24 May 2019

OCI N.V. Reports Q1 2019 Results

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  • In anticipation of the start of the season and price improvements, we built our nitrogen fertilizer inventories to a peak of 1.1 million tons at the end of March, up from 0.5 million tons at the end of December, resulting in significantly lower volumes sold and revenues in the first quarter compared to the same period last year
  • We have shipped record fertilizer volumes during April and May in a more positive market environment than a few months ago, and our inventories have already returned to normalized levels
  • We expect a record second quarter resulting in a higher adjusted EBITDA in H1 2019 than in H1 2018
  • Net debt of $4.16 billion was approximately at the same level as at 31 December 2018, despite a $105 million working capital outflow as a result of the inventory build-up; we expect deleveraging to resume in Q2 2019
  • Total own-produced sales volumes decreased 22% and revenues decreased 20% during Q1 2019 compared to the same period last year
  • Adjusted EBITDA decreased 45% to $129 million in Q1 2019 from $235 million in Q1 2018, and the adjusted net loss was $82 million in Q1 2019 compared to adjusted net income of $11 million in Q1 2018
  • A planned turnaround at Sorfert to install new equipment and an extended unplanned shutdown at Natgasoline due to utilities supply issues materially impacted Q1 2019 volumes and results

Statement from the Chief Executive Officer – Nassef Sawiris:

“We maintained our disciplined sales approach to weather the fluctuations of the fertilizer markets during the first quarter and positioned ourselves appropriately for the delayed application season in the US and delayed purchasing in Europe: we held back volumes when prices started to decline, and as a result our inventories reached record levels at the end of March.

In the past weeks seasonal demand has kicked in and our sales volumes have rapidly accelerated. We have shipped record volumes in April and May and for most of our products at higher prices than we would have achieved a few months ago, confirming the merits of our commercial strategy. Across the industry we also expect the ending stocks of nitrogen fertilizers in our markets to reach levels below the average of recent years by the end of June.

We achieved these significant additional shipments thanks to the strong execution of our operational teams and the logistical advantages of our operations. As a result, we expect the low first quarter to be followed by a record second quarter and continue our path of deleveraging.

In the US, there are currently significant bottlenecks for the transportation of product from the US Gulf into the Midwest as a result of heavy congestion on the rivers and railroads. We are able to capitalize on such issues due to our unique in-region positioning in the Upper Midwest. Our warehouses are near our end customers at the heart of seasonal demand, capturing the logistical premium as compared to product transported into the Midwest from New Orleans (NOLA).

In Europe, we are on track to ship record volumes of CAN during the second quarter and reach a higher level of sold CAN volumes in the first half of 2019 than during the same period a year ago, leveraging our robust logistical organization and proximity to key end markets.

In addition to the reduction in inventories, our production rates are looking healthy in the second quarter. Sorfert completed a major planned turnaround during the first quarter, when a new waste heat boiler was installed and other maintenance work was performed. This is expected to result in improved operating rates. After the turnaround, Sorfert’s standalone ammonia line has already been able to run close to its maximum design capacity. Natgasoline is now running well following a shutdown due to utilities supply issues, which have been fully resolved. We expect these two plants to contribute significantly to our results during the remainder of the year.

We expect further boosts to our production within the next few months. BioMCN’s second line is in its commissioning phase and is preparing for start-up in June, and the c.13% methanol capacity increase at OCI Beaumont is on track for mid-year.”


We expect continued growth in adjusted EBITDA and improvement of our leverage metrics in 2019, and we remain committed to our financial policy to prioritise expected strong free cash flows for deleveraging towards 2x through the cycle.

Nitrogen Products

Our diversified portfolio of nitrogen products consists of fertilizer, diesel exhaust fluid (DEF) and melamine:

  • As a result of our sales volumes and commitments during April and May, our nitrogen fertilizer inventory levels have returned to normalized levels. A substantial portion of our sold fertilizer volumes has shifted from the first into the second quarter as demand was delayed in both the US and Europe. In recent weeks, demand for our products has picked up considerably across the main end markets for nitrogen fertilizers.
  • The demand outlook remains especially strong in the US in Q2 2019. Wet weather has delayed some corn planting, but as a result of a poor ammonia application last fall and this spring we benefit from a shift of ammonia to urea and UAN. Attractive ammonia pre-pay has resulted in record ammonia deliveries at strong prices despite the weak ammonia season, and we expect to continue to move urea and UAN into late June.
  • We continue to expect a positive industry outlook through a tightening of the global supply and demand balance with new capacity additions below historical trend demand growth of c.2% per annum and exports from China at low annual levels.
  • Melamine selling prices have decreased slightly from Q4 2018 into Q1 2019, but remain at healthy levels and the product remains a cornerstone of our Dutch operations. We expect to continue to benefit from healthy melamine market conditions.
  • The outlook for the DEF market in the US remains positive and is expected to grow at rates of 15% to 20% per annum in the coming years. We are well on track to achieve a more than doubling of our DEF sold volumes in 2019 compared to 2018, as evident in the significant increase in volumes achieved during the first quarter of 2019. IFCo continues to look for expansion and optimization of the logistics infrastructure to further diversify into higher margin and less seasonal industrial products.


Our methanol business was affected by unplanned shutdowns in the first quarter of 2019, but production normalized towards the end of the quarter. With the imminent start-up of the second line at BioMCN and 13% increase in methanol capacity at OCI Beaumont, we are on track to reach 2.95 million metric tons of proportionate production capacity annual run-rate this summer.

Fundamentals of methanol markets remain positive:

  • For methanol we expect new capacity additions in the next 4-5 years to be below expected demand, which is growing in the mid-single digits.
  • Firming oil prices, increasing utilization rates of methanol-to-olefins (MTO) plants and the addition of multiple new MTO facilities in China should be supportive for methanol prices and demand.


Gas Markets

Gas prices have moderated in both Europe and the United States since the high levels reached in 2018. We expect to see the full benefit of the materially lower gas prices in Europe from the second quarter onwards, benefiting from a combination of spot buying and hedges for part of our natural gas requirement for our European operations.

In the United States, we continue to benefit from low gas prices and hedges, with costless collars between around $2.40 to $3.50 for the majority of our gas needs at OCIB and Natgasoline, and prices below $2.40 for almost 70% of IFCo’s requirement for the remainder of the year.

Conference call details

A conference call for investors and analysts will be hosted on Friday 24th May 2019 at 3:00 PM CEST (2:00 PM BST, 9:00 AM ET) by Nassef Sawiris, Chief Executive Officer, and Hassan Badrawi, Chief Financial Officer.

Investors can access the call by dialing:

Standard International:                +44 (0) 20 3009 5710
United Kingdom FreeCall:           0800 376 7425
Netherlands LocalCall:                +31 (0) 20 715 7366
United States FreeCall:               1 (866) 869 2321

Conference ID:                           7273919

A conference call replay will be available until 23rd June 2019. The replay access numbers are:

Standard International:                +44 (0) 333 300 9785
Netherlands:                                 +31 (0) 20 713 2967
United States:                              1 (866) 331-1332

Conference ID:                           7273919

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