Hello everyone and welcome to the OCI Global 4th Quarter 2023 results. My name is Bruno and I'll be operating your call today. During this presentation you can register to ask a question by pressing star followed by 1 on your telephone keypad. If you're streaming online you can submit your question via the webcast. I'll now hand over to your host, Sarah Rajani, Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon and good morning to our audience in the Americas. Thank you for joining the OCI Global 4th Quarter 2023 conference call. With me today are Ahmed El-Hoshy, our Chief Executive Officer, and Hassan Badrawi, our Chief Financial Officer. On this call we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook and an update on the strategic review. As usual at the end of the call we will wrap up with Q&A. The results press release and presentation are available on our website at ociglobal.com. We will be referring to slides in the results presentation during this call. I would like to remind you that any forward-looking statements made on this call involve risks and the actual results could differ materially from those statements. Let me hand over to Ahmed.
Thank you Sarah and thank you all for joining us today. On today's call we'll give a brief recap of the 4th quarter before providing an update on the strategic review and the transactions announced in the end of last year December 2023. We will walk you through our continuing business and its exciting prospects before finishing with an update on the markets. Starting with our top priority, however, safety. Our 12-month rolling recordable incident rate was 0.24 incidents per 200,000 man-hours at the end of December 2023. This continues to be well below industry averages and represents a small decrease from the previous quarter. We continue to work tirelessly on operational and process safety and strive for zero injuries throughout the organization which we believe is a key indication for overall manufacturing excellence. As stated I'd like to now hand it over to Hassan for our Q4 2023 update.
Thanks Ahmed. Turning to slide 6. On the total basis which includes our discontinued assets OCI reported revenues of $1.209 billion and an Adjusted EBITDA of $310 million representing year-on-year declines of 45% and 54% respectively. These declines were driven by lower nitrogen pricing globally compared to the record year we reported last year. Partially offset by a reduction in natural gas prices in Europe and the United States which in our case was impacted by our existing gas hedges as well. OCI benefited in the 4th quarter from positive momentum in nitrogen pricing globally driven by supply disruptions which helped offset lower volumes from the extended turnaround at IFCo compared to the previous quarter. Higher natural gas prices later in the quarter led to reduced sales volumes as customers delayed purchases for the spring application season.
We expect this demand to catch up and materialize through the course of the first half of 2024 and indeed we have seen evidence of this in recent weeks on the back of positive farm economics particularly for nitrate-based products like CAN and UAN and Ahmed will comment on this more in depth later. In contrast methanol saw a more challenging 4th quarter with down-cycle pricing, some outages on account of adverse weather conditions and operational issues at Natgasoline and some uncertainty around key macroeconomic drivers. Overall however we expect 2024 to be a healthier market than 2023 with prices expected to improve albeit likely remaining below mid-cycle.
For reference the methanol business segment in our results includes the production and sale of conventional or green methanol, biomethanol which is our green biomass methanol, and around 350,000 tonnes of conventional ammonia capacity as well as results from our trading activities. Turning to slide 7. This slide shows the net debt bridge from our total net debt as at 30 September 2023 to year-end which of course includes the divested assets on a 100% consolidated basis. We further show the adjustment from our year-end total net debt to that of the continuing operations as at year-end which mainly reflects a deconsolidation of IFCo and Fertiglobe as they become classified as discontinued operations. The $2 billion includes our outstanding bonds at OCI N.V. and utilize revolving credit facilities.
Worth mentioning that looking forward all of IFCo's cash flows until closing are attributable to OCI and Fertiglobe has now formalized a dividend distribution plan for the second half of 2023 of $200 million of which OCI's share is $100 million. This is typically paid in the month of April therefore April 2024. Moving to slide 9. On the strategic review and the transaction update maybe I'll begin with a few remarks before I hand it over to Ahmed to provide more insights. We have given some guidance today on a couple of important parameters. Firstly from a capital structure standpoint we expect to deliver and for the company to be in a net cash position at year-end 2024 subject to completion of the transactions in that timeframe.
We expect significant gross debt repayment at NV and we'll further calibrate the individual components of our debt structure in parallel with the strategic review. This will result in a robust financial position with ample capacity to complete our investment plans in line one of the clean ammonia projects. Secondly, while we are pausing the regular dividend, we have announced an extraordinary shareholder return of at least $3 billion following the completion of the transaction, which of course will be based on the receipt of proceeds. The financial resources afforded to the company by these transactions provide us with the flexibility to potentially deliver a higher dividend quantum. I will now hand back to Ahmed to continue commentary on the strategic review and other aspects of our performance. Ahmed?
Thanks Hassan. Sticking with slide 9. As you recall we launched our strategic review last year to unlock value for shareholders and address the steep market discount to fair value at which we were trading. In December we announced the divestments of our 50% equity holding in Fertiglobe and 100% of our Iowa fertilizer asset to ADNOC and Koch Industries respectively. Both transactions remain on track to close during the course of this year subject to legal and regulatory conditions and relevant antitrust approvals. The combined transactions mark a transformational juncture for OCI with crystallisation of $7.2 billion of gross cash proceeds or an expected approximately $6.2 billion of cash proceeds on a net basis which equates to approximately EUR 27 a share subject to closing adjustments.
This crystallisation of cash has helped bridge the gap between the sum of the parts or SOTP of OCI's assets and the holding company discount at which we were trading, reinforcing the company's value creation heritage and testament to the company's ability to identify, create, and unlock value over time. At IFCo it was clear to us that the asset's inherent strategic value was not recognized. While for Fertiglobe this was a natural evolution for a listed entity that was persistently and profoundly underappreciated within OCI's SOTP in the Dutch trading markets. The philosophy of the company remains one of value creation. Following these announced divestments OCI has received considerable inbound inquiry and interest in the continuing business. As such OCI is exploring further value creative strategic actions across the portfolio including the previously announced equity participation potential in its Texas Blue Clean Ammonia project.
Moving to OCI today and slide 11. OCI today is optimally positioned to execute its efforts in the energy transition space and serve growing demand for methanol and ammonia across the shipping, power, agricultural, and industrial sectors. Our business is strategically differentiated, well-capitalized, and includes our market-leading low-carbon ammonia and methanol complex in Texas, our uniquely positioned European fertilizer and integrated nitrates business in the center of Europe's agricultural heartland, our growing AdBlue/DEF capacity in Europe, and our unique import and distribution capacity at the port of Rotterdam. Moving on to slide 12, we see highlighting here the various low-carbon initiatives across the portfolio from which we are targeting a material increase in earnings from our green and low-carbon ammonia and methanol offerings in the portfolio in the coming years.
