OCP SA reported a 35 percent drop in second-quarter 2016 EBITDA, to MAD3,023 million ($312 million) on revenues of MAD11,279 million ($1.2 billion), down from the year-ago’s MAD4,687 million ($479 million) and MAD12,983 million ($1.3 billion), respectively.
Second-quarter operating profits were MAD1,763 million ($183 million), down from the year-ago MAD3,722 million ($380 million). Second-quarter revenues fell 13 percent year-on-year, but recorded a 9 percent increase on the first quarter’s MAD10,337 million ($1.06 billion).
“As anticipated, we achieved a modest sequential improvement in second-quarter revenues, reflecting increased fertilizer sales to high-growth markets. Our profitability for the period benefited from competitive raw material sourcing and cost savings following the ramp-up of our slurry pipeline,” said Mostafa Terrab, OCP chairman and CEO.
First-half EBITDA was 31 percent lower year-on-year at MAD5,916 million ($606 million) on revenues of MAD21,656 million ($2.2 billion), down from the year-earlier’s MAD8,634 million ($890 million) and MAD23,895 million ($2.5 billion), respectively. Six-month operating profit was MAD4,212 million ($432 million), compared to MAD6,975 million ($719 million).
The 9 percent decrease in first-half revenues from a year earlier reflected weaker prices across all three of the company’s product sectors. The impact of lower prices more than offset the benefits of reduced raw materials costs, the company said. The continued ramp-up of the slurry pipeline resulted in a 26 percent year-on-year increase in cost savings of MAD436 million in the first half of 2016, compared with the year earlier MAD346 million. Some 4.3 million mt of rock was transported by the pipeline in first-half 2016, 58 percent more than the 2.8 million mt transported a year-earlier.
Six-month phosphates sales fell 25 percent, down to MAD4,602 million from the year-ago MAD6,148 million, reflecting lower phosphate rock selling prices. Sales volumes also fell by 9 percent, particularly on account of lower sales to the Brazilian and Indian markets.
Sales of fertilizers rose 4 percent, to MAD10,549 million from MAD10,162 million. OCP attributed this increase mainly to positive volume effect due to the “strengthening of the company’s strategy in Africa,” accompanied by the return of Argentinean market demand.
First-half phosphoric acid sales fell 16 percent to MAD4,604 million from MAD5,492 million, with the fall primarily reflecting weaker international prices. Volumes increased by a modest 3 percent.
While acknowledging the industry environment remains challenging, OCP’s CEO believes the phosphate market is close to or at the bottom of the cycle and heading to a gradual recovery in 2017.
“Consumption should benefit from higher crop yields in key regions, and strengthening demand is also expected in response to lower Brazilian inventories,” said Terrab.
On the supply side, however, he worries that high inventory levels in China could lead to expanded exports. However, he said the factors that “could surprise on the upside” include stronger-than-expected Indian and Brazilian demand, together with limited exports from China.
Terrab remains confident that growing global demand will absorb expanded [phosphates] capacity, but said the company has “the flexibility to adjust capital spending” and “modulate production” to maximize value.