Ladies and gentlemen, thank you for standing by, and welcome to the OCI NV 4th Quarter and Full Year 2020 Results Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Conference Call. I must advise you that this conference is being recorded today, Thursday, February 25, 2021.
And I would now like to hand the conference over to our first speaker today, Hans Beyed, Director, Investor Relations. Thank you. Please go ahead.
Thank you and good afternoon and good morning to our audience in the U. S. Thank you for joining the OCI N. V. 4th quarter 2020 conference call.
With me today are Ahmed al Hoshi, our Chief Executive Officer and Hassan Badjawi, our Chief Financial Officer. As you have seen, we published our results this morning. And 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. N. V.
4th quarter. As usual, at the end of the call, we will host a question and answer session. As a reminder, statements made on today's call contain forward looking information. These statements are based on certain assumptions that involve certain risks and uncertainties, and therefore, I would like to refer you to our disclaimers about forward looking statements. Now let me hand over to Ahmed.
Quarter. Thank you, Hans, and thank you all for joining us today. Let me start by covering our top priority, quarter. We are pleased that our safety performance continued to be best in class despite the prevalence and challenges of COVID-nineteen. Quarter.
Our recordable 12 month incident rate was 0.23 incidents per 200,000 man hours as of December, a significant improvement from 2019. This continues to be one of the lowest in our global industry, but of course, our goal remains to prioritize process safety and to reduce occupational safety incidents to 0 for all our production facilities across the globe. I would also like to thank our resilient employee base for being positive and kept spirits high during an extremely challenging year. Quarter. Lastly, I'd like to also commend our Texas based OCI teams who dealt with the extreme cold weather conditions in February very admirably quarter despite challenging unprecedented personal circumstances at home.
On to the results. We are pleased that we ended the year with a strong quarter of robust quarter. As a result, we achieved a reduction in net debt of $332,000,000 during 2020, quarter despite selling prices for all our products nearing trough cycle levels during the year and on average at materially lower levels than in 2019. Our sales volume increased 15% during the Q4 and increased 23% for the full year 2020. But on a like for like basis, our full year sales quarter increased by 10% for the full year 2020 versus 2019.
Looking at the underlying drivers of this growth, quarter. Robust import demand in India, Europe and LatAm boosted a 24% increase in urea volumes for Q4 2020 as Fertiglobe year over year quarter as FerziGlobe delivered inventories that were built up during the lower summer season. Our DEF sales in the U. S. Were particularly strong and achieved once again record levels during the quarter.
And we saw our nitrate volumes in Europe increase during the Q4 year over year, contributing to an overall increase of 20% for the full year 2020 compared to 2019. Our annual volumes were lower year over year our annual ammonia volumes were lower quarter. Year over year due to a combination of turnaround activities at 1 of our ammonia lines at Surferth in Algeria and some weakness in industrial end markets. These factors offset the increase in ammonia volumes in the U. S.
On a good on an excellent fullemet. We also had another quarter of strong performance in Methanol as we recorded an increase of 48% in owned produced methanol sales volumes in Q4 2020 compared to the same period last year. This was driven by a significant step up in production at OCI Beaumont and BioMCN as both these facilities were running above 95%, quarter. OCI even above 100% on average for the quarter and despite some production downtime at Natgasoline during the quarter. I'm pleased to say that BioMCN continued its strong performance and reached record production volumes in January 2021.
With that, I'd like to turn it over to Hassan to discuss financial results.
Thank you, Ahmed. I'll briefly cover some key highlights from our financial results for the Q4. Quarter. Allow me to begin with the income statements where we recorded on for our consolidated revenue an increase of 22% to $1,040,000,000 and our adjusted EBITDA rose by 12% to $266,000,000 in the 4th quarter quarter. As mentioned earlier, sales of production volume growth in both the nitrogen and the methanol segments contributed to this quarter EBITDA performance.
The prices of our key cost input, natural gas, were on average slightly higher for the group in Q4 2020 compared to the same quarter last year. Looking at the operating segments of our business, our nitrogen businesses benefited from higher sales volume, offsetting an average quarter. On average, lower selling prices and higher gas prices in the U. S. And Europe.
Fertig Globes, our Middle East business, quarter adjusted EBITDA improved compared to both the Q4 of 2019 and the Q3 of 2020. We continue to benefit from our fixed gas price agreement quarter. At Feritiglobe and the increase in higher spot gas pricing and its coordination with product pricing. The Feritiglobe business basically quarter. The methanolos group's adjusted EBITDA was higher in Q4 2020 compared to Q4 2019 due to an increase in production volumes, higher methanol prices and insurance proceeds quarter.
In net gasoline more than offsetting slightly higher gas prices in the Netherlands and the U. S. Compared to a year ago. Turning to the balance sheet and our free cash flow performance quarter. We generated healthy operating free cash flow.
