Ladies and gentlemen, good afternoon. Welcome again. We are starting today's meeting with the management board of Grupa Kente. We have all members of the board and Rafal Lejovitch, Head of the Board of Alupol Packaging SA. Today's meeting will be dedicated to the results after the 3rd Q3 of 2021 and the prospects for the new quarter as usual.
And the meeting will be opened by Dariusz Manikow, the CEO. Then the heads of the segments will give their presentations then we will have financial details and move on to the Q and A session. Right now I will share the presentation on the screen so that you can see it. Live meeting, but it seems that we are approaching the 4th wave of the pandemic. So there will be no opportunity to receive your congratulations personally from you for our results.
Well, that was a joke, but the results of the Q3, as we informed you before the results are very good and that's why we've corrected our prospect for 2021. All results connected with EBITDA and net profit had to be raised. And I think these are the good information. But in addition to good info. We can add the we can say that we are fully booked and we are working at full speed.
And this is what is happening in many companies. We are not the only one beneficiary of this a little bit crazy demand. But with all the joy that we have right now. We cannot forget about what is happening around the world. End.
Here, we must remember about the resources because this is unusual. This is not normal. Well, this is not a natural demand growth, 100% or 200% and 300% growth of demand for metals, for instance. And we are a little bit concerned because this is a wildly growing prices of raw materials and that leads to problems, issues because we have to keep telling our clients why we have to raise our prices. So, well, everybody is concerned and that does not help good relations with our customers because some pathological situations are involved.
Somebody will buy something at a good price and then sell it again and win. But it is not a sustainable development because well in our world, security is important. So we are quite concerned here. So this is one thing about the market. And another thing is the inflation.
Well, I've So went through a lot in my company through many crisis and other issues. But with low inflation. The comfort of our operation was completely different. Well, we could we were able to actually stop discussing problems with our trade unions because we were able to actually work on the budget, and we could achieve a stable growth of the budget for our employees. And right now, All companies will have to have discussions and we are coming back to a situation that we had 10 years ago And the trade unions actually come over.
They say there is inflation, inflation plus and for instance, we will have to have salary growth of 9%. So this is the inflation scale and it's spinning out of control and this is a very bad information, a very bad piece of information and very bad situation. And next year, we will have a lot of work. And well, We are all wondering how this will continue, whether our government will be able to respond to this spiraling inflation, and there is a lot of work ahead. So this is the backdrop.
So we are working on our budget for the next year. And we've been here in this company to working professionally for many years. So this is not nothing new for us. So we are actually realizing the fact that we have to plan the budget, think about the aluminum prices, the USD prices center. The carriers also prices, because for instance, the energy prices are growing as well.
The fuel prices are growing as well. So if we have to pay for energy, well, with the growing prices, we will have to actually accommodate it into our product price, final price. So the time is very interesting right now. It requires a lot work from us. Well, we've went through a lot already.
We have a lot of experience and we are having everything under control. But I believe there are many companies that are not really prepared for that and they will be hit by the situation and I hope they will to be able to manage and in the end, win. And we hope for only good information that will be shared by us quarter by quarter. Other important messages, Well, we've just finalized the verification process, the analysis process of the flexible packaging segment searching for investor. Nothing is happening here.
Nothing new is happening here. Well, Please do not feel disappointed. This is a very good segment delivering very good results. So we have a lot of hopes for the future and we will continue operating as 3 segments and we will present you next year's budget based on 3 segments as well. And I think call.
We can move on to details right now. So extruded products segment. And Piotr Visotsky, please go ahead. Well, I will actually tell you what is the situation right now. So metals and aluminum is 3.050.
But we were also the levels of 300 and 3,200. Huge growth of per price. Last time I saw it was 10 years ago, a very high level. And that is also connected with the prices of the U. S.
Dollars. Also the billet market is really crazy. This is what we use for our aluminum profiles for extruding it. And right now, this is 14.50. This is the price.
