Grupa Azoty SA

WSE:ATT

Earnings Call Transcript 2023-Q1

[Unknown Executive]

[Foreign Language] A warm welcome to all of you. I have the pleasure of presenting and discussing our financial of our performance in general after the first quarter of 2023. It was an exceptional quarter full of challenges faced by all companies, operating -- all the players operating in the chemicals or plastics or fertilizers markets and segments.

It was a quarter when we saw a market decline in demand for a lot of products that are included in our portfolio, which was a consequence of, on the one hand, high inflation [rates] and figures in 2022 as well as high interest rates as and on the other hand a lower demand especially in terms of [basic] fertilizers.

As a recap of major events, I'd like to point out first that Grupa Azoty takes any action possible in order to rebound after this difficult and challenging period. So as we are able to emerge as -- emerge as a stronger company facing and adapting to market challenges. Therefore, we are considering our strategic flagship investment [indiscernible]. We have started the start up offering installation, and we started some sales processes. So we will move on to more details later on.

We are also developing our operations for bio fertilizers. We have opened R&D center for biofertilizers at Grupa Azoty Fosfory . We launched the second line or planned of concentrated nitric acid and Tarnów. We also received financial support for energy-intensive sectors of PLN 24 million.

Results after the first quarter are not satisfactory for us, but as I said before, it was a quarter [indiscernible] with a lot of challenges in our market environment and our broader environment. As we can see on this slide, there was a major drop in terms of our production volumes adjusted to the situation -- following the situation markets and supply in the market -- of demand and supply in the margin. As a result, our performance was much lower than the year before.

As far as market is concerned, what it looked like in the first quarter of the year, there was a number of factors and drivers which influenced how we operate in the market. First of all, we were faced with lower demand from consumers, which was a consequence, as I said before, of high inflation rate and the resulting rise in interest rates. Low level of global growth, which also impacted not only our operations, but a number of other players operating in the markets and segments in which we operate as well.

We also saw a disruption of purchasing trends, mainly in terms of sales of fertilizers where usually quarter 1 is a quarter characterized by high sales of fertilizers. We saw that a year before and for quite a number of years before. But this year, those purchasing trends were disrupted in quarter 1. What's important is the fact that we saw an economic revival and economic growth in China. We see a situation where we had COVID-19-related lockdowns and as a result, Chinese producers are facing low demand and the reranked in their interest -- or focus of interest on European markets. And economic growth -- the economic growth in China is an opportunity for us, which we can tap because we can expect lower competition from Chinese competitors, due to the fact that the demand in China will be higher.

A couple of words now on how gas trends or high gas price trends look like. What do they look like. On December 19, 2022, premises of the European Union member states set the maximum or cap level for those prices at EUR 180 per megawatt hour. And at that time, the market price was around EUR 100 per 1 megawatt hour. Right now, the price went down to lower than EUR 30. And since then, we have observed a systematic decline in the prices of gas, which is not difficult for a period like that like this because we are still -- we still were in the winter period in quarter 1. However, it is great news for the consumers and Grupa Azoty changed -- we changed our prices of fertilizers in quarter 1 to adjust those prices to market conditions.

In terms of other macroeconomic factors, you can see them on this particular slide. What's important for us is the fact we saw certain trends in electricity prices, they are lower than the electricity prices we saw at the end of 2022.

In terms of our cost and revenue, revenue expenses, you can see quite clearly that due to the decline in volumes, we see or we have seen a drop in revenue in quarter 1. In terms of our costs, first of all, you have to focus on lower gas prices, which result in a decline of the share of gas prices in our general costs or expenses from 55% in 2020 to much lower in 2023 in quarter 1. However, on the other hand, the cost of energy feedstock that is electricity, heat and coal went up and the share of those feedstocks in terms of the their costs and our general cost structure went up in the second -- in the first quarter of 2023 versus [indiscernible] 2022.

