Good morning and good afternoon ladies and gentlemen. Thank you for joining Fertiglobe's Q2 and First Half 2025 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 T he end of the course.
The presentation we will discuss today can be found on our Investor Relations website and webcast. Participants can download it by clicking on the link on the screen. As always, please be reminded that any forward-looking statements made on this call may involve risks and the actual results could differ materially from those statements. With this, I will now hand it over to Ahmed El-Hoshy, CEO of Fertiglobe.
Thank you, Rita, and welcome everybody to today's call. As usual, I'd like to start with safety, which continues to be our top priority, and we're pleased with the ongoing improvement in our reporting culture and safety records, which align well with our goal of fostering a zero injury culture. While our 12 months recordable incident rate of 0.02 incidents per 200,000 work hours at the end of June 2025 compares very favorably with our industry, we continue to pursue further improvements in operational and process safety. Our aim is to uphold the highest HSE standards to ensure safe, sustainable, and reliable operations across our entire platform for our employees and contractors.
Separately, I'd like to announce that to support Fertiglobe's announced growth strategy and to further streamline our structure, Haroon Rahmathulla's portfolio has been revised to focus on key strategic pillars, commercial investments and projects, mergers and acquisitions, investor relations, communications, and sustainability. Reflecting this dedicated focus, Haroon's job title has changed from Chief Operating Officer to Chief Commercial and Growth Officer. Please join me in wishing him all the best in this new role. As a result, Andrew Tait, Fertiglobe CFO, will report directly to me, as will Geert De Raedemaecker, our VP of Manufacturing, who's been leading our manufacturing improvement journey over the last couple of years. Moving on to our financial results, Fertiglobe today reported Q2 2025 revenues of $566 million, up 14% on a year-over-year basis, but 19% below Q1 2025 levels.
Adjusted EBITDA of $176 million, up 26% year-over-year, but down 33% on a sequential basis quarter over quarter, and adjusted net profit attributable to shareholders of $12 million, 68% higher year-over-year but down 83% compared to Q1 2025. Our results for the quarter were impacted by external factors, mainly gas supply disruptions in Egypt leading to own-produced volumes in Q2 of 1.26 million tons, 10% below Q2 2024 and 18% below Q1 2025. During the first half of 2025, our revenues were $1.26 billion, 20% higher than H1 2024, while adjusted EBITDA was $437 million, up 36% year-over-year, and adjusted net profit attributable to shareholders came in at $85 million, reflecting an 18% reduction compared to last year due to an FX gain in H1 2024. Excluding that FX gain, we would be up three and a half times year-over-year in H1 2025.
For the first six months of 2025 our own produced sales volumes were down only 1% compared to H1 2024 levels despite the external factors just mentioned. Adjusting for these external factors and turnarounds, our own produced sales volumes in Q2 2025 would have been 4% higher year- over- year and volumes in H1 would have been up 7% higher year- over- year, reflecting our manufacturing improvement journey which is the first pillar. As we discussed in our Capital Markets Day in May of this year, the downtime experienced during the quarter enabled us to execute some critical maintenance works and defer more extensive turnarounds to a later point. As a result, we are now expecting maintenance CapEx for 2025 to be towards the lower end of the previously communicated guidance range of $145 million- $170 million for 2025.
Over the past six to nine months we've delivered strong operational gain in Egypt, especially at EFC, generating nearly $35 million in recurring annual pre-tax benefits or savings per ton of urea of approximately $22 per ton. This came from higher ammonia and urea capacities, improved energy efficiency, and lower power and water consumption. In July we captured a one-off gain of over $5 million by sustaining full urea production during the gas supply disruption through enhanced energy usage and internal product optimization. I'd like to take this opportunity to highlight that while there have been some headlines that Egypt has recently increased gas prices for some industrial users, we have a long-term contract with our gas suppliers in Egypt and our gas agreement remains unimpacted by any such changes.
As disclosed publicly, we have a base price of $4 an MMBTU and escalation factors linked to our ultimate product price. Moving on to Shareholder Returns, 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 verticals, management recommends H1 2025 dividends of at least $1,100 million or $4.4 per share subject to board approval in September 2025. Including the $31 million worth of shares bought back during Q2 2025, total shareholder return of at least $131 million places Fertiglobe as one of the most competitive in the sector on a total return basis. It is important to note that the recent strength in urea and ammonia pricing may very well provide further upside to the proposed dividend floor as we confirm it in September.
