Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's OCIN V Second Quarter 2019 Results Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session.
At which time, if you wish to ask a question, you can press star 1 with telephone and wait for your name to be announced. I also must advise you this conference is being recorded today 30th August 2019. I'll now hand you over to your first speaker, Hans.
Hi. Good afternoon, and good morning to our audience in the U S. Thank you for joining the OCI Energy 2nd quarter conference call. With me today are Nasse Salias, our Chief Executive Officer, and Halston Boudari, our Group Chief Financial Officer. On this call, you will review OCI's operational events and financial highlights for the quarter followed by a discussion of OCI's outlook.
As usual, at the end of the call, we'll 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 and people certain risks and uncertainties in that, I would like to refer you to our disclaimers about forward looking statements. Now let me hand over to Jasmine.
Thank you, Hans, and thank you all for joining us today. As usual, I'd like to start today's call with highlights of our performance, during the second quarter. During our last conference call, we indicated that we had shifted a portion of our fertilizer sales volumes from the first and for the second quarter. This was due to weather conditions in the US. What if this is yet to some of the worst on record resulting in delay in nitrogen fertilizer applications, and we'll cover a little bit more of that, later in the call.
Our second quarter results confirm that this partial shift materialized accessory, our old reduced sales volumes increased by 25% So a record 3.1000000 metric tons during the second quarter of 2019 compared to the same quarter last year. Our nitrogen products
This particularly well,
we achieved volume growth of 23 percent across our fertilizer portfolio during the quarter and reached record volumes in Europe and the U. S. On the back of strong demand. As a result, our nitrogen fertilizer inventories went down from 1,400,000 tons at the end of March to more normalized levels towards the end of the quarter. Our other nitrogen products contributed robustly as well.
Our diesel exhaust fluid or DEF business in the U. S. Continues the strong growth trajectory and volumes more than doubled during the second quarter. Operationally, our Dutch facilities achieved consistent performance during the quarter with healthy production levels and no major unplanned shutdowns. Towards the end of the quarter, our Algerian operations and our dust plants went into planned turnarounds, projects.
Methanol volumes increased by 29% during the quarter. Natgasoline was the main driver of this growth as we started our production only at the end of the second quarter last year. And BIO and CN, our other industrial operation associates operating rates of around 90% during the course. This increase was despite a longer than expected unplanned shutdown at Oskai, Beaumont's methanol unit from the end of May to early July. Resulting in a loss in volume and impact on EBITDA of the methanol segments.
Since the restart early July, the plant has achieved a production increase of more than 10% above its capacity, prior to the superconnecting. Sir, the result, because of the higher volumes, our 2nd quarter revenue increased by 20% to $954,000,000. Revenue for the first half were just above the same period last year despite the extensive turnaround at Sorefetch around Jira operations during the first quarter. And the shutdown of government and lower methanol prices. Our adjusted EBITDA increased by 35% to a record $275,000,000.
We achieved this figure despite a one off negative impact of around $35,000,000, attributable attributed to the unplanned shutdown at I don't know what's needed. If you did, those 2, what what is what are the effects that occurred late in the quarter, our EBITDA for the first half would also have been higher than a year ago. If I look at the results of our NICEG's platform, the adjusted EBITDA for These three segments combined held up more than 50% for the quarter and in the high single digits for the half year with very strong performance of IFCO and our best operations. Adjusted EBITDA of our national business on the other hand was down mostly because of the shutdown at OCI ID, as well as lower methanol prices mentioned earlier. Free cash flow was at $151,000,000 before growth CapEx during the quarter, a substantial improvement from the first quarter of the year.
The capital reflects record EBITDA for the quarter and an $88,000,000 decrease in working capital as we reversed the buildup of inventory that took place towards the end of the first quarter. This was partly offset by cash interest and taxes of $102,000,000 $40,000,000, respectively, which were higher than the quarterly averages for the full year. Total CapEx reached $49,000,000 in the second quarter compared to $89,000,000 in the same quarter last year, and growth CapEx reached $22,000,000, mostly, attributable to the refurbishment of, our Dutch methanol by MTN 2nd line and the capacity expansion at Ocea Grande, both of which are now operational. As a result, we continued our deleveraging and decreased net debt by a $110,000,000 during this second quarter of 2019. I would like Now, I'll hand over to Lonza for further commentary.
Thank you, Hassan. Let me start start first with our new partnership with Abu Dhabi Oil Company ADNOC. In June, we announced a new strategic partnership with ADNOC where we combine their fertilizer business and our nitrogen fertilizer platform in the MENA region. We're excited that we are creating this JV with a with a like minded and strong partner who also has a clear strategy to unlock value in this industry. We see this JV as a value enhancing for several reasons.