This includes our complex in Texas, the home of our existing methanol and ammonia business with access to low-cost gas and a distribution platform to sell locally and export. Further, while our Dutch methanol business plant has been shut down for over two years now, it has considerable option value with approximately 900,000 tonnes of methanol production for green and/or gray upside potential. Our European nitrogen complex in Geleen, Netherlands, remains uniquely positioned and competitively differentiated with access to our proprietary Rotterdam storage and throughput facility to efficiently access Western European markets for ammonia consumption. OCI Nitrogen today produces 1.2 million tonnes of CAN with a capacity to produce 700,000 tonnes of UAN, and we're the second largest melamine producer outside of China and, as mentioned, are adding AdBlue or DEF for the first time here in a few months in April 2024.
On the fertilizer side, we recently just a couple of months ago added CAN plus sulfur to broaden the product mix, which is a higher value and higher margin product. I'll now hand it back to Hassan to give some commentary on the mid-cycle potential that we see for the remaining business on slide 13. Hassan?
Thank you, Ahmed. This slide builds upon our comments from 18 December and provides some framing around our mid-cycle assumptions. Compared to our 2023 performance, a mid-cycle scenario supported by improved operating performance, growth of our high-fuels business and low-carbon products, and the completed restructuring of our holding company costs demonstrates significant upside going forward. We have shared some basic assumptions including the mid-cycle benchmark prices that we use and target utilization rates. Worth mentioning here that these rates have been achieved historically and we hope to achieve more consistently, and they are below the targets that we have set for ourselves for the manufacturing improvement plan. The $500 million EBITDA figure does not include Texas Blue contribution or any restart to BioMCN which Ahmed just described in his remarks. It also does not capture our existing natural gas hedges.
With that, I'll hand back to Ahmed for additional commentary on our continuing operations, Ahmed.
Thanks, Hassan. The next few slides provide a snapshot of our continuing operations and highlight the competitive differentiation and some historical insights to frame positioning of the business going forward. Although 2023 was not a noteworthy year due to the extended IFCo turnaround, various other planned and unplanned outages, the impact of natural gas hedges, and volatility in gas prices in Europe, historic performance demonstrates that these assets have been able to generate and sustain a healthy level of EBITDA and free cash flow conversion before taking into account our multi-year manufacturing improvement program. As such, we expect these businesses to revert towards better performance over the coming years. On slide 15, starting with the methanol group, this business is today 85% owned by OCI with the remaining 15% owned by two strategic investors in Abu Dhabi since late 2021.
As the largest green methanol producer globally with assets at the lower end of the cost curve, OCI has some of the most competitive methanol assets in the world. As a reminder, the methanol group includes our OCI Beaumont facility, which has a 1 million tonnes methanol plant and 365,000 tonnes per year ammonia facility, and currently approximately 200,000 of the 1 million tonnes of methanol is a green methanol, a figure which we're in the process of increasing. Natgasoline is a 50% JV with Proman, another methanol and nitrogen producer, and it has a capacity of 1.8 million tonnes per year and is located within a couple of miles of OCI Beaumont. And lastly, BioMCN in the Netherlands is a shutdown plant that has been shut down since for over two years and offers over 900,000 tonnes of additional upside capacity partly green going forward.
Moving on to slide 16. This slide demonstrates the upside in driving production efficiencies across the complex historical long-term asset utilization rates to reach new heights. More recently OCI Beaumont is seeing utilization rates in the high 90s and our manufacturing improvement plan is fully focused on maximizing reliability going forward with a focus on process safety and having the right leadership across the senior management team. Moving on to slide 18 and 19. Here we're walking through our European nitrogen operations and we have some of the most efficient plants in Europe as the slide demonstrates. Energy consumption at just over 30 MMBtu a ton of ammonia produced is one of the lowest in the world and compares favorably to highly efficient plants and newer facilities even including Iowa Fertilizer in Iowa.
We have maximal production capability on both the input side where we make or import ammonia and on the product mix for the downstream production. During periods of elevated gas we import ammonia to partially replace our own ammonia production to optimize margins and on the downstream side we can choose to produce certain products to optimize margin depending on pricing in the market. Recently we have introduced our higher margin products such as CAN plus sulfur which will start contributing positively this year. Further, in Q2 production of our AdBlue/ammonia/DEF commences, another higher margin product that is not correlated to agricultural cycles and is used every day for diesel consumption not just in the trucking and industrial markets but also in the passenger vehicle markets, a market that continues to grow over the next few years.
Last month we delivered first shipments of biomelamine produced using biomethane from waste and residues of biological origin and resulting in a GHG reduction of up to 40% compared to conventional melamines. If you move on to slide 20 you can see that performance-wise European nitrogen business has been a consistent performer with robust margins and strong cash conversion. However 2023 has been somewhat of an anomaly and should not be extrapolated as definitional of the business's potential given the historic drop in TTF pricing in late 2022 and early 2023 from over $60/MMBtu to the low double-digit levels that we saw in the beginning of last year. These assets have significant upside potential from both higher utilization rates as well as a more diversified portfolio with potential of higher margins.
Would now like to spend a few minutes talking about our growth projects and specifically Texas Blue Clean Ammonia, our main investment and largest one globally. Turning to slide 2022, our 1.1 million tonnes blue ammonia project in Texas, the world's first large-scale greenfield blue ammonia plant, remains on track for commissioning in the first half of next year. Construction is well underway with about $500 million spent to date of a total investment cost of over $1 billion. The plant is more than 90% engineered, piling is complete, and the first steel structures have been erected. The plant benefits from significant first-mover advantages leveraging deep expertise from the industrial and technological leaders utilizing world-leading KBR ammonia technology and has afforded material operating synergies and substantial cost savings given its proximity to our existing operating plants at OCI Beaumont in the area.
In addition it will be connected to multiple hydrogen and nitrogen pipelines for redundancy of feedstock supply. Commercial discussions for long-term product offtakes and equity investments in the project are at advanced stages with multiple parties. This reflects a very strong commercial interest and increasing appetite for the strategics to pay a price premium to secure long-term low-carbon ammonia driven by regulatory support as well as in an effort to decarbonize heavy and hard-to-decarbonize industries. OCI's Clean Ammonia design philosophy offers highly synergistic future expansion and growth optionality. As mentioned before space for a second identical expansion has been ring-fenced with utilities and supporting infrastructure oversized to facilitate potential future expansion.
