Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's OCI N. V. Third Quarter twenty seventeen Trading Update 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. I must advise you that this conference is being recorded today, Tuesday, November 2017. I would now like to hand the conference over to your speaker today, Hans Zaid. Please go ahead.
Yes. Thank you, and good afternoon, and good morning to our audience in The U. S. Thank you for joining us on the OCI N. V.
Third Quarter twenty seventeen Trading Update Conference Call. With me today are Nasr Sawiris, our Chief Executive Officer and Hassan Badrawi, our Group Chief Financial Officer. This morning, OCIMV reported its third quarter twenty seventeen trading update. Please also note that our subsidiary, OCI Partners, reported its third quarter results on the November 6, and you can find these details the details of these results on their website. On this call, we will first review OCI's key
This number is temporarily out of order. We're sorry for any inconvenience. This number is temporarily out of order. We're sorry for any inconvenience. You may continue with your conference.
Apologies for the technical issues.
Yes. Thank you and our apologies for the disturbance dropped. So as I was saying, we will first review OCI's key operational events and financial highlights for the quarter, followed by a discussion of the current market environment and outlook. At the end of the call, we will also 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 would like to refer you to the disclaimers about forward looking statements in today's press release. Now let me introduce our Group Chief Financial Officer, Hassan Badraoui.
Thank you, Hans, and thank you all for joining us. As Hans indicated, we posted this morning our trading update for the third quarter, which provides information on volume developments, which we categorized by product group. We also give some directional indicators for some of our key financial metrics, which I'll briefly cover. Let me first start by highlighting some notable milestones this quarter. Firstly, we have successfully ramped up our state of the art fertilizer facility in Iowa, Ithklo, to exceed design capacity during September.
We hope to demonstrate further positive performance in the ensuing quarters as we have achieved higher operational stability. As mentioned in our previous calls, this complex plant with a diversified product base and capability to optimize the product mix on a daily basis has increased OCI's global production capacity footprint by 30%. Secondly, our Ibic ammonia plant in Egypt has ramped up utilization running at north of 90% after regaining access to our export jetty and resuming exports in July 2017. We expect that we will be able to achieve our 100% capacity utilization run rate after a planned turnaround in 2018. The combined impact of IFCo's ramp up and the resumption of our ammonia production in Egypt has helped drive our sales volumes up 29% to a record 2,000,000 tons during the third quarter.
This is, of course, despite a continued shutdown for maintenance and repair work on one of the ammonia production lines in Algeria, which is on track to restart in December. Overall, this represents the 19 increase in sales volumes over the second quarter of twenty seventeen. Now drilling down to our operational groups, starting with the fertilizer segment. Let me give you some highlights specific to that segment as well. Our group ammonia volumes increased by 8% in the third quarter compared to the third quarter last year, boosted by the ramp up in Iowa and Egypt, but offset, as I indicated earlier, by the continued shutdown of one of the ammonia lines and so forth.
We expect the line, as I said earlier, to restart in December. This shutdown should be covered by insurance for business interruption and will be appropriately reflected in the in our financial statements in due course. Urea volumes have increased also 53% in the February, mainly capturing growth and outputs out of Egypt and Algeria. This is this compares to what was a low quarter As you may you may recall, during the February, we also had some outages in sulfuric urea for for what was a planned maintenance.
Also last year, EFC Egypt was still affected by some natural gas curtailments and was at the time running at about 80% utilization rates as you can see from our presentations recent presentations in various investor conferences and recent conference calls, we highlight that these natural gas issues have been resolved due to the major gas fines by the likes of NE and BP that are now flooding the system. It's worth noting that EFC also had the planned maintenance turnaround in July and August of this year, which we believe was due to time to coincide with seasonality. Since that turnaround, EFCS has been running at a 100% utilization. But for that, for the third quarter on average, it was just below 90%, reflecting that turnaround. In terms of our nitrate business, we've seen and witnessed an increase of 39% during the third quarter compared to the same quarter last year.
These volumes were boosted by, again, the ramp up of UAN volumes from EFCO and were supported by what by as was our steady CEN business in Europe. Looking now at the industrial chemicals business, which includes our methanol and melamine, both segments have performed well during the quarter. Our methanol volumes have improved 11, up 11% due to healthy capacity utilization, OCI Beaumont in The US and and strong increase in sales volumes of Bio MCN in The Netherlands. Following repairs to the metal on units in May 2017, OCI Beaumont has been running consistently at rates above nameplate capacity, except for a few days of shutdown during the recent storms in Texas as an average of higher levels than before the shutdown was took place in the second quarter. Melamed sales volumes in the third quarter were the same level as last year.
