to 19.64% of CIECH S.A. s share capital; number of votes: 5,498,875, making up a 19.64% share in the overall number of votes at the General Meeting of Shareholders; including the investment fund Pioneer FIO (managed by PPIM) 5,498,875 shares amounting to 19.64% of CIECH S.A. s share capital; number of votes: 5,498,875, making up a 19.64% share in the overall number of votes at the General Meeting of Shareholders. 9. Information about the issue, redemption and repayment of debt securities and equity securities in the Ciech Group In H1 2010, the Ciech Group did not issue any securities. 10. Information about dividends paid (or declared), in total and per share, broken down into ordinary shares and preference shares Due to the net loss in 2009, the company CIECH S.A. did not pay any dividends in The Ordinary General Shareholders Meeting of June 21st, 2010 decided to cover this loss with the Company s supplementary capital. 31

34 The Ordinary General Shareholders Meeting of CIECH S.A. by virtue of the resolution of June 18th, 2009 decided not to pay any dividend from the profit of CIECH S.A. for 2008 and allocate the entire profit for the Company s supplementary capital. 32

35 11. Organisation description and identification of the effects of changes in the structure of the Ciech Group s business entities The description of the Ciech Group s organisation as well as information on the effects of changes in the organisational structure have been presented in point IV.1, IV.2 and IV.17 of this Report. 12. Procedures pending before courts, in arbitration proceedings or public administration bodies The information has been presented in point IV.7 of this Report. 13. Information concerning non-standard and non-routine transaction or transactions with affiliated entities concluded by CIECH S.A. or its subsidiaries The information has been presented in point IV.8 of this Report. 14. Information on loan and borrowing sureties or guarantees granted by CIECH S.A. or its subsidiaries The information has been presented in point IV.9 of this Report. 33

36 III. Information on the presentation principles for the Extended Consolidated Report of the Ciech Group for H Basis for preparing the Extended Consolidated Report of the Ciech Group for H The presented consolidated financial statements for the period from January 1st, 2010 to June 30th, 2010, including comparative information, was approved by the Management Board of CIECH S.A. on August 25th, 2010 to be published on August 31st, These consolidated statements cover the financial statements of CIECH S.A., the parent company, and its subsidiaries (jointly referred to as the Ciech Group ; the Group ), as well as the Group's interests in affiliates. The scope of information presented in the Extended Consolidated Report for H is consistent with the requirements of: International Accounting Standard 34 Interim Financial Reporting, the Regulation of the Minister of Finance of February 19th, 2009 on Current and Interim Information Submitted by the Issuers of Securities. Preparation of financial statements in compliance with IFRS requires the Management Board to exercise professional judgement, estimates and assumptions that impact the adopted accounting principles and the value of assets, liabilities, income and expenses presented. All estimates and related assumptions are based on historical experience and various other factors considered reasonable under the given circumstances, and the results of such estimates are the basis for professional judgement of the carrying value of assets and liabilities, which cannot be calculated using other sources. The actual value may differ from the estimated value. The estimates and related assumptions are subject to regular verification. Changes in accounting estimates are recognised in the period in which they are made, if such changes apply solely to that period, or in the current period and future periods, if such changes apply both to the current and future periods. The Management Board's professional judgements, which have a significant impact on the consolidated financial statements, and the estimates bearing a high risk of significant changes in future periods, have been presented in part IV, points 7 and 10 of this Report. No significant changes in the estimates presented in the previous reporting periods occurred in the current semi-annual period. 2. Statement of Conformity The consolidated financial statements of the Ciech Group, as well as the financial statements of all subsidiaries and affiliates of CIECH S.A. for the presented period and corresponding periods have been prepared according to all the International Financial Reporting Standards (IFRS), adopted for usage in the European Union as at June 30th, The Management Board of the controlling entity used their best judgement in the selection and interpretation of the applicable standards, as well as in the selection of measurement methods and principles for the different items of the Ciech Group's IFRS consolidated financial statements as at June 30th, 2010, including comparative data. Due diligence was exercised when preparing the tables and notes presented below. The financial statements for H and comparative data reflect the asset and financial situation of the Ciech Group in a true, reliable and transparent manner. The report on the operations contains a true image of the Group s development and achievements as well as its situation, including the description of basic threats and risk. The Management Board of CIECH S.A. declares that the entity authorised to audit financial statements, auditing the financial statements for the period between January 1st, 2010 and June 30th, 2010, was chosen in accordance with the binding legal regulations and it is: Deloitte Audyt Sp. z o.o., having its registered office in Warsaw, entered into the list of entities authorised to audit financial statements under register no. 73, kept by the National Chamber of Statutory Auditors. The aforesaid entity and the certified auditors performing the review satisfy all conditions necessary to issue an unbiased and independent opinion and audit report, pursuant to the applicable legal regulations. 3. Adopted accounting principles The accounting principles adopted by the Ciech Group have been presented in the Ciech Group s Consolidated Report for 2009, published on April 30th, The report in question includes detailed information regarding the principles and methods of the valuation of assets and liabilities and measurement of the financial result, as well as the method of preparing the financial statements and comparative data. These principles have been used on a continuous basis when preparing all consolidated financial statements of the Ciech Group since the date of transition to IFRS, i.e. since January 1st,

