Ladies and gentlemen, thank you for standing by and welcome today's OCI N.V. Second Quarter 2020 Results Conference Call. Please be advised that today's conference is being recorded, and I would like to hand the conference now to your first speaker today, Mr. Hans Zayed. Please go ahead, sir.
Yes. Thank you. Good afternoon and good morning to our audience in the U.S. Thank you for joining the OCI N.V. second quarter and first half 2020 conference call. With me today are Ahmed El-Hoshy, as of the first of this month, our new Chief Executive Officer, who is transitioning from his previous role as Chief Operating Officer, and Hassan Badrawi, our Chief Financial Officer. As you have seen, we published our results this morning. On this call we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of our outlook. As usual, at the end of the call, we will host a question- and- answer session. Just as a reminder, statements made on today's call contain forward-looking information.
These statements are based on certain assumptions and involve certain risks and uncertainties, and therefore, I'd like to refer you to our disclaimers about forward-looking statements. Now let me hand over to Ahmed.
Thank you, Hans, and thank you all for joining us today. Let me start by introducing the recent management changes. As you may have seen, Nassef Sawiris has become Executive Chairman, and in that role, he will be fully focused on the strategic direction of the company. He'll be working closely with the rest of the executive team, namely Hassan Badrawi, our Chief Financial Officer and in charge of M&A who we all know well, and Maud de Vries, our Chief Legal and Compliance Officer, as well as myself. We also, of course, have the benefit of the next layer of management that is very strong and dynamic across commercial, operational, sustainability, M&A, and other functions to position us well to continue to drive value for OCI stakeholders. We believe this is an opportune moment for the management change.
This year marks an important inflection point for the company as our portfolio is maturing, and we can now fully focus on our operational and commercial excellence to cement our position in the global industry further. Of course, portfolio optimization and M&A continue to be in our DNA, where we look for value creation and consolidation opportunities during periods of volatility in our markets with the goal of realizing the best potential for our global asset base. We continue to strengthen our leadership across the group with, for example, the recent appointment of Bart Koops for the newly created position of VP of Manufacturing to run our global production platform.
Bart will join in September and was previously at Shell for 27 years, overseeing 10 manufacturing locations across EMEA and Asia, spanning 6 million tons of chemicals production, one and a half million barrels a day of refining capacity, and with responsibility of over 17,000 staff and contractors. Turning to the quarter, safety is our top priority, and to that end, we are pleased that our safety performance continued to be best in class. Our recordable incident rate was an excellent 0.11 for Q2, and the 12-month rolling average is 0.23 incidents per 200,000 man-hours, a big improvement from 2019. This is one of the lowest in our global industry. Even though these are excellent results, when it comes to safety, any incident is one too many.
We continue to prioritize process safety and aim to reduce occupational safety incidents ultimately to zero for all our assets across the globe. With COVID-19 prevalent for some time to come, we remain even more alert than ever. We've been fortunate to have had relatively few COVID-19 cases amongst our global staff. All those afflicted have thankfully recovered, other than a few existing cases who recently contracted the disease and who we are continuing to monitor. Our goal is to keep all our employees, their families, as well as those in the surrounding community safe. The pandemic has not had a direct impact on our operations, largely thanks to the vigilance of our employees across our platform. I'd like to thank all of our OCI team members for their dedication and resilience, as well as in staying safe.
As you have seen over the last few days, Hurricane Laura landed in the U.S. Gulf Coast this morning. Our priority has been to ensure the safety of our employees and their safe evacuation from the impacted region as Jefferson County, where both OCIB and Natgasoline are located, ordered a mandatory evacuation. Consistent with the industry in the region and to ensure the safety of our staff and community, both plants were shut down yesterday ahead of the storms. We have taken many precautions across both sites as we shut them down to safeguard against the hurricane. In the last couple of hours, because this is happening live, we've gotten an update from the team in Beaumont for both OCI Beaumont and Natgasoline.
We were lucky in that the storm did move a bit to the east from our site into Louisiana, with a large focus around Lake Charles, and the wind speed did not reach the levels anticipated by the Category 4 hurricane. We're still assessing how the site looks, but very preliminary information that has come to us has suggested that everything remains intact. Of course, we're going to do a thorough investigation over the next day with the aim of restarting facilities. We're starting right now in the next few hours by sending drones in to look at the different parts of the plant. Next, I'll go on to our operational results.
