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Fertiglobe Reports Strong Q3 2021 Performance Underpinned by Robust Market Conditions

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Highlights:

  • Revenues increased 175% to $867 million and adjusted EBITDA increased 257% to $371 million in Q3 2021 as compared to Q3 2020, driven by significantly higher selling prices and volume growth of 21%
  • Adjusted net income was $158 million in Q3 2021 compared to adjusted net income of $6 million in Q3 2020
  • Fertiglobe maintains a robust capital structure with trailing net debt / EBITDA of 1.1x at the time of listing. The Company continues to expect net leverage well below 1.0x by year-end 2021
  • Strong performance underscores Fertiglobe’s robust and competitive position
  • Due to strong earnings momentum, Fertiglobe increases dividend guidance from at least $200 million to at least $240 million for H2 2021 payable in April 2022, with the final number to be determined in February 2022

Abu Dhabi, UAE – 8 November 2021: Fertiglobe (ADX: FERTIGLB), 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 by production capacity, and an early mover in clean ammonia, today reported that its Q3 2021 revenues increased 175% to $867 million and adjusted EBITDA increased 257% to $371 million in Q3 2021 as compared to Q3 2020. Due to strong earnings momentum, Fertiglobe announced that it has increased its dividend guidance from at least $200 million to at least $240 million for H2 2021, payable in April 2022, with the final number to be determined in February 2022.

Fertiglobe, a strategic partnership between ADNOC and OCI headquartered in Abu Dhabi, 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, benefiting from a unique combination of factors including strategic locations and a competitive low-cost position, which support strong free cash flows and attractive dividends. As a 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.

Ahmed El-Hoshy, Chief Executive Officer of Fertiglobe commented: “Fertiglobe’s first quarterly results following the IPO were robust, reinforcing the company’s great potential. We expect this strong earnings momentum to continue with significantly higher EBITDA in Q4 2021 compared to Q3, driven by increasing ammonia and urea prices, exemplifying the structural shift to a demand-driven market environment for nitrogen products over the medium term. Furthermore, as an early mover in clean ammonia projects, Fertiglobe is uniquely positioned to capitalize on new demand for low / no carbon ammonia as an efficient energy carrier and clean fuel as part of the energy transition. In the last few months, we made good progress by partnering with ADNOC to sell blue ammonia to Japan and reached a milestone through our partnership with Scatec and the Sovereign Fund of Egypt on a new project that could produce up to 90,000 metric tons of green ammonia in Egypt.”

Strong earnings momentum underpinned by healthy market fundamentals

Fertiglobe’s earnings momentum during the third quarter and positive outlook are underpinned by a strong market environment for ammonia and urea.

Demand is robust in Fertiglobe’s key import markets with the US, Europe, Latin America and India competing for product ahead of the spring season in Q2 2022. The USDA highlights tighter global grains markets in 2022 versus 2021, with strong support for corn in the $5/bushel range. Low grain inventory levels and stocks-to-use ratios globally, which need at least 2 years to replenish, amplify the need for nitrogen fertilizers application to ease food security concerns.

In addition, several key recent events support attractive supply and demand dynamics: ongoing high feedstock prices have significantly raised EU ammonia import demand due to capacity being shut-in; urea export bans from China are limiting the participation of the marginal exporter in future Indian tenders; Russia, one of the bigger nitrogen exporting countries in the world, also recently announced it will place export quotas on urea and nitrates, which would tighten global nitrogen balances further; and, projected new urea capacities are below the level seen over the past five years and start-ups are being delayed.

Fertiglobe’s distribution capabilities allows the company to optimise benefits from rising prices such as in the recent India urea tender where Fertiglobe represented more than 70% of the total volumes at a price above $890/mt FOB.

The ammonia market is also structurally tightening over the medium term with limited net merchant capacity additions and higher industrial demand. Ammonia markets are expected to generally remain tight even before the expected meaningful incremental demand for clean ammonia from new applications across a range of sectors including marine fuel, power and as a hydrogen carrier.

Globally, higher marginal costs are also providing support to markets, with feedstock prices resetting at higher levels from the low levels in 2020 and providing support for selling prices over the medium-term.

With a position on the low end of the global cost curves for urea and ammonia, these dynamics are benefitting Fertiglobe in particular, as the company’s competitive position strengthens considering higher feedstock pricing in other regions.

ESG – decarbonization initiatives are accelerating

Fertiglobe has multiple initiatives to develop blue / green ammonia as a solution to decarbonize industries that make up around 80% of current global emissions, capitalizing on growth opportunities from emerging demand for clean ammonia.

Fertiglobe made good progress in its efforts to capture growth opportunities within clean ammonia and the emerging hydrogen economy. A 70,000 metric ton scale-up of blue ammonia capacity through a low-cost debottlenecking program in Abu Dhabi, and sales of blue ammonia from the UAE to customers in Japan in partnership with ADNOC were recently announced. In addition, Fertiglobe will join ADNOC and ADQ as a partner in a new world-scale 1 million metric tons per annum blue ammonia project at TA’ZIZ in Ruwais.

Fertiglobe reached another milestone as it entered into an agreement with Scatec ASA (OSE: SCATC) and the Sovereign Fund of Egypt (TSFE) to jointly develop an electrolyzer facility of up to 100MW to produce green hydrogen as feedstock for production of up to 90,000 metric tons of additional green ammonia.

Fertiglobe is highly advantaged in the switch from “grey” to “green” ammonia through the addition of a “plug-and-play” electrolyzer, as Fertiglobe has all other critical elements in the ammonia value chain in place, benefiting from our existing ammonia production and distribution infrastructure, and with abundant attractive wind and solar resources for renewable energy generation in place. Fertiglobe has the ability to scale up green capacity gradually by introducing a supplementary feedstock stream, without taking any major supply or technology risks compared to greenfield projects, which allows for incremental decarbonization while focusing on long-term competitiveness in the process.

Dividends and capital structure

As previously announced, Fertiglobe substantially distributes all of the Company’s distributable free cash flow after providing for growth opportunities and while maintaining an investment grade credit profile.

Considering the strong trading environment for ammonia and urea and Fertiglobe’s strong earnings momentum, Fertiglobe has increased its guidance for dividend payments from previously at least $200 million to at least $240 million for H2 2021, payable in April 2022. The final number will be determined in February 2022.

Fertiglobe’s potential for attractive future dividends is underpinned by a robust capital structure, and an attractive financial profile with high cash conversion rates. In October, Fertiglobe closed a $1.1 billion bridge facility to right-size its capital structure. As a result, as at the first day of trading on the ADX, Fertiglobe had a net debt of c.$1.1 billion and net debt / EBITDA of c.1.1x. The Company continues to expect net leverage well below 1.0x by year-end 2021.

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