37 In 2010, the Ciech Group reviewed the principles of financial statement consolidation and adopted the reviewed financial reporting standards IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements. The changes introduced to these standards had no impact on the consolidated financial statements, except for attributing losses from a given period to minority shares. Previously, losses concerning minority shares and exceeding minority interest in a subsidiary were allocated to the owners of the parent company. Starting from 2010, all losses on minority shares are ascribed to non-controlling shares. Additionally, in 2010, the manner of presenting information about business segments changed a new business segment was sectioned off Corporate Functions. This segment presents the activity of CIECH S.A. connected with the realization of common functions, previously divided by margin keys for particular Divisions. The Management Board of CIECH S.A. decided that this way of presenting particular revenue items and cost items reflects the management solutions adopted in the Group and ensures more transparent disclosure, verification and evaluation of activity and of realizing sales and production targets established for every Division (segment) as well as separate targets, for example, cost reduction for central structures performing functions common for CIECH S.A. and the entire Group. Moreover, pursuant to the loan agreement, the segment Corporate Functions will include the Group s financing costs. The aforesaid change in the presentation of segments has been applied by the Ciech Group also to comparative data. 4. Functional and presentation currency and conversion principles The Polish zloty (PLN) shall be the measurement and reporting currency of the presented consolidated financial statements. Unless provided otherwise, the data in the consolidated financial statements has been presented in thousands of PLN (PLN '000). For the purposes of presenting selected financial data, particular assets and liabilities disclosed in the statement of financial position were translated into EUR according to the average exchange rate of the National Bank of Poland as at the balance sheet date (June 30th, 2010), i.e. 4,1458. Individual items of the profit and loss account were translated into EUR according to the exchange rate calculated as the arithmetic mean of average EURO exchange rates determined by the National Bank of Poland as at the last day of every month, i.e. from January 2010 to June 2010 respectively: ; ; ; ; ; The exchange rate for the presented reporting period is

38 IV. Notes to the Condensed Semi-annual Consolidated Financial Statements of the Ciech Group 1. Consolidated entities Organisational description of the Ciech Group The controlling entity in the Ciech Capital Group is CIECH Spółka Akcyjna, currently having its registered office in Warsaw, ul. Puławska 182, registered under the number in the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of the National Court Register. The Ciech Group is a group of domestic and foreign manufacturing, distribution and trade companies operating in the chemical industry. As at June 30th, 2010, it was composed of 57 business entities, including: the parent company CIECH S.A., 37 subsidiaries, including: - 23 domestic subsidiaries, - 14 foreign subsidiaries, 16 domestic affiliates, 2 foreign affiliates, 1 foreign jointly-controlled entity. The Ciech Group is composed of direct subsidiaries and affiliates, for which CIECH S.A. is the controlling entity, as well as indirect subsidiaries and affiliates, whose controlling entities are direct subsidiaries of CIECH S.A. The Ciech Group conducts manufacturing activity connected with the sale of own products as well as commercial activity connected with the trade of goods. Commercial activities are carried out mostly by CIECH S.A. and by its domestic and foreign commercial companies, being CIECH S.A.'s subsidiaries. Manufacturing activities are carried out by CIECH S.A.'s subsidiaries, being manufacturers. The controlling entity has no branches. When preparing the consolidated financial statements for H1 2010, the following companies underwent consolidation: 36