Despite the challenging COVID-19 circumstances and selling prices reaching trough cycles during the quarter, we delivered resilient results and deleveraged our balance sheet by $222 million so far this year, as we sold record owned production volumes during the second quarter and first half of 2020. Our volumes increased 6% during the quarter from an already strong Q2 in 2019 and increased 26% in the first half of 2020 year-over-year. Our nitrogen portfolio was the main driver of the growth. We achieved record CAN volumes in Europe in Q2, despite the pandemic and drought conditions on the farming side, taking the total increase in H1 to a healthy 16% compared to the same period last year.
UAN volumes in the U.S. were also higher, reflecting on the one hand, IFCo stabilization and debottlenecking of production following last year's turnaround and debottlenecking, and also our strengthening competitive position in the Midwest via our N-7 joint venture. Our production, commercial, and supply teams did an excellent job establishing these volumes under such circumstances. We also had the contribution from Fertiglobe in Abu Dhabi, which has been consolidated since Q4 2019. On a like-for-like basis, our first half nitrogen volumes increased by 10% during the first half. This was partially offset by lower ammonia volumes at Sorfert driven by electrical power issues in Q2 that have since been resolved with new high- voltage industrial lines attaching to the site that were put in place in July. Our methanol production was not at run rate yet during the quarter, and total owned produced methanol volumes decreased 11%.
We've made substantial progress. Following the extensive turnaround that we finalized in February, Beaumont's methanol plant was running at high levels on average in Q2, resulting in a good improvement in EBITDA for the U.S. methanol segment from the first and second quarter, despite a big drop in selling prices. We also finalized the turnaround at our methanol facility in the Netherlands in June, which was the reason for a relatively low EBITDA contribution from BioMCN. The two lines at BioMCN have been achieving average utilization rates, in the 90%-95% range since restarting, despite a heat wave in the Netherlands and over 95% in the past several weeks. In addition, from a volume perspective, Natgasoline had some equipment issues that occurred during April, which we addressed successfully.
Since the restart in early May, the plant has been able to operate reliably until our safety-led shutdown yesterday. Obviously, as I just mentioned, we're in the process of looking to restart. With that, I'd like to turn it over to Hassan to discuss the financial results.
Thank you, Ahmed. I'll cover some more details on our results, starting with the income statement. As Ahmed described, during the second quarter, we achieved resilient results and healthy volume increases. Despite these record sales volumes, however, our revenue decreased by 8% to $875 million in the second quarter as compared to the same quarter last year, which was due to selling prices reaching trough levels across all our products. Our adjusted EBITDA was 20% lower at $220 million in the second quarter as compared to the second quarter last year, again, as a result of the lower prices, but also a lower result at Natgasoline as mentioned. Our reported EBITDA, excluding the effect from Natgasoline, was at the same level in Q2 2020 as in Q2 2019, as we include our share of Natgasoline in the adjusted numbers.
We estimate this negative impact on our EBITDA from prices to have been circa $120 million if you compare Q2 2019 with Q2 2020. This is despite a benefit of approximately $50 million from lower gas costs during the quarter this year as compared to last year. When we look on a half year basis, which captures a full season for fertilizers, both our adjusted and reported EBITDA are up by 2% and 16% respectively. In terms of segment contribution, the EBITDA for the nitrogen business was overall lower during the quarter. This was despite healthy demand in our agricultural markets and despite COVID circumstances, which more than offset weaker volumes in the industrial markets. It should be noted that our European business did well and reported a higher EBITDA as we captured the full effect of the lower gas prices during the quarter.
We also benefited from healthy demand for our products in Europe and as a result, reduced inventories meaningfully during the second quarter, which obviously had a noticeable effect on our working capital. The same holds for our U.S. business, where we recorded higher volumes compared to an already very strong Q2 2019. Benefits from the gas prices were not enough to offset the weaker prices for UAN in particular. At Fertiglobe, we had a boost from the inclusion of FERTIL in our consolidated results, overall results were also significantly affected by pricing environments. Ammonia volumes were lower, that did not have a meaningful impact given the consistently low ammonia prices so far.
The methanol group's adjusted EBITDA was lower in Q2 2020 due to a sharp drop in methanol prices, as Ahmed mentioned earlier, as well as lower production volumes at Natgasoline and the turnaround activities in the Netherlands. On a reported basis, however, we saw an improvement in Q2 2020 compared to both the second quarter in 2019 and the first quarter in 2020, with Beaumont and the Netherlands both reporting better results. Worth noting that our 50% share of a further insurance payment of $10 million as compensation for business interruption losses and damages incurred in the past few months is also included in Natgasoline's EBITDA number for the second quarter. Turning to the balance sheet and cash flow. Free cash flow before growth CapEx during the quarter was $191 million.
