Board/Management Information • May 26, 2021
Board/Management Information
Open in ViewerOpens in native device viewer
Appendix to Resolution No. 138/X/2021 of the Supervisory Board of CIECH S.A. of April 22, 2021
for financial year 2020
Warsaw, April 2021
The Supervisory Board of CIECH S.A. herewith submits its report on its activities in financial year 2020 containing, among others, report on the results of the evaluation referred to in article 382 § 3 of the Code of Commercial Companies, i.e. on the evaluation of: Separate Financial Statements of CIECH S.A. for 2020, Consolidated Financial Statements of CIECH Group for 2020, the Report of the Management Board on the activities of CIECH Group and CIECH S.A. for 2020, together with the Non-Financial Report for 2020, and the Management Board's proposal regarding distribution of net profit for 2020.
The scope of this report includes:
As at 1 January 2020, the composition of the Supervisory Board of CIECH S.A. was as follows:
Due to the resignation of Mr. Mariusz Nowak as of 22 January 2020 from his membership in the Supervisory Board of CIECH S.A., on 23 January 2020 the Extraordinary General Meeting of CIECH S.A. appointed Mr Łukasz Rędziniak as a member of the Supervisory Board of CIECH S.A.
On 20 May 2020, Mr Tomasz Mikołajczak, previously Deputy Chairperson of the Supervisory Board, tendered his resignation, and on 21 May 2020, the Annual General Meeting of CIECH S.A. appointed Mr Martin Laudenbach as a member of the Supervisory Board of CIECH S.A.
On 16 July 2020, the Supervisory Board elected Mr Marek Kośnik as the Deputy Chairperson of the Supervisory Board.
As at 31 December 2020, the Supervisory Board exercised its functions in the following composition:
In 2020, two committees operated as part of the Supervisory Board of CIECH S.A., i.e.:
Information on the activities of the aforementioned committees is presented in the subsequent parts of this Report.
Acting on the basis of § 21 section 1 of the Articles of Association of CIECH S.A. and § 3 section 1 of the Regulations of the Supervisory Board, the Supervisory Board of CIECH S.A. exercised continuous supervision over the activities of the Company. In 2020, the Supervisory Board held 5 meeting, of all of which minutes were duly taken, and resolutions were adopted both at the meetings and using distant direct communication methods – without holding a meeting.
The following are some of the major issues dealt with by the Supervisory Board in financial year 2020.
The Financial Plan of the CIECH Group for 2021(hereinafter referred to as the "2021 Plan") was approved at a meeting of the Supervisory Board on 14 December 2020. The Management Board of CIECH S.A. presented and then discussed in detail the 2021 Financial Plan with the Supervisory Board. The analysis included, among others, issues such as: impact of external factors (incl. the Covid-19 pandemic), developments in the prices of salt and soda, key development projects (Grain and Golden Eye), incl. the planned production launch by the new evaporated salt plant in Staßfurt, sources of investment financing, CAPEX, key company and operational indicators, as well as the level of net debt to EBITDA, raw material strategy, inventory optimisation, fixed and variable expenses, emissions of production installation and CO2 certificate policy.
The 2021 Plan was also discussed in the context of its compliance with the approved CIECH Group Strategy for 2019 – 2021.
The Audit Committee analysed the assumptions for the 2021 Plan in detail on 7 December 2020, and together with the Management Board of CIECH S.A. discussed forecasts of the results of CIECH S.A. and its individual Business Units in terms of assumptions for production, expected increase in EBITDA, gross margin, fixed expenses, planned CAPEX level, ongoing development projects, including the construction of a new evaporated salt plant in Staßfurt coming to its end, soda and salt market environments, personnel costs and sales volumes for each type of activity. The situation of CIECH Soda Romania was also discussed and the impact of the cost of maintaining the company in a "suspended" condition on the planned 2021 results.
