Good morning, ladies and gentlemen. It is my pleasure to welcome all of you to the conference call devoted to the Grupa Azoty group companies performance in the first quarter of 2022. Today's speakers will include Marek Wadowski, Vice President of the Management Board of Grupa Azoty S.A. Remotely, Tomasz Hryniewicz, Vice President of the Management Board of Grupa Azoty S.A. and President of the Management Board of Grupa Azoty Puławy. Mr. Michał Siewierski, Vice President of the Management Board of Grupa Azoty Police. With us in the room at the Warsaw Stock Exchange, we have Grzegorz Kuberski, Director of the Corporate Controlling Department. I'll now give the floor over to Mr. Marek Wadowski, Vice President of the Management Board of Grupa Azoty S.A.
Welcome, ladies and gentlemen. We'll start traditionally by a recap, with a recap of the first quarter of the year.
In the first quarter of 2022, Grupa Azoty became a leader of the fourth ranking Poland's Best Employers 2022 in the category of Mining and Chemical segment, as well as oil and gas production. We're also recognized in the Decarbonization Initiatives ranking, as well as in the area of our sales. We launched the fifth edition of Grupa Azoty's We Care for the Polish Land lottery, and we recorded an increase in the number of applications, and we assume that by mid-June, we will have the pleasure of awarding the main prize to the winner. Moving on to our financial performance, I'd like to emphasize at this point that the first quarter of the year at Grupa Azoty is a period of major challenges, mainly consisting in a significant increase in feedstock prices.
In addition to gas, those increases related to the feedstocks that are used in the production of both compound fertilizers as well as in the Chemicals and Plastic segments. This translated into an increase in revenue with a twofold increase, with EBITDA going up three-fold. The structure of EBITDA shows that the first quarter of the year is mainly dominated by our fertilizer production. It is worth emphasizing that in terms of nitrogen fertilizers, the first quarter is traditionally the season of high demand due to the application season, which starts in the beginning of March. Moving on to the market situation, it is worth pointing out that this period should be divided into two sub-periods, so to speak.
The first period we'll focus on took place until Russia's aggression on Ukraine, that is February 24th, and after this event, that is as of February 24th onwards. By February 24th, we saw a rebounding economic situation after the pandemic-induced crisis, and we saw quite clearly that there's a strong demand on the consumer side across all our product groups. We expected stable forecast for prices, and we also saw or expected, and we had every right to expect improvements in terms of logistics, which obviously had been a major challenge in the fourth quarter last year. After February 24th, we saw additional factors in our market environment, which obviously significantly changed the situation with a number of additional challenges occurring. First of all, we need to remember about higher risk, which was clearly visible across all our markets.
For instance, in the gas market, problems related to logistics exacerbated, which was related, among other things, to lower stocks among entrepreneurs. We also saw that the fight against inflation, rising inflation rate needs a longer period, and this was, this problem was further exacerbated by the Ukrainian-Russian crisis. Additionally, this obviously is not related to that event, that particular event, but additionally, we also saw higher risk related to subsequent waves of the pandemic, COVID-19 pandemic, and I'm talking about the situation in China.
In this period, we saw stopped supplies of gas to Poland from Russia, and I'd like to emphasize strongly that the stoppage of gas supplies to Poland, given the fact that Poland has well-diversified sources of supplies of gas, I'm talking about Gaz-System and also, connections to other countries in addition to Russia, combined with high stock levels, did not in fact result in any negative impacts on Grupa Azoty. In this particular respect, we have, for instance, an agreement signed with PGNiG, and we can say that this company is fulfilling its obligations under our contracts. In addition, however, to that, we see a growing risk, and we do our best in order to flexibly react to. The way we operate, and we do have emergency scenarios prepared, and we are well-prepared to that.
I must emphasize that those scenarios are always there, and we have always had them because we can always face a breakdown that will result in disturbances in this particular area. There is one additional element that is really important at that point. I'd like to discuss it. These are sanctions. We all know that in the structure of our shareholding, nearly 20% or under 20% of our shares are held by or controlled by Mr. Viatcheslav Kantor. The sanctions were imposed on Mr. Kantor. I'd like to emphasize that after the imposition of those sanctions, we did not see any negative impact on Grupa Azoty because it does not mean that we have been under any sanctions.
