Amica zwiększyła przychody mimo pandemii | Michał Rakowski, Grupa Amica

Good morning, welcome.

Yes, I confirm — Friday, November 26th, Amica Group published its results for the third quarter of 2021, in line with earlier announcements. A brief summary in big numbers: revenue growth compared to 2020 of over 13 percent, exceeding 2.4 billion PLN in revenue. EBIT stood at 150 million PLN — compared to last year, we see a decline of 15 percent. The other key indicators, the operating result and gross profit, were also lower than last year, at 105 million and 104 million PLN respectively. I think there will be an opportunity today to address why these results are lower than last year, but the situation is completely different.

In 2020, in terms of revenues, it was a very dynamic year. Let me remind you — there was a collapse in AGD equipment sales. In the second quarter, we had a year-over-year decline versus 2019 of over 5 percent, particularly in April when the pandemic began its devastation in Europe. The following months and the next quarter were a period of making up ground. By the end of the third quarter last year, we had caught up with 2019 levels, and the fourth quarter allowed us to achieve results about 5 percent better compared to 2019. Answering your question directly — yes, the base effect is certainly important compared to 2020. We not only increased volume in value terms but also the quantity of products and goods sold. There was also the effect of implemented price increases on the market contributing to higher revenues.

Yes, exactly, we're almost at the close of November — today is the last day of sales initiated in October, which looks quite good. Let me remind you that for Amica Group, the fourth quarter is very important — it's a season oriented toward the sale of heating equipment, produced in our factory in Radomsko. In this period, heating equipment is in high demand from consumers. Therefore, our assumptions for the end of the third quarter and fourth quarter are always quite high. October was in line with our earlier assumptions, so we were pleased. November, according to the latest advanced indicators, was also quite strong. We've consistently had our assumptions, and I expect that revenue targets will be realized. However, throughout the year we are under strong cost pressure — both production costs, material and component costs, particularly visible in the third and fourth quarters. The entire year is also under pressure from costs related to goods sourced mainly from China — logistics costs and partly from price increases of our purchased goods.

Yes. As a manufacturer, Amica Group certainly faced all challenges related to component procurement. Let me remind you that in our cost structure, steel constitutes about 30 percent of manufacturing costs, so it's one of the more significant elements. Throughout the year, similar to other manufacturers, we faced challenges related to availability, particularly in the first and second quarters. Today, availability itself may not be as much of a challenge, but in terms of price, I see some positive signs on the market related to the slowdown in the automotive industry — lower demand announced by car manufacturers means greater steel availability, which also translates to prices. However, it should be emphasized that prices remain high and above the beginning-of-year level, and we are closely watching how they will develop in 2022. Many manufacturers across various industries also complain about electronic component shortages. Looking at our cost structure, another 30 percent of manufacturing costs is electronics and chips, also sourced mainly from China. Availability was a challenge this year as well, but fortunately the operational actions of our production unit allowed us to avoid production stops. Other AGD manufacturers in Poland experienced such downtime, but we did not — this was certainly a success this year that production could continue uninterrupted.

Of course, it has become customary that Black Friday is a moment of sales accumulation. However, in recent years we've seen this period extend — I think you can safely say it has become a whole month of increased sales, and that's how it is now as well. Depending on the country, the intensity varies, but indeed the Black Friday period is visible and represents an accumulation of sales in the autumn season.

In 2020, we developed many procedures and ways of dealing with coronavirus. I think they brought positive effects — particularly looking at workforce safety, which has been and remains a priority. Throughout 2020, a special team operated, represented by various areas of the company, an HR team responsible for recommending to the management board decisions related to introducing restrictions or ways of dealing with the pandemic. This team still functions, and even today I will be taking part in a meeting of this team after ours. I think we will be taking actions aimed at further ensuring workforce safety. So far, in recent weeks and months, we have acted 100 percent in accordance with government guidelines. However, the risk related to coronavirus spread is somewhat greater after the latest information about another variant. I think in the coming days we will be making decisions about introducing certain additional internal measures at the company.

The core of our business is the production of heating equipment, as I mentioned. The factory in Radomsko is responsible for producing freestanding cookers, hobs for built-in installations, and also stovetops. The factory is currently operating at quite high efficiency — we have almost 100 percent capacity utilization. This is the foundation of our business development. In 2019, as part of our strategy, we announced the Amica 4.0 program related to automation and optimization of production processes to increase efficiency. We announced very significant multi-year expenditures and we are not withdrawing from these commitments. This year, the company's CAPEX will be about 100 million PLN, and next year investments will be even larger. This demonstrates we are not backing away from our earlier declarations.

Yes, we started almost two years ago with cooperation with partners in the energy area, and this environmental aspect is very important for us. To not be empty words, one of the projects currently being implemented is a heat recovery project from production processes. We will soon complete financing and implement this solution, which will allow us to recover approximately one-third of the energy consumed by the factory. This is one of the major initiatives toward achieving at least carbon neutrality. We're not stopping there — we will develop further projects. Like many other manufacturers, we are looking at photovoltaic solutions and their efficiency. Certainly in the coming months and years we will be able to boast about another solution.

We are currently working on the 2022 budget. Undoubtedly, 2021 was one of the more difficult periods to navigate — high cost volatility in production, goods, purchase prices, and as we've recently noticed, currencies, will certainly be challenges. We have experience in all three areas. I think we will try to successfully address these and achieve results at least as good as in recent years. So please keep your fingers crossed — I hope we will surprise positively.

Thank you very much.