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

Good morning, ladies and gentlemen, and a warm welcome to the earnings call, which will be devoted to the Discussion and Presentation of the Performance of Grupa Azoty Group after the first quarter of 2024. Apologies for a bit of a delay due to technical glitches. Today's presenters will include Andrzej Skolmowski, Vice President of Grupa Azoty S,A. Management Board; Mr. Andrzej Dawidowski, Vice President of Grupa Azoty S.A. Management Board and President of Grupo Azoty Police Management Board. And joining us online, Hubert Kamola, Vice President of Grupa Azoty Pulawy Management Board -- Vice President of the Grupa Azoty S.A. Management Board and President of Grupa Azoty Pulawy Management Board. Mr. Andrzej Skolmowski, the floor is yours.

Welcome to all of you again. We will present and discuss the performance of Grupa Azoty Group after the first quarter of 2024 and this presentation and the report includes the results of work, the 12 days actually of the current composition of the Management Board and the previous composition of the new Management Board. [indiscernible] of March, the current Management Board has been taking action in order to stabilize Grupa Azoty Group's financial situation, including our major goal, overriding goal that is returning to profitable production. Detailed assumptions in the specific areas will be included in our turnaround plan, which is already in the works. The optimum scenario is to start implementing corrective actions in the coming weeks after we have obtained all the required permits and approvals, we're talking about both corporate permits, as well as the approvals of financing institutions. We are continuously updating the proposed project solutions, including to address the challenges related to the imports of fertilizers and plastics from outside of the EU. We also strive to maximize the utilization of synergies within the capital group in order to fully harness and tap the Group's potential among other things. We are structuring the management and supervision in the subsidiary companies in order to streamline them. We are working closely with all the financial institutions with -- and we are presenting all the necessary information, communicating all the necessary information to them on an ongoing basis. In April 2024, that is after the preparation of this report, we have entered into a waiver agreement with the financing institutions based on which the institutions agreed to waiver selected provisions of the terms of the agreements with Grupa Azoty, including the application of net debt-to-EBITDA ratio, as at [ December 20 -- 31st of 2023 ]. Key facts and figures and developments in the first quarter of 2024 include the lack of any effective measures taken by the company in order to adjust our business operations to evaluate challenging market conditions. Later into the quarter, we started working on the development of a comprehensive recovery plan or turnaround plan. But those works actually went into the full swing phase only at the end of April. We are striving to strike a permanent and stable agreement with the financing institutions, including the wafers. So we have already mentioned, we are implementing measures in order to restore profitable production. We are optimizing our sales, but also what's really important in terms of what we do, as the current management Board, we are trying to do our best to obtain, but also to maximize the synergies that come from our presence in the Capital Group. In the first quarter of 2024, Grupa Azoty achieved consolidated sales revenue of PLN 3.399 million, reporting at the same time, an EBITDA level loss of minus PLN 50 million with an EBITDA margin of minus 1.5%. The first quarter of 2024 was a period of sustained and persistent unfavorable macro conditions worldwide and the demand for products offered by the Grupa Azoty remains too low and to restore the Group's operational profitability, especially considering the ongoing and persistent down trend in the prices. The prices of [ all ] production feedstocks and raw materials in the reported quarter also recorded a significant year-on-year decrease, which in the case of our key raw material that is gas amounted to as much as 49%. This is a whopping figure according to the TTF quotations. The unit costs of energy carriers, especially electricity and coal were also lower. However, these declines were insufficient to achieve and report a positive EBITDA margin or EBITDA figure in general. I'll now give the floor over to my fellow speaker, Hubert Kamola to discuss the market situation.