And with this high level of market, well, we want to have some hedging, some leverage here. And Additionally, what has happened in the recent weeks is the crazy situation with the magnesium and silicon. Well, aluminum profile requires alloying additives including magnesium and silicon. Today, The magnesium is 16,500. This is the price.
This is a crazy price right now. 16,500. This is the price. This is a cosmic growth that happened within a few weeks. Now It seems stable at this level, but this is a record setting level and silicon have thought about it.
And so silicon and magnesium, We don't purchase a lot of those elements, but we are unable to function without them. So the Q3 was very good for extruded product segments. Our sales, 35 100 tons more sold. High dynamics off the value of sales, but this is also connected with the price, aluminum price on the stock exchange. 0.8%.
So we continue selecting the customers and we raised the prices because we are forced to do so because the raw materials are actually becoming more expensive. Well, with production high volumes. We work at full capacity. So we are able to improve our efficiency As I've said, the sales in Q3 during Q3 is a record high. And export takes a big share, especially in Germany.
We have a strong position there. It's our biggest export cut. The prices are really good. In Italy, same situation, big demand in Italy. And there and the production, as I've said, we are working at full capacity 247 4 shifts and naturally, we cannot increase it.
And we will be continuing our investments in November December and our production capacities will be increased. Well. I am smoothly going on to the investments. So we are investing in the presses. So for instance, 40 megatons.
So all is according to the schedule. And we can safely say that in November, we will be able to sell products of the small press and then 40 megatons will be actually launched in 2023. Everything is according to the schedule despite the crazy situation and very tough situation on the construction market. Well, I'd like to tell you about the automotive segment. So the development of e mobility, we wanted to join that as well.
And our position is very strong there. Let me say this. Our Slovenian company started supplying the components, aluminum components for American fiscal electric cars. So we forecast that the project duration is 2023, 2029 and number of aluminum profiles will be 2,000 tons per year. On the pictures here, you can see what we are manufacturing and how it is used.
And this is a photograph of a car. So all those profiles are produced by our companies by our company AKA EMI. The green profiles are capturing the energy. They are very important for the vehicles. In July this year.
It will represent the interest of the companies that operate in the Polish aluminum industry and these are the leading producers. And this is a forum to exchange experience information and we can discuss all things connected with the market, with the what is happening in the current situations. And this is an additional source of information for task. Also, legislative issues, customs issues, we were fighting also for the duties. So this will be an organization that will support the development of aluminum industry in general.
So that's all from me. Thank you so much. And we are moving on to aluminum systems. Good afternoon, ladies and gentlemen. Well, about the troubles we've heard previously, all those troubles affect us as well, our trading operations.
Well, we became more purchase company. So the domestic and foreign sales is undisturbed, but to purchase the raw material at a good price, this may proof problematic. Everybody has this kind of problems. This is not just about aluminum and the price, but Silicon, for instance, resins and other elements that are important for us to manufacture elements. This year.
Next year, we plan to introduce new interesting products to our portfolio. Unfortunately, the situation forced us to shift this and postpone it until the next year. We have just one solution for window doors, and we hope this will be very popular and other solutions will be presented in the future. And now just the sales. Well, traditionally, several selected buildings that we've recently won contracts for, just the city center of Warsaw that was actually one earlier.
You can actually see how that is growing in Warsaw. And that translates on to small and medium sized buildings, apartment buildings, family houses, single family houses. Well, we can see that and the effect is very good. The negatives, well, the unstable prices because one thing is the price of raw materials, but also the fluctuations, the lack of stability prices. It means that the work on the market is destabilized.
We cooperate with can destabilize the smooth work and we are one of the elements of the whole process and we are forced to increase our prices. This year we had this increase twice already end. Next year, we will have another price increase and we will respond to the situation accordingly in the future. And now foreign sales, interesting photographs as well. Some exotic markets.
We are very happy about our presence and that is growing on the markets that we've been present for many years. So Belgium, the Netherlands. We have interesting situation in Ukraine and an interesting project here. We are showing you the biggest Slovakian project. So HB Revis, this is our first project together and they are doing one of the very big projects in Warsaw as well.
