[Forieng language] .
[Forieng language] . Ladies and gentlemen!
[Forieng language] Mo-BRUK S.A.
Welcome to the presentation of the results for the first half of 2024 of Mo-BRUK S.A.
[Foriegn language] Henryk Siodmok, [Foriegn language].
The people to be conducting this conference with Rafał Michalczuk, CFO and Mr. Siodmok, CEO of the company.
[Foriegn language] .
In the first part of our presentation, we will present the financials for the period, and in the latter part, we'll be discussing the advancement in the investment project.
[Foriegn language].
To start with, for those people who are with us for the first time.
[Foriegn language] .
A brief resume of Mo-BRUK's activity.
Mo-BRUK [Foriegn language] .
Mo-BRUK owns two incinerating plants of hazardous and medical waste.
[Foriegn language] .
At the end of, as of the end of 2023, their total capacity amounted to 23,000 tons.
[Foriegn language] .
Whereas at the end of 2024, that capacity will amount to roughly 37,000 tons.
[Foriegn language] .
The main contributor to that expansion in the capacities is the modernization of the Karsy incineration plant, whose modernization has just finished.
[Foriegn language] .
In both of those incineration plants, we will be generating electricity from waste heat.
Yes. [Foriegn language] .
The second segment of our business is solidification and stabilization of waste.
[Foriegn language] .
In that segment we have three plants.
[Foriegn language] .
At the end of 2023, the total capacity of those plants amounted to 170,000 tons.
[Foriegn language] .
Currently, it's 400,000 tons.
[Foriegn language] .
We hope that capacity will increase to half a million in 2025.
[Foriegn language] .
When it comes to the production of RDF, refuse-derived fuels, alternative fuels, we have two such plants.
[Foriegn language] .
Our permits provide for the production of 400,000 tons per annum in those plants.
[Foriegn language] .
Our capacity at the end of 2023 amounted to roughly 100,000 tons.
[Foriegn language] .
Which represented a fourth of the permitted amount.
[Foriegn language] .
At the end of Q1 2025, that's to say, in half a year's time.
[Foriegn language] .
Those capacities will have surpassed 200,000 tons.
[Foriegn language] .
I.e., half of the permitted amount or amount per the permits.
[Foriegn language] .
Also to outline the areas of our business, I'd like to add that the market trends are positive for us.
[Foriegn language] .
The regulations in the sector are shifting towards the so-called extended responsibility and liability of the producer for the waste produced.
[Foriegn language] .
That means that the market will be favoring those entities that own their own installations because that fact, the fact of owning such installations reduces the risk of waste being illegally deposited someplace instead of being reworked or recycled.
[Foriegn language] .
Moreover, Polish as well as European regulations prefer, give preference to recycling over other modes of waste treatment.
[Foriegn language] .
All our installations and everything that Mo-BRUK is involved in is about recycling.
[Foriegn language] .
And now, let's pass on to the financial results, and mostly they will be discussed by Rafał, the CFO.
[Foriegn language] .
Okay, so we are presenting to you the results for H1 2024 versus H1 2023.
[Foriegn language] .
These are consolidated data for the totality of Mo-BRUK's business.
[Foriegn language] .
And on the gray field, on the margin, we also presenting to you the core business profitability for both periods, i.e. after the exclusion of non-core activity, that's to say, gas stations.
[Foriegn language] .
The first thing that I'd like to draw attention to is an increase in the amount of turnover for H1 2024 versus H1 2023 by 7.2%.
[Foriegn language] .
We've been able to accomplish that despite the downtime of our main incineration plant at Karsy, which lasted for exactly half a year.
[Foriegn language] .
On the other hand, our EBITDA and net results for the period are significantly lower than in the previous period.
[Foriegn language] .
There are two factors behind it. Firstly, it's the aforementioned downtime of the Karsy incineration plant.
[Foriegn language] .
We tried to deliver on the turnover for customers that had been previously taken care of or handled by that incineration plant, despite the downtime in the time.
[Foriegn language] .
First of all, as per the permits, we've been trying to fill the storage spaces with waste subject to be treated.
[Foriegn language] .
And secondly, once the storage capacity had been fully utilized, we were sending the excess waste to be treated in external plants.