In terms of the market situation, we need to remember about the persistent negative sentiment across all the markets and slight symptoms of improvement of certain ratios. We have noticed a number of segments. However, the demand remains relatively sluggish low, but still stable, which is a result of certain structural changes in these markets. Right now, we do not see any specific market shocks related to the demand. However, the unstable geopolitical situation, especially in the Middle East region had maybe paradoxically had a favorable impact on demand in the old continent because extended delivery times from alternative markets, especially from Asia, as well as their uncertainty, as well as increased freight and transportation costs, which went up across all the period contributed to greater interest in products, which are manufactured in Europe. The key factor mentioned by Mr. Andrzej Skolmowski remains the cost of natural gas, which is a significant factor affecting the cost despite those whopping decreases, we still see that those costs are very much higher than the alternative sources and higher than the average of the last 25 years. As far as gas is concerned, the main factor [indiscernible] influencing gas prices included the decrease in coal prices in European ports, but also CO2 emission [ rates ], it also contributed to a decline in prices and the prices went down despite extended LNG delivery times in Europe because we have to remember about the weather conditions, which do not contribute to any pressures. Concurrently, there were disruptions at the regional deposits and an [ accession ] of the Freeport Energy LNG outages in the U.S.A., which also impacted the availability of gas. In terms of the volumes of 2024, quarter 1 went up by [ 6% to 9% ], but still remained lower year-on-year and quarter-on-quarter. And the cost of purchase went down significantly by nearly 6% quarter year-on-year. And this were a -- this was a negative -- a positive trend. As far as electricity is concerned, we saw a lower demand for electricity, both in Poland and also across Europe. Poland was one of the most expensive energy market, electricity market in the EU, which is important to notice. In the first quarter, production from photovoltaic units went up across all the electricity markets and the European Union. As far as CO2 emission allowances are concerned, in the first quarter, the trend was downward until mid-February 2024, and the price hovered around EUR 50 per ton. It went up slightly. Right now, it is a little bit higher, about EUR 75 per ton. In terms of exchange rates, we saw the strengthening of PLN exchange rates, which obviously is not a positive sign for us considering our export markets and also [ and to ] remember about the domestic interest rates, which did not change any significant -- to any significant extent in the first quarter of 2024. In terms of CO2 emission allowances, we sold emission allowances purchased on the market in the previous periods at favorable prices. The sale concerned the surplus of emission allowances resulting from lower production levels and the remaining settlement of CO2 emission allowances for 2023. However, during the reporting period, Grupa Azoty sold emission allowances worth [indiscernible] with a simultaneous commitment to repurchase and the transaction value amounted to [ PLN 48 plus PLN 1,000 ], and we need to remember that this is presented, as other financial abilities. The balance of liabilities, as at the end of March 2024, taking into account the period of using the financing. Also, along with exchange rate differences amounts to PLN 38,000. In terms of revenues and costs, I'll give the floor over back to Andrzej Skolmowski.

