Grupa Azoty S.A. (ATT) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I have the pleasure welcoming you to the conference devoted to the performance of the Grupa Azoty Group's companies achieved in the second quarter of the first half of 2020. Today's speakers will include Mr. Pawel Lapinski, the Vice President of the Grupa Azoty Group S.A.; Mr. Tomasz Hryniewicz, Pulawy representative; and Mr. Mariusz Kadziolka, representative of Police. Today's conference is transmitted -- is being broadcasted in 2 language versions. Mr. Lapinski will start the presentation.

Welcome to the conference devoted to the performance of Grupa Azoty and the Grupa Azoty Group. This conference will be broadcasted in brand-new formula, which was suggested by you. We'll try to focus on the main highlights in terms of our financial performance in 2020 -- in the first half of the 2020, and we'll try to show you the outlook for the months to come. As Barnas has mentioned, my co-speakers will include Tomasz Hryniewicz, Vice President of the Board of Pulawy. And she will discuss the financial performance of Pulawy and Mr. Mariusz Kadziolka who will discuss the performance of the Kedzierzyn and Police. We now move on then to the key performance, highlights of the second quarter of 2020. Our financial results were relatively solid as we look at the market environment and the volatility of it. Our revenue fell to PLN 2.269 billion, which was close related to the falling price of raw materials, but also to the falling volumes across all the group, which we'll discuss in more detail by me later on. Our consolidated EBITDA stood at PLN 315 million, which was partially offset by the compensation devoted to -- paid to the energy-intensive sectors. This will be also discussed later on. Our net profit stood at PLN 57 million. As we have met the criteria for the financing under the anti-crisis shield 4.0, most of our portfolio companies applied for the support, state support, financial support. The total amount applied for exceeded PLN 65 million, and those amounts have been successfully and consistently being received by individual companies. To date, we have already received PLN 41.7 million. So most of the amount applied for will be recognized in our performance of the third quarter, consolidated performance in the third quarter of the year. Moving on to our key projects. Our highlight project, which is Polimery Police. As you might remember, at the end of May, we signed key agreements related to the project with 11 financing institutions, banks and also equity and subordinated loan suppliers or providers. This has been one of the main milestones of the project. Signing those agreements was crowned with an official ceremony attended by the President of Republic of Poland, Andrzej Duda; and Mr. Jacek Sasin, Ministry of State Assets. Currently, all construction works on all the subprojects are underway. First is PDH, PP, handling and storage terminal, also interconnections work to move on with the construction work on the critical path. We have still a number of couple of construction permits that have not been yet secured. However, these are minor in terms of their -- in terms of the progress of work. The subsequent slides, which we will see shortly, we'll show you photographs showing the progress of work. The most advanced work is being carried out at the handling and storage terminal, which you can see right now. We have launched first hydro technical works related to construction of wharf. We also launched the construction of propane, polypropylene tanks. And in terms of polypropylene unit, work is in progress. As well, you can see pipeline rack. We also continuing foundation work for key units and installations. For instance, concreting of the extruder unit for granulated propylene production is in progress. In summary, I'd like to show you the status -- current status of our financing in terms of equity and also subordinated loans. To date, Grupa Azoty, $187 million and also provided a subordinated loan of $129 million, the remaining amount of $57 million in September or October. We expect that our equity partners will provide their equity input in September and October. And at that point, we will achieve the planned or target shareholder structure. Other highlights included another flagship project, which was brought on stream at Pulawy. As of July 1, we have had a precommissioning -- commissioning of the facility for the production of ammonium nitrate-based granulated fertilizers. The production capacity of this unit is 2,600 tonnes of fertilizers per day and the budget stood at PLN 430 million. Another milestone or major highlight for us is the hydrogen partnership for building the Polish hydrogen economy. Under the [ hydrogen ] agreement, Climate Ministry putting work and efforts targeted at achievement of the Polish Hydrogen Strategy. We are Poland's largest hydrogen producer. And after the launch of the Polimery Police project in 2021, our capacity would be even greater in terms of hydrogen production. Our hydrogen is made as a product for ammonia synthesis, and we put a lot of attention and devote a lot of our attention to hydrogen in terms of our R&D units, R&D muscle where we are trying to grow and develop the group towards that right target, the hydrogen target. Moving on to the more specific discussion of our financial results starting from the stand-alone performance of our key group companies. I will, for the time being, [indiscernible] on Grupa Azoty Pulawy because this will be discussed later on by President of Management Boards. I will focus on Kedzierzyn and Compo Expert, which are the remaining 2 main subsidiaries or group. Financial results, which was up year-on-year, standing at PLN 886 million in terms of revenue despite of the [indiscernible] at result