And as a result, we were able to deleverage a further $187,000,000 quarter, resulting in a net debt position of $3,730,000,000 as of 31 December 2020. Quarter. Free cash flow before CapEx before growth CapEx amounted to $245,000,000 during the Q4, reflecting our operational performance quarter and net operating working capital inflows as we unwound our inventories that we had built up during the summer. Quarter. This was offset by capital expenditures, semi annual interest payments and also about $51,000,000 of one off expenses quarter related to the various refinancing activities during the Q4 of 2020, including the early redemption costs for our 2023 months.
Total cash capital expenditures were $52,000,000 in the quarter at about the same level quarter as the same period last year, and that culminated in $263,000,000 for the full year, quarter, which is and was at the lower end of our guidance. We continue to expect around $260,000,000 total CapEx quarter. On a 3 year average basis going forward, with our estimate for 2021 expected to be quarter. Closer to $300,000,000 as we have some carryover capital expenditure activities from 2020 quarter that are now will take place in 2021. This year, we will also start to see the benefits from our recent refinancing activities.
Quarter. We expect the bond offering last October and the refinancing at Vertigo to generate cash interest savings of more than $32,000,000 per year As we lowered our weighted average cost of gross debt by approximately 60 bps to now below 4.5 percent, N. Z. And we continue to see further optimization opportunities going forward as our leverage profile quarter. As a result of the improved outlook that Ahmed, I'm sure, will discuss NV 4th quarter.
In February, we also redeemed $147,000,000 of bonds at IFCO, which will result in further recurring quarter cash interest savings. But equally importantly, it's a reduction in subsidiary debt, which is consistent with our policy quarter to consolidate our debt activities at the holding company. We will continue to evaluate opportunities to achieve similar objectives quarter. And with that, I'd like to hand over quarter back to Ahmed for a discussion of our outlook and some concluding remarks.
Thank you, Hassan. Ahmed? Quarter. Yes. Thank you, Hassan.
I'll discuss our outlook and some exciting recent developments in our ESG efforts. The outlook for our business is undoubtedly looking much more positive than only a few months ago, and we are therefore seeing a much better 2021 ahead versus 2020. We are starting to benefit from a significant recovery in selling prices compared to last quarter as global nitrogen markets enjoy strong tailwinds and we maintain a solid order book in all our key markets. The outlook for our methanol end markets has also strengthened significantly. I'll start with the outlook for nitrogen markets.
Global nitrogen prices have recovered from trough cycle levels reached in 2020 with urea rising 30% so far quarter year to date 2021. Ammonia and nitrates and U. S. Prices were lagging in the Q4 of 2020, and we are still lower compared quarter and were still lower compared to the same quarter in 2019, but have also strengthened considerably increasing by more than 30% in the 1st 2 months of 2021. These price increases are underpinned by healthy fundamentals.
The steady increase in corn prices over the last few months to near 8 year highs, driven by strong corn imports from China and declining global corn stocks to use ratio and rising farmer incomes are supportive of farm economics and as a result nitrogen demand and of course pricing. Higher fertilizer demand in China on strong domestic crop prices Combined with the recovery in industrial urea consumption, the country is expected to likely limit urea exports from China in 2021 to a lower level that was experienced in 2020. Our nitrates order book in Europe is healthy going into the Q2 of 2021 and strong demand expected on improved farm incomes and nitrate inventories sorry, improved farm incomes and nitrates inventories in Europe quarter. Very low levels in the Q1 of 2021 compared to the prior year where we as well as our peers had stock buildup. Setting recent increases in fertilizer prices.
Compounding to the increase in demand are supply shortages in the U. S. Where natural gas prices soared in February during a cold weather spell, quarter causing most inland U. S. Nitrogen producers to reduce production rates or even idle plants.
The lower supply and logistic disruptions quarter. Have resulted in a significantly tighter balance in the market, which is supportive of higher U. S. Nitrogen prices ahead of the start of the spring season. This is particularly the case for UAN, where prices have risen by approximately 70% from trough levels in 2020 and further room to increase on attractive affordability levels as the ratio of corn to UAN prices remains close to decade lows and UAN is still at a quarter 10% discount to urea on a nitrogen tonne basis, which reached historic lows at the end of December.
In the case of urea, U. S. Is still short of product and in addition to quarter. What has been imported this year, this fertilizer year, a further 1,400,000 tonnes needs to be imported by June for the spring season in the United States. Quarter.
The latest outages are likely to increase this import requirement by another approximately 150,000 tonnes, but U. S. Urea prices continue to trade at a discount relative quarter. We also had some downtime at our U. S.
Plants in both Iowa and Texas, quarter. But the impact of the stoppages has been much more than offset by pre existing gas hedges as we went into the month of February 100% hedged in the U. S. With physical purchases as well as financial derivatives. On the industrial side, demand remained relatively subdued in Q4 2020.
There remains uncertainty on the pace of economic recovery, but we've seen a gradual recovery in global demand and markets have shown quarter. Ammonia prices lag the increase in urea prices, but the ammonia market has become extremely tight in the Q1 of 2020 with prices benefiting from higher feedstock costs, a recovery in industrial markets, high cost capacity shutdowns quarter as well as gas supply curtailments in Trinidad and outages just mentioned in the United States. OCI's DEF in the U. S. Reached record levels in Q4 2020, 2019, which combined with the higher sales prices in the U.
