Not the best 1Q for Fertiglobe: MENA fertilizers firm Fertiglobe — a joint venture between Adnoc and OCI — saw its adjusted net income plunge 62% y-o-y in 1Q 2023 to USD 135.4 mn, according to its earnings release (pdf). Its revenues fell by 41% y-o-y during the quarter to report USD 694 mn.

Lower natgas prices to blame: The fall in the bottomline and the topline was fueled by lower selling prices during the first three months of the year on the back of declines in European gas prices, demand lags in several key regions due to weather conditions, and the deferral of 100kt urea shipments to Ethiopia, the company said.

Sales are on the rise: Despite the financial results of the quarter, Fertiglobe reported a 9% rise in sale volumes of its own-produced products to 1,363kt. This came on the back of a “disciplined commercial strategy and centralized distribution capabilities” focused on demand centers that provide attractive netbacks.

What they said: “Natural gas prices declined sharply in 1Q 2023 due to a mild winter and resulted in lower marginal costs in Europe, causing deferred buying in several key regions. This, combined with relatively muted industrial demand, led to selling prices well below their levels in the same period last year, impacting our earnings growth in 1Q 2023 on a year on year basis,” Fertiglobe CEO Ahmed El Hoshy said.

Better years to come? Fertiglobe is currently making progress on several initiatives aimed at further supporting freecash generation, including a recent manufacturing improvement plan, Al Hoshy said. Such initiatives are expected to deliver “operational and EBITDA efficiencies over the next 2-3 years,” he added. It also launched an initiative to optimize the fertilizer company’s cost structure with a USD 50 mn target in annualized savings. “We expect to achieve these savings over the next 12 – 18 months. In addition, we expect a positive impact from the recent devaluation of the Egyptian pound on our cost base,” he said.

Scaling up ammonia production: Fertiglobe said it expects volumes of on-spec green ammonia at its facilities in Egypt to “ramp up over the year,” targeting a full investment decision this year on a 100 MW electrolyzer plant it is involved in with Norway’s Scatec, Orascom Construction, and the Sovereign Fund of Egypt (SFE) in Ain Sokhna. The facility is expected to produce up to c.15k tons of green hydrogen as feedstock for production of up to 90k tons of green ammonia per year in the fertilizer’s existing ammonia plants.

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