Grupa Kety Stock

Good morning, ladies and gentlemen. Welcome to the conference devoted to the presentation of the Q3 2026 earnings of Grupa Kety.

Yesterday, we published a quarterly report. And the Management Board would like to comment upon the results and all the events that took place in the past quarter following the presentation, obviously, invited to ask your questions. And the presentation, as always, will be started by Roman Przybylski, President of the Board.

Thank you, and welcome. It is our pleasure to welcome you once again, especially since we have just completed a very good Q3 of this year. The third quarter, which from our perspective, was mainly something that was marked by the acquisition of the METRA Group.

But before I go to this particular fact, let's focus on the basic, the core business. We reached very good results, still handling at a very different market, still better than the competition, trying to make the most -- and succeeding in making the most of the circumstances provided by the macroeconomic situation. The situation in the business is so-so. I'm talking about the construction production both in Poland and across Europe, there are better months and some worse so we go up and down. But generally, there is no significant revival in the industry. There is some in construction production, but mainly for infrastructure production compared to building production.

Here, the standing is rather weak or mixed actually. Multifamily housing construction is handling even worse, but at least some construction permits as far as houses are concerned [indiscernible] being issued. And I'm sure you know that the premium segment is more important to us in this respect. We hope that the economic revival is something that we will see more pronounced in the months and quarters to come. We still handle very well in this difficult market.

Another element, we have noticed in our very good quarterly results is the fact that our vertical integration really manages well due to the pressure of inflation increase of raw material costs, the margin is lower in downstream costs in mainly in ASS and SSS, However, with higher margins in EPS and FPS more production segments. So we are talking mainly about these sectors due to the higher prices, our premium is higher, stable volumes in [ SSP ], however, in EPS, obviously, we are handling very well due to the stability of the resource prices. We are making the most of the situation, which translates very world dynamic compared to the previous year.

In this respect, we obtained more than PLN 331 million of EBITDA. PLN 208 million of net profit in Polish zloty, obviously. As I've already mentioned, a very important event in Q3 was the conditional contract for the purchase of shares in the METRA Group, and there was a separate conference devoted to this [indiscernible]. So I'm not going to go into details here. But let me emphasize how important it will have on further development of the group.

METRA, manufacturers sections and aluminium systems operating in Italy and in North America with about EUR 645 million in estimated revenue very widespread and heavily present group with his heavily pronounced presence in the American market. So we signed this provisional contract. We are getting to the closing on the contract. We've already found our applications to the antitrust offices and this is going really well. As far as our business is concerned and how we handle in individual segments, I give to Rafal Warpechowski, our CFO.

Let's start from consolidated results. The quarter and the past quarter Q3 was subject to very heavy changes in macroeconomics, this being the main reason. Next to our trade decisions. As far as margin goes, the main reason having impact on our sales revenues, both in terms of receivables and liabilities. The raw materials growing, getting higher in prices, both resins and aluminum that we use in the segment of Flexible Packaging segment.

Hence, the increase of EBITDA are, I mean, PLN 331 million, that's a very good result. High profitability is maintained by the individual segments, that's, well, a slightly different situation and more about that in a moment as far as financial gain. We are mainly talking about interest here similar to the previous year, slightly lower scale, which is due directly to reduced debt ratio in this quarter. Taking into account some fiscal charges close to the interest rate. We have noted as much as well, plus 42% as far as net profit. So a perfect, excellent quarter as far as financial results are concerned.

Okay, let's start with some individual segments in their discussion, the Architectural Systems segment, in which as already mentioned, is the one that is facing a very difficult market situation. The feedstock is growing -- the feedstock prices are growing. Raw materials are more and more expensive. The segment had to change twice its price leads. Consequently, in spite of lower volumes the sales revenues are still higher year-over-year by 5% actually. But still in spite of the EBITDA and is very high efficiency and cost-effectiveness and the margin capacity still EBITDA is 9% lower compared to the previous -- the previous year. [ Already ] made products -- we are still in finished products. We are selling about PLN 100 million in a yearly scale, no large changes as far as the structure of domestic and foreign sale, we are talking about 40% of export.

