Grupa Kety S.A. (KTY) Earnings Call Transcript

[Technical Difficulty] So whether it's Friday, whether it's a weekend, no breaks. Some maintenance, even, intervals were shifted to use the overall situation in the market. So we sometimes even postpone this, I think. So this whole team is -- the credit for this goes to the whole team. I'm tremendously proud. The year 2022 has been a year in which we got to work in really extreme demand, maximum demand conditions for products. We saw this in the Extruded Products segment, where we had record figures on the extruders. We sometimes were unable to even fulfill some orders for our customers, and it was an incredible year in terms of film. And actually, we wouldn't have even hoped in the past to people queuing up for BOPP foil film. And so 30% profitability and actually, when we assumed in the business plan for both machines, we assumed 13% profitability, which has already been very high. Even too high for some, too high a task because usually, such businesses work at 9%, 10% profitability levels. So this -- usually made of the market, especially in H1, by the Flexible Packaging segment was a mastered piece, really, what we managed to do there, and earning much more money for the shareholders than have been planned. It was a feat. But in Q4, demand deteriorated. At the same time, operationally speaking, you know that the company in Ukraine. Well, it is working, but the problem there, especially with energy, you do realize this, and it is hard to include this asset among those that operate and bring profits. It's rather us in a gesture of solidarity, we seek to help our colleagues from Biedronka, actually supplying all sorts of equipment to them and food stuffs and medicine -- medicinal products. So to relieve the suffering that has affected those people. As far as the investments are concerned, we performed certain shifts in the Extruded Products segment and in the Aluminum Systems segment in terms of the sort of plant manufacturing and warehouse facility, which is supposed to help us in logistics in the future. This happened in the last quarter where we saw that the demand for products was clearly decreasing. Now looking at 2023, that's an oddity because life tends to write different scenarios. And sometimes -- sometimes these are even amusing twists of fate, and this is what has been going on in the case of our group. As the President of the Management will [indiscernible], imagine that for the first time in 13 years, 13 is not -- it will be a lucky number for some. For me, it's always been a lucky number. So for 13 years, we've always shown a higher budget. Year-on-year, always going up. This is the first time we're showing a budget to you which assumes smaller results in the previous year. But I said, twist of fate. Fate, sometimes mocks you. 2022 was excellent for the group. And 2023, we are entering it with -- well, unfortunately, we're entering a period of stagnation, of crisis. Well, people give it different names. Different branches and industries, varied information is flowing, but we -- relying mainly on the construction sector, we have to say that we recording a clear decrease in demand for our products from that market in Q4. And we don't see any higher demand as we look into the future in Q1 or the -- rather, for BOPP, well, this has finished. To put it brusquely, the margins are lower, the order volume is lower, and we're starting to go back to normal, let's call it. And so we're fighting -- we're back there fighting for the customer, fighting for orders. A good thing is that well, the raw material situation has calmed down. We were unable to buy aluminum, we are unable to buy billets, and we have to actually fight for granulated product. But now, these troubles are over and then is available, and so this is good news. Raw materials are available. Other operational activity. Well, we -- towards the end of this quarter, we will actually activate another extruder, actually, another press there. The EBITDA, we are assuming, as you -- we see the costs -- the financial cost -- the financial expense will be higher due to inflation. And obviously, to the lending costs going up, or borrowing cost, in our case. But this doesn't really change anything in terms of the contracts, in terms of the agreements with the capital market, with you and with the shareholders. I just wanted to remind you that Grupa Kety, every year, it is awarded. It is recognized. And for years now, it has been famous for being a transparent company. And it's just the budget we're bringing you for 2023 is just that. It's -- it could not have been otherwise. It's a budget created, developed just like over the last 13 years. I've been a President of Management Board forever now. And it's been -- it's created by all units, by every salesperson, by every head of production. These are partial budgets. They are built from the bottom up. And the individual departments, divisions and then the segments contribute to that, and they all constitute Grupa Kety and it's budget. So we have no right. It's actually even subject to sanctions punishable if we told you something else. Our salespeople tell us, "Well, sorry, Boss." Customers, at least in Poland in 2030, 40%, 50% fewer orders, and you are observing this. We're not in a glass bubble, we can see what's going on in the real estate development business or in the construction business in general. There is a decline in sales in DIY -- DIY stores, and it's not something we are inventing here. It is the truth, and we have to approach it somehow. These tasks, the company has to face them and face up to them. So please believe me, this work, this work that has been done by all those in this company responsible for creating the budget has been done very reliably and it's been very robust, so we will continue our policy. We do not see any threat to the realization of our strategy, and we want to implement it and we want to deliver on the results. And our promises will be promised in 2021 early on, so we believe that with 2025, EBITDA is PLN 807 million. This is what we assume. It's not threatened. It's not at risk. So that's that. As far as I'm concerned, maybe just to sum up. I'm wondering whether to do that. But maybe I can -- I'll tell you now, okay. It's kind of weird for me because when I talk to analysts, we've been wondering because some of those who saw PLN 1 billion, the figure, alongside Grupa Kety, they thought okay, that's now here to stay. But it makes one wonder when people do this because sometimes, we have to think will BOPP film, whether you sell it with a 30% of the margin. If that were the case, we would have put up not 2 machines but 5 machines. However, we had to assume that the whole competition and the whole world is blind and doesn't simply doesn't see this product. But so -- simply, you have to adopt some assumptions, and these are the assumptions we adopted building our strategy. This is a company which is at the level of about a dozen percent, not several dozen percent, if we talk about the margin rates. But we have to bear in mind that whenever the opportunity -- whatever opportunity knocks, we have to make use of it. And that's what we showed in 2022 and earlier in 2021, 2020. That was COVID, the Suez Canal incident and the war that broke out later, and so some events are simply unpredictable when we -- the point when we create the forecast, the budget. So these are the events that using your skills, using your expertise, can be made use of. And so we have brought much higher profits, and we have been able to put a much higher dividend compared to the previous -- and compared to the strategy assumptions. So this is the most important piece of information I wanted to give you today, namely that -- we are not terribly -- or that 2023 is lower than 2022. I repeat, 2022 was exceptional, so we are not worried the 2023 according forecast won't be as high. But the important thing is to keep the expertise, the skills in the company to have these assets ready and to have the skills in place in the company, the expertise. Because 2023 seems to already be a year of crisis. This is -- as we look forward, we see that -- the point is to do this decently next year. But to keep, I reiterate, to keep all the skills or the competencies in our company. Because we have proven to you that if the wind goes in the right direction, then we are capable of earning a lot of money for the shareholders. And this is the message I wanted to give you. And now, I'd like to pass the presentations of the individual segments. So the gentleman here will tell you what we will be dealing with in 2023, how I want to approach it. I believe we are approaching this tough year responsibly. And honestly, to all the shareholders, and we are in for really hard work to make all this happen to fulfill these goals.

