Construction, ladies and gentlemen. Thank you all for standing by, and welcome to today's OCINE First Quarter 2018 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 you wish to ask a question, you will need to press star and the number 1 on your telephone and wait for your name to be announced. And I must advise you all that this conference is being recorded today.
Friday, 11th May 2018. I would like to hand the conference over to your first speaker for today, Mister Hans Ayed. Please go ahead, sir.
Thank you. Good afternoon and good morning to our audience in the United States. Thank you for joining us on the OCI NV first quarter 2018 results conference call. You can find all the details of our results in our press release and financial statements, which we posted on our website this morning. With me today are Nasser Sowirs, our Chief Executive Officer and Hassan Badarawi, our Group Chief Financial Officer.
On this call, we will review OCI's Key operational events and financial highlights for the first quarter of 2018 followed by a discussion of OCI's outlook. 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 and involve certain risks and uncertainties. And therefore, I'd like to refer you to our disclaimers about forward looking statements.
Now let me introduce our Group Chief Financial Officer, Asam Badawi. Thank you, Hans. Thank you all for joining us today. As Hans mentioned, we posted our first quarter 2018 results on our website, the morning. This is the first time that OCI issues condemned financial statements for the first quarter, typically in the past, we've issued trading statements.
Going forward, we will be providing this level of disclosure for the 1st and Third quarters, as well. I'm pleased to report that, we had solid performance in the first quarter of this year. We've achieved healthy utilization rates across our asset base and witnessed a meaningful step up in, EBITDA and, and more importantly, free cash flows. Our self produced sales volumes increased by 33% compared to the same quarter last year, which was about $2,200,000 during the first quarter.
On
Yeah. On average, we realized selling prices at a higher level than those achieved in the first quarter of last year. As the market that continues to strengthen. As a result of the higher volumes and higher selling prices, 1st quarter revenue increased by 57 percent to $744,000,000, and we reported an increase in our EBITDA by 9 of 95 percent to $252,000,000. We also reported an increase in our adjusted EBITDA of 44% to $235,000,000.
The delta between the reported adjusted EBITDA this quarter's, mainly the insurance proceeds or the down payment that our insurance proceeds from the surface shutdown, which continues to further improve progressively progress. At the bottom line, we had a swing back into profits from a net loss attributable to shareholders of $47,000,000 in the first quarter last year, to a net profit of $25,000,000 this quarter. We've also achieved, as I mentioned earlier, healthy free cash flow of $120,000,000 during the quarter, despite an increase of $49,000,000 in working capital, reflecting, some market conditions, which, not a full address. The free cash flow represents a conversion rate of about 48 percent of our reported EBITDA. And we believe our company is among the best in class going forward in cash flow conversion.
Turning to our balance sheet. Our net debt stood at $4,450,000,000 as at 31st March 2018. That's dollars. Reflecting, some minor movement from the 4.447000000000 as a as a 31st December 2017. This is mainly due to some adverse currency translation differences of $38,000,000, which are partially reversed in the Q2.
The tail end of our growth capital expenditure, which was $23,000,000 during the quarter, mainly by MCN second line, the doubling of our capacity in By MCN, which is the last piece of growth CapEx we have in our system, There was also a one off accounting adjustment of $90,000,000 for the implementation of the new IFRS nine rule, which impacts the value of the opening balance of debt with no P and L impact. And finally, the next effect of $29,000,000 of several items mainly reflecting the expensing of the cost of debt repayment related to OCIP refinancing and the convertible. During our last conference call in March, we shared an update on our capital restructuring plans. I am pleased to report that we have now finalized all refinancings with a number of transactions successfully completed in recent weeks. These include in April, we completed the offering of a well oversubscribed debut bond consisting of a $650,000,000 tranche and a €400,000,000 tranche of senior secured fixed rate notes due in 2023.
The dollar notes have an interest rate of 6.625 percent. And the euros are at 5%. So I'm also pleased to say that for the first time, in conjunction with this bond issue, OCINV obtained corporate credit ratings from Moody's investor service, standards and tours, global ratings, and fixed ratings of the BA 2 double b minus and double b, respectively, all with a stable outlook. Also in April, we entered into a new revolver and term loan facility as part of our overall capital restructure. The new RCF has a total commitment of $700,000,000 with up to 5 year maturity The new term loan facility has a total commitment of $400,000,000 equivalent denominated in euros with a 4 year opportunity, both facilities ban initial interest rate margin of 4% over LIBOR with the clients as the company's deleveraging profile continues onward.