You took be by surprise a little bit, so let me find the particular slide to comment on it. In terms of revenues and expenses in the first quarter of 2024, the lower revenue in the first quarter of 2024 year-on-year amounted to PLN 500 million. And the main reason for that was the decline in product prices down by PLN 1.6 billion, combined with an increase in sales volume, which went up by PLN 1.2 billion. The realized lower level of feedstock costs was primarily influenced by the decline in the prices of key raw materials and feedstocks down by approximately PLN 1.7 billion, coupled with an increase in the volume used by approximately PLN 0.5 billion. The largest reduction in raw material costs were related to gas down by PLN 870 million, going down by 60% year-on-year, as well as fossil fuels, down by PLN 149 million, including potassium chloride and phosphates down by, respectively, 40% and 60%, as well as energy carriers, down by PLN 349 million or 45%, including coal and 42% for energy. However, we observed an increase in the cost of petroleum-derived feedstocks going up by PLN 180 million, including phenyl, propylene, propane, that are all the raw materials that are used at polyolefins to GE Poly -- GA Polyolefins with an increase of approximately 5%, 45% and 100% for propane, respectively. In the first quarter of 2024, the share of gas and raw material consumption costs accounting for 28%, which was down 14 percentage points quarter year-on-year. Right now, I'll ask you for the commentary on the market condition in the Agro segment. In the first quarter of 2024, we saw the continuing downward trend in raw material and product prices with a decline of over 40%, ranging from 11% to over 40%. The price declines also occurred in relation to the previous quarter as well. We did not see any typical seasonality. Usually, the first quarter is the strongest year -- period of the year in a fertilizer year. The stock levels were still very high, and we also saw a great price uncertainty considering alternative offers from lower priced markets. We also saw a wider spread between the prices of plant protection products and the prices of agricultural products, which affected the situation in the market. This was an untypical situation that we saw in the first quarter of 2024. A large part of the previous -- previously purchased plant protection products were used when the prices was at a totally different level. Therefore, it affected sentiment also on the farmers and also their behavior in terms of the applications. We need to remember about their situation in terms of the grain market because this affects the situation in both Poland and in external markets, and it remains under the pressure of imported grains. In terms of compound fertilizers, the first quarter was mainly characterized by an increase in demand, especially from Ukraine because Ukraine has less alternatives due to the ongoing war. In the first weeks of January in Europe, we saw signals of increasing demand for spring applications. However, they were relatively quickly subdued or suppressed by certain unexpected factors such as strikes and weather conditions in the first quarter of 2024. Throughout the most of the first quarter of 2024, we saw only moderate [ price ] changes for phosphate fertilizers, such as MAP and DAP. They remained relatively low. In terms of the situation in -- on fertilizer market in the second quarter, the outlook will depend on the demand and also the prices of urea, which currently is a favorable factor. The prices for urea throughout the past several weeks in the main hubs that is Northern Africa, U.S. and Mexican, they are going up. In terms of on the imports of urea, this remains unfavorable factor, and the first quarter of the year and also 2023, as a whole shows that there has been a strong influx of imported urea. And importantly, we saw this stronger influx from Russia, from several ports to Poland to Europe in general, which significantly affect the situation and making it very unstable. We as a group also asked a number of questions. As far as our opinions on this particular phenomena because in addition to the sanctions on the imports or exports to and from Russian Federation, we're talking about the imports of urea also because this is an indirect import of gas with an equivalent of nearly 2 billion BCM. The imports of some ammonium nitrate, which is very important for Poland remained quite high in the first quarter of the year. And my assessment is that the policy in terms of prices and also on the strengthening of our communication with the distribution network was insufficient. And we have recently held a large-scale, multilateral meeting with our distribution network, with distributors during which we communicated the situation in the market. As far as the commentary -- general commentary on the market landscape in terms of the first quarter of this year, the situation was quite stable in terms of raw materials. However, due to the observed levels of gas prices, we did not see any revival here in terms of the demand and the sector continues to be influenced by unfavorable market conditions, especially considering the fact that we border Ukraine, and this is a key country in terms of the transit to Europe and also to other countries outside of Europe. In terms of the Chemicals segment, for OXO alcohols, the products, the main factor here included lower propylene prices. That is the main contracted feedstocks going down year-on-year by 6%, and the activity of buyers remained at a very low level with simultaneous lower supply of OXO products. And the market participants expect an improvement in the supply demand balance in the second quarter of the year, keeping their fingers crossed on higher activity of intermediate [ links ] of this chain that is the distributors. The second quarter is traditionally the strongest period of the year for -- in terms of the demand for OXO alcohols. We are, therefore, preparing for that period. And the melamine, which is related very strongly to the construction sector, it is still affected by low demand after a strong recovery and that the post COVID segment related to the finishings and the constructions and the renovations of the buildings. However, the situation now is pretty -- as low as worse. Traditionally, the second quarter should bring an improvement here, and we will tap all the opportunities in this particular area as well. In terms of pigments, the main consumers of those products are the pains and varnishes sector. [ This ] also correlated to the situation in the construction sector. We are expecting a better sentiment here in the second quarter and in the second half of the year. In the Chemicals segment, in terms of the market situation, the main determinants here include limited production capacities, adaptation to the situation by most of the European producers, all European producers are actually optimizing their operations, both in the Netherlands and Germany, but