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Fertiglobe Announces Robust 2021 Net Income of $737 million and Dividends of $340 million for H2 2021, Ahead of Guidance

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Highlights:

  • Adjusted net income was $376 million in Q4 2021 compared to $44 million in Q4 2020.
  • Adjusted net income was $737 million in 2021, compared to $66 million in 2020.
  • Fertiglobe generated free cash flow from operations of $647 million in Q4 2021 and $1,182 million in 2021.
  • Net debt / EBITDA dropped to 0.3x as of Q4 2021, from 1.1x in Q3 2021 (pro forma net debt), on a $626 million reduction in net leverage compared to the previous quarter (pro forma). Management expects Fertiglobe to be approximately net debt free by end-Q1 2022, supporting growth opportunities and allowing for attractive dividends.
  • Confirmed H2 2021 interim dividend of AED 0.15 per share (c.$340 million), payable in April 2022, above the previous guidance of at least $240 million, supported by healthy free cash flows and a robust balance sheet.
  • Based on the current outlook, Fertiglobe expects the H1 2022 interim dividend (payable October 2022) to be higher than the current guidance of at least $200 million, with an update to be provided during Q1 2022 results in May.

Abu Dhabi, UAE – 14 February 2022: Fertiglobe (ADX: FERTIGLB), the strategic partnership between ADNOC and OCI, the world’s largest seaborne exporter of urea and ammonia combined, the largest nitrogen fertilizer producer in the Middle East and North Africa (“MENA”) region, and an early mover in clean ammonia, today reported that its Q4 2021 revenues increased 138% to $1,184 million, while adjusted EBITDA grew 347% to $648 million compared to Q4 2020. Free cash flow increased from $154 million in Q4 2020 to $647 million in Q4 2021. For the full year, revenues increased 113% to $3,311 million, adjusted EBITDA increased 242% to $1,551 million and free cash flow increased 162% to $1,182 million.

As a global leader in merchant ammonia and an early mover in clean ammonia, Fertiglobe is well positioned to capitalize on the global transition to a hydrogen economy, with ammonia having emerged as one of the most promising products to enable the energy transition, and benefiting from its existing ammonia production, distribution infrastructure, and access to abundant attractive wind and solar resources for renewable energy generation.

Ahmed El-Hoshy, Chief Executive Officer 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 H2 2021 and our commitment to create shareholder value, we are pleased to announce our first post-IPO dividend of $340 million, exceeding our previous guidance.

Our current order book looks healthy into Q2 2022, and we expect H1 2022 to be strong, driven by attractive farm economics, strong demand in our ammonia end markets and our globally competitive position.

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/ton.

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 annualized 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.

Ammonia is the dominant energy carrier for hydrogen. With green hydrogen seen as essential to support the decarbonization of industry, food, transport and energy, there is a huge opportunity for clean ammonia to deliver green hydrogen all over the world. Fertiglobe continues to reaffirm its unique positioning in the emerging hydrogen economy to capitalize on this new demand, including the recently announced collaboration with Masdar and ENGIE to study the co-development of a globally cost-competitive green hydrogen facility of up to 200 megawatts 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 its strategic geographic location.”

Solid market fundamentals, and favourable market positioning

The strength in ammonia and urea prices in the second half of 2021, and particularly in Q4 2021, 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 Fertiglobe’s strategic asset base.

Demand for nitrogen fertilizers is robust in key import markets, further supported by low inventories, with Europe, Ethiopia, US and India importing product ahead of the season in Q2 2022. The USDA 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 fertilizer 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:

  • Urea export bans in China 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 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 H1 2022, 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.

Dividends and capital structure

As previously announced, Fertiglobe substantially distributes all of the Company’s distributable free cash flow after providing for growth opportunities, while maintaining an investment grade credit profile. Fertiglobe announced H2 dividends at $340 million (payable in April 2022), above the guidance of at least $240 million communicated in November 2021.

Fertiglobe’s potential for attractive future dividends is supported by its cash flow performance and competitive position on the global cost curve. In October 2021, Fertiglobe closed a $1.1 billion bridge facility to right-size its capital structure. As a result, in Q3 2021, Fertiglobe had pro forma net debt of c.$1.1 billion and net debt / EBITDA of c.1.1x. Strong earnings and cash generation during the quarter resulted in a drop in net debt to $487 million as at 31 December 2021, and net debt / EBITDA to 0.3x, in line with management’s previous guidance of below 1.0x by YE 2021. By the end of Q1 2022, Fertiglobe is expected to be approximately net debt free, supporting growth opportunities and allowing for attractive dividends.

Based on the current outlook, Fertiglobe expects the H1 2022 interim dividend (payable October 2022) to be higher than current guidance of at least $200 million, with an update to be provided during the Q1 2022 results in May 2022.

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