Moving on to our -- [indiscernible] the discussion by segment. As I said in the Agro segment, quarter 1 was an exceptional period. We have never worked for quite a long time. We have not seen such a period before, especially in terms of grain prices, where we see a major drop practically since mid 2022. As a result, it translates into a lot of uncertainty and doubts on the grower's side and certain disruption of the market. And the way agriculture forms operate and it translated into a major change in our purchasing behavior trends, traditionally in quarter 1, growers will buy a lot of fertilizer products.

This quarter was much worse in terms of that particular indicator.

Other factors -- drivers, which also affected the Agro segment's figures included a drop in gas prices. And as you can see, fertilizer prices went down as well across the board in Europe. And this applies particularly -- this applies to virtually all fertilizer products. This situation causes great uncertainty on the grower's side. And we want to take action in order to stabilize the situation, to stabilize this market. We want to function in the new fertilizer segment. We want to function based on a predictable price path for fertilizers in line or in keeping with the trends we observed in previous years. We would like to eliminate the element of [a certainty] uncertainty in terms of fertilizer prices so that it is -- it does not cause uncertainty among our growers. And this is a policy we want to implement in the new fertilizer season.

In terms of compound fertilizers in this particular area, we see quite clearly [indiscernible] at the prices of compound fertilizers also went down. But however, the demand for those fertilizers in quarter 1 went down as well, quite markedly. As a result, the volume of our sales declined and we're keeping our fingers crossed [indiscernible] after this particular period, quarter 1, 2023. In the long term, this market will rebound and the demand for fertilizers -- compound fertilizers will rebound as well.

Ladies and gentlemen, you have to take note of the fact that there is growing [indiscernible] imports of the urea. We wanted to show you in an incremental way by comparing several quarters. In quarter 1, we saw a drop in import figures. However, on the left-hand side, looking at the chart, it is quite clear that in the import figures were much lower than before. And the reasons for that are, first of all, the price. Urea is imported from countries that have significantly lower production costs, where there is -- there are no additional charges related to CO2 emissions. And obviously, it is important from countries where gas prices are much lower at different levels than import. Urea is not a fertilizer. That is a good solution for the first application in our climate and you then see the same trend for ammonium nitrate. And the important figures for ammonium nitrate were not that high.

As a summary for the Agro segment, as I said before, it was an exceptional period in quarter 1. A lot of uncertainty among our farmers, a major decline in the prices of agricultural products, an increase in urea imports from countries where production costs are lower. And last but not least, continuing high prices of feedstocks -- energy feedstocks. I'm not talking about gas only, but I'm talking about energy feedstocks in general as well as feedstocks and raw materials used for the production of compound fertilizers.

Moving on to another segment, the chemicals segment. In this particular segment, we saw major challenges as well, on the market side. The first quarter, it was quarter that saw lower demand. We are showing you European market spreads for titanium white and 2-EH. They are better than the year before or last year, but volumes play a major role. And those volumes were much lower than the year before. And the prices of a lot of products went down. And you should also take notice of the fact that in the Chemicals segment, we see a growing year-on-year competition from Asian producers.

As I said before, high inflation definitely affects demand on the consumer sites. We do not see any clear signs of improvement in terms of global economy or economies and we have high competition from low-cost producers from low cost regions. The opportunity for improvement in the market situation are there. We see them. We see those opportunities and signs, and we can assume that the situation will improve, albeit slightly, but in the next quarter, however, we need to take into account the fact that this market will continue to be very challenging for us.

Coming on to the Plastics segment. In this particular segment, the situation is quite similar. As in the previous one, the Chemical segment, this particular quarter, quarter 1 saw a major drop in demand year-on-year. We adapted our production to the prevailing market situation and we also need to remember about the competition from Asian producers. You can see the price trends for various products. Benzene, Polyamide and Caprolactam. And if you compare those prices Europe versus Asia, you can see quite clearly that price levels -- price trends are much lower in Asia. There is an opportunity in the Plastic segment of sorts. And I'm talking about the revival or rebound in the Automotive segment. This will affect or translate into an improvement in the plastics segment with a certain delay, obviously, but we will do our best to tap that opportunity when it arises.