also in Austria, one of our competitors here planned and a long 3-month long overhaul. Unfortunately, the margins across Europe are very low. The manufacturers are also facing logistical problems related to the situation in the Middle East. But there was a revival for products produced in Europe. However, this is not a breakthrough watershed change compared to the previous quarters. It's only a trend. Traditionally, we are expecting a revival in this area in the second quarter. In the Plastics segment, the prices and the demand remained more or less the same. In terms of an increase in prices, it was affected mainly by higher production costs with the benzene going up by 15%, which translates directly into higher prices in the last quarter of 2023 and the first quarter of 2024. However, if we look at the spread between production costs, mainly for feedstocks and product prices that are quoted, then the spread remains the same. And it confirms that they have -- there have been no structural changes in terms of demand. In terms of the market environment, the Plastics segment is still affected by the macro situation. And we see an ongoing low sluggish demand, especially from the construction sector. So the demand is still stable, more or less, but still low. Also, the supply, especially in terms of European products remains very limited. Certain problems with the availability of feedstocks also translated into higher prices. In the first quarter of 2024, Grupa Azoty recorded a negative EBITDA result in the Chemicals segment amounting to minus PLN 90 million and Plastics amounting to PLN 56 million. However, it achieved a positive result in the following segments: Agro, going up at PLN 27 million and Energy segment at PLN 36 million and Others, the segment called Others, PLN 33 million. In the first quarter of 2024, there was a decrease in sales revenue in the Chemicals segment, down by PLN 242 million, fertilizers, going down by PLN 220 million, energy going down by PLN 92 million and others by PLN 8 million. On the other hand, we saw an increase in revenue in the Plastics segment going up by PLN 66 million accounting for 12% of the Group's total revenue. The revenue includes the sales at Grupa Azoty Polyolefin -- Polyolefins, which is currently in the process of installation and start-up testing. The decrease in revenue was mainly due to a decrease in the realized selling prices and reduced revenue going down by PLN 1.5 billion. On the other hand, an increase in sales volume had a favorable impact on our revenue figure with an additional impact of -- on the plus side, at PLN 1.2 billion. Lower cost levels resulted from a decline in prices in key production raw materials of feedstocks. In the Agro segment in the first quarter of 2024, the average price of natural gas in the first quarter, the key raw material used for the production fertilizers was on average at EUR 27 per megawatt hour according to spot TTF quotations, which was down 49% and year-on-year. After strong demand constraints in the first -- in the fourth quarter of 2023, the first quarter of 2024, we saw a seasonal rebound in demand, which was observed only in March. There was a clear and ongoing downward trend in grain purchase prices in both Poland and Europe, along with a gradual decrease in natural gas prices. So we were waiting, and the farmers are waiting for further fertilizer price reductions. And also, we are considering low pre-stocking levels, as well as application limitations and fertilizer purchases just before application. In the first quarter of 2024 nitrogen fertilizer sector also saw a slowdown in demand. This is our season, so to speak, the first quarter. However, the situation in that sector was still pretty weak and the situation in urea and ammonia market remain difficult as well with increased pressure from imported fertilizers. In the first quarter, the quantities, the volumes of urea imported from, among other countries from Kazakhstan and Russia influenced a growth in supply and a downward trend in market prices. Despite the ongoing instability in the fertilizer market in the first quarter of 2024, we also saw an increase in [ the scale of ] production with sales volumes going up by 47% compared to the same period last year. The recorded decrease in the prices of products was not offset by a decrease in raw materials. And as a result, we saw EBITDA margin for the first quarter for the Agro segment going up by 167% compared to the first quarter of 2023 reaching the level of 1.2%. In the Chemicals segment in the first quarter of 2024, we saw a decrease in the raw materials and product prices year-on-year. The negative results here were impacted by the ongoing unfavorable macroeconomic situation around the world and persistently low structural demand for the products of the Chemicals segment. On a positive note, we also saw disruptions in logistics, which resulted in delayed imports. So we're talking about the extended delivery times and higher transportation costs, which led to increased interest in product offered from -- or by European manufacturers, as well as a decrease in raw material prices, including propylene. Prices across all products, across all segments were lower year-on-year with the largest decreases observed for NOxs and [ for NOXy ], as well as urea technical-grade urea. At Pulawy, production of melamine and 1 installation was resumed and the EBITDA margin in the Chemicals segment in the first quarter of 2024 reached, unfortunately, minus 14.9%. Moving on to the Plastics segment. In the Plastics segment, in the first quarter of 2024, we reported EBITDA at minus PLN 56 million and the polyamide area, we reported at a level of PLN 14 million, while polyolefins generated EBITDA at minus [ PLN 42 million ]. Revenues from sale amounted to PLN 419 million compared to PLN 353 million in the previous year, including -- for polyamides, PLN 278 million compared to PLN 352 million in the previous year. And in polyolefins, we saw a substantial increase to PLN 141 million compared to only PLN 1 million in the previous year. The increase in prices of PA 6 at the end of the quarter resulted from higher production costs amid stable demand -- or -- and also balanced or even constrained supply from several producers, which was associated with the shortages of certain raw materials. Demand remains -- remained at a stable, but low level across all application sectors. In January 2024, Grupa Azoty repaid all the installments for long-term loans on a timely basis, totaling EUR 10 million. According however, to the stabilization agreement, as of the 2nd of February 2024 the repayment of installments due to the -- during the agreement's term was suspended, including the term loan with bank consumption, as well as loans from EBI and [ ERB]. The Group holds a syndicated loan agreement with the revolving credit limit up to PLN 1.5 billion, as well as a term loan of PLN 943 million remaining to be repaid by the end of June 2025. We