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The SYNTHOS S.A. Group

Condensed interim consolidated financial statements for the 6-month period ended 30 June 2015

THE SYNTHOS S.A.

GROUP

Oświęcim, ul. Chemików 1

Condensed interim consolidated financial statements for the

6-month period ended

30 June 2015

Oświęcim, 28 August 2015

The Synthos S.A. Group Condensed interim consolidated financial statements for the 6 months ended 30 June 2015 (in PLN’000, unless stated otherwise)

3

MANAGEMENT REPRESENTATIONS 5

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS ENDED 30 JUNE 2015 7

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 8

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 (CONT.) 9

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY FOR THE 6 MONTHS ENDED 30 JUNE 2015 10

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED 30 JUNE 2015 11

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED 30 JUNE 2015 (CONT.) 12

Note 1. Accounting policies ...................................................................................................................... 15

Note 2. Selected major accounting policies ............................................................................................ 18

Note 3. Segment reporting ...................................................................................................................... 19

Note 4. Explanations concerning the seasonal or cyclical nature of the operations ........................... 24

Note 5. Financial risk management ......................................................................................................... 25

Note 6. Net finance income/costs ............................................................................................................ 25

Note 7. Income tax .................................................................................................................................... 26

Note 8. Property, plant and equipment .................................................................................................. 27

Note 9. Intangible assets .......................................................................................................................... 29

Note 10. Available-for-sale financial assets .............................................................................................. 31

Note 11. Trade and other receivables ........................................................................................................ 31

Note 12. Trade payables and other liabilities ........................................................................................... 31

Note 13. Share capital ................................................................................................................................. 32

Note 14. Earnings per share ....................................................................................................................... 32

Note 15. Liabilities in respect of loans, borrowings, finance lease and other debt instruments ......... 32


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Note 16. Dividends paid .............................................................................................................................. 33

Note 17. Other liabilities ............................................................................................................................. 33

Note 18. Investment commitments .......................................................................................................... 33

Note 19. Contingent liabilities, guarantees and warranties .................................................................... 34

Note 20. Fair value of financial instruments ............................................................................................. 34

Note 21. Transactions with related entities .............................................................................................. 35

Note 22. Events after the balance sheet date ........................................................................................... 35

Note 23. Accounting estimates and assumptions, and judgements ...................................................... 36

Note 24. Approval of the financial statements ......................................................................................... 37


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MANAGEMENT REPRESENTATIONS The Management Board of Synthos S.A. hereby presents the consolidated financial statements for the six months ended 30.06.2015, which comprise

the consolidated statement of comprehensive income for the period from 1.01.2015 to 30.06.2015;

the consolidated statement of financial position as at 30.06.2015;

the statement of changes in consolidated equity for the period from 1.01.2015 to 30.06.2015;

the consolidated statement of cash flows for the period from 1.01.2015 to 30.06.2015;

the explanatory notes to the financial statements. The condensed interim consolidated and separate financial statements have been prepared in accordance with the requirements of the International Accounting Standard 34 Interim Financial Reporting as endorsed by the European Union and they present the financial position and results of operations of Synthos S.A. and the Group in a true and fair manner. The Directors’ Report of the Group presents a true view of the Group’s development, achievements and situation, including a description of the risks and threats. The entity authorized to audit the consolidated financial statements which performed the review of the consolidated financial statements has been appointed in compliance with the law. This entity, as well as the registered auditors performing the review, satisfied the conditions for issuing an unbiased and independent review report, in accordance with the professional regulations and standards. Signatures of the Management Board Members ……...……………………….. Tomasz Kalwat President of the Management Board ………………………………….. Tomasz Piec Board Member ………………………………….. Jarosław Rogoża Board Member

……...……………………….. Zbigniew Warmuz Vice president of the Board ………………………………............ Zbigniew Lange Board Member

……...……………………….. Michał Watoła Person responsible for preparing the consolidated financial statements


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Oświęcim, 28 August 2015


7 The consolidated statement of comprehensive income should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS ENDED 30 JUNE 2015

Note from 01.01.2015 to

30.06.2015

from 01.01.2014 to 30.06.2014

Sales revenue 2 121 319 2 349 977 Cost of sales (1 710 842) (1 955 963)

Gross profit 410 477 394 014 Other operating income 10 845 12 987 Selling costs (67 661) (66 548) Administrative expenses (87 458) (79 800) Other operating expenses (4 513) (8 437) Share value write-down (5 130) -

Operating profit 256 560 252 216

Finance income 6 34 801 2 313 Finance costs 6 (25 471) (22 315) Net finance income/(costs) 6 9 330 (20 002) Profit before income tax 265 890 232 214 Income tax 7 (19 515) (63 307)

Net profit 246 375 168 907 Other comprehensive income which may be transferred to the income statement

Foreign exchange gains/ (losses) on translation of subsidiaries and joint operations

821 11 265

Valuation of financial assets available for sale (2 644) (48 725) Other comprehensive income, net (1 823) (37 460) Total comprehensive income 244 552 131 447 Profit attributable to: Equity holders of the parent company 246 118 168 756 Non-controlling interests 257 151

Net profit for the year 246 375 168 907

Comprehensive income attributable to: Equity holders of the parent company 244 295 131 296 Non-controlling interests 257 151

Comprehensive income for the period 244 552 131 447

Earnings per share for the period attributable to the Company’s shareholders (in PLN per share):

Basic (in PLN) 0.19 0.13 Diluted (in PLN) 0.19 0.13

.


8 The consolidated statement of comprehensive income should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

Note

30.06.2015 31.12.2014

Assets

Non-current assets

Property, plant and equipment 8 2 148 864 1 966 376

Intangible assets 9 231 676 227 458

Non-current investments 2 095 6 425

Available-for-sale financial assets 10 130 631 132 553

Deferred tax asset 25 407 32 665

Total non-current assets 2 538 673 2 365 477

Current assets

Inventories 408 479 495 762

Income tax receivable 53 671 47 501

Trade and other receivables 11 965 177 949 362

Cash and cash equivalents 984 572 783 563

Total current assets 2 411 899 2 276 188

Total assets 4 950 572 4 641 665


9 The consolidated statement of financial position should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

Consolidated statement of financial position as at 30 June 2015 (cont.)