The Strategy of the CIECH Group for 2019 – 2021 was approved at a meeting of the Supervisory Board on 5 December 2018 (the "2019 – 2021 Strategy").
During 2020, the Supervisory Board discussed in detail the progress in the implementation of the 2019- 2021 Strategy, including progress in the implementation of development projects in the soda and salt segments, with particular focus on the investment in the construction of the evaporated salt plant in Staßfurt, the completion and commissioning of which was scheduled for the end of the first quarter of 2021. Discussions included the development projects aimed at developing specialist businesses in other segments, including the agro segment, and building a working environment, as well as strengthening the position of the CIECH Group as a reliable partner for local communities, caring for the natural environment.
At its meeting on 31 March 2020, the Supervisory Board assessed the reports and statements presented by the Company for approval at the Annual General Meeting, i.e.:
2019 and as consistent with the financial data included in the Separate Financial Statements of CIECH S.A. for 2019 and the Consolidated Financial Statements of CIECH Group for 2019, and meeting the requirements provided for in article 49 of the Accounting Act of 29 September 1994.
After the aforementioned assessments and evaluations, the Supervisory Board recommended to the Annual General Meeting of CIECH S.A. that the reports and statements indicated under points 1 to 3 above be approved.
In addition, the Supervisory Board also considered further issues to be discussed at the Annual General Meeting of CIECH S.A., including:
As part of supervision over the current operations of the Company, the financial situation and results of operating activities were the subject of regular analysis of the Supervisory Board.
The basis of analyses carried out by the Supervisory Board was the Financial Plan of CIECH Group for 2020 and the Strategy of the CIECH Group for 2019-2021.
Apart from those described in any other sections hereof, in 2020, the Supervisory Board also dealt with issues such as:
1) Acquisition by the Company of additional long-term financing in the form of revolving loans under the adopted 2019-2021 Strategy, enabling flexible use of funds from loans and the adjustment of the corporate financing structure to the implemented investments by replacing part of the shortterm financing with long-term financing.
The Supervisory Board updated the Market Risk Hedging Strategy (hereinafter referred to as the "MRPS") adopted by Resolution No. 82/IX/2016 of the Supervisory Board of CIECH S.A. of 26.04.2016, as amended, twice in 2020, i.e.:
The Supervisory Board analysed in detail and discussed with the Management Board the progress of work on the implementation of development projects listed below in the CIECH Group companies, including budgets of these projects, the current status of implementation, expenses incurred and their impact on the Group's cash flow, revenues, margin and EBITDA.
Development projects discussed:
• Grain (started at CIECH Soda Deutschland GmbH & Co. KG in Germany and continued at CIECH Salz Deutschland GmbH)
The project aims to develop the salt segment of the CIECH Group, understood as increasing the production capacity and sales of salt products by building and commissioning new production capacities with a target capacity of 450 thousand tonnes/year. The production will be dedicated to the segment of salt products such as: salt tablets, electrolysis salt, pharmaceutical grade salt, kitchen salt and granulated salt.
• Golden Eye (at CIECH Soda Deutschland GmbH & Co. KG in Germany)
The project aims to increase the production capacity of sodium bicarbonate with a focus on the production of a high-margin dialysis-quality sodium bicarbonate product. The project is divided into 2 phases - 1) construction of a drying room to enable the production of dialysis grade soda and 2) construction of a new DCB column and crystalliser to increase the efficiency of the system and obtain the highest quality product.
• OP-140 boiler (at CIECH Soda Polska S.A. – Janikowo CHP)
The project aims to restore the basic generation unit of the Janikowo Combined Heat and Power Plant (the oldest - commissioned in 1969), which will translate into improved steam generation efficiency, increased availability of the CHP plant and reduced dust emissions.
• DCB installation (at CIECH Soda Polska S.A. – Inowrocław Plant)
The DCB installation construction project and the expansion of the filtration installation aimed at eliminating bottlenecks (filtration and calcinations) and increasing the level of sodium carbonate production and reducing production expenses.