Including the proposed dividend and share buyback, Fertiglobe will have returned $2.6 billion to shareholders since IPO, representing one of the highest yield and total returns in our industry. We remain committed to our recently announced Grow 2030 strategy to become a $1 billion+ EBITDA global nitrogen champion by 2030 assuming 2024 pricing. This strategy is anchored on four key pillars: operational excellence being number one, number two being customer proximity, number three being nitrogen product expansion, and number four being disciplined low-carbon growth. This includes for the fourth pillar Project Harvest, a 1 million ton per year low-carbon ammonia facility currently under construction, which remains a core part of our decarbonization roadmap. In parallel, we continue to pursue the development of Project Baytown in collaboration with ADNOC and ExxonMobil as part of our broader efforts to advance low-carbon ammonia solutions globally.
While Fertiglobe remains dedicated to advancing its low-carbon project portfolio, the company recognizes that the global low-carbon ammonia market remains in the early stages of development, with regulatory frameworks and demand signals continuing to evolve. As such, and in line with Fertiglobe's disciplined approach to capital deployment across its low-carbon ammonia project pipeline, Fertiglobe has taken the decision to rephase Project Ruwais, a 1 million ton per year low-carbon ammonia project and associated auto-thermal reformer. This decision reflects the company's prudent investment strategy and commitment to timing capital allocation effectively and is consistent with the broader objectives of the Grow 2030 strategy, particularly its focus on disciplined low-carbon ammonia growth.
Finally, we've seen a recent firming in nitrogen prices with both ammonia and urea up over 20% above their Q2 averages, driven by tight supply disruptions and strong demand from key buying regions as reflected in today's solid India tender results as well as elevated gas prices in Europe. We are pleased that Fertiglobe is well positioned to capitalize on this price momentum, supported by a strengthened platform and robust commercial capabilities. With this, I'd like to hand it over to Haroon to discuss our commercial performance and outlook for nitrogen and ammonia markets in more detail.
Haroon, thanks Ahmed. Let me start by discussing the highlights of our commercial performance. Fertiglobe's total own-produced sales volumes were 1.25 million tonnes in Q2 2025, down 10% versus Q2 2024 due to the impact of external factors. Ammonia own-produced sales volumes declined 11% year- over- year, while urea own-produced sales volumes were 9% lower year- over- year. Excluding the impact of external factors and turnarounds, our own-produced sales volumes would have been 4% higher year- over- year in Q2 2025. Worth noting is that despite the outages, own-produced sales volumes were down by only 1% in the first half 2025 versus first half 2024, driven by 10% higher ammonia own-produced sales volumes and a 4% decline in urea own-produced sales volumes. Excluding the external factors and turnarounds, own-produced sales volumes would have been up 7% year- over- year in H1 2025.
Our third-party traded volumes increased by 74% in Q2 2025 compared to Q2 2024 and increased 68% in the corresponding first half period. Now, moving on to the nitrogen market developments and the outlook for our products, urea prices remained robust in Q2, averaging $408 per tonne FOB Egypt versus $425 per tonne in Q1 2025. As just highlighted by Ahmed, nitrogen markets have significantly tightened heading into Q3, with urea prices currently at $488 per tonne FOB Egypt, up 20% compared to the Q2 2025 average, having reached $500 per tonne a few weeks ago, their highest level since January 2023. Urea markets have been increasingly tight, driven by supply disruptions including from Iran and Egypt, alongside limited Chinese exports to date and strong India tender activity, as well as buying in Ethiopia, Australia, and Brazil.
Deep diving into India, robust demand has been supported by the onset of the carrot season, purchasing, strong monsoon rains, a lower stock position, and lower domestic production. Results of the latest tender were released today with awarded prices of $530 per tonne CFR West Coast, implying netbacks to Fertiglobe here from Abu Dhabi of $515 per tonne, $38 per tonne or 8% above the last printed price, which should be supportive for our Q3 financial performance. Demand from India and further purchases from Australia are expected to keep the market. Tight in the short term.
This robust demand backdrop coincided with the absence of Chinese exports in the last 18 months. Chinese exports have restarted, however, amounting to just 66,000 tons of exports in June out of the initial 2 million ton export quota in the EU. As of 1st July, 2025, new tariffs on Russian and Belarusian fertilizer and agricultural products have been enforced. The tariffs now apply an additional $40 per ton on imports to nitrogen-based products including urea. The rates will increase yearly from 2026, reaching €315 per ton by July 2028, and are applied on top of the EU's existing import duties, which are set at 6.5%. Long-term demand growth excluding China of 12.2 million tons is expected to materially outstrip additional capacity growth of 9.3 million tons by 2029, implying a deficit of around 3 million tons against prior periods of surplus.
Meanwhile, ammonia markets in the west of Suez were slower during the first half of 2025 due to the end of the U.S. application season and moderated European demand into the summer months amid sufficient supply from major export hubs. However, prices have rebounded in recent weeks following supply shortages. West of Suez prices are currently $550 per ton CFR Northwest Europe now compared to $435 per ton in May, reflecting tighter market fundamentals. The continued theme of market tightness alongside elevated natural gas prices during the summer months is expected to support higher ammonia prices in the west across the coming weeks. On the supply side, tightness is compounded by continued delays to the startup of new gray ammonia production capacity in the U.S. Gulf Coast.
