Q3 2019 Grupa Azoty SA Earnings Presentation
Warsaw Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Grupa Azoty SA earnings conference call or presentation Wednesday, November 13, 2019 at 11:00:00am GMT
TEXT version of Transcript
* Artur Rafal Kaminski
Grupa Azoty S.A. - VP of Management Board - Grupa Azoty Kedzierzyn
* Izabela Malgorzata Swiderek
Zaklady Azotowe Pulawy S.A. - Vice-President of Management Board
* Pawel Andrzej Lapinski
Grupa Azoty S.A. - Vice-President of Management Board
* Wlodzimierz Zasadzki
Grupa Azoty Zaklady Chemiczne Police S.A. - VP of the Management Board
* Wojciech Piotr Wardacki
Grupa Azoty S.A. - President of Management Board
Wojciech Piotr Wardacki, Grupa Azoty S.A. - President of Management Board 
Welcome again to all of you in the room at the Warsaw Stock Exchange, and also everybody who is watching and listening to us live using remote means of communication, to our next, yet again, conference at which we'll present and discuss the third quarter and also the first 3 quarters of 2019.
It is with great satisfaction that I can present and discuss our performance today because this is good, solid and actually record-breaking results; these are the record-breaking results that we wanted to discuss today. Looking at the company's history and our track record, I do believe that apart from 2017 -- but let me remind you that 2017 was the year in which Grupa Azoty was managed by ourselves. Grupa Azoty Group managed to perform very well, excellently, actually. The 3 quarters of this year brings us great satisfaction, especially in terms of the specific results of the Group.
I don't want to repeat the information and reiterate the information that you'll see in the materials that we handed over to you and published. I would only like to emphasize and focus on certain matters and areas. We reported record-breaking revenue from sales after 3 quarters of the year, I'm speaking about nearly 1 -- I mean nearly 8 billion, PLN 8.7 billion, including PLN 2.6 billion in quarter 3 alone. These are record-breaking results to date, and this was possible due to fully -- full presentation of Compo Expert's performance and also our consistent efforts in the Compo area -- business area, which generated revenue based on the very optimistic business plan at the acquisition date, the revenue at a certain level and also certain economic parameters and indices. The share of Compo Expert in the revenue stands at 14% at the moment, and this is not merely an addition and compounding the revenues of the 2 entities. But if you look at the revenue figures, you will see that they grew by more than 20%. This is where -- this is why I can tell you that the sources of that growth were several.
Looking at our performance. We also recognize certain externalities independent from us, especially in terms of the prices of gas and the increase, which always has an enormous impact on our costs. But at this point, the natural gas price was less than by about 40% year-on-year, and we have to remember that 2018 was an exceptional year. Between the period of March until the end of 2018, this was a period that saw an increase in gas prices, which have never been seen before. So if we compare today's gas prices to, for instance, 2015, then the reference point would be quite different. And I do encourage that you take an in-depth and more detailed analysis then looking only at a year-on-year comparison.
If you look at the performance, you will see that in the third and fourth quarter, the prices of gas went down substantially, which was compounded by a number of positive externalities. Therefore, I do believe that -- and I am sure that the performance, and this year in the third quarter is record-breaking for the Group.
I've mentioned during the press conference that Grupa Azoty Group is, to put it figuratively, a great construction site. We have had a number of major investments in the works in the pipeline and also in progress. Some people are quite happy with it, others are concerned, especially those who are looking at the company's growth plans in a very short-term perspective. However, if you consider safety and also the stability and also prospects for growth, especially considering the economic figures in general, then I do believe that the diversification of revenues and entering some new business areas, I do believe these are the only possible means to reduce the risks that the group has always faced.
The main and the major investment and CapEx figure and also one of the major investment in the Polish Chemical business, Polimery Police, the project, Polimery Police, has been progressing as planned without any interruptions and very consistently. In the third quarter, we signed the specific term sheets with Hyundai and also the Korean governmental agency, KIND. Those documents specify very detailed conditions of financing at the level of PLN 500 million in equity for Polimery Olefins, our SPV, under the project finance. This has been confirmed officially, and I would like to draw attention to the fact that the KIND Korean governmental agency published information on the project and the model, received that information at the turn of April and May and needed only a month to take a final decision. So we went together, we went on a fast track, and we signed final documents in September already. This has been a great test for a private investors relation and with our relation with the private investors, the corporation, and also the efficiency of the Korean side of that contract. They are able to take economically viable and important decisions within a very short time and with a lot of courage and determination. This is -- this also makes us very satisfied and optimistic in terms of our outlook for the future.
You might have also noticed that one of the sources to financing of Polimery Police were the proceeds from the issue of shares of Police. The initial issue was launched at the turn of April and May, and we informed you at that point of the reasons for putting that issue on hold. This has been -- this was independent of us. This was due to certain legal regulations that needed to be amended but were not. And we declared that we will relaunch that project, and we did. And looking at our relationship with the Korean side, this was also a kind of a hesitation point for them because they did not know whether or not the issue will take place. During the voting, on the relevant resolution on the share issue at -- for Polimery Police, the voting took place, and we have to remember that we have -- we can have no free float at all, for instance, no single share can be bought at a stock exchange within, for instance, 1 week. Still, the voting was unanimous. And let me remind you that Grupa Azoty is the main -- the major shareholder at 60% -- 66% and the State Treasury at 5%. (inaudible) open and the investment fund at  and also 8% account, which is accounted for another shareholder. And the rest of the shareholders are minority shareholders. Those major shareholders took a unanimous decision to launch the share issue process with preemptive rates. I would like to point to it again and emphasize that issue again.
