Q2 2020 Results Report 1) Closing of Fertiglobe refinancing expected in Q3 2020 Amsterdam, The Netherlands / 27 August 2020 OCI N.V. Reports Second Quarter 2020 Results Highlights: • Revenues declined 8% to $875 million and adjusted EBITDA declined 20% to $220 million in Q2 2020 vs Q2 2019. Revenues increased 9% to $1.7 billion and adjusted EBITDA increased 2% to $413 million in H1 2020 vs H1 2019 • OCI-produced volumes sold increased 6% to a record 3.3 million metric tons in Q2 2020 compared to Q2 2019 • OCI also delivered record own-produced volumes of 6.0 million tons in H1 2020, up 26% compared to H1 2019. On a like-for-like basis, excluding Fertil, H1 2020 volumes improved 7% year-on-year • Adjusted net loss of $20 million in Q2 2020 compared to adjusted net income of $37 million in Q2 2019 • Free cash flow of $191 million before growth capex during the quarter • Net debt $3.84 billion as of 30 June 2020, a reduction of $222 million compared to 31 December 2019 • Fertiglobe has successfully negotiated final terms with lenders for a $385 million refinancing package 1) , which will crystallise interest savings of c.$9 million per annum • OCI maintains a policy of not producing solid ammonium nitrate (AN), and has not done so since shutting down production of AN in 2008. With ever-increasing safety concerns surrounding AN, the product could be substituted by urea or other nitrates going forward • Ms. Heike van de Kerkhof is nominated to OCI’s Board of Directors, bringing 30 years’ experience in the chemicals industry and a strong track record in sustainability • COVID-19 has not caused any direct disruption to production or distribution to date • Selling prices for urea and methanol have rebounded significantly since reaching trough levels during the second quarter, and the outlook for our end markets has recently improved Statement from the Chief Executive Officer – Ahmed El-Hoshy: “We delivered resilient results supported by record volumes, despite selling prices reaching trough cycle levels during the quarter. This quarter our volumes increased 6% from the previous record second quarter last year. First half own-produced volumes increased 26% year over year, exceeding 6 million tons for the first time. Notwithstanding the low prices and the extraordinary circumstances as a result of the pandemic, we reduced net debt by $222 million so far this year. These results were achieved with an excellent safety record: the 12-month rolling recordable incident rate at the end of June was 0.23 incidents per 200,000 manhours, one of the lowest in our global industry. Operational excellence remains one of our main focus points going forward. The outlook for our end markets has become more positive in recent months and, given our low-cost position, OCI is well-positioned to benefit disproportionately vis-à-vis peers in this environment of improving selling prices.
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Q2 2020 Results Report
1) Closing of Fertiglobe refinancing expected in Q3 2020
Amsterdam, The Netherlands / 27 August 2020
OCI N.V. Reports Second Quarter 2020 Results
Highlights:
• Revenues declined 8% to $875 million and adjusted EBITDA declined 20% to $220 million in Q2 2020 vs Q2 2019.
Revenues increased 9% to $1.7 billion and adjusted EBITDA increased 2% to $413 million in H1 2020 vs H1 2019
• OCI-produced volumes sold increased 6% to a record 3.3 million metric tons in Q2 2020 compared to Q2 2019
• OCI also delivered record own-produced volumes of 6.0 million tons in H1 2020, up 26% compared to H1 2019.
