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

Good morning, everyone. Welcome to the earnings call of Grupa Azoty [Technical Difficulty] our performance and operational performance will be -- for 2024 will be discussed Adam Leszkiewicz, CEO of Grupa Azoty; and Andrzej Skolmowski, CFO, Vice President of the Management Board; Hubert Kamola, Vice President of the Management Board, CEO of Grupa [Technical Difficulty], Vice President of Grupa Azoty and President of the Management Board of Grupa Azoty Police, Andrzej Dawidowski. We also have Vice President of the Management Board of [Technical Difficulty], Pawel Lapinski. Warm welcome to the President of the Management Board of [indiscernible]. After discussion of the presentation, we'll also have time for your questions. also via our webcast. And the floor is over now to the President of the Management Board of Grupa Azoty.

Good morning and welcome to the next earnings call of Grupa Azoty Group. Due to the regulations of the management of the Warsaw stock exchange, we'll not be able to discuss everything and to take all your questions but we will try to be as open as possible to answer all your questions and address all your issues and our issues. It was a difficult year. I'm talking about 2024 both personally and to the Management Board in general across the Grupa Azoty Group. There were times that we were afraid to look ahead. We were looking for a sign of our glimmer of hope. And we hope that 2024 finally turned out to be a year that the tide has turned and we're going upwards. We will discuss our performance in more detail, but the performance in general shows us an improvement, maybe not an improvement we would expect, but a significant improvement anyway across all the segments in terms of our operations. If I think about 2024, I'm thinking about our staff and about all difficult moments because we were all involved in the [Technical Difficulty] and improvement process, for instance, by agreeing to waiver those difficult elements of the agreements. I'm talking about the liquidity and the work we have put to stabilize the situation. It was a year of changes across all our operations, across all our segments. We had an impact on the environment. We talk about our involvement across all the different areas, such as [Technical Difficulty] and we decided to put it on, [Technical Difficulty] had an impact on our environment, our partners. The situation is such that we did not have any choice. We are putting a lot of work in terms of our [Technical Difficulty]. We are also discussing those issues. Our employees, our stakeholders, our [Technical Difficulty] dialogue help us not only [Technical Difficulty] but also to build a foundation for growth in order to the situation across [Technical Difficulty] summarizing 2024 but we are also looking to have as we need to [Technical Difficulty] conservation of the situation [Technical Difficulty]. We believe that we tried our best in order to stabilize [indiscernible] in the market and an upward [indiscernible] in order to [Technical Difficulty] the macro elements did not help us better I talking about the [indiscernible] we have [indiscernible] structuring and transformation [indiscernible] to set our goals and we are doing our best to achieve our [indiscernible] with the time lines. We know that we have long way ahead [indiscernible] we will be comfortable and not to compete both internally and internationally. And to revamp our business. Therefore, we do believe those are [indiscernible]. We do believe that with time, these [indiscernible] partners will also have time to thank them later on. We will be back on track and we will become again the Grupa Azoty that you know, obviously by changing pace because things will not be the same after what we experienced, but we will be able to make sure that we will provide pool that is secure for Police. Before I move on to the discussion of specific parts of our performance, we might go back to what we saw in March 2024, where we were at the helm of -- became the new Management Board. We were talking about a loss that we inherited and a lot of problems as well. I was talking about liquidity. It's an important element of our operations, of our business. And the same applies to the image and the stakeholder relations to rebuild the relations with financial institutions after 2024 was not easy. This is a process that is still ongoing. And I do believe that we are building trust and credibility mutually, but we are also striving to reach a long-term agreement here. We need to remember that we were limited by the performance of 2023, especially in the first quarter, that is the most important quarter in the fertilizer business. We did not have any influence on the performance in that quarter. I'm talking about the first quarter of 2024. We -- to became managers of the company after the peak season of Q1. But we still managed to improve our sales performance in this segment. We spent a lot of time discussing and negotiating with the financing institutions and developing a turnaround plan based on six pillars. And also, we were talking about here with -- about the internal communication, especially with our social. We're talking about 14,000 thousand employees. And every -- each one of them knows what the situation is because we're lacking certain elements that are used usually by businesses to build motivation, to build involvement. But we are very thankful to our staff that they are with us still. They are working hard in order to improve our performance, and they put us in the situations that we are at right now. An important element to improve the situation is the program, a program that involves restructuring and transformation processes, broken down into a dozen -- around a dozen of segments and pillars. And at the end, we look at the financial objectives that we managed to reach because we're talking about both financial goals and FX, but also more operational effects because we are talking about a big group and the elements that make it easier for us to work on a daily basis and optimize our performance on a daily basis. We are proceeding with key processes at Grupa Azoty Group. They are related to cost savings, which we managed to achieve, maybe not to the extent that we would expect and we would want in a sustainable manner, especially in terms of fixed costs. We are improving this as we speak. We are proceeding with the integration processes across the group. We