A second line would be a simpler and smaller project than the first with cost benefits deriving from early-mover advantage requiring materially less CapEx scope and critically providing the opportunity to capitalize on additional clean ammonia demand at low development cost. I'd now like to spend a few minutes giving some updates on the markets to close us out. Starting with methanol on page 34. 2023 was a weak year for methanol but spot methanol prices recovered during the fourth quarter and have continued to improve more recently in the last few weeks. This has been driven by improving demand particularly in China as rising crude oil prices have supported Chinese MTO affordability and MTO operating rates continue to go up quarter-over-quarter. MTO rates averaged above 80% in Q4 up from the low-70% average in Q3.
MTO rates have softened in Q1 but remain elevated and as a result of these tightening supply and demand balances inventories have also come down recently. Prices have rebounded considerably over the last few weeks with Houston spot rates now at above $350/tonne. Medium- and long-term methanol market fundamentals remain favorable driven by three key factors. Most importantly demand for methanols and marine fuel is accelerating exponentially. We are seeing more and more retrofits resulting in more than 200 dual-fueled engine ships on the water by the mid-2020s. As you can see in slide 36 in the presentation incremental demand from the maritime sector today is expected to be in excess of 7 million tonnes per year by the end of 2028 based on current orders of more than 275 new and retrofit vessels.
That's not actually page 36. That was the page we were on earlier, yeah, page 33. In addition to marine fuels, we also see increasing demand for methanol as a road fuel in several European countries, our core current end markets for our current core end market for green methanol to decarbonize transportation fuel and move away from fossil fuels. Outside of Methanex's Geismar 3 plant and another plant starting up later this year in Malaysia, we see no major supply additions outside China over the next few years. New supply will not be sufficient to meet the needs of these new growth segments, especially with the ongoing rationalization of existing supply and the growth of traditional methanol demand with GDP. Moving to the outlook for our nitrogen fertilizer and ammonia markets, which you can see from slide 38 onwards.
Nitrogen markets were relatively quiet during the fourth quarter of 2023 with urea and CAN prices falling during the quarter impacted by demand deferrals into 2024. However year to date we've seen urea prices recover by around 20% as deferred demand has started to materialize ahead of the spring application season in the northern hemisphere. Restrictions on Chinese exports which are forecast to be in the 3-4 million tons range this year similar to 2023, low operating rates in Iran due to gas shortages and unfortunately the recent explosion we heard of this morning, and supply chain disruptions in the Red Sea are also giving further support to urea prices in the near term. Moving to ammonia prices increased in Q4 2023 compared to the previous quarter underpinned by widespread supply disruptions.
More recently we've seen prices retreating from the recent highs albeit still at supportive levels and above trough levels reached in 2023. A rebound in industrial demand would tighten the market substantially when it happens given that global ammonia trade has still not recovered to the 19+ million tonnes level where it has historically traded. However importantly potential incremental ammonia demand from the new clean energy applications continues to gain traction and our teams are continually in discussions with many potential customers across power, shipping, and downstream chemicals. For power the Japanese and Korean markets alone could generate incremental ammonia demand of 6-9 million tonnes by 2030 as we're seeing co-firing regulations come into effect over the next several quarters. Finally pivoting from methanol as a marine fuel which we discussed earlier we're seeing increasing interest for ammonia dual-fuel ships particularly in the last six months.
As of today, there are 11 new ammonia dual-fuel ships currently on order awaiting engines and more than 250 ammonia-ready ships are either already operational or on order. This market is expected to accelerate exponentially in 2026 and could generate incremental demand of around 5 billion tonnes by 2030 and significant regulatory value for blue ammonia. Let me conclude with extending my thanks to the entire OCI and Fertiglobe teams for their contributions and achievements this quarter and over the last several years. With that we'll open the line for questions.
Thank you. Ladies and gentlemen, if you'd like to ask a question please press star one on your telephone keypad. That's star one on your telephone keypad. To withdraw your question star followed by two and please do also remember to unmute your microphone when it's your turn to speak.
We do have our first question from Lisa De Neve from Morgan Stanley. Lisa, your line's now open.
Good afternoon and thank you for taking my questions. I'll start with two. For the capital distribution, can you please share how the capital distribution of at least $3 billion will be structured, for example in terms of dividends, buyback, partial tender, and also accordingly how we should think about the tax implications? And then secondly on the strategic review, so you stated that you're pursuing potentially further strategic options for the business. I mean what are the possible avenues that you see as potentially interesting and in particularly referencing to the FT article this morning I mean how would you think about a cash-out structure for OCI? Overall what is the long-term endgame for OCI and the key shareholders? Thank you.
Yeah, I think I'll answer the first question and then Ahmed on the second question. On the first question in regards to the at least $3 billion of distributions that we've guided to today, as you know of course that we've noted in earlier calls that both transactions are tax-free. In regard to the mode by which we will make the distributions, that is something that we are currently considering. It is highly likely that we'll be looking at what we have done before in the past for most of our $2 billion over $2 billion of distributions over the past two years which is through capital reductions that we believe are tax-efficient for the vast majority of our existing shareholders. However we will firm up the approach in due course as we get closer to the distribution event. Ahmed on the second question.
Yeah, Lisa, on the second question, it's not much more than what we shared in the press release that there has been multiple inbound inquiries on the remaining business and as such we've decided and in discussions with the board to reopen the strategic review and all options are on the table. The strategy continues to focus on manufacturing improvement, on increasing low-carbon volumes, on bringing our blue ammonia plant to fruition, and extending that value chain with Europe. But as you know as part of our DNA our focus is on maximizing value creation and to the extent that there is an opportunity to create value that's not being recognized in the market that's something that we have to explore and look at. So maybe I'll leave it at that.
Okay, thank you. I'll move back into the queue.
Our next question comes from Christian Faitz from Kepler Cheuvreux. Christian, your line's now open.
Afternoon, good morning, everybody. Just one question remaining for now. You mentioned you also want to reduce leverage into a net cash position by year-end. Just from a finance theory point of view, why not keep some leverage on the balance sheet? Thank you.
