Grupa Azoty SA

WSE:ATT

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon, ladies and gentlemen. First of all, we are sorry for the delay, which is due to the logistics problems.

A very warm welcome to all of you, to the conference, which will be devoted to the performance of the companies -- of the Grupa Azoty Group after the first quarter of 2018.

Welcome to all of you who are present in the room and welcome to all our webcast viewers who are watching and listening to us live.

Today's speakers include Wojciech Wardacki, Ph.D., President of the Management Board of Grupa Azoty S.A. as well as President of the Management Board of Grupa Azoty Police; Mr. Pawel Lapinski, Vice President of the Management Board of Grupa Azoty S.A.; Mrs. Izabela Swiderek, Ph.D., Vice President of the board of Grupa Azoty Pulawy, Mr. Artur Kaminski, Vice President of the board of Grupa Azoty Kedzierzyn. We do hope that Mr. Wlodzimierz Zasadzki, Vice President of the board of Grupa Azoty Police, will also join us shortly.

Now I'll give the floor over to the President of Management Board of Grupa Azoty S.A.

[Wojciech Wardacki, executive]

Welcome, ladies and gentlemen. 2 weeks ago, we had a meeting devoted to our results for the FY 2017, and also, during that presentation, we referred to certain events which took place in the first quarter of 2018, which will be discussed in more detail in terms of our performance today.

I don't want to go too much into the details at that point, because 2 weeks ago we did discuss that issue, but I would like to recapitulate on the major events of Q1.

Our work devoted to consolidation, integration across the group were -- continued in quarter 1, in particular in Agro Fertilizers as our major segment. In February, 4 major companies signed a cooperation agreement, which specified integration of sales in the Agro Fertilizers segment, followed by decisions taken by individual companies, and the corporate department has been established and is part of the organizational structure of all 4 major companies of the group, and it's headquartered at Pulawy. It is to launch its operations shortly.

The staffing is in progress. But what is the most important is that in quarter 1 we had a meeting before the presentation of our annual results with distributors, during which the new department, which will coordinate the entire sales across the group, put forward new proposals to the distributors in terms of new relations with distributors adjusted to the ever-evolving market conditions, so as to prevent certain problems and unfair competition, which unfortunately is still evident in the market. So that we have certain tools to make -- will make it possible for us to flexibly react to certain market problems.

In quarter 1, we also continued our operations in terms of our projects, in terms of startups and innovations in the research and development.

This has also been discussed recently.

I will not like to go too much into the details here because we did discuss those matters during our Annual Presentation, Annual Conference for -- devoted to 2017.

In quarter 1, we had certain events which were beyond our control, which, however, did affect our operations and also our performance.

Quarter 1 was a period which saw, especially in March and April -- in February and March, which saw major fluctuations in gas prices, with the differences between maximum and minimum prices of as much as 300%.

There was a wave of cold weather in Western Europe as well, which added insult to injury, and also problems with gas production in Norway. As a result, prices shot up and mandatory stocks in Western Europe went down, resulting in a major increase in prices of as much as 300%, which did affect certain fertilizer products and certain fertilizer products, the share of gas prices represents as much as 80% on average that represents 50%, which is only natural. And it is only natural that such fluctuations in gas prices did affect not only our company but also our European competitors.

Of course we do not -- we are not talking about Russian competitors because in their case, the Russian companies' case, gas prices are subject to a different regime.

We did react flexibly, bringing down or cutting down certain production of -- productions of certain products in which gas prices represent a high share of the overall product price.

We did react flexibly so as not to generate additional unnecessary costs and negative results.

Both gas and -- in terms of gas, we also have a contract with PGNiG, Polish gas and oil company, which refers to market parameters in European prices, which are the same parameters that are applied by our European competitors.

We are analyzing the situation. We are always on the outlook in terms of gas prices so as to make sure that we have the most optimum flexible solution and agreement, and also to modify this agreement, the certain provisions of this agreement, if necessary.

As a side note, PGNiG reported very good results, exceptionally good results, and their main client is Grupa Azoty, which means that the reserves and the stocks that our main business partner has, without even the reference to the indexes or parameters included in the agreement, meet our expectations as the major client, the most important client of PGNiG.