S. Supports an improving trend going into 2021. Melamine prices have also been going up, driven by reduced supply in the 4th quarter and solid demand in our core European markets continuing into 2021 contributing to an extremely tight market as we complete Q1 as we go into the Q2 contract pricing season. Moving to methanol markets. The outlook for methanol end markets also quarter.
Continued to improve. Spot methanol prices have more than doubled since reaching trough cycle levels in 2020 and the supply and demand balance has remained tight so far in 21 despite the resurgence of COVID-nineteen cases in U. S. And Europe. High cost methanol capacity has been shutting down and natural gas shortages in Iran, Trinidad and China of tightened global methanol supplies, which combined with delayed new supply continues to support prices.
Demand from methanol to olefin plants in China quarter was strong in 2020 and MTO utilization rates continued to be stable on the back of healthy economics. Downstream demand is also quarter. Turning to natural gas. We are well positioned to benefit from the recent increase in feedstock prices, which has driven up marginal cost of production and supports our product selling prices, particularly ammonia. It also benefits OCI as one of the most efficient producers in the U.
S. And Europe and strengthens Fertiglobe's significant competitive advantage as a result of its fixed quarter gas supply arrangements, as Hassan mentioned. I would like to give an update on our ESG initiatives. Quarter. As I'm sure you've seen, we will also be holding an ESG Investor Day on March 8.
I'm pleased to share that we've made further progress in our effort to grow our green portfolio with with some exciting new initiatives that fit well within our strategy to focus on and develop sustainable products. We continuously strive to be a leading environmental steward, especially as among our core products, ammonia and methanol are some of the best positioned products to create low carbon and carbon free quarter. And therefore, can decarbonize a wide range of end markets and industries. This creates tremendous growth opportunities for OCI and the use of methanol and or ammonia as a shipping fuel is particularly promising as these products quarter. OCI is one of the largest producers and traders of ammonia globally, quarter.
With our ammonia plants and storage tanks located directly on the major global shipping routes and located in regions with abundant and very cost competitive renewable resources. Quarter. We will be participating in the adoption of ammonia as a shipping fuel and in parallel we are working on expanding our blue and green portfolio to by the shipping sector along with a number of other industries and end markets. We are pleased that we recently reached another key quarter. We are pleased
to announce that we are very
pleased with our strong performance in the U. K, strengthening our market leading position in renewable methanol. We will continue to roll out biomethanol as a fuel, which helps reduce the carbon intensity of road transportation fuels in a highly efficient way, and we also see many opportunities in other industrial applications where this versatile product can be used. At the upcoming ESG Day, we intend to announce our 2,030 quarter. We believe that we can achieve these levels based on a differentiated strategy focused on value creation and capital discipline that helped enable the world transition to the hydrogen and low carbon economy.
We will outline how we will accelerate our operational excellence quarter programs, which we expect to yield tangible short and medium term results and how we can grow our existing portfolio of lower carbon products. Quarter. We will also detail value enhancing strategic initiatives focused on low carbon technologies, where we, together with our partners and customers, We will continue to identify, evaluate and develop more initiatives to reduce our environmental impact and grow our green portfolio. Our focus on deleveraging overall is still in place. So we're looking at asset light opportunities, quarter.
Evaluation of ESG initiatives take sustainability as well as economics into account. To conclude, we are now experiencing nitrogen markets that have not looked as positive quarter since at least 2015 and methanol markets have also strengthened considerably. Against this backdrop, we look forward to delivering another year of robust volume growth in 2021, and we expect methanol business to be a primary driver of this volume growth. Quarter. Following the solid performance of OCI Beaumont and BioMCN in the second half of last year, normalization of production and improved on stream efficiencies are expected to volume growth in the methanol segment in 2021.
This in turn drives earnings growth for the methanol group. Given a significantly more positive outlook for methanol compared to a few years ago, with regards to the methanol strategic review, we will continue to explore multiple value creative opportunities for the Methanol Group and we'll update you accordingly. We believe that based on current market fundamentals for our selling prices, quarter. Allied with our growth expectations for production sales volumes for 2021, we can deliver improved free cash flow, and we expect the drop in net leverage to below 3 times by the end of 2021. With that, we will open the line for questions.
Quarter.
And you have questions that came in. The first question comes from the line of Christian Faitz from Kepler. Your line is now open. Please ask your question.
Thank you very much. Good afternoon, everybody on the call, and especially the OCI team. Two questions, please. First of all, quarter. One for Hassan.
Can you please walk us through a free cash flow bridge for 2021, also given quarter. The net debt to EBITDA ratios, which were just mentioned. And then second question would be, quarter. Would your laudable efforts in ESG also lead to higher CapEx eventually? Thank you.
Quarter.
Yes. Thanks for your question, Christian. And I mean, as you all know, we don't give N. V. 4th quarter.
I would quarter. I would hope that you appreciate that there has to be substantive confidence behind quarter. Our decision to highlight the acceleration of our deleveraging profile going forward because quarter. Given the position of our business in terms of the global cost curve, especially with Ferdy Globe, with our fixed gas contracts, quarter. Combined with the step up in our volumes, which has been a primary area of focus year on year, quarter.