have signed integration agreement, and we will update it in order to make sure that the provisions are as effective as possible in order to strengthen consolidation. We have a number of consolidation efforts, consolidation of the [ EMR ] and service companies, shared services center, especially IT, accounting, HR processes. This is where the integration processes are ongoing as well. And we take a lot of steps connected with our asset base. And I'm talking about both preparatory work and the first decisions that we have taken regarding certain installations that are not profitable, that are not promising and that are redundant for the Grupa Azoty Group. We're talking about these investments as well. These are ongoing as we speak, Some of them has already been closed. Some of them are in progress. We are performing valuations. These processes are underway, and they will be continued. And this concern our assets, for instance, real estate. The external factors I have mentioned, you have to bear them in mind. We're talking about prices of our feedstocks such as gas. This is a very volatile situation in the past months. If we compare it year-on-year in December, we are talking about an increase in gas prices of over EUR 40 and also the increase of nearly 30% year-on-year. Not to mention what happened in the gas market in the first quarter of 2025 and the industries that we find the most important, that is alternative business and construction business. We are looking at them very closely. Imports of fertilizers, this is something we have discussed and we will go back to it. And we will go back to it in the context of the custom duties regulations that will be introduced. And I would like to thank the Polish government in this particular context. Because as part of the [indiscernible], we did manage to talk about it. But we still need to remember that there are thousands of tons of fertilizers from Russia that came to Poland, and this amount is going up. In terms of regulatory environment, we have the read directive in place. We are preparing ourselves to introduce the CBAM regulations. Cost of labor went up as well. We're talking about the cost of minimum wage. And this also added to our cost in 2024. However, taking all this into consideration, because we need to mention this. Grupa Azoty and Grupa Azoty Group in this period generated and has consistently implemented and developed and has consistently implemented a catalog of improvement efforts in order to improve our situation and in accordance with the expectations of our stakeholders and shareholders and also financial institutions as well as the Ministry of State Assets. We have managed to survive the most difficult 12 months in our history. We have managed to reverse the trends related to the deteriorating situation in terms our sales in the market business and the business in the market. And we are introducing optimization measures across the board. We also launched a catalog of measures and actions that will take us back to the growth path, and we'll be introducing it consistently in the months to come. I'll take a more prudent approach here when talking about the future. But it needs to be said that the introduction of changes in our business and organizational model, in order to reach the ultimate goal, the new organization and the implementation and completion of work on our growth strategy, including decarbonization plan, we would like to have a long-term agreement to that effect with our financing institutions. We would like to secure external capital and other sources in order for us to build the base, the foundation for us to improve our operational performance. Also in terms of investments, because we find it very important not only to improve our ongoing situation, but to build the foundations for the future. We are discussing it with our partners, including a major partner that is ORLEN concerning our cooperation for the Polymers Police project and the Polyolefins project. And we are encouraging any other partners that would be interested in working with us in terms of these assets, these projects. We are open to any discussions here. We will be improving our operational performance, and we want to strengthen our position, the position of the group and the new segments. This is very important for us. Starting with logistics, integration of our assets, looking for partners, looking for brand new solutions; but also another example, the defense sector, the explosives and the activity of our group in this particular area, not only because we have feedstocks here, but we have a lot of room here to speed up with the development. For nitrocellulose especially, we would like to be more present in this area through additional projects and products related to multi-compound powders. And I do believe that our group will be more and more active in this area because this area is of prime importance to us and will be very important to us. And in this particular area, the position of the group, the standing of the group will be increasing in the future. All those things that had -- all those things that we worry about today [indiscernible] and comprehend and our employees are worrying about [indiscernible] in the past 12 months on the canvas of the audits. We were not seeking for just to make sure we find something, but we were making sure that we find out if something is wrong. We've had 14 investigations at a potential, a total of PLN 1.200 billion. We are able to present the results. EBITDA has improved by over PLN 1 billion. The loss decreased compared to 2023 from PLN 3.3 billion to PLN 1.1 billion. With the trends, 20% improvement of sales results when it comes to fertilizers. But still remember that, for instance, in the Chemicals segment, the prices decreased by 18%. In the case of certain products, even up to 30%. It's worth to remember about that, it was a challenging factor. Still, I would like to thank very much from the whole of the Board to everyone who cooperated with us in 2024. I'm heading towards the end of my introduction. So I would like to thank all the employees of Grupa Azoty, to the whole team and managers, to the whole management that I have the pleasure to cooperate with, our shareholders, advisers, distributors of fertilizers, public administration, analytics, media. I want to thank you all very much. And right now, I want to give the floor to President Skolmowski to show us the presentation related to detailed financial results.

