Fertiglobe plc (FERTIGLB) Earnings Call Transcript & Summary

Good day, everyone, and welcome to Fertiglobe Fourth Quarter 2024 Results Conference Call. [Operator Instructions] I will now turn the call over to Rita Guindy, Fertiglobe Investor Relations Director. You may now begin.

Thank you. Good morning and good afternoon, ladies and gentlemen. Thank you for joining Fertiglobe's Q4 and Full Year 2024 Results Conference Call. With me today are Ahmed El-Hoshy, Fertiglobe's Chief Executive Officer; Haroon Rahmathulla, Chief Operating Officer; and Andrew Tait, Chief Financial Officer. On this call, we will review Fertiglobe's key operational events and financial highlights for the quarter and a discussion of our outlook, followed by a question-and-answer session at the end of the call. The presentation we will discuss today can be found on our Investor Relations website. Finally, please be reminded that any forward-looking statements made on this call may involve risks and the actual results could differ materially from these statements. With this, I will now hand it over to Ahmed El-Hoshy, CEO of Fertiglobe.

Thanks, Rita, and welcome, everyone, to today's call. Apologies for the slight delay at the beginning of the call due to the technical difficulty. As always, I'd like to begin by reemphasizing our unwavering dedication to safety, our top priority. I'm proud of the safety milestones we achieved this year at Fertiglobe with a 12-month recordable incident rate of 0.02 incidents per 200,000 work hours, as at the end of December 2024. As of this week, I'm also proud to say that Fertiglobe has had no recordable injuries in the last 12-month period through this last week and no Tier 1, Tier 2 process safety issues. Meanwhile, we've seen a clear improvement in safety reporting culture with the number of safety observations increasing by a remarkable 250% from 2022 into 2024 in just 2 years. This is exactly we want to see from our global team, aligning well with our goal of fostering a 0 injury culture. We'll not stop there and continue to place a strong focus on further improvements in operational and process safety as well as upholding our highest HSE standards to ensure safe, sustainable and reliable operations across our entire platform. Moving on to our financial results. Fertiglobe today reported Q4 2024 revenues of $466 million, down 28% year-over-year and 6% below Q3 '24. Adjusted EBITDA was $158 million, down 45% year-over-year and 7% on a sequential basis quarter-over-quarter and adjusted net profit attributable to shareholders of $42 million, which was 59% lower year-over-year, but up 47% compared to Q3 of 2024. Our results for the quarter were impacted by a 1-month turnaround in Sorfert, Algeria, in addition to our strategic decision to defer shipments of just under 240,000 tonnes to capitalize on rising prices which resulted in a shift of $59 million of EBITDA and $29 million of attributable net profit from Q4 2024 into this quarter, Q1 2025. We took a conscious decision as management to close the year out with some additional inventory and sell these tonnes at better prices in the next quarter or the beginning of this year rather than prioritizing or overly focusing on an arbitrary quarter end results and giving opportunistic traders cheap product to hold over year-end. This was, of course, supported by our knowledge of trading activities in the market towards the end of the year, and we're very pleased with this decision, which ultimately maximizes shareholder value and sets the stage for a strong first half of the year. We are seeing a strong positive trajectory with urea Egypt FOB prices now at $455, 26% above the levels that we saw in early December, supporting -- supported by a tightening urea markets on early spring buying, higher crop prices and elevated TTS gas prices. On a full year basis, our revenues were $2 billion, 17% below 2023, while adjusted EBITDA was $648 million, 35% lower year-over-year, and adjusted net profit attributable to shareholders came in at $174 million, reflecting a 52% reduction year-over-year. We also reported own produced sales volumes of 5.3 million tonnes, 6% below 2023 levels. These full year results were impacted by power outages and gas shortages in Algeria and Egypt, respectively. The provisioning for potential changes in Algerian gas price set up as part of our renegotiation as well as the deferral of tons to 2025, as mentioned just before here. Adjusting for external factors impacting our operations and the deferral of shipments, adjusted 2024 EBITDA would have been $781 million, while our own produced sales volumes would have been up 3% year-over-year in 2024, reflecting the headway we've made on our strategic initiatives and the team's focus on safety, production, energy efficiency and then emissions reductions. This takes me to our value enhancement initiatives. We are pleased to have successfully implemented our cost optimization target of $50 million annualized run rate savings by the end of December 2023, with savings spending, logistics, labor, SG&A and other costs and where we should start seeing the benefits of -- on a more immediate basis from the course of 2025 and onwards. We also continue to advance our manufacturing improvement plan, our MIP, which is 75% underway to unlock $100 million in incremental EBITDA by the end of 2025 compared to 2023. While this year, one-offs and external factors have unfortunately muted these impacts and the impacts of these efforts, we are proud that despite all these challenges, our production was only marginally down 3% year-over-year, showcasing the resilience and dedication of our team into minimizing disruptions, sustaining operations and progressing structural measures to improve long-term productivity and efficiency levels. We're also glad to highlight that our energy efficiency levels have materially improved across our facilities in Egypt, leading to a diluted impact of potential gas supply reductions given our ability to produce more tons and lower gas volume -- at lower gas volumes and a successful step up in production rates following the turnarounds, which took place last year. Separately, we have recently commissioned the new boiler in Algeria, which should significantly improve our on-site power production via internally generated steam from the boiler and reduce our reliance on the external power grid that caused the significant issues in production through the course of 2024, as you're aware. These initiatives