[ In another ] segment that we talked a lot in previous quarters, mainly due to the weather conditions in the first quarter. And in Q2, there was a big market pressure, maintaining as well is the Sun-shading Systems. The deviation of EBITDA here is PLN 11 million but it's still lower than the one observed after the first 6 months. So the situation has stabilized a little bit. Given the stable volumes as far as the sale -- the system sales, we reported 8% drop for finished products.

Now the competitive situation in the market is really very demanding, but still, it seems stable or there is a promise of stability. Last of the segments in terms of aluminium product is concerned, is the Extruded Products Segment, and it's clear, given those bars that you can see that on the one hand, very high operating efficiency because this is yet another quarter where we improved in sales volumes, 2% higher sales, combined with raw materials growing in prices, which then translated into sales revenues.

So quantitatively, there is as much as 30% of increase about and very high very high occupancy overall materials, products growing in prices, hence the twofold increase of EBITDA, nearly twofold. So this is particularly in the segment that actually benefited from the market turbulences, thanks to the very fact that we could really very efficiently find our place in the market.

Another positive factor affecting us is the customers from the construction sector. about which we've just heard that it's performing better than industry at large. Those customers account for about 50% of our product portfolio, which also supports our financial results at large. Similarly, 50% of exports. And in this respect, no significant changes were reported.

Another segment to discuss Flexible Packaging Segment, also a very good result compared to the previous year. In terms of volume, we're slightly below the year-over-year ratios, but this is due to optimization of structures and packaging types. However, as far as sales revenue is concerned. And the margin, we see very good trend. Raw materials are growing in prices, but there was an opportunity to update the prices and the capacity to generate higher gain on EBITDA.

Now let me talk about some financial ratios. Our debt has been continuously declining. That was also a very good quarter as far as Polish zloty was concerned. Strong EBITDA allowed us to finance the first tranche of dividend payment, but also increase of operating capital. That is a direct consequence of the raw materials -- raw material prices growing. Hence, the 2% EBITDA debt was what I would like to draw attention to. One of the things that I would like to draw attention is about PLN 170 million of investment expenditure. As mentioned, in Q4, CapEx should increase our estimates speak of about PLN 100 million. So we will have closed the year with about PLN 40 million to PLN 50 million below the estimate the projection.

Originally, the production was PLN 114 million. Just as a reminder, However, the increase in Q4 means that about half of the spending will be allocated in the flexible products related to the construction of the third BOPP film line, which means that we are entering the very final phase of this investment. Hence, the accumulation of spending late this year, early next year. As far as projections for Q4, I suppose, market environment, no significant changes in demand compared to Q3 are expected. The prices of raw materials have stabilized or show some downward trend, but some deviations in both sides are obviously possible due to speculation, operations and geopolitics, it's very difficult to anticipate something for the market. As far as prospects for the sales -- or sales volumes are concerned, year-over-year, they are quite comparable virtually in all segments.

So I'm not talking about any market breakdown or any rebound really. So in other words, on operating terms, we are trying to make the most of our capabilities and do whatever we can in the market given the current situation. It will be a very important quarter concerning our operations related to the acquisition of the METRA Group. We've already submitted all the documents required to procure all the permits from the regulatory bodies. We are awaiting any inquiries from the officials, and we are hoping that we will procure all those permits in Q4. As far as finances go, we will pay the second tranche of the dividend in November. About PLN 300-plus million. We will also focus on securing the METRA acquisition transaction. We have partially already done that. We managed to do it in September, a part of the operations were completed in October. And we want the foreign exchange rate under this transaction to account for about 3/4 of this entire value.

Those stable market projections as far as volumes are concerned, also cause that our annual projection should be exceeded as already performed in previous quarter, it seems that, we will have about 5% exceedance of the EBITDA model -- of EBITDA threshold according to our models according to our estimates, it is absolutely possible.

