Fertiglobe adjusted net profit surges 270% in Q2, declares $750m dividend for H1

Free cash flow increased to $789 million in second quarter of 2022 from $328 million in the corresponding quarter last year, supporting a first half dividend of $750 million, above previous guidance of at least $700 million



Fertiglobe’s assets are favourably positioned on the global cost curve, and  the Company is benefitting from a higher global gas price environment. — File photo
Fertiglobe’s assets are favourably positioned on the global cost curve, and the Company is benefitting from a higher global gas price environment. — File photo
by

Muzaffar Rizvi

Published: Tue 2 Aug 2022, 11:12 AM

Fertiglobe, 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, on Tuesday said its second-quarter revenues surged 105 per cent to $1.47 billion due to strong seasonal demand of its products.

In a statement, the Abu Dhabi-listed company said its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) soared 155 per cent to $770 million compared to the same quarter last year.

Free cash flow increased to $789 million in second quarter of 2022 from $328 million in the corresponding quarter last year, supporting a first half dividend of $750 million, above previous guidance of at least $700 million.

Solid performance in Q2

Ahmed El-Hoshy, chief executive officer of Fertiglobe, said second quarter marks another period of solid performance, driven by a favourable price backdrop supported by strong in-season demand, tight market balances and elevated gas prices in Europe, as well as higher sales volumes due to a phasing of some shipments from Q1 2022 to this quarter.

"We are pleased to announce an H1 2022 dividend of $750 million, above our previous guidance of at least $700 million, driven by strong earnings, healthy cash conversion and our robust capital structure," El-Hoshy said.

He said the outlook for the fundamentals of our nitrogen end markets continues to underpinned by tight supply, healthy farm economics and low grain stocks globally that incentivize the use of nitrogen fertilizers.

"Forward curves imply that natural gas prices in Europe will remain at elevated levels through 2023 and beyond, setting breakeven pricing well above historical average global prices for ammonia and urea. We aim to fill any supply gaps to help address global food security concerns, supported by our position as a leading producer and largest seaborne exporter globally of essential nitrogen fertilizer products," he said.

Supportive market dynamics

Nitrogen prices have support to remain above historical averages, driven by structurally tight supply over 2022-26, crop fundamentals supporting demand, and elevated gas prices. Fertiglobe’s assets are favourably positioned on the global cost curve, and the Company is benefitting from a higher global gas price environment.

Fertiglobe has a significant competitive advantage with favourable gas price supply agreements, including fixed prices in Abu Dhabi and profit-sharing mechanisms in North Africa.

Attractive dividend

Fertiglobe’s dividend policy is to substantially pay out all excess free cash flows after providing for growth opportunities, while maintaining investment grade credit ratings. Given the company’s free cash generation, Fertiglobe announced cash dividends of $750 million for H1 2022, above previous guidance of at least $700 million. The dividend will be presented to shareholders for approval and is payable in October 2022. Fertiglobe’s potential for attractive future dividends is supported by its strong cash flow performance and competitive position on the global cost curve.

"We are also delighted to receive investment grade credit ratings by three rating agencies: S&P (BBB-), Moody's (Baa3) and Fitch (BBB-), supported by an attractive cash flow profile and a prudent financial policy. We were also pleased to be included in the FTSE Emerging Market Index in June 2022, and, in March 2022, the FTSE ADX 15 Index, representing the 15 largest and most liquid companies on the Abu Dhabi Securities Exchange," El-Hoshy said.

Strong earnings and cash generation during the quarter resulted in a net cash position of $445 million as of 30 June 2022, compared to net debt of $487 million as at 31 December 2021 (0.3x net debt / adjusted EBITDA), supporting future growth and attractive dividend pay-outs.

Financial highlights

· Higher selling prices and sales volumes see Q2 2022 revenue increase 105 per cent to $1,471 million year-on-year, with adjusted EBITDA up 155 per cent to $770 million

· Q2 2022 adjusted net profit increased 270 per cent versus Q2 2021 to $438 million

· Free cash flow of $789 million in Q2 2022 versus $328 million in Q2 2021 and net cash position of $445 million as of 30 June 2022 support growth opportunities and attractive H1 2022 dividend pay-out of $750 million, above previous guidance

· First-time investment grade ratings by S&P, Moody's and Fitch (BBB-, Baa3 and BBB-, respectively) recognize Fertiglobe’s strong free cash flow generation, conservative financial policy and robust outlook

— muzaffarrizvi@khaleejtimes.com


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