should support improved overall visibility and reduce the magnitude of recent fluctuations in production rates, which have been muting the otherwise meaningful progress we've seen in our manufacturing improvement journey. As we look back on 2024, Fertiglobe reached several important milestones primarily in the majority stake acquisition by ADNOC, that's becoming its dedicated ammonia vehicle, consolidating its equity stakes in low carbon ammonia at start-up and additionally, we took the final investment decision and commenced construction at our first 1 million-tonne per annum low-carbon ammonia project in the UAE in partnership with TA'ZIZ, GS Energy and Mitsui. The project is well positioned within our portfolio and investment criteria underpinned by robust double-digit IRRs and benefiting from over defense utilities and feedstock supply and the focus on back-end ammonia infrastructure, leading to a total CapEx of less than $500 million, a fraction of global comparable greenfield costs. In line with our disciplined capital allocation policy backed by our strong free cash flow conversion and robust balance sheet and commitment to creating shareholder value, Fertiglobe's Board of Directors recommends H2 2024 dividends of $125 million or 5.5 fils per share, subject to shareholder approval, bringing 2024 total dividends to $275 million. Including these dividends, Fertiglobe will have paid $2.5 billion to shareholders, since IPO representing 1 of the highest yields and total return metrics in our industry. Next, I'd like to briefly discuss the outlook for nitrogen and ammonia markets. Encouragingly, after improving 6% quarter-over-quarter to $377 a tonne in Q4, the urea market started 2025 on an even stronger note with prices reaching $455 a tonne in Egypt FOB in 20 -- in February 2025. And their highest level since September 2023 and around 26% above early December levels of $360 a tonne. Urea prices are supported by tight market fundamentals driven by continued absence of Chinese exports, successive India tender activity, an onset of buying season in major urea importing markets, including Europe, the United States as well as Australia, in addition to the pickup in grain prices that we've seen recently. China's absence from the internationally traded urea market has had a significant impact on the traded market with just 260,000 tonnes of exports in 2024 versus 4.3 million in 2023, marking a record low in exports. The reduction in exports results from the government's efforts to prioritize the build of local stocks from managing local price fluctuations and inflation. Adjustments to China's fertilizer reserves issued in October 2024 mean that Chinese exports are unlikely to return until after the spring application season is over in Q2 '25 with consultants expecting exports of around 2 million to 3 million tonnes for the balance of this year. In India, strong domestic sales, favorable monsoon rains alongside challenging DAP availability have driven appetite for urea imports. Strong demand has continued into the early months of 2025 with India issuing 4 successive tenders between October 2024 and January 2025, securing just 2.3 million tonnes of urea from the traded market. In Brazil, buying activity has remained strong with increasing reliance on the traded market. Brazilian urea imports increased to record levels of 8.4 million tonnes in 2024 up from $7.3 million in 2023, supported by improvements in the corn barter ratio. Consultants expect tight market fundamentals to persist in the coming weeks, supported by in-season spring buying activity, including from U.S. and Europe, European tender -- sorry, Ethiopian tender activity as well as Thailand and Oceania alongside continued gas supply issues in Iran as well as limited Chinese exports. Now moving on to ammonia. Markets West of Suez were impacted by production outages at major export hubs in Q4 as well as higher TTF prices driving a 12% jump in CFR and Northwest Europe, ammonia prices to $614 a tonne on average in Q4 of '24 compared to Q3 2020 -- Q3 2024. Gas prices have continued to remain elevated into Q1 and pressure on -- and continued pressure on production cost remains in Europe. Today, TTF gas in Europe sits at above $17 of MMBtu, putting cash cost of production in Europe at $675 per tonne, and that's on a marginal cost basis, including a partial CO2 charge. That's well above the current Northwest Europe ammonia price of $575. And that's why it's no surprise that our ammonia team is receiving calls to buy tonnes from European ammonia producers we're burning approximately $100 a ton of cash on a variable cost basis, at least by just keeping their plants running as they are today. In the short-to-medium term, the commercial start-up of the new U.S. Gulf Coast project in Texas will see an additional 1.3 million tons of ammonia capacity, contributing to global exports alongside our rebound in exports from Russia. This will be supported by higher imports from India, Morocco and Europe. Consultants expect continued recovery in the global ammonia traded market to 17.5 million tonnes, during the course of this year. However, continuous delays the demand terminal, which we understand is having logistical challenges, and the recently announced further delays in the U.S. Gulf Coast project could provide further support to pricing over the next several months and quarters. 2025 also marks the final transitional year prior to the launch of the definitive start of the European Contract Border Adjustment Mechanism, or CBAM, as it's called. In 2026, companies will have to purchase CBAM certificates for the emissions of imported CBAM goods, impacting all energy-intensive segments. The development of CBAM continues to play a key role in catalyzing growth and growing interest in decarbonization opportunities, putting our low carbon portfolio and growth initiatives in a better position over the medium term. Looking further ahead, with the advancement of more stringent regulations, we continue to expect accelerated demand growth from applications for low-carbon ammonia and power generation as well as maritime bunker fuels a clean hydrogen carrier as well as to decarbonize existing uses. Incremental demand from these new applications, as we've mentined previously, is expected to reach 24 million tonnes by 2032, more than doubling the size of the current traded largely gray ammonia market. Now let me hand it over to Haroon to discuss our commercial and operational performance. Haroon?