And we've as you've seen, we've continued to deliver a step up in volumes, and we continue to see and we expect to see another step quarter. Next year, driven also by the sort of the recovery of our methanol business, combined with the backdrop of quarter. The robust pricing environment, which Ahmed described as being the best environment we've experienced since 2015. All that together quarter. Really has given our business a boost in terms of our ability to accelerate towards quarter.
What we feel is an achievable drop below 3x leverage by year end. Obviously, that is a function of, quarter. Again, prices and volumes, but we're this is definitely we're definitely feeling good quarter about the start of 2021.
Okay, great. Fair enough. Yes, thanks.
I'm happy to address the second question with regards to basically will CapEx go up given our efforts on ESG. I mean, we'll spend some time going through that quarter during the ESG seminar on March 8. But generally, as we look and approach quarter. We're taking sustainability to be something that is an opportunity for us rather than something that's a burden and a threat. And as I mentioned In the prepared remarks, our focus is on not just achieving sustainability goals, but also focusing on the economics and value.
As you know, that's something that OCI, It's part of our culture and DNA to continue to do so. So when you think about just the and I mentioned this briefly as well, but When you think about our ambitions to reduce our carbon intensity as OCI, a good portion of that and a good chunk of it quarter comes from certain focus areas on operational excellence. As we mentioned previously, with The consolidation of our operating oversight globally, one of our big focus areas are on improving on stream rates, quarter. Decreasing start, stops and conversion efficiencies. So you can do those with or without CapEx.
Without CapEx, obviously, that's Very good returning endeavor and with some minimal CapEx to be able to improve efficiencies and conversions of quarter. Our decrease in the amount of MMBtus per ton you're using or natural gas per ton, that reduces your footprint, but also generates a lot of returns. So it just makes a lot of sense It's not something that's super CapEx intensive. As I said, if it does have some CapEx, it should have a 1 to 1.5 year payback, something that's quarter. Quite quick on the payback side.
When it comes to low carbon technologies and opportunities, as mentioned, looking at biomethanol, looking at quarter. Looking at some of the demand pull that's coming in the downstream customer base where their focus is on Scope 3, while ours may be on Scope 12 because we're close to the hydrocarbon, quarter. We're seeing a lot more month over month receptivity around being able to pass some of the costs down quarter. Something like shipping is very interesting, right? Because when you if you go to some shipping lines and some have announced quarter.
Focus on ammonia as well as methanol as decarbonization mechanisms, they're very close to the customer base. It's almost like B2C when dealing with them. Quarter. And customers have shown a willingness to pay to get something that's low carbon in terms of footprint and freight or freight the fuel within freight is a very low price a very low part of the overall product price. So those are opportunities where the downstream customers showed a willingness quarter.
To pay for that and that can help allow for great returning projects or great returning endeavors with our existing base. In addition, as I mentioned, subsidies, different programs in the EU as well as the U. S. From a tax incentive perspective and subsidies are ones that quarter. We'll be continue to become available to allow for a low CapEx approach to some of these projects and helping subsidize them.
Quarter. In addition, we've looked at things like offtakes, where we're offtaking the renewable feedstock and able to produce quarter. Renewable Ammonia, Renewable Methanol and Downstream Products without having spent as much CapEx. So the focus is going to continue to be as we do spend growth CapEx, focusing on NPV, quarter. Strong NPV positive returning projects.
And like I said, a big chunk of it can be on things with either limited CapEx N. V. 4th quarter.
Okay, great. Thanks, Ahmed. And congrats to the entire team on having a great
quarter. Thank you very much, Chris.
Thank you, Christian. And the next question comes from the line of Tom Wirth from Citi. Your line is now open. Please ask your question.
Quarter. Good afternoon, gentlemen. Tom Riddlesworth from Citi. A couple of questions, if I may. Quarter.
Just if I'm interpreting this correctly, you stated that a $25 a ton increase for all products quarter. It looks like to get to your less than 3 times net debt quarter EBITDA target for 2021. You're just baking in about a $25 ton increase across all products based on some simple maths. Quarter. And yet I noticed that most of your product current spot run rate are running well ahead of that.
Is that just quarter. Conservatism on your part or are you anticipating a significant correction in prices through the second half? Quarter. Second question, if I may, is on the sequencing. Obviously, we have seen this rapid improvement in nitrogen prices quarter, but sometimes that doesn't realize in the volume.
So can you help us understand That's exactly how the prices that we've seen on the screen equate to the kind of volumes that you're selling. You call out specifically that 2Q is looking good for nitrates In Europe, is that because 1Q won't see much price increase in nitrates? So color on the shape of the 1Q, 2Q split quarter. And the third question, if I may, I'll just add in. Interest expense for 2021, given that your net debt is falling, would be
quarter. Sure. Thanks, Tom. Quarter. So going through the numbers there, I'll maybe start with the second question quarter.
And then we can jump into the first and the third question. So the second question was around are you seeing basically the timing of sales where we said we quarter. We're seeing strong price growth year to date Q1 or year to date, sorry, late February. And you're saying the average pricing that We will show in our Q1 results would potentially lag that because of forward sales. Is that what you're asking?