As a recap for the Plastics segment, we need to remember about the continuing high prices of raw materials despite a drop in demand for finished goods. I'm still talking about quarter 1, obviously. We need to remember about lower margins across the board. We're not talking about Grupa Azoty only. I'm talking about all the producers in this area. Truth be told, apart from the Automotive business, we do not see any signs of any economic revival in the market in our markets.

Moving on to [by] segment results. In terms of our financial performance, all our segments reported a lower performance than a year before. EBITDA per segment was -- by segment was negative in total. We're not discussing this particular segment separately, and I'm talking about the Energy segment, the negative performance and a negative figure in terms of EBITDA was due to lower production in the Energy segment. We [indiscernible] consumed less energy, which obviously translated into the fact that we had to sell the energy and that we had previously purchased in the market, and it affected our performance to a large extent.

We are discussing the situation -- we are negotiating the situation with our suppliers -- energy suppliers in order to modify the existing agreements. On a more positive note, in quarter 1, we had -- we received financial support for energy-intensive segments -- sectors and the amount we received was PLN [234 million]. We can see a breakdown of this amount per segment. The more energy-intensive segment the higher the amount, obviously.

Moving on to the Agro segment and our financial performance in the Agro segment -- or performance in general. Obviously, the volumes were -- was a major driver of our performance, it was, as I said before, an exceptional quarter. A quarter, which we did not see in the Agro segment before, where we saw [indiscernible] quite lower demand than before in terms of the demand for fertilizers despite the fact that the prices of fertilizers went down. Still, the demand did not pick up -- did not react to this trend. Growers, farmers would not buy fertilizers due to this uncertainty factor I mentioned before. And Grupa Azoty will take action in order to stabilize the situation and to apply a stable and predictable price [half] in the new fertilizer season as we saw before.

In the Chemicals segment, the major driver of our performance was -- were volumes again. And you can see those volumes in terms of sales volumes, it was revenue from sales and they are much lower than a year before. We should point out, and we will discuss it later on in more detail. We should point out the situation in terms of melamine. The production of melamine in quarter 1 was put on hold. However, after the close of quarter 1, we relaunched 1 line and see certain signs of a slight improvement. It's not a breakthrough yet. However, there are some optimistic signs from the market and we can be more optimistic as well, and we can maintain some production and that production will be [indiscernible].

In the Plastics segment, again, volumes played a major role affecting our performance to the largest extent. As I've mentioned an element which can much improve the situation in the segment is the Automotive business, we see an opportunity for improvement there. However, we still have to wait for that.

In terms of our purely financial situation and performance, in terms of our liquidity. We are on the safe side. We are good here. However, due to a major decline in performance in the first quarter, we see risks and the net debt to EBITDA figure at the end of the first half of the year might exceed the acceptable levels set in our agreements, financing [agreements]. The maximum level is at 4.0. At the end of March, it's higher than that particular level. However, this level is not to be reported to the financial institutions. It will be reported only after the first half of the year. However, we see certain risks here and we will do our best. We will work hard in cooperation with -- in partnership with financial institutions in order to arrive at certain agreements.

We are in the midst of major work in terms of analysis of this particular figure. And quarters to come in 2023 and the years to come.

Moving on to our investments. In the first quarter, our investment figures were lower than the year before. However, we need to stress that the level of our CapEx spending is related to 2 factors. First of all, the schedule for our investments, it went down in volume [84%] in terms of CapEx spending. And the second factor of our CapEx spending is optimization, and this is obviously related to our results, our performance in general. However, as I said before, our investment at Polymer Police is in full swing, and it proceeds as planned in line with the schedule.

A couple of words about this particular investment. The stage of completion is more than 99%, as we speak. We plan to launch commercial production -- commercial operations for the second half of the year. And what's important here is the fact that after the close of this investment, we will see a change in the revenue structure across the group and this will be one of the major elements, which will strengthen our group and our performance. After this very, very challenging and difficult period. And we will be able to show you that we can cope with those problems and challenges in the market more effectively.

A couple of photographs showing the investment, the current state of affairs. So practically speaking, we are talking about the stage of completion, which is nearing the operating -- operational stage. And the production will be launched shortly.