Thanks, Ahmed. Moving over to the highlights of our operational performance in the fourth quarter of 2024. Fertiglobe's own produced sales volumes were 1.167 million tonnes in Q4 2024, down 20% versus Q4 2023. Driven by a 41% decline in ammonia, owned produced sales volumes and a 14% year-over-year decline in urea own-produced sales volumes. This was mainly due to, as Ahmed mentioned, a planned turnarounds in Algeria, which impacted sales by 150 kt and the deferral of 139 kt of shipments to early 2025. In 2024 for the full fiscal year 2024 Fertiglobe's total own-produced sales volumes set to 5.35 million tonnes in '24 versus 2023, driven by 6% lower ammonia own-produced sales volumes and a 6% decline in urea own produced sales volumes. As discussed on our Q3 results, our operations were impacted by external factors relating to power and gas supply disruptions in Egypt and Algeria, which reduced our production volumes in the first 9 months of the year. That, in addition to the deferrals just discussed, is the key reason behind the lower own-produced sales volumes year-over-year in 2024, adjusting for external factors and the deferrals to 2025, our own produced sales volumes would have been up 3% on a year-over-year basis, showcasing the successful execution of our manufacturing improvement plan. To highlight some of the initiatives for 2024, reiterating the point on safety. As Ahmed mentioned, we've achieved an impressive safety record with a TRIR of 0.02 well ahead of global fertilizer industry averages. We successfully and safely executed major turnarounds at EFC and Sorfert, leading to significant energy savings and incremental volume, which will result in $10 million of additional EBITDA on a run rate basis. The commissioning of the fourth steam boiler at Sorfert in Q1 2025 makes the plant less dependent on power from the external grid and improves its reliability. To put this in numbers, in 2024, we lost 170 kt of salable volumes due to these externally driven power issues, and we are pleased to report that with the commissioning of this boiler, we now have additional resilience against these issues. Additionally, during 2024 -- we also lost 30 kt of salable volumes due to external water supply issues in Egypt. We initiated a water production improvement project late in 2023, which we now expect to be commissioned in Q1 2025, leading also to more resilience. The successful implementation of cloud-based process information systems also supports our manufacturing improvement plan, while also building foundations for AI applications going forward. And lastly, we are also seeing positive results through the launch of our shared services center in Egypt, significantly reducing our back office operating costs, and we intend to build further on this progress into 2025. With our manufacturing improvement plan being 75% underway, we believe there is still further upside to be unlocked on production and energy efficiency. I would now like to hand it over to Andrew to discuss the financial results in more detail.