Going forward, low-carbon ammonia is also a key enabler of the decarbonization of the fertilizer, chemicals, marine, and power generation sectors as CBAM comes into force in 2026 alongside the phase-out of free allowances under the EU Emissions Trading Scheme. Finally, I would reemphasize our unique positioning to capitalize on the recent recovery in ammonia and urea prices supported by a strong order book and robust capabilities. With that, I would like to hand it over to Andrew to discuss the financial results in more detail. Andrew.
Thank you, Haroon. Let me start with some highlights of our performance in Q2 2025, which as mentioned earlier by Ahmed, was impacted by uncontrollable external factors. Q2 2025 revenues were $566 million. That's up 14% on a year-on-year basis, mainly driven by higher urea prices and partially offset by lower volumes. Our adjusted EBITDA is up 26% year-on-year to $176 million in Q2 2025, leading to adjusted EBITDA margins of 31%. Our adjusted EBITDA margins for our own-produced volume is 38%. Q2 2025 adjusted net profit attributable to shareholders was $12 million. That's up 68% compared to the adjusted net profit attributable in Q2 2024 of $7 million. Our revenues were $1.26 billion for 1H 2025. That's 20% higher than the same period last year, mainly driven by the higher prices and the lower volume offset.
Meanwhile, our first half of the year 2025 adjusted EBITDA increased 36% year-on-year to $437 million, leading to adjusted EBITDA margins of 35%, and our adjusted EBITDA margin for our own-produced volumes is 42%. Adjusted net income attributable to shareholders was $85 million. That's down 18% compared to $104 million in the same period last year due to an FX gain last year, excluding which we would have been up 3.5x on the year-on-year. Turning to the balance sheet and cash flow performance, as of 30th June 2025, Fertiglobe reported a net debt position of $909 million. That's implying net debt to last 12 months of adjusted EBITDA of 1x, allowing us to balance value-led growth and attractive shareholder returns. In line with Fertiglobe's commitment to creating shareholder value, we propose H1 2025 dividends of at least $100 million.
That's $0.044 per share, subject to board approval in September and payment in October. Additionally, as of August 1, 2025, Fertiglobe has purchased a total of 55,000,000 shares as part of our recently initiated share buyback program. That's representing 0.66% of total shares outstanding. If you include the $31 million in share buybacks made last quarter, the total H1 2025 shareholder returns would amount to at least $131 million, and total cash return since IPO would exceed $2.6 billion. Also, as Ahmed said, the current price environment may signal upside potential to the proposed dividends as well. We are pleased to confirm that we are on track to realize $10 million annual run rate interest savings. That's a 6% EPS benefit from the recent repricing of our $1.1 billion term loans in June 2025, as announced at our recent Capital Markets Day.
That's reducing our interest margin to 90 basis points, the refinancing of the $300 million loan and credit rating upgrades following the majority stake acquisition by ADNOC as well. Our free cash flow for growth CapEx amounted to $94 million in Q2 2025 compared to $70 million in Q2 2024, reflecting performance for the quarter, dividends paid to non-controlling interest and withholding tax, working capital outflows, and net interest payments. In H1 2025, free cash flow before growth CapEx amounted to $307 million compared to $225 million in H1 2024. Our total cash capital expenditures including growth CapEx were $42 million in Q2 2025 compared to $23 million in the same quarter last year, of which $31 million was related to maintenance capital expenditures compared to $16 million in the same period last year.
Our total cash capital expenditures including growth CapEx was $66 million in H1 2025 compared to $44 million in H1 2024, of which $49 million was related to maintenance capital expenditures compared to $35 million in the same period last year. As a result of our recently completed maintenance works, we were able to defer some turnarounds and therefore expect maintenance CapEx at the lower end of our previous guidance range of $145 million- $170 million this year, unlocking additional free cash flow. I'll now hand it back to Ahmed for our outlook and concluding remarks.
Thanks, Andrew. To conclude, the near term outlook for nitrogen fertilizers remains favorable. Urea markets are particularly tight, driven by limited Chinese exports and recent production disruptions in Iran, coinciding with recurring India tenders and demand for Oceania. These price dynamics have more than offset some of the production disruptions we've seen in Egypt, and I'd like to thank the team for the tremendous work done to mitigate this challenging situation. Longer term, the outlook continues to be supported by improving demand from new and existing applications underpinned by population growth coupled with limited supply additions from new projects. We remain firmly committed to our Growth 2030 strategy to become a $1 billion EBITDA global nitrogen champion by 2030 at 2024 prices and to create breathing value for our shareholders and have continued to progress several key initiatives necessary to achieve this target.