also have a multipurpose credit limit agreement with PKO BP with a credit limit of up to PLN 1 billion or its equivalent in euro or in U.S. dollar, which is valid until the 30th of September 2025, along with the related cash pooling service agreement, a real cash pooling service agreement in PLN, euro and U.S. dollar until 30th of September 2025 as well. The total limits under reversed or reverse factoring agreement, as of the end of December 2024 amounted to PLN 2.374 billion in total, including reverse factoring limits for receivables at PLN 750 million and EUR 50 million. These agreements are used to finance the general corporate needs of the company. In the first quarter of 2024, the Group increased compared to 2023 increased utilization of multipurpose credit limits by PLN 684 million, while reducing the utilization of factoring limits by PLN 252 million. The situation across Grupa Azoty, obviously is being stabilized after extreme volatility in raw material prices, especially in natural gas and as well as products, including fertilizers, as well as significant constraints on demand and product prices due to the recessionary trends in the economy resulting from interest rate hikes to combat inflation. As a result, the Group's EBITDA was negative at minus PLN 1.2 billion, which led to an increase in net debt. Excluding our flagship polyolefins projects, that is minus PLN 3.2 billion with the bank's net debt-to-EBITDA ratio reaching a negative value of minus 2.72x. In the first quarter of 2024, the negative EBITDA generated by the Group was limited to minus PLN 50 million, while net debt continued to rise to PLN 4.2 billion due to the settlement of our commitments for the supplies in 2023, as well as an increase in receivables from product sales in the first quarter of 2024. We signed an agreement with the financing institution, a stabilization agreement on February 2nd, 2024, which ensured the maintenance of availability of financing agreement limits, which were valid until 28th of May 2024, and we are right now in the process of negotiating its extension for yet another period. And as I have mentioned before, on April 25th of 2024, we signed waiver letters waiving claims by the financing institutions arising from the breaches, which resulted from the failure to meet our net debt-to-EBITDA commitments. We have additional security for our liquidity. We're talking about our cash. And the total of both cash and free credit limits, as at the end of March 2024 amounted to more than PLN 3 billion. We are meeting our commitments on an ongoing basis in terms of how we service our debt under the agreements, financing agreements, as well as waiver letters, as well as the stabilization agreement and the available limits, ensure that we have liquidity, as well as financial stability and security [Technical difficulty] financing of the Group. The Management Board recommended the coverage of our net loss for 2023 with our reserved capital of the parent company generated from the issue of our shares above their nominal value. The recommendation was approved by the Supervisory Board and the final decision on the coverage of our net debt of 2023 will be taken by the Annual General Meeting of the parent. In terms of our CapEx spending and the investments in the first quarter of this year, we spent in terms of the acquisition of tangible and intangible fixed assets, we spent in the total of PLN 216,000 with the largest investments in the first quarter of 2024 made for the implementation of the flagship project, Polimery Police. In terms of the projects [ undertaken ] at Grupa Azoty Pulawy, it included the modernization of the nitric acid installation and construction of new nitric acid neutralization and fertilizer production installations based on nitric acid and also adaptation to BAT requirements, as well as modernization of the synthesis gas compression [ node ] for the needs of the ammonia plant at Grupa Azoty Kedzierzyn. And the quarter-on-quarter difference in the amount of investments and the outlays primarily results from the limited investment activity due to the difficult financial situation of Grupa Azoty. In this particular area, it was also approved by -- or agreed with the financing institutions. Short commentary on our Polimery Police project. Our flagship project is currently at the production stage and the test of guaranteed parameters. We have already closed 24 of those tests out of 37 required tests, 8 of which were accepted. But in terms of the successful completion here, we can report that we achieved the production rates that were planned for polypropylene and also propylene. Across the quarter, we produced more than 60 tonnes -- 60,000 tonnes of polypropylene -- of propylene -- and propylene, as well at 54,000 tonnes and the average production is as planned. As far as the continuation of the investment process, we expect integrity tests together with Hyundai in order to move towards a more commercial production for this project. AT Tarnow, our key projects include neutralization of ammonia nitrate units, they are connected with our transition climate and energy transition in order to utilize heat and the chemical reactions on more successfully and also improvement of our usage of caprolactam ammonium sulphate, as well as nitrate-based or nitrogen-based fertilizers. Grupa Azoty Kedzierzyn, we have the new energy concept, and it also fits within our strategic assumptions based on our -- and our need to meet 0 emission requirements in order to, for instance, use heat from ammonia unit in order to produce energy, electricity and energy utilities. New energy concept, the new energy concept project includes 7 investment tasks with a total budget of PLN 301 million, which serves as an alternative for the implementation of the second stage of the combined heater power plant at Grupa Azoty Zaklady Azotowe Kedzierzyn. We plan to close one ongoing project that is reversed peak boilers in September 2024. My fellow speakers will discuss their respective projects and their respective groups at Pulawy and Police in more detail later on. Moving on to the performance of group companies. In the first quarter of 2024, we saw persistently, as we said before, unfavorable macroeconomic situation around the world. The demand for products offered by Grupa Azoty remained too low to rebuild the group operational profitability, especially considering the continued price declines. Additionally, in the first half of the quarter and similarly to previous periods, there was a lack of effective -- corrective action by the company to adjust its operations to the market conditions. As a result, all leading companies within the Group did not generate net profit in the first quarter of 2024 with the exception of COMPO EXPERT, which achieved the profit out of [ 25 million ] over 3x more than in the corresponding period of the previous year. I'll now give the floor over to my fellow speakers to first comment on the performance at Pulawy.

