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OCI N.V.
Earnings Release • Feb 25, 2020
3869_iss_2020-02-25_3f0e5e58-7d28-4f01-bcf7-d4ed52005ed9.pdf
Earnings Release
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Amsterdam, The Netherlands / 25 February 2020
OCI N.V. Reports Fourth Quarter 2019 Results
Highlights:
- Revenues were \$848 million and adjusted EBITDA \$237 million in Q4 2019 versus \$942 million and \$269 million in Q4 2018 respectively, as an increase in volumes sold was more than offset by lower selling prices.
- OCI-produced volumes sold increased 19% to 2.9 million metric tons in Q4 2019 versus Q4 2018.
- Adjusted net loss was \$43 million in Q4 2019 compared to adjusted net income of \$17 million in Q4 2018.
- Net debt was \$4.06 billion as of 31 December 2019, unchanged from 30 September 2019, with an improved EBITDA from Q3 to Q4 offset primarily by a temporary increase in receivables and inventories of c.\$115 million.
- As part of the strategic review of the methanol group, the company has initiated a process with several interested parties that may result in a partial divestment or other structures.
- Following an extensive planned turnaround schedule in 2019, the company expects a healthy increase in production and sales volumes in 2020, in addition to the full consolidation of Fertiglobe.
Statement from the Chief Executive Officer – Nassef Sawiris:
"Following a transition year and the completion of our capex expansion program in 2019, we have reached an inflection point and are fully focused on operational and commercial excellence across our platform in order to deliver on volume growth and free cash flow generation.
Our nitrogen operations were steady during the fourth quarter despite an environment of low selling prices, as results were supported by strong execution and low gas prices. We have already started to see a positive effect on onstream performance and cost efficiency from last year's extensive turnaround program across our nitrogen operations, and in particular at our high-margin operations in the US and Algeria.
IFCo continued to set new record production levels in the fourth quarter and in the first quarter this year, and since the turnaround and debottlenecking program last summer the upstream plants have operated without interruption at a utilisation rate of about 115% of nameplate capacity on average. On the back of this strong performance, S&P and Fitch have both upgraded the rating on IFCo's outstanding bonds by one notch, to BB- and B respectively.
In Algeria, following the conclusion of major turnarounds in 2019, all of Sorfert's production lines ramped up during the fourth quarter, reaching record utilization levels by December. We are pleased that the plants have been running at high and stable asset utilization levels since then.
Our methanol business was affected by a combination of low methanol prices and unplanned shutdowns in the US during 2019, but should see an improved contribution in 2020 following a return to better production. Natgasoline resumed operations following the previously mentioned unplanned shutdown, for which an initial insurance payment for business interruption and repairs was received in November.
We also accelerated a planned turnaround at OCI Beaumont from the second quarter of 2020 to the fourth quarter to ensure improved performance going forward. During this comprehensive turnaround, we refurbished waste heat
boilers, which were the primary cause of the repeated extended shutdowns last year. The ammonia plant restarted in the beginning of January and has been running at up to 104%, whereas the methanol plant restarted production mid-February and is currently running at around 112% of nameplate capacity and slowly ramping up further.
As a result of our initiatives, we expect to benefit from on average higher and more efficient asset utilization rates across our platform, the ramp-up of the new capacities in our methanol portfolio, as well as the full consolidation and realization of synergies of the Fertiglobe joint venture. We anticipate that this combination of factors should result in a healthy increase in our sales volumes in 2020.
Our priority remains to maximize free cash flow generation and we remain committed to our financial policy to deleverage towards 2x through the cycle, and we continue to evaluate our capital structure to identify further costeffective refinancing opportunities."
Outlook
Nitrogen
- After a challenging 2019, global nitrogen markets are showing improving fundamentals supported by a combination of limited new capacity additions, expected increased acreage in the US this year, favourable farm economics for nitrogen and strong demand from key importing countries.
- In the shorter term, we are well-positioned for the start of the 2020 spring season with a healthy order book and urea production almost sold out for the first quarter.
- As a result of our advantageous location in the US Midwest, we expect to benefit from an expected improvement in demand in North America, driven by an anticipated return to normal planting conditions and an increase in planted acreage.