As an example, we are set to achieve $15 million- $21 million of cost savings by year end, supported by ADNOC's commitment to optimize Fertiglobe's cost. In closing, I want to sincerely thank our team for their unwavering dedication, which has been central to Fertiglobe's success, and the steadfast delivery of our strategy, always guided by our commitment to safety. I'm confident that we're strongly positioned to build on this momentum, advance our strategic objectives, and sustain our leadership in the nitrogen industry and low-carbon ammonia market. With that, we can open the line for questions.
Thank you. We will now begin the question- and- answer session. As a reminder, if you would like to ask a question today, please do so now either by pressing Star followed by the number one on your telephone keypad if you have dialed into the conference call today. Alternatively, if you are streaming today's call on the webcast, please feel free to type in any questions into the Q & A. Our first question today comes from Giuseppe Zillari with Morgan Stanley. Please go ahead.
Hi, thank you for the presentation, for taking our questions. We had three quick ones, if we may. Firstly, about third quarter volumes. How are you seeing the trend there, and are you seeing any improvement in the situations in Egypt? Secondly, the upside on the dividend floor, you said you touched upon it a i f you could give a little bit. us more color on that. Thirdly, the reduction in CapEx that you're basically deferring to next year, is there some savings in there or is it just the deferral of CapEx? Thank you very much.
I can take those questions. With regards to the volume trend in Q3 versus Q2, we don't give guidance on actual volumes for quarter versus quarter. As indicated, we had a significant volume effect in Q2 of this year driven by external events largely around the Egypt gas situation that hit a position where we had to shut down all our plants in Egypt for a period of just over two weeks in Q2 when Israel invaded Iran. From what we've been seeing so far in July now into early August, we've just seen good volumes in production. We're more optimistic here on Q3. We've seen that the Israeli gas to Egypt has resumed in it was June 28, plus the additions of FSRUs by the Egyptian government, which has increased gas availability. I want to highlight what I again said in the prepared remarks earlier.
Our Egyptian team has done an excellent job to schedule turnarounds during periods of gas price situations, which was the case in Q2, that's 1 and 2. Our ability to run on less MMDT use per ton or less gas per ton, higher capacity efficiencies on ammonia and urea plants, lower non-gas costs in terms of power and water, but also our ability to run even when gas curtailed in Egypt. We're now able to run at 100% for our two urea lines, which is great when we see this higher urea price and being able to participate in things like the India tender which just came out today with the results. With regards to your second question on the dividend, we just provided guidance in this morning's results just saying that it's going to be at least $100 for our first half this year.
As indicated, from what we've seen over the last couple of weeks and again reaffirmed today with an India tender over $530 a ton CFR going out to September 22d delivery, that allows for the price to product in Q3 at a very favorable price. We could definitely see upside in our guidance for dividends when we come to actually affirm the dividend number in September for payment in October. On your third question, can you repeat it exactly with the turnaround deferrals and CapEx guidance, you're saying is there an opportunity to save money? Was that your question?
Yeah. You reduced the guidance in terms of CapEx because you deferred it. Are there some savings involved as well, or did you just defer the CapEx basically to next year?
I think that in general this is mainly an ability to accelerate some of the turnaround activities that we've had at various plants during this Q2 period where we had the lower volumes, and it's allowed us to push out for later years, which gives us more time to kind of negotiate with suppliers, which can allow for saving. We've also been going through an adjustment in our operational structure to go to a centralized business from several middle and back office functions, including procurement. We're going to use that opportunity now and, leveraging ADNOC as a parent, try to negotiate better pricing, giving us more time to do that next year and the year after.
I don't think explicitly it is one that immediately causes a reduction in price, but the ability to negotiate more and to go from an optical-led procurement strategy to a centralized global procurement strategy with the benefit of ADNOC should afford better pricing on the CapEx side as we work to bring down our numbers versus the guidance we shared in our CMB.
Yeah, maybe just to add that point, we gave out in the CMD a guidance of 145- 170 across 2025 and 2026 on average. We still hold to that for that period of 2025 and 2026.
That's clear. Thank you.
Thank you. Our next question comes from Rene Selouan with Jadwa Investment . Please go ahead.
Yes, hello. Thank you for the call and the presentation. In fact, I had similar question. I'll just change them a tiny bit. If you could tell us why there's such a big delta between the dividends that were announced at the minimum and the cash of the free cash flow in first half. I know you're saying that in third quarter price increase, but that relates more to the second half dividend. That's number one. Number two, if you want to think of normalized volume, should we think of it as in your sales volume would have been 4% up year- on- year. So that's your normalized level, is that it?
Thanks, good to hear from you. I'll give it over to Andrew with regards to how we think about dividend and some of the flexibility that we have in terms of the timing and setting of those numbers with some of the moving pieces. Andrew, maybe start with the dividend question.
