All Posts from February 16, 2024

Iowa Farmers Union, More Legislators Weigh In on Koch/OCI Deal

Featured, Nitrogen, U.S.

The Iowa Farmers Union (IFU) on Feb. 12 weighed in on the $3.6 billion deal in which Koch Industries Inc. would buy OCI Global’s Iowa Fertilizer Co. (IFCo) plant at Wever (GM Dec. 22, 2023). They are asking the US Federal Trade Commission, the Department of Justice, and Iowa Attorney General Brenna Bird (R) to stop the deal.

“It is a slap in the face for taxpayers who invested about $550 million (as well as $1.2 billion of Iowa Finance Authority bonds) to build the plant, now known as the Iowa Fertilizer Co.,” the IFU Board of Directors said in a statement.

“The stated justification for the tax subsidies was to increase competition in the nitrogen fertilizer supply – a critical input for corn, the Midwest’s major crop,” the IFU said. “In fact, the Brandstad/Reynolds administration cited Koch Industries’ market dominance as the reason why the investment was necessary. Now we are on the cusp of those tax dollars being used to increase Koch’s anti-competitive stranglehold.”

All 36 Democratic members of Iowa’s House of Representatives also sent a letter to the agencies and AG to examine how the purchase could further entrench Koch’s market power, posing the risk of not only higher fertilizer prices but also job losses, according to Bloomberg.

President Biden’s 2021 executive order to bolster competition specifically identifies concentrated market power in agricultural input industries, including fertilizer, as a threat to farmers’ livelihoods, suggesting the letter from state lawmakers could capture regulators’ attention.

Their plea could be buoyed by the federal agencies’ new focus on labor markets when assessing deals. The FTC and DOJ under the Biden administration have focused on labor market impacts, a departure from past decades of a narrower focus on consumer welfare. New merger guidelines finalized by the agencies in December include, for the first time, the effect of corporate mergers on workers. The FTC’s proposed updates to its merger review process also require standard disclosures from deal-making companies on how their workers will be affected.

Koch has yet to disclose whether the roughly 250 fertilizer plant workers could risk losing their jobs as a result of the acquisition, or if it might close one of its older plants in favor of the Wever facility, which is one of the newest nitrogen plants in the US.

Koch Fertilizer spokesperson Greg Lemon said the acquisition is “consistent with the significant investments we have made in our business to increase production, improve reliability, and expand our customers’ access to the products and services they need.”

Some 18 agriculture and environmental groups (GM Jan. 26, p. 1), as well as Iowa State Auditor Rob Sand (GM Feb. 2, p. 1), have also pressed for an investigation of the deal. Iowa State Senator Jeff Reichman (R), by contrast, has expressed enthusiastic support for the deal (GM Feb. 9, p. 1).

CF 4Q Income Off 68%; Loses NH3 Production to Cold Weather After Heavy Fall Application Season

Ammonia, Ammonium Nitrate, Brazil, China, Earnings, Nitrogen, UAN

CF Industries Holdings Inc. reported fourth-quarter net income attributable to common shareholders of $274 million on net sales of $1.57 billion, down 68% from the year-ago $860 million and $2.61 billion, respectively. Adjusted EBITDA was $592 million versus the year-ago $1.3 billion. Tons sold were 4.91 million st, up from 4.46 million st.

CF missed the Bloomberg Consensus by 7.4% on net income and 4.48% on adjusted EBITDA, but surpassed the estimates on revenues by 4.87%.

“CF Industries’ 2023 results demonstrate the strength of our business and our team,” said Tony Will, CF President and CEO. “We ran our plants well, added the Waggaman ammonia production facility to our network, and advanced our clean energy strategy.”

Will said CF believes the global energy cost structure presents attractive margin opportunities for the company’s North American-based production network in the near-term, with the global nitrogen supply-demand balance tightening considerably in the medium-term.

“As a result, we expect to continue to drive strong cash generation, underpinning our ability to create significant shareholder value from disciplined investments in growth opportunities and returning substantial capital to shareholders,” he said.