These sanctions do not translate into any disturbance in terms of the supply or the sales, supplies of feedstocks and also the sales of products. We are aware of the fact that this is an important element, which, for instance, could be taken into consideration by financing institutions. However, both in the conversations or discussions as well as in the official position, official positions expressed in that particular respect, we do not see any problems. A couple of words about our macro environment. We should emphasize, first of all, that the first quarter is obviously a quarter in which we saw a major increase in electricity prices, which was due mainly to higher CO2 emission allowances prices and also gas prices.
We need to also point to the increase of market increase rates, which is an aftermath of the fight against the inflation, raging inflation, which obviously comes from the situation on the east. In terms of gas prices, as I said before, you can see quite clearly that the volatility increased after the 24th of February. Until that date, this market obviously had seen high gas prices. However, volatility was much, much limited and more limited or lower than after that date. The average change, daily change is then EUR 9 was EUR 9 per megawatt hour before the February 24th, but it increased four-fold. That means that the risk increased obviously as well.
The company does its best to flexibly react to hedging gas prices flexibly because I need to stress that in a situation like this, it is difficult to build any long-term strategies. However, you'll see on the chart on the right-hand side that the price of gas and the price at which we purchase gas from PGNiG is slightly lower than market price levels. That is the effect of our flexible policy in that particular area. We need to emphasize here that it is, so to speak, not an approach that could be taken in the long term. We are approaching this problem in the short term due to those major changes in our market environment, which is highly volatile. First quarter saw a major increase in costs year-over-year, mainly due to rising costs of gas.
The price of gas increased nearly five-fold and the total cost of our feedstocks went up by nearly or over 30%, which obviously translated into higher costs of our products, and we see higher revenue in that area as well. In addition to increases in gas prices, we also saw higher prices of phenol, benzene or propylene, as well as potassium chloride, phosphates, and so on. Practically speaking, we saw rising prices across the board in all our feedstock groups, be it smaller or higher, but still we see increases, as I said, across the board, and these are major increases. The Agro segment, which in the first quarter generated the highest revenue, was mainly affected by rising prices of feedstocks, mainly gas, as well as high volatility of those prices.
I need to emphasize strongly at this point that we operate and we learned how to operate and to live, so to speak, in the context of high volatility of gas prices as well as costs of production of our fertilizer products. It's worth noticing that, after February 24th , we saw a number of problems across, in the area, of our competitors, in the market of our competitors. Grupa Azoty, while Grupa Azoty Group utilized its capacities at the highest level possible. At this point, the situation in the Agro segment is as follows. We will shortly, we're just approaching the new season as of June the 1st so all the producers are keeping a watchful eye on the market and on the competition in order to open the season as well as possible, namely to adjust themselves flexibly to the market situation.
The margins that we're presenting are the margins from the German market, which are used by European producers as a benchmark. In terms of compound fertilizers, we should point to the fact that in addition to gas prices and the increases in gas prices, we also saw other major factors. That is the increase in the prices of potassium chlorides or phosphates. It is quite clear that in terms of market margins, the first quarter was much more difficult of a period due to these high increases of not only gas prices, but also other feedstocks, especially after February the 24th. A short recap. I will not repeat myself, but I would like to point to the fact that the first quarter was a period of challenges in fertilizers segment.
However, Grupa Azoty maintained its production output at maximum levels in line with our production capacities. Our prices remained one of the lowest prices across the European Union. The only event which took place in the first quarter, and that was to the detriment of our operations, was a breakdown at Police, which we'll discuss later on during this conference call. However, this was not related in any way to our market environment. Moving on to the imports of nitrogen fertilizers. We would like to show you what the situation looks like in Poland. You can see quite clearly that in terms of nitrogen fertilizers, taking, for instance, imported ammonium nitrate, you'll see that those levels went down to very low levels compared to previous years.