And last but not least, on this occasion, I would like to say thank you to many participants of all the activities. That's a great success as far as what was happening in the company is concerned, we were actually -- we are actually commended under the competition organized by [ IRP ], the best annual report competition. So congratulations to everybody involved in this activity. I wish that such a level of reporting continues to be maintained for the stakeholders next year. Thank you.

Thank you very much for your presentation. And now we are moving on to the Q&A session.

The first question is regarding cost of transaction of acquiring METRA Group, what cost level can be expected recognized in the fourth quarter of 2026?

Notable, ladies and gentlemen. In quarter 4 alone, it will not be significant amounts. We may say that transaction costs are estimated to be roughly 1% of transaction or around this figure. Half of it will be recognized within this year, a majority of which is included already in the results for 10 months and a small portion in the fourth quarter and half because it includes success fee element out of this element probably within next year after closing the transaction.

Thank you very much. And a more general question, what greatest opportunities do you see do we see in the following quarters? That means in the last quarter of this year and next quarters of 2027?

The fourth quarter, it's already here. So it is not the strongest quarter in the sectors we are active in. Therefore, it's hard to talk about something spectacular. We will be getting ready for the next year, and we are working hard on foundations on developing business in order to -- sorry, utilize those opportunities as in 2027. And we have 2 areas, as we mentioned. And when publishing the strategy last year.

Firstly, we focus on organic growth. Therefore, very strongly, we are working, and we will be working on development, both market and product development. So as you know, we have opened company in France. And we are now in the progress of building the team. We are strongly rebuilding and changing our teams in foreign [indiscernible]. We work on tools and processes to serve clients in the organization, and we implement new products or improve on the existing ones. And here, spectacular new implementation, which we actually showed in the third quarter was a synergy product.

So practically, very strongly, we on organic growth in foreign markets and in the results of our work, which we carry out on a day-to-day basis and all the backup we build for this purpose. Second element, of course, there will be integration of METRA Group, which will be a process spread over years. What else I assume that certain areas will be possible to be touched on sooner. We are buying other things, both in [ SSW ] and [ SSA ], we buy similar materials and elements. So there are areas we for sure, we will be looking for synergy and value right in the third quarters after closing.

Very strongly, I would count upon stability and improvement of macroeconomic situation and geopolitical one because this Actually, roller coaster is difficult. And we, on the one hand, are using it. As you can see in the results of this quarter, we are able to translate the macro disturbances into results, but we will all be much more calm if, first of all, the military conflicts, both in the Ukraine and in Middle East would come to an end or at least would get frozen to not to be actually affected by increased prices of raw materials, and it is actually inventing our clients who put all or give up buying decisions. So we do count upon macro [ viable ], but today, it's very to forecast when it will happen.

Thank you very much. And question is about, first in first out. In Extruded Products Segment. In the third quarter, you noticed such effect? And if yes, then what was its scale. Well, here, ladies and gentlemen, really, we were considering how in case of extruded products to calculate the one-off results related to increased prices.

Our estimations, which displayed prices were forming also -- I mean, buying prices, well, a few months ahead. And well, they pointed the possibility that in the third quarter, such effect resulted from rapid increase of prices of raw materials, well, between [ PLN 20 million and PLN 50 million ] we estimated it to be. And in what scope in that was influenced positively EBITDA stayed in the fourth quarter of [ May ] stay in Flexible Packaging Products. In the third quarter, these positive influence on FPS was much lower than in quarter 2. They were present, but they were present in the half of first quarter.

Now at the moment, we assume that the fourth quarter will be a typical one for the Flexible Product segment, well, with events typical for this segment, but not influencing the market so much.

Thank you. And in the third quarter, both Architectural Systems as well as systems of Sun-shading. Well noted, what is the factor that influenced the situation? Will quarter 4 will be under pressure also in these segments and whether in 2027, we see possibility to return to positive dynamics of EBITDA in those segments?

