Fertiglobe plc (FERTIGLB) Earnings Call Transcript & Summary

Welcome, everyone, and thank you for joining the Fertiglobe Q2 2026 Results Earnings Call. My name is Gabrielle, and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, Rita Guindy, Vice President of Investor Relations and Communications at Fertiglobe. Please go ahead.

Thank you, Gabriel. Good morning and good afternoon, ladies and gentlemen. Thank you for joining Fertiglobe's Q2 and H1 2026 Results Conference Call and Webcast. With me today are Ahmed El-Hoshy, Fertiglobe's Chief Executive Officer; Haroon Rahmathulla, Chief Commercial and Growth Officer; and Andrew Tait, Chief Financial Officer. On this call, we will review Fertiglobe's key operational events and financial highlights for the quarter, as well as a discussion of our outlook for nitrogen markets, 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 and webcast participants can also download it by click on the link at the top of the screen. As always, please be reminded that any forward-looking statements made on this call may involve risks and the actual results to differ materially from those 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. I'm pleased to kick off by highlighting our commendable safety performance with a 12-month rolling recordable incident rate of 0.02 per 200,000 work hours as of June 30. A great result that came in at a significantly improved reporting culture, and despite some of the geopolitical issues we've seen in past. Furthermore, I'd like to share that as of June 10, 2026, we reached 1 year without any reported injuries across Fertiglobe supported by more than 9,000 safety observations done by the team year-to-date. While this performance compares very favorably against industry benchmarks, safety continues to be a key focus area for us, and we must not fall into the trap of complacency. Instead, we remain committed to the highest HSE standards across our platform. Moving on to our financial results. Fertiglobe today reported Q2 2026 revenues of $1.1 billion, up 92% year-on-year and 19% higher than the Q1 2026 level. Adjusted EBITDA was $371 million, more than doubling year-on-year and up 9% compared to the previous quarter, while adjusted net profit attributable to shareholders was $145 million, up 12.5x year-on-year and broadly flat relative to the previous quarter. This performance reinforces Fertiglobe's resilience and was supported by our company's strategic geographic diversification, established trading platform and agile logistics network, which all helped us maintain customer supply during a very critical time while continuing to capture value in a volatile market environment. For the 6 months of 2026, we reported revenues of $2 billion, up 59% from the first half of 2025. Adjusted EBITDA of $713 million, up 63% year-over-year and adjusted net profit attributable to shareholders of $289 million, up 3.4x compared to last year. Total sales volumes were up 9% year-on-year, supported by our trading arm, which helps maintain supply to our customers during the unprecedented situation at the Strait of Hormuz. We tested the feasibility of exporting product out of the UAE through various channels. And despite the constraints, managed to ship about 56% of our production. Note that for Steel production itself was impacted by a 3-week stoppage on one of our lines to perform critical maintenance in June and is since operating at higher and maximum rates. On the operational side, we continue to see record utilization in Egypt and Algeria in Q2 2026, leading to an overall urea utilization rate of 92% for the first half of 2026, which is a significant improvement compared to the 81% we saw last year, demonstrating tenable progress on the company's manufacturing improvement plan. As you may recall, in Q2 2025, we experienced gas curtailments in Egypt. This year, we are pleased to report that we've not faced any gas supply issues in Egypt allowing us to capitalize on the benefits of this manufacturing improvement plan. Our strong year-to-date performance and disciplined capital allocation supported our proposed dividend increase of at least 20% year-over-year equivalent to a minimum $150 million or $0.67 per share subject to Board approval in September and payments in Ocyober of 2026. Including this proposed dividend distribution, which implies an annualized 5% yield, Fertiglobe have returned more than 50% of its IPO market capitalization to shareholders after this payment. By way of update, all our contingency -- established contingency plans have been reactivated following the recent conflict reescalation over the last few weeks, and we are well equipped to continue delivering utilization of our global production and distribution system despite the challenges with access to alternative export routes and additional storages in the UAE and elsewhere. With this, I'd like to hand it over to Haroon to discuss our commercial performance as well as the outlook for nitrogen and ammonia markets in more detail.