Thank you very much. And now, let us move to individual operating segments. Let's start from Piotr Wysocki. I give you the floor, Piotr.

Okay. As the CEO has already mentioned, a record-breaking year also for Extruded Products segment. So the results we've attained this year, we had never attained before, historically speaking. Strange year, divided -- breaking down into 2 parts actually. First half where we made the most, if not all, of the positive opportunities, you could virtually sell everything at any price whatsoever. While the other half of the year was marked by the beginning of the decrease trend in terms of the orders being placed due to the very fact that the customers simply ceased to receive orders themselves internally. Now if you have a look at the graph on your right-hand side, namely the billets and the behavior of the billets there, it clearly represents -- it clearly represents the whole year. We are talking about a 30% drop in terms of the price of the billet, which is due to the demand, obviously, that broke down significantly. And I'm talking about the breakdown of about 30%. So the adjustment in terms of the increased trend, you can also see the midst of -- and the forecast for 2023, you can see that the orders will decrease in the numbers, and that will also be reflected in the next slide. We want to produce even more in tonnes. We want to implement further activities in order to win the market. Well, obviously, we have -- if we have some projections, we have to bear in mind that profit obviously may fall. So we have to make up the loss opportunity somewhere. In terms of the negative bad things that will strike us within the next couple of months and will have a deep impact on the margin, that's the energy prices, obviously. Across the group, the Extruded Product segment is the biggest consumer of electricity, of natural gas. 70% of older price rises across the group are actually consumed by the Extruded Products segment. In past, we can say about further development and progress for electromobility. Thinking about the whole automotive industry, the sector is behaving very -- in a very non-uniform way. This is a very broad sector from buses to passenger cars, obviously, to even bikes. However, e-mobility boosts projects that we once initiated, once launched, and they will go full steam in 2023 hopefully to bring some significant income. Stable demand in terms of hard alloys. That's also very important, but this is also related to the geopolitical situation. That's something that is inextricably linked with a war in Ukraine. Hard alloys as of now for the armament industry, where we can sell a lot of these, virtually any amount. This is true frenzy in the armament -- in the weaponry industry, as far as the purchase of hard alloys is concerned. Now as regards the crisis year, we really want to make the most of this opportunity and some more. For what reasons mainly, well, we have the extrusion presses fully loaded. The efficiency grows. We have better yield. The purchase is really more -- the purchasing is more efficient. Full load on extrusion process leads to full efficiency and high performance of facilities. We want to achieve 90,000 tonnes, 6,000 tonnes more. So being within the Capital Group and having other profit within the group, we can see the shift in the tonnage that was purchased outside. We simply couldn't make up with the production in 2022 to cater the needs of Aluprof, so Aluprof bought some things outside. Some of the increase out of the 6,000 tonnes is, again, shifted back to the Extruded Products segment. Additionally, having a look at the actual trends that we want to get the tonnes from and thinking about this market is actually marked by a decreased trend, which is a big challenge to all of the commercial staff. This has been well thought of. We can see the perspective. We can see where we can get the volume from. We can get from export. We want to pretend -- we want to protect our leader position in the aluminum products. We want to grow in export. Our strategy used to be the redeployment of some individual tradespeople in neighboring countries, in Germany, in the first place. This is our main market, so our operations are aimed at winning the market, being strong in the market because we know that trends will reverse at a certain point and we'll definitely earn better money. Thinking of the record-breaking year this year, we are actually expecting a difficult year in 2023. However, thinking about the strategy of individual Extruded Products manufacturers, we follow the strategy. Basically, we say that our strategy extends until 2025. So the strategy that we demonstrated 3 years ago, we are delivering on that. Comparing [ 2023 ] to 2023, yes, we may reach actually slightly lower results, but I suppose that will be an exceptional year historically speaking. Because as far as the Extruded Products segment in Grupa Kety, I think that would be but a single decrease year over 10 years of increased trend. As far as investment is concerned, we slightly moved the extrusion prices on account of the market condition, the market situations. However, we are not abandoning these investments. We believe that in the second half of 2023, there should be some rebound. There should not be obviously an explosion in terms of investment, but at least the market should come to satisfactory levels, especially compared to the first half of 2022 where we also invest according to our strategy. We keep investing in components, as we referred to. However, we are basically talking about investing in production of aluminum components for the automotive industry, especially for electromobility segment. That will be it for me. Thank you very much. Let us now move to a discussion on the assumptions for the projections for Aluminum Systems segment, Tomasz Grela.