- The European nitrates market has witnessed a better price environment than the UAN market in the United States in recent months and the outlook for this business remains positive.
- We expect to continue to benefit from a positive outlook for Diesel Exhaust Fluid (DEF) in the United States, following a doubling of our product volumes in 2019.
- In January, our joint venture N-7 finalized an agreement with Dyno Nobel to market their DEF, urea liquor and automotive grade urea in North America. This further strengthens N-7's position as a major supplier, whilst providing additional geographic reach from a total of four sites across the United States.
Methanol
- Methanol prices have risen steadily as a result of tighter global markets, and the current spot price in the US is up more than \$100 per metric ton since reaching a trough last summer. USGC spot prices are also up almost 30% year-to-date.
- While prices remain at levels below mid-cycle, the increases bode well for a better 2020 compared to 2019.
- Against this price backdrop, we expect to benefit from the ramp-up of our new methanol capacity, as well as the normalization of production and improved onstream efficiency in 2020 compared to the low asset utilization rates in 2019 as a result of unplanned downtime.
Gas Markets
Natural gas prices have been beneficial to our operations during the fourth quarter of 2019 and we expect to continue to be a beneficiary of the low gas price environment in 2020 and beyond:
- European and US spot natural gas prices dropped considerably during 2019 and have remained at attractive levels into 2020.
- We believe there has been a structural shift in the European gas markets and expect prices to remain within a core bandwidth of \$3 – 5 per MMBtu, barring any surprise weather shocks, as a result of increased Atlantic basin LNG exports competing with Russian imports into Europe. European natural gas spot prices are currently at the low end of this range.
- In the US, Henry Hub benchmark prices have recently been at globally competitive prices below \$2 per MMBtu, and the forward curve suggests prices will remain at low levels for the foreseeable future.
Consolidated Financial Results at a Glance1)
Financial Highlights (\$ million unless otherwise stated)
| Q4 2019 | Q4 2018 | % Δ | 2019 | 2018 | % Δ | |
|---|---|---|---|---|---|---|
| Revenue | 847.8 | 941.5 | (10%) | 3,031.7 | 3,252.5 | (7%) |
| Gross Profit | 89.3 | 155.5 | (43%) | 322.8 | 622.1 | (48%) |
| Gross profit margin | 10.5% | 16.5% | 10.6% | 19.1% | ||
| Adjusted EBITDA2) | 236.8 | 269.0 | (12%) | 748.4 | 937.5 | (20%) |
| EBITDA2) | 200.1 | 248.8 | (20%) | 649.7 | 929.2 | (30%) |
| EBITDA margin | 23.6% | 26.4% | 21.4% | 28.6% | ||
| Adj. net income (loss) attributable to shareholders |
(43.4) | 17.1 | nm | (208.4) | 17.0 | nm |
| Net income (loss) attributable to shareholders | (90.8) | (18.7) | nm | (334.7) | (48.7) | nm |
| Earnings / (loss) per share (\$) | ||||||
| Basic earnings per share | (0.434) | (0.090) | nm | (1.598) | (0.233) | nm |
| Diluted earnings per share | (0.434) | (0.090) | nm | (1.598) | (0.233) | nm |
| 31 Dec 19 | 31 Dec 18 | % Δ | ||||
| Total Assets | 9,419.6 | 7,320.0 | 29% | |||
| Gross Interest-Bearing Debt | 4,662.3 | 4,580.3 | 2% | |||
| Net Debt | 4,061.9 | 4,119.6 | (1%) | |||
| Q4 2019 | Q4 2018 | % Δ | 2019 | 2018 | % Δ | |
| Free cash flow2) | 52.2 | 304.5 | (83%) | 157.8 | 620.4 | (75%) |
| Capital Expenditure | 52.9 | 65.6 | (19%) | 300.0 | 293.0 | (2%) |
| Of which: maintenance capital expenditure | 46.5 | 21.1 | 120% | 169.8 | 136.1 | 25% |
| Sales volumes ('000 metric tons)3) | ||||||
| OCI Product | 2,945 | 2,466 | 19% | 9,922 | 9,402 | 5% |