Note 30.06.2015 31.12.2014

Equity and liabilities

Equity

Share capital 13 39 698 39 698

Revaluation reserve 45 522 48 166

Foreign exchange gains and losses on translation of subordinated entities

17 588 16 767

Retained earnings, including: 2 033 120 2 117 815

Net profit for the current period 14 246 118 356 883

Equity attributable to equity holders of the parent company 2 135 928 2 222 446

Non-controlling interests 13 754 13 497

Total equity 2 149 682 2 235 943

Liabilities

Liabilities in respect of loans, borrowings and other debt instruments 15 1 658 860 1 472 550

Employee benefits payable 4 392 4 451

Deferred income from state subsidies 149 929 141 398

Provisions 30 260 30 260

Deferred income tax liability 42 537 42 736

Other long-term liabilities 17 28 832 28 813

Total non-current liabilities 1 914 810 1 720 208

Liabilities in respect of loans, borrowings and other debt instruments 15 20 380 18 518

Deferred income from state subsidies 8 064 8 064

Employee benefits payable 352 352

Income tax liabilities 390 802

Trade payables and other liabilities 12 851 260 651 519

Provisions 4 131 4 090

Derivative Instruments 1 503 2 169

Total current liabilities 886 080 685 514

Total liabilities 2 800 890 2 405 722

Total equity and liabilities 4 950 572 4 641 665


10 The statement of changes in consolidated equity should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY FOR THE 6 MONTHS ENDED 30 JUNE 2015 Attributable to equity holders of the Company

Share capital Retained earnings Foreign exchange differences on translation Revaluation reserve Attributable to non-controlling interests Total equity

1 January 2015 39 698 2 117 815 16 767 48 166 13 497 2 235 943

Payment of dividend - (330 813) - - - (330 813) Net profit - 246 118 - - 257 246 375 Other income - - 821 (2 644) - (1 823)

Comprehensive income - 246 118 821 (2 644) 257 244 552

30 June 2015 39 698 2 033 120 17 588 45 522 13 754 2 149 682

Attributable to equity holders of the Company

Share capital Retained earnings

Foreign exchange differences on translation Revaluation reserve

Attributable to non-controlling interests Total equity

1 January 2014 39 698 2 171 139 (8 636) 75 237 13 823 2 291 261

Payment of dividend - (410 208) - - - (410 208) Net profit - 168 756 - - 151 168 907 Other income - - 11 265 (48 725) - (37 460)

Comprehensive income - 168 756 11 265 (48 725) 151 131 447

30 June 2014 39 698 1 929 688 2 629 26 512 13 974 2 012 501


11 The consolidated statement of cash flows should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED 30 JUNE 2015

from 01.01.2015 to

30.06.2015 from 01.01.2014 to

30.06.2014

Profit before income tax 265 890 232 214

Adjustments

Depreciation and amortization 77 887 77 776

Share value write-down 5 130 -

Foreign exchange (gains)/losses (10 229) 7 672

Gains / (losses) on investing activities (18 920) (452)

(Gains)/ losses on disposal of fixed assets (338) (1 881)

Interest 18 700 7 993

Other 952 599

Operating profit before changes in working capital 339 072 323 921

(Increase) / decrease in receivables (18 667) (104 598)

(Increase)/decrease in inventories 99 063 14 862

Increase/(decrease) in trade payables and other liabilities, and state subsidies

(33 232) 15 342

Increase/(decrease) in provisions 39 36

Increase/(decrease) in employee benefits payable (59) (51)

Net cash generated on operating activities 386 216 249 512

Tax paid (19 631) (22 244)

Net cash from operating activities 366 585 227 268


12 The consolidated statement of cash flows should be analysed jointly with the explanatory notes constituting an integral part of the condensed interim consolidated financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED 30 JUNE 2015 (cont.)

from 01.01.2015 to

30.06.2015 from 01.01.2014 to

30.06.2014

Cash flows from investing activities

Disposal of intangible assets and property, plant and equipment

698 1 727

Loans repaid 342 -

Interest received 3 798 1 750

Subsidies received 10 584 23 074

Proceeds from forward transactions realized 20 414 2 272

Purchase of intangible assets and property, plant and equipment

(360 552) (144 323)

Purchase of shares in subsidiaries (1 373) (7 748)

Loans granted - (317)

Cash flows from cash pool (12 887) (22 571)

Net cash from investing activities (338 976) (146 136)

Cash flows from financing activities

Bond issue 201 649 -

Loans and borrowings received - 276 122

Overdrafts (repaid)/taken - (84 489)

Dividends and other payments to shareholders - (410 191)

Outflows in respect of swap transactions (1 494) (3 076)

Outflows on repayment of loans and borrowings - (119 219)

Interest paid (20 485) (10 024)

Net cash from financing activities 179 670 (350 877)

Net increase/decrease in cash and cash equivalents 207 279 (269 745)

Change in cash and cash equivalents in the balance sheet, including:

201 009 (266 864)

Cash and cash equivalents at the beginning of the year 783 563 447 055

Effect of exchange differences relating to cash and cash equivalents (6 270) 2 881

Cash and cash equivalents as at the end of the period 984 572 180 191


13 The introduction and additional notes and explanations are an integral part of the condensed interim consolidated financial statements

Information about the Group The Synthos S.A. Group (formerly Grupa Kapitałowa Firmy Chemicznej “Dwory” S.A., hereinafter called “the Group”) consists of the parent company and subsidiaries. The parent company of the Group is Synthos S.A. (hereinafter called “the Company” or “the Parent Company”), which is a joint stock company registered in Poland. The Parent Company is listed on the Warsaw Stock Exchange. The Parent Company’s registered office is located in Oświęcim, ul. Chemików 1. Basic data on the Parent Company: Telephone: Telephone enquiry: (33) 844 18 21 to 25 Fax: (33) 842 42 18 E-mail: [email protected] Website: www.synthosgroup.com On 27 August 2001, the Company was registered in the Register of Businesses of the National Court Register with the reference number KRS 0000038981. NIP 549-00-02-108 REGON 070472049 The Group’s operations comprise in particular:

manufacture of plastics;

manufacture of synthetic rubber;

manufacture of other inorganic basic and other chemicals;

manufacture of basic and other organic chemicals;

manufacture of other chemical products;

production and distribution of electricity;

production of heat (steam and hot water);

sewage treatment services;

waste storage and treatment services.

