Kghm Polska Miedz Sa Ord

Ladies and gentlemen, welcome to a results conference for the first nine months of 2023. And the results will be presented by the management board, Tomasz Zdzikot, the president of the board, Mateusz Wodejko, vice president for finance, Marek Świder, vice president for production, Miroslav Kidon, Vice President for Foreign Assets and Acting Vice President for Development, and Marek Pietrzak, Vice President for Corporate Affairs. We also have Mr. Janusz Krystosiak, Head of Investor Relations Department, who will hold the Q&A session. Please note that this conference is also available online and questions can be submitted via mail to ir at kghm.com. Answers to all the questions will be posted online in the results center, the investor's kit. Now let me give the floor to the board to discuss the results for the third quarter 2023, President Zdzikot. Thank you very much. Good morning and good afternoon to all those present here and all those who are with us online. I will try to briefly yet comprehensively present our results for the first three quarters of the year. As every quarter, these results are strongly affected by our macroeconomic environment, and this is what I'm going to discuss first. in the third quarter of 2023 the prices couple prices were quite volatile ranging from 8017 to 807 8720 per ton the average level was 8,356. So on the one hand, these prices were higher than in the third quarter of 2022. And the same is true for silver and molly. But quite importantly, And the results of our capital group are strongly affected by the exchange rate of the dollar. And in the third quarter of 2023, it was 12% lower than last year. the average price of copper expressed in the Polish currency was significantly lower than in the third quarter of the year before, as you can see on the bar in the left-hand bottom corner. As a global company, one of the most global Polish companies, we operate and trade globally. Hence, our results are strongly susceptible to macroeconomic performance of the world's greatest economies, such as the US or China. As you will see in this slide, in these charts, unfortunately, in the third quarter of the year, GDP in Europe has been rather low. Please note the quarter on quarter decline. It's quite big. And especially in Germany, the difference is quite clear. When it comes to China, And we are often asked about our predictions. We do not publish our predictions, but in this slide, you will note that the inventories historically and in the Shanghai exchange, they are quite high, and there are no growth or decline stimuli in the Chinese market. But if you look at the green bar that shows the inventories, it shows us that we have record level of inventories. At the end of this reporting level, it was historically low. It's difficult to predict the future trends, but clearly the changes in the yuan to dollar exchange rate prompts China to use domestic. resources, and in international trade, China is focusing on concentrates. It's building its internal smelting capacity. So we are glad that we signed another five-year contract with China Metals for the years 24-28. As part of this contract, we will be delivering copper cathodes, which is our major commodity. And we are happy that we will stay there for another five years. We will be selling over 250,000 tons per copper. And the prices of our products will be determined annually. This is something we published today. As we move on, we can see a very interesting chart or table that shows PMI, so the moods in the industry. It's a soft indicator, but quite important. This is a few years perspective from 21 to now and green becomes red in a nutshell and right now we are looking at both Europe And most of the world actually. So there's a lot of red here, which means that we are below the level of 50, which shows that in principle the mood is not optimistic. And this index shows the opinions, outlooks of managers from some key industries. And Europe is in the middle of that table. Despite all those factors that strongly affect our operations, we are happy to have achieved stable financial and production performance. On the left hand side on the slide you can see macroeconomic data. We've discussed this already. So the copper price both in the dollar and in the zloty decreased. Also, the dollar-to-slot exchange rate has changed unfavorably, but we are very happy about production results in the Polish operation. And President Szwider will tell you more about this, but we are very happy to have seen growth. In all the categories, these results are for the first nine months of 2023. So we have more extraction of ore, more copper in concentrate and more metallic silver and gold. And thanks to that, we can stabilize our performance. And despite the challenging macroeconomic environment, we can navigate safely and sticking to our strategy. So despite the left-hand side of the slide, On the right-hand side, we can see some good news. Our revenues decreased only slightly by 0.2%, and our debt is at the level of 1.2%. In this slide, you can see that financial KPIs as a group KGHM had over 25 billion zlotys in revenues and adjusted EBITDA for the group was 4.2 million of which 3.1 came from the Polish operations and the profit 1.7 billion, that's for the Polish operations, and 836 million for the capital group. So the group is doing well and sticking to the strategy. And my colleagues will give you the details. President Schweder. Ladies and gentlemen, payable copper production in the group, 527,000 tons. And here we have a division into domestic and international assets. Domestic production, 444,000. and 84,000 tons internationally. And let me focus on the domestic production because this is what I'm in charge of. When it comes to ore extraction, 23.3 million tons, and 1.47 is copper grade in ore, which is plus 1.3 year on year. When it comes to the production of copper in concentrate, 303.2 thousand tons, and the content is 22.5 percent, which is up by 2.7 percent year on year. Electrolytic copper production 444,000 tons and 287,000 tons of that comes from our own concentrate up by 5% year-on-year in total 0.2% year-on-year in total. Silver production 1,080 tons up by 8% year-on-year. Quite importantly the last two indicators that's electrolytic copper and silver That's our best result ever for the group. Thank you very much. And now, Vice President Miroslav Kidon. Good morning or good afternoon. Let me start by discussing our investment program. It's quite impressive. 