Full-year net income was $1.53 billion on sales of $6.63 billion, down from the year-ago $3.35 billion and $11.2 billion, respectively. Adjusted EBITDA was $2.76 billion, down from $5.88 billion. Tons sold were 19.1 million st versus 2022’s 18.3 million st.

CF projects US corn acreage at 91 million acres in 2024 and believes North American farmer profitability will improve compared to 2023 as lower crop prices are offset by lower input costs. CF suggested that the current warm weather in the Midwest could mean an early spring, which would pull demand forward and result in early river openings for barges.

CF said North American nitrogen inventories remain below average following what was probably its second-best fall ammonia application season in ten years. “A strong fall application season indicates a commitment to nitrogen-consuming crops on these acres and robust demand for additional urea and UAN applications through the first half of 2024,” said Bert Frost, CF Vice President, Sales, Market Development and Supply Chain.

CF confirmed that it lost some 150,000 st/y of ammonia production in January due to cold weather shutdowns, and believes other producers lost tonnage as well. The company added that nitrogen imports are below their three-year average.

Demand remains good from other major buyers, CF said. Brazil is now the top urea importer, surpassing India, with Brazil expected to take 7-8 million mt in 2024 and India 6-7 million mt.

Will added that the construction of new nitrogen production capacity is not sufficient to keep pace with the historical nitrogen demand growth rate of roughly 1.5% per year in traditional applications. He said emerging low carbon ammonia should further tighten the already strained global supply-demand balance.

CF said about 40% of European ammonia and 25% of urea were curtailed as of early January due to high natural gas prices, keeping European nitrogen imports elevated at a time when low gas costs make US producers very competitive.

In the meantime, other producing countries are not at full speed on exports. China urea exports are projected to be 4 million mt, with the country keeping much of its production to satisfy local demand. Also on the production side, CF cited downtime in Malaysia and export restrictions in Indonesia.

CF noted that ammonia exports from Russia remain lower due to the war and the closure of the ammonia pipeline to the port of Odessa, but Russia’s exports of other nitrogen products are at pre-war levels.

Production (000 st)   4Q-23 4Q-22 YTD-23YTD-22
Ammonia2,5252,4419,4969,807
Gran Urea 1,1301,1434,5444,561
UAN 321,8401,8276,8526,706
AN4163551,5201,517
Ammonia 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)4958041,6793,090
Gross Margin ($/M)154388541 1,599
Sales Volumes (000 st)1,0778953,5463,300
Avg Selling Price ($/st)460898473936
Gas Costs ($/mmBtu)3.01 6.88 3.677.18
Gran Urea 4Q-234Q-22YTD-23 YTD-22
Net Sales ($/M)3926051,8232,892
Gross Margin ($/M)1573018131,564
Sales Volumes (000 st)1,0381,0334,5704,572
Avg Selling Price ($/st)378586399633
UAN 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)418845 2,0683,572
Gross Margin ($/M)1044588172,083
Sales Volumes (000 st)1,8121,6907,2376,788
Avg Selling Price ($/st)231500286 526
AN4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)120189497845
Gross Margin ($/M)2550138248
Sales Volumes (000 st)4143671,5711,594
Avg Selling Price ($/st)290515316530
Other 4Q-234Q-22YTD-23YTD-22
Net Sales ($/M)146165564787
Gross Margin ($/M)6159236367
Sales Volumes (000 st)5714792,2062,077
Avg Selling Price ($/st)256344256379

USDA Projects More Soybeans, Less Corn and Wheat

Brazil, China, News Briefs, U.S.

USDA on Feb. 15 projected 2024/25 US corn acreage at 91 million acres, down 4% from the year-ago 94.6 million and below the 91.6 million estimate from a Bloomberg survey of analysts.

Corn is expected to see lower production, greater domestic use, increased exports, and higher ending stocks, with production projected at 15.040 billion bushels, down about 2% from the prior year’s record.

Domestic inventories of corn are seen ballooning to 2.53 billion bushels (roughly 64 million mt) by the end of the 2024/25 season, according to the USDA forecast. That would mark the largest year-end stockpiles since 1987. Ending stocks for wheat and soybeans are also poised to grow.

