Poland’s Azoty swings to a loss in Q3 on higher gas prices

Source: ICIS News

2018/11/08

LONDON (ICIS)--Grupa Azoty swung to a net loss in the third quarter, year on year, on the back of higher natural gas and petrochemical feedstock prices, the Polish chemicals and fertilizers major said on Thursday.

Polish zloty (Zl) Q3 2018 Q3 2017 Change
Net profit/loss -116.8m 75.6m -255%
Operating profit/loss -126.3m 100.7 -225%
Revenues 2.32bn 2.20bn 5.5%

Key points:

- Gas prices rose 50% during the third quarter, year on year, undermining Azoty’s fertilizers division as natural gas is a major feedstock.

- The company said it had faced strong pressure from imported rival fertilizers on the Polish market across the quarter.

- It added that, on the back of cost pressures, it had hiked fertilizers prices up to 20% in some cases.

- The higher price of oil translated into more expensive petrochemical feedstock prices, said Azoty, noting it faced substantial price gains in benzene and phenol.

- Azoty’s chemical business’ third-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to Zl 31m, down sharply from the Zl 84m posted in the third quarter of 2017.

- The company attributed the fall to higher gas prices and more costly raw materials used by the oxo-alcohols segment.

Outlook:

- The $269m acquisition of German specialty fertilizers firm Compo Expert, completed in the third quarter, provides the potential to deliver a sharp increase in group revenues, the company said.

- Investor in Grupa Azoty, however, are less convinced and the company’s market capitalisation has fallen sharply in the past months.

- Chemical equity analysts have said the Azoty’s refusal to disclose Compo Expert’s debt had the potential to affect investors’ perception.

Pictured: Polish currency; Azoty blamed higher feedstock prices for the third-quarter losses
Source: Thomas Schneider/imageBROKER/REX/Shutterstock

($1 = Zl 3.75)