Yes. Is there going to be any lag? Or have
you been able to sequence quarter. Your sales volumes with the spot prices. Yes, exactly that. Is there going to be a substantial lag in this quarter? Quarter.
I think of that both from a kind of commodity urea perspective, but then also those European nitrate prices.
Sure. So from a commodity urea perspective, from an ammonia perspective and from a nitrates perspective, quarter. What we've done and what we've done especially when we see and we said it in the last conference call, we see an upward momentum in pricing. We Try not to sell too far forward. Obviously, you have to sequence some sales several weeks in advance, potentially a month and a bit in advance.
But I'd say on par, if you look at us versus a lot of others in the industry, we tend to be a little bit shorter dated in terms of forward sales. Quarter. We will see, obviously, some late Q4 sales entering into Q1 and we'll see some late Q2 sales entering into sorry, late Q1 sales entering into quarter. But basically, we've been selling into the rally. Some of it will some of that has been achieved for early Q2 sales that we've done in late February, for example.
But what I've been kind of very pleased to see and taking ammonia for example as an example, Ammonia prices have increased very rapidly. I mean, in June, they were, I think, something in the high 100s. And now we're seeing ammonia prices quarter. We just did a sale earlier this week delivered to the U. S.
At $4.70 or $4.75 quarter delivered into the U. S. Gulf. What the approach has been is to continue and I have to commend our sales team on this, quarter. Continue to sell and set higher prices in the market over and above where the indices are with opportunistic sales and doing a lot more quarter.
Expanding our geographies of focus and doing some trading of product. The focus here has been quarter to get the best value for our business and to go a little bit further downstream in terms of where we're selling. In addition, quarter. We have been buying some lagging price tons in the Black Sea and the Baltic and able Generate additional margins there as well, but obviously more trading margins versus product margin. In general, we think that There will be a little bit of a lag effect, but we're not talking about a quarter's worth of lag effect, something in the order of, call it, 4 to 6 weeks at times.
Is that clear on the second question?
Yes, yes. Understood. Okay.
All right. Thanks. Hassan, do you want to take the first question?
Yes, of course. Sure. I'll have him address questions 1 and 3. On your first question, I mean, thank you for pointing that out. I mean, as I said, like this sensitivity, quarter, which is, of course, applied on the average price assumed for the full year quarter.
It provides relatively good guidance in terms of the potential upside. Quarter. And as I mentioned, we feel pretty good about the guidance we were given in terms of this leverage target. And quarter. Depending on price performance and our ability to achieve our step up in volume quarter.
We are definitely on a much more rapid path towards quarter. Our achieving an investment grade profile for the company. We hope that in due course quarter. On a rating agency from a rating agency angle that there would be sort of a catch up quarter. In terms of how the business is positioned, how it's perceived to be positioned, as you know, we got our ratings reconfirmed quarter in the end of 2020, which preceded some of the strong rallies we've seen in commodity prices.
Quarter. And I think that probably would be revisited and it's something we remain very engaged on quarter. As the profile of the business and our balance sheet continues to improve. Obviously, this also opens a lot of new doors in terms of quarter. We're fairly comfortable in terms of our quarter.
Sort of amortization for the next few years, it's up $200,000,000 we mentioned earlier per year. Quarter. And we're sitting on a pretty strong liquidity base that's getting stronger. So it's a very good backdrop. Quarter.
All, as I said, is a very good backdrop for achieving this target. In terms of the question on interest, as you know, I think last quarter 2020, we estimate that we were $320,000,000 of quarter. Interest costs, I think our guidance for this year will be sub $250,000,000 and that's inclusive of quarter interest on loans, bonds, securitization instruments that we have and lease payments as well. So again, quarter. Another substantive step down, and we hope this will see further reductions past 2021 as well.
Quarter. Thank you, Tom. And the next question comes from the line of Henk Wiehrmann from Kempen. Your line is now open. Please ask your question.
Quarter. Hi, good afternoon. Thank you for taking my questions. My first question is also on the leverage target, but quarter. Maybe a little bit different.
So I was wondering, I think in the last year's annual report, it was stated that the target quarter. Net debt to EBITDA is still two times. And I was wondering, is that still the target? And what is the rationale behind quarter. This target or any leverage target, I mean given that I think you have about EUR 14,000,000,000, EUR 15,000,000,000 worth of market value assets on quarter.
So I guess net depth of, let's say, between €2,000,000,000 to €3,000,000,000 sounds to me quite reasonable. So why is this quarter. 2 times. Is that still the case? Or is it a bit higher than that?
That's my first question.
Quarter. No, thanks for your question. It's actually a reasonable question to ask. And we I mean, I would say it's a combination of quarter. One thing to achieve an investment grade profile with fairly comfortable parameters, we think that 2 times was a reasonable target to set for a company that, as you know, we were coming out of a very large CapEx drive where we added significant capacity over the last 4, 5 years.