Let's begin with analyzing the debt level. When discussing the financial situation, I would like to pay very detailed attention to the situation that we've had in March last year, negative operational results two big investments and delayed and functional projects, which resulted with the lack of possibility of servicing the debt on the level of PLN 10 billion. And at the same time, we lacked attractive cooperation with financing institutions. When it comes to the banks, we are conducting a constructive and honest dialogue, but we have improved plenty in our communication. We are building trust in the Azoty Group, and we are demonstrating that we have a program to lead the group out of the very difficult situation it found itself in through implemented savings, corrective actions and consistent business improvements. As a result of the talks, we have received approval for the continued validity of the stabilization agreement, which ensures the availability of credit facility limits of the group and are currently valid until 15th of May 2025. We have also obtained a waiver letter, a waiver from the financing institutions of rights, arising from breaches caused by failing to meet the net debt-to-EBITDA ratio level for reporting periods. The solution that we are currently developing are intended to allow a transition from a temporary technical agreements with financial institutions made for periods of several weeks to a target long-term agreement. It is important to emphasize that the Azoty Group continues to meet all obligations in terms of servicing and repayment of liabilities arising from the financing agreements and waiver letters and the stabilization agreement. The available limits under the financing agreement ensure Azoty Group liquidity and financial security. For the 12 months of 2024, the group increased its use of multipurpose credit units by PLN 486 million and factoring limits by PLN 418 million. In 2024, the negative EBITDA of the group has been limited to around PLN 300 million. At the same time, the net debt was continuously growing because of spendings on CapEx, finance -- finalization of investment projects totaling PLN 1.35 billion, of which PLN 0.45 million relates to the polymer police expenditures. The financial resources owned by the group at the end of 2024 amounted to PLN 693 million. In total, the available limits of financing for the whole of the group, including olefins, was PLN 1.656 billion. At the same time, with financial situation stabilizing, what's important for us is to increase the volumes of sales and improvement of relationships with our clients. We have introduced a large-scale turnaround program that we call Azoty Business. We already can see the first results -- the financial results despite for a very unfavorable surroundings. It's worth to also underline the key companies of the group, including Olefin, improved EBITDA results compared to the results from 2023. In case of [indiscernible], we've worked out a positive EBITDA, but it was not enough to rebuild the activity to the positive levels. What's visible was increase of EBITDA margin in case of Olefin related to the further stages of the investment. It's still not a full scale in production. It's still being done on the basis of temporary -- on the temporary basis. If we analyze EBITDA and we normalize it, this means that we exclude the impact of one-off events from 2023, and we compare it to 2024, then we can observe that it increased compared to the previous year meaning 2023, by around PLN 1.5 billion. Mainly thanks to the restructurization measures, mainly in the area of cost reduction from the end of March last year. The corrective actions being implemented are delivering sustainable improvements in EBITDA in each subsequent quarter. Despite for the fact we've observed a big impact on the results that we achieved, there is a big negative impact of the import of fertilizers from Russia and Belarus. We can observe the increase of volume of sales with the variable changing level of prices of gas and decrease of prices of most of media and we observe raw materials and utilities. We are observing the situation. The costs compared between years, if we analyze them, the fixed cost on a year-to-year normalized basis decreased by PLN 226 million, mainly in the area of labor costs, which was related to lower employment across the entire Grupa Azoty. As my fore speaker mentioned, we have to take into account limitations related to our payment policy in the whole of the Grupa Azoty. Additionally, the termination of sponsorship and PR contracts led to a reduction in other types of expenses. The group is not spending, not one single penny on it. Lower cost of materials consumption and maintenance reflect improved efficiency in the group's maintenance-related subsidiaries. If we analyze the value of our assets, then it is amounted to PLN 24,162 billion and was lower by PLN 135 million compared to the end of 2024. At the end of December 2023, the noncurrent assets stood at PLN 18,126 billion. And the current assets, slightly above PLN 6 billion. Key changes in assets during the reporting period compared to the same period in the previous year is a decrease in over -- a decrease in other receivables by PLN 526 million, decrease in intangible assets by PLN 494 million, decrease in cash by PLN 319 million, decrease in inventory, PLN 125 million and increase in property, plant and equipment by PLN 1.654 billion, mainly in relationship to the polyolefin takeover. Key changes in the liability during the reporting period compared to the same year in the previous year, a decrease in equity by PLN 1.178 billion, increase in short-term loans and borrowing by PLN 741 million and an increase in other short-term financial liabilities by PLN 426 million. We are in sales all over the world. But what's important -- an important factor that we want to pay your attention to is the increase of sales to Ukraine. Ukraine is one of the most important export markets for Poland's agriculture and chemical sectors. We are seeing a significant increase in the past sales volumes. The group doesn't have any commercial contact with Russia. And despite for crossing out because this is a piece of information that has been published in the last month, despite for crossing out [ Mr. Kantor ] from the sanction list of the EU with still, him and his codependent companies, are covered by Polish sanctions. And the assets are still being frozen. In 2024, Azoty Group has worked on consolidated income from sales on the level that was very impressive and amounted to PLN 330 million with an EBITDA margin of minus 2.5%, representing an improvement of over PLN 1 billion in EBITDA compared to 2023. We are continuing what we launched in 2024 in terms of corrective actions aimed at ensuring the group's financial stability, improving operational performance and our activity in order to protect European fertilizer industry, our activity in terms of fertilizer [indiscernible]. In 2024, our results and performance were largely influenced by external conditions. The externalities that are driven by the persistently unfavorable global macro environment, rising geopolitical tensions and the resulting disruptions in supply chains. But mainly, we are talking about an unprecedented influx of fertilizer imports from Russia and Belarus as well as the lack of a clear recovery -- any signs of recovery actually in key markets for the group and European market, especially in Germany. It must be emphasized that in the context of our intensive turnaround activities, improvement efforts across the group, the fertilizer imports to the Polish market from Russia and Belarus totaled around 1.5 million tonnes, which means that it was an almost 2.5-fold increase compared to 2023 from Russia and Belarus and nearly threefold compared to 2022. We have already discussed it before. The European Commission proposed new regulations. We are awaiting these regulations to be in place, to be introduced in the latter part of the year. With a relatively stable situation compared to earlier periods, the natural gas prices fluctuated and were volatile month-to-month and quarter-to-quarter in comparison with previous years, we're talking about for per megawatt hour, reaching EUR 45 per megawatt hour versus December 2023. So compared to the year-on-year situation, the gas was up -- the gas price was up 27%. We have increased in terms of our volumes. So we reported higher sales volumes. We tried to restore our profitability of all our business mainly due to better relations -- or based on better relations with our clients. However, we did see higher imports of fertilizers from Russia and Belarus, which put the pressures on us and on -- that put some pricing pressures on the group's products, especially fertilizer products. We will move on to my fellow speakers. Hubert Kamola will talk about prices.