We also successfully concluded the buyback of our outstanding 339,000,000 convertible, which closed a few days ago. And finally, yesterday, we closed the refinancing of our existing debt facilities at Egyptian per provider company for a total equivalent of $445,000,000. The transaction has received extremely healthy demand from commercial banks, both local and leisure and also included a commitment of $100,000,000 from the International Finance Corporation and $60,000,000 from the European Bank for reconstruction and development This was the last piece of refinancing activity in our ecosystems that is now complete. With our capital restructuring program now finalized, we do not have any major maturities in the near future and have meaningfully extended our average maturity profile going forward. We have lowered our average cost of debt this year already by up to 35 bps, but expect more meaningful gains through expected step down provisions as our deleveraging continues.
We have reduced the sensitivity to rising interest rates due to increasing the proportion of fixed rate debt from previously 26% to around 50% of our total debt. And just over 75% of U. S. Denominated debt following the refinancing. We believe we are now extremely well positioned to achieve a healthy trajectory for deleveraging as we continue to target an investment grade profile.
And at this point, I'd like to hand over the call to Nautis, our Chief Executive Officer for further commentary and outlook.
Thank you, Hassan. As I already mentioned on our last conference call in March, we started 2018 with all our plants operating well. I'm very pleased that we can now confirm that as a result, We enjoyed a strong improvement in our operation and our financial performance during the first quarter. All our operations were contributing to this growth through a robust increase in volumes and our performance was supported by a well diversified portfolio of fertilizers and industrial chemicals. I'm particularly pleased that we generated a healthy level of free cash flow of $120,000,000 in the first quarter, despite a $49,000,000 increase in working capital.
Inventories ended at a relatively high levels at the end of March as the spring indication season in the U. S. And Europe was delayed from the first into the second quarter due to the adverse weather conditions. Now let me give you some insight on our 2 underlying markets. 1st, the nitrogen fertilizer market.
Our realized selling prices increased on average during the first quarter compared to a year ago. We believe our commercial strategy is paying off as we continue our strategy to limit both the quantity of forward contracted sales and the company's participation in the annual field season selling program in North America. We believe that this could help to create a more stable environment for nitrogen fertilizer appliances and stabilize price expectations for our customers. We continue to see a number of positive trends emerging for the nitrogen fertilizer market. Firstly, for the first time in a number of years, we see grain fundamentals improving.
Global consumption is outpacing production, grain inventories are expected to decline and farmers in the U. S. May shift back to corn acres from soybeans. Overall higher global grain price levels should boost the use of nitrogen fertilizer in the U. S.
And other major markets. Secondly, we've seen strong demand in high growth regions this year, in particular in East Africa. A trend that we expect to continue going forward is Africa at some of the fastest growing urea markets in the world, including Ethiopia Tanzania and Zania Muzambique. Ethiopia alone is a urea market of 500,000 plus tons, which is expected to grow at double digit rates in the coming years. All the required urea has been important, our plant in Egypt EFCs particularly well positioned to serve the East African markets as we have logistical advantages compared to our sets.
Thirdly, as we discussed before, we continue to have the view that nitrogen supply additions have already peaked in 2017. And that new additions will force from China continued to fall in the first quarter. Net exports amounted to less than 250,000 tons or a a drop of almost 80% compared to the first quarter last year. We expect urea exports from China to remain at low levels going forward. If at all.
Then we move to the industrial chemicals market. Our industrial chemicals portfolio continue to perform well with healthy volumes and further increases in selling prices for methanol and melamine. And the first contribution is coming through from diesel exhaust lured. We believe that each of our industrial chemicals market has a favorable outlook. Metanol markets have been growing at rates of 8% to 10% on average and we believe the outlook remains positive.
We have strong visibility into the next 4 to 5 years and expect limited new major capacity additions to come to market relative to expected continued solid demand growth in the high single digits. We are all we are very well placed to benefit our methanol portfolio. We'll get another boost this quarter with the startup of Natgasoline within weeks from now. Natgasoline reached the major milestone of mechanical completion in April and natural gas has already been introduced to the reformer. Our other growth projects, BioMCN's 2nd methanol line, is on track to start production in the fourth quarter of this year.