As stated in the Articles of Association, the Group’s duration is unlimited. The Company’s Management Board: Tomasz Kalwat - President of the Board Zbigniew Warmuz - Vice president of the Board Zbigniew Lange - Board Member Tomasz Piec - Board Member Jarosław Rogoża - Board Member Supervisory Board: Jarosław Grodzki - President of the Supervisory Board Krzysztof Kwapisz - Vice president Grzegorz Miroński - Secretary Robert Oskard - Board Member Wojciech Ciesielski - Board Member

In the reporting period Mr Mariusz Waniołka resigned from his position on the Supervisory Board of Synthos S.A. On 24 June 2015 ZWZ Synthos S.A. appointed Mr Wojciech Ciesielski member of the Supervisory Board of Synthos S.A.

mailto:[email protected]



Basic information on the consolidated subsidiaries and joint ventures is presented below:

Entity’s name and legal form Registered

office Core activities

% of share capital held and votes

Subsidiaries Miejsko-Przemysłowa Oczyszczalnia Ścieków Sp. z o.o.

Oświęcim collection, treatment and disposal of sewage, treatment of waste, providing sanitary services and similar services

76.79%

Synthos Dwory 7 spółka z ograniczoną odpowiedzialnością spółka jawna

Oświęcim manufacture of chemical products 100%

Synthos Dwory 4 Sp. z o.o. Oświęcim production of electricity 100% Synthos Dwory 5 Sp. z o.o. Oświęcim production of electricity 100% Synthos Dwory 7 Sp. z o.o. Oświęcim manufacture of chemical products 100% Synthos Dwory 7 Spółka z ograniczoną odpowiedzialnością Holding S.K.A.

Oświęcim investing and equity activities 100%

Synthos Dwory 8 Sp. z o.o. Oświęcim production of electricity 100% Synthos Kralupy a.s. Kralupy nad

Vltavou – Czech Republic

manufacture of chemical products 100%

Tamero Invest s.r.o. Kralupy nad Vltavou – Czech

Republic

Production and distribution of electricity

100%

Synthos PBR s.r.o. Kralupy nad Vltavou – Czech

Republic


Red Chilli Ltd. Nikosia investing and equity activities 100% Green Pepper SCSp Luxembourg investing and equity activities 100% Synthos Agro sp. Z o.o. Oświęcim manufacture of chemical products 100% Zakład Doświadczalny Organika Sp. z o.o.

Nowa Sarzyna manufacture of pesticides 100%

Synthos Finance AB Stockholm - Sweden

investing and equity activities 100%

Oristano Investment sp. z o.o. in liquidation

Oświęcim manufacture of chemical products 100%

Synthos FIZ in liquidation Kraków investing and equity activities 100% Forum 62 FIZ Kraków investing and equity activities 100% Calgeron Investment LTD in liquidation Cyprus investing and equity activities 100% Joint arrangements (joint operations)

Butadien Kralupy a.s. Kralupy nad Vltavou – Czech

Republic




Note 1. Accounting policies

1. The basis of preparation of the consolidated financial statements

These condensed interim consolidated financial statements have been prepared under IAS 34 Interim Financial Reporting as endorsed by the European Union. The condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 December 2014 prepared in accordance with the IFRS as endorsed by the European Union. Data in the consolidated financial statements is provided in Polish zloty, which is the Group’s presentation currency, in full thousands. Items included in the Group entities’ separate financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency”). The consolidated financial statements have been prepared on a historical cost basis, with the exception of assets and liabilities measured at fair value: available for sale financial assets and financial instruments at fair value through profit or loss. The preparation of financial statements in accordance with IAS 34 requires the Management Board to make judgements, estimations and assumptions affecting the principles adopted and the presented amounts of assets, liabilities, revenues and costs. The actual values may differ from the estimates. Significant estimates and judgements used in the preparation of these interim financial statements are the same as presented in the annual consolidated financial statements for the financial year ended 31 December 2014.

The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the last annual financial statements and were applied consistently for all periods presented in the consolidated financial statements.



2. Going concern assumption

The consolidated financial statements of the Group have been prepared on the assumption that the issuer and the Group will continue as a going concern in the foreseeable future. There are no circumstances indicating any threats to the Company continuing in operation.

3. New and revised accounting standards and interpretations

New and revised standards and interpretations:

In these consolidated financial statements, the following new and revised standards and interpretations effective from 1 January 2015 have been applied for the first time.

a) IFRS Improvements 2011-2013 In December 2013, the International Accounting Standards Board published “Annual Improvements cycle 2011–2013” which amend 4 standards. The revisions include presentation, recognition and measurement changes, and terminological and editorial changes. The changes will be binding in the European Union for annual periods commencing on 1 January 2015. These improvements do not have a material effect on the Group’s consolidated financial statements. b) IFRIC 21, Levies IFRIC 21 was published on 20 May 2013 and is binding for the financial years beginning on or after 17 June 2014. The interpretation explains accounting for liabilities in respect of taxes and fees which are not income taxes. IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. The Interpretation clarifies that 'economic compulsion' and the going concern principle do not create or imply that an obligating event has occurred. The same principles for recognizing liabilities apply to annual and interim financial statements. Using this interpretation to liabilities in respect of issue rights is optional.

The interpretation does not have a material effect on the Group’s financial statements. Other changes binding in the financial year started on 1 January 2015 have no impact on the Group’s financial statements.



Published Standards and Interpretations which are not yet binding and have not been adopted early by the Group In these consolidated financial statements the Group has not decided to adopt the following published standards, interpretations or amendments to the existing standards in the preparation of these financial statements before their entry into force.

a) IFRS 9, Financial instruments IFRS 9 replaces IAS 39. It is binding for annual periods starting on or after 1 January 2018. The standard introduces a single model providing for two categories of financial assets only: measured at fair value and measured at amortized cost. Classification is performed on initial recognition and it depends on the model of financial instruments management adopted by the entity and on the characteristics of contractual cash flows from such instruments. IFRS 9 introduces a new model for determining impairment losses – the expected loss model. Most IAS 39 requirements concerning classification and measurement of financial liabilities were transferred to IFRS 9 unchanged. The key change is introducing a requirement to present the effect of changes in own credit risk related to financial liabilities designated at fair value through profit or loss in other comprehensive income. The purpose of the changes within the scope of hedge accounting was to better match hedge accounting to risk management.