So we are very happy about this cooperation. We have a positive situation on new markets. I'm talking about China, Vietnam, Algeria, Kuwait. And I hope that In the future, we will be able to tell you more about those markets and the situation on those markets. Similarly to our domestic market, no stable prices again and that destabilizes the cooperation with our customers on European end world global markets.
Well, the whole situation connected with raw materials with the prices did not translate into worse results as you probably saw that in our message. Our segment in the Q3 and after the 9 months, The growth is over 20% in each field. So sales, domestic or foreign sales, Also, EBITDA grew and EBITDA margin grew as well. And the structure, sales breakdown by products. Well, no big differences here.
Over 60% of our sales is taken by our domestic sales, 60% architectural systems, the rest are external roller shooters and others. And now investments, we would like to tell you that the construction of both holes in Apollo and in Bialskoe are almost all finished. Apollo has already all the furnitures and in Miezhec, the hall has been accepted and now we are the equipment assembly has begun and we plan to occupancy permit in January 2022. So thank you so much. And now we are moving welcome ladies and gentlemen.
Rafa Wlachowicz. I represent flexible packaging segment. Ladies and gentlemen, we've just completed the Q3 of 2021. Very good, not as good as Q3 in 2020 we are actually selling a lot because there was a lot of panic initially and a lot of purchases in the beginning of 2020. Well, the past quarter was very good, not just for us, but full of challenges connected with some shortages and the necessity to purchase the components that are necessary for our production.
Well, we are operating in the times when the contracts may not mean a lot and we campaign based only on the raw materials that are physically in our storages. Ladies and gentlemen, during the Q3, the granulates prices so for other components is changing. There is a lot demand for polypropylene or BOPP foil is in high demand. This is very easy to recycle for instance, and that is connected with the green pressures on the market. However, What is driving the BOPP foil will affect also other segments.
We are under high pressure and this will be continued. 30% year on year. So this is due to BOPPP and the raw materials EBITDA drought, but that is connected with a very high base in 2020. That was connected with the panic on the market. After 9 months of this year, this parameter is higher by around 30% as compared to the past year.
Setting high last year. So EBITDA will be around PLN280 1,000,000. The level seems to be nothing threat. As you can see in our table with a high base of 2020 BOPP Business did very well 3% up. Packagings were not doing as good.
This parameter dropped by 15%. And ladies and gentlemen, 50% share in of BOPP in the total sales is continued more exported goods than sold in Poland. In the future, we will still be under the pressure of highly processed products and this is connected with the structure and the green trends more popular become less processed products. So simplified logical manufacturing process helps to compete successfully with big producers, small companies resulting in a price war on the market. Well, a different situation is in BOPP segment, which is doing very fine and actually much better than the packaging segment.
Ladies and gentlemen, as you can see, during the Q3, the capacities grew and they are nearly all at the level of 90% and the investment plan is continued according to the schedule. We are maintaining our manufacturing potential. That's all from me. Thank you so much. And now we are moving on to the financial details and director, Varpe Hovskiy will be presenting his materials.
Good afternoon, ladies and gentlemen. As it was already set. The Q3 was a big challenge for us because of the fluctuations on the market fluctuating macroeconomic factors, but there was a strong demand in all our segments. Therefore, sales was up by over PLN 300,000,000 slot. EBITDA was PLN 245,000,000, which is higher year on year.
There were no one off significant events. There was a normal profit tax. Net profit was NOK 167,000,000 plus 30%. And after 9 months, we've reached the level of 466,000,000. That was again a very good quarter, similar to the best one so far.
And as we According to our forecasts, earlier forecasts and seeing the horizon until end of the year, we decided to correct the forecast for this year. And according to the message from July, we increased our revenues by NOK 300,000,000 and EBITDA was increased by another PLN 90,000,000 and EBITDA compared to last year is up by NOK 90,000,000 and extruded products are responsible for at least half of it. And aluminum products and packaging are also responsible for that. And net profit, Well, operating cash flow is higher, PLN 132,000,000. But I need to say we've included the demand for the working capital that is all connected with the raw materials and the scale of our operation.