Thanks, Ahmed. Let me start by discussing the highlights of our commercial performance in the second quarter of 2026. Fertiglobe's total own-produced sales volumes of 1.2 million tonnes for the quarter was down 3% compared to Q2 2025, driven by better production in Q2 2026, offset by inventory buildup at Fertiglobe. Last year's own produced sales volumes were impacted by lower operating rates, mainly driven by external factors in Egypt. Q2 2026, however, showed resilient performance with strong operating rates in both Algeria and Egypt. This offset some of the export challenges and inventory buildup out of the UAE. Q2 2026 results do not include 100,000 tons of urea sales shifting into early Q3 2026. We have seen a visible increase in our third-party traded volumes which was up in Q2 2026, up 87% year-on-year as we strive to fulfill customer commitments to our wide-reaching commercial platform amid some of these regional constraints. This led to improvement in our total volumes up 9% year-over-year, a good result in regionally constrained and uncertain context. For the 6 months of 2026, Fertiglobe's own produced sales volumes were 2.6 million tons, down 8% year-over-year driven by lower urea and ammonia sales of 3% and 24%, respectively. The first 6 months were also impacted by trade disruptions out of the UAE and also a high base effect as H1 2025 included to [ 239,000 tons ] deferred from 2024. Once again, due to strong traded volumes, our total sales volumes were broadly flat year-over-year. Now moving on to nitrogen market developments and the outlook for our products. Ammonia and urea prices averaged $723 per tonne FOB Egypt and $866 per ton CFR Northwest Europe in Q2, respectively, supported by tight nitrogen markets following the onset of the conflict in the Middle East, which constrained the export of 21% of global ammonia and 30% of global urea exports typically passing through the Strait of Hormuz. In the urea market, supply shortages caused by the conflict escalation coincided with continued buying across several key markets, which led to urea prices peaking in the high $800 per ton FOB Egypt, $900 per ton FOB Middle East in April 2026. During Q2, Europe, Australia and the U.S. were actively purchasing urea to cover in-season demand. typically around 60% of Australian purchases happened between April and July, while the U.S. buying season in May. India also tendered for products twice in Q2 to support local stock buildup and to offset urea production losses from LNG shortages in March. During the quarter, India secured 4.2 million tons of urea imports across both tenders. The first tender for 2.5 million tons achieved an average L1 price of per ton demonstrating India's ability to pay duty times of need. Meanwhile, China was also absent from the international market for much of Q2 with the first export guidance issued in mid-May. Exports to date have been limited to just 500,000 tons up to June and are expected to average 5.5 million tons for the year compared to 4.9 million tons in 2025. As the quarter progressed, urea markets transitioned into the typically slower months as expected, which, combined with poor urea affordability saw prices getting to the low [ $400s per ton ] by end of June. By July, the more normalized price environment and support from grain prices resulted in vast improvement to urea affordability back to the 2021, 2025 average. More recently, Packet has seen a further uptrend in pricing with FOB Egypt, reaching $555 per ton in mid-July, a combination of improved affordability levels and grain price support as stimulated purchases in Europe took our deferred demand. In France, buyers have also seen support from government subsidies, providing farmers with EUR 50 per ton subsidy for nitrogen products between July and September 2026. Egypt also saw an improvement in the urea export tax, which was reduced to 10% from the earlier $90 per ton. In July Russian duties on nitrogen and phosphate products into the EU have risen to EUR 60 per ton by way of a duty from EUR 40 per ton previously. The duty will continue rising annually, reaching EUR 315 per ton by July 2028, with a declining import threshold and is applied on top of the existing EU urea import tariffs of 6.5% which is still applied to Russian product. In July, also Brazil has entered its urea buying season, which will continue across the second half of the year. India is also expected to issue a further urea tender for 2 million to 2.5 million tons in the coming weeks as it ramps up local sales for the upcoming season with the next European season also due to start towards the end of Q3. Long-term urea demand growth, excluding China of 11.4 million tons is expected to materially outstrip capacity growth 9.1 million tons by 2030, supporting a structurally tight market. Moving on to ammonia. The tightness in the ammonia market tightness amplified at the start of Q2 as supply shortages worsened with the loss of Middle East exports and ongoing buying of several major markets. Prices reached over $900 per ton CFR in Northwest Europe across May versus $667 per ton in Jan '26 and $435 per ton in May '25, as the market remained persistently tight with the loss of [indiscernible] despite ongoing ramp-up of new capacity in the U.S. Ammonia prices in the West moderated $700 per ton as the market moved into the slower summer season. However, over the last week, TTF gas prices in Europe rallied to over $20 per MMBtu due to increased concern over LNG shortages in the Middle East and Europe's need to refill gas stocks before the upcoming winter. Today, gas prices remain elevated at $90 MMBtu with the European marginal producer cost at $730 per ton excluding CO2 above current CFR Northwest Europe prices. In C-band-related markets, supply options continue to remain limited with high country default values on the import of ammonia from the U.S. until verification is established. Last week, the U.S. trade representatives office also exempted Trinidad, ammonia import duties on product into the U.S., which will encourage the redirect on trinidad ammonia flows back towards the U.S. Longer term, low carbon ammonia is a key decarbonization enabler in the fertilizer, chemical, marine, power generation sectors with growth potential across multiple geographies. Finally, I would like to reemphasize our unique global positioning to navigate challenging times and to capture value in the current market environment, supported by a strong order book and robust commercial capabilities. With that, I would like to hand it over to Andrew to discuss the financial results in more detail.