| Third Party Traded | 387 | 574 | (27%) | 1,784 | 1,752 | 4% |
1) Unaudited
2) OCI N.V. uses Alternative Performance Measures ('APM') to provide a better understanding of the underlying developments of the performance of the business. The APMs are not defined in IFRS and should be used as supplementary information in conjunction with the most directly comparable IFRS measures. A detailed reconciliation between APM and the most directly comparable IFRS measure can be found in this report
3) Fully consolidated, not adjusted for OCI ownership stake in plant, except OCI's 50% share of Natgasoline volumes
Operational Highlights
Highlights
- Own product sales volumes increased 19% to 2.9 million metric tons during the fourth quarter of 2019 compared to the fourth quarter of 2018:
- Total own-produced nitrogen product volumes were up 24%, driven by the first contribution to volumes from Fertil and continued strong growth of DEF
- Total own-produced methanol volumes were down 4% as a result of the unplanned shutdown at Natgasoline and the acceleration of a planned turnaround at OCI Beaumont offsetting a strong increase in volumes at BioMCN following the start-up of the refurbished second production line
- Including third-party traded product, sold volumes increased 10% to 3.3 million metric tons during Q4 2019 versus Q4 2018
| Q4 2019 | Q4 2018 | % Δ | 2019 | 2018 | % Δ | |
|---|---|---|---|---|---|---|
| Own Product | ||||||
| Ammonia | 490.3 | 450.7 | 9% | 1,907.1 | 2,013.1 | (5%) |
| Urea | 1,187.2 | 749.4 | 58% | 3,110.8 | 2,960.8 | 5% |
| Calcium Ammonium Nitrate (CAN) | 258.7 | 253.5 | 2% | 1,140.8 | 1,063.8 | 7% |
| Urea Ammonium Nitrate (UAN) | 411.2 | 464.7 | (12%) | 1,489.6 | 1,538.4 | (3%) |
| Total Fertilizer | 2,347.4 | 1,918.3 | 22% | 7,648.3 | 7,576.1 | 1% |
| Melamine | 39.2 | 42.7 | (8%) | 135.8 | 149.3 | (9%) |
| DEF | 152.2 | 82.8 | 84% | 508.7 | 261.0 | 95% |
| Total Nitrogen Products | 2,538.8 | 2,043.8 | 24% | 8,292.8 | 7,986.4 | 4% |
| Methanol | 406.2 | 421.9 | (4%) | 1,628.7 | 1,415.7 | 15% |
| Total Own Product Sold | 2,945.0 | 2,465.7 | 19% | 9,921.5 | 9,402.1 | 6% |
| Traded Third Party | ||||||
| Ammonia | 18.4 | 120.3 | (85%) | 160.6 | 394.4 | (59%) |
| Urea | 65.2 | 128.4 | (49%) | 329.5 | 328.1 | 0% |
| UAN | 3.7 | 24.4 | (85%) | 24.1 | 90.1 | (73%) |
| Methanol | 84.8 | 85.7 | (1%) | 482.6 | 252.1 | 91% |
| Ammonium Sulphate (AS) | 195.5 | 202.1 | (3%) | 713.6 | 673.6 | 6% |
| DEF | 19.0 | 13.5 | nm | 73.3 | 13.5 | nm |
| Total Traded Third Party | 386.6 | 574.4 | (33%) | 1,783.7 | 1,751.8 | 2% |
| Total Own Product and Traded Third Party | 3,331.6 | 3,040.1 | 10% | 11,705.2 | 11,153.9 | 5% |
Product Sales Volumes ('000 metric tons)
1) Including OCI's 50% share of Natgasoline volumes
Benchmark Prices
| 2019 | 2018 | % Δ | Q4 '19 | Q4 '18 | % Δ | Q3 2019 | % Δ | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Ammonia | NW Europe, FOB | \$/mt | 286 | 337 | (15%) | 275 | 388 | (29%) | 265 | 4% |
| Ammonia | US Gulf Tampa contract | \$/mt | 248 | 313 | (21%) | 255 | 345 | (26%) | 218 | 17% |
| Granular Urea | Egypt, FOB | \$/mt | 262 | 277 | (5%) | 238 | 315 | (24%) | 268 | (11%) |
| CAN | Germany, CIF | €/mt | 197 | 202 | (2%) | 180 | 229 | (21%) | 194 | (7%) |
| UAN | France, FOT | €/mt | 182 | 179 | 2% | 162 | 228 | (29%) | 175 | (7%) |
| UAN | US Midwest, FOB | \$/mt | 228 | 237 | (4%) | 204 | 280 | (27%) | 212 | (4%) |
| Melamine | Europe contract | €m/t | 1,510 | 1,640 | (8%) | 1,450 | 1,625 | (11%) | 1,490 | (3%) |
| Methanol | USGC Contract, FOB | \$/mt | 387 | 492 | (21%) | 336 | 493 | (32%) | 355 | (5%) |
| Methanol | Rotterdam FOB Contract | €/mt | 319 | 402 | (21%) | 270 | 428 | (37%) | 305 | (11%) |
