Highlights:
- Own-produced volumes sold increased 20% during 2017 to 7.4 million metric tons
- Volumes driven by the continued ramp-up of Iowa Fertilizer Company, record production levels in Egypt and at BioMCN, and the resumption of ammonia exports from EBIC
- Sorfert has maintained utilization rates of on average 87% to date since completion of repairs in December
- Revenue increased 18% to $2,252 million
- Adjusted EBITDA increased 36% to $634 million
- Adjusted net loss of $27 million
- Capital expenditure of $147 million in 2017
Statement from the Chief Executive Officer – Nassef Sawiris:
“We are on track to achieve a significant step-up in free cash flow generation driven by the completion of our growth initiatives and ramp-up to run-rate production volumes across our asset base. We started the year with a continued ramp-up of IFCo and the return to high utilization levels of all our plants in North Africa, which were affected by an extended shutdown in Algeria last year. The unplanned shutdown in Algeria is expected to be covered by insurance. The combined effect has boosted our average daily production volumes already significantly to date in 2018 compared to 2017.
We are now in the final stages of an ambitious capital expenditure program through which we will have grown from a single urea plant 10 years ago into a globally diversified low-cost producer of nitrogen fertilizers and industrial chemicals. With the majority of our capex behind us, we are focused on generating significant value from our well-invested asset base.
Our facilities are on average the youngest in the industry with approximately 50% of our production capacity under five years old, utilizing best-in-class technologies, which supports above-average utilization rates and low maintenance costs.
Our production capacity is also highly flexible with a focus on high value-added urea derivatives, in addition to downstream nitrates. We continue to be the global leader in the melamine market and are growing our footprint for diesel exhaust fluid (DEF). We have more than doubled our DEF capacity at IFCo this year and successfully produced diesel exhaust fluid in Egypt, with the first shipments already executed.
Optimizing our capital structure through lowering our cost of debt and extending maturities is a primary objective for OCI in 2018. This year, we have already successfully exchanged IFCo’s 2019 and 2022 bonds for longer maturities and lower coupon rates; we refinanced OCI Partners with an upsized $455 million Term Loan B facility, priced 250 bps below the previous facility, extending the maturity by approximately six years and upstreaming $217 million to the parent company; and we are in the process of concluding a refinancing of debt facilities at EFC, which is expected to materially reduce EFC’s cost of debt and extend maturities. We plan to opportunistically evaluate financing opportunities which may or may not include refinancing of existing OCI N.V. and/or other subsidiary debt at the OCI N.V. level. With our growth capex effectively complete and our capital structure optimization plans underway, we are well positioned to rapidly deleverage our balance sheet to achieve an investment grade profile within the next two to three years.”
Outlook
With the completion of our capital expenditure program, we believe that we are poised to achieve significant EBITDA growth and cash flow generation on the back of our reduced capital expenditures and our ramp-up to run-rate production volumes, driven by both our new capacity and our North African assets achieving high utilization rates:
- We expect Iowa Fertilizer Company to continue its ramp-up and achieve stable utilization rates in 2018;
- Natgasoline is expected to commence production in Q2 2018;
- BioMCN’s second methanol line is on track to start production in Q4 2018;
- With no more logistical constraints, EBIC is expected to deliver a full year of high utilization;
- We expect a significant step-up in volumes at Sorfert, which has been running at utilization rates of around on average 87% since December, significantly higher than prior to the shutdown. We expect to receive business interruption insurance payments in 2018, of which an advance payment of $20 million has been finalized.
Total capital expenditure for 2018 is expected to be in the range of $250 to $300 million, of which $150 to $200 million is maintenance capex and the balance is growth capex, primarily for the refurbishment of BioMCN’s second line. For 2019 and beyond, total capital expenditure is expected to be in the range of $150 to $200 million.