We will consolidate an additional 2,100,000 tons of urea. The JV will create scale and become the largest dedicated seaborne exporter of ammonia and urea globally. It will be another step forward in the consolidation of this steel fragmented industry. The financial metrics of the platform are favorable. It will have margins above industry average, very low leverage, and finance charges.
And it is a well invested and young asset base that ensures low maintenance costs and high gas efficiency. We also expect substantial synergies of at least $60,000,000 to $75,000,000. These are mostly straightforward commercial or logistics synergies, which we expect to achieve within a short time frame. All these characteristics translate into excellent free cash flow conversion that can fund future growth, be it organically or otherwise. Bought any unforeseen events, we expect a closing on September 30th.
Then when I turn to our performance and outlooks, First, for our nitrogen businesses. We remain disciplined in Q1, and as a result, shift to record volumes in Q2 in both the US and Europe. We delivered a record quarter despite flooding, which had had an effect on rail transport in the US Midwest. We also sold many of our products higher prices and if we would have sold them during the first quarter, as we benefit from positive trends in our nitrogen and market. I believe this confirms the merits of our commercial strategy.
I would like to thank the whole team for the excellent execution and for making the logistics for these record product movements possible. I'm particularly pleased with our record performance at EFCO, which clearly demonstrates its favorable location in the Midwest. We achieved high net backs prices compared to peers. Our N17 was fully prepared. Product was stored close to our end customers.
And we were able to deliver our product at short notice despite logistics being impacted by the floods. Looking ahead, season and summer prices of nitrogen fertilizers have been higher than the year before for the second time in a row. I believe this is due to a healthier operating environment and tightening supply. Inventory at this time of year remain lower than in previous years, which bodes well for the book. This is widely expected that corn acreage in US will increase next spring, and we see the services wanting to have adequate product available in stores rather than delay purchases, decision until next week.
We also continue to see very few new urea capacity additions in the coming years in a combination with low exports from China. Ammonia prices have been weak this year as new capacity was being absorbed and lagging urea. But we only expect any major new merchant applied for now until at least the beginning of 2022. Also, the outlook for DF looks robust and as you recall, we are on track to more than double sales volume in 2019. We saw a sequential improvement in EBITDA from the first quarter into the second I bought Natgasoline and bio and and returned to healthy operating rates.
We also benefited from lower gas prices in Europe helping volume at MCN, to achieve a profit. In the past few weeks, we reached our run rate capacity for methanol. The, debottlenecking of BioMCN sorry, the refurbishment of BioMCN second line was mechanically completed in June. And has been running stable, at stable rates in the past weeks. During the shutdown of OCI, at OCI Beaumont, we brought forward work to achieve a capacity increase of more than 10%.
This has been successfully completed and running at this higher rate since we started in the first half of July. The effect is that we have increased our proportion of methanol capacity by 27% to almost 3,000,000 tons per annum. Metamole markets have been weaker in 2019 due to several factors, including falling crude oil prices and MTO affordability, but there also continues to be a big impact from exports from sanctioned countries going to Asian markets offers at every discounted price. Gas prices are looking very favorable for our operations. In Europe, gas prices have continued to be below $4 per MMBtu in recent months or or less than half where they were last year at the same time.
We believe there has been a structure shift in the European gas market and we expect price pricing to remain within a bandwidth $3 to $5 per NMBtu with the exception of weather driven volatility. This is a result of high liquidity in LNG markets, competing with Russian and ports. In the U. S, Henry Hub remains at very competitive prices and well below last year. The forward, of course, adjusted will pay like this for the foreseeable future.
This will continue to keep our US operations at the very low end of the global cost curve. Finally, looking at the remainder of the year. We look we took advantage of the low season during the summer and have already completed planned turnarounds OCI Nitrogen, SOURCOT, and it could just court. We started another one at 1 of our 2 urea lines at ESC this month. We expect this result in higher utilization rates and better conversion economics going forward at this plant, which we've already started to see.
For example, the turnaround of surface ammonia lines has allowed the plant to go up to a 100% utilization, which hasn't been achieved on a regular basis in the We have now also reached the end of our CapEx program and have no further commitments for growth CapEx for the remainder of 2019 or in 2020. Therefore, we are about to reach our run rate capacity from the fourth quarter this year. We're now open for questions.
We'll now begin the question and answer session. Please send by while we compile the Q and A queue. This will only take a few moments. Your first question comes from the line of Chris Fryts from Kepler. Please go ahead.