One of the factors driving the higher US stockpiles is Brazil’s growing relationship with China, said Seth Meyer, the USDA’s Chief Economist, in remarks the Agricultural Outlook Forum in Washington, D.C., on Feb. 15.

As inventories rise, farm prices for corn are seen falling 8%, to an average of $4.40 per bushel in the next season, USDA said, with soybean prices slipping 11% and wheat dropping sharply by 17%. Corn, wheat, and soybean futures slid on the Chicago Board of Trade after the announcement. The Bloomberg Grains Spot Index has fallen nearly 30% over the past year.

Soybean acreage is expected to grow to 87.5 million acres from the year-ago 83.6 million. The increase was attributed to stronger demand for domestic crush, largely driven by the growth in biofuel use. Exports likely face competition from supplies in South America during the 2024/25 marketing year.

Wheat acres are projected to drop to 47 million from 49.6 million, with the decline due in part to relatively favorable prices for competing crops such as cotton and sorghum, USDA said. Sorghum acreage is expected to drop to 7 million from the year-ago 7.2 million.

The three major crops combined have a total of 225.5 million acres, down about 1% from the year-ago 227.8 million acres. USDA said this reflects lower prices and a reversion to a more typical level of prevent plant acres.

Rice planted acreage is expected to be level at 2.9 million acres as higher long-grain acreage is almost offset by a reduction in medium- and short-grain acreage. The season is starting with higher supplies due to larger beginning stocks and record-high imports. Despite increased exports and domestic use, USDA said rice ending stocks are projected to reach the highest level since 2014/15.

Cotton acreage is forecast at 11 million, up 7.5% from the year-ago 10.2 million acres. Domestic mill use is expected to remain unchanged, while exports are projected to be higher, reflecting the recovering US production level and share of global trade. Ending stocks and the stocks-to-use ratio are also projected to be higher.

Pipeline Segment Benefits NuStar Earnings

Ammonia, Earnings, Texas

San Antonio-based NuStar Energy LP on Feb. 15 reported fourth-quarter net income of $70.4 million on revenues of $451.7 million, down from the year-ago $91.6 million and $430 million, respectively. EBITDA was $199.2 million, down from $213.4 million.

“I am pleased to report that we have delivered another quarter of solid earnings results and made significant progress on many of our strategic initiatives in 2023,” said NuStar Chairman and CEO Brad Barron. The company singled out the strong revenues and volumes of its refined products pipelines, which include anhydrous ammonia, and a strong performance by the Fuels Marketing segment.

NuStar’s Pipeline segment generated fourth-quarter operating income of $129.6 million and EBITDA of $174 million, compared to the year-ago $131.6 million and $176 million, as increased revenues and throughputs across refined products systems were offset by decreases from the Permian Crude System and Corpus Christi Crude System.

“As we have said on prior calls, our Permian volumes reflected some producer-specific operational issues and delays in 2023, which were largely resolved over the course of the year,” Barron said. Fourth-quarter revenues were $228.6 million, nearly level with the year-ago $229.9 million.

For full-year 2023, NuStar’s Pipeline generated operating income of $483.2 million and EBITDA of $659 million, compared to operating income of $438.7 million and EBITDA of $617 million in 2022. Revenues were $873.9 million, up from $828.2 million.

“Our refined products systems, along with our ammonia system, generated solid, dependable revenue in 2023 as total throughputs were up compared to 2022, reflecting the strength of these assets and our strong position in the markets we serve in the mid-Continent and throughout Texas,” Barron said.

NuStar reported full-year net income of $273.7 million on revenues of $1.63 billion, up from the year-ago $222.7 million and $1.68 billion, respectively. EBITDA was $776.1 million, up from $694.2 million.

Although the pending $7.3 billion acquisition by Sunoco LP (GM Jan. 26, p. 1) is expected to close as early as second-quarter 2024, 2024 financial expectations were provided for NuStar on a stand-alone basis. The company expects to generate full-year 2024 net income in the range of $220-$260 million and full-year 2024 EBITDA in the range of $720-$780 million.