No, it's a good question, and we've been obviously doing a lot of thinking around our balance sheet management and capital structure calibration as we move forward. But as we mentioned in the press release and the call, there are a multitude of variables that are now in play, including the strategic review. So for the time being, we are committed to an extremely conservative financial profile that provides us with the ample buffer to complete our projects and lands us at a net cash position at year-end.
This is of course combined with the retirement of significant amounts of growth debts. Like we mentioned earlier we're also suspending our regular dividends. After the closing of the transactions we will recalibrate our capital structure and communicate more in due course.
Okay thank you. Thanks Hassan.
Our next question comes from Aron Ceccarelli from Bernstein. Aron your line's now open.
Thanks for taking my question. I have two. The first one where are you in the regulatory approval process of IFCo? Have you and Koch filed the HSR for the IFCo transaction yet? And my second question is how much of UAN and urea demand is currently satisfied by imports in Iowa and the Corn Belt please? Thank you.
Thanks for your question. So yes we have filed for the HSR approval process so that process has initiated already since signing the transaction.
To your second question, I mean, I think, just stepping back and thinking about the U.S. markets. The U.S. markets have been one where over half of the nitrogen in any form have come in the form of imports in the 2015 and prior period. What's happened is there's been new production that's come online including Iowa Fertilizer and other brownfield expansions in Iowa and Louisiana and Texas and Ohio and a few other areas. And so the infrastructure for imports still exists whether it's warehouses for urea, whether it's tanks for UAN, whether it's tanks for ammonia, and the railcars, pipelines, and Mississippi, Illinois Rivers are all still there in place to be able to bring in product and import. Off the top of my head I don't have the number for you in terms of how much is imported. It fluctuates.
How much gets brought into the United States when the pricing is attractive for foreign producers? They will send more product into the United States. Even at times, as we know, they send them in, as we've seen a lot of Russian product come in over the last couple of years into the United States and being sold on and around the Iowa plants and in the Midwest. And obviously the other element on the UAN and urea side is the farmers will tend to look at nitrogen values whether it's ammonia, urea, UAN values and could change preferences in a given season and put more UAN, more ammonia, more urea in the ground depending on relative value and pricing. But all products continue to be imported into the Midwest and into the United States as it is a global commodity.
Thank you very much.
Our next question comes from Nian Wu from Invesco. Nian, your line's now open.
Hi there. Thank you very much for taking my question. I was just wondering in terms of the actual Texas Blue project given the scale and the kind of first mover aspects of this project, have you encountered any sort of issues with the actual engineering given it's more of a proof of concept type project? That's my first question. And my second question would be that given the strength of the balance sheet going forward as an ongoing concern, do you have any guidance at all in terms of M&A expectations for investors? Thank you.
Yeah, thanks for this question. So starting with the first question on the Texas blue ammonia project.
This is a blue ammonia project so it's unique that this early mover advantage we see is not just an advantage because construction costs have continued to go up, equipment costs and availability have continued to be more challenging over the last several quarters and we signed this project back in 2022. But also it's an early mover into an existing proven technology. This design that we have for our 3,000 tonnes per day or over 1.1 million tonnes per year ammonia line is a KBR proven existing technology off the shelf. It has production that's operated in other parts of the world. And then as OCI we've had experience with KBR technology Purifier in the Iowa plant that we brought online in 2017 and plants in Egypt in EBIC which is part of Fertiglobe as well as in our OCI Nitrogen plant. So very familiar with KBR technology.
This design is not a new size. It's been produced and proven in terms of design nothing complex on that front. I'll just further add that this is a simpler project from an OCI perspective than one we've ever done because it's only a back-end ammonia line. So you're literally talking about 2 compressors, a converter, and some heat exchangers in terms of production relative to for example the Iowa plant which I think had over 7 I think it was 7 or 8 compressors on that site. So very straightforward to produce. We're going to be buying over-the-fence hydrogen and nitrogen from Linde and I stated during the prepared remarks we will have redundancy onto US Gulf Coast nitrogen and hydrogen supply points.
So that's where we stand on that and we feel confident in terms of the design with KBR which is one of the largest market share ammonia producers globally. On your second question I think as we stated we've reopened the strategic review due to inbound inquiry on our remaining business from a purchase perspective. Our balance sheet does stand in a good position. I think Hassan walked through our plans in terms of continuing to fund our existing and announced growth projects and we'll continue to conduct the strategic review.
Okay thank you very much.
Our next question comes from Charlie Bentley from Jefferies. Charlie, your line's now open.
Great. Thanks for taking my questions. Could I just confirm I get something like $500 million of incremental cash on balance sheet post the divestments.
Can you kind of confirm that that sort of number by the end of the year should be reasonable? That's question one.
Like we said we drafted that guide specifically on what the exact position will be. I think the direction of travel which we've shared is that in the short term we're going to be taking a bit of a conservative and prudent financial position. And we look also into all the individual pieces of our debt instruments in the context of the strategic review that's ongoing. However, of course I would add to that that in a more longer-term basis obviously we would take on a healthy level of leverage that still puts us within a healthy financial profile that's fit for purpose for our business noting that we do have some growth projects that could take on some debt in the future.
But in terms of specific cash figure guidance, I think we'll defer the conversation to later in the year. Can I just add one thing as well? As we in Q3 we announced the stake sale of Texas Blue. I mean, for example, if that were to go through in the next few months, that could have an effect on how much cash is in the business, especially since we've already spent $500 million on that plant. And as we just announced this morning that we've had inbound inquiry and we're continuing the strategic review, all of these are variables that would affect what that number could look like at onset. Yeah. And hence the decision to defer some of this discussion to later on.
But we wanted to give some parameters to the markets in terms of how the rest of the year is spanning out as we evaluate the extended strategic review.
Okay, great. And so just the second one was specifically on the remaining CapEx for Texas Blue. I know you flagged something like $600 million of incremental growth CapEx. Is that all for Texas Blue? I'm just checking there's not kind of any overruns that we should be expecting from the initial $1 billion number.
So we've said that it's an approximate $1 billion CapEx number. The $600 million for this year was one that did include a bit of growth CapEx associated for example with bringing on the DEF storage tank in Geleen in the Netherlands which will allow for the distribution in the next two months of sorry two to three months of AdBlue or DEF in Europe.