doubled at -- fell standing at PLN 32 million versus PLN 43 million due to the spread of pandemic in Latin America. This is one of the world's most difficult areas in terms of the combat or fight against the pandemic, and this obviously had an effect of underperformance in the second quarter despite of that very challenging situation in Latin America. Compo Expert still increases and boost its revenue from sales, even despite the falling prices. And we would like to maintain that situation until the end of that year -- of this year. Going back to consolidated financial performance of the Grupa Azoty Group, both in first and the second quarter, we reported falling revenues, this is obviously -- this is -- the situation is so due to problems, obviously, the spread of pandemic, most of our figures for the prices of raw materials have to be corrected and also following product sales volumes across all the group in the first half of the year. Falling revenues, the amount of the revenue is -- the fall is major. However, you will see that it has no considerable effect or no significant effect on our EBITDA figure. We're going to our EBITDA figure. As a result of the ongoing difficult market situation, our EBITDA stood at PLN 315 million, which is related or which is comparable to our result year-on-year. It is worth pointing out at this moment that we had compensation paid out to energy-intensive sectors, which allowed us to partially offset the negative effect of the challenging market environment. The next slide presents the drivers, which were most important to the development on the figure of our EBITDA and the EBITDA bridge. As you can see, the prices of products had a negative impact on our EBITDA. And at the same time, the compensation stood at PLN 445 million versus the negative effect of sales prices at PLN 563 million. Falling volumes and rising COT costs -- CO2 costs had a negative effect as well. A couple of words about the compensation received by the group, which is because this is one of the major drivers of our performance. In the report for the first half of the year, consolidated report, we presented the effect of 140 -- PLN 124 million while it is -- this is broken down into individual companies on this particular slide, Slide #24. In terms of 2019, compensation was recognized in other income. Whereas the estimates for 2020, allow for the reduction or reduction of current cost of electrical energy consumed across the group. The estimates are standing at PLN 124 million were -- at June 2020. In the meantime, we received those amounts and the amounts that we received were higher by PLN 5.5 million. This will be corrected in our report for the third quarter of the year. A couple of words now about the pandemic and its effect on the chemical industry and on our businesses. In terms of fertilizers, as we have mentioned before, we do not see any major effect, the negative effect of the pandemic on the fertilizer segment neither in Poland nor in the EU. Of course, we see a bit of some irregularities, for instance, in the logistics muscle. However, this has no major effect overall. The most difficult situation we'll see in plastics and melamine. This is obviously due to the difficult situation of our main customers by which I mean the automotive business and also the furniture business. Those businesses have a major share -- represent a major share in our product. I, and therefore, the effect was negative for us as well. In terms of titanium white and OXO alcohols, we also had some effects, some negative effects. However, they were minor. We must point out that all those turbulences and problems in our market environment has also an opposite effect, supply of products in our warehouses. This might have an impact on the margins. In the months to come, the margins might be affected by the oversupply. And this might also affect our performance. The gas market deserves a couple of words as well. Of course, it has been affected by the pandemic. We saw major falls in natural gas prices. This obviously made us very happy because it had a positive effect on our performance. However, we had to remember that the supply for gas were lower. And on the other hand, we had an oversupply, additional supply of gas from the United States. However, towards the end of the year, we expect that the gas prices will be growing -- will be rising, and we have already seen an increase in gas prices by even 100%, starting from the lower level, obviously, but still. A couple of words about our industry which also has been affected by the difficult market situation. However, thanks to the support and the compensation for energy-intensive sectors, we managed this day afloat and stay ahead of our competition. Let me remind you that we will receive -- in the third quarter, we will receive additional support from the anti-crisis shield 4.0. Those 2 factors will be definitely positive drivers to our performance. Moving on to fertilizers, which is obviously our flagship segment, starting from traditional fertilizers and then moving on to specialty fertilizers. We saw falling revenues by 11% in the second quarter, 9% year-to-date. As I said, an effect of the prices of raw material, especially natural gas prices and also lower volumes both for compound fertilizers and also nitrogen fertilizers. In terms of compound fertilizers, the situation is much more difficult due to higher imports. In the first half of the year, we saw an increase by around 20% in terms of imports in compound fertilizers versus the same period last year. This does not make it easier for us to manage this particular segment of our business. NPK, the NPK fertilizer season is still going on. The interest is, let me put it this way, standard. It's business as usual, and we are very happy that our agricultural