First-quarter net income at Grupa Azoty (Tarnow, Poland; www.grupaazoty.com) declined 163% to a loss of PLN 555.4 mn (EUR 123 mn) as all key business segments including chemicals and plastics deteriorated on weak demand, soaring energy prices, and duty-free imports of fertilisers and plastics made outside the EU from cheaper feedstocks. Revenues fell 42.9% to PLN 3.895 bn while EBITDA dropped 130% to a loss of PLN 401 mn.

Grupa Azoty said that while it is taking measures to boost its operating profitability, “it does not rule out the possibility of exceeding the permitted level of the net debt/EBITDA ratio” towards the end of June 2023. It did not disclose the acceptable ratio, which measures the debt level against a company’s profitability to pay it and is normally imposed in debt covenants signed with financial lending institutions. Should this scenario of breaching the ratio of net debt to EBITDA “become likely”, according to the company, it will “take appropriate pre-emptive steps to mitigate the risks”.

Q1 results were bolstered by PLN 234 mn funds from a Poland state aid scheme for energy-intensive sectors due to skyrocketing prices of natural gas and electricity prices in 2022.

Related: Grupa Azoty Compounding expands polyamide compound capacity in Poland

The Plastic segment revenue decreased 44% to PLN 353.4 mn as European demand in automotive, construction, and packaging sectors remained low. High inventory levels at these sectors caused a postponement of purchasing decisions. EBITDA slumped to a loss of PLN 99.15 mn from the year-earlier profit of PLN 68.63 mn.

Chemicals’ revenue slid 52.6% to PLN 845.9 mn with volumes contracting significantly, mainly melamine and OXO alcohols. The segment’s result was boosted by a drop in the price of the main raw material, propylene. In the case of the other raw materials, their prices were close to or higher than those reported in the first quarter of 2022. EBITDA swung to a loss of PLN 61.44 mn from the year-earlier profit of PLN 376.44 mn.

Revenue at Agro, which generates 61.3% of group sales, dipped 43.4% to PLN 2.38 bn due to soft demand and EU suspension of tariffs for urea and ammonia. EBITDA loss was at PLN 140 mn versus a profit of PLN 814.3 mn.