Yeah, I think, Hassan. No, correct. It's a total number which captures a big part of it. Obviously, the majority of it is Texas Blue, but it captures some of the other ongoing pre-announced initiatives. We mentioned earlier that the project is north of $1 billion, but we haven't given exact numbers yet. Obviously, we have live discussions happening with potential co-investors on the project. In due course, we'll be able to share more information. The project is progressing quite well. It's progressing relatively on track, and we are really feeling the benefit of having done early movers made early moves to secure various aspects of the project which would have been subject to significant inflationary pressures had we not done so. Even on a replacement cost basis, we're doing quite well with this project.
Yeah. Absolutely.
Then sorry, just my final one was on that point. I mean, I guess I look at the MOUs that your competitors Yara and CF signed with JERA at the beginning of 2023, and I know they're a lot earlier in terms of their projects. But I guess I wonder, you being a lot further along with these projects and maybe it would have been a bit quicker to sign some of these agreements. I guess did you look at kind of that type of collaboration with JERA at the time? And if so, I guess what was the—I guess what was the—were there any sticking points? And I guess just thinking about that, I mean, should we be thinking about Japan and Korea as the kind of primary avenue for selling down an equity stake? Thank you.
I think it's a good question.
But first off, we are the only plant that is under construction today. We are the only plant that's FID'd. We are commissioning and starting up in the first half of next year. So we're well ahead of other plants coming to fruition. And I think one of the benefits, to recall what just Hassan said, is that we had the benefit of buying the equipment and securing construction contracts over ahead of the Inflation Reduction Act even being approved. So we were able to fight some of that inflationary pressure that you've seen has affected other projects that are under study right now. I won't go into specifics on specific counterparts that we would look to potentially have offtakes with.
Japan and Korea is definitely one of those destinations where they would look at equity stakes as well as offtakes to qualify for the incentives to be able to bring in low-carbon ammonia to decarbonize their fossil fuel-related power sector. But also we do have the benefit of the ability to sell into our European distribution network as well. From an OCI perspective we're generally not in favor of announcing too many MOUs. We're focusing on sharing with the market binding agreements when and such they're available.
Thanks guys.
Our next question comes from Faisal Al-Azmeh from Goldman Sachs. Faisal your line's now open.
Hi and thank you for the opportunity to ask questions. Maybe just a few from my side.
Just on the Texas Blue, when we think about the first project you've mentioned that you've managed to secure the cost at a relatively good level, does that mean that thinking of a second project makes it a bit more difficult in light of the inflationary environment and at this stage you will only be completing one and that places any potential for another one out of, let's say, out of hand at this stage? That's my first question. And my second question relates to M&A. You've mentioned as well that you could be looking at inorganic activity. Should we assume that it's mostly in the U.S. or does Europe also fall within the spectrum of the areas that you're looking at? And then finally, maybe if you can share some color on the free cash flow conversion relating to that mid-cycle EBITDA that you've highlighted.
Part of that is obviously Natgasoline which is a dividend. But if you strip that out and you look at the remaining company excluding Natgasoline what kind of free cash flow conversion should we think about given that there's a corporate aspect of the business which has a lot of eliminations? So if you can just share some color on how we should think about the free cash flow conversion. Thank you.
Thanks Faisal. So with regards to the Texas Blue project part of our CapEx that we spent was to oversize as I mentioned utilities. Things like interconnecting pipe racks, raw water, water treatment, substations, even the connection to hydrogen and nitrogen networks. So that among others and we have a bit of an illustration of that in the presentation which we just posted allows us to build this next plant.
I mean if we'd gone with line two two years ago it'd be a lot cheaper than doing it today. But we didn't go with line two two years ago and we're not FIDing line two today. What we're communicating to the market is that if there were to be another plant to be built line two probably has the biggest advantage we think in North America in terms of building a plant in the U.S. or in Canada where a lot of the existing outside battery limit items and utilities are already in place. Right? The construction market's moving every day. Like I said on the first line we've done unit rate contracts not to take productivity risk and not to take labor market risk labor price risk on the first line.
But on the second line that will be a moving target just with what we're seeing and that's why replacement values are going up as Hassan mentioned as well. We think it's future optionality and we think that we're in pole position with Texas Blue to be a plant that can come online. But we're focused based on this last question on our offtake and our ability to place that whether it's in Japan and Korea whether it's in Europe with the advent of CBAM in 2026 the ability to produce low-carbon fertilizers and low-carbon chemicals and get into the ammonias and energy usage we think is another big potential destination.
Also we're really tracking the marine fuel side which I said at the prepared remarks at the end where we think that blue ammonia could have very strong regulatory value and we're looking to arbitrage between Japan and Korea as an end market, the European market as an end market with CBAM, and the marine fuels market where blue ammonia can fetch particularly if it's a low enough carbon blue ammonia quite a high premium and generate good returns for this project. The second question—can you repeat it again? The M&A question—it was right, Faisal. So on the second question I mean we can't provide any further detail on the nature of the inbounds for the strategic review. On the third question maybe I'll hand it over to Hassan on the free cash flow conversion.
Yeah it's a good question.
I think we provided some insight into that in the call first one to the announcement of the two divestments and we guided for circa 50% free cash flow conversion. Obviously there's some assumptions associated with that. I mean these are relatively young assets. Of course OCI's Iowa is a little bit different although it's a gold-plated facility as we have described it in the past. So it also has slightly higher maintenance CapEx. But looking at maintenance CapEx looking at assuming some reasonable leverage going forward and very low cash-effective tax rates you get to comfortably around or above the 50% free cash flow conversion mark. And that is also including minorities in that free cash flow conversion right for the methanol business? Is that right? The minorities the remaining minorities right now is only limited to the 15% stake that's in the methanol group.
Yeah.
Maybe just a follow-up on the first question Ahmed. So when we think about let's say another line you think in the current cost environment I know you would have let's say if you FID'd this 2 years back probably it would cost you less than $1 billion. If you FID another one today do you think it will cost you $1 billion given that you've already spent a lot on the infrastructure related to the project?
I think I'd prefer not to share kind of estimates on what that looks like because it changes every few weeks here in the United States with what we're seeing in the market.
But if you think about when you think about construction what needs to be done the quantities of steel, the quantities of equipment, the quantities of concrete, all the quantities of piping and welding are all materially lower in this second project and it would need to get repriced with construction to see what it looks like. All I'm saying is that it would be advantaged and directionally the quantities are materially lower and can allow for an advantage relative to others built today. But it is an interesting market in the United States right now from a construction perspective to say the least.
