Business strategy
With the Group’s stable financial position, we can afford a realistic approach to strategic matters, while constantly working to improve our competitiveness in the coming years.
With the Group’s stable financial position, we can afford a realistic approach to strategic matters, while constantly working to improve our competitiveness in the coming years. Our goal is to build the fully-integrated Grupa Azoty Group, improving the attractiveness of its product portfolio, relying on optimised processes, and implementing innovative solutions. We are flexible and ready to adapt to the changing world. In response to developments in the economy and in our business environment, we have drawn up the updated ‘Growth Strategy of the Grupa Azoty Group for 2014–2020’. We have reviewed our strategic objectives and adjusted them to the current market conditions.
The update of the strategic objectives was followed by a revision of our corporate performance indicators, which provide a benchmark to measure progress in the implementation and delivery of our strategy.
Strategic financial targets of the Grupa Azoty Group
Until 2020, the Grupa Azoty Group will pursue growth in four areas which represent key challenges to us:
The combination of the potentials of the Group companies based in Tarnów, Puławy, Police and Kędzierzyn not only has helped to keep the key chemical plants in Polish hands, but also has generated numerous cost synergies. The consolidation process initiated seven years ago has yielded savings estimated at no less than PLN 710m to date. It has resulted in lower finance costs, significant EBITDA growth, increased business stability, and improved debt financing conditions.
How we consolidate our plants
One benefit of a single procurement platform is lower prices of raw materials; the consolidation of purchasing activities generated approximately PLN 465m in savings*
•Production and maintenance synergies led to PLN 170m in savings
The optimisation of logistics (including the railway car fleet) produced savings of PLN 69m across the Group
* Data for the period from 2011 to Q3 2017.
We believe that the consolidation of the Grupa Azoty Group, launched in 2013, offers a potential for further efficiencies. In order to manage the Group more effectively, we intend to implement a system of management by business segments. Until 2020, the Grupa Azoty Group will continue to integrate its processes and to further consolidate:
- sales of fertilizers,
- procurement processes,
- logistics,
- finance,
- IT,
- the power segment; and more.
We are optimising non-current asset management, seeking to harmonise our planning and production processes, and aligning our operational performance and cost efficiency reporting process across the Group. We are launching a platform to exchange information on R&D projects, which is expected to eliminate overlapping activities carried out by different companies and to support sharing of outcomes of individual initiatives, thus maximising synergies.
We want to further reinforce our already strong position on the domestic and regional fertilizer market. We are aware that this requires us to adjust fertilizer formulations as much as possible to the needs of the contemporary agriculture. The efforts will mainly focus on tailoring our product portfolio to the needs of large-scale farms, while maintaining a strong position among small farmers.
We aim to develop specialty products: granulated and liquid fertilizers dedicated to specific crops and specific customers. We plan to add customised fertilizer lines to our fertilizer portfolio in order to respond to the needs of a specific customer or even a specific crop.
Additionally, we place a strong emphasis on innovative IT systems for farmers and rapid agricultural analysis, technologies that promote precise fertilization. We develop services in the field of specialised agriculture based on satellite maps, drones and state-of-the-art technologies. We look for solutions in start-up communities or in sectoral programmes, such as BIOSTRATEG and its continuation INNOBIO. One of our key services is SatAgro.
In order to secure the distribution of our fertilizers, we intend to gain more control over the domestic and international sales channels for agro-products. Fertilizer sale processes will be consolidated in order to simplify and streamline the relationships between the Grupa Azoty Group and its key customers. We are also improving the effectiveness of our production activities and the energy efficiency of our technologies.
We seek to diversify our revenues and become less dependent on business cycles in agriculture. To this end, we are increasing our exposure to areas unrelated to fertilizer production. Petrochemicals and plastics are our key directions. We focus on the production of higher-margin products.
We are integrating and extending the plastics product chain. The new unit in Tarnów will allow us to produce polyamides and their derivatives which offer a higher market potential, instead of restricting ourselves to caprolactam - a direct, unprocessed intermediate. We are also developing our product portfolio relying on advanced PA 6-based polymers.
Our flagship diversification project is Police Polymers. The new plant being built in Police will produce propylene and polypropylene – plastics used in a wide range of industries. The project will allow us to increase our production capacities for the most promising substances in the plastics segment. The construction site is located in a special economic zone, next to Zakłady Chemiczne Police.