Also looking at the project at a bit of a broader perspective. We also had a very difficult Friday, hot Friday. Namely, we had a General Meeting of Grupa Azoty, the main shareholder, regarding the preemptive rights and the taking up of the shares at Grupa Azoty Police S.A. It was approved by the Supervisory Board, and we saw certain moves on the part of a minority shareholder. The minority shareholding groups -- group, including Acron.
So far, Acron was pretty passive, did not take any voting during the meeting, during former meetings. However, during that particular meeting that regarded the new issue of shares, this particular shareholder was quite active. And I would like to dwell a little bit on it right now because it's very important for you to have no doubts, and to answer your questions.
Let me go back to our previous conferences, because we often emphasize that the way that Grupa Azoty is influenced by certain entities who are not -- who are pretty much against our development and our growth, it's a very major issue. We saw a very primitive attempt of taking our -- taking over the Grupa Azoty Group a couple of years ago. You are well aware of it. The competitive fight, or the competitive influence then was transplanted into the legal area. And after the new management board was appointed at Grupa Azoty Group, we needed to take very important major steps in terms of cadmium and also competitive pricing of, for instance, nitrate fertilizers and so on. Again, I would like to stress that those competitive pressures can be seen and are transplanted into other areas such as the legal area. I tried to appeal to you, the shareholders group, to take a cautious approach because there are a number of entities and groups of interest that -- who will and continue -- and will continue to try to block that project, the Polimery Police project, and put it on hold and put a number of obstacles so that is not successful.
The initial project for Polimery Police was quite different in terms of its nature. It was supposed to be a project whose aim was to build a propylene plant -- production plant. In 2014, a number of governmental agencies and also as part of the presidential election campaign and also in 2015, it was mentioned time and again. There was also an attempt of a takeover of Grupa Azoty by Acron. You might remember, certain positive reactions to it from a number of politicians. You can always come back -- go back to the Internet and see it for yourself.
Let me be straightforward. The management board of Grupa Azoty has never ever been supported from any politicians from the civic platform, platform of the [Polska], the political party. We needed to go to court, also to fight certain false information as well to counteract such information. A number of entities tried to show that our project is not feasible. It's not viable economically and whatnot. Some of these people can be called by the term that is used in the literature, useful idiots. There are a number of useful idiots in their business as well. You are business analysts, so I would appeal to you to be very careful and cautious in your analysis.
When we spoke to the equity experts, we investigated a number of economic models in cooperation with advisers and advisers could work with a number of experts with scientific titles. And there was one expert that appeared last year on the scene, and that expert tried to change the history of the world, so to speak. I cannot speak very bluntly about certain things because we are in the midst of the investigation by the prosecutor, by the General Prosecutor's Office of Poland.
There are a number of questions of, for instance, Senegal, because I'm speaking about the Senegalese case and the investigation on the Senegalese case. And that expert, when I appeared at Police -- when I came to Police in 2016, that expert took part in those very primitive actions, with the ban on competitive activities still in effect. And we needed to -- we -- you might remember that, that person was supposed to receive a fee for his involvement. These are those motives that guide such people. So please be very cautious in terms of analysts, opinions and experts. There are no sentiments in this area. Our project went through a number of phases. In -- at Stage 1, everything was agreed on, and the project was supposed to be less money-intensive. However, that project at Stage 1 was well prepared.
And looking at the propane propylene spreads, price spreads and looking at the information from that particular period, then this project could have been an explosive for the group, but it was not. There were a number of attempts to block that project, as I said. A problem appeared with the acquisition of license to the production of polypropylene. We managed, however, to acquire an American license, a very technologically advanced license, even one of the best licenses in the world out there. So at the last moment, we managed to acquire a great, great license to produce polypropylene in very advanced fractions, very high fractions, highly advanced fractions of polypropylene. So this project is still successfully progressing.
At a breakthrough moment like this, a number of people appear and a number of reactions can be seen. And the reaction of the dormant minority shareholder was pretty abrupt, but this is not an act. This is not an accident, it's not by accident and it did not take us by surprise.
Looking at Prospekt and some other publications, you will find certain publications talking about the number of investments in Russia, about the great boom in Russia in terms of the construction of polypropylene units, an active involvement of the Titan Group. Please to check out what Titan Group is all about, because it's very, very interesting.
So there was an attempt to block and undermine that project. However, the resolution was adopted in accordance with the decision of the management board. And nobody -- and I'm repeating this, nobody can block the issue of those shares. We are prepared to face any version, any course of action from a legal perspective. All our resolutions are well tested and safe. They have been verified by the experts. And I do not believe that there is a court that could annul, invalidate or cancel any resolution. Some actions were put on hold because there was one shareholder who had certain doubts and hesitations. However, we do not expect any new ideas, any new solutions that could change the course of events because this particular shareholder is highly valued by us. We do trust and confide in that particular stake -- shareholder, and we do believe that the cooperation with that shareholder will be -- and the partnership with that shareholder will be still successful.