Thank you.
Our next question comes from Sashank Lanka from BofA Bank of America. Sashank, your line's now open.
Yes, thank you for the presentation. I have two questions on my side.
Just looking at slide 13 and the mid-cycle EBITDA bridge, I think you've highlighted an increase in about 70% production. So just wanted to understand how you expect to see that ramp up of the 70% production increase. That's the first question. And sorry, that's the first part of the first question. The second part is if I had to put a split between price versus volumes, obviously volumes are on 70% increase but what upside would you need to see in prices from the current spot price to get to your mid-cycle EBITDA guidance? That's the first question. And the second question is basically on the earn-out mechanism that you spoke about on the last call from Fertiglobe. I think we were waiting for details there.
So any guidance you can provide there especially given you did mention that you'll benefit from the nitrogen market upside and you seem quite bullish on the nitrogen pricing trajectory in the next over the next few quarters. Thank you.
Sure. No I mean just to answer the two questions I think one you were asking about where do you timing of the volumes increase and the second part of that first question was on prices. So maybe I'll start with the second part of the first question. In the footnote I know it's in the fine print there you can see the benchmark mid-cycle prices assumed and you can extrapolate based on those what that looks like. So for example methanol US Gulf spot is $375 assumed in that mid-cycle number. Today we said the number's just above $350 for just today's price. Right?
You can look and see some of those other numbers in there and make a comparison. I think Tampa ammonia is not far from what is there. So you can kind of compare and contrast that as well as the gas and the TTF side obviously without taking into account the hedges as stated. With regards to the volumes, these levels are levels that have been achieved in the past and our focus over the next few years is to continue to work towards achieving and exceeding these historic levels. One of the benefits of being a smaller company now following the announced transactions in December is the continued focus on really now just two industrial sites. OCI Nitrogen Geleen and the Texas Beaumont complex in terms of the leadership.
So from that perspective you have a large increase in the manufacturing improvement initiatives to focus on bad actors, to address equipment issues and some of those that could be a little bit lumpy and be most turnarounds as they get scheduled to see improvements on the manufacturing improvement side. The other side is obviously on the blue ammonia which is the largest part of that 70% production increase. That's 1 to a little over 1.1 million tonnes. Like I said it's probably one of the easiest plants we bring on from a relative complexity perspective because it is just a back-end ammonia plant without a reformer. And obviously that is scheduled to come online in the first half of next year. So I think those are just your questions with regards to the sensitivity right?
Yeah. So, is my understanding correct that this the move towards the mid-cycle from the current level is more volume-driven than pricing-driven given most prices are not very far from the most spot prices are not very far from mid-cycle?
No, I mean, so I'm saying versus spot price today, yes, but think about last year 2023 we saw methanol prices ammonia prices much lower. So when you look on the trailing results and what we have there we had much lower methanol prices we had much lower ammonia prices towards the middle of the year. They improved in the end of the year. And then you can look at for example CAN melamine was a bit weaker with the industrial side.
So I think it's definitely price as well as volume with some of the issues that we faced last year with the Natgasoline outage being one of the major ones despite OCI Beaumont performing relatively well. So yeah.
Okay. Thanks. And I think we also had a turnaround in CAN sorry in urea and melamine in the middle of the year in OCI Nitrogen.
Got it. And then the earn-out mechanism from the Fertiglobe sale?
Yeah sorry. The second question relates to the earn-out in the Fertiglobe transaction?
Yes correct.
Yeah. No I mean as we mentioned before we are unable to provide any specific disclosure around the mechanism. But like we mentioned in an earlier call the earn-out is designed to capture upside volatility in the market which we have seen happen in numerous occasions in the last five to seven years.
And should that take place we want to be in a position to benefit from such upside volatility and capture it in the purchase price. But it is not designed to find to target an incremental premium per se on a sort of a on a normalized basis. It's more to capture meaningful movements in the markets. Got it.
So more like supernormal abnormal prices yeah.
I wouldn't say that either but let's just say it's to capture upside when there's significant when there is meaningful movement in the market yes.
Okay. Thank you.
Our next question comes from Lisa De Neve from Morgan Stanley. Lisa your line's now open.
Hi. Hi. Thank you for taking my follow-ups. I have a couple.
So, can I just confirm that you'll look to redeem all the company debts with your target for net cash pro forma position at time of completion of the transaction? Just to confirm that that would be helpful. And secondly, I mean, how should we think about OCI continued business net working capital requirements and the seasonality of that and especially how will this compare to actually OCI Group previously because you always had very limited net working capital outflows and quite limited seasonality in comparison to some of your peers. And then maybe on BioMCN, so how do you think about potentially at one point restarting BioMCN?
I mean what would really need to be in place because if I look at your direct margins right now I mean based from gas prices and contracts methanol price at a certain discount it seems that at least you're currently back in the black. So what would you need to see for actually feeling comfortable bringing that back online and is there any sort of timeline or safe window for that to be in place for you to do so? Thank you.
Sorry I was on mute. I was saying that in regard to your first question we haven't given explicit guidance on how we're going to be approaching individual components of the balance sheet. But like I mentioned directionally we were committed to achieving a net cash position at the end of 2024.
That of course does not mean that that's going to be the modus operandi medium- to long-term. However, during this period of strategic review and as we calibrate our capital structure, this makes sense for us. And we do intend to repay substantial amounts of gross debt as part of the exercise. However, it's too early to finalize on individual components. So I can't really give you the exact answer to your question except the directional guidance that we've shared so far. Maybe you can repeat the second question, Lisa, because there was a lot of questions.
Yeah, so yeah, sorry for that.
So, on net working capital, how should we think about OCI, the continued business, net working capital requirements and seasonality of that, especially how does it compare to OCI pre-announcement of these transactions because you've always had quite a balanced net working capital structure versus maybe some of your peers where the swings through the quarters can be quite pronounced. And just to understand how we should think about it in terms of remaining core, the methanol business and OCI Nitrogen.
Yeah, I mean, I think it will be like the business before even the deconsolidation. We don't think there's going to be significant swings in net working capital per se except insofar as it relates to commercial decisions that we make at times during certain parts of the year or during certain years to hold back inventory or be more aggressive at times.
But the business in itself does not require significant working capital or does not experience significant working capital fluctuations per se. And we also have built-in tools and mechanisms that we've deployed in the past that even in the case where we do have commercially driven fluctuations we have mechanisms to smoothen it out.