In the OXO segment, we are adding non-phthalate, organic and specialty plasticisers to our product portfolio.
We are building a coal gasification plant which will allow us to use domestic hard coal resources for the production of ammonia and methanol while reducing additional consumption of natural gas. The project will support the diversification of ammonia sources and development of our product offering based on methanol.
With our unique proprietary expertise in agro-products, the Grupa Azoty Group will become an active participant in research, development and innovation projects in Poland. We have established two R&D and innovation centres, in Tarnów and Kędzierzyn. We cooperate with start-ups and support their acceleration, with Idea4Azoty being our key project in this area.
We develop cooperation with business and science communities. We want to actively participate in open innovation initiatives. Our ideas and products will be in line with key economic trends based on sustainable development, including the circular economy. We are preparing to implement a project involving the launch of commercial production of graphene and to engage in 3D printing.
We carry out our activities in six specific strategy workstreams:
Product strategy, innovation strategy, operational excellence strategy, financial strategy, and corporate management strategy.
We aim for specific outcomes:
- improvement of organisational and production efficiency and ensuring business agility,
- security in terms of supply of strategic raw materials and finance,
- increased share of higher-margin products, achieved by extending our product chains in the chemicals and plastics segment,
- adaptation of our fertilizer range to the needs of innovative agriculture by providing all-in-all solutions – services based on state-of-the-art technologies and fertilizer products dedicated to specific crops and customers,
- entry into new business areas.
Structure of the Grupa Azoty Group’s capital expenditure in 2016
Below is presented the structure of the Group’s capital expenditure (including expenditure on components, major repairs and improvements):
- Growth capex PLN 701.171m
- Maintenance capex PLN 314.199m
- Mandatory investments PLN 103.213m
- Purchase of finished goods PLN 51.117m
- Other (components, major repairs, other) PLN 152.981m
Structure of the Grupa Azoty Group’s capital expenditure in 2017
In 2017, there was a slight change in the structure of expenditures: the capital expenditure decreased in relation to 2016. The following expenditure was incurred:
- Growth capex PLN 539.610m
- Maintenance capex PLN 192.148m
- Mandatory investments PLN 88.94m
- Purchase of finished goods PLN 46.76m
- Other (components, major repairs, other) PLN 157.393m
Key projects in 2017 (all figures in PLN ‘000):
Grupa Azoty
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2017 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Polyamide plant II 80,000 tonnes p.a. | 320,000 | 310,648 | 99,793 | To increase efficiency of utilisation of the Group’s caprolactam output | Project completed |
| Fertilizer granulation plant II | 141,000 | 133,172 | 19,516 | To optimise the mix of fertilizer products and to improve value added in ammonium sulfate | Project completed |
Grupa Azoty Kędzierzyn
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2017 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| New CHP plant at Grupa Azoty Kędzierzyn − Phase 1 | 375,059 | 345,663 | 58,500 | To restore electricity and heat generation capacities, to increase output to satisfy demand for electricity and heat, and to implement solutions that ensure compliance with the increasingly stringent environmental requirements | Project completed |
Grupa Azoty Police
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2017 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Exhaust gas treatment unit and upgrade of the EC II CHP plant | 290,885 | 238,993 | 40,926 | To bring the operation of the CHP plant's units in line with the requirements of Directive 2010/75/EU | 2018 |
| Upgrade of the ammonia unit | 156 ,900 | 156, 504 | 82, 639 | To reduce energy intensity of the ammonia production process and to improve the operational reliability of individual process nodes | Project completed |
Grupa Azoty PDH Polska
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2017 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Police Polymers: propane dehydrogenation (PDH) unit with related infrastructure, and polypropylene (PP) production unit | 5,276,829 | 77,936 | 76,936 | To construct a propane dehydrogenation (PDH) unit to produce propylene; in addition to the PDH unit, a power generating unit will be built and a chemicals terminal will be added to the Police seaport facilities; the project will also involve construction of a polypropylene (PP) production unit and polypropylene logistics facilities | 2023 |
Grupa Azoty Puławy
| Project name | Project budget | Expenditure incurred | Expenditure incurred in 2017 | Project purpose | Scheduled completion date |
|---|---|---|---|---|---|
| Upgrade of the existing and construction of new nitric acid units, neutralisation facilities and production units for new nitric acid-based fertilizers | 695,000 | 74,237 | 73,693 | To raise the efficiency of nitric acid production and improve the cost efficiency of nitric acid-based fertilizers | 2021 |
| Facility for production of granulated fertilizers based on ammonium nitrate | 385,000 | 151,811 | 85,205 | To improve the quality of fertilizers by applying modern mechanical granulation | 2020 |
| Replacement of the TG-2 turbine generator set | 99,000 | 60,181 | 45,152 | To increase the efficiency of electricity and heat cogeneration by replacing the TG-2 30 MWe pass-out and condensing turbine with a new 37 MWe turbine as part of the power system upgrade | 2018 |
Innovation is now one of the main growth drivers for our organisation at the level of the Group as a whole as well as individual companies. We want to be not only a beneficiary but also an active participant of the initiatives being implemented in Poland. Our ultimate goal is to lead the way and break new ground in innovation.