Now briefly some comments on our on the financial performance. As I mentioned earlier, this is a trading statement, does not include detailed financials. So my comments will be fairly limited to some directional indications on revenue, EBITDA and net debt. Our consolidated third quarter twenty seventeen revenue was higher than the same period last year, driven by record production and sales volumes and notably higher prices for our industrial chemical segment. Please note that from an accounting perspective, and it's mentioned in the press release as well, Ivkoe's assets were not yet placed into service during the third quarter as the upstream ammonia plant did not had not reached design capacity until September.
As a result, revenue recognition revenue recognition and depreciation had not started in the third quarter, but we currently expect that this will take place from the fourth quarter of twenty seventeen and onwards. Both reported and adjusted EBITDA were also higher than the same period last year despite higher natural gas costs in Europe this year. Just a comment on net debt. Our net debt was just over $4,400,000,000 as of thirty September twenty seventeen. This is a slight increase compared to net debt of midyear, reflecting 3.5% increase in the euro dollar exchange rates, which resulted in a $50,000,000 increase in euro based debt.
It is worth noting that the gross debt decreased by 1%, hovering at $4,700,000,000 Also worth noting that around $730,000,000 of our consolidated net debt is in Algerian dinar, which is affecting our debt at Sofent. And we we comment, so we'd like to know that we've seen some currency movement there with the Algeria and Binar devaluing by about 6% since June. Obviously, any further movements or any further devaluation would have a positive impact on our dollar interpretation dollar translation at a consolidated level. We remain very focused on deleveraging, supported by a significant step up in our capacity and focused on managing our CapEx going forward in an intelligent way. We're also going to be one of our areas of strategic focus going forward, we'll also be looking at reducing our overall cost of debt throughout the system opportunistically as our free cash flow is beginning to reflect what we believe should be closer to 180 in 2018.
I'd like to introduce now Nortif, who will provide some insights further insights on our relevant markets and some additional comments on overall business strategy. Thank you, Hassan. First of all, I'd like to start by saying that we are quite pleased with the performance of the Iowa fertilizer plant, which contributed to our record volumes during the third quarter. The ammonia plant has exceeded nameplate capacity during the month of September and has achieved levels close to 110% since then. The downstream units, UAN and DAF, have also exceeded design capacity by even higher rates.
And, the plant is designed to so that we can switch between multiple products at short notice and opportunistically increase our increase and maximize our netbacks. The addition of this facility gives us a strategic foothold in The US Midwest market close to our end customers, diversifies our production footprint, and increases our production capabilities by 30%. Iowa is also one of the most efficient plants globally, and its KPIs are already demonstrating very low gas consumption of gas per ton produced. With the ramp up of our production in Iowa and in Egypt and the expected restart of Algeria in December, We expect all our consolidated plants to operate at run rate capacity in 2018. We also expect to ramp up our methanol capacity over the coming twelve months.
Recommissioning activities are underway for Natgasoline, a 1,800,000 metric ton methanol facility in Texas, and initial commissioning of major subsystems has already started. We expect first production in March 2018. And we are progressing well with the methanol capacity expansion of Bio MCN in The Netherlands by taking the second line out of the mothballs we are expecting to commission the project in the fourth quarter next year. Including OCI's proportionate share in Natgasoline, the expansion of BioEmce and OCI Beaumont, our methanol group's capacity will reach 2,800,000 metric tons by end of twenty eighteen compared to 1,400,000 tons currently. As you can see, our portfolio is becoming also increasingly diversified and capable of weathering tough conditions, which brings me to the next topic, performance of our end markets.
Tonight, PGM markets have once again gone through a period of extreme volatility. We believe that part of these price swings can be explained by the way the industry is structured. Therefore, during the third quarter, we have reassessed our global sales and marketing efforts and have taken a number of measures. Most importantly, we have taken a group wide strategic decision 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 prices and the results serve our customers better.
Fertilizer markets have turned markedly more positive since our last conference call in September and despite some recent corrections. At the time, urea prices have partially recovered, but the biggest increase were late in the quarter. By the September, prices have increased by almost $100 per metric ton since the lows witnessed in June reaching a level of around $300 per ton then. The price increases have been driven by a combination of healthy demand, in particular from India, Latin America and Russian domestic demand, low global inventories and continued low level of exports from China. In the medium term, we continue to expect that the supply demand balance is trending positively as we also show in our analysis in our investor presentations.
