Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's OCI N.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 one on your telephone and wait for your name to be announced. I also must advise you this conference is being recorded today, 30th of August 2019. I now hand you over to your first speaker, Hans Beelen.
Hi. Good afternoon and good morning to our audience in the U.S. Thank you for joining the OCI N.V. second quarter conference call. With me today are Nassef Sawiris, our Chief Executive Officer, and Hassan Badrawi, our Group Chief Financial Officer. On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook. 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 involve certain risks and uncertainties. In depth, I would like to refer you to our disclaimers about forward-looking statements. I'll hand it over to Hassan.
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 into the second quarter. This was due to weather conditions in the U.S. The weather conditions in the U.S. were some of the worst on record, resulting in delay in nitrogen fertilizer applications. We'll cover a little bit more of that later in the call. Our second quarter results confirm that this partial shift materialized successfully. Our own produced sales volumes increased by 25% to a record 3.1 million metric tons during the second quarter of 2019 compared to the same quarter last year. Our nitrogen products did particularly well.
We achieved volume growth of 23% 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 1.4 million 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. continued 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 Dutch plants went into planned turnaround projects. Methanol volumes increased by 29% during the quarter.
Natgasoline was the main driver of this growth as it started up production only at the end of the second quarter last year. BioMCN, our other Dutch operation, also returned to operating rates of around 90% during the quarter. This increase was despite a longer than expected unplanned shutdown at OCI 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 segment. Since the restart early July, the plant has achieved a production increase of more than 10% above its capacity, prior to the debottlenecking. During the results, because of the higher volumes, our second quarter revenues increased by 20% to $954 million.
Revenues for the first half were just above the same period last year, despite the extensive turnaround at Sorfert, our Algerian operation during the first quarter, and the shutdown at Beaumont and lower methanol prices. Our adjusted EBITDA increased by 35% to a record $275 million. We achieved this figure despite a one-off negative impact of around $35 million, attributed to the unplanned shutdown at OCI Beaumont mainly. Excluding those two one-off 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 nitrogen platform, the adjusted EBITDA for these three segments combined was up more than 50% for the quarter and in the high single digits for the half year, with very strong performance at IFCo and our Dutch operations.
Adjusted EBITDA of our methanol business, on the other hand, was down mostly because of the shutdown at OCI, as well as lower methanol prices as mentioned earlier. Free cash flow was at $151 million before growth CapEx during the quarter, a substantial improvement from the first quarter of the year. The cash flow reflects record EBITDA for the quarter and an $88 million 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 million and $40 million respectively, which were higher than the expected quarterly averages for the full year.
Total CapEx reached $49 million in the second quarter compared to $89 million the same quarter last year, and growth CapEx reached $22 million, mostly attributable to the refurbishment of our Dutch methanol BioMCN second line and the capacity expansion at OCI Beaumont, both of which are now operational. As a result, we continued our deleveraging and decreased net debt by $110 million during this second quarter of 2019. I would like now to hand over to Nassef for further commentary.
Thank you, Hassan. Let me start first with our new partnership with Abu Dhabi National Oil Company, ADNOC. In June, we announced a new strategic partnership with ADNOC where we combined their fertilizer business and our nitrogen fertilizer platform in the MENA region.
We're excited that we are creating this JV with a like-minded and strong partner who also has a clear strategy to unlock value in this industry. We see this JV as value-enhancing for several reasons. We will consolidate an additional 2.1 million 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 still 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 million-$75 million. These are mostly straightforward commercial or logistics synergies, which we expect to achieve within a short timeframe.
All these characteristics translate into excellent free cash flow conversion that can fund future growth, be it organically or otherwise. Bar any unforeseen events, we expect a closing on September 30th. When I turn to our performance and outlooks. First, for our nitrogen businesses. We remained disciplined in Q1, and as a result, shipped record volumes in Q2 in both the U.S. and Europe. We delivered a record quarter despite flooding, which had an effect on rail transport in the U.S. Midwest. We also sold many of our products at higher prices than if we would have sold them during the first quarter, as we benefited from positive trends in our nitrogen end markets. 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 IFCo, which clearly demonstrates its favorable location in the Midwest. We achieved high netback prices compared to peers. Our N-7 team 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, seasonal 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. Inventories at this time of year remain lower than in previous years, which bodes well for the outlook. It is widely expected that corn acreage in the U.S. will increase next spring, and we see distributors wanting to have adequate product available in stores rather than delaying purchases decision until next season.
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. We don't expect any major new merchant supply for now until at least the beginning of 2022. The outlook for DEF looks robust and as you recall, we are on track to more than double its volume in 2019. Turning to our methanol business. We saw a sequential improvement in EBITDA from the first quarter into the second, as both Natgasoline and BioMCN returned to healthy operating rates. We also benefited from lower gas prices in Europe, helping BioMCN to achieve a profit. In the past few weeks, we reached our run rate capacity for methanol. The debottlenecking of BioMCN.