This shows that Polish market is a major market for us, and the demand from our Polish clients or customers is satisfied by Grupa Azoty to a large extent currently. In the Chemicals segment, first quarter, we saw obviously rising prices of practically all feedstocks across the board, which translated into higher prices of our products. It is worth pointing out the high freight costs as well as logistics problems. Those problems obviously do have an impact on the prices, on the market prices, of our products in that particular segment. It is worth pointing out at this point that the start of the war in Ukraine on the 24th of February affected titanium white market because we have no titanium white from Ukraine anymore on the market.
In terms of feedstocks in the chemicals segment, major increases related to increases in the prices of propylene as well as other feedstocks. These are the elements that are translated into the fact that first, on the one hand, we need to remember about high prices, but on the other hand, we need to, at the same time, expand the area of, or the group, of our suppliers. That means that we need to look for new suppliers of feedstocks. As a recap, the first quarter in the chemicals segment was a major challenge for us, but at the same time, we reported solid performance. We need to remember, however, about the logistics problems which persisted throughout the entire first quarter, despite the fact that we assumed that these problems will go down, but after the outbreak of war in Ukraine, they actually exacerbated.
Moving on to the Plastics segment, the situation is quite similar in terms of the prices of feedstocks. However, it is worth noticing at this point that there is one significant area we should focus on that is the automotive segment, whose problems actually exacerbated after the outbreak of war in Ukraine. This is an element we need to take into account. This is a major factor which we need to consider in the upcoming quarters, in the following quarters of 2022. The demand remained quite solid, however. Especially in terms of petrochemical feedstocks, we saw a major contribution of this element into the prices and price levels in the first quarter of 2022. Moving on to our performance by segment, we'll start with a short recap again.
As we have pointed out before, or I have pointed out before, our EBITDA went up, and this was contributed by, first of all, higher EBITDA in the Agro segment, as well as in the Chemical segment. In the Agro segment alone, we see a significant increase in revenue. As I said earlier, this is a result of the situation of the feedstock market, especially in terms of gas prices, which went up nearly five-fold year on year. In terms of sales volumes, in compound fertilizers and specialty fertilizers, there was one event that impacted the situation to the largest extent, that is the breakdown at Police, and to a lesser extent, a slightly lower sales in COMPO EXPERT. In the Chemical segment, we saw higher prices of virtually all feedstocks across all our product groups, OXO, melamine, urea, and other products.
However, we need to remember about a significant increase in feedstock prices, which was exacerbated again by the logistics problems as well as other problems related to lower availability of some feedstocks after the outbreak of war in Ukraine. In the Plastics segment, the performance was quite solid, again, higher year-on-year. However, here again, we saw a number of major challenges, mainly related to the automotive market and the situation in that market. We assume or expect that those problems will persist for quite some time in this particular segment of the industry and will affect the performance. Moving on to the financial situation, which is very stable, which is quite solid. We have available funding limits of more than PLN 8 billion. Net Debt to EBITDA at the end of March was at 1.29%, and our Net Debt went up slightly.
However, this was due to the payment terms, payment dates of our invoices. Before the first quarter or the end of the first quarter, we saw we had longer terms of payment, which also increased the level of debt. However, our debt still remains at an acceptable level for the financial institutions. A couple of words now about our CapEx projects. In the first quarter, our CapEx was at PLN 633 million, and investments went on as planned. If we have any, or if we had any applications or requests from our general contractors in terms of the deadlines or the payment terms, we have informed you or notified you about it. Obviously, we need to remember about our flagship investment, which was Polimery Police, which is Polimery Police.
We also spent a lot of money on our CapEx projects at Puławy, where we have three major investments going on. We have undertaken work in order to deliver our strategy related to the Green Azoty project. We will notify you of any tangible results and projects when they are ready to be communicated. As far as the Polimery Police project, stage of completion at the end of March is or was at 90% at the end of March. In the presentation, you will find more details on this particular project.
Obviously, I would like to focus on the fact that we signed annex number three in the first quarter to that contract, to the EPC contract, which provides for an increase in the fee for the general contractor by EUR 72 million and extends the delivery date or the deadline for the project by six months. However, this does not affect the budget, the general budget, because we are financing this project from the provision which was specifically recognized for this very project. We show you a couple of pictures. As you can see, the stage of completion is quite advanced. However, there's a lot of work to be done still and on that project, because, for instance, we need to focus right now on the most advanced elements of that particular project now.