producers are staying afloat and are doing well. The crop yield in Poland are -- is good, both in terms of quality and quantity. Of course, this does not apply equally to all the areas of Poland, but in general, it can be seen in Poland, and this will definitely have a good effect on both our agricultural producers and also on our business -- fertilizer business. Of course, we need to also mention direct payments hovering around of between PLN 13 billion and PLN 15 billion in previous years, and usually, they were paid out in October. So we are keeping our fingers crossed that the situation will be similar this year. And most of the direct payments will be paid out in the last quarter of the year, which obviously will have in -- or should have a good effect on our sales figures. Let me shortly discuss nitrogen fertilizers business. The situation is normal for the period. We always expect the demand to rise around December. By November, the demand is typical compared to previous years. At this point, we do not see any major differences. I need to mention also that as of August 1, 2021, according to the Fertilizers and Fertilization Act, we will have a new EU regulation in effect, which forbids the application of the so-called pure urea. With one exception -- with an exception of urea, including certain components, those new regulations are targeted at the reduction of the emission of ammonia into the atmosphere in accordance with the Green Act or Green Law. And in terms of fertilizers -- specialty fertilizers, we see a more challenging situation in Latin America due to the pandemic and also the weakening U.S. dollar exchange rate. In Latin America, the launch of the sales season was weaker than usual in August. And out of the 10 countries heavily -- most heavily affected by the pandemic around the world, 5 of them are Latin American countries that is Brazil, Peru, Colombia, Mexico and Argentina. These are our markets. This is -- those are the places that we sell our products. Luckily, we see no problems in terms of production outputs and output and also the supply of raw materials. A couple of words about our chemicals sector. I've heard that you were most surprised by the situation in the chemicals segment. In terms of revenue, we achieved PLN 1.16 billion (sic) [ PLN 1.216 billion ] in revenue, down 15% year-on-year. However, our EBITDA figure went up by PLN 54 million, which is up by 36% year-on-year first half of the year versus first half of the previous years. Our EBITDA margin went up to 17%, and this was due to the compensation paid out because we applied 40% of the compensation towards the chemical segment. Therefore, we saw the positive effect of compensations paid out in that very area of our business. Moving on to product groups and the product pie in the Chemicals segment. OXO alcohols -- in OXO alcohols, we saw a major drop in petrochemical raw materials. However, the margins stayed at a solid level. Alcohols -- OXO alcohols completed or closed the first half of the year without any drops in volumes. Of course, some drops and some falling volumes -- sales volumes were observed during the 6 months of the year. However, all in all, there were no drop at the end of the period. In terms of plasticizers, we did have a drop in sales in terms of melamine. The pandemic affected the melamine market heavily. We saw a major drop in demand for those products, both locally and in terms of import sales -- export sales. We also have to face challenge in imports from abroad. However, the outlook for that particular market is quite good, and we expect that before the end of the year, the situation will improve and settle down. And we keep our fingers crossed for the next year to be normal. In terms of titanium white, we also have to face a challenging situation here in that very market especially from Chinese suppliers, there's great competition in that particular market. We have lower prices, which is due not only to our import competitors but due to a number of reasons. However, in the third quarter, our situation in export markets is going back to normal, it's bouncing back. And we do hope that towards the end of the year, that product group will bounce back and go back to its normal business as usual. And the most difficult market, plastics, we reported a negative EBITDA of minus PLN 12 million, and our revenue went down by 25% year-on-year, standing at PLN 591 million versus PLN 791 million last year. In the first half of the year, we saw a weak demand or low demand across all of the European Union for polyamide and also high oversupply because the production capacity stayed as it was. So we had an oversupply situation. All the segments to which we supply our polyamide 6 projects faced a challenging situation, except for 2, the packaging for the industry and the medical segment. In those 2 segments, the situation is quite good and even exceeded our supply figures from years before -- from previous years. In the last couple of weeks, we saw -- we have seen higher demand or more orders. However, in that particular business, we need to wait for quite some times -- some time to go back to normal to the business as usual, even this might even take 1 year from now. This is what we expect depending on the economy and whether or not it will bounce back. It's worth pointing out also that we have additional competitors in this particular market, and the same applies to titanium white. Their final competitors are fighting with margins. They're fighting with new -- with us in terms of their new markets and the locations they sell their products. A couple of words about our financing position, our financing position at June 30, 2020. Our available funding limits stand at PLN 2.5 billion. As you might expect, we had the financing of Polimery Police project. I've