• BGT (at CIECH R&D Sp. z o.o.)
The project aims to develop an innovative product containing 50% less glyphosate compared to conventional market preparations, while ensuring comparable effectiveness in weed control. Globally, glyphosate is the largest molecule in terms of sales value of all plant protection products.
• Salt licks and granules (at CIECH Soda Polska S.A.)
A project involving the introduction of salt granules and salt licks to the product portfolio of the Salt Business Unit, using salt dust and tablet crumbs - hardly tradable materials (the "waste into product" project).
• Modernisation of the TG-2 turbine set (at CIECH Soda Polska S.A.)
The project implemented as a reconstruction task, consisting in the performance of a major overhaul of the turbine set to maintain its production availability and effective operation.
The report of the Audit Committee includes:
As at 1 January 2020, the composition of the Audit Committee was as follows:
Mr Piotr Augustyniak and Mr Artur Olech were members of the Audit Committee meeting the independence criterion.
Member of the Audit Committee Mr Mariusz Nowak resigned from his office in the Supervisory Board of CIECH S.A. with effect on 22 January 2020, and ceased to be a member of the Audit Committee on that day.
On 24 February 2020, the Supervisory Board of CIECH S.A. filled a vacancy in the composition of the Audit Committee by appointing Mr Marek Kośnik as a Member of the Audit Committee.
As at 31 December 2020, the composition of the Audit Committee was as follows:
Mr Piotr Augustyniak, Mr Artur Olech and Mr Marek Kośnik were members of the Audit Committee meeting the independence criterion.
The tasks of the Audit Committee were defined in the Regulations of the Audit Committee, which were approved by Resolution No. 21/X/2018 of the Supervisory Board of 5 December 2018, and subsequently amended by Resolution No. 77/X/2020 of 21.02.2020.
In accordance with the Regulations of the Audit Committee, the tasks of the Audit Committee include in particular:
In 2020, the Audit Committee held a meeting with the statutory auditor of CIECH S.A. – PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp.k. ("PwC"), and after the Supervisory Board of CIECH S.A. appointed of a new statutory auditor to audit the statutory financial statements for 2020-2021, with the statutory auditor – Deloitte Audyt Sp. z o.o. Sp. k., with whom he discussed on an ongoing basis the scope of planned audits and reviews of periodic reports of CIECH S.A. and the CIECH Group, including:
The Audit Committee also decided on giving its consent for the auditors of the Company, i.e. PwC and Deloitte Audyt Sp. z o.o. Sp. k. and their related parties, to provide other non-audit services to the companies of the CIECH Group.
The Audit Committee reviewed the Letter to the Management Board of CIECH S.A. prepared by PwC - the auditor of CIECH S.A., containing observations on the procedures as well as operating and accounting systems assessed in terms of their importance for the proper functioning of the internal control systems within the Group, which the auditor drew attention to during the audit of the consolidated financial statements of the CIECH Group for the financial year ending 31 December 2019 together with the Company's comments on the observations.
In 2020, the Audit Committee analysed and discussed periodic reports submitted by the Company, taking into account the manner in which the Company managed financial risks, as described in the Market Risk Hedging Strategy (hereinafter referred to as the "MRPS") for the CIECH Group, adopted by the Supervisory Board of CIECH S.A., and amended and updated on 20.02.2020 and 05.10.2020, which defines, among others, the risks for which hedging instruments are used, the principles of their identification and quantification and the manner of dealing with market risks, including the maximum permissible values of hedging transactions.
When analysing and discussing periodic reports of CIECH S.A. and CIECH Group, the Audit Committee became also acquainted in detail with the sources of financing of CIECH Group's activities, including external debt and indebtedness resulting from the use of funds under the intercompany loans programmes, financial leasing and factoring agreements.
