annual report - · pdf fileproducts, namely aniline, cyclohexylamine, ... market....

a n n u a lr e p o r t

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TABLE OF CONTENTS

Opening word .....................................................................................................2Basic characteristics of the company and its historical overview .........................4Development of selected financial indicators .......................................................5Organisational structure as of 31 december 2013 ............................................6Management of the company as of 31 december 2013 ......................................7Management report for 2013 ..............................................................................8Position of the company ..................................................................................10Human resources and communication .............................................................12Integrated management system .......................................................................14Research and development ..............................................................................15Environmental protection and safety ................................................................16Ownership structure of the Borsodchem ZRt. Groupas of 31 December 2013 ..................................................................................18Financial part ....................................................................................................19Auditor’s report .................................................................................................25Report on relations between the controlling and controlled entities ...................27Affidavit ............................................................................................................28

AppendicesFinancial statements of BorsodChem MCHZ, s.r.o. for 2013

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Opening wordDear ladies and Gentlemen,

2013 was a difficult but also successful year for BorsodChem MCHZ s.r.o. It was difficult because the entire staff had to make a great deal of effort to ensure that 2013 was successful. In the end, it was successful due to our joint efforts.

At this point of the text, there is usually a list of measures and actions of the management in the relevant areas that facilitated the results; nevertheless, I personally do not consider this to be absolutely necessary now. It predominantly results from the fact that a wide range of things and activities that used to be consid-ered extraordinary or had a required corrective nature became a natural part of our systematic work and management in the past few years, always with respect to the future and stability of the entire company. I am truly pleased at that and I consider our strategy to be the best approach to contribute to the general suc-cess of the whole international Wanhua – BorsodChem Group of which we are part.

The positive results in 2013 substantially reflect the implementation of systematic managerial measures, positive effects of optimum adjustment of the company’s internal processes and activities so that we were able to efficiently respond to all internal and external changes not only from business/financial and technical/produc-tion viewpoints but also in terms of using the company’s human resources potential.

The professionalism and situation of our employees may be con-sidered very stable and accordingly, the number of work positions corresponds to the need to ensure all of the company’s processes and the utilisation rate of production capacities, which was slightly below their maximum level as in the previous year.

This also reflects the volume of sale of the company’s principal products, namely aniline, cyclohexylamine, dicyclohexylamine and special amines, which experienced a year-on-year increase or

a n n u a l r e p o r t 2 0 1 3 B o r s o d C h e m M C H Z , s . r . o .

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achieved very similar results as in 2012. Substantial year-on-year growth in sales of more than 20% was achieved by cyclohexy-lamine, which is the second major product in terms of volume. The required increase of almost 7% was also seen in the special amines segment.

The company’s management continuously worked on fulfilling the medium-term strategy of the company. The volume of realised in-vestment funds amounted to CZK 118.1 million. The majority of in-vestments were made in the continuation of a programme increas-ing the reliability and efficiency of production and energy facilities as well as on projects with a positive impact on the environment and safety, which also complies with the company’s long-term strategy. Systematic work in terms of decreasing emissions (for instance, greenhouse gas emissions dropped by 30% compared with 2012) and handling chemicals as well as a transparent policy with respect to communication with the general public contributed to the con-

Přemysl AnteckýStatutory executive

tinuous enhancement of the company’s safety profile.

The most important factor in the communication strategy in all of 2013 was the 85th anniversary of launching the production in our industrial area. The celebration of this significant anniversary culminated in May 2013 with a concert of the Janáček Philharmonic Orchestra, from Ostrava, which has been our partner for many years. Along with other employees of the company, I am proud that we could celebrate this anniversary as appropriate and mainly that we made joint efforts to have a positive impact and influence on the rich history of our company.

Favourable business results in 2013 confirm the qualities and pro-fessionalism of all employees of BorsodChem MCHZ s.r.o. whose pro-active approach contributed to achieving these to a major extent. Therefore, I would like to thank the company’s staff, as well as its suppliers and partners for their long-term and fair business relationships and co-operation.

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BorsodChem MCHZ, s.r.o., in its current form, continues in traditional chemical production that dates back to 1927. At that time, the objective was to use the nearby source of coke gas to provide Czechoslovak production and surrounding European countries with ammonia, nitric acid and artificial fertilisers before World War II.

Basic characteristics Of the company and its historical overview

The production in a new plant started in 1928 with the production of ammonia and ammonia sulphate. The production programme, originally focusing on the production of fertilisers, was expanded and modernised after World War II. The production of formaldehyde and urea-formaldehyde resins was launched and the processing of hydrogen for hydrogenation was expanded. Gradually, the production of cyclohexanone as a basic raw material for the production of nylon was developed. The company pro-gressed from the production of fertilisers to the production of oxalic acid.

Production of the current significant products of the company, ie aniline and cyclohexylamine, began in 1962 when the company constructed a pi-lot plant for such production. In 1971, the company launched operations in a new phenol formaldehyde moulding material and resin production plant.

The most significant investment of the company so far – the aniline block – was put into operation in 1985. The aniline block was followed by a new production plant for cyclohexylamine and a new production plant for specialty amines in 1992. The production of hydrogen underwent a major change – the low-temperature fission of coke gas was replaced by production using the steam power reforming of natural gas. Gradually, the aniline production capacity was increased to 165kt per year, which was enabled by the construction of another modern unit of steam power reforming, an adiabatic nitrobenzene production unit and the construction of two modernised hydrogenation lines for aniline production. Concurrently, the company gradually discontinued the production of sorbite, sulphuric acid, isopropylamine, nitrogen, oxygen, argon, fertilisers and sodium nitrite, ammonia solution and oxalic acid as a result of optimising the production portfolio.