Sunoco CEO Joseph Kim told analysts in January that the company would be able to accelerate expansion opportunities within the NuStar Ammonia System’s 2,000-mile ammonia pipeline. The company sees the potential due to the growing low carbon ammonia capacity, which benefit the pipeline and storage and export out of its St. James, La., facility.

Sawiris Reportedly Considering OCI Global Assets Sale, Becoming Cash-Shell for New Acquisitions

Blue Ammonia, Egypt, Featured, Texas

OCI Global’s biggest shareholder, Egyptian billionaire Nassef Sawiris, is reported to be considering a radical overhaul of his chemicals and fertilizers empire that could include breaking up his main holding – Dutch-listed OCI Global – and offloading its parts.

Sawiris, who holds a 38.71% stake in OCI and his family a further 14.22% interest as of Oct. 23, 2023, said in an interview this week with the UK’s Financial Times that options for OCI include selling off all assets and turning it into a cash shell for acquisitions in new industries.

“We are evaluating what we want to do, not just with the money [from the asset sales] but as a team,” he told the newspaper. “And maybe OCI stays with a piece or two pieces and it becomes a cash cow, and becomes a machine for further investment. We’re quite open-minded. It doesn’t have to be fertilizer, doesn’t have to be chemicals.”

OCI in December announced binding agreements for the sale of two of its key businesses – Wever, Iowa-based Iowa Fertilizer Co. LLC (IFCo) (GM Dec. 22, 2023) and its 50% + 1 share stake in ADX-listed Fertiglobe (GM Dec. 15, 2023). The two sales are expected to bring in gross proceeds of $7.22 billion.

The sales agreements followed a strategic review by the company of all its business lines, as well as a listing review in the Netherlands after US activist investor Jeff Ubben, who owns a 5% stake in OCI, urged the company to explore options, including asset sales to improve shareholder returns.

Responding to analyst questions for comment on the Financial Times interview, OCI CFO Hassan Badrawi said in a company earnings call on Feb. 14 that it was “in OCI’s DNA to look at value maximization” and to look at opportunities that unlock value for shareholders.

“What is ascribed to Nassef in the Financial Times piece is fairly consistent with everything that we have done in the past and everything we are saying today as part of the strategic review that’s been ongoing by OCI,” Badrawi said.

OCI confirmed in its earnings statements this week that following the two announced divestments, it has received “considerable inbound inquiry and interest in its remaining business,” and the company has decided in Board discussions to reopen the strategic review.

OCI CEO Ahmed El-Hoshy told analysts that OCI is exploring further value-creative strategic options across the portfolio, including the previously announced equity participation in its Texas Blue Ammonia project. “All options are on the table,” he said.

Following the announced sales transactions, OCI’s business is now focused on just two industrial sites: OCI Nitrogen in Geleen and the Texas Beaumont complex, which is also the location of the company’s Texas Blue Ammonia project with capacity of 1.1 million mt/y. The plant remains on track for commissioning in early 2025.

Ammonia Plant Woes Weigh on Sherritt

Ammonia, Canada, Earnings, Nitrogen

Toronto-based Sherritt International Corp. reported that a prolonged third-quarter outage due to compressor issues at its Fort Saskatchewan ammonia plant required an advancement of significant maintenance funds and resulted in lower fertilizer volumes.

Sherritt had to buy ammonia during the period to meet its needs. Fertilizer prices also declined, and the company took a third-quarter $8.9 million writedown on its fertilizer inventory. Fourth-quarter fertilizer production returned to normal levels. Sherritt said it does not expect a recurrence of the ammonia problem.

In addition to the unplanned maintenance at the ammonia plant, Fort Saskatchewan experienced higher-than-normal maintenance costs, in part due to the planned biannual acid plant shutdown, which identified a larger-than-anticipated remedial scope of work.

Sherritt’s 2023 losses were attributed to lower fertilizer sales; lower fertilizer, nickel and cobalt prices; higher maintenance costs; inventory writedowns; delayed nickel sales; and an increase in rehabilitation and closure costs related to legacy Oil and Gas assets.

