Statement from the Chief Executive Officer – Nassef Sawiris:
“We delivered a strong improvement in operational and financial performance and generated healthy free cash flow of $133 million resulting in a meaningful reduction in net debt of $100 million during the quarter. These results reflect the continuing step-up in the volumes from new capacity additions and productivity improvements this year and again in 2019. Our volume growth comes at a time when our underlying end markets for all our products are on a positive trajectory for the second half of 2018 and beyond.
We have started the second half of 2018 on a strong note. Fertilizer prices started to improve in the third quarter despite market expectations of the usual seasonal weakness. Urea prices are now above $300 per metric ton, or up almost 25% from the second quarter average of $244 per ton, and have increased more than $80 per ton from this year’s low of c.$220 per ton that was reached in May, supported by healthy supply and demand fundamentals. Other fertilizer products are witnessing similar momentum. We can efficiently capitalize on the upside of a rising price environment through our commercial strategy of limiting forward sales. In May, we also started a new marketing joint venture with Dakota Gasification Company, which has given us an enhanced sales platform and extended reach in North America.
Our new methanol capacity starting up this year is benefiting from a currently strong market that is expected to remain underpinned by limited capacity additions and robust demand. We achieved a major milestone in June, when Natgasoline successfully started commercial methanol production, marking the completion of OCI’s second major greenfield facility in the United States. The facility reached full utilization shortly after initial start-up, has been running consistently above nameplate capacity in recent weeks and achieved Provisional Acceptance at the end of August. Natgasoline has shipped about 200 kt of methanol and has achieved gas consumption that has been better than design rate. We now have only one growth project remaining, our methanol expansion at BioMCN in the Netherlands, which we expect to start production around year-end. These two projects effectively double OCI’s methanol capacity this year and will position OCI as one of the largest merchant methanol producers globally.
With no major turnarounds planned for the second half of 2018, except for maintenance work at EFC and BioMCN, OCI is well-placed to take advantage of the improvements in underlying markets.”
With our growth capex effectively complete and our capital structure optimization plans finalized, we continue to believe that we will achieve significant EBITDA growth and free cash flow generation from this year onwards. The improvement comes on the back of reduced capital expenditures and our ramp-up to run-rate production volumes. We are well-positioned to achieve a healthy trajectory for deleveraging and achieve an investment grade profile.