also already discussed it. We also have -- we still have $57 million. This should be received in September/October. And the founding of the Polimery Police project should be closed then. We need to point out the debt-to-EBITDA ratio from here in the new formula. If you look at June 30, 2020, you'll see a difference of PLN 359 million, which is due to the introduction of the new standard, the new IRFS (sic) [ IFRS ] standard. We're showing the ratio of 1.36 -- 1.94 versus the previous ratio of 1.36. In the second half of the year, our net debt figure, debt figure were increased significantly because we need to remember about our CapEx projects. We spent 909 -- PLN 912 million. In terms of the cash amount, this figure stands at more than PLN 1 billion because we need to remember about the advanced payments to the companies that are involved in the implementation of our investments. The plant CapEx is at PLN 3.8 billion. And you will see on this particular slide, slide number 32, the breakdown of our CapEx projects. Polyolefins will -- the CapEx of polyolefins will account for 58% and also Grupa Azoty Pulawy Group at 23%. These are the 2 projects -- 2 main projects in terms of our CapEx structure. This will be all in terms of my contribution to that presentation. I will now give the floor over to Mr. Tomasz Hryniewicz who will discuss the financial performance and the situation at Pulawy.

Thank you very much for that introduction and for that professional and a very detailed discussion of the situation across the entire group. I will now discuss in more detail the situation at Grupa Azoty Pulawy Group. In the first half of the year, our consolidated revenue stood at PLN 1.78 billion, down by 17.6% year-on-year versus the first half of the previous year. However, our consolidated revenue in the second quarter of 2020 stood at PLN 653 million going down year-on-year again, falling by 20.7% year-on-year. Our consolidated EBITDA in the first half of 2020 stood at PLN 280 million going down year-on-year, 21%. Our consolidated EBITDA in the second quarter stood at PLN 117 million, going up by 1.5% year-on-year versus the second quarter of the previous year. And our consolidated net profit in the first half of the year stood at PLN 140 million, going down again by PLN 55 million, which is down by 28% versus the previous year. However, the consolidated -- and the consolidated net profit for the second quarter stood at PLN 59 million, going up by PLN 16 million or by 39% versus the second quarter of the previous year. Moving on to the next slide, at which we discuss our financial highlights and the costs of Grupa Pulawy -- Grupa Azoty Pulawy fell by PLN 221 million, mainly due to falling price of raw materials and unfortunately, lower sales volumes. And the higher operating costs at PLN 67 million. And the costs in the second quarter of the year stood at PLN 172 million. And higher operating costs and other items is also presented on the slide. The falling price of raw materials in the first half of the year, obviously, were due to the falling prices of natural gas, which had a positive effect on our figures in terms of both the -- in terms of both monetary value and also the quantities. In terms of benzene, we saw a decline in prices by 10%, and it had an effect on both prices and volumes. In total, we are talking about the effect of 22 -- PLN 23 million. In the second quarter, you can see that the falling gas price -- natural gas price had an effect on our -- both volumes and also prices, and the total impact is shown on the slide. The same goes for benzene at both price and the volume. In total, the effect was at PLN 29 million. Unfortunately, we also saw rising prices of electrical energy going up by 17% in the first half of the year, and it had an impact on both the price figure and also the volume in total at minus PLN 27 million. We also saw higher prices of coal, hard coal. It had an impact on our prices at minus PLN 3 million, and in terms of the volumes, at plus PLN 8.8 million. Therefore, all in all, it had a positive effect on us. However, in the second quarter of the year, the increasing -- rising, the rising prices of our main raw materials are also shown on the slide. In terms of electricity and its effect on our prices and also our volumes, same goes for hard coal prices and volumes, which had a negative impact on the prices, but a positive impact on our volumes. In total, the positive effect of plus PLN 5 million was reported. I need to mention the adjustments that we needed to recognize in the group, we had a modification of our accounting policies in terms of the recognition of CO2 emission allowances. To date, we recognize those rights based on actual emission figures in the period. At that point, we changed our approach, and we will account for those rights in proportion to the plant emission rights and plant emission allowances. Both before and now, it is recognized as the decline in costs -- or decreasing costs. I need to emphasize that this change has no effect whatsoever on our performance in the entire year. This only applies to our accounting during the year. It will have a positive impact in the second half of the year. This adjustment was made for the first half of 2020 at around PLN 70 million -- minus PLN 70 million. On July 31, 2020, we received the clearance from our decision from the Polish Energy Regulatory Office in terms of the compensation, i.e. in the amount estimated by us before, which was based on the act or on the regulations applying to the compensation awarded to energy-intensive sectors. At the end of 2019, we changed our breakdown into -- of our operating segments. Chemicals segment was renamed as plastics and was limited to the sales of caprolactam and derivative products. And the remaining production