Other investments in addition to our flagship investment include, first of all, the new energy concept. This is a concept rolled out at [indiscernible]. We are talking about the package of 7 projects -- investment projects and the idea here is to use processed heat generated from ammonia plants to produce energy medium -- energy carriers. The scheduled completion is at 93% currently. Other investments include construction of a [energy block] of energy power generation -- or power generation unit, upgrade of existing nitric acid production units and construction of new nitric acid production and neutralization of the units of production of new fertilizers based on nitric acids and the upgrade of generator to reduce NOx emissions.

Moving on to group company's financial highlights. It was a difficult period, quarter 1 was even for compo experts. We generated a positive EBITDA, but much lower than a year before. Despite the fact that Compo Expert has a diversified sales in terms of geographical structure, it still was affected by the challenging market situation.

Moving on to the performance of Grupa Azoty Pulawy. And now I'll now give the floor over to the Vice President of Grupa Azoty Pulawy.

[Unknown Executive]

Thank you very much. I would like to, first of all, recap the quarter and the determinants for our production figures and our performance in quarter 1. First of all, quarter 1 despite the spring, fertilizer application season for [indiscernible], we saw in this particular area, we saw lower demand and price fluctuations in the market as well as [indiscernible] different levels of stock than the year before. So the demand was weak and the same applies to our chemical products, especially caprolactam and melamine. We saw low demand and if there was any interest from consumers, they will be looking for cheaper products, which were offered by Chinese producers, pushing our producers from the European market.

Those factors affected our decisions in terms of our operation of our plans and our financial decisions as well. We also had 2 one-off events in the first quarter. One was positive, the other one was negative. Let me start with the positive event. We received -- in March, we received a compensation under the aid program for energy intensive sectors at total PLN 80 million. On the other hand, however, we had a negative factor. We draw down our EBITDA, but for both company and our group, we recognized write-downs for our inventories at around PLN 90 million for the company and at around PLN 75 million for the group, driving down our performance in that area.

Moving on to the figures [indiscernible] and the major highlights here for the company and the group. Let me first put -- put it in a summary and the way it changed versus the last year. First quarter 2023 was a quarter where some turbulent disruption in terms of supply versus demand situation in Europe continued due to, obviously, the effect of military aggression of Russia against Ukraine and also duty-free imports of fertilizers to Europe as well as imports of Chemical [indiscernible] segment products, produced using cheaper feedstocks and raw materials, especially in terms of electricity and ammonia and also different regulations applying to certain producers in terms of climate protection. As a result, we saw a major global drop of demand for our products.

We also saw weaker activity across all the [indiscernible] segments, which were traditionally the segments of our customers and a disruption of supply versus demand as well as pressures on the reduction of our products, and we have to adjust our production levels to the market conditions. In terms of our revenue, we saw a major drop at EUR 1.4 million year-on-year mainly due to a drop in volumes. [indiscernible] is a major factor here, and the other factor was a drop in prices of our products, especially in our major segment that is [Agro].

Production cuts, which we were forced to introduce in the first quarter of the year are translated into our costs, mainly our variable costs, especially in a major category that is material costs. In this category, we recognized our 5 major [indiscernible] costs, that is, gas, electricity, coal, benzene and sulphur. And those costs -- cost of consumption by value went down by around 30% and by -- so in terms of financials, we talking about a drop here of about PLN 0.5 million. At the same time, we saw an increase in the prices of consumption and the costs of consumption of coal and electricity at around 30-40% due to the relatively low level of COVID revenue. All our [indiscernible] categories which are shown here, that is EBIT, EBITDA, EBITDA margin were much lower year-on-year.

Moving on to decomposition of our performance by segment and a breakdown by segment, we must point out that they are determined again, let me emphasize it by the market, which affects all European producers across the board in the Chemicals segment ever since 2020, the start of 2023. That is, first of all, cheap competition from outside of EU and low activity on the consumer side on the purchasing side, which puts pressures on our prices, the price of our products. The market factors translated into a [puddle] drop of our revenues across all our business lines and as a consequence, we reported negative EBITDA levels again across the board, across all our segments.