And CapEx around PLN 45,000,000 that will mean that during the Q4 We will spend more money. The expenditures will be higher. And the cash flow in the 3rd quarter, the lower diagram. We can see that the debt also grew. We are talking about SEK 300,000,000.
This is all connected with the dividend payment. And In previous years, while the payments were happening in the Q4 and now this is earlier and the debt grew, but financial situation is very secure, very stable. All levels are very stable and secure. And because of the high EBITDA, the debt is €800,000,000 but the indicator is still the net debt EBITDA ratio is still 1, so very safe. We can see the financing structure with the stable financial structure.
We've started the process of renewals and last year We also diversified the maturity deadlines so that they are not maturing. Our debts are not maturing in 1 quarter, so it will be more diversified. We are showing you how the debt changed during the throughout the 9 months over PLN 300,000,000 flows PLN700 million generated cash, but over PLN300 million our operation and the growing prices of raw materials. We paid the tax and PLN324 million was left out of operating EBITDA SEK 430,000,000 and the debt was on the level of €840,000,000 And now moving on to the last part. This is our forecast.
We can see that the forecast for the Q4 means that we expect that the Q4 will be better year on year by approximately 30 percent. The situation will be very tough. We will have really high prices, but the demand is looking very good. So we believe that this will be good quarter. Hence, if nothing new happens, the results will also be very good.
But we will have to base on our operations on our capacities to use the opportunities on the markets. Well, operations and investments, investment plan, it will also be a challenge, very challenge for us because the spendings will be twice as high around PLN 100,000,000. So the yearly forecast for CapEx, we will probably not use the whole PLN 180,000,000. But in total it will be around 1 quarter of a €1,000,000,000 So loans So we'll be renewed. I mentioned that we are starting a budget process under very difficult circumstances, so some changes to strategy.
So we expected the prices will be as high next year. And for the strategy, as regards the strategy, we will have to spend more for investment plan. Thank you so much ladies and gentlemen. Thank you. Thank you for the presentations.
And we've actually finished the part dedicated to presentations and we will move on to the Q and A session. I have received several questions online in our chat box, and I will read them and you will answer. So the first question is as follows. Historically, the Q4 has always been not as good. So this is connected with the second half of December.
Well, are you thinking that it will be changed or maybe the situation will be standard? Yes. Well, the situation will be standard. It is always a period that gives us a an opportunity to check our equipment. It will be a better quarter compared to last year.
The passenger cars production manufacturing in Europe has been withheld. How will debt affected the extruded products in the Q4 of 2021 or maybe if it is forwarded to next year. Well, will that affect you? Well, a very good result this past quarter. Very good without automotive share.
Well, the manufacturing plants are not operating, but we did quite very well. That's a positive information for us because automotive companies say that they would like to come back to production and we will see whether we have capacities for that. But without automotive, So we will do we were doing quite well and if automotive comes back, it will be fine as well. And now packaging. How about the profitability reaching 19%, will that be under pressure during the future quarters or maybe this is a normalized level for the future.
So well, it's hard for me to say what will happen in the next quarters, but we should not be under pressure in the near future. We are quite well balanced. If one segment is not doing as well, well, The other one is working better. It's like with a way, if converting is not doing that well, then the raw materials are balancing that the segment already has. Are they related mostly to packaging or maybe BOPP.
Well, the free capacities are only in packaging area. BOPP is fully booked. And now financial question. So the increased interest rates, how that can affect the results off counter group. We are talking about 40 basis points.
We are and I guess and this is all connected with our loans. Well, we are paying market interest rates and it's not problematic at all. How much will the production capacities of the extruded products segment. What will be the growth of capacities in this segment after the presses are launched? Well, this investment center will be also connected with some modernization.