The Group will apply IFRS 9 upon its endorsement by the European Union. In the Group’s opinion the amended standard will not have a significant effect on the financial statements. As at the date of preparing these financial statements, IFRS 9 had not yet been endorsed by the European Union.

b) IFRS 15, Revenues from contracts with customers IFRS 15, Revenues from contracts with customers, was published by the International Accounting Standards Board on 28 May 2014 and is binding for annual periods starting on or after 1 January 2017. The policies stipulated in IFRS 15 will relate to all contracts resulting in revenue arising. The core principle of the new standard is recognizing revenue at the moment of transferring goods or services to the customer in an amount of the transaction price. All goods or services sold in bundles that can be made distinct within a bundle should be recorded separately; moreover, all discounts and rebates relating to the transaction price should in principle be allocated to the individual elements of a bundle. When an amount of revenue is variable, the variable amounts are classified as revenue according to the new standard if it is highly probable that the revenue recognition will not be reversed in the future as a result of revaluation. Moreover, according to IFRS 15 costs incurred to obtain and secure a contract with a customer should be capitalized and deferred over the period of consuming the benefits from the contract. The Group will apply IFRS 15 from 1 January 2017.



The Group is in the course of analysing the effect of the standard on the consolidated financial statements. As at the date of preparing these financial statements, IFRS 15 has not yet been endorsed by the European Union. Other new and amended standards and interpretations will have no impact on the Group’s consolidated financial statements.

Note 2. Selected major accounting policies

The accounting policies used in the preparation of these condensed interim consolidated financial statements are consistent with those applied in the preparation of the last annual financial statements for 2014.

Joint arrangements The Group assessed the nature of its joint arrangements carried out in an entity which has a separate legal personality and on the basis of other facts and circumstances determined that they constituted joint operations in accordance with IFRS 11, paragraph B29–B33. In respect of its share in the joint operations, the Group recognizes:

its assets, including the share in jointly held assets;

its liabilities, including the share in jointly incurred liabilities;

its revenue on the sale of products from its portion of the joint operations, its share in revenues from sales of products from joint operations;

its costs, including its share in costs jointly incurred. The Group determines the part of assets and liabilities, as well as income and costs not relating to joint operating activities in joint operations on the basis of its share in the jointly controlled entity. The Group determines the part of operating income and expenses relating to joint operating activities in joint operations on the basis of its percentage share in production purchases of the joint operations. Mutual settlements were eliminated. Subsidiaries Subsidiaries are entities controlled by the Parent Company. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated under the acquisition accounting method over the period in which the parent company has control over them, until the control ceases. The assets, liabilities and identifiable contingent liabilities of a subsidiary as at the date of taking over control are recorded at fair value. A positive difference between the acquisition price, the value of non-controlling shares and the fair value of previously held shares on the one hand, and the fair value of acquired assets, liabilities and contingent liabilities on the other hand represents goodwill, which is shown as a separate item of the consolidated statement of financial position. A negative difference between the acquisition price, the value of non-controlling shares and the fair value of previously held shares on the one hand, and the fair value of assets, liabilities and contingent liabilities on the other hand is charged directly to profit or loss.



Deferred income tax

Deferred tax for the half-year period has been determined in accordance with IAS 34 using the effective tax rate expected to be applicable to the annual profit.

Note 3. Segment reporting

Pursuant to IFRS 8, the Management Board has determined operating segments that are used in making strategic decisions. Information prepared for the persons in the Group who decide about the allocation of assets and assess the financial results of segments are focused on the groups of products by industry. Therefore, the Group’s segments reported under IFRS 8 are as follows: Rubbers The production and sale of synthetic rubbers is one of the Group’s key business areas. The Group manufactures synthetic rubbers in the emulsion technology (ESBR) by polymerization of butadiene and other chemicals (styrene, acrylonitrile or appropriate organic acid), the Group manufactures rubber in two basic types (15xx and 17xx). Synthetic rubbers, currently 14 varieties, are sold under the reserved brand name KER® and KRALEX®. The majority of synthetic rubbers are sold to tyre manufacturers, such as: Michelin, Continental, Bridgestone, Goodyear and Pirelli. Moreover, rubbers are raw materials used in the production of floor covering, conveyors, technical rubber goods (in particular for the automotive industry) and elements of footwear. The tyre industry is the key driver for demand for ESBR and has an approx. 80% share in the Group’s sales of elastomers. The remaining sales of ESBR come from markets other than the tyre market, e.g. from the production of technical rubber, shoe soles, flexible cables and conveyor belts. The Group also manufactures a new type of rubber NdPBR (neodymium polybutadiene rubber). The most important application of NdPBR are tyres, mainly tyre treads and side faces which account for 70% of PBR global consumption. Other applications of PBR comprise technical goods (hoses, belts, shoe soles, golf balls, modification of styrene plastics). The regulations aimed at so-called “green” tyres with lower rolling resistance, and thus higher effectiveness, which contributes to lower fuel consumption, implemented primarily in Western Europe, led to a significant increase in the demand for PBR, in particular in the neodymium technology which is used, among others, by Synthos. This change will continue in the future, also in other countries outside the EU and other regions outside Europe which will implement tyre marking systems (Japan, USA, South Korea). Polybutadiene rubbers, currently two varieties, are sold under the reserved brand name SYNTECA®. At present, the Group is working on extending its market offer for this specific synthetic rubber type.



Styrene derivatives The production of polystyrene plastics comprises three main types of products obtained in the process of styrene polymerization, which have different applications. The first group comprises expandable polystyrenes EPS. Expandable polystyrene (EPS) is manufactured by polymerization in suspension and in the extrusion process using GPPS as the raw material. The main area of application of expandable polystyrenes is the manufacture of styrofoam, the basic thermo insulation material used in Central Europe. Another significant application of EPS is the production of transport packaging, e.g. for household appliances, TVs, computers. EPS is also used in the production of finishing and decorative elements in the construction industry and small goods such as long floats and bicycle helmets. The second group are general purpose polystyrene (GPPS) and high impact polystyrene (HIPS). The main market for both GPPS and HIPS is the foodstuff packaging industry in the broad sense. Polystyrenes are used in manufacturing disposable tableware, all kinds of mugs and containers for dairy products, trays, cutlery, as well as shower booths, jewellery boxes etc. – all products that require stiffness and transparency at the same time, etc. HIPS is used in the manufacture of other products, requiring greater mechanical resistance. To achieve the required mechanical parameters, it is modified by the addition of polybutadiene rubber. Potential applications include, apart from packaging, e.g. cases for radio and TV equipment, elements of household appliances, toys and furniture elements. GPPS is also sold to the construction market. The third group are XPS boards manufactured on the new production line for extruded polystyrene. Extruded polystyrene is manufactured on the basis of own raw materials – GPPS polystyrene. XPS boards are a homogeneous building material with a smooth or pressed surface and honeycomb structure. It has various unique qualities, such as water resistance, thermal insulation, strength both crosswise and lengthwise, the possibility of full recycling, and it is a self-extinguishing product. It is mainly used in the construction industry as a thermo insulation material for the insulation of buildings, insulation of reverse roofs, insulation of floors, thermal bridges and layered walls. Its mechanical strength and resistance to freezing with minimal water absorbability means that it can be used in the thermal insulation of roads, bridges, rail tracks and airfields. Power and heat This segment is engaged in the generation and distribution of heat and in the generation, trading and distribution of electricity in combined heat and power plants. The basic power products, i.e. heat, electricity and transmission services (relating to both electricity and heat) are sold on the local power market.