39 List of consolidated entities measured under the equity method in H and in the comparative period Company/Group Consolidation method as at and CIECH S.A.'s control. Consolidation method as at and CIECH S.A.'s control. Business 1) CIECH S.A. Controlling entity Controlling entity According to the Articles of Association, the core business of the controlling entity includes: commercial activity including trade activity, investment activity, manufacturing activity, service activity and financial operations with particular focus on foreign and domestic trade in chemicals and activity connected therewith. The Company is also licensed to act as an agent for Polish and foreign companies. 2) POLFA Sp. z o.o. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. wholesale of pharmaceutical goods, wholesale of chemical products, wholesale of perfumes and cosmetics, retail sale of medical and orthopaedic goods. CIECH FINANCE Group 3) CIECH FINANCE Spółka z ograniczoną odpowiedzialnością Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. implementing disinvestment projects concerning unnecessary fixed assets (real property) and financial assets (stocks and shares in capital companies). 3.1.) Cheman S.A. Indirect subsidiary of CIECH S.A. full consolidation at the level of the Ciech Group Indirect subsidiary of CIECH S.A. full consolidation at the level of the Ciech Group wholesale and distribution of solid inorganic and organic chemicals, wholesale and distribution of raw materials for household chemicals, wholesale and distribution of raw materials for cosmetic and pharmaceutical products, wholesale and distribution of builders, pigments, raw materials for paints and varnishes, wholesale and distribution of food and feed additives, wholesale and distribution of acids, bases and other liquid chemicals SODA MĄTWY Group Fully consolidated lower-tier Group Fully consolidated lower-tier Group 4) SODA MĄTWY S.A. 4.1.) Soda Polska CIECH Sp. z o.o ) TRANSODA Sp. z o.o. 4.2) Polskie Towarzystwo Ubezpieczeń Spółka Akcyjna Lower-tier controlling entity (CIECH S.A.'s subsidiary) Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation. Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier Lower-tier controlling entity (CIECH S.A.'s subsidiary) Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation. Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier JANIKOSODA Group Fully consolidated lower-tier Group Fully consolidated lower-tier Group 5) JANIKOSODA S.A. Lower-tier controlling entity (CIECH S.A.'s subsidiary) Lower-tier controlling entity (CIECH S.A.'s subsidiary) manufacture of other inorganic basic chemicals, wholesale of chemical products, production and distribution of electricity, goods shipment production of salt, manufacture of industrial gases, manufacture of other inorganic basic chemicals, 37