Thank you, Piotr. Good morning, everybody. Before I move to discussing projections for the next year, a couple of words to some of the -- that is about to end the year 2022. Similarly to the entire Capital Group, it was a special and record-breaking year for us, with revenues exceeding PLN 2.4 billion, EBITDA at the level of PLN 360 million. As I've already mentioned, these are record-breaking results utilized mainly as in the Extruded Products segment. In the first half also in our segment, it was a very dynamically changing year, record-breaking 6 months and significantly more difficult second part of the year. Let alone the quantity drops of several dozen percent on a year-to-year basis, which made a result at the end of the year very good. Still probably less than we expected, having analyzed the results from the first half of the year. Unfortunately, the deteriorating situation in the construction market had an impact on that. You've all been tracking all the communication, all the media releases and you obviously know about the focus and projections for the sector for the next year. You can just make a reference to some figures, information from the media. The sheer number of building permits issued are marked by several dozen percent in drop in terms of the sheer number of the permits. Well, unfortunately, next year is obviously something to tackle. The situation that affected us in the third and fourth quarter this year will probably also continue and extend over the entire next year. We are expecting more than a dozen, if not several dozen percent, in drop investment in the construction industry. I'm talking as a director of -- sectors represented 30% of the market share in Poland for aluminum products and the roller blind component production segment, so our market analysis are very precise, mainly for the very fact that we have a different perception of the export market next year. We are expecting in terms of our sales, internal sales, to be 6%, 7% less on account of the fact that a fair share of our customers export their products that our customers, and also we, will probably make use of the increasing economy and export markets. Especially in markets where they have already launched or are planning to launch some programs to increase spending on thermal upgrading of buildings because these are actually the trends and programs that have already been prepared in some Western European countries. We want to grow as we have. We want to have our share in the export market. I'm mainly talking about Western European markets, but also the Balkans as well. That's one of the markets we have been keeping a tight eye on for more than [ 1,000 ] years, one that's been very dynamically developing. We have some share in the markets of individual countries. We think as a very prospective market about the Balkans. However, whether disregarding mature markets, including the U.K. market where this year's sales significantly increased PLN 200 million starting from the next year, we are planning to grow that. That's why we decided to implement further [indiscernible] products and certify them for the British market to reach an individual customer, the consumers which we haven't done already. We haven't yet. We are mainly recognizable in the U.K. market as a supplier of components for public utility buildings, office buildings. However, we've already prepared a plan that should allow us to actually reach individual consumers, the end users that need our products for the residential housing for the stand-alone or semi-detached houses. Next year, we would also like to achieve successfully the launch of further new products we've been developing on a regular basis. We are introducing from 500 to 700 new items in our price list yearly. The groups that we should rely on in terms of our growth over the next years is mainly the production of fire-hardened glass. As we've informed you last year, that's what we started doing last year. So starting from November, this is the glass we've been selling to the market, so we're talking about the big, really, quantities. And I'm talking about the fire-retardant glass or fireproof glass. Additionally, we are adding new pergola systems or the solar panel, twin roll products. This is a kind of a rollerblade/shades product. These are just a few of the innovations we really want to reach our customers with. We want to be present with all those innovative products in the U.K. market. So even though the market is really dwindling and will in the next year, we want to achieve more than PLN 2.35 billion in terms of the sales, so the estimated drop compared to this year is about 6%. Unfortunately, in terms of competitive pressure as far as prices are concerned, that will probably prohibit us from attaining the EBITDA comparable to this year. The margin -- estimated margin being several percent lower than this year, 1.5% lower than this year, so the EBITDA expected is roughly PLN 360 million -- sorry, it's PLN 313 million. Sorry for that. Shortly about the investments, mainly investment moved from this year related to the investing in the Zlotow plant, which we have already informed you about. Conscious about the weakness of the market and the necessity to shift and reduction capabilities, we decided to move by 2 quarters. The commencement of the construction works on this unit, however, we already selected the general contractor. We are currently performing [ preparage ] works, and we'll definitely launch the works in the first quarter, the closure being planned for the end of 2023. The full launch with full production capacity to be reached by the end of the first quarter 2024. And I suppose that would be it as of now for me. Thank you very much.

