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Current reports

18.08.2017

Current report no. 19

Information on impairment test results

The Board of Synthos S.A. ("Company") informs that in accordance with the earlier announcements presented in the current reports no. 17/2017 of August 04, 2017 and no. 18/2017 of August 09,0217, conducted impairment tests covering foreign assets of styrene business acquired in 2016.

On the basis of a review and forecasts of the prospects of EPS business acquired on 31 August 2016 from INEOS Group ("Styrenics West"), the Board of the Company assesses that it cannot guarantee the margin levels presumed during the acquisition process on products offered by Styrenics West. Assumptions regarding both the sales prices and negotiating possibilities on the purchase side are not reflected in the results and are not sustainable in the long term.

The analyzed business is not vertically integrated, what results in a strong vulnerability to unstable market environment. There was a significant variation in styrene (main raw material) prices in the period under review, which could not be reflected in the EPS prices sold by Styrenics West. The Company has taken steps to improve the competitiveness of this product group, however full implementation of new solutions will require additional time and potentially resources.

In the longer perspective, the Board of the Company also notes the risk of a decrease in EPS demand in the packaging segment due to replacement by substitute materials and consequently a threat to maintain margins and sales volumes or their growth in this segment. In Europe, about 21% of EPS consumption is spent on packaging. The remaining 79% is mainly a segment of thermal insulation, where EPS has a strong and well-established position. Due to the policy of respecting and saving energy and the development of the building sector, the insulation segment still has high growth prospects.

For the purpose of the performed tests, the recoverable value was determined on the basis of  analysis of the discounted cash flows generated by the assets of Styrenics West. The influence of the value of the write-off, after taking into account the tax effect, on the net profit presented in the statement of comprehensive income in the separate and consolidated financial statements for the first half of 2017, amounts to: 112 million PLN.

The abovementioned value is estimated and may be amended. The final tests results will be presented in the separate and consolidated financial statements for the first half of 2017.

Legal base: Article 17 (1) MAR (Regulation of the European Parliament and the Council EU No. 596/2014 of 16 April 2014 on market abuse  (Regulation on market abuse) and repealing Directive 2003/6/EC of the European Parliament and the Council Directive 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal of the European Union of 12 June 2014, No. L 173/1)

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