OCI : N.V. Reports Q1 2019 Results

'We maintained our disciplined sales approach to weather the fluctuations of the fertilizer markets during the first quarter and positioned ourselves appropriately for the delayed application season in the US and delayed purchasing in Europe: we held back volumes when prices started to decline, and as a result our inventories reached record levels at the end of March.

In the past weeks seasonal demand has kicked in and our sales volumes have rapidly accelerated. We have shipped record volumes in April and May and for most of our products at higher prices than we would have achieved a few months ago, confirming the merits of our commercial strategy. Across the industry we also expect the ending stocks of nitrogen fertilizers in our markets to reach levels below the average of recent years by the end of June.

We achieved these significant additional shipments thanks to the strong execution of our operational teams and the logistical advantages of our operations. As a result, we expect the low first quarter to be followed by a record second quarter and continue our path of deleveraging.

In the US, there are currently significant bottlenecks for the transportation of product from the US Gulf into the Midwest as a result of heavy congestion on the rivers and railroads. We are able to capitalize on such issues due to our unique in-region positioning in the Upper Midwest. Our warehouses are near our end customers at the heart of seasonal demand, capturing the logistical premium as compared to product transported into the Midwest from New Orleans (NOLA).

In Europe, we are on track to ship record volumes of CAN during the second quarter and reach a higher level of sold CAN volumes in the first half of 2019 than during the same period a year ago, leveraging our robust logistical organization and proximity to key end markets.

In addition to the reduction in inventories, our production rates are looking healthy in the second quarter. Sorfert completed a major planned turnaround during the first quarter, when a new waste heat boiler was installed and other maintenance work was performed. This is expected to result in improved operating rates. After the turnaround, Sorfert's standalone ammonia line has already been able to run close to its maximum design capacity. Natgasoline is now running well following a shutdown due to utilities supply issues, which have been fully resolved. We expect these two plants to contribute significantly to our results during the remainder of the year.

We expect further boosts to our production within the next few months. BioMCN's second line is in its commissioning phase and is preparing for start-up in June, and the c.13% methanol capacity increase at OCI Beaumont is on track for mid-year.'

Gas Markets

Gas prices have moderated in both Europe and the United States since the high levels reached in 2018. We expect to see the full benefit of the materially lower gas prices in Europe from the second quarter onwards, benefiting from a combination of spot buying and hedges for part of our natural gas requirement for our European operations.

In the United States, we continue to benefit from low gas prices and hedges, with costless collars between around $2.40 to $3.50 for the majority of our gas needs at OCIB and Natgasoline, and prices below $2.40 for almost 70% of IFCo's requirement for the remainder of the year.