We are talking about 20%, 25% growth. So slight increase in the Q1. We are talking about 4,500 tons availability since the Q1. So this is to increase the efficiency of work. We will be working with higher volumes and at the end of year November new press.
So How about the parameter at the level of 1? So the ratio, will that be maintained in 2022 or maybe the ratio EBITDA to net debt will be higher next year. Unfortunately, there are many factors involved here. We expect that the spendings will be higher next year. We will see what will happen.
So I said that mid year or between the end of the year and the beginning of next year. We plan to finish this process and we will actually inform you about it. But according to our strategy, the levels should still be safe. So it may grow with the CapEx, cumulated CapEx and with the prices of raw materials. I need to remind you that the growth were happening during the Q3 significantly.
So we may not have a full picture here. But of course, as the CEO has said, with the profit PLN 560,000,000. Well, this is all. Okay, another question. The current forecast for 2021 implies the EBITDA that was included in the strategy for 2021 should be treated as unique and the next year will not be as good.
Well, let's not say that the results are this year are unique. We do not say it anymore because there are so many events happening. So the limitations in raw materials availability and capacities and so on, there are many elements involved and because we were able to deal with this tough situation, we generated really high profits. But on the other hand, for the future, we have to remember about the energy cost. So this is the recent change and this may actually impact the situation in the future.
Well, the next year's budget will be based on the objectives, current objectives end premises. Well, if there are bigger differences, we will come back to the strategy. Well, a lot of things are happening quicker. So Well, when talking about the yearly forecast, well, we will think about the strategy as well. But this will not happen before mid year next year.
Well, I don't really want to use the word unique because we were able to actually deal with it. But that actually shows you the potential how that may work. And all the elements worked well for us, for our company. And, well, this may not bid the situation next time. So let's wait with the strategy until next year so that we can announce something.
And I hope that the pandemic is actually ending because So we have to remember about the pandemic because the 4th wave is hitting Poland and we don't know how this will affect the market. Well, the question is a good this is actually a good question because we may stick to our strategy, but we would like to achieve a better comfort when We talk about stabilization and now a technical question. What is the average in kilograms, the use of silicon and magnesium per ton of aluminum profile. Now, magnesium, hard alloys. We're talking about we buy around 20 tons of magnesium per month and silicon.
We must buy around 50, 60 tons depending on the types of alloys with 8,500 tons of sales. So these are not really big values, but without 20 tons of magnesium, we will not be able to produce as much. Monthly, we are talking about monthly amounts, 20 tons monthly. So 20 tons of magnesium monthly and 50, 60 tons of silicon as compared to 8,500 tons of sales. And again a question for you.
Despite the growing prices of raw materials and other costs, the EBITDA per ton grew significantly. Is it because of hedging or cheaper inventories will EBITDA per tone decrease, improve or stabilize? Well, it depends on the scale because this is complex question. Of course, we have some inventories because we have to actually order everything earlier. We have to sign contracts ahead of time.
But that also affects our EBITDA. But that is also connected with the prices that we increase. We match the situation on the market. We've done already several increases this year and aggressive price policy on the market. Well, we use the situation.
There is high demand on the market. We increased our prices and the prices already are very high. Further than 1 quarter ahead. We observe the situation on the market. Well, this is the whole process of price increases and we are talking about monthly increases for instance.
We also heard about hedging, so earlier purchases. There is no speculation here. Of course, we have inventories, but they are rotating, for instance, billets that were used for production where, these are operational inventories only. And in this EBITDA, you can see you don't see any financial hedging effect. This is just our operation and work.
EBITDA margin on BOPP dropped by to 15%. Is it a model kind of margin or maybe we should expect more decreases to the level of 10, 15 percent. We should not expect further decrease and the margin is similar to last year and it will be over 20% on the level of EBITDA. You have to remember that this is an export business. So we respond percent on EBITDA level sometimes 13%.
