Grupa Azoty S.A. ($ATT)

Good morning, everyone, and welcome to the earnings call, which will be devoted to the discussion of financial performance of Grupa Azoty for the first quarter 2026. As usual, we have an online webcast and also after the presentation, we will have a Q&A session. [Operator Instructions] The results and the outlook for the upcoming quarters will be discussed by Marcin Celejewski, President of Management Board and Jacek Podgorski, Vice President of the Management Board of Grupa Azoty.

Good morning, everyone. First quarter of 2026, was obviously a period where we -- when we were impacted by what happened in the Persian Gulf and the outbreak of the conflict and blockage of the Hormuz strait. It is a seemingly distant destination or location from the perspective of our core business and also the global business related to the processing of petrochemical products. It actually escalated and had significant implications for our basic core products that are fertilizers. The situation was dynamic. Right now, we are facing unprecedented events such as introduction of export duties both on fertilizers and also various semi products used in the fertilizer production, for instance, Egypt introduced export duties at $90 per tonne for any nitrogen-based fertilizers. As far as China is concerned, which is usually very restrictive, they have further tightened the export on nitrogen and phosphorus fertilizers in order to secure and safeguard their domestic market. Russians introduced a temporary ban on ammonium nitrate export, extended by the end of June also the ban on sulfur exports. Turkey introduced a further ban on urea export and Iran introduced restrictions and extended the restrictions on petrochemical products as well as -- including ammonia and urea. As far as the Polish market is concerned, naturally, what happened in the Persian Gulf had, as I presented -- as I mentioned during the presentation of our results for 2025, it also had an impact and resulted in introduction of several major changes in our organization. We reacted quite dynamically. We set up operational teams, which were to monitor the efficiency and the profitability of all our production facilities and our production of core products such as ammonia, urea and obviously, nitrogen-based fertilizers. Those teams coordinated on a daily basis their activities. They took a close look and monitored very closely the prices, and they cooperated with our commercial department in order to plan our activities for the upcoming days, also concerning the restriction on production of our facilities. Luckily, we're able to keep producing and utilizing our production capacities, but also our commercial department were focused on the maximization of our results without destabilizing the market, without creating artificial price inflation, especially considering the prices introduced by our competitors as it will be discussed in a second by the President of Management Board. As a result, we were able to react flexibly and dynamically and very swiftly to those dangerous and unprecedented, unexpected events in the Persian Gulf. So this is a positive element based on which we will build further operational changes across the board in our company. As far as other positive events of the first quarter are concerned, we engaged in negotiations with the Ministry of Agriculture in Poland, but also at the EU level, European Commission level. The European Commission also noticed this gigantic problem, which resulted due to the blockage of the Hormuz strait. They noticed that it can impact the food security across all of Europe. So we engaged in very hot debates in the European Union at the EU level and incorporation in partnership with other fertilizer producers, we managed arrive on an agreement, as you know, Grupa Azoty is [indiscernible] of the Fertilizer Europe Organization. And for the very first time, we managed to meet halfway and reach an agreement on 19th of May, Fertilizer Commission -- sorry, the European Commission published the Fertilizer Action Plan. And for the first time, the EU has explicitly linked the agricultural policy and industrial competitiveness as well as strategic autonomy with a presentation of fertilizer production within the European Union. This is a major change. And those of you who keep a close look on our business and also with regard to EU policy, you know that the chemical business, including the fertilizer business, is being pushed out of Europe. But this trend, I hope, has just been halted and maybe even reversed. This plan, the Fertilizer Action Plan published by the