Yeah, thanks Ahmed and Rene, good to hear from you. Obviously, as you know, this is a consolidated free cash flow position, so it doesn't reflect the minority leakage which we have in Salford and EBIT. That needs to be brought in as well. I just want to draw your attention to the share buyback program we brought in at the beginning of Q2. If you look at the total cash returns to shareholders, it would actually be over $130 million. If you were going to sort of annualize the share buyback and the dividends, you'd be getting around about $320 million, which is around 6% yield. That needs to be sort of borne in mind as well with reference to our program. Also, it's looking at the timing of that sort of maintenance CapEx as well as to how we've done that.
I'll share also on the dividend side, obviously there are a few moving pieces, especially with the second quarter ending where we just restarted in Egypt and obviously have started off Q3 strong from a pricing perspective. As manager stated, our focus is on returning cash to shareholders. One of those ways is share buyback. We also recognize the importance of dividend, dividend yield. That's why we did mention, you know, in the prepared remarks today that we are going to look to reevaluate the number as we finalize it in September. I just would suggest, Renee, that you, you know, continue to monitor news from our side in September when that comes out. With regards to the second question in terms of the volume, I'd say that the 4% year- over- year growth is after we removed the external factors, which is largely around the Egyptian gas situation.
What we're seeing as we start off this year, and as we started off the second half of the year, what we're seeing in terms of our ability to run more production even at lower gas rates. Also, with the Israel- Iran conflict having at least kind of the heavy 12 day period over, plus the FSRUs that the Egyptian government keeps putting in place to import gas, they put it all together. We continue to focus on an increase in our production year over year, a reduction in gas consumption per ton year over year as part of our manufacturing improvement journey and part of the CMD's first pillar of operational excellence.
We would say that, yes, Q2, I think that 4%, Q2 or H1, so the Q2 4% is not that normalized level, but we would look to increase that with some of the work that we're doing as we execute turnarounds, including the one that we executed last quarter and in ones we execute in years to come with this elevated level of CapEx that we've had, you know, just replacing certain problem, problem potential business interrupters or problematic equipment. We look forward with the changes in leadership we've made as well to continue to increase our volumes from our existing kit. Right now, as you saw in the CMD, you know, we're looking at being in the mid to high 80s in terms of utilization rate over the last several months, over the last several quarters. Sorry.
We would target to go to 93%- 95% by year end 2027, which would result in, you know, higher volumes.
Okay, clear. Thanks.
Thank you. Our next question comes from Faisal Ahmed with Goldman Sachs. Please go ahead.
Yes, I am. Thanks for the opportunity to ask questions. I just wanted to ask firstly on your views on the urea price environment, maybe going into Q4. Where do you e xpect direction things could end by the end of the year, and how are the balances looking for next year as well from your perspective? That's my first question, and then my second relates more to your taxes. Just looking at the effective tax rate for the first half, it's quite elevated. Maybe if you can talk a bit about what drove that and how should we think about the second half of the year.
Thank you. I'll let Haroon go ahead and discuss kind of the near to medium term pricing outlook, and then Andrew can discuss the effective tax rate. The effective tax rate and obviously, you know, provide more clarity around that.
Hi Faisal, thanks for your question. On the sentiment for urea, we see sentiment being pretty firm and it's backed by what we see, the positive demand dynamic as you may have picked up in the prepared remarks. We've had successive India tenders and the latest result of the tender that was just released today was a price of $530 CFR delivered India West Coast. That's $515 netback to Fertiglobe. When you see what that price is relative to printed prices, that's about $38 per ton higher. As we look into the near term demand dynamic, again positive Indian demand situation. The calisthenics going well, monsoons are about normal. They've got lower inventories at this time of the year, 5 million tons when they had 9 million tons last year, lower domestic production.
When we look across from India to the east, Australia, Brazil, Ethiopia, all pretty supportive from a supply standpoint. Chinese exports, I think what's been noteworthy this last quarter has been the absence of Chinese exports versus their quota of about 2 million tons by mid-October. Now China has exported only about 66,000 tons. That's been pretty favorable from a demand supply perspective, I think. One more point that I'd also highlight, and this is one that also plays into your question about pricing next year, is the E.U. tariffs from Western fertilizer import. As you know, the European market is a pretty significant market for us for higher netback market and we've got tariffs right now on Russian imports to Europe at around, as I said, €40 per ton. That goes up to €315 per ton in 2028.
Fairly firm sentiment that we expect to see from an ammonia standpoint as Ahmed was also mentioning from a gas price perspective, fairly supportive. That price is currently at $11.5 per MMBtu. We've seen a fair degree of curtailments in the West and as we go into the rest of the year, we do expect elevated pricing to be maintained. All in all, I think a fairly supportive environment looking more longer term as we track S& D. On the urea side, we do see a 3 million ton shortfall and I think that continues to support the market and the sentiment going forward.