After 1990, the company underwent numerous organisational and owner-ship changes. The joint-stock company “Moravské chemické závody” was formed in 1990 through the transformation of the state-owned plant. From 1 January 1999 to 26 April 2000, Moravské chemické závody was a branch of Aliachem a.s. The current BorsodChem MCHZ, s.r.o., was formed on 27 April 2000 by a split-off of the major part of the Moravské chemické závody branch from Aliachem a.s. The majority owner of Bor-sodChem MCHZ, s.r.o. was BorsodChem Zrt. which increased its equity

shareholding in 2006 and became the sole shareholder of BorsodChem MCHZ, s.r.o. In February 2011, the BorsodChem acquired a new strategic owner – Wanhua Industrial Group.

At present, BorsodChem MCHZ, s.r.o. is fully integrated into the multina-tional corporations. BorsodChem MCHZ, s.r.o. owns technologies and know-how for the production of key products which is able to develop fur-ther. The licence for the aniline production technology was sold to Japan, where two large capacity units are currently successfully operated. More than one tenth of the worldwide aniline production is produced according to the BorsodChem MCHZ, s.r.o. licence.

At present, the company is focusing on strengthening its raw material relationships in the BorsodChem group in accordance with the strategic plan of the investment group to strengthen its position on the polyurethane market. Concurrently, it keeps and develops a portfolio of small-scale special amine chemistry products.

1928Launching Production


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Development of selected financial indicatorsBusiness Results

unit 2009 2010 2011 2012 2013

Sales of products and services CZK million 2,723 4,560 4,621 5,203 5,431Exports in EXW prices CZK million 2,430 4,154 4,212 4,772 4,986Operating profit (EBIT) CZK million 69 171 107 147 187Profit before tax CZK million 40 54 47 114 132Total assets CZK million 2,812 2,942 3,045 3,086 3,205Tangible and intangible fixed assets at their net book values CZK million 2,034 1,897 1,874 1,913 1,875Depreciation rate of tangible fixed assets % 60 63 64 64 65Invested funds CZK million 81 89 118 138 118Amount of added value per employee CZK thousand 1,329 1,759 1,382 1,327 1,621Sales of products and services per employee CZK thousand 7,299 12,736 13,016 14,865 15,473

Financial Analysis

unit 2009 2010 2011 2012 2013

EBIT/SALES % 2.53 3.76 2.29 2.77 3.39EBITDA/SALES % 8.12 7.27 5.80 5.91 6.58ROE % 2.84 3.74 3.19 7.28 8.01ROCE % 3.12 7.49 4.54 6.56 7.85DEBT/EQUITY 0.60 0.59 0.60 0.43 0.45LIQUIDITY 2.04 2.26 2.43 1.90 2.34

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Organisational structure as of 31 december 2013

Managing Director

assistance Centre Internal audit

Human resources and Communication

Specialist

Information technologies and Systems Inorganic products r&D Centre Quality, environmental

Issues and Safety

planning and Controlling Dispatching amine production energy

Finance Production Amine Business Unit

Technology and Procurement

accounting organic products Sale of Commodities Investments

Sale of Specialities procurementMaintenance

Back offices logistics


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Management of the company as of 31 december 2013přemysl anteckýStatutory Executive

Vladimír KarkoškaStatutory Executive

Supervisory board:Hongjie luChairman

István Zoltán HegedüsMember

Márton DöbröczöniMember

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Management report for 2013The profit before tax for 2013 of the Company, which is a significantly export-focused firm, amounted to CZK 131.6 million and was generated in a period of partial revival in markets outside Europe; however, the prob-lems relating to the unfavourable political and financial situation of certain EU countries continued, which is also gradually reflected in the business environment. The result of operating activities amounted to CZK 186.6 million with aggregate revenues in the amount of CZK 5,507.2 million, which is CZK 220.5 million more than in the prior year. The operating profit was also CZK 40.0 million higher than in 2012, ie by 27.3%. Sales of own products, goods and services amounted to CZK 5,431 million, which is CZK 228.4 million more than in the previous year. The major fac-tors that influenced the high volume of sales, which grows year-on-year, include an increase in the volume of sales with respect to material, as well as a permanently-high level of the prices of primary raw materials and the closely-related volume in the realisation prices.

Throughout 2013, the volume of sales – not only of the company’s main products, aniline and cyclohexylamine – was close to the level of the company’s maximum production capacities. A year-on-year increase in sales or sales at the same level was achieved for most products, except for the sale of nitric acid to the parent company. In the case of the most important product with respect to volume, aniline, the year-on-year decrease amounted to only 7.2 thousand tonnes, ie a drop of 5.6%. The proportion of aniline deliveries to the parent company and to external customers changed compared with the previous years. The deliveries to the parent company increased by 2.0 thousand tonnes year-on-year amounting to 116.9 thousand tonnes and for capacity reasons, 9.2 thousand tonnes less was delivered to external customers. The second major product with respect to sales, cyclohexylamine, saw a significant year-on-year increase in sales amounting to 3.1 thousand tonnes, ie an increase of 20.3%. A year-on-year increase in the volume of sales was also recorded by the special amines segment, a year-on-year increase of 6.9% to 4.7 thousand tonnes. A planned decline in sales of 1.9 thousand tonnes was recorded in nitric acid, which the com-pany predominantly supplies to the parent company, due to the new production capacities that were put into operation. The positive results were also influenced by continuous pressure on the decrease in costs and endeavours to seek other savings in the company’s production and administrative expenses as well as search for new, less expensive sup-pliers of raw material.

Based on the positive profit achieved in 2013, the company’s equity increased year-on-year by CZK 82.2 million. The value of fixed as-sets declined year-on-year by CZK 38.0 million, which confirmed the interrupted trend reported in prior years, ie the gradual increase in the depreciation rate of tangible fixed assets and the decrease in the assets’ value. The decrease in the value of assets was also due to a one-off write off of a damaged pipe bundle in the hydrogen unit and its replacement with a new one. However, a provision against this asset was previously created and released after the unit was successfully put into operation.