Other CapEx projects, I'd like to show you or emphasize that there were other important projects which we haven't discussed before. For instance, the new energy concept at Grupa Azoty Kędzierzyn. This new energy concept obviously is in line with our strategy. We're talking about the package of seven CapEx projects meant to use process heat from ammonia installation, production installations in order to use energy, to be using energy carriers. The stage of completion of that particular project is at 86%. The effect of this particular project, new energy concept, is a major drop in the consumption of coal at Grupa Azoty Kędzierzyn. I do believe that the other investments shown on screen will also contribute to the delivery of our strategy to the fine-tuning of our strategies and the production of our main products.
For instance, the construction of the new power unit is an element of that particular strategy of upgrading our operations, for instance, at Puławy. Moving on to the financial performance and general performance of our group companies. All our group companies reported higher performance in the first quarter of 2022 in line with market trends. Utilizing this particular period, the first quarter of the year, despite the fact that each of those companies had to face major challenges in our market environment, especially in terms of the high increase of feedstock prices. I'll now give the floor over to Mr. Tomasz Hryniewicz, who will discuss the situation at Grupa Azoty Puławy.
As Mr. Wadowski has just said, Grupa Azoty Puławy and other Azoty group companies, we saw an increase in the prices of all production materials, including almost five-fold increase in the price of natural gas. Despite those price increases, the fertilizer sales were carried out without interruption due to the ongoing applications season. Additionally to the import limitations concerning fertilizer produced in Russia, which are the effects of sanctions, the market share was increased by Polish products. Some of those results due to higher prices of feedstocks and limited production were offset because of the maximum utilization of our production capacities. Therefore, the Management Board recommended the distribution of profit for 2021, which provides for the payment of dividends to shareholders in the amount of PLN 6.6 per share.
Such distribution will ensure adequate accumulation of capital necessary for the company's investment plans to be delivered and also provides a basis for further growth and increased value of the company. Puławy also took part in the support provided to Ukraine and through Caritas of the Lublin Archdiocese and other units. We donated PLN 330,000 for this particular purpose. We also provided some assistance in kind to over 40 people. As previously mentioned, Grupa Azoty Puławy was recognized in the Decarbonization Initiatives ranking for the project development and introduction of an advanced APC control system for the ammonia production facility. This is an advanced control system, the implementation of which has reduced the carbon footprint of a single ammonia production line by over 20 kg of CO2 per ton of ammonia. This project fits perfectly into the new strategy of Grupa Azoty.
One of the goals of that strategy is to decarbonize and reduce the carbon footprint of the group's installations. Moving on to our financial performance. Consolidated EBITDA for the first quarter of 2022 at Grupa Azoty Puławy Group amounted to PLN 622 million and was up by 476% than in the first quarter of 2021. Sales revenues went up by PLN 1.68 million, that is up by 66% of which on account of price increases by PLN 1.6 million on account of higher volumes by PLN 68 million. An increase in EBITDA by 12 percentage points up to 23% results from increased selling prices despite a nearly five-fold increase in gas prices.
I'd like to stress at this point that the withholding or the stopping of gas flow to Russia or from Russia to Poland had no impact whatsoever on our production levels. Current deliveries are uninterrupted and our production is carried out at the plant level. Moving on to the performance by segment or segment breakdown. First quarter saw a major contribution from the Agro segment at 90% or 90.2% in total sales revenue compared to 85.2% in the comparative period that is year-on-year and amounted to PLN 2.428 billion, which means that they increased by PLN 1.5 million year-on-year or by 181%. The main reason for the increase were obviously higher prices of urea, ammonium nitrate, and also melamine, as well as ammonium nitrate.
External sales revenues in the Plastic segment accounted for 7% of the group's revenue compared to 9.8% in the comparative period and amounted to PLN 188 million, up by nearly PLN 90 million year-on-year. This was due to higher, obviously, prices of caprolactam as well as sales volumes of caprolactam. At the EBITDA level, the Plastic segment reported a positive result of PLN 9.4 million compared to a negative amount of PLN 11.8 million in the comparative period. In terms of our Agro segment, in the first quarter of 2022, it recorded an increase in EBITDA by 490% from PLN 105 million in the first quarter of last year.