Thanks a lot Haroon. So let me start with some highlights of our performance in Q2 '26, which validated Fertiglobe's resilience against difficult market conditions. The Q2 2026 revenue of $1.1 billion was up 92% on year-on-year basis, which is mainly driven by higher prices throughout the quarter. Our adjusted EBITDA was up 111% year-on-year to $371 million in Q2 2026, resulting in an adjusted EBITDA margin of 34.2% versus 31.1% last year. Adjusted EBITDA margins on own reduced volumes was 40.2% versus 37.7% year. Our Q2 2026 adjusted net profit attributable to shareholders was $145 million. That's up 12.5x year-on-year compared to with $12 million in Q2 2025, and that's driven by lower interest costs, lower taxes following the tax rate adjustment at Fertiglobe and the EBITDA improvement as a result of the higher prices and volumes. H1 2026 revenues of $2 billion were also up 59% on a year-on-year basis, and that's mainly driven by higher prices. And our adjusted EBITDA is up 63% year-on-year to $730 million in H1 2026, leading to adjusted EBITDA margins of 35.6% versus 34.7% same period last year. Our adjusted EBITDA margin for our own produced volumes was 44.4%, that's versus 41.7% in the same period last year. H1 '26 adjusted net profit attributable to shareholders was $289 million, that's 3.4x year-on-year comparison to the same period last year, which was $85 million. Now moving to the balance sheet and cash flow performance. As of 30th of June 2026, Fertiglobe reported a net debt position of $621 million, implying net debt last 12 months adjusted EBITDA of 0.5x. That's down from $1 billion as of end of December 2025, allowing us to balance capital discipline and value-led growth while providing sustainable shareholder return. Our consolidated free cash flow before growth CapEx amounted to $320 million in Q2 '26, compared to $94 million in Q2 '25, reflecting performances for the quarter, working capital changes and maintenance CapEx as well as taxes and net interest payments. Our total cash capital expenditures, including growth CapEx were $34 million in Q2 2026, compared to $42 million previous quarter. In H2 2025, of which $26 million was related to maintenance capital expenditures compared to $31 million in the same period last year. Our consolidated free cash flow before growth CapEx amounted to $555 million in H1 '26, compared to $307 million in H1 '25, reflecting performance for the quarter, working capital changes and maintenance CapEx as well as taxes and net interest payments. Important here to note that the consolidated free cash flow does not reflect the accrued cash cost at Sorfert, amounting to $46.4 million for Q2 '26 and $82.5 million for H1 2026, respectively. Our total cash capital expenditure, including growth CapEx was $53 million in H1 '26 compared to $66 million in H1 '25, of which $36 million was related to maintenance expenditures, compared to $49 million in the same period last year. You also have noticed that on maintenance CapEx, we're still well below our guidance of $145 million to $170 million on average for '25 to '26 as we continue pushing through the net -- and given the backloaded nature of some of these investments, we therefore expect to close the gap in the second half of the year. I'll now hand back to Ahmed our outlook and concluding remarks.