In comparison with the previous year, external funding used by the com-pany increased by CZK 38.0 million. The increase was primarily due to the translation of a loan provided by the parent company from EUR into Czech crowns after the forced weakening of the Czech currency by the Czech National Bank. An increase in long-term payables of CZK 75.4 million arises from a higher deferred tax liability as well as the aforemen-tioned revaluation of the foreign-currency loan after the intervention of the Czech National Bank on financial markets. Contrarily, short-term payables, predominantly trade payables, experienced a decrease. There was a year-on-year increase of CZK 10.3 million in the amount of the reserves. An increase in liabilities correlated with an increased volume of inventory by CZK 96.6 million, especially under products that predomi-nantly involve products in transit released from warehouses not yet de-livered to customers or stored in consignment warehouses of customers outside the company’s premises before the year end. There was also a significant year-on-year decrease in trade receivables of CZK 131.8 million, which was reflected in increased cash in bank accounts.

In January 2011, in connection with the entry of a new owner of the BorsodChem Group, the entire BorsodChem Group was refinanced. The loan for refinancing was provided by Bank of China. BorsodChem MCHZ, s.r.o. received a loan from the parent company under identical conditions as those set by Bank of China for BorsodChaem Zrt. A por-tion of the loan in the amount of EUR 6 million was partly paid up in July 2012, which, together with a lower level of interest rates, resulted in a reduction in interest expenses, which is CZK 7.3 million year-on-year. Overall, the financial situation was stabilised during the year; there were no problems in funding the operating needs of the company and payments to suppliers.

CZK 5,507.2 million

which is CZK 220.5 million more than in the prior year

total revenues for 2013


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2014 OutlookThe plan for 2014 is based on a similar sales portfolio of the company as in prior years; the sales of concentrated nitric acid are anticipated in the first half of 2014; however, the major portion is planned to be produced for own consumption. As in 2013, we anticipate the full use of aniline production capacities and production volumes of other prod-

CZK 5,507.2 million

The financial result of operations was significantly worse than that of 2012, by CZK 22.1 million. This result was negatively impacted by the lower fluctuation in the exchange rate of the Czech crown, which was lower than in 2012 throughout 2013; this trend increased in the last two months in relation to the intervention of the Czech National Bank on the currency market with the macroeconomic goal of weakening the currency and preventing deflation.

By the entry of a new strategic owner, the Wanhua Industrial Group, con-cluded at the end of January 2011, the Wanhua Industrial Group became the sole owner of the BorsodChem Zrt. Group. The Wanhua Industrial Group stabilised the financial situation of the BorsodChem Group in operating activities and also provided funds for the completion of all invest-ments initiated by the parent company intending to increase production capacities and improve the economic parameters of production units.

Expenses for investments realised in 2013 amounted to CZK 118.1 mil-lion. Investments also include the costs of the REACH registration. The total volume of costs is primarily due to the ongoing projects from the previous year, namely the replacement of the pipe bundle in the hydrogen production unit, decreasing emissions of nitrous oxide in the units of nitric acid production facilities and optimising the technology to collect benzene emissions.

Starting from 2013, our company has been incorporated into the third phase of trading with emission allowances. The Ministry of the Environment of the Czech Republic approved a monitoring plan and subsequently, the allocation of free allowances based on the values from previous years. Due to the realised investment projects focusing on the reduction of nitrous oxide emissions, our company has a suf-ficient amount of these allowances and there is no need to purchase additional allowances before submission.

ucts at a similar level. The sales of aniline are expected to correlate with the maximum possible utilisation of aniline production capacities; the sales of other products are expected to be at a similar or slightly higher level than in 2013. The volume of sales of own products and services is expected to amount to CZK 5,742 million. The operating profit before depreciation is planned at CZK 274 million.

In compliance with the group-wide investment concept, the investment volume is planned to amount to CZK 77 million. This amount princi-pally involves projects initiated in prior periods as well as the new ones, which are focused on decreasing the natural gas consumption in the production of hydrogen and increasing the capacities in the produc-tion of special amines. Since 2013, our company has been included in a system of emission measuring and reporting and we anticipate that the implementation of projects on decreasing emissions in the previ-ous year will ensure a sufficient amount of free emission allowances in 2014 despite the gradually-decreasing allocation.

14.4 %

6.3 %

3.4 %

1.4 %

2.1 %

0.6 %

1.9 %

1.5 %

1.4 %

0.5 %

1.1 %

1.1 %

0.7 %

0.6 %

2.4 %

73.4 %74.1 %

Cyclohexylamine (14.4 %) Special amines (6.3 %) Dicyclohexylamine (3.4 %) Diethyloxalate (1.4 %)

Nitric acid (0.6 %) Other (0.5 %) Aniline (73.4 %)

USA (6.5 %) Indonesia (4.4 %) Spain (2.2 %) Germany (2.1 %) Switzerland (1.9 %)

Belgium (1.5 %) Italy (1.4 %) the Netherlands (1.1 %) India (1.1 %) France (0.7 %)

Canada (0.6 %) Other (2.4 %) Hungary (74.1 %)

Share of products in sales in 2013 export sales by country in 2013

6.5 % 4.4 % 2.2 %

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Sales of products and services in 2013 amounted to CZK 5,325 million in contractual prices, of which the value supplies for export from sales of sold products and services amounted to CZK 5,184 million. Production capaci-ties reached the maximum and the 2013 sales recorded an increase of 2% compared with 2012.

The major portion of sales consists of the sales of the company’s principle product, aniline, which represent 75% of the sales. A considerable portion of the aniline production was intended for supplies to the parent company located in Hungary for the post-production of methylene diphenyl diisocyanate (MDI) in 2013.

The portfolio of customers purchasing aniline, cyclohexylamine, dicyclohexy-lamine, diethyloxalate and special amines represents the company’s traditional customers with the potential for further growth and newly-attracted customers primarily from Europe and North America.

In respect of special amines, more than 50% of sales includes the sale of polyurethane catalysers, which are intended for the processing segment of PU foams as well as methyl-diphenyl-isocyanate (MDI) produced by the parent company.

Sales to foreign customersAlmost the entire production of BorsodChem MCHZ, s.r.o. is intended for export in the long-term. The proportion of sales from exports ac-counts for 97% of the aggregate sales of own products and services. Aniline, cyclohexylamine, dicyclohexylamine, diethyloxalates and special amines are predominantly exported to European markets; how-ever, the proportion of exports outside Europe continues to grow. The company achieved a significant market share on two overseas markets – USA and Asia – mainly with cyclohexylamine and dicyclohexylamine.