Source: CRU, Argus, ICIS
Operational Performance
Nitrogen Products
Total own-produced nitrogen sales volumes increased 24% during the fourth quarter of 2019 compared to the same period last year, primarily reflecting the first-time inclusion of Fertil in Abu Dhabi, as well as a strong increase in DEF volumes:
- Following an extensive program of scheduled turnarounds and debottlenecking at 11 plants across four of our nitrogen sites during the third quarter of 2019, our nitrogen operations were running at steady levels during the fourth quarter.
- In particular our high margin facilities in the United States and Algeria (IFCo and Sorfert) have improved onstream performance since their respective turnarounds in 2019.
Average benchmark and realized selling prices for our nitrogen products decreased in the fourth quarter of 2019 compared to the same quarter in 2018.
Adjusted EBITDA of the US and Europe nitrogen segments in Q4 2019 was approximately at the same level as in Q4 2018 despite the lower selling prices, supported by lower gas prices year-on-year and higher operating rates. Fertiglobe's adjusted EBITDA in Q4 2019 includes the positive effect on EBITDA from the Fertil acquisition, but was nevertheless below Q4 2018 as a result of the lower urea and ammonia prices.
Methanol
Own-produced methanol sales volumes decreased 4% during the fourth quarter of 2019 compared to the same period last year, primarily driven by:
- Lower volumes at Natgasoline year-on-year, as a result of the unplanned shutdown from August to October due to damage to a waste heat boiler. The incident at Natgasoline is covered by insurance and an initial payment of \$30 million for business interruption and repairs was received in November. OCI's share is reflected in the Q4 2019 adjusted EBITDA.
- OCI Beaumont started a turnaround, originally planned for Q2 2020, during the fourth quarter, resulting in lower volumes year-on-year. The turnaround was completed safely with no recordable incidents.
- BioMCN's production volumes increased significantly following the start-up of the second line during the third quarter, but not enough to offset lower volumes at our US operations.
Methanol prices were on average lower during the fourth quarter of 2019 compared to the same quarter last year.
As a result of the lower selling volumes and prices, the Q4 2019 adjusted EBITDA for the Methanol US segment was below Q4 2018. The Methanol Europe segment improved year-on-year as a result of lower gas prices and the start-up of the second line, but was affected by a drop in quarterly contract methanol prices compared to both the third quarter of 2019 and the fourth quarter of 2018.
| \$ million | Nitrogen US |
Nitrogen Europe |
Fertiglobe* | Total Nitrogen |
Methanol US |
Methanol Europe |
Elim. | Total Methanol |
Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Segment revenues | 134.1 | 194.2 | 357.8 | 686.1 | 115.8 | 71.3 | 9.8 | 196.9 | - | 883.0 |
| Inter-segment revenues | - | - | (13.6) | (13.6) | (7.8) | (13.8) | - | (21.6) | - | (35.2) |
| Total revenues | 134.1 | 194.2 | 344.2 | 672.5 | 108.0 | 57.5 | 9.8 | 175.3 | - | 847.8 |
| Gross profit | 30.4 | 30.3 | 61.5 | 122.2 | (41.7) | (0.1) | 4.9 | (36.9) | 4.0 | 89.3 |
| Operating profit | 26.3 | 21.2 | 30.1 | 77.6 | (47.8) | (0.7) | 6.9 | (41.6) | (22.9) | 13.1 |
| D&A | (34.5) | (20.1) | (90.6) | (145.2) | (57.7) | (4.9) | 21.9 | (40.7) | (1.1) | (187.0) |
| EBITDA | 60.8 | 41.3 | 120.7 | 222.8 | 9.9 | 4.2 | (15.0) | (0.9) | (21.8) | 200.1 |
| Adjusted EBITDA | 60.8 | 41.3 | 131.0 | 233.1 | 14.5 | 4.2 | - | 18.7 | (15.0) | 236.8 |
Segment overview Q4 2019
*Previously Nitrogen MENA segment. Fertil consolidated from Q4 2019.