European Commission focuses on a couple of elements, including strategic autonomy. We know that the production of fertilizers with -- in view of the food security should be as close to the market considering the effective -- efficiency and the price and the availability because they are enhanced in this way. Secondly, the European Union or European Commission noticed and included in this document was the fact that it is necessary to ensure energy competitiveness in terms of prices of electricity and natural gas, which are used to produce fertilizers, which had a direct impact on the following two elements. ETS, EU Emissions Trading System and carbon border adjustment mechanism. So the directions of -- under the carbon border adjustment mechanism were analyzed, and this can have an impact on the competitiveness of our products in the future. In other news, as a role, the European Union still sticks to a transformation strategy under green deal and the circular economy. However, certain elements have been added potential support for this transition process because we all know that any transition, any change is related to major investments and in short or longer term, it can result in higher costs and lower production volume. So this is counterproductive to the actual assumptions of the European Union. So the Fertilizer Action Plan is a strategic direction expressed by the European Commission, but it is the first ever -- first signal from the European Commission that will result in a change of our business and our prospects. So we have been involved in those discussions, and we want to stabilize this market. And as I said, in the second quarter, I believe it will be down to details because we are involved in the discussions with the Polish Agricultural Ministry, Ministry of Agriculture, in order to secure the production of fertilizers so as to make sure that this market is stable and free of the turbulences of the Persian Gulf, so as to avoid the potential risk of additional dysfunctions, additional increases, inflation, price spikes or unavailability of products. So we are preparing for the new season, and it shows the long-term rational thinking and we believe that the upcoming months will be beneficial to both Grupa Azoty, but also all the consumers of our products. And other important developments in the first quarter, so Mr. Podgorski will give you the details, but Azoty despite of all the turbulences is responding proactively and is doing some internal transformation projects that I discussed last month, so we are about to launch a new internal structure, which will be our first step towards consolidation within the group in search of synergies. We are currently negotiating or perhaps consulting a certain code of internal cooperation. So the consultations are internal at this stage. And this will make us even more flexible and even more efficient in terms of managing the group's assets. We have been also auditing our energy spending, which, as you all know, is one of our key cost items. We have tested decommissioning of our coal-fired boiler in Tarnow and we want to use production steam, especially in periods of maintenance downtime. So we are considering different options to replace the coal-fired boiler in Tarnow. This project -- another project that never stops is the project of improving our investment costs and administration costs. So that's Azoty business, we also try to improve our real property management in the fourth leg of divestment strategy. We try to make one basket of all real property that we could sell or rent. As far as our synergies are concerned, there are two streams here. One stream is becoming more independent. So we have a lot of assets in our group and those assets will be providing services to the company, and we want to consolidate our projects in those internal companies. So we will be spending money internally. And we are approaching the end of the first step in -- preparing our integrated production plan for 2027, so we do this with intercompany teams. We have developed a model that will help us evaluate the efficiency of our production as is. And then we will plan changes for the second half of the year looking at -- focusing at inefficiencies. So starting next year, we want to have one consistent group-wide production plan, which should generate huge operational efficiencies that will have a natural translation into the financial performance. So that's it from me. Now over to Mr. Podgorski, who will give you the financial performance in the first quarter and discuss our proactive response in the first 3 months of the year.