Quarter. And I think we needed to level set to the market in terms of what our priorities are. And our priorities have been and continue to be quarter. Deploying our free cash flow towards reducing our debt and also quarter. Resolving existing subordination within our capital structure further as we go along with optimization of our cost of debt.
Quarter. And that journey is now moving quite swiftly along. And ultimately, quarter. This is the phase of the company's entering has entered the phase where we are getting into a mature, stable production flow quarter. But we're generating free cash flow, and we hope we get to a steady state where we can also quarter.
Potentially start looking at dividends, cash dividends on a steady basis in combination with our bid averaging path. Quarter. So, Adnan, it is a destination, but more than it is a target.
Quarter. Yes. And I'll just add to what Hassan said, which is exactly right, thanks to your question. I mean, quarter. From our perspective, obviously, there was a bit of an interruption last year with the advent of COVID and what happened with in the markets on industrial markets really down demand growth last year and we're seeing the catch up and we talked through the outlook for this year and going forward, which is great.
And it was 2 times target through the cycle. Quarter. As we go through, as we've guided to below 3 times based on our expectations for price and volumes for this year, This is the point where we start and we're starting to get some inbound inquiry with regards to returning capital to shareholders. And obviously, if you were to ask us quarter. Now versus a few quarters from now, we're more firm footing now that we have a better outlook going forward.
So that's something that quarter. Could come up as we continue to demonstrate hopefully in the rearview mirror free cash flow generation and sequential deleveraging.
That's clear. Okay. The second question is on the methanol value enhancing opportunities. Can you remind us What kind of opportunities you're thinking of? And is there any time frame that you can give?
Can we expect any, let's say, Further announcements within the next, let's say, 6 to 12 months. And my last question is on the dividend to the quarter. 30 Globe minorities, which was a bit below my expectations in Q4. Can you maybe give me a number for 2021, like how much
quarter. Maybe I'll start on the methanol one and quarter. Potentially address the minority leakage. So on methanol side, I mean, not much more to say versus what we have in the press release. But just to kind of elaborate a bit, in terms of getting back to the market, we'd promised getting back in H1 quarter 2021 to the market.
We continue to look at anything that makes sense from a value perspective with regards to OCI. We'll note that obviously our free cash flow profile, our leverage profile, the outlook has materially improved. Quarter. So there's an opportunity for us to continue to generate the free cash quarter. So staying as is, as well as potentially some strategic alternatives, but we're going to be looking with a very discerning eye just given The volume ramp up close to 50% in Q4 and continuing to be a big volume driver here in 2021 quarter for our group.
It's just a very good context with regards to looking at our options from a strategic perspective. Quarter. Hassan, do you want to address the minority interest question?
Yes, sure. On the minorities question, You're correct. I believe we did our previous guidance for minorities was in the ordinance of $140,000,000 quarter. And the number was substantially lower than that for 2020. For 2021, because quarter.
Again, some aspects of it is timing, some aspects of it is sort of financial flows within the group. I would say that we would have adjusted the guidance up to be between $150,000,000 to $200,000,000 There's a bit of an accumulated effect quarter for 2021. Yes, despite that, it doesn't affect our ability to generate free cash flow and continue to quarter. I think we were able to also demonstrate that during the sort of the trough
quarter. Thank you, Hank. The next question comes from the line of Lisa DeNove quarter from Morgan Stanley. Your line is now open. Please ask your question.
Hi, good afternoon. Thanks for taking my questions and congratulations on the results. So quarter. First question, I mean, alluding to previous questions, I mean, you've said you've now entered into a mature, stable production flow at OCI, And you've already shed some light on your capital allocation priorities. But thinking more holistically, I mean, what are your midterm ambitions for OCI?
Where would you like to see OCI over the midterm, let's say, 5 years from now? That's the first question. Then 2, can you provide us with some insights on what you're seeing in the methanol market, What you're seeing on the demand side for this year? Are there still any demand segments that have yet to recover? Some granularity on that would be great.
And then I think regarding Thomas' question earlier, I mean you mentioned on selling more downstream. I mean what do you really mean? Could you elaborate quarter. What you're selling more downstream and what your strategy is there? Is that something we also see at other nitrogen players?
That will be very helpful. Thank you.
Quarter.
Sure. Thanks, Lisa. Thanks for the question. So with regards to the 5 year outlook, kind of hesitant to say what it would look like quarter. From now, but in and with a perfect crystal ball.
But what I know that's in hand now is that we are and have been quarter. Focused on the sustainability side of the business with the trends and we think that we're extremely well positioned with our product slate to take advantage of it and actually be quarter. Having potential end markets like ammonia and as a shipping fuel, So as methanol as a shipping fuel is just one example, but you could see growth in terms of in the future potentially quarter. Using our locations for storage and infrastructure as very well located bunkering areas for shipping, an area that several years ago was not on the radar screen for OCI. So we can see probably some tangential benefits of the move towards the low carbon and hydrogen economy, allowing us to expand into this space with as a provider of products, as a provider of infrastructure N.