Thank you, Haroon. Let me start with some highlights of our performance in Q4 '24, which, as mentioned earlier, was impacted by the planned turnarounds on our deferrals through to Q1 '25. So our Q4 '24 revenue was $466 million, down 28% on a year-on-year basis, driven by the lower volumes and the urea prices. Our adjusted EBITDA decreased 45% year-on-year to $158 million in Q4 '24 leading to adjusted EBITDA margins of 33.9%. Our Q4 '24 adjusted net profit attributable to shareholders was $42 million compared to an adjusted net profit attributable to shareholders of $103 million in Q4 2023. In '24, our revenues were $2 billion -- just over $2 billion, 17% down year-on-year on a mix of lower prices and volumes. Meanwhile, 2024 adjusted EBITDA decreased 35% year-on-year to $648 million leading to adjusted EBITDA margins of 32.2%. Excluding the impact of external events and the shipment deferrals, 2024 adjusted EBITDA would have been $781 million. reflecting a drop of 22% year-on-year in '24. Our adjusted net income attributable to shareholders was $174 million compared to $363 million in the same period last year. Turning to the balance sheet and cash flow performance. As of 31st December '24, Fertiglobe reported a net position of $1.05 billion, implying net debt, the LTM adjusted EBITDA of 1.6x, allowing us to balance selective growth opportunities and dividend payout, supported by our robust free cash flow generation and a healthy balance sheet. Fertiglobe also enjoys an advantageous CapEx structure for growth projects relative to peers due to already existing infrastructure, and we've communicated double-digit IRRs as the minimum return requirement for our future low-carbon growth projects on a great price basis. Our free cash flow before growth amounted to $84 million in Q4 '24 compared to a negative $658 million in Q4 '23. Reflecting the performance for the quarter, the dividend paid to noncontrolling interest and withholding tax. Our working capital inflows, including the impact of the retroactive sulfur gas pricing accrual and net interest payments. In '24, free cash flow before growth CapEx amounted to $249 million compared to a negative $201 million in FY -- in the previous year '23. Total cash capital expenditures, including growth was $74 million in Q4 '24 compared to $34 million in Q4 2023 of which $65 million was related to maintenance capital expenditures compared to $23 million in the same period last year. So in '24, our total cash capital expenditures, including growth CapEx were $168 million compared to $115 million in 2023. Of that, $137 million was related to maintenance capital expenditures compared to $94 million in the same period last year. This was slightly above the top end of our guidance range of $130 million, that's mainly driven by several strategic initiatives started during the course of the year, including an ERP and digital manufacturing implementation program, one-off expenditures related to the shared service center build-out and energy efficiency improvement projects, collectively amounting to around $15 million of spending during the year. Therefore, excluding these one-offs, the maintenance capital expenditure would have been around $122 million for 2024, well within our guidance. Some of these important strategic one-off initiatives I've just mentioned will continue into 2025 and the results of which are already being seen, as Haroon has just mentioned today. In '25, we guide for $120 million to $140 million maintenance CapEx on a like-for-like basis compared to $122 million for 2024 excluding one-offs, with no additional turnaround days compared to 2024 either. Note that this '25 guidance is still elevated from typical run rate years due to the large equipment replacements for the upcoming turnarounds as part of our manufacturing improvement program. In addition, one-off projects and efficiency improvement initiatives related to the energy consumption, sustainability, water efficiency and that ERP digital manufacturing initiatives we indicated fo '24 are estimated to add up to $50 million in '25. So other than the ERP implementation, these investments are basically no brainer spends that have paybacks that are highly attractive sub 5 years and helping generate higher earnings for the firm going forward. So as these project harvest progresses, but with planned lower CapEx as we benefit from advanced payments last year, allowing the project to continue swiftly this year. Otherwise, growth CapEx related to Baytown and the second UAE low-carbon ammonia plant are not incurred through -- are now incurred through the benefit of our new shareholder structure, whereby the assets are transferred to Fertiglobe at cost on start of commencement operations. I'll now hand back to Ahmed for our outlook and concluding remarks.

Thank you, Andrew. To conclude, the short-term outlook for nitrogen fertilizers remain favorable. With urea market -- the urea market driving tightness. Urea market tightness driven by the tight supply with limited Chinese exports and production shortages in Iran, coinciding with the major buying season in the Northern Hemisphere, Oceana as well as Thailand. Longer term, the outlook continues to be supported by improving demand from new and existing applications, coupled with limited supply additions for greenfield projects. We look forward to sharing a detailed value creation and growth strategy update with investors at Fertiglobe's Capital Markets Day in and with our Q1 2025 results in May and to updating you with more initiatives and strategic objectives in the months to come. Finally, I'd like to extend my heartfelt appreciation to our exceptional team, whose dedication has been the driving force behind Fertiglobe's success and our continued execution of the strategy we set out with unwavering commitment to safety. I'm confident that we are well positioned to achieve and continue our strategic growth path and to remain a leader in the nitrogen markets as well as the low carbon ammonia markets. With that, we can open the line for questions.

[Operator Instructions] Your first question comes from Giuseppe Villari from Morgan Stanley.