The Audit Committee analysed in detail the assumptions for the Financial Plan of the CIECH Group for 2021 at the meeting on 7 December 2020 and discussed, with the Management Board of CIECH S.A., forecasts of the results of CIECH S.A. and individual Business Units in terms of the expected increase in EBITDA, gross margin, fixed expenses, planned CAPEX, ongoing development projects, external factors (including the Covid-19 pandemic), personnel costs and sales volumes, for each type of activity.
The Audit Committee also dealt with issues related to the adopted audit plan for 2020. The results of the audits carried out in 2020 were presented by the Internal Audit Department in the form of a report and then discussed at meetings of the Audit Committee.
At its meeting on 20 April 2021, the Audit Committee discussed reports and statements of CIECH S.A. and the CIECH Group presented by the Management Board of CIECH S.A. with regard to financial year 2020, i.e.:
The Audit Committee, having met with the statutory auditor of the Group, and having familiarised itself with the abovementioned reports and statements, and the auditor's opinion on the separate and consolidated financial statements for 2020, as well as the auditor's information on the issues discussed with the Management Board of CIECH S.A. during the audit of the aforementioned reports and statements, did not make any comments to the reports that were submitted to, and for the assessment of, the Supervisory Board of CIECH S.A.
The Remuneration Committee of the Supervisory Board of CIECH S.A.:
The First Remuneration Committee of the Supervisory Board was established by Resolution No. 66/IV/2005 of the Supervisory Board of CIECH S.A. dated 16 March 2005.
In 2020, the composition of the Remuneration Committee of the Supervisory Board of CIECH S.A. (the "Remuneration Committee") changed due to resignations tendered by:
As at 31.12.2020, the composition of the Remuneration Committee was as follows:
In accordance with the Regulations of the Remuneration Committee, adopted by Resolution No. 66/IV/2005 of the Supervisory Board of CIECH S.A. of 16 March 2005, the main task of the Committee is to advise the Supervisory Board on issues related to the determination of the rules for, and amount of, remuneration of members of the Management Board of CIECH S.A., and in particular:
6) informing the Supervisory Board of any significant issues in the general context of the Committee's activities.
In 2020, meetings of the Remuneration Committee were held, among others, to:
Pursuant to article 382 § 3 of the Code of Commercial Companies and § 21 section 2 point 1) of the Articles of Association of CIECH S.A., the Supervisory Board of CIECH S.A. assessed the Separate Financial Statements of CIECH S.A. for 2020 and the Consolidated Financial Statements for 2020, the Report of the Management Board on the activities of CIECH Group and CIECH S.A. for 2020, together with the Non-Financial Report for 2020, in terms of their compliance with the accounting books and records, as well as the actual status, and the proposal of the Management Board of CIECH S.A. regarding the distribution of the net profit for 2020.
Pursuant to article 382 § 3 of the Code of Commercial Companies and § 21 section 2 point 1) of the Articles of Association of CIECH S.A., the Supervisory Board of CIECH S.A. assessed the Separate Financial Statements of CIECH S.A. for 2020 in terms of its compliance with the books and records, as well as with the actual status.
The audit of the Financial Statement of CIECH S.A. for financial year 2020 was conducted by Deloitte Audyt sp. z o.o. sp.k. (hereinafter also referred to as "Deloitte").
The Supervisory Board familiarised itself with the Separate Financial Statements of CIECH S.A. for 2020 (the "Financial Statements") and the Report of the independent statutory auditor of the audit of the Separate Financial Statements, according to which the Financial Statements:
On 20 March 2021, the Audit Committee of the Supervisory Board of CIECH S.A., having familiarised itself with the Financial Statements and the auditor's report on the audit of the separate Financial Statements, did not submit any comments to the Separate Financial Statements of CIECH S.A. for the tax year 2020.
At its meeting on 22 April 2021, the Supervisory Board, having familiarised itself with the Separate Financial Statements of CIECH S.A. for 2020 and the auditor's report, concluded that the Separate Financial Statements had been prepared in accordance with the books and records as well as the actual status, presented an accurate and clear picture of the asset and financial position of the Company, and met the requirements provided for in the Accounting Act of 29 September 1994.