Obviously [ into ] Pulawy and we need to remember that about the market of grains and it is volatile, as we speak around the world and the ongoing conflict in Ukraine continues to affect our situation in Poland and the European Commission estimates that the yields in Poland in 2023, 2024 season signal that this production value can come up, especially for corn or barley. However, we can expect a slight downward trends for wheat. As far as our activity across Europe and in terms of fertilizers, they remain low. Pulawy is pretty well prepared to our export operations. We export to, for instance, France, Scandinavia and Great Britain, U.K. or Spain. We saw lower demand for AN, especially in Belgium or Turkey and Italy. However, it did not impact Pulawy that match. What's important is also the fact that both in Hungary, Italy and also in other countries, Yara resumed the production of their fertilizers after the stoppage due to lack of demand at the end of 2023. We saw a slight improvement in terms of demand for melamine, which was already mentioned in Europe and melamine demand still remains sluggish, especially we need to remember about the imports from our competitors, and our competitor in Austria have announced a plan for maintenance shutdowns. So we tapped into this opportunity, and this is why we decided to relaunch or launch melamine 3 unit. Other units of melamine production is -- are being modernized or upgraded, and we are ready to relaunch them again. Our current management board takes action to stabilize the financial situation in Grupa Azoty Pulawy in order to achieve a certain scale of operations, which is the key and the priorities, obviously, to present a complex end-to-end long-term turnaround plan for Grupa Azoty Pulawy to the financing institutions, and we are contributing to that and through our operations. Right now, the Management Board of Grupa Azoty Pulawy is complete after the Monday's decision of the Supervisory Board. We appointed [indiscernible], as the CFO; and Mr. Wojciech Kozak for Energy Transformation, the Production and [indiscernible] for organizational corporate functions. And this is the end of the appointment of management board members for the current composition and the current term of office. And we are now ready to take action to improve our situation. Our consolidated financial revenue came in pretty solid. However, going down by 26% to [ PLN 902 million ], and we need to remember that our EBITDA came in at [ minus 79% ]. It was, as I mentioned before, Pulawy needs to operate on a full scale in order to keep its costs under control. those costs. And so, this effect of higher production was at PLN 232 million. We also saw a favorable trends, the decline in our strategic feedstocks, including gas during the period, the electricity, we saw a downturn in the prices, which was also -- which also affected a decline in costs and general costs, but also the volumes went down as well. The decline also applies to cost of coal, and this was due to lower prices by 21%, but also an increase in utilization and volumes consumed by about 4%. As far as segment performance by Pulawy, we had a negative EBITDA at Agro and Plastics, but we reported a positive EBITDA in the Energy segment and in the Others segment at, respectively, PLN 8 million and PLN 6 million. The revenue in Agro accounted for a lot of our performance, and we need to remember about the stoppage of our caprolactam production, as well as melamine production. So the Agro segment is the main contributor to our revenue at Pulawy. It is worth mentioning that from the market perspective in Poland and the Baltic states, the first quarter was a quarter of total inactivity, even though March is traditionally the peak season for fertilizers. However, we saw very low sluggish demand in this particular area. A moderately favorable factor was the Red NOx line. In terms of -- in this particular area, the revenue was down, especially for LIKAM, aqueous ammonia as well. But we need to remember that the revenue from NOXy and AdBlue went down by about PLN 34 million, which was mainly correlated to the decreases in the raw material prices, especially melamine. In terms of melamine, we are preparing to a shift between melamine 2 and 3. So we are working on it. In terms of production volumes in the first quarter of 2024 year-on-year, we saw an increase in production in nitrogen fertilizer by [indiscernible] and a decline for compound fertilizers by 27%, mainly due to FOSFORY Gdansk, Grupa Azoty FOSFORY operation and contribution. In terms of the quarter, in general, the production was stopped for caprolactam, and the Management Board decided to relaunch our melamine 3 unit, which currently operates as planned. In terms of our key investments, the main spending was on flue gas desulphurization installation upgrade to BAT conclusions, as well as modernization of nitric acid installation and construction of new nitric acid neutralization and new fertilizer production installations based on nitric acids. So we are improving the