• OCI Global (Euronext: OCI) reported total Q2 2024 revenues of $1,211 million, a 12% reduction YoY, and total Q2 2024 adjusted EBITDA of $296 million, a decrease of 9% YoY. The main reasons for the decline YoY were lower nitrogen prices globally, contractually higher gas prices in the Middle East, and a planned maintenance shutdown at Natgasoline during the quarter. The decline was mitigated by strong operational performance across other continuing operations as evidenced by 90%+ asset utilisation rates ("AUR") across both OCI Beaumont's and OCI European Nitrogen's facilities throughout the quarter. Operational improvements were further supported by $22 million of tailwinds from lower natural gas prices YoY globally and reduced hedging losses in the US.
• Total reported adjusted EBITDA before realized losses from natural gas hedges of $38 million was $334 million in Q2 2024. This compares to total reported adjusted EBITDA before realized losses from natural gas hedges of $374 million in Q2 2023. • Continuing operations adjusted EBITDA was $54 million in Q2 2024 compared to $5 million in Q2 2023. Excluding realized gas hedge losses, adjusted EBITDA for continuing operations was $80 million in Q2 2024 compared to $38 million in Q2 2023. Notwithstanding a planned turnaround at Natgasoline in the quarter, continuing operations benefited from a marked improvement in own-produced sales volumes of +10% YoY at OCI European Nitrogen and +14% YoY at OCI Beaumont, the latter of which operated at an average 96% AUR in Q2 2024. Normalized for lost volumes attributable to the Natgasoline turnaround as well as the aforementioned realized gas hedge losses, continuing operations would have posted $113 million in adjusted EBITDA in Q2 2024, demonstrating strong earnings potential on a run-rate basis.
• Total operating free cash flow was $108 million in Q2 2024. Net debt from total operations was $3,911 million on 30 June 2024, with total net leverage on a trailing 12-month adjusted EBITDA of 3.4x on a consolidated basis. • Continuing operations free cash flow in Q2 2024, including cash up streamed from IFCo, was $6 million. As a reminder, OCI is entitled to 100% of IFCo's cash generation until the transaction closes.
• Underlying corporate costs in Q2 2024 were $16 million, reduced from $24 million in Q1 2024. OCI reaffirms its corporate cost run-rate target of $30 million to $40 million to be achieved by 2025.
v Business Highlights
• First green methanol bunker delivery for X-Press Feeders: In May, OCI Methanol together with the Maritime and Port Authority of Singapore, PSA Singapore and Global Energy Trading, successfully bunkered X-Press Feeder's first methanol dual-fuelled hybrid vessel with green methanol from OCI HyFuels at the Port of Singapore. In July, OCI supplied the same vessel with green methanol in Rotterdam under OCI's supply agreement with X-Press Feeders. This was the first of fourteen dual-fuel ships ordered by X-Press Feeders that will run on green methanol supplied by OCI HyFuels. Rotterdam will be the home port to all fourteen vessels, aligning with the port's ambition to become carbon neutral. OCI will additionally take delivery of its first dual-fuelled green methanol bunker barge in late summer as part of its existing partnership with Unibarge.
• OCI expands landfill business for low carbon clean fuels: In June, OCI Methanol formed a strategic partnership with Waga Energy, a global expert in the production of renewable natural gas (RNG) to produce biomethane at landfill sites in the City of Beaumont, Texas. Waga Energy will build, own, operate and maintain the system to capture gases emitted from the decomposition of organic waste, and convert these gases into biomethane using patented WAGABOX technology. OCI will own the biomethane production, supporting its commitment to expanding OCI's green methanol production. The facility is expected to be operational by 2025 and will prevent the emission of 27,440 tonnes of CO2 equivalent annually, which is equal to the emissions from 2.8 million (US) gallons of gasoline per year.
• OCI commences production of bio-melamine: From 1 July, OCI European Nitrogen is replacing 20% of the conventional gas used during the ammonia production process for its Melafine feedstock with a biogenic source, which will further reduce OCI's carbon footprint and contribute to its customers' CO2 emissions reduction. Melafine, OCI's premium priced low carbon melamine offers a highly differentiated ~50% CO2 reduction compared to Chinese imports, and a superior energy-efficient CO2 production footprint. OCI also plans to offer a 100% biomethane feedstock option leading to an even higher carbon footprint reduction.
Strategic Review
• In December 2023, OCI announced the divestments of its 50% equity holding in Fertiglobe Plc ("Fertiglobe") and 100% of its equity interests in Iowa Fertilizer Company LLC ("IFCo") to Abu Dhabi National Oil Company P.J.S.C. ("ADNOC") and to Koch Ag & Energy Solutions ("KAES") respectively. This followed a multi-faceted global strategic review launched in early 2023, with the objective of closing OCI's HoldCo discount and crystallizing value for shareholders. OCI continues to make timely progress towards closing on both transactions, expected later this year.