Dispersions, latexes and adhesives The Group’s offer includes acrylic dispersions and styrene-acrylic dispersions, as well as vinylacetate dispersions. The main application of acrylic, styrene-acrylic and vinyl-acrylic dispersions is the production of high quality paints, acrylic plasters, priming preparations, sealers and many other construction chemical goods. Dispersions in the group of vinyl polyacetate dispersions are mainly used in the production of wood adhesives and in the paper industry, for finishing textiles and in the construction industry – for the modification of concrete and the production of emulsion paints. The Group has two installations for the production of dispersions with a combined production capacity of approx. 40 tonnes a year. Currently, dispersions are represented on the market by 18 products that are sold under the registered brand names WINACET® and OSAKRYL®. Dispersion adhesives are offered under two brand names: WOODMAX® – intended mainly for the wood industry and for making manufactured boards with various levels of water resistance (D1, D2, D3 and D4) and PAPERMAX® – adhesives for the paper industry. The present portfolio of adhesives sold contains 16 products. Two types of synthetic latexes are manufactured: bonded styrene-butadiene latex (LBS) and styrene-butadiene-carboxylic latex (LBSK). Synthetic latexes are used, among others, in the production of foam goods: mattresses, thin-wall foams, carpets and floor covering, impregnation of non-woven materials. One of the applications is also the production of asphalt-latex emulsions for sealing, used in the construction industry. Agro This segment is engaged in the manufacture and sale of crop protection chemicals and biocydes. The AGRO segment ensures seedlings protection, protection of crops from damage by pathogenic fungi throughout the vegetation period, protection of plants from pests during their growth and development, protection against weeds, and delivers the necessary micro- and macroelements in the form of special fertilizers to plants. Operating segments generate revenues mainly from the sale of various groups of finished goods. Other income and expenses have been assigned to the extent resulting from the possible analytical identification. Finance income and costs have not been included in segment reporting, because they are not covered by the reports submitted to the Management Board. The revenues from transactions with unrelated entities reported to the Management Board by operating segment are calculated in the same manner as applied in the preparation of the statement of comprehensive income. The amounts of total assets by operating segment presented to the Management Board are measured in the same manner as applied in the financial statements. Such assets are allocated based on the segment operations and the physical location of a given asset (this applies to trade receivables, inventories, fixed assets). Other assets, i.e. cash, shares, other receivables, have been accounted for as unallocated assets.



Business segments

Rubbers Styrene derivatives

Dispersions, adhesives and

latexes Power and heating Agro Other Total 30.06.2015 30.06.2014 30.06.2015 30.06.2014 30.06.2015 30.06.2014 30.06.2015 30.06.2014 30.06.2015 30.06.2014 30.06.2015 30.06.2014 30.06.2015 30.06.2014

Sales revenue Sales of goods for resale / finished goods (external customers) 983 792 1 176 781 868 412 977 114 95 742 85 865 101 282 95 392 55 850 - 2 631 1 833 2 107 709 2 336 985 Sales of services (external customers) - - - - - - 6 428 5 321

- - 6 618 7 047 13 046 12 368

Rental income (external customers)

- - - - - - - -

- - 564 624 564 624

Total revenue 983 792 1 176 781 868 412 977 114 95 742 85 865 107 710 100 713 55 850 - 9 813 9 504 2 121 319 2 349 977

Total expenses (867 042) (1 026 464

) (784 800) (907 532) (86 725) (83 720) (81 507) (80 216) (45 217) - (670) (4 379) (1 865 961) (2 102 311) Segment results 116 750 150 317 83 612 69 582 9 017 2 145 26 203 20 497 10 633 - 9 143 5 125 255 358 247 666

Other operating revenues. 3 184 82 1 025 2 124 21 32 5 602 7 942 53 - 960 2 807 10 845 12 987 Other operating expenses (507) (820) (1 892) (1 676) (335) (305) (1 520) (457) (259) - (5 130) (5 179) (9 643) (8 437) Operating profit 119 427 149 579 82 745 70 030 8 703 1 872 30 285 27 982 10 427 - 4 973 2 753 256 560 252 216

Finance income - - - - - - - - - - - - 34 801 2 313 Finance costs - - - - - - - - - - - - (25 471) (22 315) Profit before income tax - - - - - - - - - - - - 265 890 232 214

Income tax - - - - - - - - - - - - (19 515) (63 307)

Net profit

-

- - - - - - - - - - - 246 375 168 907

Segment assets 1 826 173 1 232 167 927 770 983 608 124 082 55 043 531 122 426 053 98 931 - 197 424 229 398 3 705 502 2 926 269 Unallocated assets - - - - - - - - - - 1 245 070 945 515

Total assets 1 826 173 1 341 025 927 770 1 027 801 124 082 95 275 531 122 426 053 98 931 - 197 424 229 398 4 950 572 3 871 784

Capital expenditure 247 831 85 646 23 802 9 419 2 303 526 51 774 43 780 9 375 - 25 467 4 952 360 552 144 323 Amortization and depreciation 23 269 21 929 23 180 25 551 4 180 3 442 15 703 14 530 1 865 - 9 690 12 324 77 887 77 776



Information about major customers

Revenue from sales of: - “rubbers” of PLN 983,792 thousand (1st half of 2014: PLN 1,176,781 thousand) revenues of PLN 629,972 thousand (1st half of 2014: PLN 770,583 thousand) related to sales to 10 major customers; - “styrene derivatives” of PLN 868,412 thousand (1st half of 2014: PLN 977,114 thousand) revenues of PLN 340,073 thousand (1st half of 2014: PLN 361,711

thousand) related to sales to 10 major customers; - “dispersions, adhesives and latexes” of PLN 95,742 thousand (1st half of 2014: PLN 85,865 thousand) revenues of PLN 32,788 thousand (1st half of 2014: PLN 30,803 thousand) related to sales to 10 major customers.