This reflects our operational performance for the quarter, as well as the reversal of working capital from the high seasonal levels seen in the first quarter, culminating in healthy free cash flow conversion.Total cash capital expenditures reached $68 million, again, during the second quarter of 2020, of which maintenance CapEx was approximately $52 million. We spent the balance of $16 million on various growth CapEx initiatives. In the first half, CapEx amounted to a total of $164 million. This is more than half of what we expect for the full year as the turnaround schedule for the second half is lower. Note that our interest payments are semi-annual and always higher in the second and fourth quarters based on our current debt structures.
As a result of our free cash flow generated and notwithstanding extraordinary circumstances resulting from the pandemic, we were able to further deleverage our balance sheets during the quarter. Net debt, as you may have seen, decreased by $128 million from a figure of $3.97 billion at 31st of March 2020 to the reported $3.84 billion as at 30th of June 2020, implying a total deleveraging of $222 million year-to-date. At this point, I'd also like to add and reiterate that our priority remains to optimize free cash flow generation, and we remain committed to our financial policy to deleverage our balance sheets. Obviously that is logically impacted in terms of timing and how fast we can achieve this through movement and selling prices.
We have also mentioned in previous calls that we continue to evaluate our capital structure to identify further cost-effective refinancing opportunities with a view to further simplify our structures and target savings. We're very pleased with the $385 million refinancing package at Fertiglobe, for which final terms have been negotiated with lenders. This debut financing for Fertiglobe resets the capital structure and centralizes some of the OpCo debt within Fertiglobe at the Fertiglobe holding level. The facility is meaningfully oversubscribed and attracted strong interest from an array of leading regional and international banks. The newly negotiated facility has an interest rate which is 175 basis points lower than the existing debt, or translating to approximately $9 million in annual run rate savings on the interest expense line.
We believe the success of this refinancing reflects the leading competitive position of Fertiglobe and its healthy balance sheet, stemming from its position as a global exporter. With that, I'd like to hand over back to Ahmed for our outlook and some concluding remarks before we move on to Q&A. Ahmed?
Yep. Thank you. Thank you, Hassan. As Hassan said, I'd like to conclude with an outlook for our business, which despite all the challenges around us, is looking much more positive than only a few months ago. I also believe that OCI's asset base, commercial capabilities, and financial standing are well-positioned to maintain any near-term volatility if that were to happen. If I start with the nitrogen markets, we believe that the global nitrogen markets are looking positive for the rest of the year and into 2021. The main driver is healthy demand in several importing countries as farm economics are healthy. We are seeing robust demand from India and Brazil, in particular, but also other countries in South Asia, Latin America, East Africa, as well as Australia. This benefits our export platform, Fertiglobe in particular, where we benefit from our strategically placed distribution network and healthy net backs.
The outlook for our core U.S. Midwest market has also strengthened recently and market sentiment has improved. We are anticipating a favorable fall application in the U.S. for the ammonia markets, given the rapid pace of planting this spring, and the maturity of the current crops, allowing for a potential extended application window after harvesting and before the winter. Corn prices have moved up recently, and futures suggest further upside, which is positive for nitrogen markets and pricing versus levels seen earlier this summer. On the one hand, there's been a strong pull from China, where a combination of droughts and the recovery in demand has resulted in significant increases in corn purchases. On the other hand, a recent derecho storm in the Midwest has destroyed part of the corn crop in our core area, Iowa, Indiana areas.
It is too early to state what the financial impact will be or the final impact will be, and it is being assessed, but it is likely to result in less harvesting, less supply, and more reliance on government and/or insurance programs to support the farmers. In Europe, our order book is looking healthy, and we expect nitrate prices to be supported by healthy demand and quite some room to catch up with the recent increases in urea prices. Industrial markets have been weak in Q2 2020 as a result of the slowdown in economic activity, which has resulted in ammonia prices, in particular, lagging the recent rebound in urea prices. However, we have started to see a recovery in demand in our industrial end markets, which should benefit ammonia and in some of our other industrial products such as melamine. Furthermore, the fuel ethanol market in the U.S.