Thank you, Andrew. So to conclude, the reescalation of the conflict in the Middle East has further disrupted global fertilizer supply and prices have started to reflect that with an over 20% increase in urea pricing in just the last few weeks. With that, Fertiglobe's role as a reliable provider of essential nitrogen fertilizers and products remains critical to contributing to agricultural productivity as well as global food security, supported by established contingency plans, including increased storage and alternative logistics routes as well as a global production distribution base. We are pleased with the tangible and measurable benefits of the manufacturing improvement plan, which have been critical to offset temporary and uncontrollable disruptions in our regular activities. And to close, I'd like to again reiterate that safety remains our highest priority and remain fully focused on protecting our people, contractors and assets while maintaining safe and reliable operations. We can now open the line for questions.

[Operator Instructions] Our first question is from Ray Musa from QIC Asset management.

I have a couple of questions from my side. on the production, the production exported from the UAE, can we assume a similar rate if this Strait continues to be closed? And on the utilization rates for Egypt and Algeria, can you provide us a breakdown? Thus on the tax, the nitrogen tax in Egypt, they changed it to a 10% tax, what effect do you expect in the third and fourth quarter? And finally, on the CapEx, can you give us guidance on the full year 2026 and 2027 CapEx?

Yes. So the 56% we had in Q2 as I shared in the earlier remarks was based on the production we had in Q2 in [indiscernible] in Abu Dhabi. So we had guided to under 50% in discussions with the market during Q2. We ended up above 50% to 56%, driven also by some additional shipments in June, but also the denominator was a bit smaller because we did have a 3-week critical maintenance outage that happened on Fertil 1 in June. So when guiding for the future, it's difficult to tell given the volatility around the situation. We're going to obviously try to get on as much as possible. I think still in the 50% range, under 50% range would still be where we'd guide to in general. But where we find opportunities to export more, we will accelerate that. And that's kind of what happened really in the May and June period. To your second question on the utilization rates in Egypt and Algeria. They were very strong. So they were kind of close to 100% for urea. And when you think about the overall or good quarter. We're probably in the high 80s overall. And first because of this outage and because of the early April outage that we discussed during our Q1 results we were kind of in the 70-ish percent range. With regards to the nitrogen, the kind of this export tax, when it was announced a 90-day export tax taking place in the beginning of May. So it should be coming to completion at the end of July. But that tax was changed from $90 to 10% effectively, I think, the netback of the product that is sold. So that makes sense, right, that it comes down $90 was when they saw $900 urea in April. We saw urea come down into the 400s in June. So it went to 10%, so that reduced the burden, but we had a decent part of May and June affected by this $90 tax. We're going to have to wait to see news out of Egypt. We're hopeful that the 90 days is when this is finalized. We're still waiting to see kind of the official confirmation of that by the Egyptian Government as a temporary measure. The last one was on CapEx guidance for this year and next year. So maybe, Andrew, you can go through those two.

Yes, sure. Thanks Ahmed. So as just sort of mentioned on the line, our maintenance CapEx, we're below our $145 million to $170 million on average for '25-'26, which we indicated at last year's Capital Market Day. But we intend to remain within that envelope to the end of the year. And additionally, if we look ahead to next year, we indicated a range of [ $105 million ] to $125 million to maintain CapEx year-on-year after this year, and that is still very much in our forecast. So fairly unchanged from our Capital Market Day guidance last year.