We have 2, if we may. The first 1 is about 2025 CapEx. You've already mentioned a little bit about it, but could you shed more light on the comparison between 2025 and what we've seen for '2024? And then secondly, on the estimated impact of the desired shipments. Have you based your estimate on fourth quarter 2024 prices or the prices that you are seeing now in the first quarter of 2025?

Sure. So I think -- maybe I'll start with your second question, which is with regards to the -- you're saying the $59 million shift of EBITDA from Q4 to Q1, right?

Yes, yes, correct.

Yes. So that's actually at the sales prices, if they would have been sold in that $59 million. So obviously, we've had sequential sales through the beginning part of this year with higher pricing. And so that doesn't get the benefit of the uplift in pricing. And just to note, this is a combination of ammonia and urea. So obviously, the effect is more on the urea sales that were deferred rather than the ammonia sales. With regards to the first question -- and I think you heard Andrew's remarks, and maybe I can hand it back over to him to walk through them. Well, maybe we go through 2024. And then 2025, just to kind of reiterate what you just mentioned in your remarks around some of these one-off expenditures that we have within the maintenance CapEx guidance. So here you go on second Andrew.

So just going through -- most of us, we're talking about the maintenance of those element. So we basically came in at the $137 million on the maintenance capital expenditure. Now that's slightly above what we basically included there, we saw the opportunity for us for our strategic initiatives during the year of 2024. And in there, we have basically some energy efficiency improvements. I won't indicate what plant, but these have been very good payback as I sort of indicated around that sort of 5-year payback, which we just would absolutely have done. We've also been implementing an ERP system, which is part of essentially a way to get much better, much faster in terms of our back office sort of operations. And it links in a way to the shared service center as well, where we've opened up a shared service center in Egypt. And that is essentially really sort of bringing all of our systems, all of our process together to get really good efficiency. So to give you an example, we've seen unit cost transactions on, for example, accounts payable has gone down by 95%. And this is part of sort of implementing ERP. And obviously, 1 of the things we're also doing by moving to Egypt, which has got a very deep reservoir of talents and competitive labor costs that actually sort of plays out for us. Additionally as well as foundations of digital manufacturing, where we put in more information access in the manufacturing, which enables us to -- we intend to sort of optimize and identify optimizations in maintenance going forward. So that was the beginning into 2024. For 2025, we've guided $120 million to $140 million maintenance on like-for-like. So that compares to $122 million in '24. But on top of that, basically, what I've said is there are other additional elements, where we're seeing the full piece of the ERP in the digital manufacturing and we also have a very significant -- well, very significant in terms of return, energy efficiency project, which we wanted to put down. So those are the sort of extra elements. Now we see these as one-off, no brainer is that when we saw them in front, we said, yes, we're going to invest in these because we can actually see the value accretive return on those almost immediately. Well, not immediately, but certainly within the first 5 years. And in terms of the shared service center and ERP very quickly. I hope that helps.

Yes. But could you give us maybe like a little bit more color on this additional cost? May be a range that you would expect?

Sure. So we would basically see around about -- for the digital implementations we would see around about $20 million to $25 million and then in terms of the energy efficiency projects, we were seeing around about $25 million as well. So all total, you're looking at towards $50 million.

The next question comes from Waleed Jimma from Goldman Sachs.

I have 3. The first 1 is on market dynamics. Are you surprised on how strong market dynamics has been in the last few weeks? And are you concerned about Chinese exports in the second half of the year? The second question is on the blue ammonia market. My understanding was that the South Korea has recently had a tender and only 40% of that tender has been secured. Maybe if you can share some color on that and how should we read into this? The third and last question is on the dividend policy. How should we think about the payout for 2025?

Waleed, can you repeat the second question again? I didn't hear it fully. What -- you said a tender, which tender are you talking about?

Sure. This is with regards to the blue ammonia tender that took place in South Korea just recently. Just like to hear your thoughts on that and any color you may have.

