OCI NV publishes its results for the third quarter of 2021
OCI NV publishes its results for the third quarter of 2021
Financial and outlook
Revenue increased 104% to $ 1.5 billion and Adjusted EBITDA increased 161% to $ 501 million in the third quarter of 2021 compared to the third quarter of 2020, despite three significant recoveries at our facilities in United States and Egypt
Adjusted net income was $ 56 million in the third quarter of 2021, compared to an adjusted net loss of $ 67 million in the third quarter of 2020
We expect a significant increase in Adjusted EBITDA in the fourth quarter compared to the third quarter of 2021, thanks to significantly higher selling prices and favorable raw material costs in the MENA region and the United States
The rolling net debt / Adjusted EBITDA was 1.7x as of September 30, 2021; Based on the current volume and price outlook, we expect the net leverage to decline to less than 1.3x by the end of 2021 and to less than 1.0x in the first quarter 2022
OCI plans to start returning capital to shareholders from 2022, with a first semi-annual dividend expected to be announced in February and paid in April 2022
ESG and business updates
On October 27, 2021, ADNOC and OCI successfully listed 13.8% of their Fertiglobe partnership on the Abu Dhabi Securities Exchange (ADX), generating gross proceeds for OCI of approximately $ 461 million. Following the IPO, OCI continues to hold the majority of the capital of Fertiglobe
In October, Fertiglobe announced a partnership with Scatec and the Sovereign Fund of Egypt for a 50 to 100 MW electrolyser capable of producing up to 90,000 tonnes of green ammonia in Egypt.
In November 2021, OCI further improved its capital structure by repaying $ 540 million of 5.25% Senior Secured Notes and â¬ 400 million of 3.125% Senior Secured Notes, resulting in a reduction in OCI NV’s cash interest of> $ 40 million per year from 2022.
Ahmed El-Hoshy, CEO of OCI NV commented: âThis year has been a year of transformation as we begin to reap the rewards of our growth strategy and competitive business model. We have achieved our balance sheet targets, which gives us the opportunity to start returning capital to shareholders and positions us well for future growth through targeted sustainability-focused projects.
Our order book gives us excellent visibility for Q4 and the coming season in H1 2022. Currently low grain stocks around the world will take at least 2023 to recover. It is at times like these that OCI, with its low-cost global platform, globally active young people and strong logistics, can help address these grain shortages and the challenges of food production. food security in general by providing essential nitrogen products to agricultural markets.
We continue to improve our ammonia logistics, further strengthening the global leader OCI’s ammonia production and trading platform. We added a fourth dedicated charter vessel and increased throughput capacities at our ammonia import terminal in Rotterdam, which allowed us to continue our downstream production in Europe and the weather volatility of raw material prices in purchasing record volumes of ammonia from Fertiglobe and the United States to our Dutch operations.
Our distribution capabilities, including the ability to manage inventory in relevant locations, coupled with a disciplined business strategy, allow us to maximize the benefits of rising prices, as in the recent urea tender in India where Fertiglobe accounted for over 70% of total volumes at a price above $ 890 / t FOB. This bodes well for the outlook for seasonal sales in the coming quarters.
The outlook for our methanol group is also positive in a market strongly supported by prices. Our European factories remain closed due to high gas prices, but the company has a global distribution network with access to major European and American markets, our American factories are positioned at the bottom of the global cost curve and the he company is a clean fuels company. leader. We expect the improved operational performance of Natgasoline to translate into cash dividends for the Group from 2022. â
Strong earnings momentum from our nitrogen business is supported by healthy market fundamentals
OCI’s earnings momentum has been supported by a number of factors that suggest a structural shift towards a demand-driven, multi-year environment for nitrogen products over the medium term.
Demand is robust in major import markets, with the United States, Europe, Latin America and India vying for produce ahead of the spring season in Q2 2022. USDA highlights tightening of global grain markets in 2022 compared to 2021, with strong support for corn in the $ 5 / bushel range.
Low levels of grain stocks and global stock-to-use ratios, which need at least 2 years to rebuild, amplify the need for nitrogen fertilizer application to alleviate food security concerns.
In addition, several recent key events support attractive supply and demand dynamics: high commodity prices have significantly increased the demand for ammonia imports from the EU due to the shutdown of capacity; urea export bans from China limit the participation of the marginal exporter in future Indian tenders; and, the new urea capacities planned are lower than the level observed during the last five years and the start-ups are delayed.
Russia, one of the world’s largest nitrogen-exporting countries, also recently announced that it would impose export quotas on urea and nitrates, which would further tighten global nitrogen balances.
The nitrogen outlook in the United States remains strong, supported by low stocks and strong demand with higher grain prices leading to an expansion in acreage grown in the 2022 and 2023 seasons.
In Europe, demand for nitrates is strong with limited pre-purchases this season. Sustained production cuts due to high gas prices could lead to further tightening of the market in the spring.
Globally, higher marginal costs are also supporting markets, with commodity prices recovering to higher levels from 2020 lows and supporting selling prices over the medium term.
A global recovery to generate significant demand for our industrial products
The ammonia the market is structurally tightening in the medium term with limited net additions of capacity and higher industrial demand. In addition, ammonia has significant advantages due to the expected additional demand for clean ammonia in new applications in a range of industries, including marine fuel and power, and as a carrier of hydrogen.
Melamine markets continued to tighten due to strong demand from the home improvement and construction markets, tight supply and low global inventories across the supply chain. Quarterly contract prices increased by 20% in the third quarter of 2021 and OCI announced an increase of â¬ 750 / t in October with a further increase of â¬ 250 / t in November.
The recovery in truck sales and freight activity continued, which, combined with higher urea selling prices, supports an improving trend in OICs FED US sales for the remainder of 2021 and 2022. DEF now represents over 30% of IFCo’s sales volumes and we continue to increase our volumes and strengthen our market position. The higher net revenues for this product allow us to continue to improve the yields of our nitrogen operations in the United States in the future.
Methanol market fundamentals remain positive. US spot and contract prices have been supported by weak global inventories, demand continues to recover vigorously, and new supply has been delayed and slow to ramp up. Strong demand is expected to continue, as the operating rates of the main derivatives segments, in particular with traditional applications, would be close to peak rates and provide good visibility on our sales and prices in Q4 and Q1 2022. To In the long term, the fundamentals of supply and demand tighten, as demand growth is expected to exceed capacity growth.
ESG – decarbonization initiatives continue
We continue to make good progress in our efforts to seize the value creation opportunities of the emerging demand for clean ammonia and methanol, as we assess blue and green projects on our platform that fit well into our ESG strategy.
Fertiglobe recently announced an increase in blue ammonia capacity by 70,000 metric tonnes through a low-cost debottlenecking program in Abu Dhabi and partnered with ADNOC to sell blue ammonia from the United Arab Emirates to customers in Japan. Fertiglobe will join ADNOC and ADQ as a partner in a new global blue ammonia project of 1 million tonnes per year at TA’ZIZ in Ruwais. In addition, we have entered into an agreement with Scatec and the Sovereign Fund of Egypt to develop an electrolyser facility of up to 100 MW to produce green hydrogen as a feedstock for up to 90,000 metric tonnes of ammonia. extra green.
In 2022, OCI intends to adopt a semi-annual dividend distribution policy, with a first dividend to be announced in February and paid in April 2022. Going forward, OCI intends to maintain a strong capital allocation policy and disciplined approach designed to balance the availability of funds and excess free cash flow for dividend distribution while pursuing value accretive ESG opportunities and other growth opportunities, all under a 2X target net leverage throughout the cycle and an investment grade debt profile.