On a like-for-like basis, excluding Fertil, H1 2020 volumes improved 7% year-on-year
• Adjusted net loss of $20 million in Q2 2020 compared to adjusted net income of $37 million in Q2 2019
• Free cash flow of $191 million before growth capex during the quarter
• Net debt $3.84 billion as of 30 June 2020, a reduction of $222 million compared to 31 December 2019
• Fertiglobe has successfully negotiated final terms with lenders for a $385 million refinancing package1), which will
crystallise interest savings of c.$9 million per annum
• OCI maintains a policy of not producing solid ammonium nitrate (AN), and has not done so since shutting down
production of AN in 2008. With ever-increasing safety concerns surrounding AN, the product could be substituted
by urea or other nitrates going forward
• Ms. Heike van de Kerkhof is nominated to OCI’s Board of Directors, bringing 30 years’ experience in the chemicals
industry and a strong track record in sustainability
• COVID-19 has not caused any direct disruption to production or distribution to date
• Selling prices for urea and methanol have rebounded significantly since reaching trough levels during the second
quarter, and the outlook for our end markets has recently improved
Statement from the Chief Executive Officer – Ahmed El-Hoshy:
“We delivered resilient results supported by record volumes, despite selling prices reaching trough cycle levels
during the quarter. This quarter our volumes increased 6% from the previous record second quarter last year. First
half own-produced volumes increased 26% year over year, exceeding 6 million tons for the first time.
Notwithstanding the low prices and the extraordinary circumstances as a result of the pandemic, we reduced net
debt by $222 million so far this year.
These results were achieved with an excellent safety record: the 12-month rolling recordable incident rate at the
end of June was 0.23 incidents per 200,000 manhours, one of the lowest in our global industry. Operational
excellence remains one of our main focus points going forward.
The outlook for our end markets has become more positive in recent months and, given our low-cost position, OCI
is well-positioned to benefit disproportionately vis-à-vis peers in this environment of improving selling prices.
Q2 2020 Results Report
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Global nitrogen fertilizer markets are looking positive for the remainder of this year and into 2021 on the back of
healthy farm fundamentals, supported by strong demand from major importing countries, in particular India and
Brazil, a recent strengthening of the outlook for the US, and increases in global corn demand. Urea prices have
rebounded more than 30% since reaching a trough in the second quarter, but ammonia prices have lagged as a
result of weak industrial demand. However, we have already seen a significant pick-up in diesel exhaust fluid sales
in the US in July and August to record monthly levels, and have started to see recovery in demand of industrial
ammonia and melamine.
The outlook for our methanol end markets has also strengthened. Spot methanol prices have rebounded more than
50% since reaching trough levels towards the end of the second quarter. Demand from Methanol-to Olefins (MTO)
plants in China has been rising and utilization rates now exceed 85% on the back of healthy economics. High
inventories in the system are being cleared and high-cost methanol capacity has been shutting down. Global
downstream demand continues to recuperate steadily, as fuel consumption is returning and a pick-up in construction
and other industrial activity is driving increased demand for derivatives such as formaldehyde.
Our priority remains to optimize free cash flow generation and we remain committed to our financial policy to
deleverage towards 2x through the cycle. We demonstrated healthy free cash flow conversion in the first half of this
year despite the difficult macro environment, but timing to achieve our targets remains dependent on selling prices,
as we continue to focus on operational and commercial excellence and volume growth.
We maintain our forecast that we are on track to deliver robust volume growth in 2020. As we reach our run-rate
production, we expect to benefit from a further step-up in volumes in 2021 compared to 2020. We expect this
particularly in methanol, where we have finalized major turnarounds at OCI Beaumont in February and in the
Netherlands in June.