[Foriegn language] .
Since a major part of our permits stem and margin stems from the fact that we have the appropriate capacities of the incineration plant, part of the margin had to be shared with those external plants.
[Foriegn language] .
The second factor impacting the amount of EBITDA and net result is the effect of El-Kajo consolidation.
[Foriegn language] .
H1 2024 includes all the fixed costs of El-Kajo for the six months.
[Foriegn language] .
As well as revenues and variable costs connected with El-Kajo's customers.
[Foriegn language] .
However, those revenues and variable costs have been shifted by several months, owing to the slower turning in process of the installations at those customers.
[Foriegn language].
The effects of these processes are already visible towards the end of H1. However, the major effect will be mostly visible in H2.
[Foriegn language].
Despite the fact that the major customers have been provided their services towards the end of H1.
[Foriegn language].
The EBITDA year to date, the accumulated EBITDA for that period is already positive for that period, and it can be counted by single digit millions.
[Foriegn language].
Million, million, million.
Million.
Million.
[Foriegn language] .
That's what I said. Several millions. Single digit millions, I said.
Single digit millions.
Yes. Mm-hmm.
[Foriegn language] .
Coming back to the profitability, core business profitability.
[Foriegn language] .
We wish to point to the fact that Q2 is 20% better than Q1 this year.
[Foriegn language] .
Which means that we are slowly approaching the previous period, the previous level of 55% in terms of the EBITDA.
[Foriegn language] .
In fact, that effect will be more visible in Q3, and most of all, in Q4 2024.
Teraz krótki komentarz odnośnie struktury sprzedaży.
A brief comment on the sales structure.
[Foriegn language] .
As said, the sales revenues in total increased by 7% for H1 2024 versus H1 2023.
[Foriegn language] .
And whereas the volumes increased much more, from 116,000 to 150,000 tons, that's 25%, almost 30%.
[Foriegn language].
The segment of RDF, refuse-derived fuels production.
[Foriegn language].
The revenues increased by almost 60%.
[Foriegn language].
While the volume increased by 16%.
[Foriegn language] .
There were two positive factors behind it. When it comes to the volume, it was winning new recipients.
[Foriegn language].
When it comes to the amounts, this stems from the fact that the gate fee per ton was better, and this in turn stems from the fact that it's higher for hazardous waste, the so-called pasty, and at that time the gate fee is relatively higher, while maintaining the relative profitability at the same level.
[Foriegn language].
Which means that we subjected some hazardous waste, the, as pasty RDF, for pasty RDF production. So I'm talking about such waste, which, owing to its hazardous nature, would normally have been subject to thermal processing, i.e. incineration at the Karsy plant. But since the Karsy incineration plant was not operational, we were trying to save out on some of our profitability.
[Foriegn language].
As for the solidification and stabilization, the revenues were maintained at a comparable level.
[Foriegn language] .
However, we have processed much higher volumes, 30% higher.
[Foriegn language].
Please, please don't jump into conclusions that the average price for the waste received has dropped.
[Foriegn language].
The reason behind it is, behind this phenomenon, is the change in the technology of producing artificial aggregates.
[Foriegn language].
To explain it in greater detail, I'll have to share some sentences of explication with you.
[Foriegn language] .
Just to give you an example, if we take the plant at Niecew, the permit is granted for 100,000 tons.
[Foriegn language].
As part of that 100,000 tons, 32,000 is hazardous waste, whereas 68,000 is other waste. 68,000 is other waste, non-hazardous waste.
[Foriegn language].
We have no problem fully utilizing the hazardous waste limit.
[Foriegn language].
Whereas when it comes to the non-hazardous other waste limit, the utilization tends to be at 50%.
[Foriegn language].
Now, previously, in order to manufacture waste-derived aggregates, we had to buy natural aggregates, the so-called inert, that we had to pay for it.
[Foriegn language].
Having changed the technology, we buy different kinds of waste, non-hazardous waste, sludges mostly.
[Foriegn language].
Whose price is naturally lower than that of hazardous waste.
[Foriegn language].
I mean, the gate fee is lower than for hazardous waste.
[Foriegn language].
But for us, it's positive.