Note 4. Explanations concerning the seasonal or cyclical nature of the operations

The Synthos S.A. Group in the first half of 2015. Supplies of strategic raw materials are not seasonal or cyclical. All supplies of strategic raw materials are based on long-term or annual contracts and the volumes are sufficient to maintain the continuity of production. Rubbers Sales of rubbers are not seasonal. Their cyclical nature results from the general economic environment, in particular trends in the automotive industry and fluctuations associated with the availability of butadiene – the key monomer. Styrene derivatives Seasonality in the sales of polystyrene occurs in the areas associated with the construction industry. It concerns mainly expandable polystyrene and extruded polystyrene in the form of XPS insulation panels. Dispersions, Adhesives and Latexes The construction sector, which is the main market for dispersions, is characterized by noticeable seasonality, which directly depends on the weather conditions. Power and heat The operations in the power sector are subject to cyclical changes relating to the seasonality of sales. The biggest sales of heat and electricity are generated in the winter season (i.e. in the first and fourth quarter of the year), when the demand for heat is the greatest, both for technological uses and for the municipal heating system. Agro Sales of pesticides are correlated to the agricultural industry. Distinct seasonality results from the vegetation period of crops – spring and summer months generate the largest sales.



Note 5. Financial risk management

In the interim period there were no changes in risk management compared with the previous financial year. With the exception of the debt incurred on the bonds issued, described in Note 15, there were no material changes in the structure of future undiscounted cash flows which have an impact on the liquidity risk analysed by the Management Board.

Note 6. Net finance income/costs

1st half of 1st half of 2015 2014

Income from borrowings and receivables 4 437 2 277 Net foreign exchange gains/losses 14 353 - Income from measurement and completion of transactions in derivative financial instruments

15 940 36

Other 71 -

Total finance income 34 801 2 313

Interest expense in respect of debt securities (22 790) (9 769) Costs related to the measurement of derivative financial instruments

(47) (877)

Net foreign exchange gains/losses - (10 429) Other (2 634) (1 240)

Total finance costs (25 471) (22 315)

Net finance income/costs 9 330 ( 20 002)



Note 7. Income tax

Income tax recorded in the statement of comprehensive income

Income tax was charged to profit before tax at the best possible estimate of the expected annual effective tax rate. The estimated effective income tax rate as at 30 June 2015 was 5% (30 June 2014: 11%). In 2013, the Group changed the legal form of some of its subsidiaries, as well as the Group structure, as a result of which the company Synthos Dwory 7 spółka z ograniczoną odpowiedzialnością Spółka jawna (formerly Synthos Dwory 7 spółka z ograniczoną odpowiedzialnością S.K.A.) remained an entity which is not a corporate income tax payer, thus reducing the Group’s effective income tax rate. In previous reporting periods, the Group recognized a deferred tax asset on an investment relief at the subsidiary Synthos PBR s.r.o. in the total amount. The tax relief must be settled by 30 September 2016. As at 30 June 2014, the Group adjusted its estimates on the basis of which the asset in respect of the investment relief was recognized in respect of Synthos PBR s.r.o. After accounting for the new market conditions, the Management Board decided that the current amount of the asset which could be utilized as at 30 June 2014 amounted to PLN 42,938 thousand. Therefore, PLN 36,600 thousand of the asset was charged to costs in the first half of 2014. As at 30 June 2015 the deferred tax asset on the investment relief is PLN 32,424 thousand. In the opinion of the Management Board the tax results Synthos PBR s.r.o. plans to achieve in the period in which the relief may be utilized are sufficient to fully utilize the deferred tax asset. Assumptions relating to the taxable income of Synthos PBR s.r.o. to a large extent depend on the expected quotations of butadiene.

1st half of 1st half of 2015 2014

Income tax 13 304 12 673 Income tax for the current period 13 304 12 673 Deferred income tax Arising/reversed temporary differences (149) 14 034

Revaluation and utilization of the asset in respect of the investment relief

6 360 36 600

Total deferred tax 6 211 50 634

Income tax recorded in the statement of comprehensive income 19 515 63 307



Note 8. Property, plant and equipment

Land Buildings and

structures Plant and machinery Vehicles Other

Fixed assets under

construction Total Gross amount as at 1 January 2014 30 879 846 689 1 533 645 47 748 60 353 273 368 2 792 682 Purchases - fixed assets under construction - - - - - 130 955 130 955 Reclassification to fixed assets - 21 959 37 693 868 4 206 (64 726) - Acquisition of an entity 14 388 430 75 120 90 1 117 Disposal / scrapping - (2 427) (3 289) (9 169) (251) (127) (15 263) Foreign exchange differences on translation 40 473 1 092 26 14 103 1 748

Gross amount as at 30 June 2014 30 933 867 082 1 569 571 39 548 64 442 339 663 2 911 239

Gross amount as at 1 January 2015 33 004 898 939 1 680 222 41 245 66 236 483 090 3 202 736 Purchases - fixed assets under construction - - - - - 254 083 254 083 Reclassification to fixed assets - 241 943 249 606 2 310 7 348 (501 207) - Disposal / scrapping - (390) (22 147) (374) (213) - (23 124) Foreign exchange differences on translation 20 403 849 17 9 (1) 1 297

Gross amount as at 30 June 2015 33 024 1 140 895 1 908 530 43 198 73 380 235 965 3 434 992



Land Buildings and

structures Plant and machinery Vehicles Other

Fixed assets under

construction Total Accumulated depreciation and impairment Accumulated depreciation and impairment as at 1 January 2014 - 283 236 753 407 22 857 37 169 49 714 1 146 383 Depreciation charge for the period - 14 407 53 716 2 209 2 310 - 72 642 Disposal / scrapping - (1 567) (3 323) (5 522) (307) (127) (10 846) Foreign exchange differences on translation - 52 363 9 11 - 435

Accumulated depreciation and impairment write-downs as at 30 June 2014 - 296 128 804 163 19 553 39 183 49 587 1 208 614

Accumulated depreciation and impairment as at 1 January 2015 - 310 713 858 709 20 701 39 038 7 199 1 236 360 Depreciation charge for the period - 14 898 52 034 1 852 2 877 - 71 661 Disposal / scrapping - (250) (22 030) (325) (159) - (22 764) Foreign exchange differences on translation - 204 638 18 11 - 871

Accumulated depreciation and impairment write-downs as at 30 June 2015 - 325 565 889 351 22 246 41 767 7 199 1 286 128

Net value As at 1 January 2014 30 879 563 453 780 238 24 891 23 184 223 654 1 646 299 As at 30 June 2014 30 933 570 954 765 408 19 995 25 259 290 076 1 702 625 As at 1 January 2015 33 004 588 226 821 513 20 544 27 198 475 891 1 966 376

As at 30 June 2015 33 024 815 330 1 019 179 20 952 31 613 228 766 2 148 864

Depreciation of property, plant and equipment was presented in the statement of comprehensive income under cost of sales in the amount of PLN 60,921 thousand (in 2014: PLN 58,525 thousand).