All those activities and actions taken to block that project cannot succeed. The issue -- the share issue is proceeding as planned, in line with the prospectus. In the prospectus, we needed to show the Police, the situation at the Police, the state that the Police is left in, and the importance of that particular investment for the entire group. So a request to all of you, there are no sentiments here, this is a hard fight, competitive fight in the business. And the reaction of the major shareholders shows that this particular project is of major importance to both Grupa Azoty Group and also for the Polish economy, and is also against the interest of a number of certain entities. However, this is not a competition to any Polish entity and absolutely, ORLEN -- especially, it's not a competition towards ORLEN. The market figures are growing. There is no risk in this particular area. And also, the legal situation. In the legal situation, we're on the safe side. So this very element does not really apply in reality.
As I said, we are progressing as planned, in line with the schedule. Of course, the deadlines are tight, but we are doing it. And I do not believe that, for instance, PZU could be -- could play a role of the, so-called, as I have mentioned before, useful idiot in the schedule in terms of the progress -- scheduled progress of that investment. I do not believe that this could be the course that PZU could take ever.
So we -- rest assured -- we assure, we are waiting for the developments. We are in line with the regulations. We are delivering the project as planned, in line with the prospectus. We are prepared to have a contribution of 66%, in line with the financing structure. And so Grupa Azoty Group is well prepared.
In a slight less optimistic scenario, a less desired shareholder could appear on the scene very well. The nature of share issues of that type. There might be an unfavorable surprise, a negative surprise in the course of events. However, I do not believe this is very likely, and I do believe that we will be progressing as scheduled and as planned. And I do believe that this project is a great project, and will be verified as time goes by. And again, coming back to the private investor, the Korean side, this has been a great test for our partnership and in terms of the evaluation of that particular project.
Coming back to major milestones and highlights of the period. I could talk about it on and on. I would not like to dwell too much on it. Maybe we will ask for specific questions. However, I'd like to mention that we signed a contract for the construction of a new power units. We requested very renowned experts, advisers to work with us in that particular area. There has been a number of false information published in the market referring to Russian gas, referring to major investments that would place Grupa Azoty in the market to exceed our needs in terms of our power business. This was not real, this was not feasible. Also, on the technical perspective in terms of the supply -- potential supplies of gas, the management board of [Huawei] verified the investment is viable, and is also in line with all the requirements in terms of natural environmental protection and also other legal requirements. So all those false -- all that false information referring to the stinky Russian gas is absolutely unsubstantiated.
A very important matter for us was the license, the acquisition of license for the [Oshay] deposit for [share Copal], the only mining facility of sulfur. And this is a partnership. And in the course of the partnership, certain local authorities, for instance, the mayor of [Powaniecz], a very interesting figure, you can read about him on the Internet as well. Well, there has been a number -- there have been a number of measures taken to block that investment but they failed as well. And we will do our best to proceed with that investment in line with the legal regulations, and I will take this opportunity to thank all the people, politicians, governmental authorities and other stakeholders who supported us greatly in the process and therefore, we managed to secure that particular license.
Kedzierzyn and the R&D center at that Kedzierzyn will be -- will launch that project soon. It will be highly specialized in the chemistry area, especially in terms of OXO products. And Kedzierzyn is highly competent in that very area. We would like to take it even further. Another example of the changes in the very -- in that very area. We introduced new specialty fertilizers [out of ex OXO even] at Kedzierzyn. It is also a result of the hard work and expertise of Kedzierzyn.
In terms of financial performance, you can see those figures in the materials. I'd like to mention that we started to work on the strategy for the years to come because our strategy -- horizon of our strategy is until 2020. So we are now working on the new strategy that will cover the period from 2020 to 2023. We will have our own strategic analysis. In the fourth quarter, we will decide to appoint a team. We would like to work on that strategy using our in-house resources. The major of investments that needed to be -- need to be consistently implemented and delivered. Therefore, we will focus on optimization, mainly in order to have additional savings in terms of costs and also leveraging the existing technological solutions and also novel solutions in terms of R&D as well and also circular economy. This is a major trend that we see right now; we cannot reverse it. It's irreversible, especially in terms of recycling and plastics. This is the future at which we want to -- on which we want to focus. We expect that the effect of our work will be verified by independent experts and [independent] company which will assess our efforts. And only after that assessment, we will go -- get back to you to present our new strategy and our plans.
We also presented the effects of synergies with our new addition, a new member of our group, Compo. Very consistently after the acquisition, we have been working on the synergy effects, and we already managed to achieve those effects. We decide -- we put a number of EUR 40 million, but these are very conservative estimates. There are a number of projects that we are still working on, but we cannot tell you too much about it due to confidentiality clauses and also the competition. We are streamlining our partnership, we are tightening our cooperation and our business relations. Starting in quarter 4, we will have a joint supervisory board, because we have not had it yet. We -- so far, we left the management board as it was. They -- we gave them green light because there are very, very experienced people in the business. However, in the quarter -- in this quarter, we appointed a managed 4-person management board, with Mr. [Koajay], Mrs. [Lidisteribesca] on the Board and also 2 renown experts -- legal experts. So this authority is now in operation.