[Foriegn language].
Contrary to the case that we have in the, for inert, the aggregate that we have to pay for it.
[Foriegn language].
In other words, we are increasing the utilization of non-hazardous waste instead of the natural aggregate that we had to pay for and admit previously.
[Foriegn language].
Next year, this effect will be even more visible.
[Foriegn language].
Next year, which will be the first complete year for which all the installations will be operational-
[Foriegn language].
We'll have 140,000 tons of hazardous material at our disposal, hazardous waste, and 160,000 tons non-hazardous waste.
[Foriegn language].
This is our way to increase the profitability and stability of the solidification and stabilization segment.
[Foriegn language].
Now we can pass on to the discussion of the next components impacting the EBITDA profitability.
[Foriegn language].
Practically all the items, excepting the cost of goods sold. The last line.
[Foriegn language].
Any changes involved stem from the consolidation of El-Kajo.
[Foriegn language].
Let me just start briefly with the item cost of goods and materials sold.
[Foriegn language].
This item fully corresponds to the value of fuel purchased and then sold at our gas stations.
[Foriegn language].
[Foriegn language] . The rebranding of those stations to the MOYA brand had a 30% impact on [Foriegn language] EBITDA?
On volume, not on revenue and 50%.
On revenue and 100% on the margin.
Yes, yes, exactly. [Foriegn language].
Now, let's pass on to the discussion of the individual expense items. Like I said, the entire change practically results from the consolidation effect of El-Kajo.
[Foriegn language].
Since the acquisition of El-Kajo took place in December 2023, the balance sheet as at the end of the year includes the balance sheet items relative to El-Kajo, whereas the income statement items do not. When we compare H1 2024 to H1 2023, all the cost items for the first semester of 2024 already includes El-Kajo costs, whereas the same amounts for the previous comparable period amount to zero.
Yes. [Foriegn language].
The first line is relative to depreciation, and the entirety of the increase is attributable to El-Kajo.
[Foriegn language].
The largest change is observed in the consumption of raw materials.
[Foriegn language].
And materials.
[Foriegn language] .
And again, practically the entirety of that change is relative to the consumption of cement by El-Kajo.
[Foriegn language].
Even though El-Kajo's level of activity is smaller compared to our two remaining stabilization plants.
[Foriegn language].
Under their technological process, the consumption of cement is way higher.
[Foriegn language] .
That cost is covered not only by the gate fee, but also the sales price of the end product.
[Foriegn language].
As we said, even despite the shift of the launch of the technological process of the customers by several months, we are already operating at a positive margin, enabling us to recover the losses incurred in the first half of the year.
[Foriegn language].
And to report a positive EBITDA result, which can be counted in terms of single-digit millions for the first semester.
[Foriegn language].
The second important item on the P&L structure is the increase in payroll, in payroll-related items.
[Foriegn language].
87% is attributable to the consolidation effects of El-Kajo.
[Foriegn language].
13% is the government-induced minimum wage level increase in Poland.
[Foriegn language].
A major item on the P&L is attributable to external services. We're talking about an increase by PLN 4 million .
zlotys
Actually, almost the entirety of that increase is attributable to the proportion of waste that could not be processed owing to the modernization of the Karsy Incineration Plant, and that had to be sent to external plants, transformed into RDFs and sent abroad.
[Foriegn language].
On the next two slides, we've added additional information that had not been featured in the quarterly result presentation so far.
[Foriegn language].
The first one is relative to the significant changes on the balance sheet of our group, that you will be able to notice.
[Foriegn language].
When it comes to the asset side, the largest increase has been observed in fixed assets.
[Foriegn language].
This is relative to the modernization of the two plants at Karsy and at Niecew, whose amounts correspond to PLN 70 million and PLN 6 million, respectively.
[Foriegn language].
Another important change is attributable to liabilities on the consolidated balance sheet.
[Foriegn language].
First of all, we're talking about an increase in loans and borrowings.
[Foriegn language].
Mostly, we're talking about a loan from the National Fund for Environmental Protection, worth PLN 19 million .
[Foriegn language].
The next significant item that has not changed since the end of the year was the earnout connected with the acquisition of El-Kajo.
[Foriegn language] .