In terms of our major segment, that is Agro segment, which reported -- which reports a share in our revenue at around 80% to 90%, it is a big segment in terms of technological advancement and complexity of our production lines. It includes fertilizers and also our portfolio of chemical fertilizers, for instance, urea, technical grade urea melamine. In terms of our fertilizer products in the first quarter, we saw a drop in sales of [fuel] fertilizer products due to an inactivity of our customers -- consumers and it affected also our flagship product that is, for instance, ammonium nitrate or nitrate compounds in general as well as urea products. And obviously, the imports of non-EU products had an impact on our performance as well.

We are talking about a major [indiscernible] share in imports here, also as a result of the decision of EU suspending -- suspending duties, taxes on those imports, especially for urea. And it's affected the performance of all EU producers, including our performance.

Moving on to nonfertilizer products. Again, due to low activity of our customers, we saw a major drop in sales volumes specially in terms of melamine. And we see a drop in demand of 20% year-on-year. A similar drop applied to contracted prices. According to [indiscernible], we are talking about a drop of 20.3%. Those factors determined low utilization of our production capacities, not only our capacities, but also other producers in the European Union. Therefore, in March, we decided to suspend the production of melamine production lines and in the past several weeks -- we see -- we have seen slight signs of improvement and slight rising trends and those signs are actually confirmed by the orders we are receiving from our customers.

In the first quarter, they would buy their products for Chinese producers, but they are turning to us now. Therefore, we decided to relaunch melamine 3 production line. Those symptoms and signs of improvement are not only observed by us, but also by our European competitors [indiscernible], which decided to relaunch the production in Austria and Germany. We also heard, this is not confirmed, but we believe that [indiscernible] relaunched Europe relaunched their production in Russia and still they are [indiscernible] closed.

Therefore, we see that we can consider relaunching additional melamine production lines in the quarter -- in the third [quarter].

In terms of urea the demand across Europe from all the major sectors that is automotive, construction and packaging sector continues to be low in the first quarter, and European producers continued to be under stronger pressures of competitors. That is in force from our side of the European Union. As a result, due to this difficult market situation, we reported again some negative effects in this particular segment that is lower sales volumes and prices. In general, the drop quarter from quarter was at PLN 104 million.

We see that the prices of major feedstock and raw material used in the production of caprolactam, that is benzene, went down by around 20%, but high stock levels across or along the value chain make our clients or customers to suspend their purchase decisions. Therefore, again, in March, we decided to temporarily suspend production of [indiscernible] caprolactam lines and we were not the only producer to take the decisions [indiscernible] for instance suspended their caprolactam unit -- production unit at [indiscernible], Germany. [indiscernible] also decided to put the production on hold temporarily for the first quarter.

In general, caprolactam units operated in -- if they operated in Europe. They would be operating at a much lower rate, depending on which was due to the situation in the market.

On to our production volumes. Ever since February this year, we have informed you and we have been informing you and we've reported our production volumes broken down by segment and in the Agro segment, broken down into products. In terms of the urea, I'd like to point here that it includes melamine production urea. Despite production cuts in the first quarter, we continued to deliver our contractual agreements based on our stock levels. We are looking very closely at the market situation. And if we see any signs of improvement, we know that we will relaunch certain lines that will put a halt or to increase those lines, which were slowed down.

The [third] circumstances, which affected us in the first quarter and they were actually observed towards the end last year, they are independent of Grupa Azoty Pulawy and the actions that we have taken, and we will be taking in terms of optimized situation, will enable us to go back to our full utilization of capacities if market allows.

Moving on to our investments. We are continuing our CapEx program. You can see a number of our flagship investments on screen, especially the most important project that is construction of coal, fire, power generation units. In the first quarter, our spending was at around PLN 30 million, mainly in relation to the start-up because we are talking about the stage of completion, start-up stage of completion.