In addition, we continue to optimize our capital structure to identify further cost-effective refinancing opportunities
as demonstrated by a $385 million refinancing at Fertiglobe. We are ahead of plan in generating commercial
synergies at Fertiglobe, and we will now also achieve significant interest savings for the group. This debut financing
for Fertiglobe will reset the capital structure and centralise some of the operating company debt at the Fertiglobe
holding level. We are pleased that the facility has attracted strong interest from the capital markets and will achieve
a low interest rate, reflecting the leading competitive position of Fertiglobe and its healthy balance sheet.“
Outlook
Nitrogen
• The outlook for nitrogen fertilizers for the remainder of the year and into 2021 is looking considerably more
favourable than a few months ago:
o Demand in several importing countries is expected to remain healthy, including South Asia, Latin
America, East Africa and Australia
o The outlook for the US has strengthened recently as the downward revision of corn acreage by the
USDA has reduced expected corn stocks and the outlook for corn demand has strengthened as
ethanol markets recover. In addition, global demand for corn has increased driven by purchases
from China
o We are anticipating a favourable fall application season in the US given the rapid pace of planting
this spring and the maturity of the current corn crops, allowing for a potentially extended application
window before winter
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o Following a record quarter for our calcium ammonium nitrate (CAN) volumes in Q2, our order book
in Europe is looking healthy. Going forward, we expect nitrate prices to be supported by healthy
demand and room to catch up with increases in urea prices
o Higher domestic urea prices and demand in China, combined with temporary capacity shutdowns
due to COVID-19 in China during the first half of 2020 limited the amount of urea available for
export; full year Chinese exports are expected to be lower than in 2019
• Industrial nitrogen markets have been weak in Q2 2020 as a result of GDP/industrial activity slowdown, but
are showing signs of recovery:
o Global ammonia prices have lagged urea as a result of weak industrial demand, but should benefit
from a recovery in industrial markets, with further support from curtailment of high-cost capacity
and the recent increase in natural gas prices
o The fuel ethanol market in the US is recovering from trough conditions
o Demand for Diesel Exhaust Fluid (DEF) in the US has also increased significantly recently with the
rebound of road traffic, and IFCo is reaching record shipments at increasing pace in Q3 so far
o Melamine demand in our core European markets is improving
Methanol
• US methanol spot prices have rebounded c.50% since reaching a bottom below $150 / ton in June
• Rising utilization rates of MTO plants in China on the back of healthy MTO economics versus naphtha
crackers have been a key driver of a rebound in methanol demand
• The outlook for downstream demand has also improved, with fuel consumption picking up following the
easing of lockdowns, and a gradual return of global industrial and construction activity; in the US and Europe
we have seen month-to-month improvements in demand from the lows reached in the spring
• The idling of high cost methanol production capacity by competitors also helped tighten supply / demand
balances in 2020 and supported pricing
• OCI is one of the lowest cost producers globally, and expected to benefit from the ramp-up of our methanol
capacity as well as the normalization of production and improved onstream efficiency
Gas Markets
We expect to remain at the low end of the global cost curve. In addition, the recent increase in gas prices supports
selling prices and benefits OCI as one of the lowest-cost and most efficient producers globally.
Q2 2020 Results Report
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Consolidated Financial Results at a Glance1)
Financial Highlights ($ million unless otherwise stated)
* Previously Nitrogen MENA segment. Fertil consolidated from Q4 2019
** Mainly related to elimination of Natgasoline, which is included in Methanol US segment
*** Until 2019 OCI Fuels Ltd. was included in segment Methanol US. Effective 1 January 2020, OCI Fuels Ltd. has been combined with OCI Fuels B.V. in the
segment Methanol Europe. The comparative numbers of 2019 are restated to reflect that change.
Q2 2020 Results Report
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Financial Highlights
Summary results
Consolidated revenue decreased 8% to $875 million in the second quarter of 2020 compared to the same quarter
in 2019, as higher total volumes sold were offset by lower selling prices of our nitrogen products and methanol.
Adjusted EBITDA decreased by 20% to $220 million in Q2 2020 compared to $275 million in Q2 2019. The nitrogen
segments benefited from the higher volumes and lower gas prices, offset by lower selling prices for all products.
The methanol group’s adjusted EBITDA was lower in Q2 2020 due to a sharp drop in methanol prices, lower
production volumes at Natgasoline and turnaround activities in the Netherlands.
The adjusted net loss was $20 million in Q2 2020 compared to a profit of $37 million in Q2 2019. The reported net
loss (after non-controlling interest) was $2 million in Q2 2020 compared to a net profit of $20 million in Q2 2019.