"Since the end of March, the current Management Board has been taking actions aimed at stabilizing the financial situation of Grupa Azoty, including a return to profitable production. The detailed assumptions of specific areas will be included in our recovery plan. The optimal scenario is to start implementing remedial actions in the coming weeks, after obtaining the required approvals. We are continuously updating proposed solutions, taking into account challenges related to the import of fertilizers and plastics from outside the EU," said Andrzej Skolmowski, Vice President of the Management Board of Grupa Azoty S.A.

The prices of all production raw materials in the reported quarter saw significant year-on-year declines, with the key raw material, gas, falling by 50% (according to TTF quotations). The unit costs of energy media, such as electricity and coal, were also lower. However, these declines were insufficient to achieve a positive EBITDA margin.

The key factors affecting Grupa Azoty's financial results in Q1 2024 compared to the same period last year in major segments were:

Agro Segment

In the Agro Segment, the main determinants of results in Q1 2024 compared to the same period last year were increased production and sales volumes against a generally observed market decline in prices - from products to raw materials and agricultural produce.

In Q1 2024, due to higher purchasing activity of customers, fertilizer sales increased year-on-year, both for nitrogen fertilizers (by 52%) and multi-component fertilizers (by 37%). Customer activity growth was weaker this year, with increased interest in the segment products only appearing at the end of the quarter. The continued downward trend in agricultural product prices and the supply of imported fertilizers from outside the EU, both in terms of prices and volumes due to increased market availability, negatively impacted the fertilizer market.

In the Agro segment, there was a significant year-on-year decrease in the price of the key raw material for nitrogen fertilizer production, natural gas, which offset the decline in product prices, resulting in a positive EBITDA margin for the segment. Prices of key raw materials for multi-component fertilizers (phosphates, potash salt) also saw significant declines compared to the previous year.

The EBITDA margin of the Agro Segment in Q1 2024 was 1.2%.

Chemicals Segment

In the Chemicals Segment, Q1 2024 saw a year-on-year decline in sales volumes, as well as a decrease in raw material and product prices.

Unfavorable global macroeconomic conditions and persistently low structural demand for Chemicals Segment products negatively impacted the segment's results. However, logistical disruptions causing delays in imported product deliveries (extended delivery times, higher transport costs) positively influenced the segment by increasing interest in European producers' products. The decline in raw material prices, including propylene, also had a positive impact. All product prices in the segments were lower year-on-year, with the most significant declines in NOXy, Pulnox, and urea for technical purposes.

In Grupa Azoty Puławy, melamine production was resumed on one installation.

The EBITDA margin of the Chemicals Segment in Q1 2024 was minus 14.9%.

Plastics Segment

In the Plastics Segment, Q1 2024 recorded a year-on-year increase in production and sales volumes, and a decrease in raw material (phenol) and product prices.

The European market was characterized by poor economic conditions, which - amid increasing geopolitical tensions - negatively influenced consumer purchasing sentiments. Logistical constraints caused by attacks in the Red Sea affected the lower and delayed import of PA6 and derivatives from Asia, leading to increased demand for European producers' products. Real demand in Europe from the primary application sectors of the segment's products remained low but stable. Therefore, the year-on-year increase in polyamide sales by Grupa Azoty was slight.

Due to the continued difficult demand-supply situation in Q1 2024, caprolactam production in Grupa Azoty Puławy was not resumed.

The EBITDA margin of the Plastics Segment in Q1 2024 was minus 13.4%. The segment's results also include the production and sales of Grupa Azoty Polyolefins S.A., which is at the stage of installation startup and commissioning tests.

The presented figures are estimates and may change. The final results will be presented in the consolidated report for Q1 2024, scheduled for publication on May 28, 2024.