Good morning, this is Jacek Podgorski. As you can see in this slide, the revenues, first of all, and EBITDA did not change -- sorry, revenues did not change over '25, but our EBITDA went up to PLN 317 million. If we exclude the impact of polymer project, then EBITDA would have been even higher. It would have been greater than PLN 340 million. Now this slide is the best illustration of what happened in the first quarter of the year. Starting in 2025 and showing the impact of all the factors that we calculated in an aggregated manner, you will see that last year, our EBITDA was minus PLN 8 million. And then polypropylene project delivered PLN 94 million losses. So if you exclude the negative impact of polymers, we arrive at PLN 8.6 million. One-off event of PLN 97 million, that's revaluation of our reserves for the purpose of CO2 certificates. The price of those certificates went down. So their impact on EBITDA in the first quarter is positive. Of course, we need to remember that in situations like these because of the macroeconomic environment, the price of those certificates will keep changing. So today, the price is higher than at -- on the 31st of March. So in the next months, the positive trend will be reversed. Anyway, if we extract -- if we take the 2025 result and we extract those items, we arrive at PLN 183 million. So this should be our benchmark, our point of reference to compare our performance in the first quarter '26. Now the next item, the sales price went up by PLN 35 million. So our sales efficiency generated another PLN 35 million in EBITDA. And if we omit -- if we disregard other impacts that are negligible, we come at PLN 108 million. Most of that is the difference in gas prices because you need to remember that between '25 and '26, like the quarter-on-quarter, the gas price, the average gas price went down. So the additional EBITDA generated by cheaper gas that's roughly PLN 108 million. The PLN 14 million, that's the cost of sales. That's our optimization projects mostly related to the sales logistics and that's one of the milestones that we have been trying to implement inside the company. Now our overheads are very low, much lower than 2025. And then this clearly shows you that we are -- we have improved our cost control and the situation seems stable in that area. So we arrived at PLN 341 million. In fact, most of the impact of the polymer sales was in 2025. That project still generates some negative impacts in the first quarter of 2026. That negative impact was minus PLN 24 million. So if we include the negative impact of polymers, that's PLN 317 million. That's our EBITDA. And that if you compare this to PLN 183 million, which is last year results, excluding the revaluation reserves, then you see the actual improvement, most of which is owed to lower gas prices. Now let's look at our basic product groups or commodity groups. Agriculture, here, the main driver is nitrogen, fertilizers and ammonia. So here, our revenues went up by 9%. Sales volume went up by 10%. And hence, the EBITDA here for the whole agricultural sector is PLN 239 million. Chemicals, here the situation is somewhat different. We need to start by making two important references. We have two products that's technical urea and sulfur that delivered extraordinary results. Of course, they are related to the Strait of Hormuz situation, and the protectionist policies in such countries as Russia, well, Turkey, just to give you the two largest. So those countries no longer export urea or sulfur. And then if you add major imports of urea to India, then you will see that the disruption on the supply side, in both urea and sulfur, then we as the producer of the sulfur, we actually gained from it. When it comes to sulfur, the trend will surely continue. As you can see, other products, those other products still have a negative bearing on our EBITDA, and we do not expect major changes in the months to come. Now Plastics. I discussed polymers before, but we also have caprolactam, polyamides and the information that we have, the news that we have are not good news. Unfortunately, we still have an oversupply of those products. And as a result, Grupa Azoty either abandon the production entirely, and if we keep producing, then the loss is generated. And there are a couple of drivers for this situation. In terms of polyamides, it is mainly due to the entire automotive segment situation. As we all know, across Europe, we do not produce any parts that are based on polyamide anymore. It's either that we import whole cars, relatively made cars from China or there is no need to use polyamide. So there is no demand for polyamide and the price and its impact on EBITDA is unfortunately negative. As far as the outlook for the year is concerned, the President of the Management Board mentioned the impact of the Hormuz strait situation on our production and our income. We don't assume that in the case of basic fertilizers that we produce. The positive trend -- that positive trend that we see in the first quarter is about to reverse, we don't see that. So the restrictions on exports also imposed by countries that are producers puts us in a better situation because we have fewer competitors. And we believe that in the upcoming months, we will be the beneficiaries of that situation because in the local market, the competition has shrank. And the same applies to sulfur. What we see in the sulfur market is inflated prices. And this has a ripple effect in the supply that we ensure as Grupa Azoty, is not supported by the supply from other destinations. As a result, the prices are growing, and this has an impact on the final product, on the end product. This is why we see that some of our customers are dropping production altogether or they reduce the stock volume. Keeping the fingers crossed that the situation in the sulfur market is about to change in the nearest future. And this is what we assume as well. We don't think that this positive trend will reverse. So I believe that the second quarter will be positive in this respect in this market as well. Moving on, as far as prospects and outlook is concerned, as you know, polymers, the project was sold under a preliminary agreement, not yet a final agreement, but we have a preliminary agreement and this allows us to expect that the final agreement will be signed in the third or fourth quarter of the year. And this problem, this issue, that had such a heavy bearing on our business will be finally neutralized. The discussion -- the negotiations with the banks are ongoing. You see all our communications, the standstill agreement was extended on Friday by additional two weeks. This standstill is to be interpreted in the following way. The banks see that the company is focused on better and tighter cooperation with the banks. And this gives us some space, and this will allow us to file documents or submit documents within the coming 2 weeks that were required under previous agreements. We don't see any threat of a failure on the part of the company, as far as the execution of the standstill, the agreement is concerned. Obviously, some of it is beyond our control. But we keep constant -- we keep in touch constantly with our stakeholders, shareholders and the banks. And I believe that we'll be able to manage that problem and finally resolve that issue. You probably remember that the [ term sheet ] is also subject to negotiations as we speak. And we are close to the end of this phase. And I believe that in the nearest future, this will all be a base for our further actions. First of all, the issue of shares, the last bullet point on this slide, talks about it. And secondly, we will be able to continue the process of preparing a restructuring agreement, which will give us space to breathe again for the upcoming couple of years in order to negotiate with the banks to make sure that the company comes out of this financial problem and issue in the end.