In 2024, Grupa Azoty recorded a year-on-year decrease in raw material consumption costs, especially energy raw materials, down by PLN 666 million, especially coal and electricity. The gas costs went down by PLN 623 million. Mineral raw material prices, especially potassium and phosphate rock were down by PLN 311 million. And these reductions in prices were primarily due to negotiations undertaken by the Management Board as well as price rise trends. In terms of petroleum-based raw materials, we saw an increase in prices of PLN 722 million year-on-year. This is mainly due to higher consumption volumes. We're talking about phenol, propylene and propane, the key feedstocks used for GA polyolefins -- polymer police. In terms of gas consumption in 2024, we're talking about 17.8 terawatt hour versus 2023, a major increase when we saw 15.2 million. Grupa Azoty is able to use more than 20 terawatt hour at maximum capacity. So this is the direction that we are striving for. And as Andrzej Skolmowski mentioned, the [indiscernible] quotations, the quotations at the Dutch hub, we're talking about 24 -- between 24 and 28 and even the euro per megawatt hour at the end of the year. Across 2024, for the share of gas process in all our feedstock base is 34% going down by 3 percentage points versus 2023. Let us now move on to the Agro segment, where the EBITDA margin generated at minus 2.3% was even -- was considerably better year-on-year because we're talking about 105 on the minus side. But we managed to improve it considerably. The operational performance in the Agro segment were also based on the write-down, and our efforts in terms of maximizing the capacities were effective. We took a lot of steps in terms of sales. Despite a delayed actions taken in 2024, we managed to effectively prepare a whole conceptual base for the entire year. And we managed to proceed throughout the year based on this new approach. We had more work in terms of export directions. We're talking about Ukraine and Germany. Obviously, the volumes went up mainly due to very effective logistics. These are very complicated issues. Obviously, we're talking about, for instance, differences width of tracks in Ukraine versus Poland. And we had a higher tonnage in terms of the volumes versus 2023. Despite the imports, we managed to increase our share in the domestic market and we're also implementing new products. We're talking about it on social media. We have harmonized our portfolio, product portfolio and the entire marketing and brand concepts. The demand for mineral fertilizer in 2024 was up, but it was coupled with ever-growing pressures due to imports from the East. This was especially visible in the Polish market, which is the main target market for this expansion in terms of the imports of products from the East. A couple of words about imports because this is a major issue that has an impact continually on our performance, on our efficiency. In 2024, the total imports for Poland was at 4.4 million tonnes, up 25% year-on-year. 47% of these imports were [indiscernible] fertilizers, but it applied to all types of fertilizers, for instance, phosphate based fertilizers. We're talking about an increase of nitrogen fertilizers, up by 16%, potassium fertilizers by 28%, multi-compound fertilizers up by 64%. So this is a still unfavorable dynamics for us. We're taking a lot of steps in order to optimize the situation. And in July 1, we are expecting the introduction of instruments by the European Commission in order to protect the European market. Let me remind you that due to a number of measures, country-based measures, under the help of Fertilizers Europe, our association, the European Commission put forward the proposition in order to introduce certain instruments for the mineral fertilizers in order to protect our market, which was supposed to be introduced as of the 1st July of 2025. In order to counter effect the -- or counteract the imports from Russia and Belarus, those decisions are to be taken by the entire commission, the commission that deals with international trade. We are expecting a voting at this commission on the 1st of May. We know the preliminary tax of those regulations to be discussed, and we are expecting the session at the beginning of June and the voting. We are keeping our fingers crossed that these regulations, that these protective instruments will be introduced. Moving on to the Chemicals segment. In 2024, we saw a major improvement in EBITDA, plus 51% versus last year. And the main drivers in this segment are volumes and also improvement in costs, the technical cost of production. Unfortunately, we did not see a good effect in terms of our prices due to the pressures due to higher imports and competitors. These are the two problems that are faced across Europe. And we're talking about China and Russia in terms of urea and mineral fertilizers. And we are talking about technical-grade urea. So we're talking about the urea used for coatings, resins and glue. In urea, we had a good effect of up 100 tons year-on-year. For OXO alcohols, we also saw an improvement of 71% year-on-year. We had a negative effect on melamine and the production assets are put on hold. We are doing our best in order to optimize our cost base and we are doing our best in order to use those assets if profitability goes up. We are also happy with the EC decision in order to introduce customer duties on products imported from Russia -- China. In the Plastics segment, we see two product groups, polyamide 6 and polypropylene at Grupa Azoty Polyolefins. In the polyamide 6 group, we saw a drop in feedstock prices and the resulting drop in price of products year-on-year, but we saw an increase in prices in polypropylene product group. The key driver in the Plastics segment, looking at 2024, was polypropylene. We're talking about more than PLN 200 million negative impact on EBITDA. We focused on the improvement of our cost base here, so the freeze of the production of caprolactam at [indiscernible]. We also only launched it for a short time in order to use up the stock. And the entire production was used -- was frozen for the time. We saw an improvement also in terms of our commercial efforts. So the increase in sales of polyamide 6 and a considerable increase in the sales of polypropylene as the situation across the European Union or Europe in general is pretty favorable in the Plastics segment. We are awaiting continuing rationalization and optimization in terms of the use of our capacity. So we're talking about around for 65% polyamide 6. So the consolidation and rationalization of our production capacities and the usage of production capacities is ongoing. The EBITDA margin -- or the EBITDA went up by nearly 30 percentage points and, in absolute terms, PLN 200 million beyond. In the reporting period, the group took a number of key measures related to limiting our investment and expenditures while negotiating the conditions for prolonging the access to our credit limits and credit facility limits. And due to the restructuring measures and improvement measures that we have introduced, the Management Board decided to set up special teams, dedicated teams as well as the dedicated committee, Investment Committee. The main task of this committee is to perform a detailed analysis of our investment plans and reducing our investments and expenditure on CapEx on 2025 and in the following years. We also adopted new rules for the assessment and for the approval of investment projects while also analyzing those projects as part of the group and the synergies that would be possible across the group. As far as the main investments or CapEx projects are concerned that are ongoing, we keep up with the new energy concept. [indiscernible] the total budget here is PLN 320 million, and this current stage of completion is at 100%. Construction of a coal-fired power generating [indiscernible]. This is a big scale, a large-scale project, which will be discussed by Hubert Kamola in a second. Neutralization of ammonium nitrate at Tarnów with a budget of PLN 210 million and the construction of the neutralization and precipitation units at Tarnów with a budget of PLN 141 million. So maybe a comment on the coal-fired generating units. We issued too charging notes for the delay by the general contractor. There were a number of tasks that were not completed by the general contractor. So we are talking about PLN 229 million. And the second one was issued on the 13th of February, corresponding to the 20% of the equivalent of the total fee. And at the same time, we filed a case on the court in Lubin, and we are waiting for this case to proceed. We are also at the very final stages for the inventory taking of this particular project in order to assess the stage of completion of this project and will be used to develop final scenarios that we're working on from the perspective of both technical and operational issues, also including the partnerships with external partners that we are considering right now. Let me add that we are finalizing the building of the boiler, which was the last key stage that closes the above-mentioned investment program. The new energy concept in Kedzierzyn. In the scope of our vast investment in polyolefins, production of polypropylene is based on the conditional temporary takeover. And until we sign, the amount of polypropylene produced has to be agreed with the general contractor. From July 31, 2024, the company will decide on its own what types and quantities will be -- are being produced. The general contractor is -- we are still having ongoing negotiations and talks. We've signed a contract between the companies Azoty Group, Azoty Police and ORLEN and others. It is a contract on cooperation and stabilization. Last year, we've extended until 12th of May this year. Accordingly, to the contract there, Azoty Polyolefins Group and [indiscernible] decided that during the time that when the contract is binding, they are going to continue the Polimery project. We are considering of launching commercial cooperation in the field of polypropylene with Azoty Group concession. The cooperation with banks finalizing the project has been extended until 20th of May 2025. I want to briefly add when it comes to polyolefins that plant in 2024 has produced over 211,000 tonnes, which is around 500% of production power of the plant. The current stage is temporary until we focus on the final consumers of polypropylene. In the scope of 2024, we can also mention that the key stage was a transition to the production under the decision of the company, which is a circle of products that are being chosen and implemented in the framework of production of polypropylene. This is fully decided by the company and not the general contractor, which allows us to adapt product group and product offer to the requirements of the market and to increase the potential of sales of products on the European market and in the world. ESG is a strategic sector of group's development. We consistently integrate environmental, social and governance, ESG issues with its development strategy. ESG, well, we've been implementing the ESG strategy integration, and we took it into account in our daily management and operational processes. It's worth to underline that when it comes to climate and environment, we are conducting detailed calculation of the coal footprint in accordance to the appropriate protocols, covering all the scopes of emissions, Scope 1, 2 and 3. In 2024, they took into account all the subjects that are in the group, which either produce or sell such goods as fertilizers, chemicals or polymers. So now we have the room for questions and answers. The first questions will be taken from the audience in the room.