We also secured corporate decisions related to a change -- or changes in this project to increase the project budget from PLN 1.2 billion to PLN 1.3 billion and extension of the project deadline to June 20. In polymer, this was based on the claims of our partners Polimex-Mostostal, which is a general contractor and the claims were related to a change in the value of the project and the deadline. And those claims were based on the fact that this project was rolled out in this very exceptional period and the force majeure events that is the COVID-19 pandemic or Russia's military aggression against Ukraine, which resulted in an exceptional and unpredictable increase in the prices of both materials and raw materials and services.

Tomorrow, May 24, we will have a General Annual Meeting, at [indiscernible], and we will take those decisions. In general, our CapEx spending in quarter 1 was at PLN 72 million mainly in terms of our Agro segment and the projects that we are implementing, include environment-friendly projects to reduce our negative environmental impacts. Thank you very much for your attention.

Thank you. And I'll now give the floor over to Mr. Michal Siewierski to comment on the performance Grupa Azoty Police.

[Michal Siewierski, executive]

Welcome to all of you, and I'd like to discuss, first of all, major events of quarter 1. We signed an agreement with Titania AS. And this agreement was signed until the end of 2025 to secure the supply of ilmenite, which is the major feedstocks used in the production of titanium white. On the 10th of March, the Management Board of Grupa Azoty Police received information on the decision taken by the national environmental protection and water management, fund in terms of support for [indiscernible] energy-intensive sectors and we received PLN 78.2 million under that decision.

At the end of March, Grupa Azoty Police, [indiscernible] operation and [indiscernible] of Technology [indiscernible] signed an agreement on the development and construction of the nuclear energy units with an MMR yield UltraSafe MMR reactor. At Stage 1, we are planning to build an MMR reactor with a capacity of 30 megawatts that will be used as a training and test unit. It will be connected to our energy infrastructure at Grupa Azoty Police, which will make us -- which will enable us to test it and put it in practice and see what it looks like.

We selected distributors of our product, polypropylene [indiscernible] in Poland to be distributed by Grupa Azoty compounding. At the end of March, at the C terminal at Police, we will see the first delivery of ethylene. Our Polymer Police project is nearly at more than 99% stage of completion.

Moving on to our consolidated financial results, I'd like to point or draw your attention to our EBITDA at minus EUR 30 million, and net result at minus PLN 51 million. Those results were much higher year-on-year. First quarter of 2023 was a period of lower activity of sectors that are traditionally our consumers as well as high prices of energy feedstocks as well as imports of products from outside of European Union with no custom duties. As a result, we saw a drop in demand for our products.

Those disruptions in terms of supply versus demand in the European markets also caused by Russia's military aggression against Ukraine translated into the drop in our price of our products and an increase in the cost of production. As a result, the cost of -- or the cost levels of our key feedstocks went up apart from gas, which was cheaper.

In terms of phosphates and potassium chloride as well as coal, they all went up. And as a result, we saw lower margins those factors, especially lower demand versus higher cost of production translated into lower sales volumes year-on-year -- on the other hand, certain positive factors included, first of all, financial aid to energy-intensive sectors on the back of rapid and major increases in natural gas prices. In terms of compound fertilizers, year-on-year, we saw an increase in major raw materials and energy carriers, which translated into higher prices year-on-year. However, our margins were much lower.

Our net result was impacted by [put-call] revaluation and had a negative impact of minus PLN 20 million.

Moving on to the analysis and a recap of our situation and performance by segment, we should point to the fact that in our fertilizer segment, EBITDA came in at PLN 11 million and the margin was at 1.9%. The positive EBITDA was reported for our Fertilizers segment only, and it was also due to the fact that we received an aid from the state for energy intensive sectors. And in the Fertilizers segment, due to low activity of our fertilizers, we saw a drop in sales of both technical and other products, the fertilizer products.

We, on the other hand, saw a major increase in phosphate, [potassium] chloride in terms of their prices. This did not apply, as I said before, to the natural gas prices. In pigments, our EBITDA went down, and we reported a loss of minus PLN 23 million. It was impacted as the segments impacted by a major increase in the prices of our raw materials and lower demand. Despite the fact that the average level of prices and the level of our sales, the margins went down.