We are tightening our contacts, business contacts in this very area. We had a meeting of all representatives -- sales representatives from all over the world. This meeting takes place every 2 or 3 years, and the representatives of all the markets presented their performance and discussed their plans. So we are working very closely. We have also people who are coordinating this partnership. The only obstacle that we encountered were the breakdowns that we saw in the plastics area. I'm talking about the breakdown of the new Polyamide 2 plant. The guarantee expired, and those also -- it was considered the force majeure effect. After the guarantee period, the product, the machine manufactured by a very renowned manufacturer producer actually broke down, which was unforeseen. We needed to counteract this problem, and therefore, we have certain repercussions at that point. But we managed to overcome them.
And the second breakdown that we saw, which affected the synergy effects. We did inform you beforehand that we will try to use some of our products and send them over to [Grazette], the Compo plant. During a very typical annual overhaul, the technical supervision office tested certain boilers at the ammonia plant. They -- by using very modern equipment, they actually detected certain leakages, minor leakages, but they decided to block that unit. We welded the boilers, but the welds were not tight. And our specialists from [Tarvuth], and from Huawei were very much involved in the problem. We found the source of that problem. These boilers are 20- to 30-year-old machines. This is an example of the challenges that we needed to face, that we still need to face. And also the cost of maintenance of such old machinery and plants.
It turns out -- turned out that around 20 years ago -- or 20, 30 years ago, Police was fooled by one of the suppliers. The chromium content in the metal that the boilers were made from resulted in leakages. It also affected our production of urea, but we managed to detect a problem. We will also launch a new line and the synergy effects with Combo will be delivered as planned.
Grupa Azoty in many areas, Grupa Azoty is consistently delivering its projects. And it is with great satisfaction that I will give the floor over to the representatives of the major group companies. And I would like to express my gratitude to all people working in the group, to all our employees across the Grupa Azoty Group. Because in this very, very challenging, difficult period, we delivered great projects and we delivered superb results. So this is a major, major achievement. Thank you very much for that.
Pawel Andrzej Lapinski, Grupa Azoty S.A. - Vice-President of Management Board 
Ladies and gentlemen, as my predecessor just mentioned, if we look at the performance on the third quarter. Our performance is record-breaking, especially in -- both in terms of revenue from sales and EBITDA. EBITDA came in at PLN 316 million, which is a great figure, and it was expected by us. However, it is worth pointing out that we still have one, the last quarter, ahead of us and the level of revenue at PLN 8.66 billion for the first 9 months of the year means that at the end of the year, the revenue figure will exceed PLN 12 billion, which, again, will be a record-breaking result for the entire year.
As you can see on this particular slide, and let me focus on year-to-date results, the last year was very challenging. Our EBITDA came in at 4 - PLN  million. It was additionally reinforced with selling prices that were higher than a year before, despite the price of gas. The price of fertilizers went up and also the prices of other products compared to the previous year's figures. The same applies to the raw material prices. We managed to have certain savings in terms of the restructure of those savings, the major savings related to the price of gas and also benzene, PLN 25 million.
In terms of other costs. Other costs went up, especially in terms of coal -- hard coal and electricity, at 73 -- going up by PLN 73 million, the same for phosphates and potassium chloride, and other miscellaneous costs went up as well.
In terms of CO2, the costs went up by PLN 48 million, and additionally, 108 -- PLN 103 million in terms of the share of Compo Expert in our EBITDA. All in all, EBITDA margin was at 15% for the 9 months of the year, and EBITDA stood at PLN 1.257 million -- billion PLN.
In terms of our geographical structure, you can see that European Union is our major market, and with 15% around the world. We sell products across all continents, Australia is not listed, in particular, in that slide, but we do sell to Australia as well, North and South America, and also both at 3% and also Asia at 4%, and then Africa at 1%.
In terms of the breakdown of our performance by segment. As might be expected in the third quarter, the breakdown in terms of the segment share is comparable to our previous results, traditional fertilizers at 59%, chemicals at 23% and plastics at 13%. The agro fertilizer segments were the major segments in terms of EBITDA at 62%, 13% for chemicals and only 1% in the plastics segment. I will dwell more upon it in a second.
As I have mentioned, higher prices going up by 73% for electricity and coal were seen in the period. However, let me remind you at that point that Grupa Azoty buys electricity in the perspective of 3 years -- of the prospective 3 years. That means we are 2 years ahead, and also 70% with 1 year ahead. This year, our policy was similar in terms of CO2 purchases as well. We had forward instruments transactions -- we use forward instrument transactions, and we are buying at up to 70% of our volumes within the perspective of 1 year and up to 50% within the perspective of 2 years.
A couple of words about our customers' market. As you can see on that particular slide, in Europe, we had major droughts and flooding depending on the particular area of the continent. As a result, some countries saw major shortages in terms of grain production. However, luckily, Poland was not very much affected. We saw certain drought periods, but all in all, we expect a rise in production figures at 8%. What is really important as well is that Germany and also France reported higher figures, and these are our major markets for our projects -- products. This makes us very optimistic in terms of the outlook for the future.