contribution here, and we plan to launch nitric acid production in August 2024. So it's the [ song ] of the nearest future. We completed the adaptation of flue gas desulphurization installations to BAT conclusions. This project was already accomplished. In terms of the power block, which is currently the largest investment at Pulawy. It reached 99% or 99.9% completion. In August 2023, the regulatory run or the adjustment run of the block commenced during which optimization processes, test runs, and safety measures were conducted. On December the 20th of 2023, Polimex-Mostostal, the general contractor, announced the need to extend the completion of the investment. The reason for the extension was due to the damage to the boiler during the adjustment run. This is a very unfavorable development because in total, the delay for this project will be around 2 years, assuming that we have final tests and the acceptment of this installation as planned. Right now, we are analyzing the progress of this project, and we do not rule out the possibility of claims towards the general contractor. We are also examining how this investment will impact the companies and the Group's product profitability today, but also within the coming 5 years or 10 years, you need to remember that this is the integral part of our total structure. In the first quarter of 2024, the Capital Group, Grupa Azoty Pulawy, and current investment expenditures amounting to PLN 50 million, representing a drop year-on-year by about 31%. Thank you very much for your attention. And now moving on to Police. Grupa Azoty Police, in terms of the key facts and figures and developments of the first quarter, we -- this includes stabilization agreements, agreement reached with the financing institution, which allowed us to move on smoothly to the first quarter and the first quarter to the second quarter. However, in terms of our optimization efforts, operational and cost optimization in the first quarter, we see in terms of costs and also in terms of revenues, we see a lot of room for improvement at Police. Moving on in terms of changes in the company's governing bodies. In the first quarter of this year, we changed the composition of the Supervisory Board and also the Management Board. We appointed 3 new Board members on 26th of April 2024. And then the company now has a complete composition of the Management Board complete and stable. And the first quarter of 2024, it was yet another quarter, where we reported negative EBITDA. It improved year-on-year reaching minus [ PLN 21 million versus minus PLN 30 million ] last year. Considering the key factors, they were the significant decrease in selling prices and also export prices, which did not catch up and the decrease in feedstock prices, which did not catch up with a drop in final products. And this is why we had to report a negative EBITDA. This also applies to demand. The demand is still insufficient to meet the supply and also our capacity is not utilized as planned, even though our volumes -- production volumes went up on a positive note. In terms of our gross result in the first quarter, we generated a positive margin at 2%. In terms of our performance by segment, the first quarter, in the Fertilizer segment, we reported a positive EBITDA. Unfortunately, we had to remember that we reported a negative result at minus PLN 12 million at the EBITDA level. In terms of our EBIT level, we need to remember that we did not receive any assistance for energy-intensive sectors compared to 2023, where we did receive such additional support. So still, I believe that our performance at the EBIT level is pretty solid without this assessment. Looking at all the fertilizer groups and products in terms of the volumes of sales, we see an increase and also in terms of production volumes. This also applies to the pigments segment. Our main completed investment and ongoing investments, they first of all, related to the expansion of our logistics space, Phase II and the budget for this investment was [ PLN 15 million ], and the stage of completion is right now at 79%. After the completion of this project, we should be more free this year in terms of our ability to send the products and also store our products. In terms of titanium white, the investments focus on the system for bulk storage of titanium white in order to also adjust the needs of our customers, B2B, especially in terms of paint sector and also security automation for 2 ammonia production facilities, Stage 2 with a total budget of PLN 44 million, as well as modernization of the turbo unit -- turbine unit, along with auxiliary equipment. Our CapEx spending in the first quarter of 2024 was reported at PLN 28 million, going up year-on-year mainly our planned investment and ongoing investment were mandatory spending and also maintenance CapEx with lower focus on our growth CapEx. Today, we focus on how to utilize our production capacities to the maximum. Therefore, we focus on these 2 areas. This also obviously includes the purchase of tangible assets.

