OCI NV, Amsterdam, remained in the negative column during the third quarter, reporting a net loss attributable to shareholders of $182.5 million, and deepening the net loss of a year-ago of $15.0 million. Revenues were down 18 percent, at $633.9 million from $773.5 million a year-ago. EBITDA came in 50 percent lower at $105.8 million against the previous year’s $213.1 million, while adjusted EBITDA was 53 percent off at $107.2 million, down from $229.9 million.
The company cited lower production resulting from planned turnarounds and debottlenecking at 11 plants across four nitrogen production sites, together with lower methanol and ammonia prices, as the primary drivers behind the downturn in quarterly EBITDA compared with a year-ago. The results were also adversely impacted by an unplanned shutdown at OCI’s Natgasoline methanol plant in Beaumont, Texas, from August to the beginning of November. That shutdown, caused by damage to a waste heat boiler, is covered by insurance.
The lower EBITDA, coupled with accelerated depreciation at the Iowa Fertilizer Co. (IFCo) nitrogen plant in Wever, as well as non-cash foreign exchange losses and a pre-insurance loss at Natgasoline due to the shutdown, were the main factors behind the deeper adjusted net loss for the quarter versus a year-ago, the company said.
Third-quarter OCI-produced volumes sold decreased 5 percent, to 2.2 million mt from the year-ago 2.3 million mt. Own-produced fertilizer sales were 13 percent lower at 1.61 million mt, down from 1.84 million mt in the same prior-year period.
Lower sales volumes were recorded across all the main own-produced fertilizer products. But the biggest decrease was seen in CAN volumes, down 36 percent compared with third-quarter 2019. The company cited “a record second quarter,” which resulted in a 9 percent higher level of sold CAN volumes in the first nine months of the year versus a year-ago.
Sales of third-party traded products amounted to 433,200 mt in the third quarter, marginally lower than a year-ago.
OCI highlighted the strengthening of its competitive position in the nitrogen sector following the completion of the Fertiglobe joint venture with Abu Dhabi National Oil Co. (ADNOC) on Sept. 30, which has seen the combination of ADNOC’s fertilizer business into OCI’s Middle East and North Africa (MENA) nitrogen fertilizer platform (GM Oct. 4. p.1).
According to the two parties, Fertiglobe will be the largest export-focused nitrogen fertilizer platform globally, and the largest producer in the MENA region, with a production capacity of 5 million mt/y of urea and 1.5 million mt/y of merchant ammonia. OCI said the consolidation has resulted in the addition of 2.1 million mt/y capacity to its platform, and is expected to generate substantial synergies.
OCI said IFCo finalized a four-week debottlenecking project in early August, following which it has increased its operating rates further and achieved better cost efficiency. Since the facility restarted, the plants have been running at high and stable levels, with the ammonia and urea synthesis plants setting new production records at 116 percent and 118 percent of nameplate capacity, respectively.
It noted that despite the turnaround at IFCo, Diesel Exhaust Fluid (DEF) and UAN volumes were up, partly due to a longer-than-usual season in the U.S.
At Sorfert in Algeria, following a turnaround at one of the ammonia lines in the first quarter, the other ammonia line was shut down for a turnaround from June until August. In Egypt, one of EFC’s urea lines was shut down for a turnaround during the quarter. OCI Nitrogen’s melamine and CAN lines in the Netherlands were shut down for turnaround during June and July.
Despite the turnarounds, OCI reported that the adjusted EBITDA of the U.S. and Europe nitrogen segments improved in the third quarter of 2019 compared to a year-ago. Nitrogen U.S. posted a third-quarter adjusted EBITDA of $31.5 million, up from the prior-year quarter’s $30.4 million, while Nitrogen Europe reported an adjusted EBITDA of $31.2 million for the quarter versus the year-ago $25.2 million.
However, the third-quarter adjusted EBITDA of the Nitrogen MENA segment was sharply lower than a year ago – down 40 percent, at $77.4 million from $128.0 million – with the company citing the turnarounds there, as well as the lower ammonia prices behind the downturn.
Regarding its methanol business, despite the unplanned outage at Natgasoline, OCI reported that its own-produced methanol sales volumes improved 25 percent during the third quarter, totaling 428,400 mt, up from the year-ago 343,700 mt.
Increases in sales volumes were primarily driven by higher volumes at Natgasoline, which were still fully reflected in July volumes as well as BioMCN’s second line, which started up during the third quarter and reached stable operating rates towards the end of August. Additionally, there was also full production from BioMCN’s first line during the third quarter, versus a planned turnaround during the third quarter of last year.
As a result of lower methanol selling prices in the third quarter and the Natgasoline shutdown, third-quarter adjusted EBITDA for the Methanol U.S. segment came in well below third-quarter 2018, at just $2.6 million versus the year-ago $66.1 million.
OCI noted that it has received an initial insurance payment of $30 million for the unplanned shutdown at Natgasoline, which it said will be reflected in its fourth-quarter results.
For the nine months to Sept. 30, OCI reported a net loss attributable to shareholders of $243.8 million, significantly widening the year-ago $30.0 million net loss. Revenues were down 6 percent, at $2.18 billion from $2.31 billion. EBITDA came in 34 percent lower from a year-ago at $449.6 million, down from $680.4 million, while nine-month adjusted EBITDA was 23 percent off at $511.6 million, down from $668.5 million.