This liability will be paid in the event of El-Kajo's meeting the assumed EBITDA level in 2025.
[Foriegn language].
The largest liability item on the balance sheet is the liability due to the dividend, which is to be disbursed to the shareholders this October.
[Foriegn language].
The last, most important change is the item of investment liabilities, or you can say, liabilities attributable to investment projects or construction in progress worth. The change was PLN 28.5 million.
[Foriegn language].
These are non-financial liabilities attributable to the contractor under that project.
[Foriegn language].
The last item to be presented is not reflected on the balance sheet. This is the section dedicated to significant post-balance sheet events.
[Foriegn language].
First of all, we launched the second tranche of loans from the National Fund for Environmental Protection.
[Foriegn language].
As planned, the amount of both of those loans launched or drawn amount to PLN 46 million .
[Foriegn language]
Another significant event was obtaining the facility of [Foriegn language] 20 million at Alior Bank.
[Foriegn language].
Which, along with the other facility financing limit at mBank, amounting to PLN 15 million , in total amount to PLN 35 million . None of those facilities have been used so far.
[Foriegn language].
And the last significant item that has been presented in our interim publication.
[Foriegn language] .
Was the accomplishment of leaseback financing operations of PLN 50 million .
[Foriegn language].
Whereof we have already repaid PLN 5 million so far.
Leasing. Leasing [Foriegn language] .
That lease is attributable to part of the investment project in Karsy, that has not been funded by the loan from the National Fund for Environmental Protection.
[Foriegn language].
The moment we receive the last component of the funding from the National Fund for Environmental Protection of PLN 38 million .
[Foriegn language].
The totality of the investment project, worth PLN 130 million in Karsy, will have been funded both by the National Fund for Environmental Protection and the lease.
[Foriegn language].
Meanwhile, the totality of the investment in the meantime has been funded by Mo-BRUK's own equity resources.
[Foriegn language].
And now pass on to the investment projects to be discussed by President Siodmok.
[Foriegn language].
The total CapEx program, investment project program of Mo-BRUK for 2024-2025 amounts to PLN 250 million .
[Foriegn language]. a
The most important major part of the investment projects, which was the modernization of the Karsy incineration plant, has already been completed. We will be showing you some pictures of it as a next step.
[Foriegn language].
The second very important project in Niecew, when it comes to its advancement, we estimated at 2/3 of the schedule, and towards the end of 2024, the turn of 2025, it should be launched and commissioned.
[Foriegn language].
The first two projects largely disrupted the normal process and reception and processing of waste.
[Foriegn language].
Despite this, we've been able to increase the revenues and the volumes.
[Foriegn language].
The project at Skalbmierz will be finished in the first half of 2025.
Skalbmierz .
Likewise, the Karsy RDF project. I'll discuss it in just a moment.
[Foriegn language].
That project is connected with the expansion of the production capacity for RDF.
[Foriegn language].
Whereas the modernization project of Raf- Ekologia should be completed at the turn of next year.
[Foriegn language].
That modernization should be crowned with the launching of a power generating turbine.
[Foriegn language].
Here you can see the pictures of the modernization process for the incineration plant in Karsy.
[Foriegn language].
On the left top picture, you can see the building without the roof.
[Foriegn language].
Today, the entire roofing and external covers of the building have been replaced with new ones.
[Foriegn language].
Inside, the installations are operational.
[Foriegn language].
The remaining two pictures show the ORC, which is used for power generation.
[Foriegn language].
The two top pictures. On the left hand side, you can see the boiler, and on the right hand side, the deaeration process.
[Foriegn language].
And the bottom picture shows the steering cabin. Steering booth.
[Foriegn language].
As of today, it's the most state of the art incineration plant in Europe.
[Foriegn language].
The installation is controlled via two thousand sensors.
[Foriegn language].
Two hundred automatic decision making loops.
[Foriegn language].
This installation enables us to meet the BAT, Best Available Technology requirements.
[Foriegn language].
25,000 tons of through put.
[Foriegn language].
I believe that one of the ensuing quarterly conferences will be organized there so that investors can come and see and touch it, see how it operates.
[Foriegn language].
One more word to add: we are very proud and happy with the rate of accomplishing that modernization project.