In this difficult market reality, we are sure that our needs and interests will be taken into account by PGNiG.

Quarter 1 is also a period of unstable weather. After the frosts, the ground was frozen, which in March prevented farmers from using liquid fertilizers.

Many grounds, many portions of land were clearly frozen, especially when you flew over the land, that you could see it clearly from the plane, looking down.

And this was followed by a period of snowing, and farm work started and only then our sales went up.

This year, we had a cumulation or a cumulative effect of high stocks in the warehouses of our distributors.

Some companies started much earlier than Grupa Azoty in terms of the stocks.

These were all the elements that distinguished quarter 1 in comparison with previous years.

In terms of our macro situation, the macro situation which was beyond our control, it shows the significance and the importance of diversification of revenues, which we consistently implement across the group.

It's due to diversification, thanks to diversification, we were able to make our performance contingent mostly on -- not only on Agro Fertilizers but also chemicals. Not only in terms of titanium white but also OXO fertilizers.

If you look at sulfur prices, if you look at Siarkopol and the measures that we took at -- in Siarkopol, this also had a positive effect on that segment.

The financial performance which we did manage to have in that very unfavorable period is very positive because it needs to be referred to previous years.

The consolidated revenue in quarter 1 reached almost PLN 2.5 billion, consolidated EBITDA came in at PLN 403 million, consolidated net profit reached nearly PLN 190 million -- PLN 188 million, to be exact.

And all the measures that we have taken, despite lower revenue and lower EBITDA, which followed downward trends, we were able to keep up the pace in terms of our EBITDA margin, which came in at 16.1% versus 16.9% year-on-year.

I would like to also mention at this point about yesterday's decision of the management board.

We decided to recommend the payment of dividend for 2017 at PLN 1.25 per share, which is the highest historically, highest dividend since 2013.

That is since the year as of which the organization of our group is based on 4 major companies.

Looking at our profitability versus our share prices quoted yesterday or looking at the average of the chemical market, our profitability was, in our opinion, very good, in the face of those challenging conditions.

If we look at a comparison -- and at that point, I would like to refer back to the diversification efforts and the change -- revamping of our structure of revenues, we compared our revenue and EBITDA and net profit in the -- generated in years 2007, 2017, and also we are presenting a forecast for 2023 on this particular slide.

It becomes evident that the group or Grupa Azoty Tarnów had an absolutely different scale of revenue. In 2007, revenue came in at PLN 1.3 billion, EBITDA came in at PLN 163 million, versus 2017 in which we reported revenue at PLN 9.6 billion and EBITDA at PLN 1.1 billion.

In terms of the forecast, I would like to emphasize that those forecasts do not include potential acquisitions.

In terms of the forecast for 2023, we are expecting our revenue to reach PLN 15 billion.

In terms of the particular structure of our segment performance, in 2017 we had a breakdown between fertilizers -- Agro Fertilizers and chemicals.

In 2017, we had a breakdown into plastics, Agro Fertilizers and chemicals, and plastics represented nearly 15%.

And in 2023, we want the share of Agro Fertilizers to be much lower than 50%, which will allow us to react flexibly to ever-changing economic cycles, and to change our product structure moving towards more advanced products, highly processed products, and we want to increase and improve our margins and profitability, so as not to be exposed to certain macro risks which are beyond our control.

I'll now give the floor over to Mr. Pawel Lapinski, Vice President of the Management Board of Grupa Azoty S.A. to discuss those results in more detail.

[Pawel Lapinski, executive]

Thank you very much. Mr. Wardacki mentioned certain figures. I would like to go back to the question of margins, and I would like to emphasize that our EBITDA margin came in at more than 16% with revenue falling down at around 7%, which is a little bit higher than the analysts -- market analysts' consensus, which came in, as far as I remember, at PLN 362 million.

In addition to the standard information, I would like to also discuss certain additional information in terms of investments made by the group, which is to meet your expectations.

And also, I'll discuss our relations -- the relations of our performance versus the prices of wheat.

Moving on to the more detailed information, in terms of our segments, we had 2 factors which affected -- which had a positive influence on our segment.