units were included -- are now included by -- in our other segments, for instance, the agro segment, to make sure that our reported performance is comparable. As a result, some of our products were moved to other business. For instance, in terms of the products produced by Grupa Azoty. In terms of Agro, we are talking about EBITDA at PLN 168 million and falling revenues, which were due to lower sales prices, which we expected after the record-breaking year of 2019, combined with lower sales volumes. The cost of sales went down by 100 -- by 25%, mainly due to lower sales volumes and lower -- obviously, lower prices of natural gas. In terms of plastics, the first half of the year, the segment's EBITDA went down by PLN 26 million, and revenue also went down by 35%, which was due to lower price of our products and also lower volumes going down as well. Cost of sales went down by PLN 39 million, that is by 22.3%, which obviously was the effect of lower volumes and benzene prices. And our selling costs went down as well. In the second quarter, EBITDA went down by PLN 16 million. And the segment revenue went down by around 62 million or minus 55%, which is a high figure in terms of the falling revenue, which is obviously impacted by falling prices. And in terms of selling costs, on cost of sales, it went down by 39.2%. A couple of words about the caprolactam market. Global caprolactam market saw limited production output especially in terms of the automotive market. Their production plans in Asia and in Europe had to be stopped, had to be even stopped, therefore, we saw an impact on the caprolactam sales. In the second half of the year, we are expecting higher benzene prices and also steady bounce back of the market, and we believe that we will see higher rising caprolactam prices. In terms of the situation in the market, we do expect that this will be -- this will be better. This will improve only in 2021. In the first half of 2020, we had a number of -- and 88 CapEx projects with a total value of PLN 2.9 billion. Focusing on our highlights here on the flagship projects. We had a construction of the coal-fired power generation unit. The budget was at PLN 1.2 billion, and the budget spent is at 3%. We -- this project is meant to adjust our production units to the latest energy protection requirements and to assure steady supply of energy sources. We're talking here about heating water and steam. The next investment I'd like to focus on is the upgrade of the nitric acid unit and also the construction of the new nitric acid production units. The progress of work is -- here at 38%, and the total budget is at PLN 695 million. We have already spent 308 -- PLN 309 million to date. We want to improve the cost effectiveness of the nitric acid production. The planned deadline for an investment is 2024. This was when the production unit will be brought on stream, and the investment that -- has already mentioned, facility for the production of granulated fertilizers based on ammonium nitrate. The progress is at 90%. The budget is at PLN 430 million. We have already spent more than PLN 200 million on that project. We want to keep up with the expectations and trends in the market. We want improve the quality of our fertilizers with new granulated fertilizers. We planned 2 new production lines. We are talking about granulated ammonium nitrate and also calcium ammonium nitrate. The commissioning of those lines is planned. Those 2 lines are interconnected. Therefore, we started our work in the beginning of July this year. Due to the complexity of that project and the plant, we expect that the completion -- we expect the completion to fall at around 2024, but some parts of it will be brought on stream in 2021. And last but not least, we also have an upgrade of steam generator, OP-215 No. 2 to reduce our NOX emissions. The budget spend has already -- is already at 46%. The total budget is at PLN 93 million. We need to reconstruct and also upgrade the steam generator as the main production unit for our steam. And again, this will be brought on stream in 2021. In summary, I'd like to focus on the key developments in the first half of the year. On March 23, we had a change in the management Board. Mr. Krzysztof Bednarz was recalled from the Board and Ms. Izabela Swiderek as well. Mr. Andrzej Skwarek has been appointed. Ms. Anna Zarzycka-Rzepecka was also recalled from the management board after the reporting period. We had a merger between Koncept and Prozap, which is in keeping with the overall strategy that is synergies and streamlining of our operations. The merger will be registered with the National Court Register -- it was registered in the National Court Register on January 29, 2020. In an effort to meet the environmental law, in December 2019, we presented updated documents concerning the meeting of requirements on prevention of major industrial -- industrial accidents, and we received a decision that we meet those requirements. That decision will allow us to commission the project I have mentioned before, the mechanical granulated fertilizers. We had an agreement on collective disputes with the trade unions, finishing all the collect -- all the disputes -- trade disputes across the group. I would like to take this opportunity to thank all our employees and also of the subsidiaries to strictly adhere to the very difficult and demanding requirements in order to counteract and prevent the spread of the pandemic. As a result, we managed to keep the continuity of our business and also protect jobs, not to lose any employees as well as ensure full safety both to all of the parties involved, employees, suppliers and clients. Thank you very much. And I will now give the floor over to Mr. Mariusz Kadziolka to discuss the financial performance and the situation at Police.