Our melamine business continued a healthy trajectory and remains a good source of diversification. Melamine prices continued to increase in 2018 after consecutive quarterly price increases throughout 2017 and demand for the product remains healthy. Finally, diesel exhaust fluid has been an exciting recent addition to OCI's industrial chemicals portfolio following the startup pool. EFCO in 2017. Diesel exhaust fluid is a fast growing and high margin product, which has been growing at rates above 20%.
And is expected to maintain high growth rates in the U. S, Europe and in China. We have been ramping up our DF operations this year, We have been rolling out the product in the United States where we have increased production capacity at EFCO and have boosted logistical capabilities with an enlarged railcar fleet and more storage capacity. Outside the U. S, we have been increasing DEF capacity as well.
We executed the first shipments from Egypt in March, and we are planning to start production of these exhaust fluid in the Netherlands next year. To conclude, our first quarter results support our expectation that we are on track to achieve a significant step up on free cash flow generation, Our free cash flow of $120,000,000 in the first quarter was a good achievement and combined with the strong increase in EBITDA, the first signs that we are on the This year, we will see a step up in the volumes coming through from Iowa and our plants in North Africa as well as the startup of our methanol facilities. We will have some turnarounds in the summer and have a large list of small production improvements. But these will help us achieve even higher run rate going forward in 2019. We expect to have in 2019 all our facilities up and running for a full year.
With that, we will open the
session. I have questions that came through. Your first question comes from the line of Tom Wrigglesworth Your line is now open. Please ask your question, sir.
Hassan, thank you very much for the call and the option just to ask questions. I'll start with 3 questions if I may. A few, kind of more strategic ones to start off with. Obviously, your commentary around nitrogen pricing infers that we are kind of maybe past the trough of the cycle. In terms of the level of corporate activity, that we've seen in consolidation, which I think you guys have said in the past that you think consolidation would take place as it surprised you that there haven't been bigger deals whilst things have been more suppressed and how would you see that kind of continuing as maybe the cycle picks up?
2nd question, again, is more focused on OCI. Obviously, as we exit kind of 2018, it looks like your organic growth and investments are delivered. What should we expect next from OCI, you're not famous for a company to not be doing something. And the last question kind of more on the first quarter performance, you note that the run rates was 110% for March for the IFCO facility. I think we all understand that, you know, the challenges of cold weather through the fourth quarter probably, provided a bit of a low run rate entering the first quarter, you know, if if go had been, if it if go hadn't had an uninterrupted first quarter, how much more EBITDA do you think that would have delivered?
Could you give us some sense as to, because I appreciate it's still in ramp up? Those are my questions. Thank you.
First, I'll start by your question on consolidation. I am, I tend to differ because you you saw already last year the agrium potash corp transaction which is a positive first step of a positive consolidation, not just in potash, but also in nitrogen. Other players, who have high government participation in their shareholding, are typically not able to take advantage of, changing market conditions. Enhance, we're not active in that part of the consolidation. So we believe that moving forward from our standpoint is that we had to finish our major ramp up of the capacity expansion.
And that will be done by endofthisyear. And then our next priority would be to achieve investment grade and deleverage. So from our side, we will not be doing any major acquisitions in the short term. And on the issue of EFCO yet, January and, and February had had some, interruptions due to the extreme weather. That probably, did not change the fact that the market full was weak as a result of the adverse weather conditions.
So we finished still despite that inventory buildup with a high inventory sorry, despite the shutdowns with a higher inventory level, than we would have expected. So it's quite difficult to assume, but, on a run rate basis, I can tell you that March EBITDA contribution was multiple times more than January February combined.
Okay. That's very interesting. Thank you.
Thank you, sir. Your next question comes from the line Christian Faitz. Your line is now open. Please ask your question.
Yes. Good afternoon, gentlemen. Two questions if I may. First of all, Can you give us an indication of rough tax rate for the full year 2018, please? And then second of all, Given the shortened application season in the Northern Hemisphere, it's due to, adverse weather conditions, prolonged winter conditions.
Do you believe you can, in terms of volumes catch up, in the remainder of the season, despite the compressed application window. Thank you very much.