Sales to local customersSales of products and services on the local market account for only 3% of the aggregate sales. As compared to other export markets, the consumption of the company’s products in the Czech Republic is small. The reason is the localisation of the consumer base – ie the production of polyurethane substances, rubber chemicals for the treat-ment of water and cyclamates is located outside the Czech Republic.

Position of the company The company produces and sells inorganic and predominantly organic chemi-cal products and is among the leading producers of amines, specifically aniline, cyclohexylamine, dicyclohexylamine and several special amines. The portfolio of inorganic products supplied to the market includes hydrogen and concentrated nitric acid. A complementary product of the company is diethyl oxalate.


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Description of key productsAniline is the product generating the predominant portion of the company’s sales. It is widely used and serves as the basic substance for the production of MDI, ie an original semi-finished product in the production of polyurethane substances that have almost unlimited use in the automotive, construction, textile, shoe, and furniture industries. In addition, aniline is successfully used as a semi-finished product for the production of rubber chemicals, specifically for vulcanisation accelera-tors and antidegradants. Marginally, aniline is used in the production of dyes, pharmaceuticals and other chemical substances.

Cyclohexylamine, produced by the company from aniline, is used in Europe and the USA predominantly for the production of rubber chemicals as a vulcanisation accelerator and it is used as one of chemi-cal substances for the treatment of feed water of steam boilers. The predominant application of cyclohexylamine in South-Eastern Asia is for the production of artificial sweeteners (cyclamates).

The production of various types of special chemical (eg corrosion inhibitors) and also rubber accelerators and the use in the lubricant and oil segment are major applications of dicyclohylexamine.

Special amines (dimetylcyclohexylamine, pentametyldietylentriamine, dimetylbenzylamine and metyldicyclohexylamine) are used as part of catalyst systems in the production of tough and semi-tough polyure-thane substances. Other produced special amines are used for the production of nuclei (ColdBox metallurgical method), production of agrochemicals, pharmaceutical intermediate products or in the produc-tion of organic dyes.

Concentrated nitric acid is supplied solely to the parent company in Hungary and is used as the basic raw material for TDI production.

Diethyloxalate is solely supplied for the production of agrochemical products.

Human resources and communicationIn terms of human resources, 2013 may be considered relatively stable as regards the number of employees and the maintenance of their professional qualities. The number of job positions corre-sponded with the need to cover all business processes and the extent of using production capacities.

Attention was predominantly given to the targeted improvement of quality and structure optimisation in selected sections, satisfying the current and future staffing needs of the firm and continuous staff-ing of vacant positions. In 2013, we also successfully implemented the “Pool” programme aimed at young graduates or applicants with little practical experience who may prepare themselves for assuming executive positions in the long term. Positions in the pool were staffed in line with specific and planned HR changes taking into consideration the necessary length and scope of preparation.

The education and development of employees remains the company’s priority in the long term. The objective is to attract and maintain a suf-ficient number of quality and qualified employees, in other words, to have the right people in the right positions. For this reason, the company does not only rely on the maintenance of qualifications but provides its employees with the possibility of professional and personal development.

In 2013 we succeeded in creating favourable conditions for the utilisa-tion of a new HR management tool, the “Programme for Increasing Staff Flexibility”, which allows us to find more-efficient solutions to future needs. This programme includes employees who are expected to assume a wider variety of responsibilities and achieve future growth or who are at least take more responsibilities at the horizontal level. The programme is designed as an open system incorporating new em-ployees on an ongoing basis and is composed of two parts. The first section includes a plan for the training of selected staff and the other section contains a plan for training related to data sharing support. Selected employees have individual plans with set objectives to be met during the training.

Educational activities in 2013 were primarily focused on the professional ca-pability of employees to work under applicable legal regulations, increase in qualifications, language courses for key employees and innovative education through professional courses, training and seminars. Selected employees were involved in the educational activities of the Association of the Chemical Industry entitled “Educating for the Competitiveness of the Chemical Industry in the Czech Republic” which is co-financed by the ESF and the Czech state budget.

The permanent cooperation with schools of all levels, primarily in the form of continuous professional training and field trips, contributes to maintaining the required qualifications and expertise. Another benefit of this long-term co-operation is a significant share in creating a positive perception of chemistry, which can be environmentally friendly.

The overall high quality of the company is also reflected in its social policy with respect to employees. The care for employees results in consistent com-pliance with the contents of the collective agreement concluded and motiva-tion events of the company’s management, which exceed the scope of the collective agreement. The character of most of the benefits provided primarily consisted of benefits above those defined in the Labour Code focusing on health protection and occupational safety and employee healthcare.

During the year, the Company organised regular meetings of the manage-ment with trade unions at which representatives of trade unions were informed about the activities in the Company. In the last quarter of 2013, the Company conducted collective bargaining, which was completed by the agreement of both parties and the conclusion of the Collective Agreement for 2014. Mutually-beneficial relationships support the social consensus in the Company.

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Internal and external communication is also involved in the scope of human resources. The HR and communication function took over the role of the guarantor for the preparation of corporate identity materials and a unified visual style and it also plays a very important role in solving crisis situations. All employees are regularly provided with information on the prepared or ongoing changes, on the company’s results, future tar-gets and plans. As every year, the Company published its Environmental Impact Report and its Annual Report in 2013.

Emphasis is continuously put on building and maintaining a positive image for our Company and fulfilling the particular forms of cooperation with individual external entities. Therefore, based on long-term, correctly-developed relations, the company successfully cooperates with the neighbouring municipal districts, predominantly in the form of supporting their cultural and social activities. There were regular meetings of the Com-pany’s management with the representatives of the self-governing authori-ties of the closest municipal districts, in which participants were informed about the development in the Company and the planned initiatives in the environmental protection and the safety of operation of our equipment.