On the supply side, there are now only few capacities starting up, and we expect Chinese exports to continue operating at these low levels and not to increase beyond 3,000,000 to 4,000,000 ton exports this year and trending downwards thereafter. Operating rates in China have been below what some analysts consider design capacity. However, we strongly debate the, those actual capacities compared to what the plant have ever produced. So some of these design capacities are, strictly nominal capacities that have have never been achieved in by the Chinese plants. The Chinese industry is behaving significantly more responsible, focused on cash flow generation and limiting environmental pollution.
The restrictions that are applied in that regard have started to bear fruit. The industry is now operating at levels that are slightly achieving positive cash flows. And currently, the domestic market prices are higher than export prices, making another reason for Chinese producers to export less. The outlook for urea demand continues to be healthy with a lot of good pockets of increased demand in emerging markets and the industrial use of urea in The US for DEF. Despite the recent cancellation of a tender in India and the delayed award of an India of an tender in Ethiopia, those significant two demand pockets remain there, and nearly the demand has been shifted back and will increase the pent up demand and positively going into the beginning of next year.
Brazil is on track to reach a record of almost 5,000,000 tons of imports in 2017, which would be a 25% increase over 2016. Demand is also helping other countries in Latin America, in Southeast Asia, and in East Africa. In Russia, planted acreage and exports of nitrogen intensive agricultural products in particular wheat is also increasing to record levels. Ammonia prices have been lagging urea throughout the third quarter and were down significantly both compared to the third quarter last year and to second quarter this year. We reached historical drops in August at levels where most producers were in the red, but sentiment in the the ammonia market has become more positive in the past few weeks and prices have started to move up, but still well below economic levels for many producers.
The increases in the ammonia price are a result of the rebound in downstream products as well as higher gas prices in Europe. On the industrial chemical side, our methanol business is benefiting from significantly higher prices, up 40% during the third quarter compared to a year ago. The outlook for the methanol market remains robust with strong demand growth in US and Asia, coupled with relatively limited new capacity addition, ensuring a healthy balance. Both traditional demand and methanol to olefin demand in China are very strong. Operating rates in the MTO sector have been increasing, and we expect the start up of three new MTO units in the next twelve months to further contribute to a higher run rate of demand.
Traditional demand for methanol in U. S. Has also increased and expected to remain strong in the near term as markets are buoyed by increased demand for downstream products for the building materials sector. We expect to benefit from this market environment through our existing operations in The U. S.
And Netherlands as well our two growth projects. MELA mine prices have contributed well so far this year and are continued to be on an upward path for the coming quarter and going into 2018, increasing for the second year in a row. European contract selling prices have gone up every quarter this year. The current quarterly European contract price is EUR 185 higher or 13% higher than at the end of twenty sixteen. Today, we announced a further price increase of EUR 60 per ton, which will be effective from the beginning of twenty eighteen.
This business continues to be a healthy source of diversification for OCI's operations. Before we open line for questions, I would like to highlight a few points. Firstly, would like to say that our centralized global commercial team has done an excellent job during difficult market conditions, and their efforts were centered to achieving record volumes this quarter. Looking ahead, we expect our volume driven growth to continue. We expect the full contribution from Iowa from the fourth quarter this year, better utilization of our assets going forward, in particular at Ebix, and the return of sulfur to normalized run rate starting from December.
In 2018, we'll be ramping up our additional methanol capacity. We believe we are well positioned to benefit from the upside in the fertilizer selling prices. We are our locations are closer to our customers in Northern Europe and in the Midwest in The United States, which should ensure higher netbacks compared to our peers. Our plants offer product arbitrage among multiple downstream products, which gives us the opportunity to maximize netbacks at various times. We do have an efficient global integrated distribution platform that relies on our products as well as on outsourced trading opportunities.
Based on all our plans ramping up to run rate going forward, any increase in selling price will flow to the bottom line. We estimate that the $20 per ton change across all our products will have an impact of approximately $100,000,000 of EBITDA. Thank you, and we're now open for questions.
Thank you, ladies and gentlemen. We will now begin the question and answer session. The first question comes from the line of Tom Wigglesworth. Please ask your question.
Good afternoon, gentlemen. Thank you very much for your presentations. Three questions, if I may. The first is, could you just give a little bit more detail as to what you mean by a full quarter of impact from the IFCo facility? Is that 80%, 85% utilization rate across all products, is that what we should be thinking there?
And secondly, it's hard for us to see, but could you identify to us what the UAN price inland in the Midwest is today? And the third question is they according to ICIS, there's been a number of reports about a potential outage in your Galeen facility. Could you just clarify what's happening there and any financial impact, if there is any? Thank you very much.