The company said fertilizer prices stayed low due to an ample supply of nitrogen. It expects 2024 prices to remain relatively unchanged from 2023.

Fourth-quarter fertilizer production was off only 2%, to 61,092 mt from the year-ago 62,254 mt, while sales volumes were down 10%, to 55,509 mt from 61,664 mt. Average prices were down 36%, to $414.80/mt from $647.03/mt. Revenue fell 42%, to $23.1 million from $39.9 million.

Full-year fertilizer production was off 12%, to 219,707 mt from 250,147 mt. However, sales volumes were level with the prior year at 170,161 mt versus 170,427 mt. Prices were down 28%, to $548.16/mt from $759.91/mt, while full-year revenue was off 28%, to $93.3 million from $129.5 million.

Sherritt reported a fourth-quarter net loss on earnings from continuing operations of $53.4 million on revenue of $34.8 million, down from the year-ago loss of $7.3 million and $48.6 million, respectively. Adjusted EBITDA was a negative $7 million down from a year-ago positive $35.5 million.

Sherritt had a full-year loss from continuing operations of $64.3 million on revenue of $223.3 million, down from the year-ago net income of $63.7 million and $178.8 million. Adjusted EBITDA was $46.1 million versus the year-ago $233.1 million.

As reported last month (GM Jan. 19, p. 24), Sherritt is reducing its workforce across Canada by 10% and is making changes to executive management as it seeks to improve Metals segment operations following a disappointing 2023. Fertilizer is within the Metals segment. Metals will be streamlined, while Technologies will be restructured.Elvin Saruk was named Chief Operating Officer, responsible for leading both Sherritt’s Metals and its Power and Oil and Gas divisions.

OCI Slides after Tough 4Q, Lower Dividend

Ammonia, CAN-17, Earnings, Nitrogen, Urea

OCI Global posted a 69% drop in adjusted EBITDA for full-year 2023, to $1.21 billion from $3.89 billion the previous year, but beat the average analyst estimate of $1.18 billion (BloombergConsensus). Revenue was down 48%, to $5.02 billion from the prior year’s $9.71 billion.

The company reported an adjusted net loss for the year of $162.9 million, missing the $116.6 million estimated loss by analysts (BloombergConsensus). OCI reported an adjusted net profit of $1.34 billion in FY2022.

The loss was “driven primarily by materially lower nitrogen pricing globally,” OCI said in its Feb. 14 earnings statement. The company also cited a “challenging year” for global methanol markets.

During the 12 months, there was an extended IFCO turnaround as well as other planned and unplanned outages in the US with an estimated financial impact of around $44 million.

For the fourth quarter of 2023, OCI reported an adjusted net loss attributable to shareholders of the company of $46 million compared to an adjusted net profit of $204.6 million the previous year. Fourth-quarter adjusted EBITDA was 54% lower year-over-year, to $310.4 million from $669.2 million, while revenue fell 45%, to $1.21 billion from $2.2 billion.

OCI noted that despite a reduction in global nitrogen prices in the fourth quarter, the company’s operations benefited from lower natural gas prices in Europe and the US, as well as a reduced negative impact from realized hedging losses. The company said realized gas hedging losses amounted to $38 million in the fourth quarter.

However, it said higher gas prices later in the quarter led to reduced sales volumes as customers delayed purchases for the spring application season.

The company’s own products sales volumes for the fourth quarter totaled 2.395 million mt, down 2% from the prior year’s 2.64 million mt. Own-produced fertilizer sales volumes were down 6%, to 1.98 million mt from 2.09 million mt

For the full year, own products sales volumes were down 3%, to 10.54 million mt from 10.89 million mt. Own-produced fertilizer sales volumes were 2% lower than in 2022, to 8.47 million mt from 8.63 million mt.

OCI believes the outlook for nitrogen markets remains supportive, underpinned by healthy agricultural demand fundamentals, emerging demand for low carbon ammonia, and tightening supply dynamics in the medium term.