Your line is now open.
Yes. Thanks. Good afternoon, gentlemen. Christian Faitzier from from Kepler Cheuvreux. Couple of questions, please.
First of all, Can you elucidate the impact you would expect in Q3 from the maintenance shutdown at Bisco? And at which nameplate capacity levels the client's now running. Would it be fair to assume something like 150% or so? Cause I believe it had been running at 1 110% before. Second, what is your view on methanol pricing?
And the 3rd question I have is independent of the absolute levels of proceeds you would get for the methanol assets. What are your priorities for uses of the proceeds? Thank you.
Okay. So the the aircon turnaround was quite successful and executed, just around, in about 4 weeks. It took a lot it lasted for 4 weeks. So you can obviously do the math. And we strategically, position the, the turnarounds in the summer where we, typically fertilizer it has the tough pricing So we, did not produce at a time when there is no significant demand.
And this is also helpful for the overall market environment. So, EFCO has achieved post the deposit post the, turnaround with some, minor tweaks and debottlenecking certain areas, a 116% record of intake capacity for ammonia and, significantly improved, gas efficiency. So we're very happy with, with all the initiatives taken, during that turnaround. As far as the outlook for methanol,
We will not
predict, oil prices. So we were refrain from, that correlation, or what you can say is that we have witnessed since the beginning, of August an almost $35 increase in spot prices, in US methanol. So we believe that we are, witnessing trough pricing in the rest of the world. And, possibly, if some of the, fundamental trade issues are resolved. We should see some, further improvement in that price, but as always, there is a strong correlation with the oil price that affects methanol affold affordability in MTO plants.
I would like to add that we expect almost 3,000,000 tons of additional demand resulting from this startup of imminent startup or actually one of them already started up in China of, additional MCO plans. So, the additional NCO plans come with a new demand, that obviously bodes well for the outlook. On the, issue of the, strategic review on methanol, I will not be able, to comment on that process at this stage. This is a review process. There are many options that are being considered.
So we'll not be commenting on that until we have something firm to report.
Okay. Fair enough. Thank you very much.
Thank you. Your next question comes from the line of Roger Spitz from the Bank of America. Please go ahead. Your line is now open.
Thank you. Good afternoon. So how much, was available under your, revolvers to draw as of June 30th, 2019?
Around $200,000,000.
Thank you. My other question is is I think at the time of the ADNOC JV announcement, we had the following information from ADNOC, about 596,000,000 of sales 239,000,000 of EBITDA and 41,000,000 of cash. Do you have, any update of those three figures as of June, LTM, June 30 2019?
We will not be commenting on that. We hope to close the transaction. On, as we mentioned, on the 30th September. And moving forward, we'll provide all that information.
Thank you very much.
Thank you. Your next question comes from the line of Lee to Denise coming from from Morgan Stanley. Please go ahead. Your line is now open.
Hi, everyone. Thank you for taking my questions. First of all, I believe that you mentioned during the call that U. S. Inventories lower heading into the autumn application season?
And I mean, if I look at across different players in the potash and natural end market, having some mixed messages, which you are currently flagging higher U. S. Inventories and quite some extra stock in the distributor sites. I wonder if you could give us some color on what you're seeing and expecting for the U. S.
Season. And then secondly, obviously maintenance is a big part of the nitrogen business. And I just wonder if you could give some color on further maintenance that will need be carried out in the second half and maybe even for next year? Thank you.
So first of all, I will not comment on the potash inventory, but what actually see is that site reps went into, July. So people were still buying into July. And taking out, inventory. So, on the nitrogen side, I happy to confirm that inventories are, significant in all from what we observe, around that than the the last year and the previous year. Okay.
Got you. But but we don't have any, view on the potash. The, and very good solid demand, in August. As far as turnarounds, barring 1 last, an an additional 2 weeks of one train in Egypt, which should be done for the year. And next year is a much larger turn around here, than this year.
Okay. Thank you very much.
We have no further questions coming from the phone lines. But just a reminder, everyone, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Bye. We have Another question coming from the line of Geoff Here from UBS. Please go ahead.
Your line is now open.
Hi. I was wondering if you could maybe give us some background to, what happened with the talks between Sabik and yourselves around the methanol assets?
As I mentioned before, we will not be commenting on the methanol review courses, more on, on any of the parties we are engaged ship.
Okay. Thank you.
We have no further questions coming from the phone lines. Please continue.
You very much for your attention, ladies and gentlemen, and looking forward to our next quarterly call.
Thank you so much. It does conclude our conference call for today. Thank you for participating. You may now disconnect.