Ladies and gentlemen, I think that to these questions, the answer was included in earlier answers. So the main reason is weak market, first of all, for the volume, both in construction. I mean, both in Poland and all over Europe because in both segments, we are selling a great share of exports. But what we sell in Poland is a great majority exported by our clients. So weakness of the market is the decisive factor here. this weakness of the market results from small number of new started construction products and savings, putting off investment decisions or withholding them by both companies and individuals.

And here, unfortunately, the construction segment is weak here. And -- but as we always repeated this, the residential [indiscernible] this must be increasing, so that weakness must not be indefinite. And we assume that a certain moment, it will start bouncing up as you can see in Poland, we can see more construction pyramids issued, so -- granted.

So these results are visible. This is for sure the main element we are struggling with today. And as I also mentioned, we are doing a lot of work in order to be able to -- in the following quarters to be growing start growing if macro and the market help us all the better. But if not, we will be actually struggling, growing comparing with the competitors, but I'm strongly convinced that we will see positive dynamics in those segments in [indiscernible]. And now -- thank you.

The question regarding the Extruded Products segment, whether the improvement noted in the third quarter should be considered durable, permanent? And how do you actually foresee this segment for 2027. In today's situation, for sure, in part -- results of quarter 3 are supported by macro trends, this was a situation in quarters 2 and 3. What was unquestionably growing volumes and obtaining and maintaining high level of our high content of the portfolio, this is our organizational success.

And both these results are present a 14% profitability is a high level now. And it's difficult to assume that it is a level in today's market, which is possible to be maintained. So minimum is actually taking off the effect of turbulences in the raw material market. But still, we have potential because using of the capacity to the level of 70% roughly, and we still can be increasing it up to 100% using the capacity.

After 2 increases of prices in architecture and in no, we are not planning such changes. We will be watching the situation on the go, both from cost side, raw material size and market size today, no plans of this kind are not in place today.

So thank you. How can you specify the initial threat regarding spending for the 2027?

Well, they will not be significantly different from this year's figures probably. But we are waiting for -- in total, of course, for closing the transaction of acquiring METRA, it will influence CapEx. But if we look at [ County Group ] alone, for sure, it is a level oscillating somewhere close to this year's forecast.

Whether questions of the full estimations for the quarter 4. Did the management Board consider elements related to rotation of stock, I mean, [ FIFO ], whether in the fourth quarter and the management would expect?

Well, the fourth quarter, we actually assume at the level similar to last year's, and we believe that these effects with current raw material stands with stabilization or even downwards trend, they will not be significant.

Thank you. A request for reminding what is the currency position of the company, what costs -- operational costs the company is bearing in U.S. dollars and which in the euros.

Economic exposition is a couple of million euros a month -- we are generating a couple of million euros a month in case of other currencies, these are very small amounts because we convert aluminum both in U.S. dollars right away to euros.

So actually reduce this exposure to euro. So as you can see, part of our loans are also denominated in euros to have a kind of natural hedging between operational exposition and financial one. [ Exposure ].

So please remind us changes in price of aluminium and in Sun-shading, what was the scale of price rises and the 2 ones compensate totally and the increased prices of raw materials?

Well, the price increases happened in the quarters first and second May in ASS and the second increase was slightly put off in price in SSP. And there, in case of Architectural Segments altogether, we estimate them the amount of about 12% in case of Sun-shading. It was less increasingly accruing with price increase.

Thank you very much. So whether following the increases prices made or generally expensive raw materials and translation of it on to product prices is a company of segments facing demand barrier among clients and if so, in which segments?

That is a big problem, as I already mentioned, namely costs growing, especially construction costs, and I'm mainly talking about the construction sector. They precisely are those that caused the market to be rather weak.

It doesn't specifically pertain to aluminum. The costs increased at large. So I'm talking about both aluminium fittings. The same goes with PVC fittings and PVC joinery elements, it's not that aluminium is on the downside compared to other materials. Simply put, the construction, of course, have grown up, meaning that some customers have a delay or with trophon certain investments or the projects are not just not commenced.