In the third quarter, we saw a slowdown in terms of demand. However, the -- towards the end of the quarter, the demand figure went up and it's on an upwards trend, especially in terms of the demand for nitrate fertilizers.
In terms of our performance, in more detail, our revenue went up by -- standing at PLN 1.5 billion, EBITDA at PLN 196 in quarter 3, and also the EBITDA margin of 13%. The demand, as I said, weakened a little bit in this particular quarter. However, it picked up in the second half of the quarter.
Another important information is the fact that we receive direct payment grants and direct payments and also, a small source of financing an [A fund] for the drought situation. And the farmers will most likely have the funds for the purchase of our products. According to our information from the market, to the best of our knowledge, we do know that the farmers are putting their purchases on hold in terms of agricultural products. This is a very typical situation for this period. Farmers are keeping their stock and waiting for -- with the sale -- with the sales for until the period of higher prices.
In terms of Compo Expert's share, the margin went up from 6% to 9%, and the revenue figures are also strong. In the fourth quarter, we expect a relatively better situation year-on-year.
The synergies effects have already been mentioned. These effects can be even higher because we are still working hard on the opportunities for more synergies, and we have certain strategic projects in the making in the pipeline, and we do expect that the synergy effects will be even higher in the longer term.
The Chemicals segment fared not that well. We have a number of chemical groups but -- especially melamine and OXO alcohols and plasticizers performed not that well. We are facing higher supply, the situation of higher supply in the market.
Other product groups are at standard levels in terms of their sales figures. For the 9 years of the -- for the 9 months of the year, our EBITDA came in at 1% lower year-on-year. And in the fourth quarter, we do -- we can expect that the performance will be weaker year-on-year -- quarter-on-quarter. However, the situation across the product groups is under our control, and we are doing our best to face the competition -- the competitive pressures.
And the Plastics segment, the weakest segment of all. We saw a major slowdown in that particular market, especially in the automotive and construction business where our customers for -- the customers where our product worked and also the household goods business.
Other business areas, for instance, oils and textiles were stable. In the coming quarter, we expect to see a continuing slowdown because the fourth quarter is typically the period when our customers are clearing their warehouse storage areas, and we are expecting purchases to resume only in the month of January 2020.
The results reported for quarter 3 were affected by major price increases, for instance, for phenol and benzene. The prices of those 2 raw materials went up, but the situation is more stable right now, especially in terms of phenol, in which case we even reported better margins year-on-year. You have to remember about the spread in terms of benzene and phenol prices, which can affect our performance in quarter 4.
In order to achieve stable performance in Plastics across the group, we are working on the units to produce modified plastics. We want to include that particular element across our group. We will launch a new production unit for modified plastics at Tarnów. And we assume that in 2020, half of the capacity of that particular unit will be utilized, 50% and, towards the end of the year, this level should be achieved. As a result, we'll be able to -- we should be able to stabilize the margin. And as you might not -- as you might know, the margin, the profit margin on modified plastics is higher, for instance, in comparison with polyamide. This should stabilize our business in the future.
Thank you very much. And right now, I'll give the floor over to Mrs. Izabela Swiderek, representing Grupa Azoty Pulawy.
Izabela Malgorzata Swiderek, Zaklady Azotowe Pulawy S.A. - Vice-President of Management Board 
Ladies and gentlemen, the third quarter at Grupa Azoty Pulawy and the Grupa Azoty Group also gave us satisfaction. Although our revenues from sale in the third quarter went down year-on-year slightly, however, I'd like to draw your attention to the fact that the parameters -- the performance parameters are very much varied. And EBITDA and net profit figures are much higher than in the third quarter of the previous year, which is obviously related to the prices of strategic raw materials, especially in terms of the prices of natural gas.
In the third quarter, the prices of natural gas went down by more than 50%, which obviously had an impact also on our net profit figures. We, however, look at the performance and the figures for the 9 months of the year versus the previous year. We can see that all parameters went up.
In terms of revenue, standing at PLN 2.7 billion, these were generated through the sales of our Agro products. Most of our product -- fertilizer products offered by Grupa Azoty Pulawy were sold at prices that were higher year-on-year. This, as I said before, generated an increase of nearly PLN 130 million year-on-year. And the 2 main drivers were the higher prices of our products at more than PLN 432 million, and a portion of that amount was adjusted, offset by a decline in terms of the volume of sales at PLN 113 million.
My predecessor has mentioned the major driver, which was a decrease in the prices of strategic raw materials, especially, as we have all mentioned, the natural gas. In the period of 9 months of the year, the price went down by more than 30%. And also another positive driver of our performance included a change in the prices of benzene at nearly PLN 25 million for the first 9 months of the year.
Obviously, the parameters -- or actually the EBITDA figure at nearly 500 -- PLN 540 million was driven mainly by the Agro segment, both in terms of revenue from sales and also the savings in terms of costs, with a positive effect of nearly PLN 140 million, both in terms of our performance parameters and margins and revenue figures.
Ladies and gentlemen, in terms of our EBITDA bridge for the 9 months of this year versus the previous year, as I have mentioned before, the difference is at more than PLN 300 million. And this difference was generated mainly through the sales of our products in the Agro segment.