Okay. That was helpful. Just to follow up on the production volume. Can you expect similar utilization rates till the end of the year?

So we don't guide on utilization rates in general. But I think one thing that Andrew mentioned around the CapEx, if you look at our year-to-date CapEx on the maintenance side, compare that to our guidance for the year that we have a bit more back-ended CapEx spending, which could affect some utilization rates. But otherwise, we don't actually give guidance around utilization rates, pricing are earning.

Our next question is from Rene Selouan from Jadwa Investment.

I'm wondering, given the much higher year-on-year performance, despite the challenges that occurred, why wasn't the dividend growth in line with the free cash flow growth and the results of the company in the first half?

Rene thanks for the question and the comments, and I could have expected this one from you, I think. So the consolidated free cash flow was $555 million. But as we said before, that's a consolidated figure, consolidating all of our minority. So when you basically look at it in Algeria, we have the product type, which is the minority and -- we have a 45% minority in Egypt. When you look at those minorities together, that's about $210 million out of the $555 million. We do adjust $210 million. And then when you look at the gas accrual we have because we continue to have higher payables for the gas accrual for the higher gas price, that's an $83 million increase in payables that actually to be paid and it's not our cash because it's going to have to go to the Algerian government. So the $210 million was $83 million for the gas approval. That alone takes you, [indiscernible] about $300 million from that figure. And then growth CapEx, we had in the first half, $16 million of growth CapEx. And then the portion of Acromas, which is associated with the higher earnings at Algeria is around $60 million. So if you kind of go through all of those and you make those reductions, it comes out to $186 million. We guided to at least $150 million in some of the -- and we'll confirm that number in September, as we said, but also has to do with kind of where [indiscernible] and timing of when they get upstream, where there can be some differentials. But generally, we do continue to look to adhere to our payout ratio. I just wanted to give you that bridge on the numbers.

Our next question is from Ram Kamath from Barclays.

Your trading contribution has improved substantially in this year, both 1Q and 2Q. So perhaps, could you just talk through what -- I mean, contributing to this increase and -- is it something you would focus on and expand further? And how should we see this in the second half or in general? And second, specifically on the profitability, the headline EBITDA margin was impacted by understandably higher largest cost and conflict related and export duties, as you have mentioned. But could you provide more detail on this? Should we consider this country related cost as one-offs or they are likely to continue until the situation in West Asia normalizes?

Yes. Thanks for your question. As your point on the trading profitability is a good one and basically highlights the strength of the commercial platform. So as we look to meet our commitments in globally, especially, let's say, in Australia, as you may remember, we acquired a distribution business in Australia last year. And as we looked this year during the conflict, to honor those commitments, that's where our trading team did a very good job of sourcing product at a very competitive price. And then basically on selling that to some of these short positions that we had in Australia, mainly and some of the other parts of the world. So it's more, I think, a testament of the adaptability of the platform, where we do have the shots that need to be fulfilled and sourcing competitively, whether that's from Africa or parts of the world to meet that short commitment. Yes, Andrew, do you want to take the next one?

Yes, sure. Thanks. Just taking this -- so looking at those one-off costs, so they are related to the complex. And we see them really essentially as one-off adjustments as a mixture of safety purposes at the beginning of the quarter, and there were some exceptional costs that essentially arose at that beginning of that conflict. So if I sort of break those down, we saw about sort of $6 million from flaring to reduce [indiscernible] for safety reasons in the early period. Then we've had some exceptional logistics in temporary warehousing costs of around about $9 million in some exceptional insurance costs. So, essentially, what we see is these are really related to sort of one-off safety measures at the earlier phase. So we don't really see those carry through into other quarters after this.

Our next question is a follow-up question from Ravi Musa from QIC Asset Management.