is also recovering from trough conditions, which is obviously favorable for end markets associated with agriculture as well as transportation. Lastly, and quite important, the demand for diesel exhaust fluid, or DEF in the U.S., has increased significantly recently with the rebound of over-the-road traffic. We saw a very strong recovery for DEF out of Iowa Fertilizer, with record volumes in July and sales in August at a pace that suggests that it will even be better. We've already been able to increase prices, which bodes well for the 2021 contracting season. In the methanol markets. The outlook for our methanol end markets is also strengthening. There can be some volatility going forward depending on how the pandemic develops, but spot methanol prices have rebounded already more than 50% since reaching a bottom below $140 per ton of spot price in June.
In our main U.S. and European markets, we've seen month-to-month improvement from demand from the lows reached in the spring, and going forward, we see support from several factors. First, methanol to olefin economics versus naphtha crackers are healthy, resulting in rising utilization of MTO plants in China, which have been a key driver of a rebound in methanol demand. The outlook for downstream demand has also improved, with fuel consumption picking up following the easing of lockdowns across the globe and a gradual return of global and industrial construction activities, driving increased demand for derivatives such as formaldehyde and acetic acid. The idling of high-cost methanol production capacity also helps tighten supply and demand balances in 2020 and has supported the price recovery.
All in all, we feel good about the improving outlook for both the nitrogen and methanol businesses, and we believe that given our low-cost position, that OCI is well-positioned to benefit disproportionately vis-à-vis peers in the environment of improved selling prices. In the meantime, we focus on operational and commercial excellence, volume growth, synergies at Fertiglobe, as well as the optimization of our capital structure— all with the goal of generating free cash flow and lowering our net debt. I'd like to just finish with some remarks about the wider environmental impact and sustainability as a top priority for the company and our strategy. As a global leader in our industries and our communities, we are committed to investing in products that help feed the world and provide greener fuel solutions, including, for example, biomethanol, based on waste gas.
Products such as ammonia and methanol have significant potential and stand to benefit from increased sustainability focus as clean- burning fuels and as storage of energy with storage and transportation infrastructure in place globally already. We are dedicating a significant amount of time and manpower to identify, evaluate, and develop sustainability initiatives that reduce our environmental impact, grow our green portfolio, and innovate more effective ways of reaching the world's carbon-neutral goals. We are also working on improving our reporting and transparency and are expanding performance management of non-financial parameters. You will have seen today that we also announced the nomination of Heike van de Kerkhof as a Non-Executive Director, and who will have a specific focus on sustainability, diversity, and inclusion within our board of directors, in addition to her extensive insights and background in the chemicals and industrial space. With that, we'll open the line for questions. Operator?
I'm so sorry. I was on mute. Okay, ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone. Would you like to take our first question now, sir?
Yes, please.
Okay. Our first question comes from the line of Christian Faitz. Your line is now open.
Yes. Thank you. Good afternoon, Ahmed, Hassan, and Hans. I have a couple of questions. I'll ask them one by one, if I may. Ahmed, thanks already, for providing some news on the impact of Hurricane Laura. Let's hope all your employees and their families are safe as well. First question. Can you share with us any update on the planned methanol disposal?
Sure. With regards to the planned methanol disposal, we don't have an update from what we shared in the last quarterly conference call, other than that we have postponed it till the first half of next year. We remain to come back to the market with an update in the beginning of the year next year.
Okay, thanks.
With regard to this, thanks for your sentiment on Hurricane Laura. So far, from an employee perspective, everybody's accounted for. There's been people without power, but we're still collecting information. We're thankful and hopeful that we'll not get any negative news.
Okay, thanks. My second question, please. Can you please run us through the scheduled maintenance shutdowns in all of your major locations for this quarter, and perhaps also for H2 overall? Thank you.
For this quarter being Q2?
Q3 and Q4.
Yeah. As Hassan mentioned, with regards to the amount of CapEx spend we had in the first half of this year, this should be a lower intensity second half of the year. We did mention in the press release an OCI Nitrogen turnaround, as well as an inspection stop, a small inspection stop we had to do over the course of the second half of this year. It's really for one ammonia line and one of our nitric acid/fertilizer lines. Otherwise, we don't provide guidance with respect to specific shutdowns, but I can say that it should be materially lighter than the first half of the year as well as last year.
Okay, great. Thanks. Final question, please. How do you see free cash flow evolving in the second half of this year? Thanks.