Now, we should pass the third segment, Flexible Packaging. And Rafal Lechowicz, the President of that -- a look of segment of Flexible Packaging.

Now before I pass the budget presentation for 2023, just like the previous speakers, I wanted to give you a couple of words summing up the year which is about to end, 2022. Well, it was abundant in a number of extraordinary events, which actually helps to make decisions, to make optimum decisions at the optimum time of high efficiency. And we also -- thanks to that, achieved unprecedented financial results. And the sales volume will have exceeded PLN 1.5 billion this year. PLN 300 million, this is operating profit, and PLN 330 million EBITDA. And I would just like to point out very clearly that these are forecasts because as you remember perfectly well in the food stuffs manufacturing industry, actually estimating the Christmas and New Year period is virtually impossible. Our customers are unable to determine their actual demand for packaging, hence, this result continues to be open and open-ended. And I believe that 2022 will go down in history not only due to the spectacular financials, but also, and mainly perhaps due to the fact that there has been a clear acceleration in the pace of packaging structures launched on the market. Conventional structures manufactured successfully for a couple of decades started to be replaced on a large scale by cutting solutions, environmentally friendly solutions. And in the same period, and let me have the slide. Together with our customers, the avant garde of the changes I talked about, we managed to actually look at a couple of hundred projects, whose example you can see in the slide presented here. The changes are going generally in the following direction. Where possible, multi-material packaging is being replaced with laminates based on paper -- laminated products based on paper. Refined paper, either with thermal hardened varnish. All cleaned, all polymer -- all thin polymer layers. And actually, where a high barrier rate is required, aluminum foil and polyester film is actually eliminated from that. So new laminates are based most often on PP film, very sophisticated PP or PE film. And I just want to remind you that the development and manufacturing and refinement of these films, this is what the segment has been investing over the last couple of years. So let me have the next slide. Ladies and gentlemen, the new year brings about new challenges. And definitely, we will keep working with our partners, with our business partners, on recomposing the market to make sure that the packaging we launch is as environmentally [indiscernible], that -- the smallest possible impact on natural environment. And we already have cutting-edge machine stock, which fits within the trends I've talked about. And what is also very important, experience and highly professional manufacturing and process, staff. And a big challenge in the implementation of simple, uniform, homogenous structures and environmentally-friendly structures. This is based on shortening the supply chain of value added within the segment. Unfortunately, this leads to a decrease in the margins generated. And this happens also due to the fact that increasingly often, our structures are based on semi-finished products which we have to buy from suppliers indicated by our customers at a specifically defined price. And this actually makes us and others packaging manufacturers, well, processes of the materials entrusted to us. Unfortunately, as the President has mentioned at the start, there is also another segment under pressure. The PP Film segment, and this is another segment of ours, and demand for PP film started to decrease already in Q3 2022, and I informed this. Unfortunately about this, after Q3 at the conference in Q3. Unfortunately, the situation has not changed so far. It is estimated that the demand for PP in Europe is lower than the record demand, obviously, negative. It's lower than the record figure in the crisis of 2008. That was the record -- the negative record, so it is lower. And obviously, this is not unrelated to the reduction of the use of plastic in nearly all fields of life. Despite all these negative market trends I've been talking about, the segment is -- actually it remains ready to fulfill all the basic financial parameters assumed for 2023 in the long-term strategy 2021-2025, which is still in force. And consequently, we are assuming that sales next year will exceed PLN 1.15 billion. Well, EBITDA will reach PLN 195 million, which will be PLN 4 million higher versus the strategy assumption in the strategy for 2023. That's the last slide. Ladies and gentlemen, we will keep working in the high 84% level of utilization of the production capacities we have. As far as the plan investments are concerned, they will amount, in accordance with the assumption of the strategy, will be PLN 15 million. You can see PLN 19.7 million here, because 4.7% of this is the amount which actually is rolled -- is carried over to complete the investments we started in 2022, in the year which is about to end. So PLN 15 million new investments. This is all as far as I'm concerned. Thank you for your attention, and I remain available to you during this conference until it finishes.

Thank you very much. And now we will pass to the next part, which will be presented by Mr. Rafal Warpechowski, member of the Management Board and CFO of the company.