40 Company/Group Consolidation method as at and CIECH S.A.'s control. Consolidation method as at and CIECH S.A.'s control. Business 5.1) Polskie Towarzystwo Ubezpieczeń Spółka Akcyjna Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier FOSFORY Group Fully consolidated lower-tier Group Fully consolidated lower-tier Group 6.) GZNF FOSFORY Sp. z o.o. 6.1) AGROCHEM Spółka z ograniczoną odpowiedzialnością in Dobre Miasto 6.2) AGROCHEM Spółka z ograniczoną odpowiedzialnością in Człuchów 7) Alwernia S.A. Lower-tier controlling entity (CIECH S.A.'s subsidiary) Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Fully consolidated subsidiary of CIECH S.A. Lower-tier controlling entity (CIECH S.A.'s subsidiary) Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Fully consolidated subsidiary of CIECH S.A. manufacture of other chemical products n.e.c. manufacture of chemical fertilisers and nitrogen compounds, manufacture of other inorganic chemicals, manufacture of other organic chemicals, manufacture of refined petroleum products, manufacture of plastics, wholesale of grain, seeds and animal feed, transhipment services based on own transhipment and storage base manufacture of other inorganic basic chemicals, manufacture of dyes and pigments, manufacture of other organic basic chemicals, manufacture of chemical fertilisers and nitrogen compounds, manufacture of gypsum, production of heat (steam and hot water) 8) POLSIN PRIVATE LIMITED Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. wholesale and retail sale of a variety of goods in the Far East markets 9) DALTRADE PLC. 10) VITROSILICON Spółka Akcyjna Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. distribution and wholesale of chemicals in the UK market. manufacture of other inorganic basic chemicals, manufacture of household and technical glassware, manufacture of plastic packing goods, manufacture of other plastic products 11) Przedsiębiorstwo Transportowo- Usługowe TRANSCLEAN Sp. z o.o. 12) Zakłady Chemiczne Organika- Sarzyna S.A. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. Fully consolidated subsidiary of CIECH S.A. ZACHEM Group Fully consolidated lower-tier Group Fully consolidated lower-tier Group 13) ZACHEM S.A. 13.1) ZACHEM UCR Spółka z ograniczoną odpowiedzialnością Fully consolidated subsidiary of CIECH S.A. Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Fully consolidated subsidiary of CIECH S.A. Indirect subsidiary of CIECH S.A.; lower-tier full consolidation international transport of liquid chemicals, tank truck and rail tank car wash manufacture of plastics, manufacture of pesticides and other chemical products manufacture of organic and other non-organic chemicals, manufacture and sales of plastics, manufacture of plastic plates, sheets, tubes and profiles, manufacture of dyes and pigments, services of installation, repairs and maintenance of general-purpose machinery 38

41 Company/Group Consolidation method as at and CIECH S.A.'s control. Consolidation method as at and CIECH S.A.'s control. Business 13.2) BORUTA - ZACHEM Kolor Spółka z ograniczoną odpowiedzialnością (Company established through the merger of: BORUTA-KOLOR Sp. z o.o. (the acquired company) and ZACHEM Barwniki Sp. z o.o. (the acquiring company, consolidated since December, 2006)) 14) S.C. Uzinele Sodice Govora Ciech Chemical Group S.A. Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Fully consolidated subsidiary of CIECH S.A. Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Fully consolidated subsidiary of CIECH S.A. Soda Deutschland Ciech Group Fully consolidated lower-tier Group Fully consolidated lower-tier Group 15.) Soda Deutschland Ciech GmbH 15.1.) Sodawerk Holding Stassfurt GmbH ) Sodawerk Stassfurt Verwaltungs GmbH ) Sodawerk Stassfurt GmbH&Co.KG ) KWG GmbH ) Kaverngeellschaft Stassfurt GmbH Subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier. Subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect subsidiary of CIECH S.A.; lower-tier full consolidation Indirect affiliate of CIECH S.A. measurement under the equity method at lower tier n.e.c. manufacture of other inorganic basic chemicals, wholesale of chemical products manufacture of other inorganic basic chemicals, wholesale of chemical products, production and distribution of electricity 39