Sure. Hassan, would you like to take this one?
Yeah, sure. As you know, we focus our guidance on CapEx and our expectation for interest, and we defer to you on your modeling views on commodity prices. What I can tell you is that on an annual basis, and I think I've used this sensitivity before, I apologize to repeat it, but I think it's a good indication. On an annual basis, if you apply a $25 per ton average increase in our portfolio of commodities, that alone results on an annual $330 million EBITDA improvement. This should give you the sense of the sheer size of impact of pricing movements. We are obviously focused on achieving our operational and volume targets. This year has been a meaningful step up, as you saw already in the first half. Given the lower intensity CapEx schedule, we should continue to see good volumes in the second half.
At least this is what we are aspiring for. It becomes really about how prices continue to move as we come out from these trough levels. As a business, we have demonstrated resiliency. We'd like to think that even in such extreme circumstances where we saw all prices hit trough levels, we were still able to generate free cash flow, de-leverage, and continue on our path.
Okay, great. Thanks, Hassan. Just to clarify, $25 you said, leads to a $330 million EBITDA sensitivity, right?
Yeah.
Great. Thank you very much, gentlemen.
Thank you.
Okay. We will now take our next question. Okay, our next question comes from the line of Lisa De Nijs. Your line is now open.
Hi. Good afternoon, Ahmed El-Hoshy, Hassan, and Hans. Three small questions. First, on the nitrogen outlook. Could you provide some detail? You provided detail on the demand side, and you touched on China exports for the remainder of the year. Could you tell us a little bit more about how you think about how the supply side will develop over the next 12 to 18 months, specifically with new supplies coming on stream from Iran, possibly India, and as well from Brownfield in Russia? That's the first question. Thank you.
Sure. With regards to the supply side, it's obviously something we focus on. From what we see for the next six to 12 months, there have been delays not only on the urea production side, but also on the new methanol side for additional capacity coming online. A lot of things were slated to come online in the middle of this year, then got deferred to later this year into next year. With the continued increases in demand that we've seen, particularly on the urea side, if that's the commodity you're asking about, we think that it should be able to be absorbed by the additional demand that we're going to continue to have out of the South Asian, Latin American, U.S., and European markets. The Indian additional production, we understand they're still on the high side of the cost curve.
To the extent you have some increases in the LNG pricing environment, which we've started to see, they'll continue to be on the high end and may not run at full rate. On the Chinese side, some of the natural gas-based and coal-based production continues to be marginal when you think about the average price that we saw, for example, in Q2 and Q3.
Sure. Thank you very much. Second question is on the methanol side. I know I'm aware that a meaningful amount of your methanol volumes are typically contracted, but I wonder if you could provide some color on what you're seeing on the methanol demand side, specifically in Europe and U.S. I'm particularly looking for what you're seeing in July and August versus the second quarter. Is demand picking up on the industrial side?
Yes, absolutely. I think basically with Christian's question and the previous question about free cash flow outlook from the first half moving into the second half of this year, one of the things that was quite important to keep in mind is that the results that we're presenting today reflect a pretty poor performance from our methanol production side overall. We had a very large turnaround in Europe that had a lot of the production out for the quarter, as well as sizable downtime in Natgasoline in April. Given that we're on an improved volume outlook from a production perspective, we do feel like we can achieve a lot more out of that part of our business.
With regards to the demand that we've been monitoring since March, when COVID started to hit, we did see some reductions in nominations in May and June from some of our customers in the U.S. and Europe. We've started, as you mentioned, to see that come back. Say versus our contracted amounts and nominations, we don't see any shortfalls at this point for the August and September time frames. We've seen a good recovery. Some parts of the industrial markets are still kind of ramping back up. From our customer base, speaking for OCI itself, we feel pretty good about the demand.
Thank you very much. Just a housekeeping question, if you like. Just could you provide any sort of guidance on CapEx in the second half, and how should we think about maintenance, abnormal maintenance CapEx, and maybe any growth CapEx we should account for? Thank you.
Sure. Hassan, maybe you start with this one and I'll jump in.
Yeah. As we mentioned, I think in previous calls, our CapEx guidance for this year was meaningfully lower than last year. The first half certainly has higher intensity, so a larger share of the year has been already expensed in the first half of 2020. We expect that number to be lower for the second half. There is some impact from the inspections in Holland, which Ahmed can comment about a little bit, which may have slight impacts on the CapEx number that we were expecting for the year, which was circa, I believe we had mentioned up to $260 million of CapEx. Might move a little bit. That's not my barge.