Your next question?
Yeah so the last one was on BioMCN so just about how you would think potentially about restarting that unit at some point. What would need to be in place for that? And the reason I'm asking this is because if you look at your direct cash margins for running a direct margin spread on methanol if you base that from the current gas prices in Europe and contract methanol prices I mean you would actually currently be back in positive territory.
I'm just asking you what would you need to see to feel comfortable bringing that back online?
Yeah, Lisa. So obviously it's a relevant question we brought it up today just given where the gas environment has been and it kind of maybe creates a bit of a déjà vu to a few years ago when at times this is the diversity that having methanol allows for. As being one of the only on-purpose natural gas-based methanol production facilities in Europe and I think recently read that there have been a couple of permanent shutdowns of off-gas produced methanol in Europe. I think we're getting into that neighborhood where it's something to be considered. As you know we have 900,000+ tonnes of production capacity. We can restart our second line which is 450,000 tonnes.
It's something that we're monitoring right now and we see as a good potential upside where we can also generate not just gray methanol but also some biomethanol and make a margin into that market. So it's something that we're definitely considering. We won't go into specifics on exactly what gas price it is and exactly what CO2 level because that's also a relevant metric what that looks like. But we did as you recall refurbish this plant in 2019. I've had a lot of good CapEx that went into it and we considered a good swing that could be in operational when we're close to the mid-cycle pricing and have that optionality towards going green. Note that the mid-cycle analysis that we provide that does not include BioMCN does not assume that BioMCN is back in operation. Exactly.
The $500 million assumes nothing from BioMCN. So we put that as optionality. You had another question I believe.
Well, just one moment please. It has dropped from the queue. One second. Lisa, if you do have another question please rejoin the queue. Our next question comes from Laurens Vegter from Credit Suisse. Laurens, your line's now open.
Good afternoon. Thanks for taking my question. Yeah, I appreciate the call today. Thanks a lot for that. I was just wondering what about your commitment to an investment-grade rating unless I missed it in your report but it's something that you usually refer to and I think that yeah maybe you could provide some more color on that. Thank you very much.
Yes, hi. No, it's a relevant question.
In the context of the ongoing strategic review and sort of all the variables in play, we are still committed to an extremely conservative financial profile as I mentioned earlier. We believe that the financial profile that we are constructing going forward will be IG-like, but there are other considerations that we need to that will be taken into account by the rating agencies and that's something that's going to be worked through and of course get impacted by the strategic review that's ongoing. However, we are committed to maintaining the appropriate financial profile accordingly. Hope that answers the question.
Yeah, okay. No, that's helpful, yeah. Thanks.
Our next question comes from Nian Wu from Invesco. Nian, your line's now open.
Hi there. Thank you for my follow-up. I think I've just you just answered the IG question I had in mind.
But just for a little bit more color perhaps you mentioned that you were already negotiating off-take contracts for Texas Blue. I mean just to give us an idea given that you framed a picture where there was quite a strong demand backdrop to that in terms of the proportion of the output that's currently being negotiated can you give us any color on how much of the 1.1 million capacity is kind of currently under negotiation in terms of off-takes please?
Yeah. We won't be able to go into detail on the level and/or percentage which we could potentially off-take but I will just reiterate what I said earlier that we look at Japan and Korea as being interesting markets which is highly competitive in terms of who could be procuring our blue ammonia production capacity.
But also there are several European buyers that want blue with CBAM's onset in 2026 and seeing a path to be able to arbitrage for example nitrate fertilizer produced with blue ammonia relative to urea which might have CBAM implications coming in in 2026. Plus I think in the next few quarters we're going to see and that's what we're weighing against the continued regulatory support on fully FuelEU Maritime IMO focus on CO2 where blue ammonia ends up being one that commands quite a big premium into that market. So we're balancing all of the above and we're looking at where we can have a good predictable cash flow stream from that blue ammonia project while retaining upside optionality given where we're looking to maximize value at that asset. Okay. Thank you very much.
Our next question comes from Aron Ceccarelli from Berenberg. Aron your line's now open.
Thanks for taking my follow-up. Maybe can I ask you first question: can you give some color around maintenance CapEx for RemainCo, please? The second question is, sorry for going back to the antitrust for IFCo, but I understand it's a long time ago. But in 2009 one of the reasons why the CF agreement deal didn't go ahead was because the regulator looked at it not from a regional perspective only but from a state perspective only. So maybe can you give us a little bit more color why this should be different? And final question is maybe can you confirm that you had more than a single bidder for the IFCo plant? Thank you.
Yeah, thanks for your questions. On the maintenance CapEx, I believe we included it in the presentation that was used concurrently with this call. I hope you can locate it.
In the presentation we give guidance for 2024 of $125 million for maintenance CapEx. We haven't given guidance in the beyond years as we have typically focused on the year ahead. That's the figure and that's obviously built into the free cash flow conversion sort of guidance that we shared earlier. On the antitrust Ahmed? Yeah sure. I mean I can comment on 2009 actually predates me in the fertilizer industry but what I can say based on kind of experiences that we've had is that as you may recall in 2015 with CF OCI and CF entered into a merger a tax inversion that was ultimately canceled due to tax due to the reversal of tax inversions.
But it was approved in antitrust in the first round after 59 days where CF went from I think a 60%-65% market share to with the addition of IFCo closer to 80% market share on UAN. And CF did have an existing UAN plant in Iowa at the time and OCI was adding with Iowa Fertilizer UAN capacity and that was approved in that first round. But probably more relevant in this administration last year CF bought the ammonia plant of Dyno Nobel at Waggaman in Louisiana which I think is within 100 miles of the Donaldsonville plant that has over I think 6 ammonia lines and one of the largest single-site ammonia production facilities.
So both in the state of Louisiana approved within eight months, I think, treating it as a global commodity and, as I said earlier, we continue to have import capacity throughout and around our Iowa Fertilizer plant. So I think from that perspective and given that Koch is a much smaller entity as a number three player, I think puts us in a good position with regards to that and obviously the ability to swing between products on a supply and demand perspective depending on changes in prices. And maybe can you just confirm that Koch was not the only bidder for IFCo plant please? Now you're getting into trade secrets, but yes there were more than one bidder and Koch was the winning bidder on this plant.
That's great. Thank you very much guys.
We currently have no further questions, so I'd like to hand the call back to Sarah Rajani to continue. Sarah over to you.