On 31 May 2013, our Company celebrated the 85th anniversary of launching production. The celebration of this significant anniversary cul-minated with a concert by the Janáček Philharmonic Orchestra, based in Ostrava. Prominent guests, who included our foreign owners, business

partners and representatives of institutions, as well as our employees, heard a congratulatory speech and the thanks of Jason Ding, the chair-man of the board of directors and CEO of the Wanhua-BorsodChem Group, in the form of a personal letter for Přemysl Antecký, CEO. The appropriate celebration was an expression of gratitude to everyone who has contributed to the successful results of our company. We are convinced that this event was not only a pleasure for all visitors but also contributed to the good reputation of our company and its positive perception by the general public.

Our company continues to support the activities of Heyrovsky Second-ary School of Chemistry and the High-School in Ostrava-Zábřeh. In the long-term, the Company provides funding support to sponsor Silesian Days of Preventive Medicine organised by the regional hygienic station of the Moravian and Silesian region and we support the regional profes-sional training of young, talented chemists. We participate in a popular event called “Chemistry at the Castle” in cooperation with regional universities. In 2013, we continued to cooperate with the Janáček Phil-harmonic Orchestra in Ostrava as we became its major partner in 2012.

All of these activities that are parts of the long-term communication policy show that we are fully aware of our role as a production chemical company and also as a major responsible firm operating in the Moravian Silesian region.

average monthly salary development (in CZK thousand)

30.5

30.0

29.5

29.0

28.5

28.0

27.5

27.0

26.5

26.0

25.5

25.02007 2008 2009 2010 2011 2012 2013

26.3

28.2

27.1

29.3

28.828.9

30.5

average recalculated headcount (persons)

540510480450420390360330300270240210

2007 2008 2009 2010 2011 2012 2013

516

407

373358 355 350 351

proportion of value added per employee (in CZK thousand)

1,800

1,600

1,400

1,200

1,000

800

600

4002007 2008 2009 2010 2011 2012 2013

1,327

550

1,329

1,759

1,382

1,327

1,621

Structure of educational expenses in 2013

31 %

34 %

22 %

13 %

Language training – 31% Professional training – 34% Statutory training – 22% Education of key employees – 13%


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Integrated management systemIn 2013, BorsodChem MCHZ, s.r.o. maintained and further developed the inte-grated management system which includes the quality management system, the environmental system and the safety system.

The quality management system and the environmental management system are certified by Lloyd’s Register Quality Assurance (LRQA) according to ČSN EN ISO 9001:2009 and ČSN EN ISO 14001:2005 system norms. The safety system is certified by the State Labour Inspection Office according to ČSN OHSAS 18001:2008.

In 2013, the LRQA certification organisation conducted two inspec-tions in which the integrated management system’s certification was successfully defended.

The environmental management system and the safety system cover the whole company, and the quality assurance system within the integrated certificate covers the activities relating to aniline, cyclohexy-lamine, dicyclohexylamine, special amines, nitrobenzene, concentrated nitric acid, diethyloxalate and activities relating to the management of chemical products design and development.

At present, approximately 99.5% of the company’s sales are generated from quality management certified activities.

The quality, environmental and safety department’s laboratory contin-ued to work under the accredited quality system in accordance with the ČSN EN ISO /IEC 17025:2005 system norm in 2013. In the previ-ous year, this part of the company was successfully reviewed by the Czech Accreditation Institute in which the Accreditation certificate was successfully defended. The accreditation relates to analytical methods in water, soil, air and working environment testing, including the collec-tion of individual samples.

Since 2011, the company has held a prestigious Authorised Economic Operator certificate – its highest-level Simplified customs proce-dures/Safety and security award. The certification offers a number of advantages arising primarily from the simplification and acceleration of customs procedures, fewer physical inspections of the goods and preferential customs clearance. This certificate is granted to reliable, financially-stable companies that comply with customs requirements, prove solvency, have a satisfactory and transparent accounting and logistics system, and comply with safety standards in the long term.

Integrated Management System certificate

accreditation certificate authorised economic operator certificate

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Research and development

The research and development activities focus on special amine chemistry. The research and development centre deals with technology problems in the production of simulations and analysis of technological processes in the laboratory and the support of launching new products and development of new technological procedures. Laboratories are equipped with test-ing batch and continuous reactors and distillation columns, for the development of new technologies, similar devices in the semi-plant size are used. In addition, modern analytic technol-ogy is available.

The research and development centre utilises the potential of the aca-demic sector. In collaboration with the Institute of Chemical Technol-ogy, Prague, the centre is involved in special projects, such as the de-velopment of catalyst systems and more-complex technology relating the production of special amines. Additionally, in cooperation with the Technical University in Ostrava and Chemoprojekt Praha, the testing reactor for the development of catalysts for the liquidation of nitrogen oxides arising from the production of nitric acid has been operated in the premises of BC-MCHZ. BorsodChem MCHZ provides the neces-sary energy and energy media for the operation of this reactor.


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emissions of selected air pollutants per unit of the relevant production (kg/t of production)

2.0

1.5

1.0

0.5

01995 2000 2005 2010 2013

1.64

0.56 0.61 0.480.26

0.095 0.111 0.015 0.014 0.005 Nitrogen oxides Organic substances

kg/t

pollution of waste water emitted into the odra river per unit of production (kg/t of production)

1

0.8

0.6

0.4

0.2

01995 2000 2005 2010 2013

0.82

0.502

0.373 0.3650.269

0.1730.103 0.115 0.147

0.065

0.219

0.088 0.056 0.0640.008

chemical oxygen demand biological oxygen demand NH4+

kg/t

16

Environmental protection and safety BorsodChem MCHZ, s.r.o. puts emphasis on the environmental protection and the provision of occupational safety and health during all of its operations.

For the results in the reported areas, the company has been holding the “Responsible Care – Responsible Business Activities in Chem-istry” certificate since 1998. In September 2012, the company was recertified for another four-year period, until October 2016.

The company’s long-term effort to provide a balance between the economic, environmental and social levels was rewarded in 2006 by the Board of Directors of the Association of the Chemical Industry of the Czech Republic: as the first Czech company, BorsodChem MCHZ, s.r.o. received the “Sustainable Development Certificate”.