Upon assessment of the Separate Financial Statements of CIECH S.A. for the tax year 2020, the Supervisory Board of CIECH S.A. recommended to the Annual General Meeting that the Separate Financial Statements be approved.
According to article 382 § 3, in conjunction with article 395 § 5 of the Code of Commercial Companies and § 21 section 2 point 1) of the Articles of Association of CIECH S.A., the Supervisory Board of CIECH S.A. evaluated the Consolidated Financial Statements of the CIECH Group for 2020 in terms of its compliance with accounting books and records, as well as the actual status.
The Audit of the Consolidated Financial Statements of the CIECH Group for 2020 was carried out by Deloitte Audyt sp. z o.o. sp.k. (hereinafter referred to as "Delloite").
The Supervisory Board familiarised itself the Consolidated Financial Statements of the CIECH Group for 2020 (the "Financial Statements") and the Report of the independent statutory auditor of the audit of the Consolidated Financial Statements, according to which the Financial Statements:
On 20 April 2021, the Audit Committee of the Supervisory Board of CIECH S.A., having familiarised itself with the Financial Statements and the auditor's report on the audit of the Consolidated Financial Statements, did not submit any comments to the Consolidated Financial Statements of the CIECH Group for the tax year 2020.
At its meeting on 22 April 2021, having familiarised itself with the Consolidated Financial Statements of the CIECH Group for 2020 and the auditor's opinion, the Supervisory Board concluded that the Consolidated Financial Statements of CIECH Group for 2020 had been prepared in accordance with the accounting books and records, as well as the actual status, and met the requirements provided for in the Accounting Act of 29 September 1994.
Having assessed the Consolidated Financial Statements of CIECH Group for 2020, the Supervisory Board of CIECH S.A. recommended their approval to the Annual General Meeting.
According to article 382 § 3 of the Code of Commercial Companies and § 21 section 2 point 1) of the Articles of Association of CIECH S.A., the Supervisory Board of CIECH S.A. evaluated the Management Board's Report on the Activities of the CIECH Group and CIECH S.A. for 2020, together with the Non-Financial Report of the CIECH Group for 2020, in terms of their compliance with the accounting books and records, as well as the actual status.
The Supervisory Board familiarised itself with the Management Board's Report on the Activities of the CIECH Group and CIECH S.A. for 2020 and the Report of the independent statutory auditor of the audit of the Consolidated Financial Statements of the CIECH Group and the Separate Financial Statements of CIECH S.A., which comprised: an opinion on the Report on the Activities, statement on the application of corporate governance and information on the non-financial information.
With reference to the Management Board's Report on the Activities of CIECH Group and CIECH S.A. for 2020 (hereinafter referred to as the "Report"), the auditor concluded that the Report had been prepared in accordance with the requirements of article 49 of the Accounting Act (Journal of Laws of 2019, item 351) and § 70 and § 71 of the Regulation of the Minister of Finance of 29 March 2018 on current and periodic information provided by issuers of securities and conditions for recognising information required by the laws of a non-member state as equivalent (the "Regulation on current information" - Journal of Laws of 2018, item 757) and that it was consistent with the information contained in the audited separate and consolidated financial statements.
In addition, the auditor stated that in consideration of the knowledge about the Parent Company and the Group and their environment obtained during the audit, it had not identified any significant distortions in the Joint Activity Report.
On 20 April 2021, having reviewed the Report and the report of the auditor, the Audit Committee of the Supervisory Board of CIECH S.A. did not make any comments to the Management Board's Report on the activities of the CIECH Group and CIECH S.A. for 2020, including the Non-Financial Report of the CIECH Group for 2020.