Thank you very much for this detailed discussion of your performance and the Group's performance after the first quarter of the year and moving on to the Q&A session. Starting from which quarter you should see the PDH production at full volume. Can you reach the average cyclical EBITDA? Is it more than [indiscernible] per year? And whether the utilization of our capacities will be a problem? And how much CapEx do you still have to -- for this project?

In terms of Polimery Police project, we should focus on 2 areas. So before we close the project and after the close of the project and full commercialization. Today, we assume that the full usage of production capacities should be seen towards the end of this year. In terms of integrity tests and the approval of full operational capacity of the project, it should be closed. This process should be closed by midyear. Looking at EBITDA and the prospects and the market trends today, they're pretty volatile, but they are going up. Therefore, we keep our fingers crossed that our results here will be picking up as well.

Next question, whether [ EBA ] regulations can improve your performance?

Let me try to answer this question partially. As far as [ EBA ] is concerned, 2024, 2025 is the process of -- is a monitoring period for us. But as of the 1st of January 2026, it will be in effect fully. So all the parameters will be subject to the CO2 equivalent just as in the European Union currently speaking. Let me add something to it at the scale and level of the improvement of our performance will depend on the market landscape, but also the price of EUA units.

What actions do you take in order to optimize your fixed costs? What is the potential to reduce your headcount? And why your restructuring efforts were taken so late. Other state-owned companies seem to take action faster?

Well, from our perspective, they are not delayed -- the measures that we take are not delayed. Starting from March the 20th, we have been working on it intensively in order to improve the management process across the Group. Also, in terms of the communication with the market, what was said previously by Hubert Kamola, he talked about communication with our clients and the customers. But also, in terms of communication with the financing institutions, we are in the midst of preparation of an end-to-end recovery plan. Obviously, from the -- from our perspective, the new Management Board, Grupa Azoty, we see that this work is really intensive. From the perspective of the company's interest, obviously, this was taking -- taken quite late. We see that there was no reaction from the previous management Board to the worsening and deteriorating situation in the market, which we saw at the end of 2022 already. So we, as the new Management Board are working hard to prepare an end-to-end turnaround plan to improve the situation across the Grupa Azoty Group. This includes a number of actions and measures taken to optimize our fixed costs and we are taking a number of measures and planning a number of measures in order to reduce the number of our non-operational assets. We have identified most, if not all of them, and we are taking actions to either resell them or to start partnership and cooperation with some other entities that can use those assets more efficiently. We will communicate the decisions taken in this particular area and the progress of work in this area [ when due ] in terms of how we implement our end-to-end recovery plan shortly.

The next question, whether the current market environment will allow you to generate positive EBITDA in the Fertilizers, Chemicals and Plastics segments?

Yes. In terms of Fertilizers, we are hopeful here right now, this is a key point in time, starting the new season and the new opening in terms of new prices, the new offer will be placed for a part of the volumes of the products that were produced at the turn of April and May. We see favorable trends here in this area. I mentioned about increases in the price of urea before. So we are pretty optimistic here in terms of the Chemicals, a large share of the Chemicals segment are the technical grade urea, melamine and OXO alcohols. So there is a lot of price pressures here. And so, we have a lot to do here in terms of that particular area and we're working on it. In terms of the Plastics segment, I don't remember, I do think that Mr. Dawidowski is the person to answer that question. Well, we see the positive trend in terms of feedstock prices versus product prices for propylene, for polyamide, for other products, we are also expecting to see that. So we expect that the prices in the coming months should be better compared to the first quarter of the year. In terms of EBITDA that we generate, this is one of the key factors here. So we are optimistic here. We're looking at it, and the outlook is pretty positive.

Next question. From the Ministry of State Assets, we heard that the construction of the energy power block and also your other projects at Police and Pulawy. They -- those cases can actually end up on the prosecutor's office. What's the situation like right now?

We are confirming that we are in the midst of work on legal analysis, and these 2 -- in these 2 project areas, both from the technical side, but also business risk side. We are preparing a legal analysis as well. And we do not rule out that the conclusions of this legal analysis will lead us to contact the prosecutor's office in the end, but this is all we -- so we do not rule it out, but this is all we can say at that point.