Christoph. I have several questions, if I may. More detail regarding the fourth quarter. How come you have such a high result the energy sector? It's PLN 140 million in the fourth quarter and the average in the previous years was much lower. Is it a situation that we can maintain? Or is it a onetime type of a situation?

Energy segment to us is always backup. It's not a business segment, it's a supportive segment. In this case, it's an impact of calculations of the -- impact of our calculations with Polimex that we've had in the fourth quarter.

What was more or less the effect then?

It was a calculation, PLN 115 million.

Once again, can you repeat please?

It's a calculation of a guarantee of PLN 115 million.

Second question I have, in the Agro fertilizers segment. At the end of the quarter, the prices were growing through all the first quarter, and then the price was much higher at the end of the fourth quarter than in the third quarter. So how do you take that into account?

Well, we have not overestimated in the last year what we've been underlining and was crucial in the scope of shaping prices. It was important to us to maintain and to manage the price path in the fertilizers. So we didn't have such results, such an effect.

All right. When it comes to the cost of gas, I'm calculating briefly that the group has a pretty big discount compared to the average. It seems around EUR 10 per megawatt per hour. It probably is because of former contracting of prices in the previous quarter. So do we have a big delay compared to the market? And how can this relate to the first quarter? Because in the fourth quarter, there was an increase.

We believe that when it comes to Polish situation, it's not fully liquid. We have one main driving provider that has an impact on the prices. We purchased the gas and the prices based on the contract formula. And that's probably why. So it's rather FDDF, those are Western -- German and Netherlands markets.