Thank you very much for this discussion of financial performance and operational performance of Grupa Azoty. We'll now move on to the Q&A session. The first question to Marcin Celejewski. What will happen in terms of the export of fertilizers to Europe and European Commission's decisions?

Yes, the European Commission suspended temporarily the export duties on certain fertilizers, including urea and ammonia in order to reduce prices and support agricultural producers and also take care of this gap in imported fertilizers. And I believe that in the end, we will be able to increase our production capacities and supply our products not only in Poland but also across the European Union. I'm talking about fertilizer products, obviously. But the prices -- the duties went in, were really put on hold. However, the decision does not impact any antidumping duties on the imports of fertilizers from Russia and Belarus. This is good news. And as far as Russia and Belarus is concerned, those antidumping measures will be introduced as of the first of July. So looking at this situation and imported fertilizers from Russia and Belarus, they are a margin of the supply in our country, and I believe that this increased duty will stop finally the import of those fertilizers from Russia and Belarus, from those aggressive producers. So I believe that this impact -- this measure introduced by the European Commission should not increase the prices too much. So the imports will come from mainly Northern Africa under the quotas that we have and you should not forget that some expertise will be introduced in other markets as well. And some of the markets which were intensively -- which intensively export their products, they will feel that decision, and our policies very reasonable. So we believe that the prices of fertilizers should not be impacted too much by this decision.

Two questions to Jacek Podgorski, I'll combine them in one. Would you expect any one-offs in EBITDA in the upcoming quarter, maybe revaluation of provisions or CO2 emission, right? And why -- where does the price of CO2 emissions come from?

Yes, I discussed it during the presentation. So the positive impact was recognized in the second quarter -- in the first quarter. In the second quarter, we believe that those provisions will have a negative impact on EBITDA. In terms of the prices of CO2 certificates, this market is volatile and the prices are beyond our control. So they are outside of our scope. We keep looking at the prices of CO2 certificates. And I believe -- and also the impact of those changes on our EBITDA. So during the presentation, I tried to show you the impact of the so-called Anova -- of the one-off, sorry, because we don't want to show anything as a permanent success, while this is a one-off event. So as you can see, this amount was reported as a one-off.

Next question, Agro segment reported an increase of 157% year-on-year. Can you tell us right now that the fertilizer products are, again, a flywheel of your growth?

Well, it looks that they have returned to that path, the path of growth, which was the regular -- standard path and trend for fertilizers because fertilizers are a part of our business, which will bring us the highest income and the highest positive impact on EBITDA. And we see it as we speak. When you look at this slide, this additional positive impact actually focuses on ammonia and -- focuses on ammonia. And Mr. Celejewski mentioned that during the conference, during the earnings call, ammonia is a semi product, which is very sought after. And because of the introduction of duties, we believe that in the coming months, the situation will persist. In addition, the fertilizer season is extended in Poland because we started the season a little bit later than usual because we had temperatures that are really low still in February, minus 20-degree Celsius. And then there was a spell of drought and as a result, the farmers did not apply fertilizers on their fields. So the season will be prolonged, will be extended, and we will sell our fertilizer products even in June. So the sales levels will be very high until June.

A couple of questions. I will combine them in one. When will you have the issue of your shares?

Definitely by September 13, 2026 is the deadline. The first issue, which has already been planned will be performed by this deadline. In terms of the exact schedule, we're working on it and this is teamwork. This is a team effort, not only within the company, but also outside of it in cooperation with banks as well and financing institutions. So we'll try to wrap up the share issue as soon as possible.

A question from our fellow journalist, Dariusz Malinowski. Please discuss your sulfur business in more detail? Do you benefit from the closure of the Hormuz strait? What are your prospects for this business? And is there more interest -- higher interest among your customers for sulfur and demand for sulfur?