In terms of our CapEx projects, the group implements its investment program according to the schedule. In the reporting period, the largest expenditures were incurred on the following projects: modernization of the steam boiler OP-215 No. 2, replacement of the TG1 turbine set, as well as construction of a power unit based on coal fuel. In this particular investment, the material advancement of work was at 67%. In the first quarter of 2022, we commissioned fixed assets to be used under eight investment projects, including the investment project under the name of spraying urea's inhibitor on urea. In order to be in line with the European directive, which imposed such obligation on us as of August last year, we selected that particular project to meet the requirements of that particular directive.
We also commissioned TG1 turbine set, and the project aims to increase the efficiency of cogeneration of electricity and heat by replacing the previous TG1 extraction condensing turbine set with a capacity of 30 MW of energy within a unit with a nominal capacity of 34 MW of energy as part of the modernization of our power system. As I've mentioned before, our CapEx projects are delivered as planned, and the level of our CapEx is in line with the schedule. In the first quarter of 2022, Grupa Azoty Puławy incurred capital expenditure of approximately PLN 50 million. That is down by 83% year-on-year. This year, we plan to finalize or complete most of our largest CapEx projects. That is the construction of granulated fertilizer plant.
That is the second line, because I need to remind you that we commissioned the first line last year, December last year, and we started production then. Obviously, as well, obviously the completion of power unit as well as the modernization of our steam boiler, OP-215, and as I have mentioned before, the replacement of the TG1 turbine set. Due to the advancement of work, those outlays were not as spectacular as in previous periods. At the same time, we are running advanced analysis concerning the possibility of using ecological green energy sources, which as I have mentioned before, is well in line with the group's strategy for 2021-2030. Thank you very much. This will be all from me. We'll now ask Mr. Michał Siewierski to discuss the results at Grupa Azoty Police.
First of all, I need to mention a number of significant events. That is, first of all, signing a letter of intent on the construction of an LPG terminal between Grupa Azoty Polyolefins as well as the Zarząd Morskiego Portu Police. We also announced the force majeure due to some unexpected problems, as well as a breakdown of two OP-230 boilers. This could not be prevented. We also signed an agreement between Grupa Azoty Police, Grupa Azoty Police Serwis and the West Pomeranian University of Technology in Szczecin for joint projects in terms of research and science. Grupa Azoty Police was also involved in the aid provided to Ukraine. In a recap, our performance in the first quarter was dominated by major increases of feedstocks, including potassium chloride, phosphate, sulfur, ilmenite and gas, obviously.
As a result of these changes, as well as the developments in the macro environment, we saw higher prices of our products. Which was obviously impacted by the geopolitical situation after the aggression of Russia on Ukraine, which resulted in disruptions, especially in the feedstock market, affecting the availability of a number of feedstocks for the production of many products. In the first quarter of the year, we recognized the net result of PLN 16 million , slightly above the result in the previous year after the first quarter. The consolidated EBITDA for the first quarter 2022 was at PLN 46 million, with an EBITDA margin at 4.4%, that is up by four percentage points, or down by four percentage points below the margin in the previous year.
The failure of boilers in the power and energy engineering center and the lack of possibility to generate technological steam were major factors impacting our operational performance. This problem was eliminated, and we informed you about it in the current report. All segments in the first quarter reported positive EBITDA levels. Moving on to the segment breakdown, we need to emphasize that, the fertilizer segment generated PLN 36 million with EBITDA margin at 4%. That is lower by 3 percentage points year-over-year. The pigment segment in the first quarter generated the EBITDA margin at 6.5%, and, EBITDA level was at PLN 7 million. The performance of those segments were impacted mainly by the breakdown of boilers in March last year, which stopped or significantly curtailed the production.