Impairment write-downs and their utilization The Group did not record any write-downs of fixed assets in the reporting period. Under the project financing agreements signed in previous years, in the first six months of 2015 the Group received a subsidy for implementing new EPS types in the amount of PLN 3,792 thousand, and for the research and development centre in the amount of PLN 5,118 thousand. The subsidies received were presented in deferred income in respect of state subsidies.

Note 9. Intangible assets

Development

costs Concessions,

licences, computer software and other

Trademarks, production know-how

Production licences

Goodwill Other intangible

assets

Total intangible

assets Gross amount as at 1 January 2014 29 380 71 508 - 91 478 0 93 853 286 219 Acquisition of an entity - 48 - - 4 262 - 4 310 Purchase 6 263 9 182 - - - 1 655 17 100 Sales/scrapping - (1 914) - - - - (1 914) Foreign exchange differences on translation - 50 - - - 116 166

Gross amount as at 30 June 2014 35 643 78 874 - 91 478 4 262 95 624 305 881

Gross amount as at 1 January 2015 41 407 78 447 55 100 98 198 4 262 96 884 374 298 Purchase 2 001 266 13 141 - - - 15 408 Sales/scrapping - (4 867) - - - - (4 867) Foreign exchange differences on translation - (84) - - - 57 (27)

Gross amount as at 30 June 2015 43 408 73 762 68 241 98 198 4 262 96 941 384 812



Development costs

Concessions, licences,

computer software and

other

Trademarks, production know-how

Production licences

Goodwill Other intangible

assets

Total intangible

assets

Accumulated amortization and impairment write-downs as at 1 January 2014 646 40 327 - - - 93 853 134 826 Amortization charge for the period 3 4 210 - - - 894 5 107 Foreign exchange differences on translation - 16 - - - 116 132

Accumulated amortization and impairment write-downs as at 30 June 2014 649 44 553 - - - 94 863 140 065

Accumulated amortization and impairment write-downs as at 1 January 2015 654 49 122 - 1 656 - 95 408 146 840 Amortization charge for the period 3 4 470 - 1 656 - 73 6 202 Sales/scrapping - (5) - - - - (5) Foreign exchange differences on translation - 42 - - - 57 99

Accumulated amortization and impairment write-downs as at 30 June 2015 657 53 629 - 3 312 - 95 538 153 136

Net value As at 1 January 2014 28 734 31 181 - 91 478 - - 151 393

As at 30 June 2014 34 994 34 321 - 91 478 4 262 761 165 816

As at 1 January 2015 40 753 29 325 55 100 96 542 4 262 1 476 227 458

As at 30 June 2015 42 751 20 133 68 241 94 886 4 262 1 403 231 676



Note 10. Available-for-sale financial assets

Available-for-sale financial assets

Shares held as at 30 June 2015 Number of shares Value in PLN’000 - Echo Investment S.A. 17 884 050 120 181 - Global BioEnergies 59 625 10 450 Total 130 631

Shares held as at 31 December 2014 Number of shares Value in PLN’000 - Echo Investment S.A. 17 884 050 125 903 - Global BioEnergies 59 625 6 650 Total 132 553

Note 11. Trade and other receivables

30 June 2015 31 December 2014 Trade receivables from related entities 72 197 Trade receivables from other entities 808 345 740 266 Receivables in respect of other taxes 73 585 136 711 Receivables in respect of financial instruments 66 3 791 Receivables in respect of cash pooling agreement 63 443 50 212 Prepayments for the purchase of fixed assets 12 590 8 928 Prepayments 7 009 9 403 Other receivables 67 51

965 177 949 362

Note 12. Trade payables and other liabilities

30 June 2015 31 December 2014 Trade payables from other entities 380 021 416 195 Trade payables from related entities 483 223 Dividends payable 330 813 - Taxation, customs duty, and insurance payables, excluding income tax 2 085 4 383 Wages and salaries payable 10 218 5 990 Accruals 60 215 64 540 Special funds 101 401 Investment commitments 59 379 152 098 Other liabilities 7 945 7 689

851 260 651 519



Note 13. Share capital

30 June 2015 31 December 2014 Number of shares at the beginning of the period 1 323 250 000 1 323 250 000

Number of shares at the end of the period 1 323 250 000 1 323 250 000

Par value of one share (in PLN) 0.03 0.03

Note 14. Earnings per share

Basic earnings per share

The calculation of basic earnings per share was based on the net profit of the Parent Company’s shareholders and the weighted average number of shares as at the date of preparation of the financial statements. These values have been determined in the following manner:

30 June 2015 30 June 2014 Net profit for the period (in PLN ‘000) 246 118 168 756

Weighted average number of shares at the end of the period 1 323 250 000 1 323 250 000

Earnings per share Basic (in PLN) 0.19 0.13 Diluted (in PLN) 0.19 0.13

Diluted earnings per share

There are no factors that would cause dilution of earnings per share.

Note 15. Liabilities in respect of loans, borrowings, finance lease and other debt instruments

This note presents information on the Group’s liabilities in respect of loans, borrowings and other debt instruments.

30 June 2015 31 December 2014 Non-current liabilities Liabilities in respect of bonds 1 658 860 1 467 149 Bank loans and borrowings - 5 401

1 658 860 1 472 550

Current liabilities Liabilities in respect of bonds (interest) 16 778 14 918 Current portion of loans and borrowings 3 602 3 600

20 380 18 518



In the reporting period the Group issued Senior Notes with a total nominal value of EUR 50,000,000 (2014: EUR 350,000,000) through its subsidiary Synthos Finance AB (publ) with its registered office in Stockholm, Sweden (“Senior Notes”). The Senior Notes bear a fixed interest rate of 4,000% per annum, with interest payable semi-annually (on 30 March and 30 September), the first payment of interest was on 30 March 2015, and their redemption date is 30 September 2021. The Senior Notes were issued at a price equal to 100% of their nominal value in the total amount of EUR 400,000,000. The Senior Notes are repayable on the same terms as the existing and future unsecured senior debt. The Senior Notes are unsecured and are guaranteed jointly and severally by the Issuer and its subsidiaries: Synthos Dwory 7 spółka z ograniczoną odpowiedzialnością sp. j., SYNTHOS Kralupy a.s., TAMERO INVEST s.r.o. and SYNTHOS PBR s.r.o. (together with the Issuer the "Guarantors"). The Synthos S.A. Group earmarked the funds from the issue for repayment of the debt drawn from banks.