I think one just small point to add also on the gas side with $11.5- $12 MMBtu continuing for the next several months. Obviously, winter could see upside on that, is that the cash flow of urea in Europe is in the low $300s and you're seeing pricing well above $500 delivered now into Europe. We've seen a market that's become much more demand driven versus supply driven, i.e., you've seen a disconnect between urea pricing and natural gas pricing in Europe, and that's a good place for the market to be in.
We see that continuing for the next several years on account of what Haroon said in terms of SMD, particularly as China continues to be, you know, not, not very present in the export market, even if it does export 2 million tonnes or 3 million tonnes, which would be a deviation from the last two years in terms of activity. We think that puts the market in a good place and puts us in a good place with regards to urea. If wanted to second that. Andrew, can you go through the explanation on the effective tax rate cash and reported?
Yeah, sure, happy to do that. Hi Faisal, and thanks for the opportunity. You're right, it's actually higher than normal and I think what you're talking about is the profit, the effective profit tax rather than the cash tax, which is 6%. As you're aware, the last few years we've had a difference between the two where our effective cash tax rate is around 10%, 11% and our profit tends to be about 17%. The reason for that difference, I'm sure you're aware, is the engagements we have with the Egyptian government on a particular subject which leads to uncertain tax provisions which we book. That's always in there, I think it was possibly masked last year a little bit by the large FX movements going on in Egypt.
One of the reasons you've got a slightly higher elevated element is there was a tax filing deadline happened just in late Q2, and because we're still engagements from certain tax provisions, we would sort of book the penalty and interest which would relate to that year. Now I'm looking forward and happily looking forward to a resolution before about the end of 2025 on this. I think we'll be able to offer more clarity going forwards on this. I would refer you to our normal historical tax rates and the effective cash and profit rate difference. Lastly, the other one is a smaller contribution on Fertile, which is our highest taxpayer, where we currently pay 25%. There's probably been a bit more reliance, I think, on the income generation from Fertile in this last quarter.
Perfect. Maybe just to circle back to one of Ahmed's comments. Ahmed, you mentioned that effectively the cash margin today is well above what it used to be, r ight? And t hat's mostly demand driven. I mean, how should we think about that spread effectively over time? Right? If gas prices normalize next year for any reason, what in your view is that spread likely to be, let's say in 2026, if the current balances remain as tight next year as well?
I think it becomes that the correlation isn't as strong. You can have gas go from $11.5 up to $15 or down to $9 per MMBtu in Europe and your urea market is still going to be demand driven. It's a bit less in that connection that we've seen in prior years when you're in a more supply driven market that we were riddled with from 2019 until 2024 because that extra ton had to find a home. Now you're seeing the market pulling those tons and it's nice because it ends up being a bit of a less correlation towards European gas versus ammonia and it's a much larger part of our production base. A nice kind of diversification from our perspective.
Maybe o ne final question. Do you see any risk of demand destruction at $500+ or do you think the market can absorb that kind of pricing requirement?
No, I think it's a very good question. It's something that we always monitor, which is the portability side of the market. Maybe Haroon, you can discuss kind of where we see the affordability because it is higher area pricing and we've seen some tampering in crop prices. Maybe start and I'll finish it off.
Sure, absolutely. Faizal, look, I mean, I think when you step back and just look at, you know, urea as a nutrient, just a reminder there that, look, this is essential. It's an essential nutrient. It needs to be applied every year. You know, farmers may try and delay some of their purchases, but they can't do that at the cost of yield. At the end of the day it must be applied, it can't be skipped. You know, when you look at pricing for corn futures right now, corn futures are back up above $4 a bushel. From a farmer income perspective, that's obviously a positive. You look at some of the alternatives out there, including, you know, delivered prices for DAP, for example, now they are at around $800 per ton CFR India. So it's a pretty competitive, pretty competitive offering.
When you look at overall willingness to pay, as we've seen from the India tender, you know, strong willingness to pay from India. Europe, as you remember last year, we had a drought and hopefully we don't see the same conditions this year. Industrial demand nevertheless in Europe has been pretty good as well. I think, as Ahmed said, this is something that we're monitoring, but it looks fairly supportive right now from an affordability standpoint.
I mean, the way we think about it is exactly like you could have, if you do have some demand disruption in certain markets, while we still see huge buying in India, looking for 2 million tonnes right now, looking to import more than last year, despite the pricing. If you were to have that demand disruption in certain markets, you don't apply the urea, you don't get the crop yields you need, then it becomes basically a feedback loop where crop prices go up and you need to apply more next year. You're basically, you know, when you get to that kind of demand disruption space, you're actually increasing demand for the future one year out or two years out. It's not, I think, a bad place to be as a nitrogen producer versus, you know, phosphate and potash that farmers have a bit more flexibility around.