3 billion 250 million. All our investments continue as planned. There have been no threats to our plans for this year. As you will note in the slide, we focus mostly on maintaining our production and its further development. Here let me briefly discuss our investments. As I said, here we focus on deposit access program and new mining areas. We have opened new mining areas, actually exceeding our plan, which is very important. And we have been quite successful with replacing our machine park. We will have a record level this year. We bought and got delivered 180 mine machines. 21 to Lubin, 72 to Rudna, and 87 to Polkowice-Sieroszowice. We obviously continue the efforts in implementing and building new shafts. GG1, Europe's longest, is already there delivering fresh air to the miners and we are working on air conditioning systems, 33 megawatts of power. For those, they will allow us to maintain the appropriate temperature for the staff working down there. GG2, the Otra shaft, the work is underway. And then Redka shaft and Gaworzyca shaft, these are also moving forward. Importantly, the maintenance shutdown at Lagnica is now over. And as planned, the plant resumed operations on the 14th of October. Right now, we are calculating the data, the figures for all the repair works. We are analyzing the performance of our maintenance and repair services. We also finished phase one and phase two in the southern quarter. Right now we are, we commenced work on tailing sludge management. And simply speaking, all these efforts, as a result of all these efforts, the quality of tailings delivered to Żelazny Most storage facility will be much more dense. There will be more solids in it. As a result, the storage will be cheaper. And when you have more solid waste, you need less strict embankments. In our Polish operation, we are about to implement a new technology for increasing solid contents in tailings. So that's it when it comes to major investments. Now the next slide that talks about the deep guagulf. facility this has been an important progress for us when we accessed this deposit so as always would like to tell you about how we increase our production from that deposit and year-on-year We have, well the share of production from Deep Guagov has grown by 35%. The slide also shows you concession areas and let me bring you some news. We have nine domestic concessions, seven for copper, one for hydrocarbons, and one for potassium salts. And quite importantly, an administrative court in Warsaw ruled refused to accept a complaint submitted by a competitor. And that decision put an end to a 10-year dispute over that concession area. Now the floor goes to our colleague specializing in renewable energies.

Thank you.

Thank you. I'm glad to see that we're starting with renewables. We can boast a lot. Last year, this area is where we... developed and enhanced our acquisition and our development processes. As for development, as you can see in this slide, connection condition applications have been filed for 88 in photovoltaics and 15 photovoltaics large projects have been applied for in Lower Silesia, close to our technological process plants. Also smaller PV projects are being implemented in Głogów Smelta Plant 1, 2, 3 and also some smaller projects. We have successfully completed a large acquisition project. We acquired more than 47 MW of solar projects in four target companies, SPVs, So one is on board already and the other three solar companies are going to be acquired most probably in January. And in quarter four we signed... a preliminary agreement to acquire another project before the RTP for another close to 20 MW in solar power, which is to be in a direct vicinity of our technological facilities. A lot of interesting information showing us that renewables are being developed at our company. So the energy transition is reality here. There's also a wind farm project here. So we're working on it. It's a prospective project for our wind farm. Another topic that is related to energy, that's our SMR project. So information was published or released last Friday on what the situation is. We have the decision on light water reactor technologies from five developers developing such projects. And we need to add that SMR projects globally are at a developmental stage, R&D projects, so they've not advanced into implementation. So we need to be next of a kind, not first of a kind. So, well, this is why we have analytic work which is ongoing. So we need to have a transparent and fully competitive project here. So... Ultimately, when SMR technology is profitable and implementable, we would like to choose a supply of technology that will be most competitive in terms of profitability, safety, and environment. Such a decision will be done in the future when SMR technology is developed. obtained the basic decision showing that KGHM is a good, reliable investor. The decision is about