To maximise the potential benefits, the R&D&I activities of the Grupa Azoty Group will be operationalised in order to establish appropriate structures, procedures, principles and best practices, which will be coordinated at the Group level.
This initiative will be supported through further development of the existing research and development centres, establishment of new units, and building product specialisations. Our strategy will focus on driving innovation to extend the value chain with high-margin, low-tonnage specialty products, adapting new technologies to our needs, and refining existing processes.
We want to actively participate in open innovation initiatives, also by working with promising start-ups (through commercial contracts and/or equity participation), implementing corporate social responsibility projects, and engaging with local communities.
See about projects implemented by our companies
Grupa Azoty S.A.
With its own research facilities, Grupa Azoty S.A. can easily improve its technologies, thereby upgrading the quality of its products. Recognising the need for constant search for the most advanced technological solutions, the company has become a valued and sought-after initiator and active participant of innovative research programmes conducted by leading Polish scientific institutions.
| Grupa Azoty S.A. cooperates with such institutions as: |
|---|
| Akademia Górniczo-Hutnicza (AGH University of Science and Technology) |
| Centrum Badań Molekularnych i Makromolekularnych PAN w Łodzi (Centre of Molecular and Macromolecular Studies, Polish Academy of Sciences in Łódź) |
| Instytut Chemii Organicznej PAN w Warszawie (Institute of Organic Chemistry, Polish Academy of Sciences in Warsaw) |
| Instytut Chemii Przemysłowej w Warszawie (Industrial Chemistry Research Institute in Warsaw) |
| Instytut Nawozów Sztucznych w Puławach (New Chemical Syntheses Institute in Puławy) |
| Naczelna Organizacja Techniczna (Polish Federation of Engineering Associations NOT) |
| Politechnika Krakowska (Cracow University of Technology) |
| Politechnika Warszawska (Warsaw University of Technology) |
| Politechnika Wrocławska (Wrocław University of Technology) |
| Stowarzyszenie Elektryków Polskich (Association of Polish Electrical Engineers) |
| Stowarzyszenie Inżynierów i Techników Przemysłu Chemicznego (Polish Association of Chemical Engineers) |
| Uniwersytet Rolniczy w Krakowie oraz ICSO Blachownia w Kędzierzynie Koźlu |
| Wyższa Szkoła Biznesu – National Louis University (University of Agriculture in Krakow) and ICSO Blachownia in Kędzierzyn-Koźle |
Grupa Azoty S.A. is perceived as a trusted and experienced partner for technology projects carried out globally, and a reliable European provider of established patents and licences that set new industry standards thanks to the company’s top-qualified technical staff. Its efforts focus mainly on further product diversification
Grupa Azoty Puławy
Experts from Grupa Azoty Puławy are always looking for new ways to improve technologies. They combine their expertise with the experience of a number of scientific institutions, such as the New Chemical Syntheses Institute in Puławy.
Grupa Azoty Puławy’s areas of innovation:
- Developing the fertilizer portfolio by adding advanced products and application methods
- Biotechnology projects implemented with the support of the New Chemical Syntheses Institute in Puławy – use of plant material and development of sustainable products
- Advanced products for the chemical industry obtained from existing products and intermediates (melamine, caprolactam)
- Optimising the production process efficiency by means of systemic and technological solutions
BEST PRACTICE
Grupa Azoty Puławy joined the 13th edition of Innovation Pitch, an event organised by the Industrial Development Agency. Its objective is to identify innovative solutions and potential partners for the company.