At its meeting on 22 April 2021, the Supervisory Board concluded that the Management Board's Report on the activities of the CIECH Group and CIECH S.A. for 2020 presented in an exhaustive manner the functioning of the Company and CIECH Group in 2020. The Report complied with the financial data contained in the Separate and Consolidated Financial Statements for 2020 and with the requirements provided for in the Accounting Act of 29 September 1994.
Having assessed the Management Board's Report on the activities of the CIECH Group and CIECH S.A. for 2020, the Supervisory Board recommended its approval to the Annual General Meeting.
The Application on the distribution of the net profit generated by the Company in 2020 in the amount of PLN 155 287 361.59 (say: one hundred fifty five million two hundred eighty seven thousand three hundred sixty one PLN 59/100 grosz) Management Board of CIECH S.A. it will be submitted to the Supervisory Board for evaluation at a later date. In connection with the above, the Supervisory Board of CIECH S.A. at the meeting on April 22, 2021, it did not assess the motion of the Management Board of CIECH S.A. on the distribution of net profit for 2020.
The Supervisory Board of CIECH S.A. submits to the Annual General Meeting of CIECH S.A. a concise evaluation of the Company's situation in 2020, including the assessment of the internal control system and the system for the management of risks significant to the company.
In 2020, CIECH S.A. achieved revenues of PLN 1,805,507 thousand (for 2019 - PLN 2,286,065 thousand), operating result amounted to PLN 66,482 thousand (PLN 109,972 thousand in 2019) and a net profit
1 The presented information includes financial figures for continued and discontinued operations.
of PLN 155,287 thousand (PLN 60,436 thousand in 2019), the balance sheet total was PLN 4,375,424 thousand (PLN 3,889,932 thousand at the end of 2019), and the cash balance increased by PLN 95,304 thousand, to the level of PLN 265,287 thousand. Both internal and external factors had a significant impact on the Company's results. The key factors having a positive impact on the operating result include higher selling prices, e.g. salt tablets, relocation of soda sales towards higher-margin markets and significant savings on fixed expenses. The operating result was negatively affected by the decrease in the sales volume caused by COVID-19 and the limited production capacity due to failures of production lines. The operating result was also negatively affected by lower sales volumes of raw materials for the production of plant protection products and PUR foams, due to the change in the model of raw materials purchase for the needs of subsidiaries.
The net result achieved in 2020 was mainly influenced by the share in profits (PLN 182 million), the result on exchange differences (PLN 33.5 million), balance sheet valuation of derivative financial instruments (- PLN 20.2 million), the implementation of CIRS and forward contracts (- PLN 47.3 million) and income tax (- PLN 23 million).
In 2020, sales revenues of CIECH S.A. amounted to PLN 1,805,507 thousand, and were lower (by 21%) compared to 2019. The main reason for this decrease was the hibernation of the plant in Romania and the lower volume of soda and salt sold as a result of the decrease in demand due to COVID-19 and the limited availability of sodium carbonate. The lower volume of raw materials sold for the production of PPP and PUR foams also had a negative impact. Among the positive factors influencing revenues, there was a significant increase in prices, among others, of salt tablets.
In 2020, the gross profit on sales amounted to PLN 248,206 thousand, and in the same period of the previous year – to PLN 343,256 thousand, while the operating profit (EBIT) for 2020 was at the level of PLN 66,482 thousand and PLN 109,972 thousand for the comparative period, which resulted in the EBIT profitability for 2020 at the level of 3.7% (4.8% in the previous year). Adjusted EBITDA was PLN 84,305 thousand for 2020 and PLN 119,586 thousand for 2019, which gave the adjusted EBITDA profitability at the level of 4.7% for 2020 and 5.2% for 2019, respectively.
Equity as at 31 December 2020 amounted to PLN 1,593,766 thousand (at the end of 2019, PLN 1,463,204 thousand). Liabilities (long and short-term in total) of CIECH S.A. as at 31 December 2020, amounted to PLN 2,781,658 thousand, which means an increase in liabilities by PLN 344,662 thousand compared to the previous year result. This increase was mainly due to changes in the balance of loan liabilities by PLN 356,101 thousand.