Ladies and gentlemen, hello. And before we comment on the consolidated figures for 2022, I just wanted to give you two words about the macroeconomic assumptions underlying our budget. And as usual, we make use of within the scope of the general global parameters, such as the growth pace and foreign exchange rates. We use the forecast from several dozen financial institutions seeking to obtain an average, and it seems that we will be working in an environment of high interest rates and high inflation. However, there will be a significant slowdown of economic growth both in Poland and in the European markets, which are our main export markets. Now as far as raw materials are concerned, the basic raw materials we use in our production, we assume a certain stabilization compared to the levels we saw in October and in November also. So the budget creates neither significantly larger revenues from sales or a significantly larger impact on the reported results due to the fluctuations in the raw materials prices due to the volatility in raw material prices. But compared to the average for the whole of 2022, this is more or less 15% less in Polish zlotys, if we talk about figures in terms of aluminum and petrochemical products we use in production. So summary of the consolidated results, next slide. Both 2022 against the budget for that year and the budget for the -- Subsequently, as the President said, we have already exceeded our very ambitious budgetary assumptions versus what the company has today, namely, all the production capacities over PLN 800 million of assumed EBITDA. We have exceeded by around PLN 200 million, so this all happened in the first half of the year. The second half of the year was much closer to the budget. And even Q4 was, or has been, as we have already signaled, below the budget assumptions. And so as a result, we can say that with -- if we do not take into account one-off events, this budget was our ambitious base for the preparation of the budget for the coming year. And so net of one-off events, that is. And then what we predict for this first half of the year, the effects of the slowdown, we have drafted a budget for 2023. Which means, again, about a dozen percent less, PLN 721 million. EBITDA, this is, as we said, in line with this strategy. So we assume that these results will be obtained in a deteriorating and in a tough environment at the hybrid level in line with our strategy. Financial expenses. These will be an important element affecting our profit and loss. And what we assume budget is interest rates on credit, on [indiscernible] credit. And will take into account the lower tax rate, effective tax rate. This is lower by around PLN 30 million because the investments we done in the Aluminum Systems segment and the Extruded Products segment will be eligible to tax relief, and we'll be able to recognize this in tax assets. And so next slide, we talking to the cost of expenses of our operational expenses, and this translates into the possibility of obtaining profitability. As I said, raw materials, 15%. This is, well, a fixed element of the composition of our products. And then we have the impact of macroeconomic factors, what I mentioned already at the start. And then we have the main cost items, energy by more or less PLN 100 million. This will be a result. As you know, the dramatic increases in energy prices already seen in 2022. Now this trend has come down a bit and neither has reversed over the last couple of months over. We will no longer have this benefit which we had in 2022, thanks to earlier securing of the prices. And we are coming back to levels close to the market levels. And this is mainly an effect of the changes in the price of these utilities, only slightly volume-related effect. Now two more significant items, employee benefits and third-party services. This is a similar approach. We assume a situation of high inflation and high changes in the level of remuneration objectively in the market because of the presence in the market. It seems that we'll have to address our needs too in this field, and hence, these assumptions reflect in the market trends, these assumptions related to the items I've mentioned. Next slide shows us the summing up of the financial activities. And good news here, a very good news here. This year, with the record EBITDA, we will deliver around PLN 550 million of cash flows on operational activities. However, in the budget. Despite a lower profit, these cash flows will be nearly PLN 850 million, and this is due to the fact that we are expecting reverse trends in terms of working capital. And this year, it has been growing very strongly, PLN 300 million nearly. Next year, its release in the amount of around PLN 185 million is planned. And as far as investments go, we can say that investments planned in the strategy for the years 2022, 2023 in the total amount be similar to those implemented in 2022, 2023. However, we changed the schedules a bit in response to the market environment, namely about PLN 170 million. These are investments which we did not actually implement consciously, in fact, in '22. We are moving them to 2023. And these are mainly investments increasing our production capacities. And we believe that this will reflect in a better manner the market demand for our products. In total, we will spend around PLN 390 million on investments. And the third main item of cash flows is dividend. And we have kept in this project, the -- kept to the guidance, kept to the assumptions in the underwriting of strategy. 85% of consolidated net profit, consolidated in the form of dividend from the previous year. So as you can see, this is nearly PLN 560 million. In total, this will make our debt increase by around PLN 200 million from PLN 1.25 billion to around PLN 1.45 billion next year. And the net debt-to-EBITDA ratio due to the lower profitability will amount to 2x, and this is still a level we consider acceptable and safe. And using the opportunity, I will say that the structure of our debt, both in terms of the term structure, of the maturity structure and of the currencies will be very similar. And to this year, we have achieved the assumptions, so we have organized credit for -- investment credit for the Extruded Products segment, the Aluminium Systems segment, so the situation is stable and safe. Packaging systems are concerned. So this is also something that is in our plan, namely the increase of the scrap in the packaging that we produce. As far as the involvement in some individual local initiatives -- as far as the working with the group actually there will be twice as many of the initiatives, nearly 70 this year, or actually next year, which is also related to the anniversary of Grupa Kety, the 70th anniversary of foundation. However, we are focusing on 2 indicators that pertain directly to our personnel, our sales. Namely, safe -- [indiscernible] the safety and stability our personnel turnover. We are a tech company, so we obviously are very preoccupied with safety and security. This is a very difficult to attain, however, a very important job to do. It's something that we want to sustain. Obviously, yes, we are going to analyze the situation on an ongoing basis. And in this project, we attained 85% payoff of dividend. Also, year-by-year we increase the number of vendors that confirm that they comply with the standards and principles that we disseminate and promote obviously. Also in this third category, we are expected to grow. And now just a couple of words of wrap up to highlight what the CEO mentioned at the beginning. Our 2 main strategies are the one already completed and executed and the strategy proposed at the end of 2020. We can clearly see that the 3 years, on account of the reasons that we always highlighted, were by all means unique, very special. We couldn't have expected such a sheer scale of different turbulences of global reach. However, within this turbulent environment, we could actually operate even more swiftly and efficiently than others, delivering even high results. What we want to show still on the safe side. We are actually happy about the recent 3 years, very special unique years, that we decided to also share the profit with the shareholders. Obviously, this is time marked by significant uncertainty. Uncertainty, something that actually is inherent to our existence on the market. We see the threats, however, we believe in our products. We believe that the strategy assumptions, the premises that we decided to assume will not be changed. And the financial layer. As far as this is concerned, we still believe that the dividend policy is very important to us, and I think a significant value to all the shareholders. So our financial indices, those that we have presented, let us think, let us suppose that it can be successfully implemented in the future. Thank you very much.

