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OCI Global reported substantial financial results for Q4 2024, driven by significant gains from strategic transactions and operational efficiencies. Despite a slight drop in pre-market trading, the stock has shown remarkable strength with a 47.8% return over the past year and is currently trading at $11.66. According to InvestingPro analysis, the company appears slightly undervalued based on its Fair Value assessment.
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Key Takeaways
- OCI reported a net profit of $5 billion, largely due to strategic divestments.
- The Clean Ammonia Facility in Texas is progressing as planned, with a projected completion in late 2025.
- The company reduced its corporate headcount by 70% compared to the previous year’s peak.
- Strategic transactions yielded $8.7 billion in gross proceeds.
- OCI anticipates additional capital returns to shareholders in 2025.
Company Performance
OCI Global demonstrated strong financial performance in Q4 2024, with total revenue from operations reaching $4.1 billion and trailing twelve-month EBITDA of $1.5 billion. This performance was bolstered by substantial gains from the sale of subsidiaries, despite challenges such as decreased EBITDA in the latter half of the year due to lower nitrate prices and higher gas costs. The company maintains a gross profit margin of 32.1%, though InvestingPro data indicates room for improvement in profitability metrics. The company’s strategic focus on infrastructure and efficiency has positioned it favorably within the European nitrogen market.
Financial Highlights
- Total revenue: $4.1 billion
- Adjusted EBITDA: $826 million
- Net profit attributable to shareholders: $5 billion
- Continuing operations revenue: $975 million
- Reduction in corporate headcount by 70%
Outlook & Guidance
OCI is optimistic about its future prospects, expecting an additional $1 billion distribution in Q2 2025. The company is also exploring further strategic options and potential capital returns to shareholders. With a gross cash position of $2.1 billion and a healthy current ratio of 1.17, OCI is well-positioned to pursue future investments and maintain strategic flexibility. The company’s overall financial health score from InvestingPro is rated as "GOOD," with particularly strong momentum metrics.
For comprehensive analysis and detailed financial metrics, access the full OCI Global Research Report, available exclusively on InvestingPro, along with reports on 1,400+ other top stocks.
Executive Commentary
Hassan Badrawi, CEO of OCI, highlighted the company’s strategic agility, stating, "We continue to evaluate all strategic options for OCI going forward at all levels." He emphasized the importance of maintaining strategic flexibility, noting, "This affords us a lot of strategic optionality going forward." Badrawi also reiterated the company’s commitment to enhancing shareholder value: "We have consistently taken strategic decisions with a focus on enhancing value for our shareholders."
Risks and Challenges
- Volatility in gas prices could impact profitability.
- Regulatory changes, such as the EU’s CBAM and tariffs on imports, may affect market dynamics.
- Competition in the European nitrogen market remains fierce.
- Potential delays in infrastructure projects could impact future earnings.
- Macroeconomic pressures and inflationary trends could influence operational costs.
OCI Global’s strategic initiatives and financial discipline have yielded impressive results in Q4 2024. While the market’s immediate reaction was tepid, the company’s robust cash position and ongoing projects suggest a promising outlook for the coming year.
Full transcript - OCI NV (OCI) Q4 2024:
Nadia, Call Coordinator, OCI Global: Hello, everyone, and welcome to the OCI H2 twenty twenty four Results Call. My name is Nadia, and I’ll be coordinating the call today. I will now hand over to your host, Sarah Rejani, Vice President, Investor Relations and Communications to begin.
Sarah, please go ahead.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: Thank you. Good afternoon and good morning to our audience in The Americas. Thank you for attending the OCI Global second half twenty twenty four conference call. With me today are Hassan Badrawi, our Chief Executive Officer and Bishoy Gurgis, our Chief Financial Officer. On this call, we will provide an overview of OCI’s twenty twenty four audited results and an overall update on our business and strategic developments.
We will end the call with the usual Q and A. The press release, investor presentation and annual report, which contain financial statements, are available on our website at ocipenglobal.com. We will be referring to slides in the investor presentation during this call. I’d like to remind you that any forward looking statements made on this call involve risks, and the actual results could differ materially from those statements. Let me hand it over to Hassan.
Hassan Badrawi, Chief Executive Officer, OCI Global: Thank you, Sarah. As always, we start by reaffirming our strong commitment to safety, which is a central focus to the organization. On Slide three of the presentation, you can see our 12 rolling recordable incident rates was 0.43 incidents per two hundred thousand working hours at the December. Throughout this transitional period, the team at OCI has remained committed to putting health and safety first and to delivering operational excellence across our facilities, as our divested operations have been transferred to new ownership. In this regard, we continue to work closely with local authorities to investigate and understand the circumstances regarding the tragic incident in October at the Clean Ammonia Facility in Beaumont, Texas, and I would like to thank all my colleagues across OCI for their professionalism and integrity in navigating this, incident and this period of transition.