Z. And it's potentially a catalyst or a creator of more low carbon and renewable fuels and feedstocks Over the course of the decade. And this relates partly to your other question with regards to downstream. I mean, we're going to be looking further and further quarter. For example, the chemicals downstream markets when it comes to products like ammonia and methanol, quarter.
Because as we said, we're getting more of a demand pull with the sustainability push that we're seeing globally right now, and quarter. It's going into new verticals and end markets we haven't seen before. So that's another element quarter. Of course, over the course of the next 5 years, we always look for what's the value creating opportunity for the stakeholders of OCI. Quarter.
To the extent there's something that makes a lot of sense from a synergies perspective, M and A is always a possibility quarter. For us to take advantage of and I think we're well positioned with our global asset base. There's still synergy quarter. Potentials in the Middle East following the ADNOC OCI joint venture that we had, as well as in very fragmented quarter European Nitrates as well as U. S.
Nitrogen market as well. So I think the in terms of some of that activity Could happen with OCI on the nitrogen or methanol side or it could happen outside of OCI. We anticipate that happening because quarter. The bid ask tends to get a bit smaller as you're coming out of a trough and the market could continue to see consolidation and should continue to see consolidation now that you're approaching and in some cases piercing mid cycle levels where people have a bit more quarter cash that they're able to work into the systems and consolidate a very fragmented market. The second question, quarter.
You were saying new you were saying in terms of the methanol markets, what is fully recovered? And are there some areas that just Still aren't back at what you would expect to be from a run rate perspective. Was that the question, Lisa?
Yes. Just a bit of
an outlook on what you're seeing on the demand side and if there are still any categories that need to recover. Thank you.
Yes, I mean, we've seen even from a few quarters ago, we've said that we've seen nominations come up from our existing contractual customer base on the methanol side quite well. So quarter. I think the methanol commercial team has done an excellent job of getting a nice diverse set of candidates quarter sorry, customers for our business, which as you know is primarily selling into the European and U. S. Markets, which is a big advantage of OCI's methanol group.
And so we've seen nominations from customers in terms of what they expect Month over month continue to stay strong, but there's some areas that just are lagging still. So With road transportation down with the lockdowns and the revised lockdowns that we have in the last several months, That's had an effect on demands for methanol as a blend with gasoline or biomethanol as well. And despite that, we've seen quarter. Recently good volume movements as well as a good quarter as well as pretty strong price recovery over the last few months. So from a demand perspective this year, quarter.
We see it being a good recovery here, something in the mid single digit 5%, 5 plus percent demand growth. And from a supply perspective, quarter. Really, there's one plant in the U. S. That now looks like it's going to come online later in Q2.
And That plant is going to be something less than 1.5% of global supply being added despite the continued demand growth. So products like MTBE, The blending of gasoline, DME, those are areas where methanol still hasn't reached that run rate potential because of, Like we said, the slowdown in kind of on road transport, which we anticipate quarter. As vaccines are rolled out and as we get towards the middle of the year and the second half of the year, that's improved.
Quarter.
And you had a third question on going more downstream?
You've answered that one. I mean, I can try another question, but you've answered the downstream one.
Go back in the queue.
Thanks, Jason. Quarter.
Thank you, Lisa. And the next question comes from the line of Chetan Udeshi from JPMorgan. Your line is now open. Please ask your question.
Yes, hi, thanks. Just a couple of questions from my side. Just first on cash quarter. In Q4, is it possible to quantify what was the benefit from the sale of CO2 permits? That would be first.
And quarter. Second question again just on numbers. There's a big provision movement between reported and adjusted advertising of $50,000,000 plus. Quarter. So can you just throw some light on what those provisions relate to?
Thank you.
Quarter. Sure. Hassan, do you want me to take the CO2 question and then you'll cover provision?
Yes, we
go ahead. Yes.
So basically on the CO2 side, it's approximately $80,000,000 worth of CO2 quarter. Credit, as you know that the EUA's, which is part of the ETS program in Europe, you're allocated quarter. Carbon units in proportion to your production levels And we had a surplus, so we're able to monetize that in Q4 and also have locked in that exposure to our continued CO2 exposure as a instead of producing assets
quarter. Yes. And
I think I'll just add one other thing and maybe Hassan can drop in on the provisions. I will also say that quarter. When you look at the free cash flow and ex the CO2s, you also see that Q4 did have a onetime quarter refinancing cost of $51,000,000 that number for free cash flow is net of. And so that's As Hassan mentioned, to improve our run rate interest profile going forward. So we spent $51,000,000 really on the retirement of the I think it was approximately $1,000,000,000 of bonds in euros and dollars to pay the call protection and materially reduce our interest expense.
So that's also kind of a one off on the negative
Yes, that's a very good point, Ahmed, actually, to sort of build the quarter free cash flow bridge for Q4. In terms of the provisions, I mean, it's really it tends to be a combination of things. We don't quarter. Delve into the individual components of them because some of them have to be have to do with ongoing events. Quarter.
But it can be a combination of historical litigations, quarter tax disputes in various jurisdictions. We tend to take as a company, our policy is to be very conservative in estimating quarter. Such provisions, as you know, as you've seen in the past 5 years, there's a lot of reversals that end up taking place as well. Quarter. So but I'll leave it at that.