So on the tax rate, Hassan will give you the
on the tax rate, as you know, This is one of the one of the areas of strength in OCI. We have, we're able to achieve quite a low effective tax rate Our guidance for this year has been in the range of 15 to 18 percent effective tax rate. Although I will note here that our actual cash tax is will be lower than that. And that of course is a reflection of a combination of some of the jurisdictions in which we operate, Egypt, where we have, no taxes on our EbEC asset, Algeria, which is tax exempt, and some and some efficient tax structuring that we've done, throughout the system that, where we are reaping the benefit of that. On the catch up of the
The catch up is actually, might be in the U. S. Slightly different than in Europe. In the U. S, the ammonia application, was really hit by the shortened season.
But we are seeing healthy UAN pickup. So it's a bit of a shift in the product mix in the Midwest where the ammonia demand was, period was shortened, but accelerated UAN and take up. So we believe that, we should have a reasonable, no buildup of inventory by the end of the
Next question comes from the line of Frank Claassen. Your line is now open. Please ask your question.
Yes, good afternoon, gentlemen, Frank Claassen, Degroof Petercam. Two questions, please. First of all, on DAF, could you elaborate a bit more on your plans how big could it be for you and how easily is it to switch existing plants from to urea to DAF? And secondly, now that your refinancing is done, what will be the average cost of debt going forward?
I'll start by answering your question on behalf. A urea plant that is a modern plant built in 10, 15 years can produce a urea liquid, which then you mix with high quality water, demerized water, and then you have a product which is called the ES. The challenge is more for the older plants. And in our case, having the youngest fleet of plants in the industry. In the case of Egypt, these are, 10 to 15 years old older plants the process of producing DF took us less than 3 weeks of calibration.
The Iowa plant was planned from the beginning to have an element of DEF. What we have done is that we increased the capacity with less than a $1,000,000 of investments in pumps and other pieces of equipment, but in essence, this was just a capacity increase. So we produce more liquid urea than granular urea, for example, or other downstream products like UAN. So, this is for new plants. And this is why we could benefit, from the expansion in the DF capacity.
In the case of our Dutch facility, it requires a little bit more time, and that's why we are seeing it go into 2019. But not at a significant cost. It requires, some changes that are a bit more time consuming, but not that costly. So our plan is that we will have a significant part of the Iowa plant service. The busy Midwest trucking, demand.
And now we are seeing also agriculture tractors using, DEF in their tractors and Arlington. So the demand is growing in Europe and the North America by 20%. DEF for the first time, made its mark in China. And the 1st year, it only consumed like the equivalent of 100,000 tons urea. But as new trucks get rolled out and due to the scale in China, we expect China to be, a big contributor to the growth in DEF.
And our size of DEF in Iowa could reach a third of our total output in DEF. EF trades at a premium to Midwest urea, which again trades at a premium to the rest of the world and particularly in Nola urea. And the challenge in logistics in the U. S. Is increasing.
There is a bigger shortage on barges, on trucks, and all that. And we're very confident that the Midwest premium will continue to go to expand and go back to its
historical differences. And regarding your question on the cost of debt, it's true we are realizing some gains of 35.40 bps as we mentioned earlier in 2018, taking our weighted average cost of debt to be in the range of 5.5% to 6%. But our new debt facilities that we've introduced as part of the restructure allows us to capture further meaningful reductions in our cost of debt as our leverage begins to decline. So there is a built in ratchet that allows us to to capture to get further benefits 2019 onwards.
Okay. Thank you very much.
Thank you. Next question comes from the line of Karim Salaban. Your line is now open. Please ask your question.
Hi guys. My question is, given the U. S. Renewed sanctions on iran, I know
that there was additional capacity of some
end products of yours like methanol that were expected to come online from iran. Do you think that will impact pricing of methanol or any of your other end products?
I mean, on that. This is, early times. The biggest impact really is on plants under construction. There is under the U. S.
Sanctions, still something like 180 days. So shipments in place So definitely, Iran is a big player in the methanol export plant market as well as a big exporter of nitrogen. What we can say is that in the past sanctions have resulted in a couple of things. Number 1, a complete slowdown of any new capacity additions due to the effect of not receiving critical parts, etcetera. The second is that the operating rates of the existing plants dropped significantly.
So it was kind of a double whammy for in the past. So, definitely, it will have an impact short term will be small. There'll be more clarity probably in the next 180 days.
Great. Thank you.
Thank you. Next question comes from the line of Josh Herr. Your line is now open. Please ask your question.