It’s been a year of significant transactions, key execution milestones and projects, and major turnarounds in almost all of our assets, so the team has been quite busy. Before I provide further commentary on our business and strategic developments, I’d like hand over to Bishoy Gergis, our CFO, for commentary on the financial results. Bishoy?
Bishoy Gurgis, Chief Financial Officer, OCI Global: Thank you, Hassan, and welcome, everyone. Turning to Slide five and the full year financial summary. On a full year basis, we generated revenue from total operations, which includes both our continuing and discontinued operations of $4,100,000,000 USD an adjusted EBITDA of $826,000,000 and a reported net profit attributable to shareholders of $5,000,000,000 This reflects a substantial gain on sale of subsidiaries during the period. On a continuing operations basis, which comprises of our European Nitrogen segment and our corporate entities, OCI reported full year revenues of $975,000,000 and then an adjusted EBITDA loss of $32,000,000 Focusing on the operating segments, adjusted EBITDA in our European Nitrogen segment was $55,000,000 for the full year. Notwithstanding higher production volumes sold year on year, the adjusted EBITDA for the segment decreased to $7,000,000 in the second half of twenty twenty four, primarily as a result of lower nitrate prices, higher gas prices and increased EUA charges.
Going forward, at a macro level, we expect our European business to benefit from materially lower gas prices as TTF returns to historical norms, as well as improved fertilizer pricing supported by an evolving regulatory framework with the phased introduction of CBAB in 2026 and the proposed EU tariffs on Russian and Belarusian imports later this year. Our first quartile cost position in Europe continues to strengthen with USD 15,000,000 of achieved energy efficiencies in 2024. The decline in continuing operations, other adjusted EBITDA accounts for a corporate cost base that is still being reconfigured towards a more sustainable footprint following the recent divestments. Note that the year on year second half increase in underlying corporate costs reflects a stop to corporate recharges for these divested businesses as well as a lag in achieved cost savings relative to the timing of transaction closings in 2024. The increase also includes certain non recurring and restructuring costs that were not treated as one offs.
Notwithstanding these considerations, OCI continues to make substantial progress in rightsizing its corporate cost base to better serve the continuing structure and scale of the business, with corporate headcount 70% lower today compared to its peak in 2023. OCI expects to beat its previously guided target of $30,000,000 to $40,000,000 in corporate costs on a run rate basis by the end of twenty twenty five. With respect to OCI’s methanol business, where the company remains exposed to cash flows until the completion of the sale to Methanex, adjusted EBITDA increased from $39,000,000 in the second half of twenty twenty three to $91,000,000 in the second half of twenty twenty four. The improvement was driven by higher methanol and ammonia prices in spite of lower owned produced sales compared to the same period last year. Turning to Slide six and the cash bridge for continuing operations over the period.
This bridge shows the evolution of our USD 2,200,000,000.0 net debt position from the thirty June twenty twenty four to a net cash position of 1,400,000,000.0 as of the end of twenty twenty four. Please note that continuing operations net debt as of the thirty June, last year was restated the consolidation of OTI’s methanol business. Breaking down the key drivers, the second half of twenty twenty four saw several large cash inflows related to the completion of transactions, as part of the strategic review. This included $3,600,000,000 in gross proceeds following the closing of the IFCO divestment in August, dollars ’1 point ’9 billion, in proceeds following the Clean Ammonia closing in September and $3,200,000,000 in proceeds following the close of VerdiGlobe in October. A key consideration in this regard a few key considerations in this regard: The net proceeds received by OCI from the IFCO transaction amounted to approximately $2,600,000,000 after adjusting for bond defeasance mark to market on outstanding hedges, net working capital and net debt positions and other transaction related costs.
For clean ammonia, twenty percent of the purchase price consideration, equivalent to $470,000,000 remains outstanding pending project completion, which we expect in the second half of this year. As of thirty one December twenty twenty four, total cash spent on the project totaled $954,000,000 out of a budget of $1,550,000,000 which includes contingency and was reviewed by PwC as part of their year end audit.