42 2. Effects of changes to the organisational structure of the Ciech Group s business units in H1 2010, including business mergers, acquisitions or disposals of the group's entities, long-term investments, demergers, restructuring and discontinuation of activity No changes regarding the transfer of companies in which CIECH S.A. holds direct shares/stocks occurred in the structure of the Ciech Group in H1 2010; however, the following changes occurred: CIECH FINANCE Sp. z o.o. On January 8th, 2010, the District Court registered an increase in the share capital of the Company by PLN 250 thousand through the creation of 500 new shares of the nominal value of PLN 500 for each. The above shares were acquired by the previous sole shareholder, CIECH S.A., in exchange for cash. CIECH S.A. s percentage share remains the same. The aforesaid increase of the Company s share capital was adopted at the Extraordinary Shareholders Meeting on October 19th, Chemiepetrol GmbH (in liquidation) On March 15th, 2010, the company Chemiepetrol GmbH (in liquidation), having its registered office in Hamburg, registered under the number HRB in the B Commercial Register, was deleted from the Commercial Register by way of the decision of the District Court in Hamburg. The Company Chemiepetrol GmbH was put in liquidation by way of a resolution adopted at the Shareholders Meeting on November 26th, CIECH S.A. was a majority shareholder in the Company (60% of shares in the share capital). Daltrade Plc On June 1st, 2010, the General Shareholders Meeting adopted a resolution on: Changing the legal form of the company from Plc (public corresponds to S.A.) into Ltd (private corresponds to Sp. z o.o.); Decreasing the Company s share capital from GBP 1,004,937 to GBP 10, through decreasing the nominal value of every share from GBP 1 to GBP 0.1. Soda Deutschland Ciech GmbH On June 3rd, 2010, the District Court in Stendal registered an increase in the Company s share capital by EUR 1,500 thousand (B Commercial Register). The issued shares were acquired by CIECH S.A., which remains the sole shareholder of Soda Deutschland GmbH. The Company's share capital after the increase amounts to EUR 16,525 thousand. ZACHEM S.A. On April 14th, 2010, CIECH S.A. acquired 493,815 shares, constituting 3.33% of ZACHEM S.A. s share capital. As a result, CIECH S.A. increased its share in the share capital of ZACHEM S.A. from 87.34% to 90.67%. Zakłady Azotowe w Tarnowie-Mościcach S.A. On April 22nd, 2010, CIECH S.A. sold in block transaction all its shares in Zakłady Azotowe w Tarnowie- Mościcach S.A., i.e. 2,560,000 shares, constituting 6.5% of the Company s share capital. As a result of the transaction, CIECH S.A. holds no shares in the Company. Z.Ch. Organika-Sarzyna S.A. On June 15th, 2010, CIECH S.A. acquired 184,816 shares, constituting 2.18% of Z.Ch. Organika-Sarzyna S.A. s share capital. As a result, CIECH S.A. increased its share in the share capital of the Company from 90.87% to 93.05%. In the structure of the Ciech Group, with regard to the companies in which CIECH S.A. holds indirect shares/stock: In H1 2010, a change occurred in Huta Szkła Wymiarki S.A., a company affiliated with VITROSILICON S.A. The company VITROSILICON S.A. increased its share in the share capital of HS Wymiarki S.A. to 36.19% through the acquisition from minor shareholders of 12,841 shares, constituting 1.05% of the share capital. In March 2010, the company Soda Polska CIECH Sp. z o.o. acquired 500 shares from the increase in the share capital of Zakład Gospodarki Popiołami Sp. z o.o. and increased its share in the share capital from 29.28% to 29.56%. On May 6th, 2010, ZACHEM S.A. became the owner of 98 shares in Boruta Zachem Kolor Sp. z o.o., acquired on April 26th April 27th, 2010 from minority shareholders and increased its share in the share capital from 95.52% to 96.01%. By way of an agreement dated May 26th, 2010, ZACHEM UCR Sp. z o.o. (a subsidiary of ZACHEM S.A.) disposed of 255 shares in METALPUR Sp. z o.o, constituting 24.52% of the share capital and as of this date holds no shares in METALPUR Sp. z o.o. On May 6th, 2010, Alwernia S.A. acquired from Alwezz 62 shares in SOC-AL. Sp. z o.o. and became the sole shareholder in SOC-AL. Sp. z o.o. The previous share of ALWERNIA S.A. in the share capital amounted to 95.12%. 40