In addition, in our Chemicals segment, our second major segment at Grupa Azoty Pulawy, it also had a positive contribution to our EBITDA figure at more than PLN 20 million. On the other hand, a slightly negative impact was generated by the remaining segments of our business. As I have mentioned before, most of our Agro products were sold at prices which were higher year-on-year which had a positive effect of -- on our EBITDA at PLN 140 million. Of that amount, the major effect was attributable to fertilizer products.
In the Chemicals segment, we had a weaker situation in the quarter -- in the third quarter and also throughout the 9 months of the year. The prices of main products offered in the Chemicals segment by Grupa Azoty Pulawy was slightly lower, which obviously affected our -- which obviously offsets the positive contribution of the Agro segment.
Most of our products in terms of the volumes were sold at lower volumes. And this particular factor applies both to the Agro segment and also to the Chemicals segment.
In terms of raw materials, both for the period of 9 months of the year and also for the 3 -- for the third quarter, we have a positive contribution and in addition to the lower prices of benzene and natural gas, which were the major drivers. Also, the prices of sulfur and hard coal as well as electricity had a positive impact, both in the 9 months of the year and in the third quarter. Those prices had negative impact. Obviously, those prices went up. And additional factor, which was on the negative side in terms of our EBITDA, was the prices of CO2 emission allowances both in the 9 months of the year and also in the third quarter. And in the third quarter, those prices went up quite considerably which, as I've mentioned, affected our general performance in terms of EBITDA.
In terms of our 2 major areas of business, at Pulawy and also across the Pulawy Group, obviously, our revenue in the Agro segment is a major driver. That revenue comes from the sale of fertilizer products, going up to 55% in terms of its share, of which the major product group are nitrogen fertilizers. Please be aware that this particular subsegment came in at a lower level in terms of the revenue in the third quarter alone. However, if we consider our performance for the 9 months of the year, we will see that there was an increase at 15%. The third quarter traditionally and naturally is a period of a slowdown in terms of the demand of fertilizers, which obviously was also compounded by the weather conditions, and this also affected our phosphate fertilizers and our performance in that particular area.
Therefore, the revenue in this particular subsegment went down as well in the third quarter. However, over the period of 9 months, we had a positive effect going up by 11% compared to the previous year's period. Most of our products, fertilizer products, both in terms of nitrate fertilizer and also phosphate and compound fertilizers in the annualized period were sold at higher prices year-on-year. In some cases, they were lower in terms of volumes, but the prices were higher compared to the previous year.
In terms of our Chemicals segment, the period is unfortunately -- in the period of the third quarter is unfortunately a period of a slowdown, and this can be visible if we look at the performance of Grupa Azoty Pulawy as well. However, the difference between our performance in Chemicals in the third quarter and the difference between our performance this year and the year before is not very high and is at 8%.
Two flagship products, which is melamine and caprolactam in that particular segment, were sold at prices which were lower than a year before and also in 2 periods before, and also the volumes of sales were a little lower. This is due to high supply of melamine in the market and also the fact that melamine is sold from Asia. As my colleagues have mentioned before, this element must be analyzed and managed by the company.
Let me go back to -- if you let me refer to what is really important in terms of our highlight of Grupa Azoty Pulawy. One of the major highlights is the fact that we launched a major -- the largest investment at Grupa Azoty Pulawy, that is the construction of a power unit, which was launched just recently on September 25, after signing a contract with the general contractor for this investments. As you probably know, this contract value is at PLN 1.6 billion -- PLN 1.16 billion. It is a turnkey project with a lump-sum fee.
In addition to that major investment, we are still continuing certain other investments, and we are drawing near their completion, especially in terms of nitrate units and also nitric acid units. This investment is progressing as planned in line with the schedule.
Summing up, the third quarter of the year is a period when we spend PLN 130 million on our investment projects on the CapEx project, both in terms of upgrades of our existing installations and also the launch and construction of new units in order to increase our production capacities.
That will be all in terms of my part of the presentation. Thank you very much, and now I'll give the floor over to Mr. Zasadzki to describe the situation at Police.
Wlodzimierz Zasadzki, Grupa Azoty Zaklady Chemiczne Police S.A. - VP of the Management Board 
Ladies and gentlemen, good afternoon. In terms of our financial performance at [Chemiczne] Police, then despite a very difficult challenging situation and the turn of the second and third quarter, our financial performance is well above the estimates, your estimates.
Looking back at our historical figures. Our performance is at an average level reported since 2011, with a slight exception of 2012, which was the year that saw a noticeable and major deviation in terms of our performance. The revenue for the 3 quarters of the year stood at a level comparable to the -- our previous year's performance, and EBITDA -- but EBITDA went up, and also the same applies to our net profits for the first 9 months of the year. We have to remember that the third quarter is usually and traditionally a period of a slowdown in terms of the sales of fertilizers. And as you might know, Police mainly sells compound fertilizers. A very interesting situation was observed in terms of compound fertilizer sales because, in terms of volumes, we sold lots more of our compound fertilizer products than the year before, probably due to certain new legal regulations in the European Union. But also, this was driven by the group's strategy, especially in terms of the corporate trade department which is involved in the joint policy and joint sales of all our fertilizer products across the group, which eliminates certain competitive pressures between the group companies. And that joint strategy and commercial strategy allows us to compete more effectively with imported products. As a result, we saw a positive contribution to our revenue, for revenues from sale. We saw a positive effect in terms of both volumes and also financial figures in terms of revenues. This was due mainly to higher prices of our products -- selling prices of our products. These higher selling prices were achieved, as I said, due to our joint strategy of sales and also our effective competition with the imports -- with importers. This effect was also driven by the fact that those selling prices outpaced -- or the rise in the selling prices outpaced the rise of the breadth of our main raw materials. And also we diversified our supply sources and maintained constant relations, constant and effective relations with our suppliers, for instance, with phosphate rock ilmenite or slag and also potassium chloride.
