INDUSTRY INSIGHTThought Leadership

Fertiglobe: A Producer of Essential Nitrogen Fertilizer and Early Mover in Clean Ammonia

Ahmed El-Hoshy, CEO, Fertiglobe, speaks to GPCA Insight about the company’s growth since its formation, its resilience in time of growing market volatility and its plans to grow its clean ammonia offering to reinforce its role as a leader in the global energy transition

Since Fertiglobe’s establishment in 2019 as a joint venture between ADNOC and OCI, how has the company performed over the last three years and what have been some of your main challenges and successes?

Since our establishment, we have achieved several milestones and significant growth, developing into a regional champion with global reach. Today, we are responsible for approximately 10% of the combined ammonia and urea seaborne exports globally, establishing ourselves as a crucial link in the global agriculture industry. We are also the largest producer of nitrogen products in the MENA region.

Over the past three years, we successfully completed our listing on the ADX in October 2021, which raised USD 795 million and saw high investor demand across the retail and institutional tranches with oversubscription levels in excess of 22 times. The IPO was a significant milestone in our growth journey and has enabled us to pursue further diversification and growth opportunities by providing access to new sources of capital and key investors. Since listing, it has been very rewarding to see our stock perform well, as we continue to witness strong appetite from local, regional and international investors.

Recently, we also achieved investment grade credit ratings by S&P, Moody’s and Fitch, supported by an attractive cash flow profile and a prudent financial policy. In addition, we were included in the FTSE EM Index in June 2022, following our March 2022 inclusion in the FTSE ADX 15 Index, representing the 15 largest and most liquid companies on the ADX. All these successes are underpinned by our continuous delivery of excellent results across the past few quarters, with strong performance across all key metrics. Given our free cash generation, we announced cash dividends of USD 750 million for H1 2022, above our previous guidance of at least USD 700 million, which will be payable in October 2022.

Of course, challenges remain given the current volatility of global markets and we continue to monitor changing global geopolitical dynamics. Fortunately, our strong competitive advantages, including our strategically located asset base and global distribution capabilities, and our long-term gas contracts, enable us to provide attractive cash generation through the cycle.

With the theme of this year’s GPCA Agri-Nutrients Conference being ‘food security’, what is the role of the agri-nutrient industry in achieving the twin goal of food security and sustainability?

Food security is one of the most pressing issues of our time, with the need to increase food production to keep up with rising demand. Consequently, this issue is at the heart of our operations and our sustainability mission. Now, more than ever, given global supply shortages and disruptions, the fertilizer industry, including players like us, have a crucial role to play in supporting global food security and sustainability by enabling farmers to increase crop yields and help feed the world’s ever-expanding population.

Specifically, our products, including nitrogen fertilizers make a significant contribution to sustainable crop production, given that nitrogen is an essential element for plant growth and development and accounts for approximately 70% of any crop’s nutritional needs. It is required in every crop cycle and cannot be substituted, with nitrogen fertilizer making up 60% of global fertilizer usage.

Fortunately, our region has not been significantly impacted by supply chain disruptions and shortages, so we are able to continue to produce essential fertilizers and supply our global customers. Moving forward, we are focused on running our plants efficiently to fill supply gaps that may arise and as such help address potential grain shortfalls and overall food security concerns.

What are your plans around hydrogen, green ammonia and the clean energy transition?

We continue to execute on our hydrogen strategy to drive future growth and sustainability. As an early mover in clean ammonia, our focus is on capturing opportunities in the hydrogen economy and expanding our clean ammonia portfolio. We are continually looking for new projects to invest in as well as partners to work with that will reinforce our role in the global energy transition and strengthen our position as an enabler for the hydrogen economy. Already, in the UAE, we have partnered with ADNOC, ADQ, Mitsui and GS Energy on a low carbon or blue-ammonia plant in Ruwais, and we have entered into a partnership with Masdar and ENGIE to co-develop a globally cost-competitive emerging green hydrogen facility in the UAE. We have also partnered with Scatec, Orascom Construction and the Sovereign Fund of Egypt to develop up to 90,000 tons of green ammonia in Egypt, leveraging existing infrastructure and value chains.