First of all, gas prices and energy. We are selling both gas and energy to our local clients, business partners. Therefore, we reported a positive performance at PLN 23 million. And also the Chemicals segment, we distributed part of our nitrogen product in the form of technical grade urea and products such as AdBlue. These were the positive factors. On the other hand, we did have negative factors which affected our performance, namely the Agro Fertilizers segment and, to a certain extent, to a minimum extent, also the Plastics segment.

In terms of the specific structure after quarter 1, we had a breakdown into segments presented on the next slide, which is in line in our direction and our assumptions.

Now the main culprit of what has happened in quarter 1 is obviously the weather.

We had 2 major heat of cold weather in March, during which temperature fell to even minus 20% -- degree Celsius. The second wave of cold weather was not that bad, however, the price of gas did shoot up considerably. This is the situation we have not seen for many years.

And secondly, the application of fertilizers in March, the major part of this month, was impossible, and the application, the use of fertilizers was only possible in the last week of March and also in April.

Those 2 factors, which were due to bad weather conditions, adverse weather conditions did affect the performance of our Agro Fertilizers segment.

It is also clearly visible here that we had differences in terms of the transfer prices and costs.

On the left-hand side, you see a chart which presents the level of gas prices, which is much higher year-on-year, but if we look at the following slides, the price of gas fell in subsequent months.

This is the specificity of Europe and the Europe's weather. The weather in Europe was cold. We had a cold wave, however, the prices of gas also depend on more global trends.

The prices of energy, electricity and coal, especially coal, which is much higher than last year, and also heat, which is the main cost driver in the Chemicals segment, chemicals production, were also important and presented an additional factor affecting our performance.

You can see the benchmark prices, which are falling down, but the direction of gas prices or the trends for gas prices are quite opposite.

As a result, it did affect our price of products, and we do expect that the market will see a surplus in terms of the quantity of certain products, which obviously will be visible in the months to come.

The situation that we have right now, which is lower sales -- I'll discuss this in a second, in a moment -- also affected our competitors. So this problem affects all European producers without exceptions.

On the next slide, you can see -- I'm sorry, I need a moment here to move to this particular slide.

In general, we reported an 18% decline in revenue falling by 18%, and our overall performance was affected also by higher costs.

As you can see, the volumes went down considerably, especially in terms of fertilizers, compound fertilizers, to be more specific, and also for other fertilizers, which reported a double-digit decline.

Some of the volumes here in terms of products sales will be moved to quarter 2, and our overall balance for the first half of the year will be -- will look much different. However, we are talking about an overall decline in terms of fertilizers volumes, sales by volume of 15%.

Looking at the Chemicals segment, the situation here is much more stable. As I have mentioned before, we moved certain parts -- we sold certain parts of our fertilizers, both noxious and urea, technical grade urea reported good results in spite of certain problems in other product groups. For instance, melamine, which reported good sales but was also affected by gas prices.

As per titanium white, it drives well. We are expecting at the end of the year, we will relaunch certain production capacities and as a result, in terms of our EBITDA for that segment, it went up to PLN 20 million, and also sales went up. This also applies to our benchmark prices, which reported growing trends.

In terms of Plastics, the situation in the Plastics segment is still stable, with prices moving on in the direction that was expected. However, you might ask why our performance in the Plastics segment is lower year-on-year compared to quarter 1 2017.

First of all, let me start with caprolactam. We reduced the sales of caprolactam by 11,000 tonnes, which represents 63%, which was in line with our earlier plans, the shift towards polyamide.

As a result, the production of polyamide went up by 11%. Why did we reduce the sales of caprolactam?

First of all, we wanted to have a deeper processing and to report better performance at the level of polyamide.

Second of all, we need to remember about the prices of -- in Asia and also the prices -- the exchange rates of U.S. dollar.

Our sales to Asia lost its momentum in terms of our margins, and the differences between U.S. dollar and PLN exchange rates represented a decline of 20%, and as a result, the revenue from Asia is much lower than a year ago.

Luckily, we did manage to move certain volumes to polyamide, which is sold to Western Europe and is usually settled as euro, in the currency of -- in the European currency.

If it hadn't been for that decision, then probably, the worse -- the problematic situation in Asia, we would probably report a lower performance.