We have a couple of questions on the webcast. Firstly from Andrew Kecskes . When do you expect to realize the mid-cycle EBITDA or said differently EBITDA from continuing operations was a loss of $23 million in 2023. Can you help us to bridge to the $500 million mid-cycle figure and how much progress should we expect in 2024?
So that's a good question. It was part of the reason why we wanted to also provide some of this insights into how we view the business and its potential. So the information provided is sort of part of that bridge thinking.
But retrospectively looking at 2023, which was a challenging year, there was a combination of factors which include natural gas hedge losses and of course we continue to have a hedge book for the continued operations that at year-end had unrealized losses excluding Natgasoline in the neighborhood of $125 million. There were some production issues that Ahmed mentioned earlier in the Natgasoline facilities. We of course in the wake of the transactions we had not yet launched or began to execute the restructuring required for what was a global platform with holding company costs that associated with that and that will take us some time to recalibrate. We're targeting that by next year we bring down our holding company costs to a more reasonable range of $30-$40 million although we are targeting the lower end of the range.
Then also as described earlier in the call, even though spot prices is closer to mid-cycle for methanol, we are coming out of rough conditions for methanol that on an average basis for the year, and similarly ammonia prices were also lower. And of course natural gas prices, although there was a sort of a historic drop in natural gas in Europe, the year was not consistently experiencing lower gas prices. When you combine all these factors and you combine it with the sort of the mid-cycle explanation that we provided, you begin to see what that bridge could look like. And just to add one last point on this drop in natural gas in Europe, which is very significant, right. We had a situation which I could say the most easy corollary or the most easy parallel is mid-2008.
We had natural gas go from over $60 MMBtu to I mean today's at $8 MMBtu but it dropped into kind of that 11-12 dollars. So you've had production right during a period where gas prices were high and we saw this with a lot of the European peers at a historic high and to repeat that kind of drop's just not something that is possible unless gas goes back up to $60. So that was kind of the historical element of it and it became a bit of that self-fulfilling prophecy in that people didn't want to catch a falling knife on the buy side. They see gas prices going down they don't want to buy they want to wait till absolutely the last minute to buy. And that's what hit a lot of European nitrates and nitrogen producers in the first half of last year.
We did have the benefit of the ability to import ammonia and do other things but that coupled with the melamine slowdown and these lower prices explained a big part of that. Yeah.
We have a second question from Stijn Demeester . Can you quantify the adverse impact of the gas hedges in the coming years in relation to the mid-cycle EBITDA of $500 million? Is there a one-off impact of the gas hedge in relation to the IFCo divestment? And I think the other question has been answered.
Yeah as I mentioned earlier at the end of 2023 excluding net gasoline our sort of unrealized gas hedges stood at a negative $125 million. We do have the hedges associated with IFCo which were both physical and financial are being treated as part of discontinued operations.
As for the hedges associated with the continued operations we do have a book like I mentioned I quantified the figure at year-end and that's a little bit again front heavy as we mentioned in earlier calls on the overall total gas hedge book the pre-divestments in terms of 2024 and 2025 and it trails off in the outer years. I would say that we've also shared that it's in the zip code of the sort of $4 per MMBTU. That's where the cost of that hedge book stands.
We have a question from Rutger Pritschen Rieth who's asking, can you talk us through the expected price profile premiums of blue ammonia that will be produced by Texas Blue next year and how lucrative will this state-of-the-art plant be?
No I mean I think it's the billion dollar question here with regards to that.
In terms of the blue premium, right, we think that the fact that we'll be the first blue ammonia plant and there's the scarcity value there where nobody else is under construction in the United States and CBAM will have started implementation and be incrementally kind of implemented from 2026 to 2034 that gradually will increase the value of a low-carbon product relative to those that need to produce carbon-intensive products for fertilizer use. The other area is on the industrial new energy use. That area, as I mentioned previously, we could see blue ammonia having a regulatory value given how we capture over 95% of the CO2. We could see a regulatory value of blue ammonia in the order of $1,000 a tonne of blue ammonia. Right. So that's something that we're monitoring closely over the next few quarters.
The third avenue is obviously in the Japanese and Korean markets depending on the incentives that are brought into place and what the Japanese and Korean utilities would want to buy to be able to reduce their emissions and reach their CO2 emission targets. That's going to depend obviously on the regulatory side. So whether it's CBAM whether it's the Japanese Korean regulations or whether it's the gas directive under FuelEU Maritime and IMO those are all elements that will be driving that blue ammonia premium relative to gray. But as Hassan stated and as you could see in that slide when we showed mid-cycle we assumed gray pricing or historical kind of gray pricing rather than the addition of that blue ammonia premium.
Okay. We have another question that's come in from Sam Norman.
Are there any covenants included in OCI's bond debt covenants that will require certain pieces of debt to be retired upon the sale of the IFCo and Fertiglobe assets?
The answer is no.
Okay. The final question from Steve Jobber. Nassef Sawiris was interviewed in the FT today stating OCI may become a cash cow and becomes a machine for further investment. We are quite open-minded. Can you clarify or expand on this and perhaps give us some reassurance over your cash pile?
Yeah, we're aware of the piece that was published today in the Financial Times. I mean, frankly, what is ascribed to Nassef in the Financial Times piece is fairly consistent with everything that we have done in the past and everything that we are saying today as part of the strategic review that's been ongoing by OCI.
As Ahmed mentioned earlier in the call, it's in our DNA to look at value maximization and look at opportunities that unlock value for shareholders. We see that as part of our fiduciary duty to evaluate all options as they become available. That's something that we will continue to do hopefully with success. Bringing in $6.2 billion of net cash proceeds doesn't mean that it has to be spent. We're going to look at it as if every dollar counts and that's how we focus on how we run our business and hence our continued focus on the strategic review.
There's one final question from John Greenwald. Understanding that you remain in communication with rating agencies while you undergo another strategic review, have they communicated any parameters or requirements needed to maintain IG ratings based on recent discussions?
We appreciate the question, of course, but our conversations at this time with the rating agencies are confidential and I'm sure they will update the markets on our targets when appropriate. Part of that, of course, is driven by, like we mentioned earlier, several variables in play that we will evaluate and as we move forward I'm sure the picture will become clearer. Thank you.
There are no further questions at this time.
All right. Thank you all for joining this quarter's conference call and looking forward to the next one. Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.