Okay. I'll start to comment on your first question. Full quarter, when you see some reports saying that UAN in September was, like, 65%, it doesn't mean that the plant in September were not operating, but we are balancing multiple downstream products and all that. So a full quarter, by definition, could be, higher than 85%. I mean, we aspire for higher than 80% because, 85% because the plant on a on a regular day can produce above a 100%.
So even if you have 10% of outages, you can end up the quarter at close to a 100%. But I won't speculate on what happens. We still have another six weeks to go, and I don't wanna jinx the production. But as we speak, the production is, as I mentioned before, on on a good day, can be more than a 110% of all, ammonia and downstream products. But this plant can produce more than its actual capacity in downstream product, and we can actually, purchase and have purchased occasionally ammonia to, manufacture it into downstream products and produce even higher cash flow as a result of going downstream with purchased ammonia on top of our ammonia that we manufacture currently at a rate of a 110% of the nameplate.
On the UAN price in the Midwest, it reflects a reasonable premium over the published NOLA price. I'm not sure exactly what it is right now, but last time I checked, it was over a $170 in the Midwest and a bit lower, obviously, on the NOLA price. Concerning the Hainan outage, the outage was in one of our ammonia plants, and it shouldn't affect dramatically the results because at $6 gas, we are producing ammonia at around 200, and we purchased ammonia in the market at slightly higher than what the production cost is. And in a way, we're not gonna shed any tears when we when ammonia is not in full production in Europe with with gas in right now at $6, and the market for ammonia being at such ridiculously low price levels. So the downstream production continues, and that's where where most of the margin is captured when ammonia prices are this low.
So Okay. Hope that was the answer on Killeen. It's one of the two ammonia lines which produces about 40,000 tons a month. And I think all in all, that plant will be out for four to six weeks and should be back in production within two weeks.
So you you can meet all your downstream commitments in in Galen? Okay.
And and, actually, I think we we are benefiting this year from the start of our strategy of not selling more than sixty days thirty to sixty days forward of any commodity that we produce or any product that we produce. This strategy serves our own stakeholders' right. Even the customers in 02/2008, when they bought urea for a thousand dollars, they had to pay a to suffer when urea prices went down during the application season by more than 60%. So it can go both ways, but we do not believe that selling to traders and stockists in the low part of the season so that they become our competitors when demand arises is a smart thing to do. We are happy that some traders have lost money and decided that they will not follow this policy in the coming months because the arbitrage between the paper market and the physical market is highly manipulated in this industry.
The the paper market is so thinly traded that with one or two barges in New Orleans in the paper market, you create a fictitious price for a $600,000 purchase of a barge that benefits trading companies that can do something and import from Gulf producers at a formula that is linked to a very thinly traded one barge of a thousand $500 price in NOLA, and yet the producers in the Arab Gulf lose a lot of money when they export to these traders at a formula price that they can manipulate with movement in the NOLA thinly traded paper or spot market. So we are starting to put starting by ourselves, putting some discipline to make sure that full transparency and selling to customers and users and not speculators.
Okay. Understood. Thank you very much.
The next question comes from the line of Christian Faitz. Please ask your question.
Yes. Good afternoon, gentlemen. Three questions, if I may. First of all, the net gasoline ramp by March, when do you expect the plant to be fully ramped? Second of all, can you share with us some insights into the most recent tender in India?
What are your thoughts on that? And then can you also share with us the timing of the mentioned EBIT plant turnaround? Thank you.
So first of all, your first question, so pre commissioning has started. We expect to start production, in March. Obviously, during the decommissioning, that is the plan. But during commissioning, you could have a few hiccups that could make that date slip. So these are provisional dates, but construction is, above 90 some percent complete.
And that last 10% is mostly pre commissioning and commissioning and minor installation works remaining. So, obviously, the hurricane in Texas had a fall on the schedule. We we lost close to four to six weeks until we reached back full construction manpower on-site. So but we are fairly confident that the March date should be close to where we start producing methanol at a good company. Methanol plants are a much simpler process than fertilizer plant.
You can think of it as one third of Iowa fertilizer company in terms of the size of the mechanical equipment there. Your question on the Indian tender, we have taken the decision not to participate in the Indian tenders for the last three years. A lot of times, the rationale for canceling a tender has put some sellers into difficult situations because they keep products for the tender, then the tender gets canceled. So I think long term, I'm not sure that this will serve the buyers right by adopting these strategies. However, we are not participate we didn't participate in any Indian tender in the last three years and do not intend to do so in the foreseeable future.