OCI said the completion and successful start-up of the second methanol production line at its BioMCN facility during the third quarter marked the completion of the company’s growth capex program. For the remainder of 2019 and in 2020, the company said it will benefit from a ramp-up in volumes, also reflecting this year’s turnarounds and debottlenecking program.
“With the completion of our capital expenditure program and the concentration of turnarounds and debottlenecking projects at four of our nitrogen sites during the third quarter, together with the consolidation of the Fertiglobe joint venture, we expect to benefit from a significant increase in sales volumes in the fourth quarter and beyond,” said OCI NV CEO Nassef Sawiris.
For its nitrogen business, the company expects higher sales volumes as a result of “a significantly lighter” program of planned turnarounds in 2020 than this year, and expects the biggest increases in volumes next year to come from its lowest-cost plants, Sorfert in Algeria and IFCo in the U.S.
OCI reported its global nitrogen order book is currently “robust,” based on recent tenders awarded to Fertiglobe to supply a combined total of almost 700,000 mt to India and the Ethiopian market.
It also expects IFCo to benefit from a positive outlook for DEF, following a doubling in volumes in 2019 compared with the prior year, and sees further strong growth in 2020 for this product.
In methanol, OCI said it expects to see a significant increase in its methanol volumes next year as a result of 2020 being the first full year of new methanol capacities, namely Natgasoline, BioMCN’s second line, and the OCI Beaumont, Texas, plant debottlenecking finalized in July this year. Volumes will also be boosted due to the normalization of production following this year’s shutdowns.
Sawiris also expects the company to continue to benefit from low natural gas prices in both Europe and the U.S., maintaining OCI’s position at the low end of the global cost curve. He noted that the company has yet to get the full advantage of the lower gas prices because of the three-month hedge that expired during the third quarter, but expects the company to benefit fully from the low gas price environment from the fourth quarter onwards.
He sees European gas prices remaining within “a core bandwidth” of $3-$5 per MMBtu, barring any surprise weather shocks, as a result of the increased Atlantic basin LNG exports competing with Russian imports into Europe. In the U.S., with Henry Hub benchmark prices significantly below the levels of last year at global competitive prices, he believes the forward curve suggests this will remain for the foreseeable future, enabling the company to keep its U.S. operations on “the left-hand side” of the global cost curve.
Nitrogen Segment: Selected Financials
| Nitrogen ($/M) | Total Revenues | Operating Profit | Adjusted EBITDA |
| 3Q-2019 | |||
| U.S. | 104.8 | (20.4) | 31.5 |
| Europe | 151.4 | 13.9 | 31.2 |
| MENA | 210.8 | 38.5 | 77.4 |
| 3Q-2018 | |||
| U.S. | 111.6 | (5.2) | 30.4 |
| Europe | 214.9 | 7.7 | 25.2 |
| MENA | 268.3 | 88.8 | 128.0 |
| 9M-2019 | |||
| U.S. | 407.0 | 40.5 | 158.7 |
| Europe | 617.4 | 58.0 | 111.1 |
| MENA | 622.2 | 118.1 | 244.3 |
| 9M-2018 | |||
| U.S. | 341.4 | 8.5 | 96.7 |
| Europe | 651.5 | 28.7 | 76.4 |
| MENA | 812.5 | 265.7 | 360.2 |
Product Sale Volumes (‘000 mt)
| 3Q-2019 | 3Q-2018 | % change | 9M-2019 | 9M-2018 | % change | |
| Own Product | ||||||
| Ammonia | 457.2 | 500.9 | -9% | 1,416.8 | 1,562.4 | -9% |
| Urea | 618.2 | 740.0 | -16% | 1,923.6 | 2,211.4 | -13% |
| CAN | 155.3 | 243.5 | -36% | 882.1 | 810.3 | +9% |
| UAN | 379.3 | 359.6 | +5% | 1,078.4 | 1,078.7 | – |
| Total Fertilizer | 1,610.1 | 1,844.0 | -13% | 5,300.9 | 5,657.8 | -6% |
| Methanol1 | 428.4 | 343.7 | +25% | 1,222.5 | 993.8 | +23% |
| Melamine | 28.5 | 36.9 | -23% | 96.6 | 106.6 | -9% |
| DEF | 130.6 | 77.8 | +68% | 356.5 | 178.2 | +100% |
| Total Industrial Chemicals | 587.5 | 458.4 | +28% | 1,675.6 | 1,278.6 | +31% |
| Total Own Product Sold | 2,197.6 | 2,302.4 | -5% | 6,976.5 | 6,936.4 | +1% |
| Traded Third Party | ||||||
| Ammonia | 29.8 | 128.6 | -77% | 142.2 | 274.1 | -48% |
| Urea | 78.2 | 70.7 | +11% | 264.4 | 199.7 | +32% |
| UAN | 10.1 | 17.7 | -43% | 20.3 | 65.7 | -69% |
| Methanol | 150.2 | 81.9 | +84% | 397.8 | 166.4 | +139% |
| AS | 139.1 | 135.5 | -7% | 518.1 | 458.0 | +10% |
| DEF | 25.7 | – | nm | 54.3 | – | nm |
| Total Traded | 433.2 | 434.4 | -3% | 1,397.1 | 1,163.9 | +19% |
| Total – All | 2,630.8 | 2,736.8 | -4% | 8,373.6 | 8,100.3 | +3% |
1 Including OCI’s 50 percent share of Natgasoline volumes