So we do not follow just short periods like 3 month periods. In October, for instance, we expect that the margin will be 20%. So only good This is what I've said during presentation. In packaging, the trend there is a green trend, more simpler packaging is more popular, so highly processed Several layer and packaging are replaced by simpler, unified packaging driven by the green trends. So, we have more competitors because if there are more companies producing the same product there always can be a price war.
Well, the market, but we've dealt with the situation very well so far. And we have a good balance between BOPP and Packagings. And now the question about energy and gas prices. We'd like to hear your comments on the forecast for 2022. What kind of expenditures are you planning to have?
Because the budget has not been published yet. Maybe we could hear what will be the percentage growth, What will be the scale? Well, what we've seen in the recent weeks on the markets are very dynamic changes, but we purchase gas and energy in advance. We break this down into tranches into in order to stabilize the price for us. We continue this policy and the growth will not fully translate onto our operations.
But we are talking about 50,000,000, 60,000,000. But if we treat the very high prices today as stable prices. So the missing hedging will be according to today's prices. We are secured partially secured until the Q3. So after the winter period, especially as regards to gas, maybe the situation will improve.
Move. What kind of salaries? What kind of growths are you expecting here? Well, yes. On the budget level 6%, one digit growth, but not below 5% surely.
In August, Russia Aluminum was supposed to be come with 15% duty who's covering the costs, the buyer or the seller? Well, the conditions that were given to us were very hard. Well, this is the situation on the Ukraine on the Ukrainian market. We've only had the situation in Ukraine, well, 15% duty that affected us and then we translated it to our clients. But yesterday, in metal courier, this is Russian metal bulletin.
They say that the duties will be removed as quickly. Fluctuations in additives, can they affect the consistency of production, volume of production. Well, we are safe here. 80% of magnesium on the European market comes from China. So the question is, there are inventories in Europe.
The situation because we have inventories and then we will see what will happen with this high price and what will happen in China. So far continued work taking into account the price fluctuations, availability fluctuations of aluminum and problems potential problems for companies processing aluminum. If there are any opportunities to take over such companies. Will you take that into account order. Do you stick to the idea of the 4th leg of your business taking into account the relatively low level of debt?
Well, we are checking our suppliers because when we talk about billets, this is the problem, the supply problem. Recently, a billet producing company has been closed down recently. Flexible approach to the market. If there is an opportunity, a good opportunity, then we so this has to be a very good opportunity and flexible approach to investments. This is what we half.
We keep watching the situation. So the 4th general, the same applies. We have several projects on the table and this is what we are going through. But I can't really say anything right now because we are not involved in anything specific right now. Thank you.
And another question, should we expect that the volumes will grow in the Q4 across all segments. Yes. Director Lejovitch, did you hear the question? Because we've heard that the volumes will be higher in their segments. How about the packaging?
Can we expect higher volumes as compared to last year? No, not in packaging, but propylene, yes. And now the question for aluminum systems. How about the clients? Do they accept higher prices?
Where is the threshold institute. We believe that there is a threshold for the growth of prices. Well, the biggest problem is the contracts that are signed several months ahead because it's very high, very hard to introduce a price, increase and this is where we have the biggest problems. But the client who continuously sells the product translates that directly into end customer quite successfully. And today there is no tendency that the customers who were able to pay for aluminum product and give it up and go for cheaper wood, for instance, or plastic.
So we don't see that. But It may happen that the retail customer says no and or a customer who would like to build this building will not be able to do it with the prices. There is a threshold, but we will see how high. How about the current situation in construction industry? Does that affect you?
No. Well, against all odds in our segment, well, the flow has been really the best in years. Are there any problems with liability of subcontractors. I can only say, that only what I hear from our customers as far as I know, When it comes to the assembly companies, the situation has not changed. It's not worse nor better.
They have quite a lot of work. There is no huge problem there. Thank you so much. That was the last question from our chat. There are no other questions that were emailed to me.
That means that we've exhausted the Q and A session. So I'd like to thank you so much. I'd like to thank our viewers. I'd like to thank our management board. And again, I'd like to as usual, I'd like to invite you to the next presentation