And thank you. So that's what we have. That concludes the presentation part, and let us now move to the questions that you can post on the chat in the app. We have already received a couple of questions that you have submitted before.

So let's start with the following general inquiry, namely the one related to the effect of the National Recovery Fund being or not being achieved and its impact on the company. Well, a great question, indeed. If you asked us about -- because our budget is very realistic, if you ask us what the green lights can be expected in terms of the [ actual ] recovery plan, we would say the following things. It's hardly imaginable that our customers would make any initiatives in terms of investment where they are supposed to phase interest rates of credit at more than [ 1,000% ]. No hope there, definitely. We had hoped and we still have hope that there will be an agreement with the European Union in terms of the National Recovery plan because they would definitely mobilize, they would definitely start the flow of funds to individual municipalities and comments. That would probably translate into specific increase in terms of investment in infrastructure, which would be a good sign for the Kety Group. I suppose for some, there's maybe a short-term perspective for others, it may be long-term perspectives. However, indeed, if the funds flow, I suppose that would be more than welcome, not just for the entire economy of Poland, for all the Polish people, but also for the Kety Group, we will definitely benefit from that. Depending on the distribution of the funds, once the plans are approved in individual administrative units and individual sectors of the economy. The implementation thereof, I suppose, may just start the second half of next year, the last quarter over the next year. So I suppose, we should not expect any spectacular outcomes even if the National Recovery plan is actually put into implementation. Okay? No more specific questions.

While talking about good economic conditions concerning the extruded products, especially concerning hard alloys, is there any non-investment capacity to increase the production and sales volume in this respect?

No. To give you the brief answer, without investment, yes, you can implement certain specific, let's say, performance targeted programs, efficiency-related progress, but this is a completely different story compared to soft alloys. With the 440 press, the one that is going to be launched in the end of 2023, that it may interchangeably produce certain other alternative alloys other than hard alloys. This is a very complex product. Well, here's a press, there's a press, obviously.

However, -- but you've already done some things this year, right? Some, let's say, small steps aimed at increasing efficiency?

Yes, in terms of performance, we've done a few things, so efficiency-oriented activities. As far as tonnage, as far as the volume is concerned, that actually is up to big investments. We are obviously keeping track of the market for quite some years. It always was problematic. Now on account of the arms industry and the war in Ukraine, that was a big problem actually, was in the backlog. But still, this year, you could really sell a lot. You could see the follow-up of products from Russia. Russia used to be the biggest supplier, the biggest vendor of hard alloy-based products into the European market. So that always also had an impact. Okay. Thank you. Next question.

Which component of the projection, do you consider to be the most risky one concerning the projected results. Where do you expect, let's say, the biggest sphere of the biggest field for risk that some of the components is not attained, having a potentially negative impact?

So if I want to answer this question, where the biggest risk is to be sold? I suppose the biggest challenge, not risk, is to make up for the lost opportunities with the export. The drops that we can see in the construction industry in Poland, I think this is the sphere that for the SSA actually, this is something that we should really focus on attaining with the Aluminum Systems segment in export markets, we have already established some, let's say, representations, agencies and subsidiaries, individual local market. However, it's definitely not going to be easy because in Western Europe, we're not talking about a situation where the markets are very hot in investment, you can just enter and start selling your own merchandise. No, the struggle is going to be really, really harsh. I think the export market is where we can seek some new investments. In the Balkans also, in Slovenia for instance, with a new subsidiary. In Germany, we are going to definitely seek some solutions to increase our volume -- sales volume for packaging, for instance, as [indiscernible] has mentioned, he has actually been struggling for quite some year to really get on a train, direct it to the station, change of the packaging format as flexible as the -- in terms of the flexible packaging segment, I could be speaking of actually is technology engineers, all those that design our packaging, they did a fair share of work. They have managed. So they have already proposed eco-friendly solutions, solutions that really cater to us or actually meet some environmental standards. However, so as BOPP, well, this is a big question mark there. I just hope for the segment to attract as much orders as possible in order to comply with the budget assumptions -- another question.

Now about the EBITDA margin, while the participants of today's conference meeting, data conclusion that historically speaking, across the recent dozen or so years, we have never had such a low margin as the one planned for 2023, even in the -- in year 2008, in the crisis year, even then was the margin higher? Is it on account of a very conservative approach? And if so, can we expect that at the end of the day, the margin would be slightly higher?

