Brazil’s state-owned oil and gas company Petróleo Brasileiro SA (Petrobras) on Dec. 29 reported that it signed a contract with financially troubled fertilizer and chemical producer Unigel Participações SA for industrialization on order (tolling agreement) for the production of fertilizers at the Sergipe and Bahia plants. No further details were provided.
Unigel has been leasing the two nitrogen plants from Petrobras (GM Aug. 14, 2020) but struggled in 2023 due to high natural gas prices and low fertilizer prices. Petrobras said the partnership is in line with its Strategic Plan 2024-2028+ for fertilizer production.
Petrobras said last June that it had started talks with Unigel to analyze joint projects in fertilizers, green hydrogen, and low carbon initiatives (GM June 9, 2023). It said studies with Unigel as to the production of low-carbon projects will continue.
Unigel gave an update on the status of its Agro (Fertilizer) and Chemical plants as of Dec. 22, saying it halted production at both fertilizer plants in June and August to control inventories. It said currently that only the Sergipe plant is in production and is focusing on urea and ammonia.
As for its Chemicals division, styrenics production was temporarily halted at Camaçari for only a few days during the year and at Cubatão from June to August. The polystyrene plant at Sao Jose dos Campos was down from June through mid-November. Currently, it said all plants are operational.
In acrylics, the acrylonitrile plant remains idled, and methacrylates have been running at only half capacity since June. The acrylic sheet plant in Mexico and the sodium cyanide plant in Brazil have continued to operate normally.
Unigel said it could not reveal the value of the recently announced sale of its Mexican acrylic sheets plant until the deal actually closes, and noted that the most significant precondition to closing is approval by Mexican antitrust authorities. However, Unigel said the sale involves a substantial capital infusion that will be used to strengthen the company’s cash position.
Unigel’s losses piled up in the third quarter as sustained lower global prices of urea and ammonia pressured the cash-strained fertilizer maker’s operations. The release of third-quarter figures on Dec. 22 came a day after second-quarter results, which were also overdue.
The company, which filed for temporary protection from creditors in December (GM Dec. 8, 2023), had a third-quarter loss of R$524 million ($108 million) compared with a year-ago loss of R$19 million. Revenues shrank to R$972 million from R$2.43 billion, while adjusted EBITDA was a negative R$149 million versus the year-ago positive R$433 million.
Unigel’s net debt rose to R$4.24 billion ($847 million) from December 2022’s R$2.23 billion ($465 million).
Unigel reported a nine-month net loss of R$1.06 billion on revenues of R$4.1 billion, versus the year-ago net income of R$491 million and R$7.52 billion, respectively. Adjusted EBITDA was a loss of R$276 million ($58 million), down from the year-ago positive R$1.65 billion ($332 million). Unigel attributed the nine-month loss primarily to the performance of its Agro segment, which posted a negative result of R$266 million.
Results were partially affected by measures to shore up liquidity such as offering discounts to reduce stockpiles, the firm said. It also lost income by shuttering some of its plants.
Unigel breached lending agreements for local bonds that require it to keep the ratio below or at 3.5 times. Its dollar bonds, which last changed hands at 30 cents, already trade at distressed levels.
The company entered a mediation process with creditors over its debt restructuring, and executions on its debt were suspended temporarily (GM Dec. 15, 2023).