Poland's ZAP Q4 op profit slumps on feedstock

21 August 2006 14:49  [Source: ICIS news]

PRAGUE (ICIS news)— Poland’s Zaklady Azotowe Pulawy (ZAP) on Monday blamed “enormous increases” in natural gas feedstock costs as fourth quarter 2005/06 operating profit plummeted to Zloty 13.6m ($4.4m/€3.5m).

 

This compared to the Zloty 65.3m earned by the melamine, caprolactam and nitrogen fertilisers producer across April-June last year.

 

Company president Malgorzata Iwanejko said: “Last year the situation on the gas market was unlike anything that we have ever witnessed and we tend to regard it as an extraordinary situation.

 

“Let me remind you that during the past financial year we had four price rises: in July 2005 (up by 8.5%), in October 2005 (up by 7.4%), in January 2006 (up by 10.5%) and in April 2006 (up by 7.6%).”

 

Natural gas is ZAP’s chief raw material, representing one third of its costs. In the fourth quarter alone, the cost of gas incurred by the company rose by more than Zloty 37m on the corresponding period of the previous year, added Iwanejko.

 

The quarter also saw net profit fall steeply to Zloty 13.1m from Zloty 50.3m, although revenue edged up by Zloty 16.7m to Zloty 540m.

 

State-held ZAP recently announced it was entering into a polyamide-6 joint venture with Italy's Aquafil partly in order to diversify away from products highly vulnerable to gas price hikes.

 

Looking at the overall financial year, Iwanejko was encouraged that the company recorded its highest ever sales revenue – Zloty 2.03bn, compared to 2004/2005’s Zloty 1.95bn. Nevertheless operating profit was cut from Zloty 286.4m to Zloty 156.9m while net profit came in Zloty 75.8m down at Zloty 126.1m.

 

She observed that sales growth was partly driven by higher revenue from granular fertilisers, particularly urea and ammonium nitrate. “We were well prepared for the delayed commencement of the fertiliser application season, which enabled us to maintain fertiliser sales at a stable level until the end of June,” said Iwanejko.

By: Will Conroy
+44 20 8652 3214

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