BEST PRACTICE
In 2017, Grupa Azoty Puławy received a funding recommendation for its BIO-FERTIL project in the third edition of the sectoral programme BIOSTRATEG. The project’s objective is to develop a technology for the production of solid mineral fertilizers containing biocomponents such as humic acids and useful microorganisms, designed to improve biophysical and chemical properties of agricultural and degraded soils. The design activities are carried out by a consortium of the Research Institute of Horticulture, Bohdan Dobrzański Institute of Agrophysics – Polish Academy of Sciences, Institute of Soil Science and Plant Cultivation, and the New Chemical Syntheses Institute in Puławy.
In 2016, Grupa Azoty Puławy obtained funding for two projects in the first INNOCHEM competition for innovative chemical industry ventures, run by of the National Centre for Research and Development.
One of the projects involves a new e-caprolactone production process based on oxidation of cyclohexanone with hydrogen peroxide. The other focuses on the development and implementation of advanced process controls (APC) for an ammonia unit.
BEST PRACTICE
In 2016, around 120 managers from Grupa Azoty Puławy attended a training session on innovation. The purpose of the meeting was to:
- demonstrate the potential of the innovation ecosystem within and beyond the company,
- inspire the participants to support innovation and discuss the potential for innovation inside the company,
- identify tools to support the company’s development in the area of R and D as well as prospective sources of funding for R and D and innovation activities,
- demonstrate how innovation is understood in our strategy and corporate culture.
Grupa Azoty Police
Grupa Azoty Police launches more and more advanced mineral fertilizers that help farmers obtain high yields. These include Polifoska Krzem and Polifoska Tytan.
Grupa Azoty Kędzierzyn
In 2016, Grupa Azoty Kędzierzyn obtained funding for two projects in the first INNOCHEM competition for innovative chemical industry ventures, run by the National Centre for Research and Development.
The objective of the first project is to develop new physical forms of fertilizers or additives and slow-release fertilizer formulations containing micronutrients such as zinc, copper, manganese, boron, molybdenum and iron. According to the plan, the new generation of fertilizers will be launched in 2022.
To read more on this topic, click on the expanding element Learn more*
The goal of the second project is to obtain an innovative fertilizer through a new biodegradable agent technology and a micronutrient combination method. The new product will address the needs of agricultural producers related to the necessity to reduce nitrogen use, improvement of fertilizer performance through enhanced nutrient absorption, and reduction of the cost and time of fertilizer applications
To read more on this topic, click on the expanding element Learn more**
The project ‘New slow-release fertilizer forms containing additional biologically important micronutrients’
The project envisages the development of a new group of dual-function additives, distinguished by slow release of fertilizer components into soil and capable of complexing metals. Depending on the type of fertilizer, both organic and inorganic additives will be developed. Organic additives will be based on polymer compounds, which are capable of chelating micronutrients. As regards inorganic additives, we plan to introduce micronutrients by ion exchange or by depositing natural or synthetic aluminosilicates in a porous structure.
The project will involve research on a formulation of selected fertilizer groups on a laboratory scale, as well as the determination of performance parameters of the resulting products, including their stability in time. Additionally, an assessment will be made of the possibility of using the newly developed range of organic additives in high-nitrogen fertilizers with process safety and safety in storage maintained. A trial batch of a new fertilizer formulation will be produced in the course of the project, where it will undergo field testing in order to determine the product’s effectiveness.
The project ‘Development of an innovative high-nitrogen ammonium nitrate fertilizer enhanced with micronutrients in the form of chelates of biologically important metals (zinc, copper, manganese, molybdenum and iron) based on newly developed chelating ligands’
The project focuses on the development of new chelating substances supporting effective bonding of metal ions. The substances will be 100% biodegradable and will therefore not contribute to soil pollution. In addition, it is expected that ions of biologically important metals, as growth promoters, will be more effective and will not interfere with the action of nitrogen as a primary nutrient. Micronutrient additions will perform the function of promoters for specific crops (dedicated to rape, maize etc.).
The project is expected to produce a new type of a biodegradable chelating ligand, its production technology and a method to combine micronutrients in the fertilizer matrix, and to lead to obtaining an innovative fertilizer with the model properties of nitrogen fertilizers and process safety maintained.