Net debt of CIECH S.A., calculated as the total of long-term and short-term liabilities due to loans, credits and other debt instruments, less cash and cash equivalents, amounted to PLN 1,829,818 thousand as at 31 December 2020, which means an increase compared to the end of December 2019 by PLN 241,433 thousand.
Cash flows from operating activities in 2020 stood at PLN 66,310 thousand, and were by PLN 128,861 thousand higher than the operating cash flows generated in 2019. The lower level of trade receivables, lower tax paid and lower interest had a positive impact on the change in the value of these cash flows. The level of the deviation from 2019 was negatively affected by the lower operating result.
In 2020, the recognised surplus of investment expenditure over inflows was PLN 333,415 thousand. The loan extended to related entities had the greatest impact on the balance of cash flows from investing activities.
The balance of cash flows from financial activities was positive and amounted to PLN 358,058 thousand. These operations were mainly affected by the funds obtained from cash pooling.
The control system in CIECH Group consists of:
In 2020, the Internal Audit Department of CIECH S.A., acting on the basis of the Organisational Regulations of CIECH S.A., carried out a series of inspections and audits on the basis of the approved Audit Plan, both at CIECH S.A. and at CIECH Group companies. The Department also carried out ad hoc audits at the request of the Management Board and Supervisory Board of CIECH S.A.
Audit and inspection reports, together with conclusions, are presented on an ongoing basis to the Management Board of CIECH S.A. and relevant organisational units, and their implementation is monitored.
Both the control and audit plan, as well as information on their implementation and results are presented and discussed at meetings of the Audit Committee of the Supervisory Board of CIECH S.A.
CIECH S.A. has an internal control system covering significant areas of activity within the entire CIECH Group, which is adapted to the Group's organisational structure and also includes subsidiaries. However, it requires constant improvement through regular audits and inspections of areas identified as the most susceptible to various types of irregularities.
The Risk Management System, operated currently within the CIECH Group, was implemented in 2020 and formally defines the scope, activities, participants and their scope of responsibility for risk management within the CIECH Group. It is an ordered set of general principles and guidelines in the form of a strategy, policy and risk management procedure in the CIECH Group. The system was implemented to enable the CIECH Group to achieve its strategic goals without taking any excessive risk. For this reason, the system:
• in the case of risks not yet identified, it enables their proper identification and estimate.
The system is continuously developed and constitutes a comprehensive and corporate solution. It is an important element of supporting the Group's current operations.
The Supervisory Board of CIECH S.A. uses it in monitoring the effectiveness of internal control and internal audit systems.
The objectives of risk management in the CIECH Group are implemented through:
Measures taken as part of the risk management process of the CIECH Group are carried out on an ongoing and regular basis. Risk management is carried out in a two-dimensional manner - vertically and horizontally, identifying risks not only occurring within the entity, organisational unit or process concerned, but also those risks whose effects affect various areas of the Group's operations, entities and processes from the point of view of the entire CIECH Group. Only such a comprehensive approach and understanding of risks enables effective and efficient risk management and tangible benefits for the Group.
In terms of responsibility for the risk management process, a special role in the process is played by its key participants, namely the Management Board of CIECH S.A., the Executive Committee, the executives and the Director of the Risk Department.
The correctness and effectiveness of the implemented risk management system is monitored by the Supervisory Board and the Audit Committee, among others, on the basis of information from the Management Board of CIECH S.A. on current risks and methods of their management.
The risk management process within the CIECH Group was defined and implemented in accordance with the "International Standard ISO 31000: 2018 Risk Management".
The goal of the CIECH Group is to ensure that it is perceived by its stakeholders as a transparent organisation with high awareness and understanding of the risks that may affect the achievement of its objectives.