Thank you very much for the introduction. I'd like to -- I'd like to start by saying I'm happy to be here with you and all the investors and also other participants. Grupa Azoty Police closed the first half of the year with EBITDA at nearly -- with both EBITDA and revenues figures, which were solid compared to the previous year. Our revenue in the period stood at PLN 1.2 billion, going down by around 7% year-on-year, and the EBITDA margin stood at 8%, going up by 1 -- going down by 1 percentage point year-on-year. In terms of the structure, sales structure, it remains similar to the previous years, especially in terms of our fertilizer segment at 88% (sic) [ 83% ] and also the other segments represent around 15%. The second half of the year turned out to be better for the company and for the group versus the previous year as the EBITDA margin stood at 10%. A key driver of our lower performance in the first half of the year or the falling prices of our products, mainly compound fertilizers, ammonia, urea, however, this was partially offset by falling prices of natural gas. Moving on to the next slide, which is devoted to our fertilizers and pigment segments. In terms of fertilizers, the revenue for the first half of the year stood at more than PLN 1 billion. Our EBITDA is at PLN 65 million, and our EBITDA margin stood at 6%. The structure of sales are compound fertilizers standing at 67%, and urea and ammonia representing 27%, while other products account for such as NOX account for 6%. There were no falling prices of raw materials in terms of the raw materials used for the production of compound fertilizers. It was translated into lower margins versus the situation that we reported in ammonia sulfur, and natural gas were lower in terms of the prices. However, phosphates and electrical energy, those prices were much higher. The potassium chloride, those prices did not change at all. Rising prices of electrical energy was to a great extent offset by the compensation, which we have discussed before. However, irrespective of that fact, the overall prices of our feedstocks used for the production -- the production of compound fertilizers did not fall, especially in terms of phosphate and potassium chloride. EBITDA was down this year, the first half of the year, which was mainly due to -- which was due to the drivers that I have already discussed. In the second quarter, our performance were better than before than last year, mainly due to much better performance in the segment of nitrogen fertilizers. In terms of pigments, our segment revenue exceeded PLN 183 million and EBITDA stood at PLN 34 million, which was up by 25% year-on-year and the EBITDA margin stood at 19%. In terms of the structure of our sales, titanium white represents more than 90%, while the remaining 10% are other products usually -- we are talking about byproducts from the production process of titanium white. All in all, we had an impact of higher prices of some materials. However, we also had an offsetting factor that is lower prices of natural gas. The ilmenite prices was up 11% year-on-year, the same for titanium slag going up by 2% year-on-year. And the prices of CO2 emission allowances stood at between EUR 14 and EUR 27. All the commitments are met by our company on a timely basis and consistently. Moving on to the next slide, which discusses and presents the key developments in our group. Our Polimery Police project in progress was recognized as the most reliable project in the fuel and chemical sector. We also received a distinction in which were thanked by our -- because of our involvement in the fight against the pandemic. In terms of the pandemic, we helped the Polish State Fire Service and also hospitals. We assisted our employees as well. We provided them with all possible -- all available personal protection equipment to make sure they do not contract the coronavirus. In terms of our CapEx and the CapEx projects, the key projects were already been discussed, by which I mean Polimery Police. Let me now discuss other main projects in the first half of the year. We launched 17 new CapEx projects, and we are obviously continuing 45 earlier projects, which were launched in previous years. As I've mentioned before, we need to, first of all, upgrade our power unit to connect and supply our propane dehydrogenation and the production of polypropylene. The upgrade of that system and the main transformer station will provide and ensure the distribution of electrical energy to suffice the needs of the new Polimery Police project. The budget for this project is at PLN 56 million, and the planned completion date is 2022. The next CapEx project is the modernization upgrade and the extension of the demineralization -- water demineralization station, which will ensure that Grupa Azoty Police will not have