Hassan Badrawi, Chief Executive Officer, OCI Global: The
Bishoy Gurgis, Chief Financial Officer, OCI Global: Fertigold cash flow represents a $3,600,000,000 gross purchase price, less a contingent consideration held in escrow of $362,000,000 and a previously disclosed purchase price adjustment of $70,000,000 Collection of the contingent consideration is dependent on the materialization of certain indemnifications agreed with ADNOC as part of the transaction. These indemnifications relate to several matters which are governed by confidentiality clauses. Management’s estimate is that the amount held in escrow will cover the indemnification. Overall, we have taken a conservative approach in our financial statements with potential upside as we work towards improving our estimated and contingent liabilities as they relate to, fertiglobe and clean ammonia. The bar with OCI cash flows, in the bridge includes the settlement of a securitization facility at OCI methanol, which is expected to be recovered as part of the closing adjustments in the transaction as well as operational cash flows from our, methanol and European nitrogen businesses as well as other corporate items.
I will now hand back to Hassan.
Hassan Badrawi, Chief Executive Officer, OCI Global: Thanks, Bishore. Turning to Slide eight as a backdrop, this slide provides an update on the four announced transactions and the use of proceeds to date. We continue to expect the sale of OCI methanol Methanex to close in the second quarter of twenty twenty five, subject to receipt of regulatory approvals. Also, in regard to our methanol business, concerning the dispute with OCI’s joint venture partner, ProMen, in respect to the net gasoline assets, On the 01/29/2025, OCI received a favorable decision from the Delaware Court of Chancery. A last minute appeal by ProMan was subsequently irrevocably withdrawn, and as a result, the Court’s ruling in OCI’s favor is now final.
Following this successful resolution, OCI’s indirect interest in the Net Gasoline joint venture will be included as part of the transaction. On OCI Clean Ammonia, renamed to Beaumont’s New Ammonia by Woodside, the project remains on track for completion in the second half of the year. We continue to be responsible for the construction, commissioning and start up of the facility and have a financial obligation to pay for the remaining capital expenditure and operating costs through project completion. Construction, as mentioned earlier, is well advanced, as you can see from the images on Slide 21, was $954,000,000 spent, by year end out of a total investment cost that we’ve estimated, to be $1,550,000,000 including contingencies and which has been validated as part of the year and audited by TWC. With regards to the use of proceeds, we’ve initiated the following corporate actions during the second half of the year.
We’ve repaid $1,800,000,000 in debt. We mentioned earlier the buyout of minorities in OCI methanol, and we’ve returned approximately $3,300,000,000 of capital to shareholders through the repayment of capital and cash dividends. Following this extraordinary distribution, OCI has a remaining fiscal reserve balance of €1,360,000,000 or the equivalent of $1,500,000,000 which is available for future capital repayment in the same manner. Finally, we continue to expect to make further the extraordinary distributions of up to $1,000,000,000 in the second quarter of twenty twenty five via repayment of capital or as a cash dividend if shareholders choose to elect as previously guidance. Turning to Slide nine.
This slide highlights OCI’s key assets and liability considerations in the wake of various strategic developments the company has undertaken. The company had a gross cash position of $2,100,000,000 as of the end of twenty twenty four, which is to be offset by the expected distributions of up to $1,000,000,000 which is, of course, subject to all the necessary approvals. The right hand side of the slide captures a zoom out of our remaining assets and current receivables offset by some of the company’s key liabilities. As mentioned earlier by Bishoy, we have taken a prudent and conservative accounting approach across our financials on several key items, including the Fertiglo consideration held in escrow and the presentation of indemnities, also in relation to the measurement of liabilities on telamonia and various other accounting matters within the stand alone financials. Starting with assets and, and current receivables, computing operations today comprise OCI’s European nitrogen assets, namely our production facility in Geylen, a competitively positioned nitrates, ammonia, AdBlue and Menamine production platform and OTE, the only independent or one of the only independent ammonia import terminals in Europe, which is solely dedicated to third party sales and uniquely located in the Port Of Rotterdam with a license with license to grow further and a leading pan European distribution platform enabled by OT’s last mile logic, logistic capabilities and unique terminal access.
With the expected close of OCI metal transaction in the second quarter, subject to the required regulatory approvals, we expect gross proceeds of approximately $1,600,000,000 comprising a cash consideration of $1,200,000,000 and an equity consideration equivalent to 9,900,000.0 shares in Methanex. We expect to receive 20% deferred consideration in respect of the Osea Aquin Ammonia transaction upon project completion in the second half of twenty twenty five, which is the $470,000,000 mentioned earlier. And as previously referenced, collection or of the ferdy globe or part of the ferdy globe contingent consideration is dependent on the materialization of certain indemnifications agreed with ADNOC as part of the overall deal, and that is something we’ll continue to work on going forward. On the liability side, some key considerations include the contractual commitment to complete the Tainamoia project. There are also some transaction related costs and other nonrecurring items, restructuring costs and hedge gas hedge related costs as we execute all the remaining transactions.