Can I follow-up on the CO2 point because clearly the CO2 prices are going up? So quarter. What was the sort of thought process around monetization of CO2 in Q4? I mean, are you quarter substantially net long CO2 in Europe today, because clearly with the CO2 prices where they are heading, what would have thought quarter.
Quarter. Sure. So with regards to that, as I mentioned, with the CO2 credits, we have we do have quarter. Hedges in place. And the reason behind doing a transaction like that is that we were able to monetize them and
to undertake those hedges and still do it well
below our cost of funding. So, Take those hedges and still do it well below our cost of funding. So that's one of the rationales to be able to do that as a way to generate additional cash quarter. So without having to pay as much as our interest expense. In terms of our CO2 exposure, it's something we Continue to be focused on, but it's a minimal impact despite the higher prices we've seen as of late in the last month or so.
Quarter. We are currently net long, but there's some timing differences because you tend to receive your quarter. CO2 credits for the following year, a month or so before you have to pay CO2 quarter for CO2 units under DTS program for the prior year.
Understood. Thank you.
Quarter. Thank you, Chetan. And our next question comes from the line of Fazal Alaznal. Your line is now open. Please ask your question.
Thank you.
Thank you and hi quarter. Hi, everyone, and thanks for the opportunity to ask questions. My first question is regarding the JV with ADNOC. Maybe quarter. If you can shed some color on how ADNOC views this JV.
Are they just in this on the passive side or Are they looking to grow it over time? How are they viewing the fertilizer market themselves? And where can quarter. Where do you fit in that equation on the long term? And my second question is regarding that gasoline.
I mean, we've been reading a few teething problems quarter. The plant has been taking, has those been resolved? And what is the current status there? Thank you. Quarter.
Thanks, Faisal, for the question. So on the AdNOC JV side, I'll start maybe If he has anything to add, should also mention it. But we find that the JV, as you know, is quarter. The Chairman of our Board for Fertiglobe is the Head of AdNOC, Doctor. Sultan.
And there's a lot of focus quarter. In ADNOC on Fertiglobe as it is a very good vehicle when we think about the low hydrogen economy and you've seen some of the announcements quarter. Out of Abu Dhabi generally and out of ADNOC over the last couple of months around positioning ammonia into Japan, quarter. Ammonia is shipping fuel, various other initiatives that are being looked at by ADNOC, quarter. The real vehicle for that is Fertiglobe.
So definitely seen as a prime way of taking advantage of the quarter. On the sustainability globally we're seeing right now, there are opportunities for blue ammonia, there's opportunities for green ammonia in the future. As quarter. Some of the ADNOC Board members are also on the board of, for example, Masdar, which is the renewable city in Abu Dhabi as well. Quarter.
So access to some of the cheapest renewable electricity feedstocks feedstock pricing globally quarter really positions Fertile, which is the asset that ADNOC contributes to the joint venture very well in that space. And ADNOC is also very excited by the prospects quarter that we have in North Africa, where we also sit in areas some of the best areas from a wind and solar perspective as well.
Quarter. So very much seen as
a Online participant is now exiting.
It's very much seen as a strategic partner quarter with us and very excited about the future and we continue to have discussions at the board level for the joint venture regarding Fertigold. Hassan, do you have did you want to mention anything further?
No, Hassan, you've covered it comprehensively. It's certainly one of it's also one of the first quarter. As partnerships where ADNOC enters as a minority stake albeit a significant stake, yet a minority stakeholder. So quarter. As a partner, that also was a testament to the opportunities that this platform does provide, quarter, both from having sort of the strategic seaborne focused global leader, quarter, which has had a substantial impact on the seaborne market, and we've realized quarter.
A lot of synergies that we've been commenting about since the close of the deal in September 2019. But I and also, as Ajam mentioned, the positioning within the region quarter. With a partner like Alnok opens a lot of possibilities.
Yes, that's exactly Obviously, Hassan, some other members of the team were instrumental in creating the joint venture with ADNOC and getting it closed in 2019. Quarter. With regards to the natgasoline question, Faisal, the plant that is as we mentioned broadly, quarter. We had outages in the U. S.
And that gasoline is currently down. We anticipated coming back quarter online in the 1st bit of March. And we're addressing Some things while the plant is down right now, but one of the offsets we've had in the case of Natgasoline, which is less so than we saw in with IFCO and OCI Beaumont quarter is that we're able to monetize some of the pre purchased gas before the run up in gas prices and we saw Obviously, some gas reached some pretty high levels in the Texas area. So that's been a reasonable offset to The downtime that we've seen in neck
arsenic. Got it. Okay. Thank you very much.
Quarter. And you saw obviously the insurance cash flow should be received here in Q1 as well quarter from what we put in the press release.
Yes. Thanks.
Quarter. Thank you, Faizal, and thank you, speakers. There are no further questions at this time. Please continue. Thank you.
Quarter. Great. Well, thanks everybody for joining. We'll look forward to the next conference call. Please tune into the ESG seminar we have on March 8,
quarter.
Thank you. Thank
you. Thank you,