The first quarter in 2022 saw major increases in feedstock prices year on year, including a nearly fivefold increase in the prices of gas, as well as dynamic increases of phosphate, ammonia, sulfur, and so on. The trend is a dynamic continuation of rising trends which started still in 2021. The highest contribution in the consolidated results at Police came from the fertilizer segment, similarly to last year. Operationally speaking, the higher margin for the past period was achieved in the pigment segment at 6.5%. In terms of our CapEx projects, as at March 31st, 2022, we are continuing our flagship investment. That is the Polimery Police project, in which the material advancement of work at the end of March 2022 was at 90%.
It should be emphasized at this point that we are also involved in certain adjustment investments. That is, for instance, the upgrade of a transformer station, 110 kilo. For the propane dehydrogenation and polypropylene units, recycling of hydrogen originating from the propylene units to be used in the ammonia unit, that is the stage of completion of that project is at nearly 20%. Another important project is the project which is meant to make the production of demineralized water independent of the variable salinity of the Oder River, as well as increasing the ability to produce special waters, and the budget of this project is at PLN 108 million , and the stage of completion is more than, currently more than 92%.
In the first quarter, our CapEx spending was at PLN 20 million, of which nearly 45% accounted for growth projects. Thank you very much for your attention. A short recap then before moving on to the Q&A session. First of all, I'd like to emphasize once again that the first quarter of the year was a very challenging and volatile market environment, especially in terms of high gas prices and volatile gas prices, as well as the prices of other commodities and feedstocks. This affected, obviously, the prices of our products, which followed the prices of feedstocks. Those challenges, market challenges in the beginning of the year were further exacerbated by the armed aggression of Russia against Ukraine. Throughout the period, that is the first quarter of the year, we continued our production with maximum utilization of our capacities.
I would like to point out that many of our competitors, especially after the 24th of February, cut their production levels. In the first quarter, we saw a major breakdown at Grupa Azoty Police, which obviously has already been discussed. Traditionally, the first quarter is a solid quarter in terms of demand, the demand for fertilizers or nitrogen fertilizers, specifically speaking, and the beginning of 2022 was no different. This is where the structure of our EBITDA comes from, where EBITDA is dominated by the sales of our nitrogen fertilizers. It is worth noticing that Grupa Azoty, however, is not only about fertilizers.
We also reported a solid performance in the chemical segment, which goes to show that the diversification of our operations was made possible for us to actually have a flexible approach and flexible actions taken in this very challenging period that the first quarter of the year was. Throughout the period, we also maintained one of the lowest prices of our fertilizers across the European Union, despite a major increase in costs, production costs. That'll be all in terms of the presentation itself.
We will now be able to move on to the Q&A session. Thank you for your questions. First question, why the stage of completion at Polimery Police is at more than 90%, the deadline is set at 2023? What is the actual stage of completion at the end of the first quarter of 2022 and, in relation to the crisis in Ukraine, did you see any risk that the budget needs to be revised? Mr. Michał Siewierski will answer that question.
Thank you. In response to that question, I need to say that, as of March 31st, the unused budget at Polimery Police project versus the outlays in that particular period leads to a conclusion that our reported stage of completion relates to the construction or commissioning or the supplies received by us. This does not equal financial completion or the budget. Let me remind you that the budget, approved budget is at $1 million, translated into PLN 7.2 billion at the average exchange rate assumed in the financial model for that project.
The next question, what is your assessment of the current prices and demand in the fertilizer segment now that your Russian export bounced back? Mr. Tomasz Hryniewicz will answer that question.
Russia does export fertilizer products still. However, the directions in which, to which, Russia sends their products are different. Russian producers focus on India and South America right now. As for the European market, as well as including Poland, which is the leading market in Europe, the activity of Russian producers is very low. In Poland, we do not expect in the months to come, in the nearest months, we do not expect any products from Russia, for instance, due to the problems with payments, the logistics, as well as freezing or blocking certain entities under sanctions or, for example, PhosAgro. Thank you.
The next question, what was the effect of the changed policy, revised policy for the purchases of gas from PGNiG on the performance in the first quarter? Could it have a major impact on the second quarter of the year?
A couple of words about our approach here and our policy. We try to be as flexible as possible to hedge in terms of hedging gas prices due to this very dynamic and volatile market situation. Therefore, our policy is short term rather than long term. Also, we try to alleviate or mitigate the volatility in the market. In the first quarter of 2022, the hedging of gas prices did have a positive influence on our EBITDA level. However, it was lower by half, by 50% year-on-year.
