OCP SA, Casablanca, reported a 5 percent fall in third-quarter EBITDA to MAD4.6 billion ($478 million) on revenues of MAD14.87 billion ($1.55 billion), down from the year-ago MAD4.82 billion ($511 million) and MAD14.5 billion ($1.54 billion), respectively.
Third-quarter operating profit came in 16 percent off at MAD2.79 billion ($291 million), versus the same previous year quarter’s MAD3.34 billion ($355 million).
Revenues were up by nearly 3 percent, driven by increased fertilizer exports, the company said.
For the nine months to Sept. 30, OCP reported a 2 percent increase in EBITDA to MAD13.08 billion ($1.36 billion) on revenues of MAD42.45 billion ($4.42 billion), up from the previous year’s MAD12.83 billion ($1.37 billion) and MAD41.1 billion ($4.4 billion), respectively.
Nine-month operating profit came in 11 percent lower, at MAD6.62 billion ($689 million), down from MAD7.45 billion ($797 million), with the company citing mainly higher depreciation costs linked to new investments coming online.
Nine-month revenues increased by 3 percent in local currency, driven mainly by strong phosphoric acid sales, the company said. Phosphoric acid revenues increased 17 percent year-over-year in local currency, while fertilizer and rock sales remained broadly stable compared to a year-ago.
The company noted that rock revenues benefited from slightly improved pricing during the nine-month period, resulting from the product mix. However, it said this impact was largely offset by lower export volumes, due in part to non-integrated fertilizer capacity closures in North America.
Nine-month rock sales volumes totaled 741,000 mt, down almost 5 percent from the year-ago 778,000 mt.
Strong sales volumes were the primary drivers of higher phosphoric acid and fertilizer exports, which the company said largely compensated for lower acid prices and partially mitigated the effect of year-over-year decline in DAP prices.
Exports of acid were supported by demand in Asia, which imported less finished products during the third quarter. Nine-month acid sales amounted to 797,000 mt, marking a 13 percent increase on the year-ago 703,000 mt.
OCP highlighted its fertilizer exports increased across several regions in the nine-month period, led by growth in exports to Latin America (+0.6 million mt) and Europe (+0.4 million mt). It noted that the European increase was due in part to demand recovery from the last two years on the back of improved weather conditions. For Latin America, it noted that demand was mainly prompted by low inventories in Brazil.
The company also highlighted its strong market position in Africa, which accounted for 21 percent of OCP’s exports in the first nine months of this year. It said the continent represents the largest consumer of the company’s specialty product volumes.
Nine-month fertilizer sales volumes totaled 2.43 million mt, marking a marginal downtick on the year-ago’s 2.455 million mt. Fertilizer sales accounted for 55 percent of the company’s total nine-month revenues.
OCP Chairman and CEO Mostafa Terrab expects market conditions during the final quarter of the year to be similar to those seen in the third quarter, with soft selling prices tied to lower raw material costs and high inventories in certain regions offsetting demand growth in others. However, he is more upbeat for 2020.
“2020 should have improved market conditions starting in the second quarter, driven by better crop fundamentals and an uptick in demand,” he said. “Specifically, demand is anticipated to be stronger in Africa, where OCP has consolidated its position. Additionally, inventories in the U.S. and India are expected to be drawn down, and demand in Brazil and Europe should remain strong.”
On the supply side, the chief executive believes the position should remain “relatively stable,” with limited capacity ramp-ups. At the same time, he expects raw material costs to be “stable-to-soft” in 2020 as additional capacities come on-line.
Capital expenditures reached MAD8.51 billion ($886 million) in the nine-month period, up from the year-ago MAD7.2 billion ($771 million).