We did increase our production capacity significantly. Our production capacity -- new capacity after quarter 1 is at 75%, which is much higher than we had expected before. And one more information -- piece of information which is important for you, when we launch new plants, new installations, we sometimes -- we usually generate or produce a product which is of nonstandard quality, second degree quality, so to speak, and we did sell those products at a little lower prices and lower margins.

This also affected our performance in quarter 1.

All in all, if the capacity utilization remains at the same level, the situation throughout the year should be good.

We are also selling new volumes on the market, which is always related to lower margins. We try not to cannibalize, so to speak, the European market. We try not to undermine the European market, therefore our targets are usually outside of Europe.

We also launched the sales of polyamide to the United States of America, and this is where we want to gain new market. And with time, our margins should improve and increase.

A couple of words about our investments. You might remember, you probably do remember about our investment program, PLN 7 billion in investment up until 2020. Starting from 2014, we spent, so far, PLN 4 billion, which means that for the 3 years to come, we still theoretically have PLN 3 billion to spend to meet our promises.

We know that we will spend more. Our investment program, our CapEx program is still growing, and it reaches even outside 2020.

In terms of our investments in 2018, I would like to draw your attention to the fact that a major part of our investment outlays will be focused on growth CapEx, and a great share will be also directed to Grupa Azoty Pulawy.

On the next slide, you will see that information which is in more detail. You -- we're talking about the granulated fertilizers plant at Pulawy, investments related to nitric acid at Pulawy as well, and also the esters plant.

We had a whole list of investments, several dozen investments, investment projects, which all make up the amount of our investment spending that I have mentioned.

In terms of our financial standing, you can see that our ratios are at very safe levels.

Net debt to EBITDA at 0.53. Net debt at PLN 604 million.

Thank you very much for your attention, and I will now give the floor over to Mrs. Izabela Swiderek, Vice President of the Board of Grupa Azoty Pulawy.

[Izabela Swiderek, executive]

Good afternoon, ladies and gentlemen. I would like to recap in terms of our performance of Grupa Azoty Pulawy and the Grupa Azoty Pulawy Group in 2001 first quarter -- in 2018 first quarter.

Of course, all the market trends that have been discussed by my colleagues did affect our situation and our performance at Pulawy in quarter 1 this year.

Our revenue at PLN 910 million is lower compared to the previous year -- year-on-year. And the situation on the agricultural market and also import volumes affected our performance in terms of our revenue.

Our revenue went down slightly.

If we analyze our revenue structure and the decline in our revenue versus our sales, you can see that sales in Poland went down by 6%, or PLN 36 million, and our sales outside of Poland went down by PLN 57 million, which represents nearly 16%.

Those results affected our EBITDA and the EBITDA margin, which was also influenced by an increase in costs, mainly due to the increase in costs of our main strategic ingredients, main strategic raw materials.

The price of gas in quarter 1 is nearly 10% higher in comparison with the corresponding periods last year, and if we add an increase of 5% in the prices of electricity and the increase in the price of coal by 6%, then obviously those were the factors which had to affect our performance.

The only case in which the situation was reversed was the price of benzene, which went down by more than 13% year-on-year.

In quarter 1, we did not see at Grupa Azoty Pulawy any one-off events, and we did not have any one-off write-offs in terms of our assets.

If we analyze our EBITDA in reference to last year, you can see that our EBITDA went down by PLN 45 million.

And if we analyze the situation by segment, you will see that the Agro segment had a negative impact on our EBITDA representing nearly PLN 37 million.

Therefore, lower revenue combined with higher prices of production at Grupa Azoty Pulawy resulted in the overall performance of that particular segment.

A similar situation was observed in the Chemicals segment, which had a negative effect of minus PLN 23 million on our overall EBITDA despite the fact that we did sell higher volumes of our products than we had expected before, then in -- mainly in the case of caprolactam whose price was lower than expected.

Caprolactam itself resulted in a negative impact of the Chemicals segment going down by PLN 23 million, as I said. However, we did have a positive contribution by -- from the energy segment.

As Mr. Lapinski previously mentioned, we did sell our electricity to external customers, and the prices of electricity had a positive contribution to our EBITDA in quarter 1.