Obviously, we are aware of the fact that if gas prices continue to fall or will fall, if gas prices fall, then with the hedging that we have, the hedging influence that we have, we might see a deterioration or a negative effect. We are monitoring the situation closely, and as I said before, we do not have a long-term approach, but rather a short-term approach. It is difficult to predict the situation in the months to come, but we are monitoring and analyzing it on an ongoing basis, and we will try to adjust our hedging activities and efforts as time goes by, depending on the market situation. As you can see, the effects are quite positive, and we expect and hope that these positive effects will continue.
Next question, what are the alternative scenarios that you take into account when gas supplies from PGNiG are stopped? Historically, we did have such periods and, what would happen, what needs to happen in order to, for those supplies to stop?
Fi rst of all, it's not PGNiG that stops gas supply, but the transmission system operator. Obviously, this decision is taken based on a solid and thorough analysis of what happens in the system. In a situation, for instance, when we have a long, harsh winter, it might happen that the stock levels are not adequate and the balance is not adequate. The situation could happen, but it will depend on the actual state of affairs in the market, and it's very difficult to predict. It's not a black-and-white situation.
That is, we don't have gas or we do have gas. We need to remember that if we have such limitations actually, then we would need to talk about certain percentage of cuts, not 100% cuts. We do not, however, see that risk. Obviously, we are well prepared to face those risks because we need to be. I'd like to emphasize once again that the agreement, the contract with PGNiG is delivered as scheduled, in accordance with the provisions of our agreement. Despite the fact that Russia stopped gas supplies to Poland, we do not see any disruptions on that account.
The next question concerns plastics. Where did the loss come from at Puławy, compared to a higher profit at Puławy? What is the effect of this policy on transfer prices? This question will be answered by Mr. Hryniewicz.
Both at Tarnów and at Puławy in the reporting period generated profits. However, Tarnów, due to the highly processed product that is polyamide as well as the production scale, generates higher margin. In addition to that, the production of polyamide is based on nearly 80% of in-house-produced caprolactam, which is cheaper than the feedstock purchased at Puławy because Puławy based produce caprolactam based on benzene, while Tarnów it is based on phenol. The margin model is based on a uniform breakdown of profit, and the scale of that profit is well explained. It was well explained before at the beginning of the presentation.
The next question concerns lower volumes at COMPO EXPERT, production volumes. That is, does it come from higher base or logistics problems?
There are three factors. There have been three factors that are actually important here. First of all, we need to remember that, COMPO EXPERT market is much different than nitrogen market, especially that this market is fragmented, geographically speaking. The first factor was the fact that the prices of those specialty fertilizers were going up. Then we saw higher interest of customers for those products. As a result, rising stock levels in the first quarter, therefore in the last quarter of the year. Therefore, in the first quarter of this year, it went down. We also had droughts in certain geographies where COMPO EXPERT operates. The third factor was the fact that there were disruptions in terms of logistics, high prices of freight.
Still, we need to emphasize that the company generated a higher EBITDA mainly due to high prices of products sold in COMPO EXPERT markets. The next question concerns the assessment of the demand and margins for basic chemical products. Generally speaking, obviously, what is going on in the market, that is the inflation rate going up as well as the interest rates going up, obviously does have an effect on the demand for our products, especially in terms of chemical products. We expect that the second quarter could not be as good as the first quarter. However, in this particular respect, the difference should not be significant. However, it is quite clear that the macro environment does have an effect on the demand for those products.
The next question concerns Chemicals segment as well.
What part of the record-breaking performance was contributed to melamine, and what are the trends for the coming quarters? I'd like to say that yes, we are talking about the contribution at 20% to EBITDA from melamine production and sales. The second quarter is a challenging quarter for melamine, mainly due to the imports from Asia, where the price difference versus of Asia versus Europe is quite significant. Obviously, we need to remember about logistics problems. They are also important and significant. Looking at the application of melamine, we can see quite clearly that the second quarter will be a major higher challenge compared to the first quarter, mainly due to the purchasing power and the increase in interest rates or inflation rate.