Are there any delays?

We can prepare those differences for you. This is publicly available data, those differences. If you take a look at the [ DFTH ] in Germany, then you can see.

Yes, there are differences. But do you use such a strategy that you purchase -- you contract purchasing into the future?

We have a possibility of creating securities in the latest terms. We've revised our policy in this respect. It's not because of securities. It's driven by the differences that are provided by our contracts.

All right. And maybe one more question from me regarding CapEx in 2025. Here, regarding the CapEx, its level, but also whether you every several years have to conduct a general reconstruction when it comes to the production of urea or ammonium. How does it relate to the previous results of the company? Has the company conducted such renovations? And will they be needed in the future?

Well, I can tell you that when it comes to the renovations of our production lines, those for sure include OpEx and CapEx renovations. Those are mainly CapEx related to modernization and recreating the property and in the framework of our whole CapEx basket, they are being managed.

What's more or less the level of CapEx for 2025?

I would like to add to the 4 speakers' intervention. The planned CapEx for 2025, we want to maintain it on the level of around PLN 650 million. It's a significant decrease right after March last year. We've started operations verifying the CapEx level. So we've lowered to the level of around PLN 850 million. The reported CapEx of PLN 1.350 billion includes spending on polyolefins project. Those are being implemented from a separate source of financing at the level of PLN 450 million. But our ambition when it comes to the CapEx level for '25 is PLN 655 million.

Without PDH, right?

Yes, without PDH.

And how much PDH do you have left?

It is dependent on the final of our terminal negotiations with the contractor.

And according to the budget?

According to the budget, it's PLN 100 million.

EUR 100 million, right?

Yes.

If I may, pose a question from Noble Securities. Azoty Polyolefins, you've been negotiating for several months the engagement of ORLEN into the project. Initially, it was supposed to be finalized on 12th of November. Whether during the nearest weeks, it's going to finalize, are there any chances or is it going to prolong to the third quarter?

Ladies and gentlemen, initially, we've had from September 2024, the first intention letter, the first understanding that indeed was providing a time frame until November. This was a first stage. We have not assumed such a complex finalization of the whole talks in November because of the specificity and many other conditions. This process is still ongoing. Right now, we have understanding until 12th of May with ORLEN. We don't want to forecast today what's going to be next because we are in the phase of constant consultations and talks. This project, all I can tell you, is still developing. And subsequent talks are showing us more and more scope for potential benefits to both sides. And we are seeking for the best possible solutions for both sides, meaning Azoty Group and ORLEN. At the same time, I would like to thank very much ORLEN for their engagement in the project. And in the end, I believe that we are also seeking for the best possible solutions for the polyolefin company. As we right now are bind with the understanding until 12th of May, we are about to inform you in the nearest 2 weeks regarding what's next.

Do you negotiate -- or are you negotiating with any potential foreign partners in this project?

Throughout the months, we're talking about in the past, we discussed it during our earnings call or calls, actually. I've always said that we are always open to any partners. So every cards are on the table. We're open to any negotiations, any talks. We attracted a lot of interest not only as the Grupa Azoty Group, but also via other companies among foreign partners, potential investors in this area. So these contracts have been established. And we do hope that we will continue those talks in the weeks to come. This is always an option. And the solutions that we have in place in terms of legal and formal solutions as such, ORLEN is our main partner, and we'll do our best to reach an agreement. If not, we will look for other solutions without any exceptions, and we will not exclude any potential partners for Polimery Police and Polyolefins projects.

[ Saminsky ], Polityka Insights. The first question concerns 2025 segments. Which segments will bring the highest increase in terms of value according to you in the year to come? And thanks to what leverage?

This is a sales and financial questions, so I'm not sure who's the target of this question. So Agro is the major segment. This is nothing new. It's always been our major segment. We are working on the portfolio. We're increasing the volumes. If we compare 2023 and 2024, you'll see it. And we intensively work on the protection of the Polish and the European market. In terms of our competition, we expect the introduction of additional customs duties. And we are also seeing work in progress on antidumping duties on, for instance, AN or urea, technical-grade urea. You need to remember that AN is a product that has the longest history in terms of dumping prices. So there are a number of elements that should add to our performance in this segment. We're also looking at the normalization in terms of raw material and feedstock prices, we're talking about prices of natural gas, but also the supply from Qatar and the United States of America, which will have a major impact in short, mid- and long-term perspective, especially in terms of our cost base. Therefore, we can expect certain normalization as well in terms of our Eastern partners or Eastern situation. So all those efforts that we're taking should influence our business in a positive manner. So this is something that we should focus on in terms of our forecast and the projected improvement in the months to come.

And what about the remaining segments?

Yes. In the Plastics segment, we are expecting an improvement in our performance, especially for polyamide 6. We do not see any sign of recovery in terms of demand in the construction and automotive businesses. So we see no upward trends in terms of volumes of production. But what we see is the rationalization on the supply side. So the products -- the production of these products across Europe. At the same time, we need to remember about our restriction in terms of logistics and the extended logistic processes. So this is why consumers in Europe focus on locally-produced products. Also in the Plastics segment, the key driver of our performance will be polypropylene. As a product group and as you all know, we hold -- we are holding a lot of negotiations in cooperation with our partner, and this will be a driver in the future for 2024 in terms of performance of this particular segment, Plastics segment.

Will you see a positive EBITDA this year in this segment?