“Nitrogen markets were relatively quiet during the fourth quarter of 2023, and urea prices were impacted by demand deferrals into 2024,” the company said. “However, urea prices have rebounded so far this year as the deferred demand ahead of the spring season application started to materialize in the Northern Hemisphere.”

OCI sees further support for nitrogen fertilizer prices during the coming months driven by low inventories in key importing regions, ongoing restrictions on Chinese exports, low operating rates in Iran due to gas shortages, and supply chain disruption in the Red Sea.

The company further believes medium-term fundamentals remain positive with limited major new supply and a significantly slower pace of capacity additions over the 2024-2027 period compared to the previous three years.

OCI’s shares dropped as much as 5.1% after the company’s forecast for shareholder returns of only $3 billion this year following the sale of the company’s stakes in Fertiglobe and Iowa Fertilizer Co. LLC, an amount in line with only some analysts’ expectations, including Jefferies analyst Charlie Bentley, as cited by Bloomberg.

The Amsterdam-listed company expects $6.2 billion of cash proceeds on a net basis – equating to approximately €27 a share – from the two sales, subject to closing adjustments.

OCI on Feb. 14 said it would use the proceeds from the two sales to “significantly” cut holding company debt to a net cash position by year-end 2024, alongside a “substantial” distribution of capital to shareholders of at least $3 billion. OCI also said it would fund the remaining capital expenditure required to complete its Texas Blue Ammonia project in Beaumont from the sale proceeds.

OCI said construction at the 1.1 million mt/y blue ammonia project is well underway with about $500 million spent to date of a total investment of over $1 billion. The plant remains on track for commissioning in early 2025.

OCI Product Sales Volumes

‘000 mt4Q-2023 4Q-2022 % change FY2023 FY2022 % change
Own Product            
Ammonia 585.9 571.2 +3 1,898.2 1,986.7 (4)
Urea 1,141.8 957.0 +19 4,621.0 4,241.4 +9
CAN143.4 213.9 (33) 877.6 1,018.5 (14)
UA105.2 350.8 (70) 1,073.9 1,383.0 (22)
Total Fertilizer 1,976.3 2,092.9 (6)8,470.7 8,629.6 (2)
Melamine18.7 7.3 +156 63.4 83.8 (24)
DEF94.9 254.4 (63) 645.0 917.2 (30
Total Nitrogen
Products		2,089.9 2,354.6 (11) 9,179.1 9,630.6 (5)
Methanol1305.4 286.0 +7 1,375.6 1,255.1 +8
Total Own Products
Sold 		2,395.3 2,640.6 (2) 10,536.7 10,885.7 (3)
Traded Third-Party            
Ammonia 96.7 76.7 +26 292.3 358.5 (18)
Urea 110.6 223.3 (50) 724.4 1,541.7 (53)
UAN 9.5 121.2 (92) 108.4 329.7 (67)
Methanol 198.7 99.0 +101 510.7 381.3 +34
Ethanol and Other 27.6 9.7 +185 94.3 23.3 +305
AS 31.5 80.9 (61) 273.7 542.2 (50)
DEF 139.5 90.1 +55 374.2 419.3 (11)
Total Traded
Third-Party 		614.1 700.9 (12) 2,378.0 3,596.0 (34)
Total Own Product
and Traded Third-
Party 		3,009.4 3,341.5 (10) 12,914.7 14,481.7 (11)

1 Including OCI’s 50 percent share of Natgasoline volumes

Fertiglobe Profits Decline; Expects Strong Demand

Ammonia, Earnings, Nitrogen, Urea

ADX-listed Fertiglobe Plc, the strategic joint venture between OCI Global and UAE state-owned oil giant Abu Dhabi National Oil Co. (ADNOC), reported a 39% decline in fourth-quarter adjusted EBITDA, to $289.2 million from the prior-year $472.1 million. Revenue also fell 39% year-over-year, to $645.9 million from $1.05 billion.

Fourth-quarter net profit was $94.5 million, down 45% the prior year’s $171.9 million, while adjusted net profit after minorities was $102.5 million for the quarter, some 48% lower than the prior year’s $196.4 million.