Segment overview Q4 2018
| \$ million | Nitrogen US |
Nitrogen Europe |
Fertiglobe | Total Nitrogen |
Methanol US |
Methanol Europe |
Elim. | Total Methanol |
Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Segment revenues | 147.7 | 255.0 | 351.3 | 754.0 | 182.9 | 66.7 | - | 249.6 | - | 1,003.6 |
| Inter-segment revenues | - | (0.1) | (19.3) | (19.4) | (42.7) | - | - | (42.7) | - | (62.1) |
| Total revenues | 147.7 | 254.9 | 332.0 | 734.6 | 140.2 | 66.7 | - | 206.9 | - | 941.5 |
| Gross profit | 35.7 | 27.7 | 99.2 | 162.6 | 23.4 | (19.7) | (9.4) | (5.7) | (1.4) | 155.5 |
| Operating profit | 30.8 | 20.2 | 122.6 | 173.6 | 0.5 | (15.6) | 7.3 | (7.8) | (24.4) | 141.4 |
| D&A | (29.7) | (15.1) | (45.4) | (90.2) | (32.8) | (1.7) | 17.6 | (16.9) | (0.3) | (107.4) |
| EBITDA | 60.5 | 35.3 | 168.0 | 263.8 | 33.3 | (13.9) | (10.3) | 9.1 | (24.1) | 248.8 |
| Adjusted EBITDA | 60.5 | 37.0 | 143.5 | 241.0 | 56.8 | (13.4) | - | 43.4 | (15.4) | 269.0 |
Segment overview 2019
| \$ million | Nitrogen US |
Nitrogen Europe |
Fertiglobe | Total Nitrogen |
Methanol US |
Methanol Europe |
Elim. | Total Methanol |
Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Segment revenues | 541.1 | 812.1 | 1,055.5 | 2,408.7 | 547.6 | 251.1 | - | 798.7 | - | 3,207.4 |
| Inter-segment revenues | - | (0.5) | (89.1) | (89.6) | (66.9) | (19.2) | - | (86.1) | - | (175.7) |
| Total revenues | 541.1 | 811.6 | 966.4 | 2,319.1 | 480.7 | 231.9 | - | 712.6 | - | 3,031.7 |
| Gross profit | 84.0 | 114.6 | 197.7 | 396.3 | (61.1) | (14.3) | 16.8 | (58.6) | (14.9) | 322.8 |
| Operating profit | 66.8 | 79.2 | 148.2 | 294.2 | (84.3) | (17.0) | 24.2 | (77.1) | (112.1) | 105.0 |
| D&A | (152.7) | (71.3) | (222.6) | (446.6) | (151.6) | (14.6) | 72.5 | (93.7) | (4.4) | (544.7) |
| EBITDA | 219.5 | 150.5 | 370.8 | 740.8 | 67.3 | (2.4) | (48.3) | 16.6 | (107.7) | 649.7 |
| Adjusted EBITDA | 219.5 | 152.4 | 375.3 | 747.2 | 86.9 | (1.0) | - | 85.9 | (84.7) | 748.4 |
Segment overview 2018
| \$ million | Nitrogen US |
Nitrogen Europe |
Fertiglobe | Total Nitrogen |
Methanol US |
Methanol Europe |
Elim. | Total Methanol |
Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|
| Segment revenues | 489.1 | 906.8 | 1,237.6 | 2,633.5 | 549.5 | 238.2 | - | 787.7 | 3.7 | 3,424.9 |
| Inter-segment revenues | - | (0.4) | (93.1) | (93.5) | (77.8) | (1.1) | - | (78.9) | - | (172.4) |
| Total revenues | 489.1 | 906.4 | 1,144.5 | 2,540.0 | 471.7 | 237.1 | - | 708.8 | 3.7 | 3,252.5 |
| Gross profit | 55.2 | 81.5 | 370.6 | 507.3 | 139.6 | (18.3) | (5.1) | 116.2 | (1.4) | 622.1 |
| Operating profit | 39.3 | 48.9 | 388.3 | 476.5 | 94.0 | (18.0) | 20.9 | 96.9 | (69.1) | 504.3 |
| D&A | (117.1) | (62.8) | (174.6) | (354.5) | (86.5) | (8.3) | 25.4 | (69.4) | (1.0) | (424.9) |
| EBITDA | 156.4 | 111.7 | 562.9 | 831.0 | 180.5 | (9.7) | (4.5) | 166.3 | (68.1) | 929.2 |