In terms of the structure of our revenue, then despite the structure looks almost identical to a number of previous corresponding periods, then it must be, however, noted that our revenue in the Agro segment is falling at the expense of the revenue of other segments.

In quarter 1, the revenue generated in the Agro segment fell down by 4 percentage points, whereas the contribution of the Chemicals segment went up.

Moving on, the increase of nearly 69% in the energy segments also had a good contribution -- positive contribution in our overall performance.

In quarter 1, the sales -- overall sales -- we're focusing on the Polish markets, which represented more than 69%, and the rest, which is more than 30%, was sold in foreign markets.

The Fertilizers segment, as I have mentioned before, had a negative contribution to our EBITDA, generating revenues at lower levels versus our revenues in the corresponding period last year. I would not like to repeat what factors contributed to that situation. I would like to add that we had a decline of PLN 63 million for nitrogen fertilizers, which is due to the fact that they were a negative price trend outside of Poland. So we sold lower volumes of product at lower prices.

In terms of phosphate fertilizers and compound fertilizers, considering their share in the overall performance of our Agro Fertilizers segment, they generated sales lower than -- lower by 15% year-on-year, and the prices also reflected international trends. Most of our products were sold at prices which were lower on average by 6% for NPK products up to 1.5% for other products.

EBITDA of our Agro Fertilizers segment went down by PLN 37 million year-on-year, and most of our shares were focusing on the Polish markets, representing more than 72%.

Moving on to the Chemicals segment, which also had a negative contribution to our EBITDA, the revenue in the Chemicals segment went up -- went down by PLN 11 million, which is due mainly to the lower prices of our product, especially in terms of caprolactam, which reported a decline by PLN 21 million. But we also had other negative factors, for instance, a decline in the prices of benzene, which affected the prices of caprolactam and also a change in the exchange rate of U.S. dollar. The main products of the Chemicals segment, which is melamine, reported higher sales by PLN 13 million, which was an effect of the international trends in the caprolactam market. And the average increase in price -- in the price of caprolactam represented 12%, and as my colleagues have already mentioned, we need to remember about the international trends of caprolactam prices going down due to the changes in price of benzene, which also had an effect on our performance. In general, our EBITDA in the Chemicals segment went down year-on-year, and in terms of the geographical structure of our sales, we usually sell caprolactam to international -- on international markets.

In terms of our financial position and financial ratios, we are on the safe side. All our ratios are stable, especially in terms of the liquidity ratio, which went down only slightly on the back of our investment projects, which are in progress. Our debt levels are very safe, which is represented by the positive ratios presented on the slide. Our investment outlays made in quarter 1 exceeded PLN 75 million -- PLN 75.5 million, and most of these outlays are related to the main strategic investments, which is the upgrade of the nitric acid plant, where we spent more than PLN 9 million, and also the production -- the plant, in which we produce granulated fertilizers, in which we spend -- or for which -- on which we spend PLN 3 million, and the third major investment is the replacement of the energy production units. These are only several investment projects, because most of them are also replacement projects, replacement CapEx aimed at improving the working conditions of our employees and the quality of our product. All in all, we spent more than PLN 75 million on our investment projects in quarter 1.

Mr. Wojciech Wardacki will now discuss the performance at Grupa Azoty Police.

[Wojciech Wardacki, executive]

At Police, we need to, first of all, take a general look at our performance, which was generally speaking positive. First of all, we had substantially lower performance in the Fertilizers segment, both in terms of EBITDA, the revenue and net profit, which was obviously due to the market conditions, the difficult market situation, a major increase in gas prices and also a decline in the prices of ammonia. However, this situation was to a large extent offset by a good trend in the Pigments segment, where we reported higher revenues year-on-year by 1 quarter, 25%. And also in terms of EBITDA, we did report higher results for Pigments. Obviously, our performance needs to be analyzed against a bigger picture of the market in comparison with our peers. So if you refer our performance to the market, then despite the fact that Yara reported a significant increase in sales, it also reported a significant decline in their net profit, which means that their performance here was much worse than ours at Grupa Azoty Police. The same applies to our petrochemical products.