Obviously, at Police, compound fertilizers are the major product group. And if you look at the revenue figures for compound fertilizers, you will see that the revenue went up year-on-year. However, the sales of urea and ammonia went down. However, as you probably know and are well aware, it was due to a major breakdown which took us an entire quarter, nearly 3 months. If it hadn't been for that particular situation, that particular breakdown, I do believe that our performance would have been record-breaking at Police.
In terms of our second major segment at Police, that is the sales of pigments, namely titanium white. Let me put it this way. Looking at the figures, we see a noticeable downward trend, both for the revenue and profit figures. However, we compare that performance with a very exceptional year, which was 2018, which was due to the fires that occurred in the previous year in the market. Obviously, there was also an influence from the east from China and the prices of titanium white went down as a result. And that decline in prices -- in titanium white prices was at approximately 11%.
In a nutshell, in terms of our performance, that will be it. I would like to spend much more time on what's very important at Police and has a major, major effect on our performance at Police, namely SPO and the project that will be implemented based on the SPO.
I have been asked time and again, why do we need -- why we needed a share issue at Police? First of all, because out of all the major companies, it is only Police that could offer the price issue. And secondly, the group will achieve a larger share at the Polimery Police projects -- in the Police Polimery projects and additional advantages in the future as well. I will discuss them to the extent possible in a second.
But let me tell you at this point that through the issue of shares, we will and we count on increasing the free float at Police because the benefits of the projects are not only capital-related. But we're looking also at the advantages of -- not only looking at the advantages for the investors, but also the investors will benefit from capitalization of our company.
Market capitalization of -- for Police is at a very low level. You are well aware of that fact. I cannot promise you that Police will see the very same situation as the company -- as a certain company at -- in Saudi Arabia at which, within 10 years, the capitalization went up from 10% to 50%.
Our ambition is not that high, but we do count on increasing the fleet float and also on deriving certain advantages based on the SPO.
We have already mentioned the stage of that product. Mr. Wardacki mentioned the agreements that have been signed and the arrangements that have been made. I, on my part, would like to focus on the financial part of that project to the extent that can be communicated to you because, obviously, some of that information is confidential. But I do believe that you will be able to translate that limited information into financial figures.
The volumes expected for that project is at around 547 million tonnes, and the very investments consists in 3, so to speak, independent projects, which can function or operate -- be operated independently. We have a terminal in which we'll be able to trade in LPG. It requires a limited investment in order to generate the potential for new revenues.
The second element is propylene, with  railways siding, we will be able to supply propylene if we needed more propylene to be delivered. And let me put it this way, this very installation is adjusted for the polypropylene production, but the polypropylene unit is very flexible. This is a similar plan at Arabia -- at Saudi Arabia is used to produce lots more than expected.
Thanks to the railway siding, as I mentioned, which can be constructed in the terminal, we will be able to source propylene, but we can also sell propylene. There are no limitations to our sales of that particular product. And polypropylene, which is the final product with a production capacity of 5 -- [437,002,000 tonnes], for which we will need around 500,000 tonnes of propane. And today's price of propane is between $500 and $600. And the cost of propane is at around PLN 1 billion, as you can easily calculate.
The revenue is estimated. And this information was communicated in the prospectus, this prospectus that I'm showing you right now. So the revenues are expected and estimated at $685 million, that is approximately PLN 2.63 million. And propane accounts for around 50% of our operating cost -- cash costs. Cash costs, I'm emphasizing this. And again, this information is published in the prospectus as well. So total cost -- total operating cash costs are at approximately PLN 2 billion.
Is there any questions in terms of our performance and also our products? I will be able to -- I will be ready to answer them. But right now, Mr. Artur Kaminski will discuss or present and discuss the performance at Grupa Azoty at Kedzierzyn.
Artur Rafal Kaminski, Grupa Azoty S.A. - VP of Management Board - Grupa Azoty Kedzierzyn 
Thank you very much for that introduction. Ladies and gentlemen, our financial performance at Kedzierzyn in the third quarter of 2019 and also for the 9 months of the year-to-date are presented on that particular slide. Our EBITDA and net profit figures are shown. And despite the lower -- lowering figures in terms of revenue year-on-year, we did manage to improve our performance, both in terms of EBITDA at Grupa Azoty Kedzierzyn and also our net profit.
Our revenue from sale in the third quarter are at PLN 415 million, which is down year-on-year versus the third quarter of the previous year.
