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The Warsaw Voice » Other » September 2, 2009
Economic Forum in Krynica
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Dynamic Change
September 2, 2009   
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Paweł Jarczewski, chairman of the board of Zakłady Azotowe Puławy SA (Puławy Nitrogen Plant), talks to Bartosz Grzybiński.

How would you sum up the 2008/2009 financial year which ended recently?
It was a year of dynamic changes for Puławy. We made the most of the changing conditions on the markets for fertilizers and chemicals. The first quarter of the financial year closed with a record net profit of zl.157 million. Then, unfortunately, the crisis took its toll on the chemical sector and powerful global companies started to limit production and close down plants. In mid-November, we too decided to reduce our production capacity, being one of the last companies in the sector to do so. We did not, however, decide to stop any of our installations.

Things turned out particularly difficult in the automotive industry and that affected sales of caprolactam, which is used to produce construction fibers. To make matters worse, in the third quarter we had to deal with a currency crisis. We were also the only company in Poland to be affected by reduced natural gas deliveries in the wake of a conflict between Russia and Ukraine. Still, we managed to bring the situation under control thanks to a competitive advantage provided by our integrated production system. It allowed us to smoothly adapt our range of products to what happened on the market. We also used direct trade contacts, enabling the company to resume its full production capacity and optimize the sales structure.

Despite changing market conditions, I consider the net profit of around zl.200 million a very good result compared with the rest of the chemical industry.

What is the investment strategy of Zakłady Azotowe Puławy? How much does the company plan to spend in the coming years and on what?
I believe that a time of economic crisis is a good time for investment. We have positive experience carrying out such projects. One example is 2002, when we decided to build a new melamine installation.

Spending on all investment projects in progress will total zl.1.5 billion, zl.400 million of which will be spent during this financial year. The largest project under way at the moment is the Oxygen Generating Plant/Ammonia/Urea facility, which will cost around zl.240 million. Our urea production capacity will allow us to increase the annual production volume by around 270,000 metric tons to 1,125,000 tons. In another important environmental project, we are building an installation to remove sulfur from flue gases.

We have also started research on new fertilizers. Produced as either granulated or liquids, the new fertilizers will expand our range of products and address new trends. We also expect that the liberalization of anti-dumping duties will open markets to rival companies from beyond Poland's eastern border. But by the time this happens, Zakłady Azotowe Puławy will be distributing new-generation fertilizers to minimize the risk of facing strong competition from single-compound fertilizers sold by Eastern European producers.

We are also paying a great deal of attention to our new environmentally friendly product called AdBlue. It is used to clear exhaust gases of nitrogen oxides in new generation truks. The process of selective catalytic reduction (SCR) has been introduced in conjunction with the increasingly restrictive environmental standards adopted by the EU. The market for AdBlue keeps growing rapidly and Puławy is the market leader in this part of Europe. In December, we completed a project to increase our production volume from 30,000 to 100,000 tons per year. We have been watching with great interest a new initiative by passenger car producers who are about to begin selling cars with the SCR system. This may prove to be another milestone in the development of the market, a fact that we will certainly want to take advantage of.

What are the biggest opportunities and dangers for the company?
Let me quote an analyst who has said that we are absolutely number one in the chemical sector. We have a superb sales network and an integrated production system. Our Achilles' heel is that raw materials account for 50 percent of all operating costs. This hurts us, but I believe that if we strengthen our foundations, we will have something others can be envious of.

What is the new financial year going to be like for your company?
There is clearly a lot of work ahead of us and we'll have to do this work facing extreme market conditions and costs. But like I said, in such crisis situations, we keep seeking opportunities to build our future market advantage. We have an extensive investment schedule and never cease to consider new projects.
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