| Adjusted EBITDA | 157.2 | 113.4 | 503.7 | 774.3 | 229.3 | (7.7) | - | 221.6 | (58.4) | 937.5 |
Financial Highlights
Summary results
Consolidated revenue decreased 10% to \$848 million in the fourth quarter of 2019 compared to the same quarter in 2018, as the increase in total volumes sold was more than offset by lower selling prices for our nitrogen products and methanol.
Adjusted EBITDA was \$237 million in Q4 2019 compared to \$269 million in Q4 2018. The nitrogen segments benefited from lower gas prices in Europe and another strong performance from IFCo, offset by lower selling prices for all products. The methanol segments were impacted by lower selling prices and the unplanned shutdown at Natgasoline.
The adjusted net loss was \$43 million in Q4 2019 compared to a profit of \$17 million in Q4 2018. The reported net loss (after non-controlling interest) was \$91 million in Q4 2019 compared to a net loss of \$19 million in Q4 2018.
| \$ million | Q4 2019 | Q4 2018 | 2019 | 2018 |
|---|---|---|---|---|
| Net revenue | 847.8 | 941.5 | 3,031.7 | 3,252.5 |
| Cost of Sales | (756.3) | (786.0) | (2,708.9) | (2,630.4) |
| Gross profit | 89.3 | 155.5 | 322.8 | 622.1 |
| SG&A | (75.2) | (51.1) | (219.1) | (177.6) |
| Other Income | 1.0 | 36.5 | 5.8 | 62.6 |
| Other expense | (2.0) | 0.5 | (4.5) | (2.8) |
| Adjusted EBITDA | 236.8 | 269.0 | 748.4 | 937.5 |
| EBITDA | 200.1 | 248.8 | 649.7 | 929.2 |
| Depreciation & amortization | (187.0) | (107.4) | (544.7) | (424.9) |
| Operating profit | 13.1 | 141.4 | 105.0 | 504.3 |
| Interest income | 1.5 | 2.8 | 5.9 | 8.7 |
| Interest expense | (89.3) | (80.1) | (311.8) | (340.7) |
| Other finance income / (cost) | 18.9 | (13.5) | (21.0) | (32.6) |
| Net finance costs | (68.9) | (90.8) | (326.9) | (364.6) |
| Income from equity-accounted investees | (16.7) | (15.5) | (56.6) | (30.8) |
| Net income before tax | (72.5) | 35.1 | (278.5) | 108.9 |
| Income tax expense | (15.0) | (13.4) | (21.7) | (9.4) |
| Net profit / (loss) | (87.5) | 21.7 | (300.2) | 99.5 |
| Non-Controlling Interest | (3.3) | (40.4) | (34.5) | (148.2) |
| Net profit / (loss) attributable to shareholders | (90.8) | (18.7) | (334.7) | (48.7) |
Consolidated Statement of Income*
* Unaudited
1) FY and Q4 2018 have not been adjusted for IFRS 16
Reconciliation to Alternative Performance Measures
Adjusted EBITDA is an Alternative Performance Measure (APM) that intends to give a clear reflection of underlying performance of OCI's operations. The main APM adjustments in the fourth quarters of 2019 and 2018 relate to:
- Natgasoline is not consolidated and an adjustment of \$19 million was made for OCI's 50% share in the plant's EBITDA in Q4 2019, which includes OCI's share of an insurance payment of \$30 million related to the unplanned shutdown in Q3 and Q4 2019. Natgasoline's contribution to adjusted EBITDA in Q4 2018 was \$27 million.