In terms of titanium white, the volumes went down by around 23% year-on-year. In the first quarter of 2023, we saw low demand for titanium white and related products. Major drops in terms of demand, we're talking about the drop of 30% year-on-year, we saw in the [Coatings and Paints] segments. The prices of titanium white in the European Union went down a second year in a row, mainly due to the macroeconomic factors as well as competitive prices of titanium white imported from China.

In terms of other activities, the loss was mainly due to electricity as a factor and negative macro environment. Across the board, EBITDA was lower -- much lower than a year before. And in terms of margins, they reflected the limited demand for our products as well as unfavorable relations of price versus production costs.

In terms of volumes, we need to point out that the limited demand and high cost of production resulted in lower sales volumes year-on-year as well as reduction of our utilization -- the utilization of our capacities in order to maintain reasonable stock levels. We adjusted our operations on an ongoing basis based on the European -- situation in European market in terms of supply and demand, just as other producers in Europe did. The volumes -- production volumes went down year-on-year, especially in terms of urea, technical urea as well as ammonia and also our fertilizers, we report a drop of a major drop in terms of production volumes in order to adjust our operations to the situation, we decided to publish all the reports in terms of our volumes of production for you to know what the situation looks like.

In terms of our CapEx projects, our priority project is obviously Polymeric Police as well as upgrade of the main transforming station in Police to connect and supply propane dehydrogenation and polypropylene units, which is currently at 99%. Another major event is recycling of hydrogen originating from propylene units to be used by the ammonia unit and the stage of completion here is also at 99%.

Another major CapEx project is the making of production of the mineralized water independent of variable solidity in the Oder River and increasing the ability to produce special waters in the water preparation unit. And the budget here is at PLN 111 million and is the stage of completion is at 100%. It is currently being settled. The new major CapEx project is the second stage of the systems installed in the ammonia unit at the end of March. The stage of completion of this project is at 20%.

In the first quarter of 2023, our spending is at PLN 19 million, of which around 26% were growth CapEx. In general, our CapEx spending was down 8% year-on-year in the first quarter of 2023. The company rolled out 62 CapEx projects. And as part of our CapEX spending, we had environmentally-friendly projects with a budget of around PLN 1.8 [million] and the growth projects at PLN 4.2 [billion].

As I said before, in the first quarter, we had CapEx spending at PLN 19 million. Thank you for your attention, but we will do before we move on to Q&A session, we'll have a short recap of the situation. Again, as we said time and again over the past almost hour, it was an exceptional of quarter across the board for all the capital group companies and an exceptional very challenging fertilizer season, especially in terms of how it affected the demand which went down considerably at all our segments. We adjusted our operations, our activity in terms of the production to the supply versus demand situation. And the same can be said about other producers, who are not an exception to this rule. We continued our strategic investments in CapEx projects in order to come out of the situation, emerge from the situation as a stronger group.

We still see a very difficult and challenging situation in terms of raw materials and feedstocks, but we see certain signs of improvement of some promises around the corner, just not a breakthrough yet. However, we see certain positive signs. So ladies and gentlemen, that will be all in terms of our representation of our performance after the first quarter. And now I believe we are now ready to move to the Q&A session.

[Unknown Executive]

Moving on to the Q&A session. Then question number one, do you have any problems in terms of the transformation of gas to [indiscernible]. No, we do not have any such problems. We did not have them in quarter 1 and we do not have them right now.

Next question, the increase in terms of cost of coal and electricity year-on-year in million PLN. I will ask Michal Siewierski to answer that question.

[Michal Siewierski, executive]

An increase in terms of cost of our energy feedstocks in quarter 1 year-on-year quarter, quarter 1 2022 was at PLN 181 million for coal and PLN 240 million for electricity.

[Unknown Executive]

Next question. Why your presentation for quarter 1 is not available at your website?

Actually the presentation is now available on our website. Apologies for technical problems. So now you can download it and review it. So please do.

By all means, thank you very much for we hope to see you at the next conference after the second quarter [update]. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]