Thank you. Did you hedge the CO2 emission allowances for 2023 or did you secure them?
We are talking about more than 80%. We are doing it in line with our purchasing policy. That is, we are trying to buy those emission allowances, CO2 emission allowances in advance in order to counterbalance the volatility on the market and achieve average prices. The price is obviously lower, significantly lower, than today's prices. We're looking for ways to have that price resting on some reasonable levels. Obviously, this price is quite high, but it's still much lower than today's market prices.
The next question concerns our macro environment and the falling prices of gas in May. Can you expect that the actual price of gas is lower than the benchmark? Will this effect be compensated, offset by, in the second quarter?
Well, it's actually difficult to say. We would wish it to be, but we wish it to happen, but it depends on the actual market situation. As I said before, we are taking a short-term flexible approach here, but we do not have any guarantee that the price, the actual price, is always lower than the market price. We need to be aware of the fact that this price is volatile, and we are doing our best to stabilize our costs, but we do not, we cannot give you any guarantee that our price will be always lower than the market price.
The next question, the chemical segment's performance, was it impacted by high freight costs and transport costs which limit the import of melamine from Asia to Europe?
Obviously, yes, it does have a major impact. The logistics problems always have an impact on the prices of our products. Also we assume in this area that those problems will not disappear in the months to come or the periods to come.
What was the indirect effect in the first quarter of a practically zero level of imports of ammonium nitrate to Poland?
This is to the benefit actually of, for us, for Grupa Azoty. Due to our microenvironment, Grupa Azoty now focuses on how to satisfy the domestic demand, and this is our policy. This is the core of our policy in the first quarter of 2022. The reduction of imports, or as you said, practically no imports in the first quarter of the year, resulted in the fact that our domestic sales levels were high. This phenomenon obviously has an impact on us and the sales of Grupa Azoty products is higher. It is to our benefit.
What was the impact of the use of safety stocks contracted at lower prices during the breakdown event at Police?
Well, this obviously relates to gas prices. The total effect and a negative impact of this breakdown on our performance is around PLN 25 million. Grupa Azoty took advantage of the market situation, especially in fertilizers. Is
Is there any risk that you will be facing an imposition of an extraordinary windfall profits tax?
I don't think this is a question to be answered by Grupa Azoty. Obviously, we pay all our taxes in accordance with the current regulations, and obviously, we intend to do so in the future as well. It's very difficult for me to answer what will happen in the future, predict it. We will pay our taxes, obviously.
Which of the investments could impact EBITDA, and which should be treated more as a maintenance CapEx?
Nitric acid unit and granulated fertilizers unit, these two increase or expand our product portfolio. Whereas the power unit at Puławy is meant to drive down our emission levels as well as improve our efficiency in terms of energy production. However, all those three projects have an impact on EBITDA, positive contribution on EBITDA. All these projects are profitable, but the detailed impact will depend on the assumptions. However, in general, we need to say that all these investments are profitable and contribute to EBITDA.
Gas prices went up five-fold, however, revenue from fertilizers went up only two-fold and the volume stayed flat. This is a major difference given the fact that the gas is a major cost. How is this possible?
You cannot translate it directly. The fact that gas prices are going up two-fold does not mean that the prices of products will go up two-fold. The contribution of gas prices to the prices of products is obviously important, and the prices of products went up due to the increases in gas prices. However, the situation is as follows. The profitability or the profits in general on fertilizer production depends on a number of factors. On the slide, we are showing you absolute values in terms of by how much both our costs and our profits went up. In terms of percentages, it is a difference.
It is a different conversion because in practice, costs are lower. They need to be lower than revenue in order for us to recognize profits. There is no black and white correlation here, mathematically speaking, because gas does not represent 100% of the cost.
We are running out of time, or we actually have run out of time. If you have any additional questions, I do believe that all the other questions will be answered individually by our investor relations staff. If you have any further questions, we will be ready to answer them after the conference call. You will also meet Mr. Wadowski during our investor chat today. Thank you very much for your attendance and thank you very much to all our online webcast viewers.
I'd like to thank our speakers for the presentation and discussion of our performance in the first quarter of the year. Thank you very much.