Based on its compliance with the requirements for the safety and health protection management system (OHSAS 18001), which also involves system environmental protection, fire protection and preven-tion of serious accidents, the company was repeatedly awarded the “Safe Plant” certificate in 2011, which is valid until May 2014.

All production technologies of the company are comparable to the best available technologies (BAT) and have received valid integrated

licences. The established emission limits for air pollutants and water pollutants are adhered to.

In compliance with European legislation in the area of chemicals – the REACH Guideline – 16 major products of the company were regis-tered at the European Chemicals Agency in Helsinki in

2010 - 2013. An essential part of the registration was the Chemical Safety Report which defines the safety conditions for the production and the subsequent use of products as substances pursuant to REACH.

In terms of the implementation of the EU emissions trading system (EU ETS), the company met all legislative requirements and created favour-able conditions for successful trading with emission allowances for greenhouse emission in the third trading period from 2013 to 2020.

The environmental protection and the safety and health protection at work are regularly assessed and the following charts show the development in principal indicators.

production of waste per unit of the relevant production (kg of waste/t of relevant production)

16

12

8

4

01995 2000 2005 2010 2013

14.58

7.10

4.103.40 3.61

In compliance with the requirement regarding the “ongoing improve-ment” of the management system, the company incurred approxi-mately 72.1% of the aggregate investment costs in environmental protection and improvements in safety, including fire protection and occupational safety and health protection in 2013.

The company took preventive measures leading to a decrease in waste water pollution, greenhouse gas emissions, raw material and energy de-mands and improvements in the process safety of the technologies in use.

Sustainable Development Certificate

responsible Care certificate

Safe plant certificate

Water drawn and released from/into the odra river per unit of production (m3/t of production)

25

20

15

10

5

01995 2000 2005 2010 2013

22.48

14.76

9.14 8.49

5.87

21.24

11.85

7.36 6.67

4.16

Drawing Emission

During 2013, the modernised biological waste water treatment plant was put into permanent operation including, inter alia, nitrification, denitrification, and ozonisation, which had a substantial impact on decreasing the pollution level of released waste water.

The placement of the secondary catalyst in nitric acid produc-tion plants was completed. The catalyst will allow us to decrease greenhouse gas emissions, namely nitrous oxide, by approxi-mately 85%.

Indicators of work-related injuries

16

12

8

4

01995 2000 2005 2010 2013

16

12

6

21

6.11 6.29 6.08

3.201.65

1.05 1.17 1.02 0.56 0.28

Number of work-related injuries Frequency of injuries: number of new work-related injuries per million working hours Rate: number of new work-related injuries per 100 employees Number of days of absence

kg/tm3/t

543

700

29

355

83


17

18

Ownership structure of the Borsodchem ZRt. Groupas of 31 December 2013

First Chemical Holding

Vagyonkezelő Kft.

petrochemia Blachownia S.a.

(poland)100 %

BorsodChem MDI production ltd.

100 %

BC-MCHZ s.r.o.(Czech republic)

100 %

BC-energiake-reskedő Kft.

(Hungary)100 %

BC-ablakprofil Kft. „under liquidation“

(Hungary)100 %

BC erőmű Kft(Hungary)

26 %

BC-KC Formalin Kft. (Hungary)66.67 %

BorsodChem (Yan-tai) Company ltd.

100 %

BorsodChemItalia S.r.l

(Italy)100 %

polimer SzolgáltatóKft. (Hungary)

100 %

BorsodChem ZRt


19

Financial partall data is in czk thousand

20

1. Balance Sheet as of 31 December 2013 – Full Version

in CZK thousand 31.12.2013 31.12.2012

Gross adjustment net net

total aSSetS 6 745 877 -3 540 544 3 205 333 3 085 824

A. Receivables for subscribed capital

B. Fixed assets 5 395 789 -3 520 899 1 874 890 1 912 913

B.I. Intangible fixed assets 67 728 -49 137 18 591 19 263

B.I.3. Software 44 224 -42 769 1 455 2 243

B.I.6. Other intangible fixed assets 22 852 -6 368 16 484 15 258

B.I.7. Intangible fixed assets under construction 511 511 1 553

B.I.8. Prepayments for intangible fixed assets 141 141 209

B.II. Tangible fixed assets 5 328 061 -3 471 762 1 856 299 1 893 650

B.II.1. Land 101 796 -2 967 98 829 101 796

B.II.2. Structures 2 033 533 -1 223 866 809 667 842 114

B.II.3. Individual movable assets and sets of movable assets 3 321 278 -2 362 214 959 064 939 925

B.II.6. Other tangible fixed assets 505 505 455

B.II.7. Tangible fixed assets under construction 22 591 -21 666 925 493

B.II.8. Prepayments for tangible fixed assets 865 865 32 590

B.II.9. Valuation difference on acquired assets -152 507 138 951 -13 556 -23 723

C. Current assets 1 342 537 -19 645 1 322 892 1 168 487

C.I. Inventories 449 459 -12 837 436 622 340 033

C.I.1. Material 189 162 -12 749 176 413 133 954

C.I.2. Work in progress and semi-finished goods 68 844 68 844 63 383

C.I.3. Products 190 896 -88 190 808 129 711

C.I.5. Goods 12 985

C.I.6. Prepayments for inventory 557 557

C.II. Long-term receivables 400 400 1 200

C.II.1. Trade receivables 400 400 1 200

C.III. Short-term receivables 575 427 -6 808 568 619 728 003

C.III.1. Trade receivables 481 498 -6 338 475 160 606 971

C.III.6. State - tax receivables 91 881 91 881 116 984

C.III.7. Short-term prepayments made 220 220 192

C.III.9. Other receivables 1 828 -470 1 358 3 856

C.IV. Current financial assets 317 251 317 251 99 251

C.IV.1. Cash on hand 247 247 220

C.IV.2. Cash at bank 317 004 317 004 99 031

D. I. Other assets 7 551 7 551 4 424

D.I.1. Deferred expenses 7 551 7 551 4 424

total lIaBIlItIeS 3 205 333 3 085 824

A. Equity 1 643 884 1 561 698

A.I. Share capital 865 100 865 100

A.I.1. Share capital 865 100 865 100

A.III. Statutory funds 55 176 50 718

A.III.1. Statutory reserve fund/Indivisible fund and other profit funds 55 067 50 626