While we have historically been natural gas based, our aim is to move to products based on renewables, i.e., from “grey” to “green”. In doing so, we will decarbonize our footprint including our food, fuel and industrial feedstocks end markets by focusing on low and no carbon hydrogen. This remains at the core of our long-term ESG strategy and value creation model, which has critical elements in the ammonia value chain in place, benefiting from our existing ammonia production and distribution infrastructure. Among our peers, we are best placed to capture huge growth potential in the hydrogen economy and be an ESG leader. In the future, we will continue to spearhead the global shift to blue and green ammonia.

According to the World Bank, overall, fertilizer prices are forecast to rise by 69.2% in 2022 followed by a decline by 11.4% in 2023. How do you assess this forecast and how would it impact Fertiglobe and the agri-nutrient industry in the GCC region?

Forecasts always tend to be wrong one minute after they are published, and it is hard to speculate in this industry, but despite higher prices this year, the outlook for nitrogen fertilizer demand is supported by critically low grain inventories globally as well as decent farmer profitability in key grain exporting regions. In addition, while there has been some demand destruction on the industrial side, the overall market for ammonia and urea remains tight, which enables industry players with favorable positioning on the global cost curve to maintain higher sales volumes and strong profitability.

 Beyond this year, given our operational excellence program and our young, world-scale strategically located production assets, we are well-positioned to capture the highest netbacks through the cycle. Additionally, the outlook for the fundamentals of our nitrogen end markets continues to be underpinned by tight supply, high marginal costs in the industry, healthy farm economics and low grain stocks globally that incentivize the use of nitrogen fertilizers.

How do you expect factors, such as surging input costs, supply disruptions caused by sanctions in Belarus and Russia, and export restrictions in China, to impact the agri-nutrient industry in the GCC in the future?

While we continue to monitor global geopolitical issues, we have not been impacted by supply disruptions, and as a commodities business, inflation is not a major problem for us with labor costs not being a major cost component. Additionally, we are a net beneficiary of a higher global gas price environment and have a significant competitive advantage with favorable long-term gas price supply agreements. While some producers in Europe and Asia have been forced to curtail capacity due to natural gas shortages, GCC-based companies with higher visibility on feedstock costs, such as Fertiglobe, tend to have more defensive cash flow generation. Lastly, Chinese government measures to curb exports until at least H2 2023 and prioritize domestic supply, are expected to cap 2022 exports, adding to the global supply tightness. Medium term, Chinese exports are expected to remain low due to a stringent environmental policy and the prioritization of energy for domestic use therefore supportive for overall market dynamics.

Moving forward, which markets would Fertiglobe be focusing on for expansion and growth? What are your plans for the African market, where your activity is already successful and well established?

We are always looking to leverage our market-leading position by growing third-party traded ammonia and urea volumes and increasing our physical presence and distribution networks in high growth markets. We continue to explore opportunities for expansion and ways to sustainably grow our business. Two key pillars of our growth strategy are operational and commercial excellence, as we strive to maximize our output while lowering our carbon footprint per ton produced and increasing our reach and netbacks supported by a world-class commercial platform. We have recently supplied several urea shipments to key importers in Africa, including Ethiopia, and plan to increase our presence there, leveraging our North African assets. Our current operating footprint across MENA offers exciting potential with the region well-placed to take advantage of green hydrogen and ammonia demand due to abundant wind and solar resources for energy generation. Our assets enjoy existing access to the entire hydrogen supply chain and are ideally located near key bunkering hubs on the busiest shipping lanes in the world, positioning Fertiglobe’s portfolio very favorably to capture the hydrogen potential at minimal capex compared to greenfield projects.


Is there anything else you would like to add?

Our main priority to execute on our strategy for growth has remained unchanged post-listing. Moving forward, we will look to create even greater long-term value for shareholders, keeping decarbonization and sustainability at the core of our strategy. We will continue to look for new avenues of growth and expansion, putting our business, shareholders and the safety of our people, first.