Hi, thank you very much for the opportunity to ask the question. I have a very basic question I'm just trying to understand the gap in from volume growth of 25 percent to revenue growth of 57%. I think when I look at the benchmark pricing that you have, obviously, prices aren't up by almost 33%. On average across the mix. So I'm just trying to understand what else is in the revenue line that's giving you that growth beyond volume.
So you have higher realized prices this year. In many product segments, higher, methanol prices, higher month to month comparables of urea prices, even higher CN prices. So, a combination of volume growth as well as pricing growth and product mix. So as you get to sell products like def, which are higher price than a normal urea. So the that correlation becomes a bit skewed towards the expansion of cash revenue and margin.
Okay.
And to compliment not the response, the positioning of our plants as part of our investment thesis and the margin we're able to capture in our business through the commercial streamlining we mentioned a couple of calls ago. That's starting to come through our results as we now in a quarter like this, have beaten the delta in the benchmark crisis.
Okay. Thank you.
Thank you. Your next question comes from the line of Joe Myers. Your line is now open. Please ask your question.
Thanks for taking the question. Just in terms of questions about the overall market, can you just talk a little about, I mean, obviously, the the Chinese exports continue to basically drop, almost quarter on quarter month by month. And where do you think that levels out or what's your view of the sort of is the current level sustainable or do you think you can continue to have decreases there? And then finally, if you can just give a little bit of color, obviously, on the corn versus soy consumption and question that you see among, you know, the farmers and what's the sort of ratio that we should sort of or what are you thinking in terms of expectations in terms of that shift and how does that impact your business? Thanks.
On the first question, I think China will go to 0. I have no doubt about it. It just doesn't make sense to import expensive coal, leave the pollution in China, and then it's for the product that only achieves the following. You leave the pollution in China, and you leave Christophe trade partners who are complaining about the trade deficit and you make no margin. So, I don't see Chinese exports continuing.
And while DEF was only 100,000 tons, everything happens in China big and fast. The fact that they are very much focused on environmental constraints. And due to the fact that DEF affects cities more than CO2 emissions, because the NOx emissions are stay in each particular city. We think that, DF in China will grow extremely fast, and this is our own findings from China. And that can take any slack and any excess capacity in urea.
So we think urea sports are a thing of the past in the medium term. On your question about corn and soybeans, there are 2 issues related to that. One is the fear of Chinese sanctions, the products that have been put on the list could include a play a big role in that change. But in general, higher grain prices, will could result in an increased acreage to be planted with corn in the Midwest to the magnitude of creating an additional 1,000,000 or 2,000,000 tons of urea demand, and that's just in the U. S.
So, that is definitely a positive.
Okay. Thank you.
Thank you. Next question comes from the line of Reakin Patel. Your line is now open. Please ask your question.
Hi everyone. Good afternoon. Thanks for taking my questions. Just 2. Firstly, I saw, obviously, the can volumes were down slightly in Q1.
I assume that's obviously because of the, the colder weather, but I just wanted to get your view on the outlook for that market in Europe for the rest of the year. Maybe what you think about the nitrate premium, with respect to cans And secondly, just a follow-up on the question on Iran earlier, do you think that if these sanctions do come to fruition that there could be a potential positive impact for your North African business if the likes of, say, Turkey and some countries in Europe start to look away from Iran and move towards North Africa. I know it's hard to say, but just a few would be good.
So, on the European, there is kind of link to the global nitrogen market. I think market is, and it's following very similar patterns to urea. This year weather plays a big role. The other negative that we saw on the European market was higher gas prices, to, and that puts a cap on where CN prices can go down. What particularly what was very important was the lesson learned from our CN strategy last summer, where we only sold product 1 month forward.
And we were witnessing later in the year early next year. Some of our competitors delivering old commitments at in some cases, up to €30.40 cheaper than where we are, we're selling our products. So basically, it's a flawed strategy to sell to a trader or a stockist, that merely leaves the product in warehouses for 4 months And you tell him that early product, at a steep discount 4 months later as the demand starts picking up You have a competitor indicator that you just sold the product cheaper early on in July August. So part of the bigger problem of CIN is, is that a rush to sell a lot of products off season to stockists, we consider stockists and traders as non end customers and for shareentially competitors So that is the big overhand, on the CN. Your other question on, Iran and Turkey.
As I said before, it's early days, but definitely, Iran supplies a lot of product competing with North Patrick and product in Turkey. Should that situation change that will boost demand for North African product going into Turkey.