The refurbishment of BioMCN's second line was mechanically complete in June and has been running stable at stable rates in the past weeks. During the shutdown at OCI Beaumont, we brought forward work to achieve a capacity increase of more than 10%. This has been successfully completed and running at a higher rate since we started in the first half of July. The effect is that we have increased our proportionate methanol capacity by 27% to almost 3 million tons per annum. Methanol 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 offered at heavily discounted prices. 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 less than half where they were last year at the same time. We believe there has been a structural shift in the European gas market. We expect pricing to remain within a bandwidth of $3-$5 per MMBtu, with the exception of weather-driven volatilities. This is a result of high liquidity in LNG markets competing with Russian imports. In the U.S., Henry Hub remains at very competitive prices and well below last year. The forward curve suggests it will stay like this for the foreseeable future. This will continue to keep our U.S. operations at the very low end of the global cost curve. Looking at the remainder of the year.
We took advantage of the low season during the summer and have already completed planned turnarounds at OCI Nitrogen, Sorfert, and IFCo this quarter. We started another one at one of our two urea lines at EFC this month. We expect this to result in higher utilization rates and better conversion economics going forward at these plants, which we've already started to see. For example, the turnaround of Sorfert's ammonia line has allowed the plant to go up to 100% utilization, which hasn't been achieved on a regular basis in the past. 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.
Thank you, ladies and gentlemen. We'll now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, you can press the hash key. Once again, for questions, please press star one. Your first question comes from the line of Christian Faitz from Kepler. Please go ahead. Your line is now open.
Yes, thanks. Good afternoon, gentlemen. Christian Faitz here 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 EFC? At which nameplate capacity levels is the plant now running? Would it be fair to assume something like 150% or so? Because I believe it had been running at 110% before. Second, what is your view on methanol pricing? The third 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, the EFC turnaround was quite successful and executed, just around in about four weeks. It lasted for four weeks. You can obviously do the math. We strategically positioned the turnarounds in the summer, where we were typically fertilizer has the tough pricing. We did not produce at a time when there is no significant demand, and this is also helpful for the overall market environment. EFC has achieved post the debottleneck, post the turnaround with some minor tweaks and debottlenecking certain areas, 116% record of nameplate capacity for ammonia and significantly improved gas efficiency. We're very happy with all the initiatives taken during that turnaround.
As far as the outlook for methanol, we will not predict oil prices, we will refrain from that correlation. What we can say is that we have witnessed since the beginning of August, an almost $35 increase in spot prices in U.S. methanol. We believe that we are witnessing tough 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. As always, there is a strong correlation with the oil price that affects methanol affordability in MTO plants. I would like to add that we expect almost 3 million tons of additional demand resulting from the imminent startup, or actually one of them already started up in China, of additional MTO plants. The additional MTO plants come with 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. We will 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. How much was available under your revolvers to draw as of June 30th, 2019?
Around $200 million.
Thank you. My other question is, I think at the time of the ADNOC JV announcement, we had the following information from ADNOC, about $596 million of sales, $239 million of EBITDA, and $41 million of cash. Do you have any update of those three figures as of LTM June 30th, 2019?
We will not be commenting on that. We hope to close the transaction, as we mentioned, on the 30th of September. Moving forward, we'll provide all that information.
Thank you very much. Yep.
Thank you. Your next question comes from the line of Lisa Dinev coming 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 are lower heading into the autumn application season. If I look at across different players in the potash and nitrogen market, there have been some mixed messages, which you are currently flagging higher U.S. inventories and quite some extra stock in the distributor side. I wonder if you could give us some color on what you're seeing and expecting for the U.S. season. 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 to be carried out in the second half and maybe even for next year. Thank you.
First of all, I will not comment on the potash inventory, but what we actually see is that side dress went into July. People were still buying into July and taking out inventory. On the nitrogen side, I would happy to confirm that inventories are significantly lower from what we observe around us than the last year and the previous year.
Okay. Thank you.
We don't have any view on potash. Very good solid demand in August. As far as turnarounds, barring one last, an additional two weeks of one train in Egypt, we should be done for the year, and next year is a much lighter turnaround year than this year.
Okay, thank you very much.
Yes.
We have no further questions coming from the phone lines. Just a reminder everyone, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We have another question coming from the line of Geoff Haire from UBS. Please go ahead, your line is now open.
Hi. I was wondering if maybe give us some background to what happened with the talks between SABIC and yourselves around the methanol assets?
As I mentioned before, we will not be commenting on the methanol review process, nor on any of the parties we are engaged with.
Okay. Thank you.
We have no further questions coming from the phone lines. Please continue.
Thank you very much for your attention, ladies and gentlemen, and looking forward to our next quarterly call.
Ladies and gentlemen, that concludes our conference call for today. Thank you for participating. You may now disconnect.