Thank you.
Thank you. At this time we have no further questions from the telephone lines, and I'll hand over to the management team to read the webcast questions.
Thanks, Amity. We received a few questions on the webcast, a few questions relating to the task which has been already answered by Andrew. Some questions on the outlook for urea and ammonia prices. Where are we on the urea and ammonia pricing cycle? Are they expected to taper off in the second half of the year?
Yeah. Just before we go there, I mean, just to be sort of clear on that, when we see you on the 34% for Q2, as I said, that is an unusual element, and I would, you know, direct people's attentions to the historical rates.
Yeah, I think that's an important addition, Andrew, thanks for that. Just to kind of answer the question on where we are on urea ammonia pricing cycle effectiveness Q2, our view is that the, you know, the market, when you kind of feel right now for both ammonia and urea, feels extremely tight. Struggle to really find a cargo for ammonia, you know, and it's not just a function of, you know, Egypt and Iran in Q2 and kind of slow down to get back, but you've seen significant outages in Southeast Asia and Trinidad continues to be a very troubled gas situation and from a supply perspective in a difficult position. Also, what we just discussed with DAP pricing being extremely strong and robust, we've seen good demand into the phosphate markets for ammonia which has been helpful.
With regards to urea, I think we answered this question before in terms of, you know, the summer, you know, being in Q3 which is typically your seasonal low and hitting pricing that's among the highest of the year. We think it's a very good position to be in in Q3 because basically, you know, this India tender today will clean up some of the tons that are in the market to be delivered by September 22nd as discussed.
You kind of bode well to have low inventories going into the latter half of the year where you're going to start seeing European and U.S. buying for the Northern Hemisphere startup later this year in earnest and China is going to enter and Iran is going to enter the kind of the winter heating months kind of in late Q4 and into Q1 which could support kind of export activity out of both those nations. You know, we're pleased with where the market's at right now. That kind of tends to be our, you know, short to medium term view. Thank you.
Thanks, Ahmed. On a related note, some of the recently published Sharia planners like India have been filled at prices close to $450 or $500 and above that. Do you think you'll be able to capture such prices in the second half of this year?
Haroon, do you want to answer that?
Yeah, no thanks for that question. Look, as I mentioned earlier, the result of India's latest tender was announced today and the prices were actually at $530 CFR delivered. Yes, we would look to, you know, maximize our shipments to take advantage of that attractive price, and that price is on a netback basis 8% as I mentioned with the printed indexes, and that continues to support this upward trend that we've been seeing in urea prices.
Thanks. On the Algerian DAC contract, can you please guide that? The Algerian negotiations have been finalized. When can we be at a normalized profitability level, and generally, question from several people on the status of the Algeria price.
I think it's a similar answer to what we had in the CMD in May the last time we met. We haven't signed and put ink to paper on the gas contract in and of itself. We've been provisioning at levels that have been kind of acknowledged from both parties. We had a gas provision through Q2 and we're up to date on our provisioning since late 2023. As soon as there's an update from that side, we will release an update from an Algeria perspective into the market. There's alignment between both parties now, it's setting at these levels from a provision perspective.
Thank you. On the gas situation in Egypt, questions on what the external factors are, how the situation is now in Egypt, and if we've seen improvements so far.
Yeah, so in short, the answer is we have seen improvements. Israel has resumed flows back again into Egypt, which were fully cut off in mid June to late June, which affected our results in Q2. We have seen also these floating storage and regasification units coming up, these floating storage and regasification units being installed late June and into July, where we've seen better availability in Egypt. We have definitely seen an improvement in the gas situation in Q3 versus Q2. It's not fully back to normal yet during the very peak power months. I'm happy to say that we're able to run both our urea lines and that, you know, just, you know, when you think about urea north of $500 netbacks, that's well over $800 and just a $900 ammonia.
From our perspective, we're going to continue to work with the team on maximizing urea production, we're running at 100% capacity, and we've seen in the Q2 results how the pricing effect of what happens in Egypt, given it's such a major exporter of urea, has outweighed some of the volume effects that our team has helped mitigate with some of the actions I discussed in the prepared remarks. It's an answer to these calls.
Thanks, Ahmed. Can you elaborate on the Project Ruwais rephasing?
Yeah, I mean, I think as we indicated in the prepared remarks, this rephasing is part of our overall strategy of what we said was pillar four, a disciplined low-carbon ammonia strategy. We have Project Harvest that's under construction with a low-carbon ammonia, not blue ammonia but low-carbon, under construction to start in 2027, 1 million tons per annum. We continue to work on the development with our partners ExxonMobil on the Project Baytown in Texas, which is still pre-FID. We took the decision just given where the demand was at in terms of the regulatory side, CO2 pricing, government subsidies in terms of being able to have contracts for difference between ammonia and hydrocarbons in terms of the replacement. We took the decision that from a capital structure perspective, capital allocation perspective, it makes sense to rephase this project.