Great. Thank you.
Next question comes from the line of Christian Faitz.
Yes, thanks for taking a quick follow-up question. Could you talk about, talking about a different regional, the entire trainee dot situation and how that is affecting potentially your assets in Vermont? Thank you.
I think there's a massive market is quite tight So, the outages and all that are playing an important role but it's a it's really a demand story that is, helping the national market. You have to think that nothing was very sensitive to oil prices. We are seeing a lot of the methanol going in China ending up in cars, for example. So the higher the oil price the more demand for methanol as a fuel. The higher the oil price, the more competitive MTO plants are that are using methanol versus, using naphtha crackers.
So Methanol is primarily a two story. Has 2 sides to the story right now. 1 is the higher oil price and the other one, the tightness and the I mean, like a very strong demand.
Thank you. The next question comes from the line of Tom Rublesworth. Your line is now open, sir.
Thank you. Some follow-up questions, if I may. Corn Belt pricing, has been at a premium to the NOLA price certainly through the first quarter. Is that something that you've been able to lock in, for the second quarter? And, I mean, obviously, we're looking at 30s kind of trader prices.
I'm just interested to know if that situation is is gonna be alleviated or if you think that that premium will continue throughout the course of this year, and actually it will never catch up. So that's the first question. 2nd question, if I may, following on from, the questions around interest expense, I understand that you have kind of stepped down mechanisms in some of the new debt instruments that you've issued. Could you just elaborate kind of what that means? And, because in terms of as we see the cash generation pick up on the net debt fall, what will that actually do to, will there be just a mechanical drop in your interest costs, rather than you needing to reissue new instruments to capture your stronger balance
Okay. So, I'll start with the first program question on the Midwest premium. And I leave Hassan to walk you through the step down process and the flexibility in the financing. On the Midwest premium, the Midwest premium has a floor, which is the logistical cost of moving products from NOLA into barges and all that. But there is an added premium because of the difficulty in logistics at peak season, the availability of barges, the availability of trucks and double handling, which is becoming a big issue more and more.
I mean, a lot of other industries are starting to feel the pinch of increased logistics. So we always said that we think of the Iowa Fertilizer company as a hybrid between a manufacturing plant and a logistics center because we are located in a very attractive location in the middle of the biggest nitrogen demand as well as the biggest tracking demand in the Midwest. So, as we, we see actually the Midwest premium growing rather than, coming down. And that will continue even, in nominal terms, as far as the premium is concerned, We see a possibility that that is we'll see more of it in the second quarter than we saw in the first quarter. We're seeing that right now.
And in regard, yeah, and in regard to your question on the on the debt all our new bank facilities at the holding company level which have been issued in conjunction with the bond have basically a leverage based margin grid that's the sort of the grid that I mentioned earlier, which allows us to benefit from, the decrease that is naturally going to be happening, to our leverage metrics as the ramp up of our EBITDA and our, happens. And as we continue to hit our run rates, with our free cash flow conversion profile, which is quite unique. That means that deleveraging can occur very rapidly. And we can approach being an investment grade profile within, 2 years plus that could be could be in depending on pricing, of course. And this is fairly standard for these type of debt facilities.
And as you as you actually mentioned, this allows us to save on having to reissue future debt to capture that deleveraging benefits.
So we get actually 2 benefits. 1 is a step down in interest expense. On the revolver as well as the OCIP, term loan B. But you also get a reduction in absolute that's because the revolver is very flexible, and sizable. So as we de lever we pay, we don't need to issue that.
It's just an on demand facility.
So in terms of quantifying that, if I may, so in 2 years, if you were investment grade, would your interest expense be, do you think that could be what 20% lower than it is today or is it, or would it be more like, you know, 40%?
A lot of metrics including interest rate and all that. I think, we'll give you the, the basis of our loans. And you do the math based on your expectations of where interest rates are going to be in 2 years.
Okay.
All right. The next question comes from the line of Rob Fong. Your line is now open. Please ask your question.
Hey, thanks. One quick admin question first off. The in your disclosure, when in the segmental reporting you give revenues and you give a net profit line, but I think what would be really helpful to investors, especially at some of that side, would be getting EBITDA by division just because, obviously, that's the way that the deal was presented. We kind of had the the breakdown and that will be really helpful in the reporting going forward. Is that something that you think you can do in future reports?