A.III.2. Statutory and other funds 109 92

A.IV. Retained earnings 615 719 557 067

A.IV.1. Accumulated profits brought forward 615 719 557 067

A.V. Profit or loss for the current period (+ -) 107 889 88 813

B. Liabilities 1 530 468 1 492 468

B.I. Reserves 58 354 48 082


21

B.I.1. Reserves under special legislation 27 27

B.I.4. Other reserves 58 327 48 055

B.II. Long-term liabilities 904 298 830 671

B.II.2. Payables - controlled or controlling entity 732 974 671 904

B.II.10. Deferred tax liability 171 324 158 767

B.III. Short-term liabilities 567 816 613 715

B.III.1. Trade payables 530 757 579 175

B.III.5. Payables to employees 8 622 8 586

B.III.6. Social security and health insurance payables 5 210 5 116

B.III.7. State - tax payables and subsidies 13 329 1 985

B.III.8. Short-term prepayments received 502 2 972

B.III.10. Estimated payables 8 268 15 037

B.III.11. Other payables 1 128 844

C. I. Other liabilities 30 981 31 658

C.I.1. Accrued expenses 4 382 3 980

C.I.2. Deferred income 26 599 27 678

2. Profit and Loss Account Structured by the Nature of Expense Method for the Year Ended 31 December 2013

in CZK thousand Year ended 31. 12. 2013

Year ended 31. 12. 2012

I. Sales of goods 45 138 18 381

A. Costs of goods sold 37 512 15 460

+ Gross margin 7 626 2 921

II. Production 5 507 211 5 286 679

II.1. Sales of own products and services 5 431 011 5 202 622

II.2. Change in internally produced inventory 66 558 81 659

II.3. Own work capitalised 9 642 2 398

B. Purchased consumables and services 4 945 844 4 825 096

B.1. Consumed material and energy 4 559 812 4 481 341

B.2. Services 386 032 343 755

+ Added value 568 993 464 504

C. Staff costs 207 689 193 522

C.1. Payroll costs 150 613 140 521

C.2. Remuneration to members of statutory bodies 229 118

C.3. Social security and health insurance costs 53 317 49 761

C.4. Social costs 3 530 3 122

D. Taxes and charges 10 821 9 482

E. Depreciation of intangible and tangible fixed assets 175 544 165 685

III. Sales of fixed assets and material 5 331 10 183

III.1. Sales of fixed assets 636 145

III.2. Sales of material 4 695 10 038

F. Net book value of fixed assets and material sold 4 647 9 854

F.1. Net book value of sold fixed assets 45 283

F.2. Book value of sold material 4 602 9 571

G. Change in reserves and provisions relating to operating activities and complex deferred expen-ses

-4 349 -73 704

IV. Other operating income 61 095 24 698

H. Other operating expenses 54 433 47 936

* Operating profit or loss 186 634 146 610

X. Interest income 396 197

22

in CZK thousand Year ended 31. 12. 2013

Year ended 31. 12. 2012

N. Interest expenses 24 821 32 117

XI. Other financial income 108 025 123 381

O. Other financial expenses 138 619 124 357

* Financial profit or loss -55 019 -32 896

Q. Income tax on ordinary activities 23 726 24 901

Q 1. - due 11 169

Q 2. - deferred 12 557 24 901

** Profit or loss from ordinary activities 107 889 88 813

*** Profit or loss for the current period (+/-) 107 889 88 813

**** Profit or loss before tax 131 615 113 714

3. Development of Fixed Assets

Balance at 1 Jan 2013

additions Disposals/transfers

Balance at 31 Dec 2013

Cost in CZK thousand

Tangible fixed assets

Buildings 2 024 967 10 746 -2 180 2 033 533

Land 101 796 101 796

Individual movable assets and sets of movable assets 3 238 593 129 621 -46 936 3 321 278

Other tangible FA 455 50 505

Tangible FA under construction 22 159 142 453 -142 021 22 591

Prepayments for tangible FA 32 590 1 320 -33 045 865

Valuation difference on acquired assets - 152 507 -152 507

Intangible FA

Software 44 275 969 -1 020 44 224

Other intangible FA 235 235

Valuable rights 18 161 4 456 22 617

Intangible fixed assets under construction 1 553 5 073 -6 115 511

Prepayments for intangible FA 209 2 865 -2 933 141

Total cost 5 332 486 297 553 -234 250 5 395 789

accumulated depreciation and accumulated amortisation in CZK thousand

Tangible fixed assets

Buildings and structures - 1 163 924 -44 171 2 180 -1 205 915

Individual movable assets and sets of movable assets - 2 281 930 -126 431 46 937 -2 361 424

Provision against tangible FA -35 667 -2 967 16 926 -21 708

Provision against tangible FA under construction - 21 666 -21 666

Valuation difference on acquired assets 128 784 10 167 138 951

Intangible FA

Software - 42 032 -1 757 1 020 -42 769

Other intangible FA - 235 -235

Valuable rights - 2 903 -3 230 -6 133

Total accumulated depreciation and amortisation - 3 419 573 -168 389 67 063 -3 520 899

Total net book value - 1 912 913 1 874 890


23

4. Development of Major Investments

In CZK thousand Balance at 31 Dec 2013

Pipe bundle 71 275

Blower K1401 F 12 828

5. Trade Receivables

In CZK thousand Balance at 31 Dec 2013 Balance at 31 Dec 2012

Gross adjustment Gross adjustment

Before due date 459 824 520 229

Total past due date 21 674 -6 338 93 602 -6 860

Of which:

Up to 90 days 15 336 86 742

91-180 days

181-365 days

More than 365 days 6 338 -6 338 6 860 -6 860

Total receivables 481 498 -6 338 613 831 -6 860

6. Trade Payables

In CZK thousand Balance at 31 Dec 2013 Balance at 31 Dec 2012

Before due date 530 757 579 175

Past due date 0 0

Total payables 530 757 579 175

7. Number of Employees

Indicator 2013 2012

Average recorded number of employees

Recalculated headcount Persons 351 350

Physical headcount Persons 352 352

Physical balance at the year-end Persons 352 354

8. Sales Volume

Sales of finished products in CZK thousand Year ended 31 Dec 2013 Year ended 31 Dec 2012

Aniline 3 908 360 3 872 768

In-country 88 471 67 665

Cross-border 3 819 889 3 805 103

Cyclohexylamine 763 972 594 118

In-country 3 763 2 232

Cross-border 760 209 591 886

Special amines 334 780 297 520

In-country 11 717 15 252

Cross-border 323 063 282 268

Other 318 099 333 152

In-country 37 337 37 149

Cross-border 280 762 296 003

TOTAL 5 325 211 5 097 558

24

9. Income Tax Payable for the Year Ended 31 December 2013

profit before tax in CZK thousand 131 615

Items to add (+) 19 217

Deductible items (-) 89 718

Tax base (tax loss) 61 114

Deduction of the tax loss (-) under Section 34 (1) of the Income Taxes Act -793

Deduction of gifts under Section 20 (8) of the Income Taxes Act -737

Adjusted income tax base 59 584

Tax rate 19%

Tax 11 321

Tax relief under Section 35 (a) or Section 35b of the Act -152

Total tax 11 169

10. Proposed Distribution of Profit for the Year Ended 31 December 2013

profit for the period before tax in CZK thousand 131 615

Income tax payable for 2013 11 169

Deferred tax liability for 2013 12 557

Profit to be distributed 107 889

Allocation of the reserve fund to retained earnings 55 067

Retained earnings 615 719

Balance of retained earnings after the allocation of the reserved fund 778 675


25

Auditor’s report


27

1. Introduction:Controlling entity: BorsodChem Zrt. Kazincbarcika Bólyai tér 1, H-3702, P.O.B. 208 Hungary

Controlled entity: BorsodChem MCHZ, s.r.o., Ostrava – Mariánské Hory, Chemická 1/2039, Corporate ID 26019388

Investment of the controlling entity in the controlled entity: 100% of the share capital of

the controlled entity

2. Relations between the Controlling and Controlled Entities pursuant to the Provisions of Section 66a (9) of the Commercial CodeIn the 2013 reporting period, the following transactions were made on the basis of purchase contracts concluded between the aforemen-tioned entities:

a) To the controlling entity – sale of aniline and concentrated nitric acid at an arm’s length price at which this product would be sold to foreign entities.

b) To the controlled entity – sale of ammonia, sodium hydroxide and nitric acid, also at an arm’s length price.

In addition, costs of services in the aggregate amounts of CZK 662 thousand and CZK 6 thousand were billed to the controlling entity and the controlled entity, respectively.

In the year ended 31 December 2013, the Controlling Entity was paid a share of the 2012 profit of CZK 25,720 thousand based on the deci-sion of the general meeting.

The balance of the long-term loan provided to the controlled entity was CZK 732,974 thousand as of 31 December 2013 with a due date of 31 January 2016; the interest on this loan was billed in the amount of CZK 24,819 thousand.

In the reporting period, no legal acts, except for those mentioned above, were effected between the controlling and controlled entities, nor was any other performance or counter-performance provided, oth-er measures carried out, benefits accorded or disadvantages imposed that would have resulted in any detriment to the controlled entity.

3. Relations between Related PartiesIn the 2013 reporting period, the following contracts were concluded between related parties, ie between the controlled entity (BorsodChem MCHZ, s.r.o.) and another entity controlled by the same controlling entity, based on which the controlled entity, ie BorsodChem MCHZ, s.r.o., as the buyer, purchased goods or services from the related party as specified hereunder:

a) From Petrochemia Blachownia S.A. – purchase of benzene and sulphuric acid; and

b) From BC-KC Formalin Kft – purchase of formalin.

The contracted prices for the above transactions always correspond to the arm’s length prices for which the goods would be sold to foreign third parties.

4. ConclusionHaving evaluated the foregoing relations, we state that no contracts were concluded or measures effected between the controlled entity, controlling entity and related parties, based on which the controlled entity, the issuer of this report, would suffer any detriment. Therefore, a declaration regarding compensation for detriment or the conclusion of a contract for the compensation thereof would be unnecessary.

The company has decided not to disclose amounts under related party contracts citing business secrecy restrictions .

This report forms an integral part of the Annual Report of BorsodChem MCHZ, s.r.o., Chemická 1/2039, Ostrava – Mariánské Hory.

The controlled entity did not adopt any other legal acts in the interest or at the initiative of the related parties in the reporting period.

The controlled entity did not adopt or effect any other factual measures in the interest or at the initiative of related parties.

In Ostrava on 25 February 2014

Report on relations between the controlling and controlled entities

Přemysl AnteckýStatutory Executive

28

I hereby declare that the information in the annual report fully reflects reality. Person responsible for the annual report.

Přemysl Antecký Statutory Executive

Affidavit


29

Issued by:BorsodChem MCHZ, s.r.o.Member of Wanhua – BorsodChem GroupChemická 1/2039709 03 Ostrava – Mariánské HoryCzech Republic

Realisation and design:Agentura API s.r.o.

Year of issuance:2014

30

Administrator

Lístek s poznámkou

Member of Wanhua Industrial Group


31

BorsodChem MCHZ, s.r.o.Member of Wanhua – BorsodChem Group

Chemická 1/2039709 03 ostrava – Mariánské Hory

Czech republic

Corporate ID: 26019388recorded in the register of Companies on 15 December 1999

File C, Insert 22763, District Court in ostravawww.borsodchem-cz.com

Administrator

Lístek s poznámkou

Member of Wanhua Industrial Group

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