As a business overall, as we hit our sort of mature run rates, we come out of this significant methanol repair program that we had undergone at Natgasoline, which has successfully demonstrated some stability until the safety-led shutdown. I think overall, we're hoping to start getting to a more sort of run rate phase with very limited growth, except on very interesting bolt-on high return growth projects, and similarly, green initiatives that we're evaluating in due course, that have a more long-term nature. Ahmed, any to add?
That's exactly right. I think that what Hassan's mentioning is what we had in our press release and what I mentioned earlier, which is OCI Nitrogen was scheduled for a turnaround at the end of this year. These inspection stops took the opportunity to undertake some activities during these inspection stops here in Q3. That resulted in some of the CapEx that would've been booked in 2021, potentially getting booked in 2020. That could lead to some of that nominal variance versus our guidance from a few months ago.
Very helpful. Thank you very much.
Okay. Our next question comes from the line of Faisal Al-Azmeh from Goldman Sachs. Your line's now open.
Yes. Hi, this is Faisal Al-Azmeh from Goldman Sachs. Thanks for the opportunity for asking questions. Just a few questions on my end. Maybe starting off with if you can shed some light on the situation in Egypt and the recent shutdown of the ammonia plant. Do you see any potential for the cost structure changing? We've been hearing kind of the likelihood of maybe revising or coming out with a new cost for natural gas there. That's something that some of the companies have been kind of highlighting. Is that something that you think could happen? If so, how does it also impact the domestic sales of fertilizers in Egypt and the pricing that you actually sell domestically? Secondly, maybe on nitrogen fertilizers and when thinking about the pricing strength that you've kind of mentioned just now.
We've seen the strength kind of winding down a bit. If you can kind of share a bit of a view on trading flows recently and then what has caused that strength to fade out. Thirdly, just on the synergies with ADNOC, if you can shed some insight on the numbers achieved so far this year, and whether you've identified further potential for next year. Thank you.
Sure. I'll take the first two, and then Hassan, perhaps you can give the update on the synergies for Fertiglobe. Good speaking to you, Faisal. With regard to the first question, on the Egypt side, obviously our gas price is at $4 in MMBtu, which is for the production of ammonia, it ends up at these trough ammonia levels we saw a few months ago, resulting in pretty low margins on just the ammonia portion. We still make sizable margins, obviously, on the urea side. With regards to the gas price review, we understand that that's something that's being undertaken right now, and reviewed by the government for a number of sectors, one of which is fertilizer. To ensure this, I can't shed light on where that stands, but that's something that we understand to be under review. I'll kind of leave it at that.
With regards to what that means for domestic sales, we've seen a move towards liberalization of the domestic sales market for urea, which means that the government's going to be allowing more international pricing into the domestic markets rather than the lower domestic prices. That should also bode well for Egyptian fertilizer producers. That's something we are monitoring and focusing on across our network. Obviously, otherwise, Fertiglobe does have further advantage gas in the non-Egyptian plants right now. The second question Sorry, do you have a follow-up, Faisal?
No, I don't have a follow-up.
The second question.
That's okay
The second question was with regards to trade flows and the run-up that we've seen on the pricing side.
Over the last several months, if you recall, in June, and obviously that's reflected in the Q2 results that we had, May and June, we had very low pricing in NOLA, in the U.S., despite it being the spring season. I think a bit of producer panic, and consumer panic at the same time. Very low liquidity. People did not want to buy until they saw the demand right then and there, even when you were on the cusp of being in season. You had prices go to low $200s for urea that was just not sustainable. Below cash costs for a lot of production globally.
Since then, with the turndowns of supply that we saw at marginal cost producers, the fact that logistics prevail, logistics costs are something that doesn't go away when prices are lower, and the sizable demand increases out of India as well as Brazil, we've seen this big recovery where the Indians have continued to come back to the market and take additional supply, culminating with the tender, whose results we've seen this week, Indians taking well over 1.5 million tons of urea. That's helped suck up a lot of the supply in the system over the last several months. As the Indian season comes to a close before coming back with Rabi later this year, in late October, November, this is where Brazil starts to step in because it has two crops going in this Q4 and Q1 of this year.