It seems to me that each time we -- and we each time stress this element, aluminum compared to other construction materials is slightly privileged actually because it pertains to the premium segment far more, and I'm talking about single-family houses, larger residential buildings or more demanding solutions as well as the commercial segment instead of just multifamily housing construction sector.

It is definitely something that we are continuing to pursue that we are definitely trying to respond to the current market situation. The tools we have at hand is our price leads, but also discounts, it's something that we can effectively use. But once again, just to mention, the raw material costs are unfortunately quite variable and very, very unpredictable. Following this clear increase after the breakout of war in Iran, now we see some significant drops as far as polypropylene and polyethylene and aluminium.

Thank you very much. The following question pertains to the plans related to the acquisition. To what extent to what extent will the personnel currently managing the METRA group companies continue to manage the new structure?

And to what extent will the [ Kantar ] Group be trying to put their own people at key positions in the new group?

It's just too early to speak of details here. I mean, we will be able to make any decisions and talk to the manager after we seal the deal, we closed the transaction. But we can tell you more about our general mindset, and we have already mentioned that as we spoke about, the METRA Group before, one of the main advantages that we have received in the purchase of METRA is that this is a large business or rather a group of businesses for a couple of years, they were managed by a fund, which means that the transfer of ownership to the [ Kantar ] Group does not involve any departure of the previous owner losing team management.

The top professional management, both in Italy and in Europe and in North America will simply put be maintained in the company. we will definitely want to or even have to make some changes in the management structures, both formally. We also changed certain procedures, managerial and oversight procedures definitely. But as far as ongoing business management, we will be willing to resort to local managers instead of sending people from Poland to distant locations.

Our contracts for materials based on petroleum, mainly resins, [ poly granulates ] of polypropylene, polyethylene or the hedged by some derivative transactions. And if so, what kind of horizon are we talking about here?

Most of these transactions are implemented on the spot market. with some significant diversification of suppliers, which actually makes us quite efficient, agile in cases of turbulences, which we noticed in the second and third quarter.

Thank you very much. Could you please say a little bit more about the French market. How do you intend to manage on this market since we know that this is a rather hematic market, let's say.

It's quite difficult to it's difficult to enter for non-French businesses. Well, the point is that every single market, domestic market in Europe is quite diverse. There are no to markets in which we can sell the product in the very same way. The EU is a collection of different countries with their own regimes, markets, standards and so on and so forth.

And still, we are capable of selling more than half of our products or actually -- about half of our revenues from outside from abroad. So the response to the most general responses well, we will see but to expand this reply, I definitely think that we need to be focused.

Obviously, we have to have a local subsidiaries organization, local sales representatives, visiting customers, those that are quite savvy in terms of their own specific market and cultural context namely, what products are being sold, why, what are arguments to refer to? What about the competition and so on and so forth. It needs to be connected with good preparation on our part. We need to have the right products and solutions implemented. That's precisely what we were handling.

And we have products dedicated to the French market. We made some organizational effort. In this respect, we also need this local certification. And that's basically typical to every single European domestic market. This is an ongoing process. Part of those, we already have some of those we will get in the months to come, but we are definitely ready to be quite focused and to enter resolutely to the French market.

However, it all requires us to be focused and committed. We have to work in a focused and streamlined manner. So we will definitely focus on this market and we try to adapt our package of products and services to this market because this is one of the markets where we notice the biggest potential, which is obviously due to the fact that this is one of the three largest economies in Europe. At the same time, it's also a country that is quite accustomed with implementation of aluminium solutions in construction industry.

In terms of aluminium, this is the largest market in Europe, very close to the Italian market. The value of the market is simply put, enormous. So even if in the first years, we just obtained a small piece of the pie. This will be very important from the perspective of strategy optimization.

Thank you. How will you settle the relief on the investment in the Flexible Packaging systems will anything be cleared next year?