With respect to OCI’s capital structure, that is something that we will be reviewing on a continuous basis as we achieve the various milestones in our strategic roadmap. In closing, I wish to extend my thanks to the entire OCI team for their value contribution across our subsidiaries and the corporate organization. And with that, we conclude our prepared remarks, and we would like to open the forum for our usual Q and A.
Nadia, Call Coordinator, OCI Global: Thank you. If you have joined via the webcast, you can submit written questions at the bottom right of your screen. The first question goes to Christian Faitz of Kepler Cheuvreux. Christian, please go ahead.
Christian Faitz, Analyst, Kepler Cheuvreux: Yes. Thanks. Good afternoon and good morning, everyone. Thanks for taking my questions. Two, please.
First of all, are you still looking for strategic options of OCI in Nitrogen Europe? And how is incoming interest going? Second, can you elucidate a bit this still $362,000,000 contingent consideration you are expecting for, Sverdi Globe? That’s it.
Hassan Badrawi, Chief Executive Officer, OCI Global: Thanks, Christian. In regards to your first question, we will be and continue to evaluate all our all strategic options for OCI going forward at all levels. And that’s all I could say at this juncture. In respect to your second question, as described in our prepared remarks by Bishoy and myself, we have taken a conservative approach in regards to potential indemnifications pertaining to this transaction. We’ve actually done so across our financial statements because it’s a unusual set of circumstances as we transition through these, these deals.
This cash is held in escrow, and the management will work going forward to improve the leakage associated with any of these potential contingent liabilities.
Christian Faitz, Analyst, Kepler Cheuvreux: Okay. Thanks very much.
Nadia, Call Coordinator, OCI Global: Thank you. The next question goes to Aaron Casarelli of Berenberg. Aaron, please go ahead.
Aaron Casarelli, Analyst, Berenberg: Hello. Hi, good afternoon. I have just one question. It’s on again on the Slide seven of your presentation. On the transaction costs and related one off expenses and gas hedges, I think in Q3, you mentioned a figure up to $400,000,000 if I remember correctly.
Do you have more visibility today of how, that figure could look like? Thank you.
Hassan Badrawi, Chief Executive Officer, OCI Global: Hi. I think the $400,000,000 number was actually part of a question. And we said that that’s a bit of an, an inflated number relative what we think we can, we will end up with, but that was part of a question asked to me and not part of the response. Overall, you know, other than transaction fees associated with payments advisors, legal advisors, financial advisors, we do have some, one off restructuring costs as we downsize our organization to make it fit for purpose, for the new size that we’ve, that we find, and may there may be further adjustments going forward depending on the strategic roadmap that we undertake, but we haven’t given any specific guidance on what the total, total quantum will be. But the numbers that you see represents costs paid for related to closed deals.
Aaron Casarelli, Analyst, Berenberg: Okay. And if I may have follow-up just on the SEK362 million on escrow account. Since the Ferdy Group transaction is now closed, how long will it take in order to have a clearer idea about the potential collection of this cash?
Hassan Badrawi, Chief Executive Officer, OCI Global: Difficult to give you an exact response, but, it is, all I can say, these are active files that we hope to reach conclusions on in due course.
Christian Faitz, Analyst, Kepler Cheuvreux: Thank you.
Nadia, Call Coordinator, OCI Global: The next question goes to Mazahir Mamadi of Redburn. Mazahir, please go ahead.
Mazahir Mamadi, Analyst, Redburn: Thank you. Hi. Thanks for taking my questions. So just one question from me. If I look at your net cash balance, it’s at $1,400,000,000 right now.
And it looks like you will have another EUR 2,000,000,000 of incoming cash and EUR 1,000,000,000 of outflow to dividends, which puts your H2 of this year cash position at something like $2,400,000,000 Any color on what is the course of action? What you are planning to do with that cash balance?
Christian Faitz, Analyst, Kepler Cheuvreux: Thank you.