Well, let's put it like this. We should keep in mind that we definitely had -- well, we once had a definitely more limited capabilities. We were a very compact facility. When we were meeting in the conference, there were just a couple of persons, a couple of entities, short meetings, not a big conference room. Conference call showed getting out of that strategies, very easy to attain consolidation policies. So it was easier to get support for our customers, especially those that have a harsh time paying, who are kind of a credit bank actually there. So we could actually -- we're eligible to and entitled to actually demand higher margin. However, we are now a big capital group operating in different areas. Our impact is not equal. We are not operating on the same field as it used to be, mainly based on the Polish market where we get in terms with individual customers, and we got in terms of individual customers. Now that's a big unknown. The next year is a big unknown. As I've already mentioned, the film sector, for instance, again, you just can't struggle for your margin if you struggle for market share. Now we are focused on market share, right? And our main job is not having a look at a single year because you are perfectly aware of the fact that if it was a [ debt-like ] situation, be or not be there. It was not about cutting costs, some layoffs because these are short-term solutions. The management board would probably show you some better margin for next year. However, we definitely wouldn't get unscathed. From the execution of next year, we would really get some bumps and some beating. And with the prospects for the next year, we would really be locking process engineers, we would be locking development in investment. We will be locking projects -- products, and we did not abandon anything. With full capacities, with full competence we want to get through the year 2023. And I suppose that would be but a single year across the entire history of the company. So I don't think we should focus on the negative prospects for the next year because if our, let's say, component budgets allowed us to set up the whole comprehensive budget, we have no right to paint our grass green, to color up the prospects and then offer you something because this is -- it has never been in DNA of this company, neither is it in the nature of this management board. We are always honest, straightforward and blunt. How we see it, what we see in the future and what we are showing to you is something that we learn from our salespeople, from production engineers and so on and so forth. And I think hidden, if you would be looking at, you won't find. We don't conceal anything. We are perfectly open towards our shareholders. I'm not just talking about the shareholders that our survival depends on but just talking about Mr. Smith, who has bought 10 shares of our group and things that, yes, it was nice to get some dividend every single year. We want to be fair to every single person. That's our current state of knowledge. That's what we are presenting to you right now.

Just a couple of words to add on this note, especially considering the very specifics of our segment, let me just tell you that over the recent 7 years, Aluprof was buying aluminum at PLN 10 to PLN 12 per kilogram. Now we are talking about PLN 20 to PLN 21 per kilogram. Obviously, over the recent 18 months, we implemented 4 rises. So I believe that our products, also some -- we got to the cap actually. That's the level that is hardly acceptable by the consumer, by the customers. So it's -- the prospects of further rises is very limited, even though we are expecting further rises in terms of costs: labor costs, energy costs. Now imagine that the margin we've been talking about, or we talked about 2, 3, 4 years ago, considering the changes in prices of raw materials, it simply prohibits us from ensuring the margin as high as before. That's also one of the risks you inquired about. Any further increase of prices of raw materials will also be encumbered with significant risk and something that actually would prevent us from rising our prices. And that obviously has an impact on the margin planned for next year, maybe for flexible product segment.

A couple of points about this matter. This year has already basically replied to this question on our behalf. Still, I'd like to go back to BOPP film. So our business, on account of the extraordinary happenings over the recent years, generated a very high EBITDA, PLN 150 million last year, about PLN 180 million this year, preemptively answering a question about the consolidated EBITDA of the segment. This -- or actually next year, we are planning to have this index on a level of PLN 50 million, which follows the strategy assumptions as well as the things that we assumed when we are making a decision to invest, interesting information for all of you since you participated and kept track of the investment since the very beginning of that, at least most of you did. You surely remember that, that's a greenfield investment that we started in 2017. An investment, which had a return on investment total ROI of 40% in 2020, which is something that I really wish to all the investor people investing in Poland. Thank you.

Just to wrap it up for extruded products. Can the margin be higher?

Well, we will do anything we can to have it. We designed our budget based on the sales plans on specific customers and their needs, especially those forecasted for the next year, the information about the prices that can realistically pay. And thus, Other margin is as of now realistically speaking, but obviously, we'll do our best to grow it. Just to supplement on this crisis here. 2008, back then, the prices of aluminum were nearly $1,000 lower, which evidently influences the percentage of the margin because then automatically, the raw materials' base grows. So this is also an element that needs to be taken into account comparing margin in percentage terms, not in value terms. The larger the raw material space, the lower the percentage margin for us. In 2008, the raw materials' base was much lower. And so it was easier to achieve a margin at the level of 15% or even 16%, which we effectively recorded in 2008. Currently, the level we are forecasting namely around 14%, is actually achieved different macroeconomic assumptions.

Another question for the Flexible Packaging segment. The strategy until 2025, does it assume such a quick passage of a switch of the packaging market to low-margin products or the strategy until 2025, when you say it's not at risk, you're assuming that other segments will make up for the result of the Flexible Packaging segment?