Sure. So on the recent market dynamics, I mean, part of why we held tonnes back as we did see, sitting in November before year-end and into December as the market is kind of getting into this interesting period where the Europeans had really delayed buying. The Americans were very delayed also on buying and then the Chinese had not entered the urea market, where we saw sub-300,000 tonnes exported last year to build up local stocks. That's obviously continuing to this year. We've also seen, as you saw, record Brazilian imports and Australia really taking in a lot of supply. And the Indian market kind of having a few disappointing tenders in a row, where they're trying to build up stocks for also a very strong demand season. So we did feel this kind of perfect storm coming and that's why we held some tonnes back to kind of sell into these markets. We like where pricing is at right now, but also I do think over the next couple of months, the market still does feel very tight. The question is going to be how many -- how do tonnes move up in the U.S. into the Midwest for the river open season, where they start taking in tons later in February. And also we're keeping an eye on weather conditions during the application period. But to your point, Chinese exports continue to be something that we take a look at. We think, just because you're just going into the Chinese season right now, it's something that we think will keep us in a good position through May and kind of later in the Q2 period. And once it kind of comes up and again, I think market analysts are still expecting this whole year will be at the 2 million to 3 million-tonne level because you should see some stock drawdown during the spring application season. There's going to be concerns if there's too much export activity, you could see a big sharp rise in pricing in the Chinese markets and the government is not supportive of a large input inflation on their cropped inputs for their agricultural sector. Is that sufficient on the first question?

Yes, that's very clear.

And 1 last thing actually, I'll add, is TTF sitting at $17 MMBTu. We have to also keep in mind what that means on the floor price for urea for marginal cost of production on urea in Europe as well for some of urea production that sits there, when we look at and see how that market evolves. We've seen even the forward curve for gas for the balance of this year is relatively flat, not seeing a big dip in the summer pricing for natural gas in Europe because you have to replenish stocks before next winter on the gas supply side. So it's also something that we have our eye out on. With regards to your second question on South Korea yes, I mean as we saw when we participated in the H2 global green ammonia center that we won last year, there's always going to be a lot of talks of new projects and bids that, when people and pen comes to paper and people need to basically bid on a project, all we've seen, and I think the market undertakes is a huge rise in replacement costs for any new builds, particularly anything that's blue ammonia that's going to have new potential autothermal reformers, carbon capture sequestration, new plants. All these footprints are coming in at much, much larger checks than people have seen in the past for greenfield. So we think it's going to continue to put a constraint on the amount of new supply that's potentially coming to the market, but we think that South Koreans did a big step forward by trying to secure some tonnes, but they need to secure significantly more for their hydrogen targets for 2030 and onwards. And it's the same thing for Japan, where Japan has in late-March deadline for their contract for difference program, where they're also trying to secure tonnes for later this decade and into the 2031, 2032 period. So we're pleased after kind of look 2- to 3-year delay in terms of demands into those markets for Japan and Korea, more -- much more activity there, same with Singapore also, but on a smaller basis with the Singapore inside. And now with carbon border adjustment mechanism starting from next year and kind of an increase look politically into blue as well as green solutions, but also blue solutions for decarbonizing [ harbit ] to the base sectors in Europe, that's also supported for demand for this type of low carbon production. And the third question with regards to dividends, we're not giving forward guidance on dividends, but we will provide more color in the Capital Markets Day with our Q1 results. So we'll give a bit more color on that then.

Your next question comes from Alex Comer from JPMorgan.

Hello, can you hear me?

We can.

Just a couple of quick questions from my side. Just in terms of kind of run rate EBITDA, should we assume that Q1 is going to be now like a bump per quarter because you've got this, so we're going to get this extra $59 million. So just what is kind of run rate EBITDA? Is it $220 million for Q1 or something around that level. Where are we on the Algerian gas contract in terms of what -- when we hear on that? And then just in terms of -- you spoke very positively about the urea market at the minute and oil gas prices. But I suppose just to be sort of devil's advocate here. Is 2025 as good as it's going to get? Because obviously, we have a lot of LNG coming into the system as we go forward, that's obviously going to impact gas prices. You seem to be talking about moderating your -- or adjusting your capital allocation policy, which sort of suggests to me that you're looking to pay a lower dividend. Is that factoring into your thinking or not?

Sure. Let's try to take that 1 by 1. So I mean, I think, I've been around long enough in the industry not to fall into the trap of giving you a quarterly guidance, when I'm in the middle of the quarter. So I hope you'll forgive me, Alex, but I'm not going to give you an estimate for Q1 results. But what I'm going to do is help you triangulate around the fact that we had a big 1-month outage for Sorfert for ammonia urea in Q4. We had $158 million of EBITDA. And at the December prices, we transferred $59 million of EBITDA or just under $30 million of net income from Q4 into Q1 by delaying sales. But to kind of also help you triangulate and suggest Q4 average gas prices were $13.5 in MMBtu in Europe. Average ammonia prices were $614 a tonne and average urea prices were $377 a tonne for FOB Egypt, right? That's Q4 levels on average for the market. Where we're sitting at right now is about $4 higher in MMBtu on TTF gas that's in present. Ammonia is about $30 weaker at $575 for Northwest Europe today. But we think, as I mentioned in my prepared remarks that, that is heavily under bid given cash costs are at $675 on a marginal basis for European producers. So we do expect shutdowns imminently, and we're starting to see them in Europe, causing Northwest Europe to go up and urea prices at $455 a tonne FOB Egypt, which is a good $80 above the average for Q4. Now obviously, we were at lower prices in Jan and into early Feb, and we'll see how the next month or 2 progress. But it puts us in a good position and hopefully, with the Capital Markets Day, we could spend a bit more time on what we mean by run rate EBITDA. With regards to your second question, can you repeat it again, please?