As I said before, sulfur is a very profitable product for us and it will remain so in some foreseeable future. We don't know for how long, but obviously, on export restrictions introduced by some countries, including Russia will have an impact on the shortage of sulfur on the market. It is not easy to replace the sulfur that is produced in refineries as a byproduct or a waste product overnight. And we are not able -- we as well are not able to produce more waste sulfur at Siarkopol. So I believe that those prices will -- higher prices will persist for quite some time. It will have an impact on a positive EBITDA, but -- and there's also other side of this coin. As I said during the presentation, our sulfur customers find it increasingly difficult to address the higher price of sulfur and its implications to the production of the products. It might even restrict their production, their own production. So sulfur in the upcoming couple of months or maybe even in the longer term, will have a very positive impact on our EBITDA.

The last question to Marcin Celejewski. The EuroStat data suggests 80% drop of imports from -- on fertilizers from Russia and Belarus. What is the impact for Grupa Azoty in the -- in your positioning in the European market?

I will refer to what Mr. Podgorski said before whether fertilizers will remain a key product in our portfolio because this is something that this question refers to as well. And also as far as the directions outlined by the European Commission in the Fertilizer Action Plan. So the marginal imports of fertilizers from the aggressive importer that Russia and -- importers that Russia and Belarus are will definitely have an impact on a certain gap in supply. But we have discussed it with the Ministry of Agriculture, and we take measures in order to prepare ourselves to that situation in the short term to level it out, to flatten out that difference and remove that gap. So I'm talking about our discussions with the Ministry of Agriculture, but also it is up -- it is also -- this discussion also takes place and is escalated to the European level. So we have a reduced supply of fertilizers in the market that are imported. And there are two elements to discuss here. I believe that in view of the fertilizer plan, which defined the fertilizer market as a major -- as a market of major importance for Europe, and we have a couple of companies, including Grupa Azoty as the second largest producer of fertilizers. And I believe that in the short term, those mechanisms that are worked on by Grupa Azoty in partnership with the Ministry of Agriculture will help us to overcome that problem, that shortage and find ourselves in a very good position in the end. And also, we have great resources in Poland. And Grupa Azoty is a great asset, great resource as the second largest producer in Europe. So we need to also consider the increase of our own production capacities. In reference to sulfur, as discussed by my predecessor, it is a great positive news that we have an increase in the price of sulfur. And we take benefit from it. We tap into it and leverage it. But we don't want to have a situation where we are maximizing the benefit in the short term, but we might -- must not compromise our situation in the long term. And considering the directions outlined by the European Commission and also our discussions with the Ministry of Agriculture, we believe that the results we're reporting for fertilizers show very clearly that fertilizers are a flywheel of our business and they are at the core, at the heart of our business. And natural direction that we must take is to strengthen our production capacities here. So tactically speaking, maybe in 2027, the Management Board will start the discussions on how to increase our production capacities because we do have them, and we can increase the production of fertilizers and ammonia as well. Because this, I believe, is a very solid foundation, our major competency -- competence, sorry. And in the longer term and the foreseeable time, it will remain a flywheel. The main driver for Grupa Azoty's further growth, and we will build our additional pillars of our business around it, as we discussed during the previous conference. After the second quarter, I believe that I will be able to discuss it in more detail. So this is the answer to that question. It's pretty complicated, but in a nutshell, in the short term, we will do our best in order to secure and manage that gap because the gap is there due to the restrictions of imports of fertilizers to Poland. And Grupa Azoty, we look at the situation we're consolidating, we are trying to maximize the utilization of our production capacities based on negotiations with the Ministry of Agriculture and maybe with the European Commission in the future as well. But we are focusing on the investments on our core business, not on projects such as polymers. We focus on our competencies. We focus on our core business where we represent a great strength, not only for Poland, but also for the European Union.

Thank you very much for your participation in today's earnings call. Thank you for your attention. Thank you for all the questions. And thank you to the speakers for presenting and discussing the performance of Grupa Azoty. We will see you again after the publication of our results after the second quarter. We will inform you of the time and date of that earnings call shortly. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]