Well, the margin in the Flexible Packaging segment is not low. That's the first thing we need to say. In the budget for 2023, we assume that we will reach 19% of EBITDA, which is a much higher result than the market. And what else did you ask about?

Well, the question was generally about whether we assume this switch to eco to environmentally friendly packaging strategy.

Well, of course, it's a compilation of the BOPP margin and flexible packaging margin. So BOPP was assumed in the strategy, it was 13% EBITDA. That was the assumed margin. In packaging, it was 23%. So whether we'd assumed it, Yes, we did. But we will be watching this, definitely the pace at which the market transition will progress. So currently, it's 15%. It essentially happened in 1 year in terms of printed packaging. And these are the solutions which are homogeneous, which are environmentally friendly, which are characterized by lower value added. But the margins continue to be very satisfactory indeed. And I assume that next year, we will be working on an average margin of 17% EBITDA versus 19%, assumed in the strategy. But these are obviously different packaging items. This packaging is simply much more expensive. So a whole lot of profit, a whole of EBITDA generated is higher than that assumed in the strategy. So this compilation is positive at the end of the day. Thank you very much.

Thank you. I just want to remind you that in the strategy published, the goal for Flexible Packaging segment for 2025 at the EBITDA level that was PLN 202 million. So leaving aside the percentage rates, which we emphasize all the time, it depends on the raw materials' base in terms of the profit or the bulk of it, supposed to have been generated by the Flexible Packaging segment. We are actually very close to this goal, 3 years ahead, actually. Thank you very much. And another question.

Can the amount of spending on research and development be quantified in the segments? Is there a fixed policy, for instance, saying that every year, X percent is spent on R&D?

Well, this concerns to the largest, extended -- the Aluminum Systems segment in terms of R&D because this is what we do in the group actually to the logistics. Now we do not envisage fixed percentage rates in relation to spending in this area. But in the budget, every time we take into account the work planned for the subsequent year related to launch of new products to testing thereof in Poland and abroad. And the investment then related to launching new products and spending is different each time, and it is adapted to the needs of the market, domestic and export markets. So the answer's no, we do not have clearly defined and fixed shares of spending on R&D. So that this concerns are essentially all the segments because it's not a one fixed amount, which would depend on the EBITDA or net profit generated. This is every time drafted when -- as the budget is drafted. And this is related to investments. And this is an item related to development. So it sometimes happens as it has happened over the last couple of years in the case of packaging to catch up with the trend and to actually be in touch with the environmentally friendly directions in packaging, then the spending will be higher than in previous years. And it's definitely the case. But if we're talking about the suite product segments, a laboratory has been established. And as the automotive order volume was increasing, this activity will involve our spending. But as the present -- as Mr. [indiscernible] mentioned earlier, this is not a fixed figure, which we would have in the budget every year permanently.

A question about the distribution of EBITDA profit in 2023 versus this year, we are talking about an improvement in the second half of 2023. So are we supposed to expect that the figure -- the EBITDA reported in the first -- the second half of next year will be higher than the comparable figure for the second half of this year?

Well, the distribution this next year will not be equal between the 2 halves of the year. We had PLN 600 million, H1 and PLN 400 million, H2, this year, just to remind you. So the second half was worse. In 2023, we assume that the first half of the year will be worse because this has been actually discussed today. This will -- the market will be like. So this will be around PLN 300 million, and the second half will be close to H2 2022. So it will be more like PLN 400 million. So we have PLN 6400 million 2022 and PLN 300 million to PLN 400 million next year. We could say, so this is the kind of direction a reverse trend.

And energy costs now. What share of energy and cash and the forecast is assumed it will be actually purchased on the spot market and what has already been secured?

Well, we've really secured around 3 quarters in terms of gas for 2023 and nearly 60% in terms of electricity. Having said that, we are not planning spot purchases of the whole amount that is still lacking. But in accordance with the policy we have adopted, we have some successive stages and some periods in which we will be supplementing this level. And obviously, today, we can say that over the last couple of weeks, we could see that it's worth waiting a while because the trend is -- might be better than it was in the previous month. But before the end of the year, successfully and cyclically systematically, we will be securing -- we will have secured the whole year before the end of the year.

Thank you. Another question related to finances. What is the vulnerability of the EBITDA guidance to its exposure to changes of -- let's say, 10% change of the exchange rate of the U.S. dollar to the Polish zloty?

As you know, we generate euro, and we spend dollars. So our exposure to the dollar is a short position. So 10% is around PLN 0.45. So a fluctuation -- depreciation of the zloty is a cost of around PLN 15 million a year, if the dollar goes up by PLN 0.45. And so however, this would have to be a deviation only with regard to the dollar. So the zloty would have to be depreciated or appreciated to the dollar, but also to the euro because it's a proportional change towards the dollar and to the euro, this exposure kind of is set off mutually. So it's low, let's say, this is around several million in currency, let's say.

Another financial question. This estimated figure for Q4, did it actually include one-off events in any of the segments?

No, this is a result, which comprises the 11 months actually and the forecast for December. We're not expecting any extraordinary one-off events.