Our EBITDA is at PLN 69 million, going up by as much as PLN 98 million year-on-year. And the same applies to a high increase in terms of our net profit at PLN 41 million in the third quarter of 2019, going up by PLN 83 million versus quarter 3 in 2018.
Our performance to date for the first 9 months of the year is also shown on the slide for these 3 main economic parameters. They went up, both in terms of the revenue at PLN 1.3 billion, going up by PLN 11 million year-on-year. And also, our EBITDA increased considerably in the first 3 months of the year, going up by PLN 89 million versus the 9 months of the previous year. And our net profit figure for the first 9 months of the year stood at PLN 105 million, going up by as much as PLN 150 million year-on-year.
The next slide presents an EBITDA breakdown or bridge, so to speak, between our EBITDA and comparable periods in 2018 and 2019 and also the drivers for the EBITDA figure, both positive -- both on the positive and on the negative sides. For both figures, by which I mean the third quarter and also for the first 3 quarters of the year, positive drivers included the prices of -- selling prices of our products at Grupa Azoty Kedzierzyn and also the volumes of raw materials used in production, obviously, the prices of those raw materials. These were the positive drivers. However, the negative drivers in both cases included sales volumes which were lower year-on-year, but this applies mainly or exclusively to the Chemicals segment, Oxoplast at Grupa Azoty Kedzierzyn.
Going down and going into more detail, our performance was impacted by higher production in the Fertilizers segment, which applies also across the entire Grupa Azoty group and also a decrease in the prices of our major raw material used in production, which is natural gas.
Negative drivers, on the other hand, included an increase in the prices of polypropylene and electricity and also a major decrease in terms of volumes of Oxoplast alcohols mainly and also overheads. And thirdly, lower prices in the OXO materials in the OXO product group and volumes, not only prices, but also volumes. Obviously, our performance went up quite noticeably across the Grupa Azoty Kedzierzyn group, which was visible in terms of individual indices, for instance, return on equity or EBITDA margin. These -- and also return on capital employed. These indices went up quite considerably year-on-year. And also our net debt figure went down, and it stood -- after the 9 months of the year, it stood at PLN 139 million versus PLN 237 million in the previous year. Even if we include the effect of the international -- on the IAS 16 leases standard, which came into effect in this year, under which we need to include, for instance, certain leases into our net debt, including also the perpetual use of [Roxa plants], still our net debt figure went down quite considerably across the entire group and the company at Kedzierzyn.
Next slide presents our financial performance at Kedzierzyn broken down into segments. Both in terms of segment revenue and also EBITDA, broken down into our 2 major segments, that is Fertilizers and OXO alcohols. You can see quite clearly that the improvement of our performance at Kedzierzyn were mainly driven by the Fertilizer segment whose performance is very, very good across all areas of our business, in terms of both segment revenue and also EBITDA, broken down into nitrogen fertilizers or RedNOx group products. However, due to a sudden economic slowdown and also a very difficult situation in the market saw the supply exceeding demand and also a very aggressive price policy and price pressures -- we can use that particular expression, price pressures, you will see that our performance in OXO alcohols segment went down quite considerably. Still, it is not as bad, it is not that high compared to the increases across the entire group. So all in all, taking into account our performance. But in the Fertilizers segment and in the OXO alcohols segment, we increased and improved our performance, which gives us great satisfaction.
The last slide presents the major highlights and events and also our investment plans delivered in the third quarter of 2019 at Grupa Azoty Kedzierzyn, including new products in our portfolio. As Mr. Wardacki has already mentioned, specialty plasticizers, including Adoflex and Oxovilen and also the new ZAKsan 33 fertilizer.
We also secured a permit from the local construction supervision inspector for special ester units -- for the production of special ester -- for special ester products. We secured that permission. And it is now -- the unit is now in operation.
And also we signed a new supply agreement with the company Silekol, which is part of the Pfleiderer capital group. This agreement concerns the supply of urea, and it improved pretty considerably our terms and conditions -- commercial terms and conditions, can compare it with the previous contracts.
In terms of our CapEx projects in the third quarter of 2019, we continued the upgrade and expansion of the car weights and the main gate at Kedzierzyn and also continued implementation of the new energy concept project. This, I have mentioned at the previous conference, the Warsaw Stock Exchange. And also we had new decisions by our corporate units related to the permit to launch the research and development center in order to support innovation in the OXO segment and also the plastic processes -- processing area, which is very important to us as a major decision, a major corporate decision, especially given this -- the slowdown in this particular segment.
So this is a forward-looking measure in order to anticipate the future and be prepared for the future. And we'll also continue the upgrade of the synthesis gas compression unit. All those investments are in line with the schedule, and there are no delays whatsoever. And I do believe that we will be able to deliver them with no problems and very efficiently.
Wojciech Piotr Wardacki, Grupa Azoty S.A. - President of Management Board 
Thank you very much, ladies and gentlemen. Unfortunately, there comes a time -- the time to tell you good -- to say goodbye to our webcast viewers who are watching and listening to us live and took part in this conference.
Thank you very much to all of you out there participating in the conference over the Internet and who have stayed with us until the end. Thank you very much for being here, and I do hope that you will participate in the very next meeting, in the very next conference.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]