New investments, energy transformation and opportunistic M&A transactions are some of the key elements of the CIECH Group’s gameplan for 2021 and beyond. CEO Dawid Jakubowicz speaks with Acuris Capital Intelligence.
Interview by Joanna Socha
Q: What is your operational outlook for 2021 and 2022?
We are in the final year of our current strategy set for 2019-2021. This year, we are expecting a significant improvement in our financial results. We want to reach about PLN 700-735m in EBITDA versus 585m in 2020, representing an increase of approximately 20-25%. Right now, we are focusing on finalizing our new strategy.
We are worried about the fourth pandemic wave which could occur in 4Q21 and coincide with us working on soda ash contracting. We are also looking at our competition and clients as COVID-19 has had a significant impact on all of us. Luckily, CIECH is not just a soda ash producer, but it also has a diversified portfolio of other businesses that are less cyclical and grow even in adverse market conditions, such as plant protection products, silicates and glass packaging.
Q: What strategic objectives have you set to capitalize on markets in 2021 and beyond?
We are yet to finalize and announce our new strategy. Still, we are focusing on opening our greenfield project - a salt works in Germany, one of our largest investments so far. Right now, we are at the commissioning phase. We are planning to start sales later this year. We also want to increase our production capacity in the area of silicates and this is why we are looking forward to launching our silicates firing furnace by the end of 2021. CIECH is also commercializing its recently launched pharmaceutical-grade sodium bicarbonate installation in Germany. It also focuses on energy transformation according to its recently announced ESG strategy and decarbonization goals.
Q: How does your capital position support these ambitions?
We have a strong market position, as evidenced by our cash flow, which has allowed us to finance the large investment program that we have just discussed. In fact, we did not have to utilize debt financing to fund this CAPEX. We also proved our balance sheet quality by paying high dividend to our shareholders this year.
Q: Can you tell us about your debt refinancing or new debt issuance plans for the year?
This year, in March, we completed bank refinancing of more than two billion zlotys.
We optimized our debt structure and secured attractive interest rates that could reduce the debt costs over the next few years. As far as covenants are concerned, we have a comfortable 4X net debt to EBITDA ratio included in the credit agreement, which gives us good firepower when it comes to potential M&As. We do not see any need to increase our debt or raise capital in the nearest future.
Q: What are your own M&A objectives in 2021 and beyond?
From time to time, we conduct strategic option reviews, which has recently resulted in an exit from our synthetic resins business. This year, we are analyzing our smallest business of glass packaging: we want to examine its prospects, the investments it will require and the kind of cash flow it will generate, either within our group or outside it. Our goal is to maximize value for the shareholders.
Q: So there could be potential divestment happening?
Yes, we could look at it. There could be a total or partial sale of this packaging business, but it also does not have to happen at all. There are also other changes coming. We want to undergo an energy transformation, improve processes within our organization, implement new technologies. We do not rule out acquisitions. We could consider both Polish and international targets, as long as they are from our sector. M&A is part of our strategy, so if we close any transaction, it should not be a surprise for our market. We are actively monitoring the market and have defined our goals. If any transaction were to happen, it could be in the area of our core business.
A bit of a background: CIECH is an international developing chemical group with a strong position on global markets. Since 2005, CIECH S.A. has been listed on the Warsaw Stock Exchange, and since 2016, simultaneously, on one of the largest stock exchanges in Europe - Börse Frankfurt. The development of the Group is supported by its strategic investor – Kulczyk Investments. As one of the largest Polish exporters, CIECH ships its goods to almost each continent.
This interview has been edited for clarity and length.