Well, I don't think so. Following the recent change in regulations. I mean, the relief or the exemption, we will be possible to recognize past a specific date, which will mean according literally the regulation that we can recognize them in our reports in 2028. However, there are some discussions or some remarks that we sent to the Ministry. So that maybe this particular system may actually be in collision with other fiscal solutions.

So I'm not judging right now. I don't mean to be very specific. However, in the projections for the next year, we do not assume that any of these investment release will be recognized under our financial reports.

Thank you. At previous presentations, we mentioned that a fair share of the products sold via the segment of architectural systems is actually reexported. Hence the request to explain the market standard is the sale of our domestic products cleared in Polish zloty. Is it cleared in euros or in -- well, the currencies of the respective countries where the given product ultimately is exported?

Whatever we sell to our customers, we always sell in Polish [ zloty ]. No exceptions there. No situations, as those mentioned in the question, this mechanism works in such a way, that, as you probably know, the Polish window joinery industry is a tycoon is an export powerhouse not just in Europe but worldwide.

Nobody exposed as many windows as Poland does. And we are talking mainly about PVC, but proportionately also aluminum. So based on the Windows, aluminum windows manufactured in Poland is estimated about 90% on of those solutions, those products actually are exported. It's the same structure is not identical as far as the [ sales ] are concerned, but a fair share of the products are also exported.

We roughly know where our customers reexport our products. There are some slight differences in products. So we sell different systems to the customers that export to Italy and slightly different products. We sell to those export to France, but this is this is actually up to our customers' discretion. Their price policies are at their discretion. They obtain price list and rebates and discounts in Polish zloty.

Thank you. To what extent are the current energy price growth can be translated to the increase of course in 2027? What's the correlation between those 2 aspects?

Given that, as you know, we are trying to apply our hedging policy slightly in advance, both for electricity and natural gas. The level of hedging as far as electricity right now is nearing 50% as for gas, about 60%, I think it's even more than 60% here, which causes that. If we were to simulate the prices for the next year at current prices, I think we would pay in 2027 for these 2 utilities, about 15% more than in this year. And we are talking about more than PLN 200 million for this year as budgeted.

Thank you very much. In Q3, the costs of the managerial options cost increased by PLN 6 million. Hence, a request for information about the level expected in Q4. Will it also be an increase or what about 2027?

So in this respect, our estimates are prepared on a quarterly basis. Let me just remind you that the costs related to the option scheme based on parameters such as net profit or EBITDA depend on whether or not we estimate these parameters as targets of the programs of the scheme to be fulfilled. Originally, our budget would not provide for the completion of the given tranche of the scheme. So we never cleared the costs related there, too.

And given the months for the -- sorry, the results of the 9 months of this year, we decided that the exceedance of the budget actually allows us to complete the tranche based on levels of 2023. However, maybe at the end of the year, we will consider a possibility depending on the level of exceedance, obviously, because we may be able to clear one more tranche from the previous year. And you probably know that based on the results of 2025 that tranche was not completed.

Anyway, each time, depending on the budget and its current standing, the backup costs, those reserve case are determined on an ongoing basis. I think it will be best to wait for the projection for 2027, then we will be able to estimate the costs related to the scheme.

I think it's the last question that I have received so far. Is there any option scheme for the management of the METRA Group based on the shares in that particular company?

As far as we are concerned, the management of the METRA Group has in place very reasonable motivational schemes based on similar principles as ours, namely relying on the ongoing results of the company. But some small fraction of the managers also receive some additional transaction-based bonus as agreed with selling party. But are we talking about the bonus that is paid in shares? No, no, obviously, it's not.

Thank you very much. So I can see right now, we have actually exhausted all the subjects raised by the participants by those that participate in this transmission in this broadcast. So I therefore would like to thank you very much for today's presentation and obviously, for all the questions you have posted. You're all warmly invited to the next broadcast as we release our estimates for the year 2027. And we intend to hold it at mid-December as per the corporate calendar. Thank you very much. We thank you. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]