Fourth-quarter own-produced sales volumes grew 15% year-over-year, to 1.46 million mt, driven mainly by higher sales volumes. Third-party traded volumes fell 51%, however, to 119,000 mt. Total product sales volumes in the quarter were 5% lower year-over-year at 1.58 million mt.

For the full-year 2023, own-produced sales volumes grew 5%, to 5.71 million mt, while third-party traded volumes fell 57%, to 472,000 mt. Total product sales volumes for the 12 months were 6.18 million mt, a 5% downturn on FY2022’s 6.52 million mt.

Fertiglobe posted a full-year 2023 net profit of $348.9 million, down 72% from the prior year’s 1.25 billion, although the result was essentially in line with the average analyst estimate of $347 million (BloombergConsensus). Adjusted net profit after minorities was $363 million in 2023 versus $1.29 billion the previous year.

FY2023 earnings per share were 4.20 cents versus 15.1 cents in 2022, missing the average estimate of 4.23 cents per share. Adjusted EBITDA for the 12 months was down 59% from the previous year, to $1.0 billion from $2.47 billion. Full-year revenue fell 52%, to $2.42 billion from $5.03 billion, and came in below the average analyst estimate of $2.45 billion.

Fertiglobe attributed the fall in revenues to a decrease in nitrogen product prices, but the company highlighted a 23% quarter-over-quarter growth in revenues and a 45% increase in adjusted EBITDA in the fourth quarter versus the third quarter.

“This growth reflects a strong order book, higher sales volumes, and increased ammonia prices driven by a higher gas prices and tight markets due to supply disruptions,” the company said. “In the fourth quarter of 2023, ammonia prices increased due to widespread supply disruptions, while urea prices were impacted by demand deferrals into early 2024, resulting in reduced imports from key regions.”

Fertiglobe expects demand to recover ahead of the spring application season in the Northern Hemisphere, with healthy demand in other regions, including Brazil and Australia, which will provide a platform for its own prices to move higher. The company said the medium- to long-term outlook for nitrogen markets continues to be supported by limited incremental capacity additions and healthy demand growth.

“Further price support in the coming months is expected to be driven by low inventories in key importing regions, ongoing restrictions on Chinese exports, and supply chain disruption in the Red Sea, to which Fertiglobe has limited exposure,” the company said.

The company said it will pay dividends of $200 million, equivalent to 9 fils per share, for second-half 2023, subject to shareholder approval at the AGM in April. This will take full-year dividends to $475 million, including $275 million already paid in the fourth quarter, and will be “one of the highest dividend yields in the company’s industry and market.”

Fertiglobe said it is also ready for its “next chapter” in light of the announced sale last December of OCI’s 50% + 1 share stake in Fertiglobe to ADNOC for a total consideration of $3.62 billion (GM Dec. 15, 2023).

The completion of the transaction will see OCI fully exiting the Fertiglobe jv and ADNOC becoming the majority shareholder in Fertiglobe with a total ownership of 86.2%. The free float traded on the Abu Dhabi Securities Exchange will remain at 13.8%.

The transaction remains subject to legal and regulatory conditions, including antitrust approvals, but is expected to close during 2024. OCI CEO Ahmed El-Hoshy told investors and analysts at a company earnings call on Feb. 14 that Fertiglobe doesn’t expect any regulatory challenges.

“ADNOC doesn’t have any urea or any material ammonia production outside of Fertiglobe, so it should be relatively straightforward,” he said. “The deal supports our future growth plans and makes us a key component of ADNOC’s ambitious roadmap and will enable Fertiglobe to further leverage ADNOC’s resources, expertise, and network to pursue new growth opportunities, especially in the emerging markets of clean ammonia and blue hydrogen.”

El-Hoshy said Fertiglobe’s priorities will be to continue to unlock potential in its core products of urea and ammonia, accelerate the pursuit of new market and product opportunities, and expand its focus on sustainable ammonia.

“The strategy will be to continue balancing dividend payments with selective investment in value accretive growth projects,” he said. “This will be supported by healthy free cash flow conversion and a robust balance sheet.”

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