Saudi Arabian Mining Co. (Ma’aden), Riyadh, this week said its first international acquisition, of African fertilizer distribution company Mauritius-based Meridian Group, is progressing “according to plan,” and it expects the transaction to close in the current third quarter.
Ma’aden announced the deal in April, and will acquire an 85 percent stake in Meridian in an all-cash transaction that will provide it with a network of operations across southern Africa, from Malawi to Mozambique, Zimbabwe, and Zambia, and a distribution volume of approximately 500,000 mt/y of fertilizer (GM April 19, p. 1). The Saudi company will acquire the remaining 15 percent of Meridian’s equity over four years. The financial details of the deal have not been disclosed.
Meanwhile, Ma’aden reported a net loss of Sar243.7 million (approximately $65 million at current exchange rates) attributable to shareholders of the parent company for the second-quarter ended June 30, compared with a year-ago net profit of Sar517.8 million.
The reported loss came in wider than the average analyst estimate, with Bloomberg putting the average estimate at a Sar128.8 million loss (range loss Sar29 million to Sar227 million).
Ma’aden attributed the loss mainly to decreasing realized prices for all products except gold, and to one-time costs related to the restructuring of its aluminum rolling business. It said the impact on profit of these two factors was Sar481 million and Sar159 million, respectively.
Profitability was additionally adversely impacted by higher input costs, operating expenses, depreciation, and finance costs, in part driven by full recognition of the operating costs of the majority-owned Ma’aden Wa’ad al Shamal Phosphate Co. (MWSPC) and Ma’aden Rolling Co. (MRC). MWSPC and MRC started commercial operations last December (GM Dec. 7, 2018).
Second-quarter revenues were up 26 percent on a year-ago, however, reaching Sar4.3 billion against Sar3.4 billion a year-ago. The company mainly cited increased sales volumes of ammonium phosphate fertilizer as well as aluminum flat rolled products, and MWSPC and MRC reaching full commercial operations, as driving the revenues’ increase
But EBITDA was down by 29 percent on second-quarter 2018 at Sar1.3 billion.
“The second quarter of 2019 showed further weakness in our core commodities, phosphate and aluminum, with prices continuing the downward pressure seen since 2018, although gold prices remained strong,” said Ma’aden President and CEO Darren Davis.
Ma’aden’s Phosphate business, which includes the ammonia business, saw a 21 percent decline in second-quarter EBITDA to Sar574 million from a year-ago. Sales grew 41 percent year-on-year to Sar2.098 billion, in part reflecting the inclusion of MWSPC. The Phosphate business contributed 44 percent of the company’s second-quarter 2019 EBITDA.
Davis noted the further decline in phosphate prices during the quarter and that they remained under pressure. But he highlighted the “further good progress” made at MWSPC in the second quarter in ramping up operations, with the operation “steadily overcoming commissioning technical challenges.”
Trial DAP production began at MWSPC’s Ras Al-Khair plant on July 8, 2017. It has nameplate capacity for 3 million mt/y of ammonium phosphate fertilizer capacity. Mosaic Co. and SABIC own 25 and 15 percent stakes, respectively, in MWSPC.
Second-quarter production of ammonium phosphate fertilizer (most, if not all, is believed to have comprised DAP) amounted to 1.328 million mt, an increase of 68 percent on a year-ago. It should be noted that second-quarter 2018 production did not include MWSPC ammonium phosphate fertilizer production, as it was not at that time in commercial operation. Trial DAP production began at MWSPC’s Ras Al-Khair plant on July 8, 2017. The plant has nameplate capacity for 3 million mt/y of ammonium phosphate fertilizer capacity.
Ammonium phosphate fertilizer sales reached 1.26 million mt in the second quarter of this year, up from 750,000 mt a year-ago. Sales volumes from MWSPC were not included in the year-ago quarter.
Company-wide second-quarter ammonia production increased to 600,000 mt, an increase of 18 percent on the year-ago. The company noted second-quarter 2018 ammonia production was lower due to the Ammonia-I unit maintenance turnaround shutdown.
Ammonia sales were up 16 percent in the second quarter at 348,000 mt from a year ago.
Phosphate Fertilizer & Ammonia Production & Sales (‘000 mt)
| Q2-2019 | Q1-2019 | Q2-2018 | |
| Ammonium phosphate fertilizer | |||
| Production | 1,328 | 1,233 | 789 |
| Sales | 1,264 | 1,101 | 750 |
| Ammonia | |||
| Production | 600 | 591 | 507 |
| Sales | 348 | 396 | 301 |
Looking ahead, Ma’aden sees a continued deterioration in phosphate and ammonia markets “with limited sign of recovery.”
“Whilst market challenges are likely to continue, production will reach record levels in 2019, and the company will have renewed its focus on operational excellence,” Davis said.
Regarding the company’s growth investments, he said the company’s Ammonia-3 project is progressing within the approved schedule and budget. The 3,300 mt/d facility at Ras Al-Khair was the first plant to begin construction at the company’s planned third large-scale phosphate complex, “Phosphate 3.” The engineering, procurement, and construction contract for the ammonia plant was awarded in October 2018 (GM Oct. 26, p. 1) and is scheduled for completion in early 2022. On completion, this third ammonia unit will take Ma’aden’s ammonia production capacity to around 3.5 million mt/y.
The completion of Phosphate 3 will raise the Saudi company’s capacity to supply phosphate fertilizer to global markets by 3 million mt/y, and take its total phosphate fertilizer production capacity to nearly 9 million mt/y. According to Ma’aden, Phosphate 3 will make Saudi Arabia the world’s third largest producer of phosphate fertilizer, and the second largest exporter.