Fertiglobe, the strategic partnership between Adnoc and OCI Global, has posted Q1 2023 revenue of $694 million, adjusted EBITDA of $297 million, adjusted net profit of $135 million, and free cash flow of $271 million.
Earnings were impacted by industry-wide lower selling prices during the quarter due to continued declines in European gas prices and demand delays in several key regions, primarily due to weather conditions, as well as the deferral of 100kt in urea shipments to Ethiopia, with an estimated EBITDA impact of $35 million.
Despite slower price momentum in the first quarter, Fertiglobe delivered a 9% increase in own-produced sales volumes during the quarter. This was driven by the company’s disciplined commercial strategy and centralised distribution capabilities, targeting demand centres that offer attractive netbacks.
Strong order book
Fertiglobe continues to have a strong order book for the coming months, and markets have begun to tighten into the second quarter, resulting in improved prices in some regions.
In line with its continued commitment to creating and returning shareholder value, Fertiglobe guides for at least $250 million in dividends for H1 2023 payable in October 2023. The exact amount will be disclosed with the Q2 2023 financial results in August 2023.
Ahmed El-Hoshy, CEO of Fertiglobe, commented: “Q1 was a quarter where natural gas prices declined sharply due to a mild winter and resulted in lower marginal costs in Europe, causing deferred buying in several key regions. This, combined with relatively muted industrial demand, led to selling prices well below their levels in the same period last year, impacting Q1 earnings growth on a year-on-year basis. The nitrogen outlook remains favorable in the medium to longer term. New supply that commissioned in 2022 has been absorbed by the market, and limited major greenfield supply additions are expected in the next four years. Meanwhile, agricultural demand is buoyed by attractive farmer economics, incentivising nitrogen fertiliser application to replenish decade-low grain stocks.
Free cash generation
“We are progressing several initiatives to further support free cash generation, including our manufacturing improvement plan announced last year, which is on track to deliver operational and EBITDA efficiencies over the next 2-3 years.
“In addition, we recently launched an initiative to further optimise Fertiglobe's cost structure targeting $50 million in annualised savings, aimed to reinforce our top quartile cash cost positioning, and we expect to achieve these savings over the next 12-18 months. We also expect a positive impact on our cost base from the recent devaluation of the Egyptian pound.”
Following the commissioning of the first phase of Egypt Green Hydrogen in Ain Sokhna during COP27 in Q4 2022, Fertiglobe has announced the production of on-spec green ammonia at its facilities in Egypt.
Electrolyser plant
The company expects volumes to ramp up during 2023, targeting a Final Investment Decision on the full scale 100MW electrolyser plant this year. The plant aims to produce up to 15,000 tonnes of green hydrogen as feedstock for production of up to 90,000 tonnes of green ammonia per year in Fertiglobe’s existing ammonia plants.
With these projects and initiatives, the company reiterates its commitment to delivering on its sustainability agenda, and to showing meaningful progress towards a more sustainable production footprint while playing a role in decarbonising other industries in its value chain, including power and transport.
Dividends and capital structure
As of March 31, 2023, Fertiglobe reported a net cash position of $564 million, compared to net cash of $287 million as of December 31, 2022, supporting future growth opportunities and an attractive dividend pay-out.
The company reiterates its dividend policy to substantially pay out all excess free cash flows after providing for growth opportunities, while maintaining investment grade credit ratings (S&P: BBB-, Moody’s: Baa3, Fitch: BBB-; all with stable outlooks).-- TradeArabia News Service
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