The European and American buyers who've been waiting as well, they've seen this rally. They've been waiting on the sidelines. You've seen that reflected in the pricing in the U.S. and Europe. We expect, and we're starting to see some green shoots with the Europeans coming back to work close to August here and starting to look at the demand for later in the year and next year. On the U.S. side, starting to look towards positioning products, we'll call it two to three months out from now, to start building domestic supplies in the U.S., because the U.S., as you know, still needs to import something like 4 to 4.5 million tons of urea before the spring next year.
There's some catch up that still needs to be done where that low liquidity in the U.S. and European markets should start to dissipate and start seeing some more transactions. Hassan, do you want to discuss the synergies?
Sure. Yeah, on the synergies, that's obviously a reflection of the integration plan that has been really quite successful since the consolidation of Fertiglobe into our business. We have not given any specific progress reports on a quarterly basis, but we have stated, I believe, in the past that we were targeting north of $60 million of commercial and technical synergies based on the prevailing prices, selling prices at that time. Note that since then, we have also added to that target $20 million of technical cash savings that don't necessarily appear in the EBITDA line because of the extremely successful technical integration work. As you know, we have almost three technologically identical plants, which gives us a lot of possibilities. We continue to work on what other value we can extract from this very interesting combination.
You already saw on the commercial side, the name Fertiglobe appear increasingly so as a brand. We have been able to participate intensely in large tenders that we were never really present in before. We had to participate in the past through traders and through middle entities. Now we have appeared inside with the ability to supply from multiple sources, and has been quite commercially beneficial for us, without getting into too much detail. Lastly, another feature of the synergies, of course, has been the recently and successfully negotiated refinancing of our debts in Fertiglobe, part of our debt in Fertiglobe, as we continue to hold, obviously, the Algerians dinar debt in Algeria at the Sorfert level.
The rebalance of the debt has been centralized at the Abu Dhabi Holdco entity, and we have been able to achieve significant flexibility, good tenor, and most importantly, a meaningful reduction in our interest rates. I think this is directionally reflective of the states of our business, the stabilities we're achieving and Fertiglobe's thesis as a global exporter and the synergies we've been able to extract. We hope we can continue to find similar optimization opportunities across our group, especially in the backdrop of very strong capital markets on the debt side.
Thanks. Maybe just a quick follow-up on the last point. When looking at the GCC or Egypt or even North Africa, could you expand that cooperation to include other players maybe on the distribution side where you can kind of widen the offering? Do you think at this stage you're just focusing on ADNOC and then maybe at some point you would look for more consolidation within the market? Not necessarily M&A, but just forming JVs of certain sorts. Thanks.
Ahmed, should I start?
Yeah, I mean. G o ahead and I'll jump in.
Okay. No, I was going to say, it's a good question. Ahmed mentioned a very important word at the onset of the call, that it is in very much embedded in our DNA to think of value creation and optimization of our asset portfolio in many ways. Ahmed successfully led the creation of such joint ventures in the U.S. on the trading side, which have been extremely important for our business there, and impactful. Maybe not in visibly tangible ways, we know it has been impactful and synergistic. We believe that such opportunities should arise. We would evaluate in other regions. We continue to look for ways to extract value from this very technologically advanced, young asset base that's been put together this past decade. Ahmed, do you want to add?
Yeah. That's right. Like N said, we're looking at the ways that are done on a cashless as well as potential M&A basis all the time. The commercial team and the general management team at Fertiglobe has done a great job of actually being a distributor for some lone buyers, producers that are single plants or two plants that would like Fertiglobe to distribute their products. I think Nassef had mentioned on previous calls, the size of our export platform at Fertiglobe on a run rate basis is larger than Chinese exports. That has room to continue to grow regionally. We've gotten pretty good inbound inquiry as well, some successful one-off distribution opportunities with certain other producers. We continue to evaluate those opportunities on a more systematic basis.
Yep.
Thank you.
Okay, we will now take our next question. It comes from the line of Senan Kiran. Your line is now open.
Hi there. Good afternoon. Two questions. I think, Hassan, it was you that mentioned some of the industrial applications have seen some weakness. Is that across the board or are you seeing some sectors weaker than others?
I can take that one, Hassan, actually.
Go ahead.