43 3. Financial figures by business segment BUSINESS SEGMENTS PLN 000 Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) TOTAL Revenues from third parties 703, , , ,526 95, ,950,075 Revenues from inter-segment transactions 21,524 31,336 41,035 2, (96,494) - Total revenues 724, , , ,545 96,090 - (96,494) 1,950,075 Cost of sales (649,692) (260,390) (651,250) (115,903) (80,334) - 91,718 (1,665,851) Gross profit/loss on sales 75,217 70,585 89,800 37,642 15,756 - (4,776) 284,224 Selling costs (50,835) (19,682) (35,107) (23,462) (9,037) - 5,350 (132,773) General and administrative expenses (33,218) (15,957) (30,275) (5,145) (9,607) (22,463) 450 (116,215) Profit/loss on receivables management 257 (80) 441 (942) (249) Profit/loss on other operating activities 52,384 1,905 (4,639) 1,450 (683) (3,530) - 46,887 Operating profit/loss 43,805 36,771 20,220 9,543 (3,496) (25,993) 1,024 81,874 Balance of exchange differences and interest on commercial settlements (20,785) (9,826) (43,587) (6,310) (1,707) - - (82,215) Cost of financing the Group (64,233) - (64,233) Profit/loss on financial activities (not ascribed to segments) ,084-46,084 Share in profit of affiliates Profit/loss before tax 23,922 26,945 (23,367) 3,233 (5,203) (44,142) 1,024 (17,588) Tax (20,243) Net profit/loss (37,831) Profit on discontinued operations Net profit/loss for the financial year (37,831) Amortisation/depreciation 61,554 12,706 31,323 9,095 4, ,819 EBITDA 105,359 49,477 51,543 18, (25,993) 1, ,693 41

44 PLN 000 Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) TOTAL Revenues from third parties 798, , , , , ,893,478 Revenues from inter-segment transactions 22,674 4,594 18, ,047 - (47,455) - Total revenues 821, , , , ,627 - (47,455) 1,893,478 Cost of sales (608,111) (302,228) (513,088) (69,821) (93,375) - 44,605 (1,542,018) Gross profit/loss on sales 213,233 48,033 38,256 32,536 22,252 - (2,850) 351,460 Selling costs (57,180) (19,323) (27,797) (14,713) (11,554) - 3,741 (126,825) General and administrative expenses (36,227) (18,784) (30,301) (9,587) (9,254) (24,278) 1,016 (127,415) Profit/loss on receivables management (,516) 674 7, (3,172) - (12) 4,237 Profit/loss on other operating activities 58,612 1,104 18,854 (290) 1, (32) 80,015 Operating profit/loss 177,922 11,704 6,102 8,119 (594) (23,645) 1, ,472 Balance of exchange differences and interest on commercial settlements (42,501) (2,997) (34,300) (2,172) (81,935) Cost of financing the Group (57,626) - (57,626) Profit/loss on financial activities (not ascribed to segments) (1,146) - (1,146) Share in profit of affiliates 1, ,687 Profit/loss before tax 137,108 8,707 (28,198) 5,947 (559) (82,417) 1,863 42,452 Tax (23,000) Net profit/loss ,452 Profit on discontinued operations Net profit/loss for the financial year ,452 Amortisation/depreciation 62,338 13,562 25,916 8,519 1,227 1, ,477 EBITDA 240,260 25,266 32,018 16, (21,730) 1, ,949 42

45 PLN 000 Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) TOTAL Tangible fixed assets 1,378, , ,693 88,627 6,872 7,239-2,219,455 Intangible assets 107,907 29,965 11,968 1,672 1,725 5, ,069 - goodwill 38,460 14, ,632 Shares in affiliates 5, ,145 Inventory 78,969 97,837 87,576 29,556 6,641 - (1,712) 298,867 Trade receivables 255, , ,690 46,667 46,649 - (34,554) 700,354 Other assets , ,917 Total assets 1,825, , , ,522 61, ,988 (36,266) 4,063,807 Trade liabilities 214,987 72, ,215 14,432 34,854 - (38,531) 540,461 Other liabilities ,707,099-2,707,099 Total liabilities 214,987 72, ,215 14,432 34,854 2,707,099 (38,531) 3,247, PLN 000 Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) TOTAL Tangible fixed assets 1,435, , , ,354 7,594 6,926-2,321,160 Intangible assets 137,899 29,430 15,170 2,070 2,337 5, ,936 - goodwill 41,463 12, ,772 Shares in affiliates 38, ,945 Inventory 104, ,520 59,714 35,130 11,327 - (2,381) 341,435 Trade receivables 294, , ,768 36,908 63,220 - (18,055) 736,312 Other assets , ,938 Total assets 2,010, , , ,462 84, ,894 (20,436) 4,353,726 Trade liabilities 206,864 44, ,160 15,428 45,091 - (19,519) 468,312 Other liabilities ,945,404-2,945,404 Total liabilities 206,864 44, ,160 15,428 45,091 2,945,404 (19,519) 3,413,716 43