Well, the second was really is 2025 -- Algerian gas.

Yes, yes, sure. So I remember. So Algerian gas, we've continued to provision at the levels that we expect to finalize that. We haven't announced the market a finalization of that gas contract. It has dragged on a little bit, but they have no different position than when we stood in our Q3 results in early November. And with regards to your statement and is it as good as it guess, I think, what we've been seeing is LNG is something to focus on and what the CTF gas do, that's a big driver of ammonia prices, et cetera. What we've seen is it's been a bit higher for longer, right? So like if you'd asked me 3 months ago, did I think gas is going to be a $17 MMBTU when we were sitting at $13, I did not expect that to be the case. We do see that now people are needing to refill stocks for next winter. So it gives good visibility over this next year, 1.5 years. Obviously, there are geopolitical matters that could affect things in either direction. So it's hard to say, but we do think, obviously, we -- what we're looking at is to try to grow our EBITDA from a manufacturing improvement perspective, from our commercial synergies, from our cost-cutting programs that we want to continue as well to deal with and volatility and we're adding with project harvest in 2027 and some of these other projects, more production capacity later in this decade. So we do think that project time lines for LNG exports only go in 1 direction and project time lines for ammonia and urea plants addition only go in one direction. They either are delayed or they're delayed, right? So that's basically some of the areas where we've seen and kind of have seen that kind of extended decline on the TTF gas price and you can see that also in the forward curve, it doesn't have that much backwardation on an immediate basis. And meanwhile, one of the reasons why we're sitting at today's pricing level is that we've seen resilient and very strong demand for Brazilian application, for Indian applications going to the U.S. application now, potentially European as well as Australian is that stock-to-use ratios are still below historical averages and corn prices are at elevated levels trying to incentivize more production to be able to feed and kind of combat weather disruptions in crop yields that we've seen in recent past.

Just 1 further clarification. Did you say that the tonnes delayed into Q1 were ammonia or urea?

They are combination of both the 239,000 tonnes are a combination of both. So I think it was a -- if memory serves me, I think a little over 100,000 was your ammonia and then urea was the balance of just around 140,000. The urea would get more of the price uptick than the ammonia, which has seen a little bit more of a sideways and slightly lower price, since December. But as I said, I think that we're pretty excited about ammonia pricing here in the next month or 2.

Your next question comes from [ Matt Hoch ] from S&P Global Markets.

I just have 3 questions. The first 1 is that now that Fertiglobe is separate from OCI, I'm wondering, if you're planning to become more of a spot on the ammonia market out of Egypt and Algeria and now that, that cargo was not destined for OCI. The second question is how does Fertiglobe expect the EUs CBAM policy is going to shift ammonia and urea export trade flows starting in 2026. Are you anticipating a shift to a greater reliance from your end on other export destinations outside the EU with the added cost of CBAM. And then the final question was just on the decline in production you mentioned in Algeria due to power outages at Egypt due to water issues. You mentioned in Algeria, you lost 170,000 tonnes of production in 2024 because of the power issues. Can you just outline the breakdown of ammonia versus urea in that 170 kt. And similarly, with the lost production in Egypt due to water issues, you said it was 30,000 tons of production loss in 2024. Can you just break down that 30,000 in terms of ammonia and urea.

