OCI Global (Euronext: OCI), a global producer and distributor of hydrogen products providing fertilizers, fuels, and feedstock to agricultural, transportation, and industrial customers around the world, today reported first quarter 2023 revenues of $1.4 billion and adjusted EBITDA of $336 million, reflecting lower selling prices, a decline in own-produced volumes of 12% compared to a year ago, and realized gas hedging losses of $98 million.
In particular, own-produced volumes in Europe were 46% lower YoY. Margins in the European nitrogen segment were also impacted by high-cost inventories produced in Q4 2022 and sold in Q1 2023 following a sharp drop in gas prices, and restart delays post Q4 2022 turnarounds. The combined impact was $74 million during the quarter.
In the methanol segment, unplanned outages had an estimated negative impact of $77 million on adjusted EBITDA, of which c.$30 million due to the winter freeze in the US. Following the restart, the plants in Texas have been running well.
We reduced net debt and maintained consolidated net leverage at 0.3x as of 31 March 2023. In April, OCI returned $800 million to shareholders and Fertiglobe distributed $700 million of dividends, of which $350 million to OCI, with respect to the period H2 2022. Guidance on the return of capital to shareholders with respect to H1 2023 will be provided with the Q2 2023 results.
Ahmed El-Hoshy, CEO of OCI Global commented:
“Our Q1 results were affected by challenging market conditions, but underlying fundamentals remain healthy for our existing nitrogen and methanol businesses. European gas futures over next winter and 2024 are pricing in expectations of a tighter market than current levels, implying ammonia cost support of ~$815/t including CO2 and $650/t excluding CO2. This should result in closures of European marginal production if pricing remains below cost for a sustained period.
I am also pleased about a growing diversified customer base from both existing traditional and new applications for our low carbon ammonia and methanol businesses as we started delivering low carbon fertilizers to several food & beverages customers, and expect demand for green methanol to power new methanol-powered container ships.
Our hydrogen growth initiatives are progressing well, reinforcing our role as a leader in the global energy transition. We are already the largest green methanol producer in the world and are establishing a comprehensive low carbon platform by decarbonizing our existing platform and executing new projects. We are well ahead of our peers, with the first large-scale blue ammonia project set to start production in the US in early 2025.
We have been receptive to comments made by shareholders, including Inclusive Capital, regarding the significant share price discount to OCI’s intrinsic value, despite strong incumbent positions in our markets and the tangible steps we are taking in executing on our hydrogen strategy. In this regard, we have started a comprehensive review of all our business lines with the aim to unlock value, including an evaluation of our listing in the Netherlands.
We also reiterate our commitment to our operational excellence program, which is on track to deliver operational and EBITDA efficiencies. In addition, we recently launched an initiative to further optimize OCI’s and Fertiglobe’s cost structures and reinforce our top quartile cash cost positioning. Fertiglobe has already identified a run-rate of at least $50 million per annum savings to be achieved over the next 12 – 18 months.”