Just two follow-up questions. One on the UAE production, much volume did you export in July? And another is on Egypt. Are you seeing any issues in terms of gas supply in Egypt?

We don't disclose the volumes individually that we export out of different locations. So I wouldn't be able to give you on to give you kind of a percent of growth of both our typical growth for actual production. As we said, the 56% and actual production was paced by the downtime in June and the downtime in early April. With regards to the gas in Egypt, the gas been fine and Egypt Government has done a good job of [indiscernible] additional gas and balancing the system, and we have had no interruptions from gas.

Do you expect any interruptions or any effect from gas? Or do you think it will stay the same?

Typically, in the summertime, and we're sitting in kind of late July, early August. So I can't forecast, I think the government has been really focused on securing pipeline gas imports as well on cargo, the growth relying on higher renewable capacity coming on stream in Egypt. So I think we've done a good job, but it's still a deficit market. So we'll see what happens over the next month, 1.5 months. But so far, we're well underway through the summer and the hot period and they continue to support all the gas that the fertilizer sector needs.

Our next question is from Abdessamad Raghibi from Bernstein.

So I'm quite curious about how do you see diversification. I mean, we know that diversification has paid off during the conflict. And I mean you mentioned that the commercial platform is working just fine. So I'm really wondering whether is this something a theme that Fertiglobe is looking to, I mean, beyond 2026, of course?

I mean it's a good question. As we think about our growth 23 strategy and is our overall focus on we're balancing continued dividend descriptions with growth, including disported ADNOC and XR warehousing, new investments or any growth investments, we continually make areas to expand geographically. We've reviewed many, many opportunities over the last several years. As Haroon mentioned, we bought away through distribution assets in Australia. We like that market a lot. And there are other markets that can be very interesting for us, and it adds for resilience and flexibility to be able to deliver from different production points as well as having kind of downstream reach our second pillar of our Growth 2030 Strategy is getting closer to the customer. So I do think over time, you could see more geographic diversification as well as potentially some additional downstream, we're adding extra ammonia in UAE with project harvest, but also especially downstream uses of ammonia, whether inside the Middle East or in the Middle East or abroad.

We will move on to next question. I will now hand over to Rita. Please go ahead.

Thanks, Gabriel. Thanks, everyone. We will now go over to the webcast questions we received. The first one is on gas costs. What gas costs can we assume across Egypt, Algeria and UAE for the second half of this year.

Yes, it's a very good question. We can't predict the gas cost because as a reminder, we have gasoline -- sorry, product linked gas pricing effectively in both Egypt as well as Algeria. So product prices are very strong. We'll see a higher gas cost. And so to give you a sense, in Q2, our overall gas price was $6 an MMBtu for Q2. And if you include the [indiscernible] of Algeria, it was actually $8 MBtu. But that's with the higher pricing that we saw in Q2. So again, it's that right way risk. If we do see stronger pricing like we've been witnessing here in July, persistent, we're in the mid-500s for urea, ammonia, we're seeing going close to $600 in the Air Gulf and Northwest Europe in the 700s and going up. That could result in some higher gas costs, but that's more than absorbed by or higher product pricing and leading to higher margins in those scenarios.

Thanks, Ahmed. And then there's some questions on Project Harvest. The first one on whether when in 2027, the first production is expected and when the plant is expected to reach full capacity?

Yes. So we're -- when we look at Project Harvest, it's well underway. So we're looking to be more towards the latter half of 2027 where we sit today. But for the construction inside battery limit project itself is going swiftly. We've actually reported over 5 million man hours without a lost time injury. So we're very happy to have that. And we're 90% construction complete as we stand for the plant itself. And with regards to full capacity, I think the question is when will it reach capacity, there will be a ramp-up period as typical for new production plants. So we won't start off right away at 100% on utilization base.

Thank you, Ahmed. And then on project CapEx, how much has been spend, how much is left to spend in the second half of this year and '27 and whether that's a total project cost or only Fertiglobe share, the $500 million?