five light water technology developers. Those are most crucial in terms of nuclear developments at KGHM. And besides, CCGT units are working for steam ahead. We were thinking about some restrictions related to high gas prices, but we were surprised positively with the level of gas prices that we can be using as fuel without such restrictions. Now the key financial figures. The President has outlined them already, the most important ones. the situation on the global commodities market is what it is because of the economic slowdown globally. So the prices over those three quarters, especially in quarter three, reflected the situation on global markets and it's much worse compared with 2022 when prices of commodities were high, especially copper. And also the exchange rate at dollar exchange rate was weaker compared with the three quarters of 2022, which impacted on our results. In these nine months, the copper price in zlotys per tonne is more than 8% lower than in the three quarters of 2022. And quarter three, the difference is 3% down. But the success is that with this unfavorable macroeconomic situation we managed to keep the level of revenues stable and in the case of Polish Miedź, Polish Copper was higher. EBITDA is 4,235,000,000 in the group which is a decent result and more than 3,000,000,000 in Polska Miedź. Very good results. Historically speaking, we are referring to the high base that was the previous year. We need to be aware of the economic changes in the economic situation. Sometimes you benefit from high commodity prices and strong dollar. Otherwise, you have a different situation when the macroeconomic situation is not so favorable. Now, group revenues. Well, the group revenues have remained almost unchanged compared with the previous year. So we were really making up for the negative trends, minus 2 million and minus 81 million. for the prices of commodities and exchange rates. So the change was almost two billion, which was unfavorable. But we increased the volume of sales of our products. So we need to thank Mr. Schweder. And our production's been running very well. Mr. Keaton, you know, with their active sales, we need to thank them as well because we've seen this slowdown in the global economy, but we've been selling successfully to those markets where, well, there's a higher premium and lower cost and also the adjustment for derivatives. So we lost because of that adjustment. Minus 254 million this year was more than 400 million in plus. So a positive change, a huge success. So this allowed us to keep our revenues at a similar level. When you look at this graph to the right of revenues from contracts with customers broken down to parts or segments, of our group. In the case of Polska Miedź, this is almost 700 million more. We had more of a problem with KGHM International with a negative difference in revenues, but we are trying to improve the situation in KGHM International. No, it costs by nature an increase. by seven percent in total but there are two parts here which influenced that difference so that there's a the tax on extraction of some minerals it increased because last year the polish parliament reduce the tax. This year we haven't had this change of the tax or reduction in tax. You can see the slide has been changing so for the nine months it was 2 billion 797 million and compared with 2 billion 300 million in the previous year. Well, it will also be referred to in the questions. And another positive development was 5,597,000,000 our own metal bearing materials. So 900,000,000 less in spending and costs compared with the previous year. So in terms of sales, it was a negative situation, but the prices of concentrate were lower. But as Mr. Spiller said, we were trying to optimize our own domestic production from our own concentrate. So with such high production, high level of own concentrate, we were able to increase our revenues from these sources. Other costs by nature up by 14%. so mainly labor, so that's the pay, increase in pay, higher costs of materials, and third-party services as the pressure of inflation because of the domestic and also global situation. These are global macroeconomic factors affecting our business, our costs of the services we buy and materials. And in other quarters, you see that in quarter three, Well, it was a significant level, but when you compare it with quarter two 2023 and quarter one 2023 and quarter four 2022, you see that we're trying to handle the problem of inflation and mitigate the situation in terms of the cost rises. And, well, it's not been rising over these successive quarters of 2023. And C1 is related to what I described in the previous slide. So up by 34% in the group, as is caused by international, with some exceptional situations, problems with the deposit. Now we're moving to a high-quality deposit. So I hope that this is going to improve And in the case of Polska Mij up by 26%, the tax costs are, because the tax relief is no longer there, as for the other costs, it also impacted the level of C1, the Polska Mij, but it's calculated in the dollar. The dollar was weaker. So if we convert that to Zloty, the increase is 21%, not 26%. So the dollar exchange rate actually had a strong influence on the figure because of the conversion. Net result now. The change is a lot compared with the previous year. So 1 billion 940 million that affected the consolidated result. So this includes the profit which was lower and the debt figure was affected by the dollar. So the dollar was weaker so that was a positive influence. It did not bring profit so much down. And other differences. One of events, oxide project was long disposed of and Franka made 300 million zloty of difference altogether.