The functioning risk management process, as one of the elements building the Group's value, focuses on the categories of risks presented below, which are of key importance from the point of view of achieving the objectives set for the Group:
The CIECH Group does not limit itself to the aforementioned risk categories. The Group makes every effort to identify and verify the key risk areas on an ongoing basis and effectively reduced them through its developed and implemented risk management process.
The method of financial risk management is defined in the Market Risk Hedging Strategy adopted by the Supervisory Board (the "MRPS") for the CIECH Group, and successively updated (with the last update of the MRPS of 5 October 2020), in which the procedures and division of tasks in the area of risk management with regard to currency risk, interest rate risk and the risk of changes in the prices of raw materials (coal, gas, electricity and CO2 emission certificates) are described and adopted. The document defines the purpose of market risk management, defines the risks for which hedging instruments are applied, defines the principles of identification, quantification and determination of the manner of proceeding with market risks, including the maximum allowable value of hedging transactions. The MRPS specifies the instruments used for particular types of market risks and the rules of operation of the Market Risk Committee. Hedging transactions are concluded based on the recommendation of the Market Risk Committee composed of the Management Board of CIECH S.A. and representatives of the executive staff.
The Compliance System, implemented by the CIECH Group in 2018, is a set of rules, processes, measures as well as formal and organisational activities the purpose of which is to avoid the risk of violating any type of compliance obligations applicable to CIECH Group. The Compliance System has been implemented in the CIECH Group in order to eliminate any risk of non-compliance with external and internal requirements by continuously examining the conduct of CIECH Group in terms of compliance obligations, understood as any laws, internal regulations and ethical standards applicable to all business processes existing within the CIECH Group in connection with its operations.
The Compliance System defines business areas (e.g. Divisions within CIECH S.A. or CIECH Group companies) depending on the scope and specificity of compliance obligations managed by members of their executive staff who are responsible for ensuring compliance of the operations of the CIECH Group with the requirements, among others, of: competition protection, environmental protection, product quality and safety, capital market law, occupational health and safety, counteracting fraud and corruption, preventing conflicts of interest, energy law, personal data protection, protection of company property, infringement of or bypassing accounting and financial reporting rules, preventing and combating discrimination, mobbing and harassment, as well as protection of intellectual and industrial property rights.
The following tools are used within the CIECH Group in order to ensure efficiency of the Compliance System:
Explanatory proceedings in cases of violations of regulations are carried out by the Compliance Officer of the CIECH Group, in cases of violations of ethical principles and conflicts of interest – by the Ethics Committee of the CIECH Group, and in cases of mobbing/discriminatory behaviour – by the Commitee for Counteracting Unlawful Behaviour.
In 2020, there were 4 reported violations. There were no reports of anti-corruption violations.
The assessment of the Separate Financial Statements of CIECH S.A. for 2020 and the Consolidated Financial Statements of CIECH Group for 2020, the Report of the Management Board on the activities of the CIECH Group and CIECH S.A. for 2020, together with the CIECH Group's Non-Financial Report for 2020, made it possible to conclude that the information contained therein was consistent with the accounting books and records, as well as with the actual status, and that their content was consistent.
The Supervisory Board of CIECH S.A., having regard to the above assessment, recommends that the Annual General Meeting of CIECH S.A. approve:
In addition, the Supervisory Board of CIECH S.A. recommends to the Annual General Meeting of CIECH S.A. that the following individuals holding office of Members of the Management Board of CIECH S.A in financial year 2020, be discharged from their duties:
| 1. Sebastian Kulczyk | - Chairperson of the Supervisory Board | …………………………………….…… |
|---|---|---|
| 2. Marek Kośnik | - Deputy Chairperson of the Supervisory Board | …………………………………….…… |
| 3. Łukasz Rędziniak | ………………………………………… | |
| 4. Martin Laudenbach | ………………………….…………….… | |
| 5. Artur Olech | ………………………….……….……… |
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.