Fertiglobe announces $340m dividend after Q4 2021 results

Fertiglobe, the strategic partnership between ADNOC and OCI, the world’s largest seaborne exporter of urea and ammonia combined, the largest nitrogen fertiliser producer in the Middle East and North Africa, and an early mover in clean ammonia, has reported that its quarter four (Q4) 2021 revenues increased by 138 per cent to $1.18bn.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 347 per cent to $648m compared to Q4 2020. Free cash flow increased from $154m in Q4 2020 to $647m in Q4 2021. For the full year, revenues increased 113 per cent to $3.31bn, adjusted EBITDA increased by 242 per cent to $1.55bn and free cash flow increased by 162 per cent to $1.18bn.

Fertiglobe operates a diverse regional footprint of four world-class production facilities in three countries: Egypt, Algeria and the UAE. The company has significant non-GDP growth levers, benefitting from a combination of factors, including strategic locations and a competitive low-cost position, which support healthy free cash flows and attractive dividends.

Ahmed El-Hoshy, CEO of Fertiglobe, commented: “Driven by an unmatched global position, and supportive industry dynamics, Fertiglobe delivered a solid set of results in Q4 2021, further underpinning our exciting growth potential. Considering healthy free cash generation in the second half (H2) of 2021 and our commitment to create shareholder value, we are pleased to announce our first post-IPO dividend of $340m, exceeding our previous guidance.”

Poised for growth

El-Hoshy said Fertiglobe’s current order book looks healthy heading into the second quarter of this year. He expects the first half of the year to be strong, driven by attractive farm economics, strong demand in Fertiglobe’s ammonia end markets and its globally competitive position.

He added: “Our distribution capabilities, including the ability to manage inventories close to key demand centres coupled with a disciplined commercial strategy, allows us to optimise benefits from the current market conditions, as exemplified by the recent award to supply 500kt urea to Ethiopia this quarter and in the second quarter this year at an average price of $724/tonne.

“We continue to strengthen our world-leading ammonia production, logistics and trading platform. OCI has increased throughput capabilities at its ammonia import terminal in Rotterdam by an annualised rate of c.300 kt which has enabled us to optimise our ammonia netbacks by directing more product to Europe where pricing has been higher, reflecting the benefits of our global platform and the focus of the team on commercial excellence.”

The company is well positioned to capitalise on the global transition to a hydrogen economy, with ammonia emerging as one of the most promising products to enable the energy transition, as well as benefitting from its existing ammonia production, distribution infrastructure and access to abundant attractive wind and solar resources for renewable energy generation.

“Fertiglobe continues to reaffirm its unique positioning in the emerging hydrogen economy to capitalise on this new demand, including the recently announced collaboration with Masdar and French company Engie to study the co-development of a globally cost-competitive green hydrogen facility of up to 200MW in the UAE. This represents a great opportunity for the company and the UAE to play a crucial role in the global energy transition. Abu Dhabi is an ideal location to produce green hydrogen given the country’s commitment to a low carbon future, its unique renewables profile and strategic geographic location,” El-Hoshy explained.

Fertiglobe’s strong performance continues, with FY revenues up 113% in 2021, and adjusted EBITDA up 242%. A recommended dividend of $340 million for H2 is ahead of expectations, and the outlook for 2022 is positive with attractive market dynamics. More: https://t.co/mswBvXLZvI pic.twitter.com/lm2TgCmMGW

— Fertiglobe (@fertiglobe) February 15, 2022

Market outlook for 2022

El-Hoshy stated that the strength in ammonia and urea prices in the second half of 2021, particularly in Q4, underscores the ongoing structural shift to a demand-driven market for nitrogen products over the medium-term. Market fundamentals continue to reflect a healthy demand backdrop amid continued supply constraints from key exporting regions and high feedstock prices in other regions, all in favour of the company’s strategic asset base.

According to a statement by the company, demand for nitrogen fertilisers is robust in key import markets, further supported by low inventories, with Europe, Ethiopia, the US and India importing product ahead of the season in the second quarter of the year.

The US Department of Agriculture highlights tighter global grains markets in 2022 and 2023 versus 2021, with strong support for corn above $5/bushel and spot prices currently at $6.50/ bushel, driving an expanding crop area in the 2022 and 2023 seasons. Low grain inventory levels and stocks-to-use ratios globally, which need at least two years to replenish, amplify the need for nitrogen fertiliser application to ease food security concerns. Recent weather concerns in South America have contributed to further tightness in global grain markets.

In addition, several other factors support attractive urea supply and demand dynamics. These include urea export bans in China. These are limiting the participation of the marginal exporter in future Indian tenders at least until July, with China implementing mandatory requirements for summer stocking and tighter environmental restrictions.

Projected new global urea capacities are also below the level seen over the past five years and are slow to ramp up.

Russia, one of the major nitrogen exporting countries in the world, also has export quotas on urea, nitrates and a ban on ammonium nitrate exports until H2 2022, further tightening global nitrogen balances.

The ammonia market is structurally tightening over the medium term, with limited net capacity additions and higher industrial demand. Ammonia prices in Q4 2021 and into the first half of this year, have been supported by a strong US fall ammonia season lowering inventories ahead of the spring season, higher demand from ammoniated phosphates production and a number of planned and unplanned outages. Further, there is significant upside for ammonia from the expected incremental demand for clean ammonia in new applications across a range of sectors including marine fuel and power, and as a hydrogen carrier.

Globally, higher marginal feedstock costs are also providing support to markets, with prices, particularly natural gas in Europe currently at c.$26 / mmBtu, resetting at higher levels and providing support for selling prices over the medium-term.