We'll look into it. I appreciate the appreciate the comments, and we'll look into what we can do in terms of our disclosure. There's quite a bit of data already available on the various opcos based on existing debts but we can look into that.
Got it. Thank you. That's really helpful. And obviously at the time of that deal, you were talking about Q1 and saying had strong expectations. What, is there any short term guidance you're willing to give on Q2 in terms of volume increases year on year or anything along those lines?
No, I think we made a statement that we expect overall in the year that our guidance didn't change. What we can say is that, the, we look at year on year performance in terms of plant reliability and in terms of the trends and prices, I would say that on those, both metrics are, supportive of our statement that we're not changing our guidance.
Okay.
Thank you.
Thank you. The next question comes from the line of Fanaan Kieran. Your line is now open. Please ask your question.
Hi. You mentioned that investment grade is a possibility the next 2 years or so. Is it a target on its own right or you would be just happy to have a investment grade profile?
Can you repeat the question? The line wasn't very clear.
You mentioned that you would get back, in 2 years time, you could potentially get to investment grade profile, so your metrics would be good enough. But is it a target on phone rights? Like if, the right acquisition came along, or you wanted to, you know, dividend out a certain amount of, the cash generation. Is it a strong target for you to become investment grade?
Yes, it is.
Okay. And then you mentioned that the average selling prices were higher in Q1 for most of your products. Are you able to quantify what was the average selling price increase? Year over year in Q1 twenty eighteen?
No, but we can tell you that the key products, have had increases in pricing and, magnitudes of $30, $40 on urea. You're talking about a significantly higher number, on methanol. Miller mine is up 5% but it's a whole list of products. I would say that across all products, we were seeing improvements year on year.
Okay. And then you also mentioned that Natgasoline is, about to start. It's a commercial production when do you think you would ramp up fully, this site?
I mean, we have introduced gas to the formers, it's mechanically complete to introduce gas into the reformer. So the process started, towards production, as with any new plant, very difficult to predict. But so far, the pre commissioning, the commissioning and the start up, is going very smooth. So, I wouldn't put an exact time on it, but sometime, in the summer, we think will be in good shape to have steady operations.
Okay. And if the methanol prices where where they are today, what sort of a EBITDA potential this operation has. I think during the roadshow, we were given maybe 300 to 400 kind of a range. Obviously, it's a bit of a range, but given the methanol prices, stay where they are, what's the
That range would be a good description.
Okay. And the are just, the turnarounds in that you expect to have in sulphur at the end of the year. Is that a major turnaround? Do you expect to have a big impact in terms of contributions to EBITDA?
No, the surfer turnaround is not necessarily going to happen. This year might be pushed further down to next year. And it's not a huge it's not a multi month stoppage. It's 2 to 3 weeks. So it's not like a major disruption.
Okay. And I'm guessing the ebic turnaround that happened already. That was also a small one.
Yep.
Okay. And just just to, you know, comment on what Rob just said on the breakdown of EBITDA by operations that will be helpful for all of us investors.
No. We look on this, but we, we look into it.
Okay. Thank you very much.
The next question comes from the line of Harry Dirumalai. Your line is now open. Please ask your question.
Hi, thanks for taking my question. I have 2, please. You mentioned that Natgasoline's production could commence any time in the summer, assuming you have about 5 to 6 months of clean run rate of production this year. Do you expect recapitalization of the Natgasoline balance sheet to happen this year, or do you think that's something that you would consider 2019? That's the first question.
And the second question, you said that the insurance for the sofa claim has been settled at $20,000,000. Is that the final amount that we can expect or is there anything incremental that we can expect during the course of this year?
First, I'll answer your first question. You probably misunderstood. We plan to hopefully start producing methanol in the coming 2 to 3 weeks. We said that normalized production should happen this summer. Depending on that, we will see where we are and where the credit markets are, and make a decision around the summer.
About the financial structure of Natgasoline. On the other on the
insurance, yeah, this the the, the number then reflected in Q1 that's a down payment or a prepayment on the insurance amount And we have not yet disclosed the full outcome of that insurance claim that continues to progress. But this is a partial payment.
Thank you, Harry. And there's no further question at this time. Please continue, sir.
Okay. Thank you everybody for joining us for this call and looking forward to our next call. Thank you.
Thank you. And that does conclude your conference for today. Thank you all for participating. You may all disconnect. Have a good day, everyone.