Fertiglobe reports drop in first-half profit as global nitrogen prices slump

The company is 'on track' to achieve annual run-rate savings of $50 million by the end of 2024

Nitrogen markets bottomed during the second quarter and are tightening rapidly, says Ahmed El Hoshy, chief executive of Fertiglobe. Photo: Fertiglobe

Fertiglobe, the world’s largest seaborne exporter of urea and ammonia, on Wednesday said it expects a slump in nitrogen prices that dragged its first-half profit lower to reverse course this year as it remains focused on cutting costs and delivering its proposed $250 million dividend.

Net profit attributable to owners of the company for the six months to the end of June fell to $214.9 million from $786 million in the year-ago period, the Fertiglobe said in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.

First-half revenue fell to $1.25 billion from $2.66 billion a year earlier.

The company said it is “on track” to achieve annual run-rate savings of $50 million by the end of 2024.

“We are pleased to see that nitrogen markets bottomed during the second quarter and are tightening rapidly, with a strong price trajectory in recent weeks despite the traditional summer lull for fertilisers,” said Ahmed El Hoshy, chief executive of Fertiglobe.

Limited additional supply and healthy farm economics support a “favourable” nitrogen outlook in the medium to longer term, he said.

Fertiglobe has proposed a dividend of at least $250 million for the first half of this year, which is subject to board approval in September and with payment expected to follow in October.

Nitrogen fertiliser prices are linked to the price of natural gas, a key raw material.

European natural gas prices, which soared after Russia's invasion of Ukraine last year, have fallen to 2021 levels, mainly because of stockpiling and lower demand.

Dutch Title Transfer Facility gas futures, the benchmark European contract, was last trading at €27.12 ($29.80) per megawatt hour on Wednesday after surging to an all-time high of €345 per megawatt hour last year.

Fertiglobe's second-quarter results were hit by lower selling prices amid volatile gas prices, the company said.

The company's profit in the April-June period fell to $79.2 million from $429.4 million in the year-ago period.

Revenue during the same period dropped to $551.5 million from $1.47 billion.

Fertiglobe, a joint venture between Adnoc and the Netherlands-listed OCI, raised about $795 million from its initial public offering in 2021, amid strong demand from international, regional and local investors.

The company’s output includes 6.7 million tonnes of urea and ammonia produced each year at four units in the UAE, Egypt and Algeria, making it the largest producer of nitrogen fertilisers in the Mena region.

On Wednesday, Fertiglobe said it would benefit from a “normalisation” of trade flows after the EU reintroduced import tariffs on ammonia after a six-month temporary suspension.

The company also expects import demand for urea in India, the top importer of the crop nutrient, to rise to 4 million tonnes in the second half of this year, up from 2.5 million tonnes in the first half.

There is potential “further upside” due to recent rains and flooding, a new tender and reduced domestic production run-rates, Fertiglobe said.

“Going into the [second-half] of 2023, we are well-positioned to service demand emerging from key regions, leveraging our centralised distribution capabilities and targeting demand centres that offer the highest netbacks,” Mr El Hoshy said.