46 Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) Recognised impairment losses 3,099 1,137 2,075 1, ,999 Reversed impairment losses 4,336 5,236 3, ,914 Recognised impairment losses (not ascribed to segments) Reversed impairment losses (not ascribed to segments) TOTAL ,493-1, Soda Agrochemical Organic Silicates and Glass Other operations segment Corporate Functions Eliminations (consolidation adjustments) Recognised impairment losses 7,970 1,833 1, , ,558 Reversed impairment losses 202 2,474 5, ,457 Recognised impairment losses (not ascribed to segments) Reversed impairment losses (not ascribed to segments) TOTAL ,398-1, GEOGRAPHICAL SEGMENTS PLN 000 Poland European Union Other European countries Africa Asia Other regions TOTAL Total assets 2,692,610 1,270,904 43,606 19,826 23,019 13,842 4,063,807 Net sales of products, goods and materials 807, ,165 50,169 96, ,965 64,652 1,950, PLN 000 Poland European Union Other European countries Africa Asia Other regions TOTAL Total assets 2,679,447 1,576,093 29,469 6,305 54,777 7,635 4,353,726 Net sales of products, goods and materials 965, ,539 41,586 16, ,187 25,120 1,893,478 44

47 4. Information about the Ciech Group s financial standing Profitability in H In H1 2010, all return ratios reflecting the activity of the Ciech Group deteriorated in comparison with the same period of the previous year. The main negative factor affecting the ratios was lowering of sales value and margin level in the soda segment. It was the result of very low prices of soda ash in the European markets in the perspective of the last 4 years (lower by approx. 30% in comparison with the record-breaking prices in Q1 2009), accompanied by growing manufacturing costs. In the entire 2009, the market of fertilizers was facing very low demand from agricultural producers and low prices in the global markets in comparison with the record-breaking ones in Minor price drops in the global and European markets of phosphorus-based chemical fertilisers were recorded in H (as compared to the increase in Q1 2010) at simultaneous increase of raw material prices. Apart from the factors having a negative impact on the operating activity of the Ciech Group, its net result and return ratios were negatively influenced by the costs of external debt servicing. Moreover, the net result was also affected by the negative balance of exchange differences and sale by CIECH S.A. of its shares in Zakłady Azotowe Tarnów. The table presents the return ratios: Return ratios of the Ciech Group Item Gross return on sales 14.6% 18.6% Return on sales 1.8% 5.1% Operating profit margin 4.2% 9.6% EBITDA Profitability 10.3% 15.6% Net return on sales (ROS) (1.9%) 1.0% Return on assets (ROA) (0.9%) 0.4% Return on equity (ROE) (4.6%) 2.1% Calculation principles: gross return on sales gross sales profit for a given period / net sales of products, services, goods and materials, return on sales sales profit for a given period / net sales of products, services, goods and materials, operating profit margin operating profit for a given period / net sales of products, services, goods and materials, return on sales (ROS) net profit for a given period / net sales of products, services, goods and materials, return on assets (ROA) net profit / total assets at the end of a given period, return on equity (ROE) net profit for / total equity at the end of a given period. Return levels of the Ciech Group PLN thousand Q Q Q Q Q Q Q Q Q Gross profit from sales EB IT DA Gross return on sales EBITDA profitability Source: CIECH S.A. 45