Note 16. Dividends paid

On 24 June 2015 the Ordinary General Shareholders’ Meeting passed a resolution on the payment of dividend of PLN 330,812.5 thousand (in 2014: PLN 410,208 thousand). The dividend was paid out on 17 July 2015.

Dividend paid per share

1st half of 2014 2014 Dividend paid per share 0.25 0.31

Note 17. Other liabilities

This note presents the information on the Group’s liabilities in respect of the finance lease of land.

30 June 2015 31 December 2014 Non-current liabilities Finance lease liability 28 832 28 813

28 832 28 813

Note 18. Investment commitments

As at 30 June 2015, the Group incurred investment commitments of PLN 229,300 thousand (31 December 2014: PLN 433,534 thousand).



Note 19. Contingent liabilities, guarantees and warranties

As at 30 June 2015, the Group did not grant any contingent liabilities to unrelated entities.

The Group’s tax liabilities

The tax authorities in Poland and in material foreign operations may audit the books of account and tax settlements within five years of the end of the year in which the Group Companies filed their tax returns and they may impose upon the Group Companies additional tax obligations plus the related charges and interest. In the opinion of the Management Board, there are no circumstances indicating the possibility of any significant liabilities arising in this respect.

Note 20. Fair value of financial instruments

Detailed information on the fair value of financial instruments which may be estimated is shown below:

Financial instruments measured at fair value as at 30 June 2015

Level 1 Level 2 Level 3

Available-for-sale assets 130 631 - - Derivative instruments - 66 - Derivative instruments - (1 503) -

Financial instruments measured at fair value as at 31 December 2014

Level 1 Level 2 Level 3

Available-for-sale assets 132 553 - -

Derivative instruments - 3 791 -

Derivative instruments - (2 169) -

Level 1 Shares of listed companies. The fair value was determined on the basis of stock market quotations. Level 2 SWAP contracts hedging the interest rate on loans. The fair value was determined on the basis of the valuation by the bank which issued the contract. Level 3 Not applicable.



Note 21. Transactions with related entities

Transactions with other related entities

30.06.2015 31.12.2014

Receivables Other 72 197

Total 72 197

Liabilities

Other 483 223

Total 483 223

1st half of 2015 1st half of 2014

Revenues Other 109 1 861

Total 109 1 861

Costs

Cersanit Sports Club (an entity related through the key shareholder)

480 960

Other 5 050 5 844

Total 5 530 6 804

Note 22. Events after the balance sheet date

On 3 August 2015 the Group sold 17,884,050 shares in Echo Investment SA at a price of PLN 6.75. Revenue from the transaction amounted to PLN 120,610 thousand, and the gain on the transaction was approx. PLN 5,186 thousand. On 15 August 2015, due to a breakdown of installation of ethylene, there was a fire at a chemical plant in Litvinov Chempark Zaluži in the Czech Republic, owned by Unipetrol Group (part of PKN Orlen Group). Synthos Group obtains raw materials from the cracking installation located in the plants owned by Unipetrol Group and is connected by pipeline to these sites, through which the Synthos acquires fraction C4, ethylene and benzene for its manufacturing plants in the Czech Republic, and as a result of the accident and the fire, supplies have been temporarily suspended. The event can have negative impact on the Synthos Group results, but dynamically changing commodities prices, the possibility of buying raw materials from alternative sources, the availability of infrastructure for the transmission of ethylene to Litvinov, and the range of available information about the total effects of the accident and the nature and timetable of conducted repairs do not allow to estimate approximately the impact of this event on Synthos Group results. Accordingly, the Group launched alternative sources of supply and and is using existing stocks of raw materials and products.



Note 23. Accounting estimates and assumptions, and judgements

In its financial statements the Group uses estimates based on assumptions regarding the future, which are subject to regular assessment based on its previous experiences and other factors, including the expectations relating to future events, which in a given situation seem reasonable. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below.

a. Provision for the cost of scrapping assets

The Group sets up a provision for the costs of scrapping assets. During the previous financial period costs expected to be incurred in respect of scrapping assets, the expected period for completing the demolition and the discount rate adopted were reviewed. There is no basis for changing the estimate as at 30 June 2015.

b. Deferred tax asset and its recoverability

The Group recognizes a deferred tax asset on its investment relief. The results of the Management Board estimates as to the recoverability of this deferred tax asset are presented in Note 7 to the financial statements.

c. Development costs

Development costs comprise the costs related to designing work, developing new products for customers and costs of work aimed at reducing the costs of obtaining the key raw materials for production from alternative sources – these relate to the Rubbers segment. As at 30 June 2015 Management Board estimates are consistent with those of the previous period.

d. Economic useful lives for property, plant and equipment and intangible assets

The Group reviews the economic useful lives for property, plant and equipment and intangible assets on an annual basis. The Group determines the estimated useful lives and on this basis the amortization and depreciation rates for particular items. These estimates are based on the expected economic useful lives of the assets. The amortization and depreciation rates used by the Group reflect the manner of using economic benefits from the given fixed assets. The economic useful lives adopted by the Group to-date did not lead to losses arising in the event of the sale or scrapping of a given asset.

The review of the useful lives of the assets performed in the prior year did not result in any changes to the adopted useful lives. The useful lives of assets will be updated at the end of 2015.

e. Joint arrangement – Butadien Kralupy a.s.

The Group has interest in Butadien Kralupy a.s., which meet the definition of a joint venture pursuant to IFRS 11, Joint arrangements, due to the obligation to repurchase the products manufactured in the joint operation from Butadien Kralupy a.s. Therefore, in practice the parties are the sole source of cash inflows ensuring continuation of the joint operation, and thus they have the rights to significantly all benefits from the venture’s assets and are obliged to cover its liabilities. In the 6-month period of 2015, no significant changes to estimates and methodologies or assumptions which could materially affect the current or future period took place.



Note 24. Approval of the financial statements

The Management Board of the Parent Company of the Synthos S.A. Group hereby represents that on 28 August 2015 it approved the Group’s condensed interim consolidated financial statements for the period from 1 January to 30 June 2015.



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