We Need a Level Playing Field
March 3, 2014
Paweł Jarczewski, president of the Grupa Azoty S.A., talks to the Voice.
It’s been a year since Polish chemical companies were consolidated as the Grupa Azoty S.A. What can you tell us about the results of this consolidation?
The main part of the process has already been completed. At present, we are still implementing the management model adopted in December. It will additionally streamline the operation of the group. In the first nine months, measures aimed at achieving synergy produced over zl.70 million in savings of the zl.100 million planned. We already have preliminary data for the whole year and I can say that the outcome of the year-long work on initiatives designed to achieve synergy looks promising.
In which areas have you managed to achieve success?
We have generated savings mainly through joint purchases of raw materials, logistics operations, trade and production. Of course, we have to do that on a constant basis. That’s why in the near future we are going to draw up and put into practice a program for operational excellence in line with the highest standards.
What development prospects does Grupa Azoty have? Where do you see potential for building its strength and value?
Fertilizers are the main area of activity for the Grupa Azoty because this business generates the lion’s share of its revenues. Our advantages include a high production capacity, a wide range of products and our presence on the third biggest agricultural market in the European Union. In terms of high-volume products, we have to continue our efforts to improve production efficiency. While monitoring changes in the way crops are cultivated, we should continue to focus on developing modern fertilizer formulas to meet the specific needs of individual crops. The acreage of plants which need sulfur-rich nutrients, like rape and maize, has recently expanded significantly in Poland. At the same time, owing to the policy of reducing emissions of sulfur compounds to the atmosphere, sulfur no longer falls on the soil along with acid rain. This is the reason why several years ago the Grupa Azoty took steps in this direction. Our investment projects have been planned in detail to meet the needs of customers and we have already noticed a considerable increase in the consumption of liquid fertilizers containing sulfur. The decisions we have taken are a cause of satisfaction and we are going to carry out further development projects of this kind.
Will the Grupa Azoty be focusing on the Polish market alone? Do you see a potential for the company on foreign markets?
The Grupa Azoty operates globally and derives half of its revenue from exports. Our main market is of course Poland and neighboring countries, particularly Germany, but our products are also well-known in France and Britain. We have also been present for years on the South American market. At the end of last year, we signed a number of long-term contracts in Brazil, strengthening our position in that country and making it a stable marketing outlet for our products. Last year, we also strengthened our trade contacts with Africa. As you can see, we operate on dynamic markets with a huge potential for the development of agriculture and with dynamic demographics.
What about your joint plans with the Lotos Group and copper giant KGHM?
The petrochemical project we are conducting with the Lotos Group and the government company Polish Development Investment (PIR) is now our biggest undertaking in terms of investment spending and technological complexity. The first studies have shown that it is a promising project and we now have to wait for the completion of the full feasibility study. It will give us a basis for taking decisions. If the project is to go ahead, we will have a chance of carrying out an initiative which may be a driving force for other petroleum-based sectors in Poland.
We have also begun cooperation involving raw materials with KGHM Polska MiedĽ. Global companies, and we consider KGHM to be one, try to diversify their mining operations. They want to base their expansion on cooperation with industries which offer potential for growth. And the fertilizer sector is definitely one of these. KGHM has potential for the exploration and extraction of raw materials used by the fertilizer industry, while we have expertise in the marketing and logistics of these kinds of products internationally.
We are also keeping track of the exploration work carried out around the world by PGNiG. We want to start talks with the company on cooperation in acquiring natural gas. Our goal is not to invest in gas sources in the form of concessions or extraction, but to exploit our transport and processing competencies.
What are the biggest challenges for the Polish chemical industry today?
A major challenge, which should be treated both as an opportunity and threat, is the agreement on free trade which the European Union and the United States are negotiating. As a rule, we support Europe’s trade liberalization. However, we also have to make sure that equal, or at least comparable, opportunities are created for both sides. The production of fertilizers is currently much cheaper in the United States than in the EU, not only because of lower prices of natural gas but also because of much lower emissions costs. The EU’s climate policy forces businesses to invest. In addition, there is the EU REACH system on the registration, evaluation, authorization and restriction of chemicals. We should take care to ensure a level playing field on the free market. We are going to hold a broad discussion about this within the European Union.
Last year, the Grupa Azoty became a member of the Central Europe Energy Partners (CEEP) association. As a representative of the Polish chemical industry, what do you hope to achieve through joining this organization?
We not only want to use CEEP’s expertise and solutions, but also to be an active member of it in the European Union. I will be personally committed to this work because issues concerning raw materials, energy and the environment play a key role not only in the operation of the Grupa Azoty but in European industry as a whole.
Chemical producer Grupa Azoty S.A. has become the 21st member of Central Europe Energy Partners (CEEP), an association of energy and fuel sector companies from Poland, the Czech Republic, Lithuania, Romania, Slovakia and Hungary.
Grupa Azoty S.A.—the Azoty group—was established as a result of merging Poland’s four largest chemical plants, Tarnów, Police, Puławy, and Kędzierzyn-KoĽle.
Azoty produces a range of chemical products such as OXO alcohols, caprolactam, modified technical plastics, and melamine. The group is the second largest producer of fertilizers in Europe, and also provides state-of-the-art laboratory services.
Azoty products are sold in more than 50 countries. The group has its own logistics facilities and a research and development center. As of the end of June 2013, Azoty had more than 13,200 employees.
Azoty is a large consumer of energy, in particular gas, as a raw material as well as for heating purposes. The price of energy is an important factor that impacts the company’s competitiveness, especially on foreign markets. The company plans to become actively involved in the ongoing debate in the EU on CO2 and NOx emissions, using opportunities developed by CEEP.
Azoty has been listed on the Warsaw Stock Exchange since June 30, 2008, and on Feb. 19, 2013 it became a part of the MSCI Emerging Markets index. Azoty also features on several other Warsaw Stock Exchange indices, such as the WIG-CHEMIA, WIG30, WIG, WIG-PL, and the Respect Index.