Hassan Badrawi, Chief Executive Officer, OCI Global: Sorry, I was on mute. No, I mean, this is the one of the most common questions we’ve had over the past several quarters since we started executing the multitude of transactions that have gotten us to this point. Your I mean, the figures that you mentioned, at least on a growth basis, are correct. You know, what this does is that it affords us a lot of strategic optionality going forward, and as we’ve mentioned in the past, you know, we continue to evaluate the strategic roadmap for OCI going forward, and we do not preclude further distributions of capital to shareholders as as an avenue going in the future as well. So at this stage, can’t give you an explicit answer, but we are highly cognizant that all all options are available, are on the table, including significant incremental returns of capital to shareholders.
Thank
Christian Faitz, Analyst, Kepler Cheuvreux: you.
Nadia, Call Coordinator, OCI Global: Thank you. We have no further audio questions. I’ll hand back to Sarah for any written questions.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: Thank you. We have a question from, Rutger Botenhuis on the webcast. Could you please clarify the company’s intentions regarding the remaining outstanding bonds? And a second question from Rupka. Recently, there’s been significant interest from major players in the terminals at the Port Of Rotterdam.
Is OCI evaluating the potential sale of these assets as well?
Hassan Badrawi, Chief Executive Officer, OCI Global: Maybe I’ll start with the second question, and it is true we have, we’re also aware that, with the structural long term decrease in ammonia capacity in Europe, even though we’ve seen some recent upstarts as the TTF gas normalizes, we have over the past five years seen a consistent trend of permanent shutdowns as well, and no new building of capacity in Europe, so that’s for sure. And with the limited infrastructure and busy infrastructure in the transport landscape in Europe, assets such as our such as our terminal in Rotterdam, have increased in value. And, I believe, it’s one of the reasons why we had started a journey of expansion of the terminal over the past couple of years. It’s a very, you know, long winded process to secure permits, to find the rights, and to satisfy all the criteria, and that’s something we’ve been working on for some time and have started a path to doubling our throughput, in our existing terminal with potential further expansion upside available to us over the coming couple of years. So that’s something that we continue to work on, and we do agree that the value of such infrastructure, has consistently, gone up.
Bishoy Gurgis, Chief Financial Officer, OCI Global: On the bonds, Bishore? Yeah. So with respect to the 2,033 bonds, we are viewing the closing of the METCO transaction as a significant milestone and we’re planning to undergo a review of our capital structure at that point. And we’re, you know, we intend to act responsibly, in terms of how we would deal with the bonds at the time.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: We have a second question on the webcast from Van Den Scharer. Regarding potential reinvestment opportunities. Would you consider making an acquisition subject to a vote by majority of minorities, for example, like a SPAC?
Hassan Badrawi, Chief Executive Officer, OCI Global: I can comment at this time on, future capital allocation or strategic, initiatives. I think we’re, as I mentioned in our last call, we’re extremely focused on executing the existing strategic initiatives. We have, you know, over $2,000,000,000 worth of proceeds we need to finalize and complete on, including, completing the first blue ammonia, one of the first blue ammonia plants in The United States, and, and as we evaluate our options going forward, we will be able to we hope in the near term to communicate to our stakeholders, a, in a meaningful way, our our plans for the future.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: We have another question from, Atal Musofi. What will you do with your Metonex shares after the transaction closes? Is there a lockup period?
Hassan Badrawi, Chief Executive Officer, OCI Global: I believe it’s public information that, we have approximately four months lockup on the shares in addition to some various other considerations, legal considerations. But at this time we have not given any guidance on our intention, in regard to this matter.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: Question from Alexandra Wallach. Do you have a time frame for when you will be able to give further clarity on strategic direction of
Hassan Badrawi, Chief Executive Officer, OCI Global: OCI? Like I mentioned in my answer to the question before last, we hope that in short order we provide the market with some visibility, you know, looking at the history of OCI, we, you know, we have, we have consistently taken strategic decisions with a focus on enhancing value for our shareholders, and that is something that we continue will continue to do going forward. And as soon as we have material information to share on the direction of travel going forward, we will proactively share it with our stakeholders.
Sarah Rejani, Vice President, Investor Relations and Communications, OCI Global: There are no further questions on the webcast at this time. Thank you.
Nadia, Call Coordinator, OCI Global: Thank you. And as a reminder, on the third line Thank
Hassan Badrawi, Chief Executive Officer, OCI Global: you for joining us. Yeah.
Nadia, Call Coordinator, OCI Global: I’ll hand back to you.
Hassan Badrawi, Chief Executive Officer, OCI Global: No, I just wanted to thank everyone for participating in the call and looking forward to our next call.
Nadia, Call Coordinator, OCI Global: Thank you. This now concludes today’s call. Thank you all for joining. You may now disconnect your lines.
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