- Transaction costs are related to the Fertiglobe joint venture that closed on 30th September.
- The unrealized result on natural gas hedge derivatives of (\$0.7) million in Q4 2019 and \$8.8 million in Q4 2018 relates to hedging activities at OCI Beaumont and in the Netherlands.
- Other adjustments of \$10 million in Q4 2019 include movements in provisions and fair value adjustment of inventories related to the Fertiglobe consolidation.
| \$ million | Q4 '19 | Q4 '18 | 2019 | 2018 | Adjustment in P&L |
|---|---|---|---|---|---|
| Operating profit as reported | 13.1 | 141.4 | 105.0 | 504.3 | |
| Depreciation and amortization | 187.0 | 107.4 | 544.7 | 424.9 | |
| EBITDA | 200.1 | 248.8 | 649.7 | 929.2 | |
| APM adjustments for: | |||||
| Natgasoline | 19.2 | 27.2 | 59.8 | 44.9 | OCI's share of Natgasoline EBITDA |
| Expenses related to expansion projects | 4.7 | 0.5 | 8.4 | 2.0 | SG&A / other expenses |
| Sorfert insurance income / release of provision | - | (26.9) | - | (57.7) | Other income |
| Unrealized result natural gas hedging | (0.7) | 8.8 | 4.8 | 8.8 | COGS |
| Transaction costs | 3.1 | 3.8 | 19.3 | 3.8 | |
| Other including provisions | 10.4 | 6.8 | 6.4 | 6.5 | |
| Total APM adjustments | 36.7 | 20.2 | 98.7 | 8.3 | |
| Adjusted EBITDA | 236.8 | 269.0 | 748.4 | 937.5 |
Reconciliation of reported operating income to adjusted EBITDA
Net income attributable to shareholders
At the net income level, the main APM adjustments relate to non-cash foreign exchange gains or losses on US\$ exposure and accelerated depreciation of \$36 million at Sorfert and OCI Beaumont, identified during turnarounds.
Reconciliation of reported net income to adjusted net income
| \$ million | Q4 2019 | Q4 2018 | 2019 | 2018 | Adjustment in P&L |
|---|---|---|---|---|---|
| Reported net income attributable to shareholders |
(90.8) | (18.7) | (334.7) | (48.7) | |
| Adjustments for: | |||||
| Adjustments at EBITDA level | 36.7 | 20.2 | 98.7 | 8.3 | |
| Add back: Natgasoline EBITDA adjustment | (19.2) | (27.2) | (59.8) | (44.9) | |
| Expenses related to expansion projects | - | - | - | 20.0 | Income from equity accounted investees |
| Expenses related to refinancing | 9.1 | 15.4 | 9.1 | 31.4 | Finance expenses |
| Unrealized loss / (gain) gas hedging Natgasoline | 5.0 | - | 12.0 | - | Income from equity accounted investees |
| Forex gain/loss on USD exposure | (18.6) | 15.4 | 9.6 | 34.3 | Finance income and expense |
| Derecognition of deferred tax assets | - | - | 22.4 | - | Income tax |
| Other | - | 3.0 | 3.7 | 3.0 | COGS |
| Accelerated depreciation | 36.0 | - | 53.6 | - | COGS |
| Non-controlling interest adjustment | (1.5) | 14.2 | (12.9) | 32.7 | Minorities |
| Tax effect of adjustments | (0.1) | (5.2) | (10.1) | (19.1) | Income tax |
| Total APM adjustments at net income level | 47.4 | 35.8 | 126.3 | 65.7 | |
| Adjusted net income attributable to shareholders |
(43.4) | 17.1 | (208.4) | 17.0 |
Free Cash Flow and Net Debt
Free cash flow amounted to \$52 million during Q4 2019 reflecting the reported EBITDA for the quarter, phasing of cash interest payments, which are higher-than-average in the second and fourth quarters of the year, negative currency effects of \$24 million and working capital outflow of \$21 million during the quarter. Working capital movements were impacted primarily by a temporary increase in trade receivables and inventories of c.\$115 million during the fourth quarter.