Just from a commercial perspective, it definitely varies, and it varies by location as well. We did see some weakness from some of our ammonia customers in Q2, for example, in Europe. They actually turned down production in Q2 and have since restarted. As their downstream value chain, whether they be in the textiles, automotive, plastics end markets, they've all started to pick back up. We've seen good demand out of our industrial customers in the U.S. Gulf Coast, and it's been fairly resilient for both ammonia as well as methanol. Our methanol consumers, actually in Europe as well, our specific customers have been quite resilient. Now, there have been some areas where there have been pockets of weakness over the last several months. I'd say the general trend is to continue to see people reopen and try to build back stocks after periods of weakness. Hello?
Hello?
Yep.
Hello?
Yeah.
Okay.
Sorry, did that answer your question?
Yes. I said thank you, but maybe it didn't come through. The other question I had was on the refinancing opportunities you might have to simplify the structure or to reduce the interest burden. Any comments on the bonds you have which became callable, I guess back in April?
Yeah, obviously it's also a very valid question. All I can say at this time is that we obviously continuously monitor the markets. We're quite aware of the strong market conditions that prevail. We will make our evaluation, we consistently look week in, week out on whether there are any opportunities that we should be looking at. Should something arise, obviously, it's something we're going to be quite transparent about.
Thank you very much.
I'll add to that, of course, that as a company, and something that's worth reiterating, because despite the tough conditions we've seen on commodity prices, all our recent refinancing activity has given us quite a comfortable maturity profile going forward, averaging less than $160 million of repayments per year for the next three years. Our liquidity position continues to be quite robust, with $1.5 billion of available liquidity, $900 million of undrawn committed facilities, of which nearly $700 million of that is sitting at the NV holdco level. That's, again, quite a comfortable position, and that gives us the luxury of making any further optimization decisions in a calm and calculating manner.
I understand. Thank you.
Okay. Our next question comes from the line of Chetan Udeshi. Your line is now open.
Hello. Hi, thanks. Couple of questions. Just first one, at this point looking, it's almost end of August, and given the different moving parts, can you help us understand how do you see overall Q3 in terms of earnings directionally versus, say, the second quarter? Should we expect a material change or significant change either way, versus second quarter? That would be just a first question. Second one was just a clarification in a way. There is a big deferred tax liability balance on the balance sheet. Is there any cash element to it in the future at all, or is this something got to do with just accounting, which may not have any cash implications in the future? Thank you.
Yeah. Hassan, do you want to take the tax question first, and then I'll jump in on the Q3?
Hello? Sorry, I was on mute. No, there is no cash aspect to that. I think as a company, we've continued to deliver on a pretty low cash tax rate, which is reflective of a combination of factors, whether it's the fact that some of our businesses have benefited from accelerated depreciation, including our U.S. assets, for example, which actually also protects us from any further, whether because of carry-forward losses and a combination of accelerated depreciation. Whatever happens in the U.S. in terms of a political landscape, we're pretty much a little bit indifferent there. Also, a combination of the fact that our businesses such as Algeria are not subject to tax because all petrochemical exports from Algeria are not taxable. Of course, we have fiscal unity in our European business, which also allows us to manage our tax bill.
Overall, we've maintained pretty effective cash tax, and we are forecasting that will continue at least for the next several years.
Sure. Thanks, Hassan. Chetan, can you remind me, you said that you wanted to get some guidance on how Q3 was looking versus Q2?
Yeah, just directionally, Of course, there's no specific guidance, but just directionally, should we expect any major change either way? Just wanted to see in terms of directional change.
Yeah. Just given the commodity nature of our business, we don't like to give specific guidance whether it's directionally or otherwise with regards to how the quarter performs. We'll say that we've seen good volume of production, and we've seen a recovery in prices across the board, particularly urea, here in Q3. The European contract price for methanol, for example, we should see that step up in Q4 because the spot prices recovered quite meaningfully. I'll leave it at that. Yeah, typically Q3 is a lower quarter for fertilizer companies in general. Q2 tends to be a little bit stronger, but we've seen a good recovery here in Q3 as stated on the urea side and on the methanol and ammonia side.
Understood. Thank you.
The one thing I could add to Ahmed's statement is that obviously, you recall also last year, our Q3 last year was specifically quite intense in terms of turnaround activities. That is the backdrop we leave you with.
Understood.
Yeah. That's a good point, Hassan. Any further questions?
Okay. Once again, if you wish to ask a question, please press star and one. Okay, sir, there are no further questions at this time. Please continue.
Okay. Thank you very much. Thank you everyone for joining this call. Please stay safe and look forward to our next quarterly update.
Thank you.
Okay. That does conclude our conference for today. Thank you for participating. You may all disconnect.