We're not looking to FID it on the previously announced timeline of early next year. Also, again, I want to reiterate that the Project Ruwais and the Project Baytown, both pre-FID, are not part of the $1+ billion adjusted EBITDA guidance we have by 2030. That was based on just having the Project Harvest, which is already under construction.
Thank you. The E.U. has put in place opportunities on nitrogen-based fertilizers from Russia. Are you seeing any impact of this in the European market? Egypt and Algeria import as GDP in the European market. How do you see the market?
We've seen positive sentiment now around the tariffs. The Russian tariffs that have now come into effect, as you know, they're starting at €40 and growing over the next few years to be over €300. That will definitely have an effect. We are the largest market share for urea into Europe and are well placed with our duty free product from Egypt and Algeria to go into the European markets as well. As you know, the trading that our team does, led by Hassan Navid, focused on placing more product into Europe where it makes sense in terms of actual trade flows. We have not seen a huge shift yet. I think there's been some obviously discussion of tariffs on the U.S. side. Right now there are no tariffs on Russian product into the U.S. but that could change.
From our perspective, these European tariffs are, especially as they continue year- over- year, going to have a very big effect because Russia has been exporting significant urea as well as nitrates into the E.U. market. Note that all this is on top of their already existing 6.5% duties that Russia and products has into the E.U. For example, countries like the U.S. as well as GTA countries have to pay that we avoid, given we are in North Africa and Egypt and Algeria with duty free access. Haroon? No, I answered most of that question. Do you have anything to add?
No, Ahmed, I think you covered it pretty well.
Thank you. We got a question about the outset for low-carbon ammonia and how we see that.
We continue to be bullish on low-carbon ammonia over the medium to long term into a variety of hard sectors. That includes chemicals. It includes ammonia, the marine fuel, where there's very promising advancements on the engine side and many ships ordered already. We're just at the tip of the iceberg there for engines coming from the marine side as well as power generation, whether it's for ammonia into low-carbon ammonia into power production, into big energy importing countries, or crashing back into hydrogen to use, both in the power sector as well as in the transport sector and otherwise. It does take some time for the infrastructure to evolve.
More importantly, we have seen a bit of a pendulum swing back in terms of pricing of CO2 in key markets and the enforcement around that and the allocation of subsidies and support and encouragement for countries to have that demand. We've seen, for example, in Japan, $20 billion allocated to the Contracts for Difference program. In Japan, when you were talking about the ammonia prices that were assumed three, four years ago that could afford a certain amount of tons, but now with ammonia pricing going higher because of the high replacement cost of big ammonia plants, big auto thermal reformers, we've seen the cost skyrocket on the CapEx side. What that means is that the price of that blue ammonia is much more expensive than what it was a few years ago in terms of what the Japanese were expecting to pay.
If you have a fixed $20 billion and you have an increasing price of ammonia, that means less volume available for the subsidy program. That doesn't take away from the long-term outlook, which we shared in the capital markets. We see it rapidly evolving past 2030. It does also re-emphasize what we see in our market that we continue to trade at a significant discount of replacement value, less than 50% of replacement values for the globe. Part of the reason why we buy back our own shares and part of the reason why we think that a lot of the new project announcements.
Will. Not see the light of day in terms of FIDs, because it makes sense to buy our own shares. Do M&A often, for the most part, with regards to the capital that you have, rather than go take four years of construction risk or five years of construction risk to pay par and basically build a plant from scratch. That's a big, I think, barrier to entry that keeps getting higher and higher. The CapEx per ton keeps going higher and higher, and I think that bodes well for the medium to long term in our industry where people be more reluctant to put stakes in the ground and build these plants where we're all trading well below replacement cost.
Thanks Ahmed. The last question we got was in shutdown, are there any shutdown planned for the second half of this year or 2026?
We don't give guidance on planned turnarounds for commercial purposes as we like to have that advantage given that we're trading and delivering a lot of our own product. What I can say is that Q2 was very heavy, you know, with the Egyptian gas curtailments. Otherwise, we undertook some pretty significant turnaround activities that helped us give a bit more of a runway from a production standpoint going forward. I'd rather not provide any more detail on specific strong orders or years in terms of turnaround schedules.
Thanks Ahmed and thanks everyone. I think that concludes our webcast questions. Please reach out in case of further questions.
Thanks Rita. Thanks everyone for joining this call and I want to thank the Fertiglobe team for the solid effort to be resilient during a bit of a challenging quarter for us here in Q2. Thank you. Thank you.
Thank you everyone for joining us today. This concludes our call, and you may now disconnect your line.