Total cash capital expenditures were \$53 million in Q4 2019 compared to \$66 million in Q4 2018. Maintenance capital expenditure was \$47 million during Q4 2019, and growth capital expenditure was limited at \$6 million following the completion of OCI's growth capital expenditure program.
Net debt stood at \$4,062 million as at 31 December 2019, largely at the same level as \$4,059 million as at 30 September.
Reconciliation of EBITDA to Free Cash Flow and Change in Net Debt
| \$ million | Q4 2019 | Q4 2018 | 2019 | 2018 |
|---|---|---|---|---|
| EBITDA | 200.1 | 248.8 | 649.7 | 929.2 |
| Working capital | (21.2) | 145.0 | (38.3) | 83.9 |
| Maintenance capital expenditure | (46.5) | (21.1) | (169.8) | (136.1) |
| Tax paid | (3.5) | (1.2) | (59.9) | (34.3) |
| Interest paid | (79.6) | (109.3) | (268.3) | (271.2) |
| Dividends from equity accounted investees / dividends paid to NCI | - | 30.1 | (4.5) | 9.0 |
| Insurance receivable / received Sorfert | - | - | 31.8 | - |
| Adjustment non-cash expenses | 2.9 | 12.2 | 17.1 | 39.9 |
| Free Cash Flow | 52.2 | 304.5 | 157.8 | 620.4 |
| Reconciliation to change in net debt: | ||||
| Growth capital expenditure | (6.4) | (44.5) | (130.2) | (156.9) |
| Acquisition non-controlling interest OCI Partners | - | - | - | (117.6) |
| Other non-operating items | (0.7) | 34.3 | 45.1 | (25.2) |
| Lease payments | (8.8) | - | (30.0) | - |
| Other non-current items | (6.2) | (3.6) | 5.4 | (0.8) |
| Net effect of movement in exchange rates on net debt | (23.8) | 9.8 | 24.2 | 51.8 |
| Other non-cash items | (9.0) | (5.5) | (14.4) | (44.7) |
| Net Cash Flow / Decrease (Increase) in Net Debt | (2.7) | 295.0 | 57.9 | 327.0 |
Notes
This report contains unaudited fourth quarter and full year consolidated financial highlights of OCI N.V. ('OCI', 'the Group' or 'the Company'), a public limited liability company incorporated under Dutch law, with its head office located at Honthorststraat 19, 1071 DC Amsterdam, the Netherlands.
OCI N.V. is registered in the Dutch commercial register under No. 56821166 dated 2 January 2013. The Group is primarily involved in the production of nitrogen-based fertilizers and industrial chemicals.
This report has been authorised for issue by the Board of Directors on 24 February 2020.
Auditor
The financial highlights and the reported data in this report have not been audited by an external auditor.
Investor and Analyst Conference Call
On 25 February 2020, at 16:00 CET, OCI N.V. will host a conference call for investors and analysts. Details on how to access the call can be found on the OCI N.V. website.
About OCI N.V.:
OCI N.V. (Euronext: OCI) is a leading global producer and distributor of nitrogen products and methanol providing sustainable solutions to agricultural and industrial customers around the world. OCI's production capacity spans four continents and comprises approximately 16.1 million metric tons per year of nitrogen fertilizers, methanol, diesel exhaust fluid, melamine, and other nitrogen products. OCI is headquartered in the Netherlands and listed on Euronext in Amsterdam.
For additional information contact:
OCI N.V. Investor Relations Department:
Hans Zayed Director Email: [email protected]
Tel: +31 (0) 6 18 251 367
For additional information on OCI:
OCI stock symbols: OCI / OCI.NA / OCI.AS
Honthorststraat 19 1071 DC Amsterdam The Netherlands