If we -- moving on to the Fertilizers segment, our revenue was much lower year-on-year, going down by nearly 20% -- 18%, to be more specific, mainly due to lower sales of compound fertilizers, which went down by 25%, urea going down by 14%, ammonia going down by 13%. All in all, our EBITDA went down by nearly 42%, in this particular area. Our performance in the Fertilizers segment is mainly due to the difficult market conditions, especially by higher gas prices, which in March reported a threefold increase, and also a decline in the prices of ammonia, which is shown in this particular chart showing a spread between those figures. To add insult to injury again, we need to remember about the very challenging weather, which had a major impact on the -- our results in terms of the sales of compound fertilizers. On the one hand, the demand for gas resulted in a major increase in the gas prices, but on the other hand, it resulted in the fact that farmers were not able to apply or use fertilizers.

Therefore, we had 2 problems: first of all, the weather, which resulted in higher gas prices, and secondly, a delay -- a major delay in the application of fertilizers by farmers, especially of compound fertilizers, because these were -- these fertilizers were usually more popular.

At Police, our overall performance was improved by good sales of titanium white, and the revenue in terms of titanium white went up by nearly 25% year-on-year, and EBITDA went up by nearly 75%. In terms of our financial strength, those ratios, especially the profitability ratio, were affected by the market situation. They went down, however, they did go down only slightly year-on-year, but EBITDA -- or EBIT went up by 2% with EBITDA going down by 1%. Our liquidity ratios remained more or less flat year-on-year. And the same applies to our debt ratios.

Thank you very much for your attention. I would like to add one thing at this point. We are talking about the situation in ammonia. At Police, on the one hand, we sell ammonia to Tarnów internally, these are our internal sales, but we also sell our product to foreign markets, which is due to the favorable location of Police. And with the price of gas going up so significantly, it did affect our performance in this particular area. We had to postpone our maintenance shutdowns, and also it did affect our situation and our performance in the fertilizers. However, if we refer to our situation and our profitability since 2013 as shown on this particular slide, then if we look at our revenue, we will see that our revenue went down in 2015, but the EBITDA margin stood at a very good level. And the same applies to net profit, which in 2015 went up versus 2013 or '14. We did take a number of measures to cut down on our overhead and other costs. We also modernized and upgraded our installations, our plants. In previous years, we did not have proper maintenance procedures. For instance, it applies to Pigments, where upgrades are necessary and were necessary, and we did take those efforts in order to modernize those installations. We also want to upgrade the entire chain of production in other products.

I would like to add at this point that if we analyze the performance of our peers, for instance, Yara, then despite Yara reported higher revenues, it did report a decline of more than 40% in terms of their net profit. This is very important. If we are talking about ammonia at Grupa Azoty, then we needed to optimize our costs. We needed to cut down on our costs, and at Police, we did take a lot of effort to optimize our cost structure.

We will probably have a number of questions from you later on during the Q&A session and after the conference. And also you probably will ask about our African operations as well, but in terms of phosphates, we did sign a number of agreements for phosphates, the supplies and the low-cadmium phosphates in particular, which will be used for the production of products of certain parameters to be sold in specific markets.

Moving on, we will now give the floor over to Mr. Artur Kaminski, who will discuss the performance of Grupa Azoty Kedzierzyn.

[Artur Rafal Kaminski, executive]

Ladies and gentlemen, good afternoon. I would like to discuss the performance and financial standing at Grupa Azoty Kedzierzyn in the first quarter of 2018. And with all responsibility, I would like to state at this point that our situation was pretty much stable and pretty much satisfactory, especially in the face of a number of events and problems which were beyond our control. These were discussed before. In terms of our main parameters, our revenue and EBITDA and also net profit, as presented on this particular slide that I am showing right now, we are very proud to say that in quarter 1 2018, we reported higher revenue, going up by PLN 12 million year-on-year. I will discuss it in more detail later on, but this increase was mainly on the back of good performance in the sales of OXO alcohols, which offset other sales. Despite the fact that our revenue went up year-on-year, we did report a slight decrease in EBITDA and also net profit. The situation is still stable. We're still on the safe side. This decrease and declines are slight. However, we have to remember that these were due to higher costs, and especially higher costs of my main strategic feedstocks. Obviously, we're talking about gas, natural gas, for which average prices in quarter 1 went up by 10%, almost 10% year-on-year, which represents the amount of around PLN 10 million at our company. This is the reason why our revenue went down -- our performance went down, in general.