This is our ambition. But please do not mistake ambitions with the plans. But yes, this is our ambition.

Second question on the new value-generating segments or areas. You mentioned before that transports and logistics could be one -- could be such an area. Do you keep it up with those declarations? Do you -- can you expect any income or value generated in this particular area?

In terms of logistics, Grupa Azoty has an extensive logistics infrastructure which is not yet adjusted to our needs. So we're talking about reduced production volumes, looking at previous years. We know that those logistics assets could be used more efficiently in the future. This is our goal. We focus on our port assets, seaports, and the entire change of situation in terms of geopolitical situation and the imports of products to Poland. This is why we focus -- what we focus on, especially in terms of ammonia. And obviously, we will focus on the imports of green ammonia, but what we see today is the demand from the market also for gray ammonia. And we're talking about internal demand but also external demand in the market. And we're not only talking about Poland but also our neighboring markets. So we're talking about the entire CEE region. Grupa Azoty is the only company in this particular region that is ready to take up such logistics. We have a transshipment-type terminal for ammonia. We are the largest owner of railway rolling stock infrastructure to transport ammonia. So we are the only company that can meet those expectations. And green ammonia will become an energy feedstock in Europe. This is the easiest energy carrier in terms of green energy. So Grupa Azoty wants to continue with these particular operations in order to serve our clients and customers for green ammonia. So our goals and our ambitions also includes the extension of the infrastructure that will allow us to send our products to Ukraine directly. We have, as I said, a transshipment terminal connecting traditional tracks with wide-gauge tracks. And this is the element of our logistics muscle that we want to tap in order to use our potential commercially.

A question on the cost side, concerning the cost side. You buy a lot of gas. And the flexibility here was restricted in the past years, we're talking about natural gas, obviously. Do you expect to become more flexible in this area? Will you be able to -- especially concerning the act of law on mandatory stocks, will you be able to buy more flexibly?

As you mentioned, we're talking about legal and formal framework. We have a Draft Act adopted by the Polish parliament and we're waiting for the final decision of the Ministry in terms of the additional charge. But what we expect in the short term, 1 year or 2 years, this could represent an additional cost. But in a long-term perspective, it is an opening to the new market in terms of the key feedstock for our key technological processes. And this is what we're working on.

You also said that you would be publishing your strategy for 2025 midyear. When can we expect the strategy then?

Mr. [indiscernible] will answer your question.

We are consistent. We want to publish the strategy in the first part of the year -- first half of the year, maybe in this month -- in June. We have almost completed, so we're ready to publish it.

If there are no more questions, let us move from the room. Let's move on to online questions. So what are the worst performance by company, especially in terms of [ condition ]?

Ladies and gentlemen, as we said before, Grupa Azoty generated a positive EBITDA for 2024 at PLN 30 million.

Introduction of customs duties for Belorussian and Russian fertilizers, what impact will it have on your performance? Will it be enough for you to generate profit?

I don't expect that you can actually translate it, this particular introduction of customs duties to our -- to the value, to the figures that we could give you. But obviously, to a certain extent, the market is discounting the situation. But I would also take a look at gas as our key feedstocks. So -- and this whole composition of all those major elements will be positive to us.

What will be the effect of the agreement of [indiscernible] on Grupa Azoty?

Our position is consistent with the position of the Polish government. So we believe that whatever is unfavorable for Poland and for the European Union for the agriculture needs to be addressed, and we need to remember about the production of crops and agricultural production in general. So we do not expect this agreement to materialize as such.

In addition to the sales of PDH, do you expect any other forms of cooperation with ORLEN?

The ORLEN Group is a major partner for us. And as you know, and you probably know, these relations, this partnership between the two groups are not about polymer only. This is very interesting because we are together here because we are both the shareholders at Polyolefins. But all those synergies related to feedstocks, raw materials, because we sell part of our products to ORLEN as well, the question of the issue of gas, these are all the areas that we work together, where we discussed or renegotiate when we're looking for synergies all the time. If we don't find those synergies, we will inform the market. If we find them, we'll inform the market as well.

The releases of staff employees at Tarnów, has this process stabilized? Have you reached an equilibrium here? Are these the final effects? And do they translate into any real savings?

Looking at the group as a whole, all the solutions that we implemented in Tarnów, they apply to the group in general. So we are consistently proceeding with the process of optimization of our headcount across the group and all group companies. We have discussed it with you on an ongoing basis. The headcount is about 2,000 people at Tarnów. But we drove down the headcount from 15,700 to around 14,000. So we are waiting for the figures for the month of April. But these processes are necessary not only to drive down the level of fixed costs, but also to strengthen our competitive standing in terms of the prices of our products. We did not see -- or we have not seen those processes in this group for a long time. We had an over employment actually in some companies. The situation deteriorated in recent years, so we need to adjust the situation based on what we need. We need remember that we have safe limits for the employment, for the headcount, for our installations. And we need to keep up with them or stick to them. So safety is always our priority and it's always been. So the optimization process will be continued. When will it become optimum? It's difficult to say. We will an eye on an ongoing basis on the situation. The management boards of all companies and also the supervisory boards of all companies are looking at it. And this is our task in order to optimize headcount across the group. We will proceed with this process and we will do our best to organize our group and all group companies in such a way as to adjust the headcount to the level that is required by law, but also that is effective for us in order to compete with our competitors. The reduction of headcount is neither a priority nor the only area that we are performing optimization effort or taking optimization efforts. This is one of the elements across the group and one of the elements as part of our AZOTY BUSINESS projects. So we have a pillar there. We have an element there related to HR, and we're not talking only about reduction of our headcount. We are talking about looking for certain measures, certain solutions in order to improve the employment processes. As we said at the beginning, we are limited in terms of the introduction of motivational measures and programs. We need to look at more effective measures. We're talking about Azoty Care, where we look for other measures and financial motivational programs. So we want to manage this area, HR area, very effective because we consider our employees our core capital, core assets.