• As previously guided, OCI intends to use the expected cash proceeds attributable to the Fertiglobe and IFCo transactions to significantly deleverage OCI, and to deliver a substantial extraordinary return of capital to shareholders of at least $3 billion conditional upon the closing of both transactions later this year.
• The payment of an initial extraordinary cash distribution of EUR 4.50 per share (equivalent to ~$1 billion) was approved by shareholders at an extraordinary shareholders' meeting ("EGM") on 25 April 2024 and is subject to the completion of the divestment of OCI's entire equity stake in the share capital of Fertiglobe to ADNOC. OCI has proposed a second extraordinary cash distribution of up to EUR 10.00 per share (equivalent to ~$2.3 billion) subject to the completion of the Company's sale of its 100% stake in IFCo to KAES, and subject to a voting resolution at a further EGM on 21 August. The amount that will be repaid to shareholders has not yet been determined and remains subject to the discretion of the Company's board of directors provided that the amount that will be distributed in the second distribution shall not exceed EUR 10.00 per share.
• Both extraordinary distributions are expected to be made as repayments of capital or - at the election of the shareholder - as payments from the profit reserve, subject to Dutch Dividend Withholding tax. Shareholders that do not make a choice will automatically participate in the repayment of capital. A choice for one option implies an opt-out of the other option. Further details on the distributions will be announced by the Company in a timely manner before the distributions become payable. • As a result of the recent strategic events and the upcoming extraordinary distributions of cash to shareholders, OCI has suspended the payment of regular dividends. For context, OCI has distributed over $2 billion in cash to shareholders since commencing dividend distributions in FY 2021.
• OCI communicated at its Q1 2024 results that following significant inbound interest in the continuing business, OCI would continue to explore various options and opportunities to maximize value for its stakeholders. OCI will provide an update on its strategic review during its conference call on Monday 5 August.
Ahmed El-Hoshy, CEO of OCI Global commented:
"We are pleased with OCI's robust performance in the second quarter of 2024 and the business's continued progress in efficiency gains as we prosecute our global decarbonization strategy. Further to the announced divestitures in December 2023 of our equity stakes in Fertiglobe and IFCo, we remain focused on successfully running our continuing business and growing our leadership position in low carbon offerings across our key markets. Over the past quarter, OCI has taken significant steps towards advancing its strategic aims, leveraging our strong expertise and leading positioning in the green methanol market where we continue to accelerate expansion plans fuelled by green methanol adoption, as well as further diversification in our premium European nitrates portfolio.
Following extremely challenging market conditions in 2023, conflated with prolonged turnarounds at some of OCI's assets, OCI benefited in the second quarter of 2024 from sustained improved asset reliability across the business. OCI's manufacturing excellence program and investments to improve reliability continue to drive productivity gains, with asset utilization rates surpassing historical levels across both the nitrogen and methanol complex: OCI Beaumont achieved a 96% AUR through Q2, whilst OCI Nitrogen saw both ammonia lines running at ~90% AUR during the quarter. The improvement is further evident in the 4% year-on-year improvement on a continuing basis. The OCI team continues to do an outstanding job driving forward our operational excellence program, focused on reliability and process safety fundamentals.
On a continuing basis, our differentiated and well capitalized platform is optimally positioned to accelerate efforts in the energy transition space. In the US, this portfolio includes OCI's Texas Blue Clean Ammonia facility, which is on track to commence production in 2025, alongside our first quartile, low-cost methanol complex also located in Beaumont Texas. In Europe, OCI's portfolio includes our leading integrated nitrates platform strategically located in Europe's nitrogen heartland, and our proprietary import and distribution capacity at the Port of Rotterdam. With recent expansions into AdBlue, the CAN+S markets, and most recently bio-melamine, we have enriched and diversified our European capacity through increased exposure to attractive non-agricultural, lower volatility, premium nitrogen markets. We remain committed to increasing the volume of lower carbon products that we supply to our distribution customers in Europe, meeting their decarbonization needs as we continue to replace conventional products with more sustainable ones.
Finally, I wish to extend my thanks to the entire OCI team for their relentless focus on process safety and operational excellence, which remains our top priority, and my colleagues' ongoing commitment to manufacturing excellence."
Conference call details
A conference call for investors and analysts will be hosted on Monday, 5 August 2024 at 1:00 PM CET (12:00 PM BST, 7:00 AM ET) by Ahmed El-Hoshy, Chief Executive Officer and Hassan Badrawi, Chief Financial Officer.
Investors and analysts can access the call and ask live questions by pre-registering here.Upon registration, an individual access code and dial-in details will be automatically sent via email.
Participants may also join via the webcast. Please pre-register and join here.
Please log-in or dial-in at least 10 minutes prior to the start time to ensure a fast connection to the call.
A replay of the webcast will be available through the OCI Global corporate website at www.oci-global.com
Download press release:
https://ociwordpress.s3.eu-west-2.amazonaws.com/assets/Q2-2024-Results-Report-vF_02_08_24-1.pdf
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