[Foriegn language].
By standard, comparable projects, take two to three years, plus one and a half years of the parametrization process.
[Foriegn language].
In our case, we dismantled the components of the old incineration plant in December, and by the end of July, the new incineration plant was up and running within seven months.
[Foriegn language].
This is all thanks definitely to our team, the contractors and the funding institutions.
[Foriegn language].
We consider it to be the greatest success story of this semester.
[Foriegn language].
You saw those pictures in the previous presentations.
[Foriegn language].
In the bottom picture you can see the plant, the way it operated before.
[Foriegn language].
That entire paved space will be, I mean, production shop floor will be erected upon it.
[Foriegn language].
On the next pictures, you can see the construction process. The pictures might not convey the reality, but two thirds of the projects have already been completed.
[Foriegn language].
Currently, the roofing is being installed.
[Foriegn language].
New silos have been installed.
[Foriegn language].
All the new production-related equipment and machines and devices have been ordered.
[Foriegn language].
It should all be completed by the end of this year.
[Foriegn language].
The gray arrow on the top picture shows the RDF plant at Karsy.
[Foriegn language].
In that plant, we are increasing the capacity from 90,000 to 200,000 tons.
[Foriegn language].
The machines and devices have already been bought.
[Foriegn language].
So when it comes to the first permits and the conditions of development.
[Foriegn language].
We have submitted applications to issue the building permit.
[Foriegn language].
On the bottom picture, you can see the new production line.
[Foriegn language].
It will have a capacity of over 140,000 tons.
[Foriegn language].
It will be using half the electricity.
[Foriegn language].
The entire energy, the entire electricity to be consumed will be derived from the ORC device located next door. The electricity will be generated based on the waste heat.
[Foriegn language].
This is just another example to illustrate the fact that Mo-BRUK is the benchmark in terms of circular economy.
[Foriegn language].
That's everything. Yes.
[Foriegn language].
Thank you very much for your attention and we are ready to address your questions.
[Foriegn language].
Have we been so clear and exhaustive in our statements? Are there no questions?
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
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J[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
Can you give an update on ecologic bomb situation? [Foriegn language].
Currently, we are taking care of two ecological bombs.
[Foriegn language].
In Częstochowa and Katowice.
[Foriegn language].
A third one in Prażmów, that's 2,000 tons, has also been won by our company.
[Foriegn language].
However, that case has been appealed against and was resent to KIO. That's the National Chamber of Appeal.
[Foriegn language].
That's to say that the municipality has chosen us, but the competitors failed to accept that decision.
[Foriegn language].
This week, the largest tender has been launched for the neutralization of the largest ecological bomb in Poland, in Rogowiec, in the province of Łódź. That ecological bomb is estimated at 30,000 tons.
[Foriegn language].
The conditions have already been protested against by a competitor.
[Foriegn language].
The very conditions have already been appealed against by the competitor to the KIO, the National Chamber of Appeal.
[Foriegn language].
So we can say that the three tenders that have been launched this year for ecological neutralization of ecological bombs, their conclusion was in our favor.
[Foriegn language] , sorry.
All right, another question. Can you give more information about the leaseback operation that occurred after the period? What is the expected return of the investment? [Foriegn language]
That's the project at Karsy, that's part of the module, which is combined with the energy generation component at Karsy.
[Foriegn language].
So most of the rate of return for that project is attributable to the fact that most of that leaseback is related to the generation of electricity, power generation, for the purposes of the plant itself and the RDF production plant.
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language].
[Foriegn language.
Tak.
[Foriegn language].
The ORC module, the one to generate energy based on the waste heat, PLN 35 million is attributable to ORC out of the PLN 50 million.
[Foriegn language] .
The remaining part is attributable to the incineration plant itself.
[Foriegn language].
But since it had the word "boiler" in its name, there was no way to obtain funding from the National Fund for Environmental Protection for that one.
[Foriegn language].
The lease, the leaseback transaction had a purely technical nature. We first had to purchase the devices and then to fund them with a financial, in the form of a financial lease.
[Foriegn language].
[Foriegn language]
[Foriegn language]
Given the current electricity prices, the payback period for that turbine will be four years.