Okay. So on the first question around separation from OCI and planning to become more of an ammonia spot exporter from Egypt, Algeria. So, we've always -- I mean we have been selling ammonia from Egypt, for example, into other markets and Algeria also into other markets, even while Fertiglobe had a majority stake from OCI. OCI was 1 of several customers of Fertiglobe and so definitely, Fertiglobe continues to look to trade more in terms of getting offtakes of supply, which we're able to place in better markets we have. Anywhere from 3 to 4 vessels on the market at any given time. So we're quite active into the European markets, whether it's to OCI or others. And by the way, we can also supply OCI in this market because they continue to be short. And as I stated earlier, in this type of environment, I think that you probably could see 5 million to 8 million tonnes of annualized ammonia demand just come out of Finnair here in Europe. Last year, most ammonia producers that could produce ammonia in Europe were producing ammonia because they were making a margin over TTF. Today, we've seen that for the first time inverse where you're $100 below the cash cost of production. So definitely, we'll continue to look to be active in those markets. And it's not just spot, by the way. We do have some kind of 1- and 2-year contracts into consumers on an index basis into various end markets. With regards to the second question on CBAM, I mean it's going to be interesting to see how trade flows developed, but I think it's an important reminder for us that CBAM's implementation in 2026 is going to be very minimal, right? It's going to be a small percentage of the overall effect. And basically, the idea is that from 2026 through 2034, the effect of CBAM is going to get larger and larger and free allowances given to European domestic producers of ammonia is getting it smaller and smaller. And what we anticipate is that there's going to be a pass on of that into the ammonia price, just like you have on duty paid versus duty unpaid ammonia today for some people that have to pay duties into ammonia and urea into Europe, we happen to be do the exempt out of Egypt and Algeria. That's going to continue on the duty exemption we have versus those markets. But on CBAM, I think a couple of points. 1, is we are the largest market share of urea and one of the largest market share of ammonia sellers into Europe today. Europe is a premium market for us. We continue to expect it to be a premium market for us. 2, is that, as you know, with our manufacturing improvement plan on energy efficiency focus and the fact that we have what we believe to be the youngest fleet of ammonia urea plants globally, it put us in a position to have a lower MMBtu per ton or lower CO2 charge per tonne, so that we could have that kind of arbitrage from a CO2 perspective or benefit versus other less efficient plants. So that's the major part of our improvement plan, not even part of the $100 million that we were targeting by this year in terms of manufacturing improvement plan is the CO2 savings of having kind of plants that can run at efficiency levels like Haroon mentioned earlier that we hadn't seen before. And with your third question, which is in regards to the external power outages and issues, I think we uploaded some information on the web with our management presentation on the investor presentation, can provide a bit more color on how the Algerian events affected our results. But I'll pass it over to Haroon to go through and help kind of triangulate that for you.

Yes. Just to answer that question. So as Ahmed mentioned, some good information on the -- in the investor deck. But roughly of that 170 kt is roughly equal between sort of the impact of ammonia and urea. And by the way, that's salable product. And to give a bit more background, historically, we've taken more power from the grid. The reason we call this an external issue. It has nothing to do with our plant. It's basically a power that comes -- that's provided by [ Sonelgaz ], which is the local power provider in Algeria and they have had issues with the grid. So to kind of minimize the impact of that external exposure, we brought in this new boiler. And that just means that the amount of power that we draw externally is substantially reduced from what it was before and that gives us a bit more confidence around the reliability of the plant and independence from some of these external issues.

And just to add to that, we're talking about, I think last year, we had 10 power outages that affected our results in Algeria. And what we want to do with this boiler commissioning now this quarter is to avoid that entirely, be able to withstand a small kind of power shock, even if we're going into kind of like an island mode and give us much higher reliability, and we feel very good about having brought this boiler online and makes a lot of sense, even though it did have some one-off extra CapEx to put it in place as reflected in our maintenance CapEx last year as we discussed.

Okay. So the boiler is operational?

Yes.

Right now we don't have any pending questions. We'd now like to hand back over to the Fertiglobe management for final remarks.

Thank you, Aleen. We have a few questions on the webcast. The first 1 is on the Sorfert Algeria gas pricing mechanism. If there's any update on the new agreement? Ahmed?

Yes. I discussed in one of the earlier questions, we'll provide updates once we've reached a final agreement with our counterpart. We don't have any differences in terms of estimation of the effect other than what we provided for in the provision back in November of last year, and we continue to provision at that same level.

Thank you. There is another question on the same topic on the provision How much was provisioned? For Andrew?

So in terms of provision, if you look at the EBITDA impact for Q4, that was $37 million. For net income, that was $16 million.

There is another question around expectations for sales volumes in '25 compared to 2024.

So we don't give guidance on sales volumes. But as we just mentioned in some of the earlier questions, what we tried to do, whether it's the water project in Egypt, or the boiler project in Algeria to kind of be able to withstand the external factors plus the manufacturing improvements. Our goal is to continue to kind of create value by producing more and consuming less gas in the process.

And a question, I think that's been answered throughout the call. What led to the shipment deferrals?

Yes, I think we've discussed that extensively.

And also a question around the dividend policy, which I believe you've answered. I think that all the topics that are covered. It's mostly around these issues. Okay. I think, Ali, if there's no further questions on the audio line.

Okay. Great. Well, thanks, everyone, for joining this call and look forward to catching up with the Q1 results.

Thank you for attending today's conference call. You may disconnect. Have a wonderful day.