The next slide presents a structure of revenue at Grupa Azoty Kedzierzyn in quarter 1 2018. The strength of Grupa Azoty Kedzierzyn is the model structure of diversification of revenue sources. One segment tries to outdo another, so to speak, at Grupa Azoty Kedzierzyn, and especially at OXO alcohols at 40% and the Fertilizers segment represents 30-plus percent. If one of our segments face a difficult, challenging conditions, then the other one would make up for it, and it did happen in quarter 1. The revenue -- the performance at Fertilizers segment went down, but the situation -- this decline was offset by another -- by the other segment. The decline was due mainly to lower sales of fertilizers, especially due to bad weather -- adverse weather conditions and delayed application of fertilizer products by farmers. However, in terms of our revenue generated by OXO alcohol segment, it went up by 14% and taken into account that this segment was stronger than the Fertilizers segment, it did offset the negative trends in the Fertilizers segment.

The 14% increase was due to, first of all, higher prices of products and also higher volumes of products sold, and the market was more receptive of our products with a good relation between supply and demand, and also we did have higher propylene prices and to remember that propylene is one of the major feedstocks used in the production of OXO alcohols.

Taking into account the price index -- the indexes, we know that the prices of propylene do affect the prices of OXO alcohols, or have a positive effect on them.

Moving on to the next slide, which discusses our financial performance in more detail with a breakdown to the 2 -- into the 2 major segments, OXO and Fertilizers.

In Fertilizers, our revenue represented 3 -- PLN 200 million -- more than PLN 200 million, which went down year-on-year by PLN 19 million. However, EBITDA in the Fertilizers segment in quarter 1 stood at PLN 40 million, going down year-on-year by PLN 13 million, of which PLN 9 million was related to higher price of gas and PLN 4 million were due to higher prices of other feedstocks, such as electricity, coal, coal powder and the fact that we did not manage to reach assumed margins on certain product sales. However, in terms of our OXO alcohol segment, our revenue went up considerably to PLN 241 million in quarter 1 2018, which represents a very positive trend and allowed us to offset the lower performance of our Fertilizers segment.

Our EBITDA for OXO alcohols went up as well, which was owing to both higher prices of products in that particular segment and also higher volumes.

Moving on to sales volumes. In the Fertilizers segment, we represented a quarter-to-quarter -- a year-on-year decline, however, I can still claim that our situation in this particular area is still safe despite very challenging market reality. However, in terms of our OXO alcohols, we have noticed a major progress and the positive trends both year-on-year and quarter-to-quarter, moving on from the beginning of the year up until quarter 1 '18. We need to remember that higher production in 2017 versus 2016 was related to the launch of new production. In terms of the geographical breakdown, obviously, sales in Poland represent the lion's share of our sales structure. We sold the rest in terms of fertilizers to the European Union only, whereas for OXO alcohols, the situation is reversed. Most of our OXO alcohol sales are focused on the European Union with only a certain part sold in Poland.

The next -- the last slide presents our financial strength and financial ratios. These are on a very stable level -- on a stable level. They reported a certain slight decline, which were -- which was mainly due to an increase in our costs on overhead and operating costs. This was reflected mainly in the EBIT margin, EBITDA margin, return on capital employed and return on equity. However, our liquidity ratio went up, especially in terms of our current ratio, which went up slightly. In terms of our debt ratio, our net total debt went down -- went up, I'm sorry. And the net debt went up from PLN 126 million to PLN 195 million, which was due to intensive investment outlays and also additional tranches of our intragroup loans and also cash pulling loans. These were the factors that increased our net debt, and the most capital-intensive projects included the launch of the new power plant, the combined heater power plant, which was brought on stream in quarter 1 and represented a large portion of those figures. In terms of our financing structure, we had a 50% -- almost 50% to 50% breakdown between overdraft and multipurpose credit facilities and corporate loans. Our financing structure is in line with the consolidation efforts of the entire group, which means that our corporate loans and multi -- and -- our corporate loans represent nearly 95%.

Thank you very much. And thank you for participating in our conference in this room and also thank you to all the webcast viewers who are watching and listening to us.