What's the demand of -- cash so that the company can maintain its competitiveness in the larger scale?

The basic factor which causes the ratability of the group is not cash. What we observe in the analysis of our results is unfortunately still a negative EBITDA. We are happy we've improved it. But still for 2024, we report negative EBITDA. So the factor that guarantees on cost ratability of the business is not cash, unfortunately. Answering a bit differently, there is no amount of cash -- whatever amount of cash we would have at our disposal, we could use it to improve our structure of balance, especially on the right side of the passives and the implementation of investments that would improve efficiency of our production. Such investments are already being implemented, and we are planning to have more of them.

Could management board say something more regarding the plans of LNG imports? When and what prices? This is a question regarding inter alia cooperation of American gas partners.

We conduct multi-dimensional works aiming at better assessment of our cost position. We also are, thanks to that, taking better decisions regarding the level -- the way how we use all the possible options that are on the market. So right now, there is expansion of building new capacities of export in LNG in United States. Woodside has informed several days ago about a new terminal and giant financing of over $16 billion in that respect. So we are looking at all projects like that as a potential chance. Of course, it's not a simple process in Poland. We have one terminal, another is in Gdansk and similar terminal is in Lithuania and Germany. So liberalization of the market when it comes to the access to the storaging issues gives us a chance for a more flexible purchasing model.

Last question, what stage are you at when it comes to preparing project when it comes to nitrocellulose?

Ladies and gentlemen, consequently, after signing an intention letter in November previous year, we've been implementing this project. We are after the stage of feasibility study, right now, we've begun to prepare the environmental documentation. We are intensely discussing with potential providers of licenses and equipment. In the next weeks to come are going to be the period of time when we will be finalizing and establishing will who will be the final partner and beginning the preparation of the documentation for implementation of the project.

Yes, the floor is yours.

Christoph, two more questions, if I may. First, AZOTY BUSINESS Program, do you have a target regarding redacting costs for 2025, PLN 200 million less?

The program consists of many initiatives and pillars, in the framework of which the teams are working, preparing results of systematic changes, but also results -- financial results. Because of that, the answer is positive, meaning that, yes, we have assumed our goals related not only to 2025, but also that on -- the program has been constructed in such a way, we haven't been communicating that. But yes, we have assumed specific goals that we are internally communicating.

All right. One more question about PDH. Where is the problem when it comes to technology? Is there a technological problem regarding to a failure? Or is this installation simply getting its momentum and it's about to get its full productive power? I understand that in the last year, you've been using 50% on average of the power. So the question is how does it look like in the next months? Has it stabilized? Is it growing?

When it comes to polyolefins and installation, which is supposed to be one of the driving factors of the positive results in the segment of Plastics and assets, here, we have a mix of different factors. For sure, what's important is still the big number of failures caused by unproper process of investments or mistakes during the process. Because of that, today, we focus rather on fixing those mistakes. We are managing insignificant elements of technology. We are managing to address that. But what indeed is still burden to us are onetime smaller or bigger failures, which are surprising to us, and those are related to quality of the process of construction of the installation. We assume that we will maintain. Well, this year, we should have similar use to the use of previous year. Maybe it will be higher. We would like it to be above 50%.

I have 1 more question regarding PDH. How does it look like to develop the demand? What stage are you at and to which extent would you be able to serve additional -- well, let me put it differently. Is it a bottleneck that there are technological limitations in the production or demand?

Right now, the bottleneck is the possibility of producing in a stable way on a high level. Because what Andrzej Dawidowski said, we've produced 211,000 tonnes of polypropylene and the whole of it has been sold. We, of course, are working on rentability. We are finding our space on the markets, mainly neighboring markets. And this, we are succeeding slowly but surely. We have a dozen of people in the team of sales, which is managing very well the product promotion. Here, we rather count on stability of the high production. This is the first question. But, of course, market conditions could also -- at the time when these installations or investment has been decided upon, those market parameters were significantly better, we could have achieved much better results. But it seems to us that we will, if we achieve the expected levels, then we will know how to find our niche and produce it on the level which will be positive and which will give us positive results. Let me add from the market point of view, polypropylene market is, first and foremost, focusing on so-called yearly products and the subsequent grades that it's consuming. From the level of polyolefin company, we are unable to ensure separate grade in the whole of assortment. So therefore, we are having spot transactions. Part of our sales are based on spot transactions. And this limits our possibility of impacting on the market in a constant and stable way. Another thing is the situation of the company, which is the liquidity aspect. So we are focusing on as fast actions as possible with regard the capital of this project. And we are also implementing sales in the segment of so-called distribution or traders. Ladies and gentlemen, if there are more questions, this is where we are finalizing our conference. Thank you for your presence and all the questions. I want to invite you to our investor chat with Andrzej Skolmowski. After the long weekend on the 7th of May, we will be sending you invitations. Thank you very much, and see you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]