excessive salination of the Odra River and will provide, obviously, the technology -- the technology and the supply of water to the Polimery Police project. The budget is at PLN 108 million, and the planned completion date is again 2022. The next investment, this is not shown on this slide, but we are replacing a tower and the budget is at PLN 60 million, and the planned completion date is at 2021. We also have a new tray at the [ 500 08 ] unit, and the budget for this particular project is PLN 11 million and the completion deadline is 2021 as well again. The next project is the construction of the production loading and storage of urea. This project will allow us to make sure that urea supply is steady, and it will also increase -- and will also allow us to increase the production outputs. The budget is at -- the budget -- and we are in line with the budget, and we are going to complete that project in this year. We issued more than 49 million ordinary [ borrower ] shares Series C worth 20 -- more than PLN 20 per share. The proceeds from that issue will be applied towards the Polimery Police project. We also received the co-financing for our projects to produce new liquid fertilizer products based on -- based on the decision on the co-financing. We received 50 -- around 50% of the funding versus the planned spending on that particular project. The management Board of the company decided to distribute net profit at more than PLN 60 million and appropriate net profit to the company's -- to the increase of the company's share capital in its entirety, which was approved by the General Shareholders Meeting. Thank you very much for listening. And I'll now give the floor over to Mr. Pawel Lapinski again.

We received a number of questions. We have already answered some of them. However, there are several questions, which we have not replied to during the presentation. I will now like to take this opportunity to answer them. StockWatch asked the following question, "The Russian SIBUR Corporation started the production of polymer production unit, and the production output is expected to be higher than that of the Polimery Police project. How do you see the new competition? Will it affect the effectiveness of your project?" SIBUR, the new installation, SIBUR is expected to cater to the Chinese market mainly. This is no direct competition for us. This is not a target market for the Polimery Police project. You can see quite clearly, based on the information communicated by SIBUR that China will be the target market, especially if you consider the engagement, involvement, financial involvement of Chinese stakeholders and also the location of this particular project. So I think it's pretty clear. And also, the new production unit will be focusing on polyethylene mainly. Not polypropylene. Polypropylene will only represent a very limited value in terms of the production output, which is similar to our output. You need to remember that the polypropylene market is a growing market, and it can absorb such volumes -- such production volumes with no problems, especially considering that, that production output will be targeted and sold at a completely different market than ours. The next question, "When can we expect any updates on the free CO2 emission allowances starting as of 2021?" As far as we know, the decision is to be taken in January -- by end of January 2021. And this can change obviously because the discussion on the new Green Agreement can affect that decision-making process. We estimate that our allocation will be reduced by around to -- 10% to 20%. We're talking about around a dozen percent of reduction versus our previous allocation figures. "What was the effect on the compensation of -- received by energy as intensive segment -- energy-intensive businesses by segment?" The breakdown was as follows: 45% for agro; 10% for fertilizers; and the chemical, 25%; and the remaining amount for the energy. "Do you see any risks in terms of your EBITDA for fertilizers in the quarters to come?" No, we do not see any such risks. We believe that we will report positive EBITDA and the EBITDA margin in the months to come -- in the quarter to come. A question about the accounting treatment or accounting method applied at Pulawy. Mr. Hryniewicz has already discussed it. Let me now repeat it. This is -- this applies only to the situation for -- during the year. This is a purely accounting treatment. However, at the end of the day, this should have no effect on the performance after the second half of the year. It did have an impact on the performance after the first half of the year. This will be all in terms of your questions. Let me now take this opportunity by -- to thank you. And hopefully, we'll see you during the -- at the next conference. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]