On Ebix, the turnaround, will probably be done, in the, in the summer. And in general, we try to for 2018, we are trying to focus most of our maintenance activities in the summer.
Thank you very much.
Next question comes from the line of Frank Please ask your question.
Afternoon. Frank Glassman, Degroof Petercam. A question on Swarford. What exactly caused the disruption? And when do you expect the insurance payments to come in?
Do you still expect them to come in at 2017? And secondly, looking at your balance sheet, while net debt is still moving up, there's a convertible coming up for refinancing. Could you just say anything about your how you're looking at your balance sheet currently and what are your refinancing opportunities? Thank you.
So the one piece of equipment that should not fail have failed, and hence, the the business interruption insurance claim, which has been filed. The tie the exact timing of the payment, whether it happens in the coming few weeks or there is a partial payment in the coming few weeks, is not And as soon as that happens, probably you will hear more about it in the with the year end results. But the claim has been filed, and it's a standard business interruption claim for a piece of equipment that should not update. Sorry.
What was the other part of your question?
Yeah. That's more on your balance sheet.
You're not
The balance the balance sheet, obviously, to just to simplify matters, the third quarter, we we had witnessed urea prices close to $200 and ammonia prices not far from that level also. These are prices that very few producers would generate cash flow. We did generate cash flow, but we still continue to dribble on our previous commitments on CapEx plans. But terms of deleveraging at current pricing and with our current footprint, we expect deleveraging to have started in the fourth quarter and to continue to to accelerate in 2018. And to give you an idea, if prices move up by $60 or $70 across across all our products, we would be at below two times net debt to EBITDA within a few quarters of operating at these levels, which still would be lower than mid cycle.
Okay. Thank you very much.
The next question comes from the line of Tom Wrigglesworth. Please ask your question.
Thanks, everybody. Sorry, doesn't seem to be much for queue. I thought I'd come back with a few more that I've got on my list. Firstly, you mentioned that Brazil demand had been very strong in the nitrogen market in the year to date. Is it reasonable to assume that this has been a step up in Brazilian demand and we could we should look at these high level of imports from Brazil going forwards?
And what gives you confidence in your view? And secondly, Hassan, you talked about potentially lowering the your average cost of debt. Could you give us some kind of sensitivity as to how quick how much of the debt could be quickly addressed? I and I mean, what whatever quickly is maybe over the next twelve months, assuming, you know, cash flow generation and deleveraging occurs? Thank you.
On on I think there is a the strong demand is probably here to stay and to grow further. The ag sector is one of the few bright spots in the Brazilian economy. The operators there and the exporters and the soybean crushing, ethanol, all the activities in the Brazilian ag sector have been spared of a lot of the the problems that the Brazilian economic economic and political situation have suffered. So given the fact that there is no capacity either planned or forthcoming soon in Brazil and they're not natural gas strong natural gas producer, you can for forecast that in the next five years, there's the demand can only an imports can only go one way because there is no domestic supply appearing in the horizon. And the the fundamentals for Brazilian agriculture continue to be strong with the huge, untapped area of the land and, redundant water supplies.
So that is for Brazil. The cost of that, we we obviously are at the last part of our CapEx program, which with most of the CapEx, with the exception of Bio MCN fully funded, for now. So it is normal that as the, cash flow starts to improve, that all our ratios are improving. And we are already in advanced discussions about several of the pockets of refinancing. And it's just about the cost of funding, the allocation of debt, and the currency, of the debt and the most efficient from a tax perspective as well.
So it's a whole re revamp of our various debt and with one theme that the number one target is to lower the cost of debt. And I think that within six months, you will see the first signs of that effort bearing fruit.
Okay. Thank you very much.
The next question comes from the line of Rohan Shah. Please ask your question.
Yes. Hi. Good afternoon. This is Hartmann from Deutsche Bank, Massifan. I just want to know if you are looking to refinance, actually, your your your debt next year And what actually your target assumption in terms of net debt to EBITDA?
It's perhaps a question for Hassan. And the second thing on Algeria, correct me if I'm wrong, but since you have been running this plant, actually, there were some couple of shutdowns. So I just wanted to understand if there are some specific technical issues on this plant and what can explain the different shutdowns that we had in in Algeria?
So I'll start by answering the Algerian. So the the shutdown right now is in a different plant. We have two plants in in Algeria, two ammonia plants and one urea plant. There has been a shutdown in one ammonia plant in one area. It was unfortunate that there was a the spare part was a long lead item.
It's a million euro waste heat boiler, but it took a long time to get that piece of equipment into. The the other plant, the material a failure of a piece of equipment that shouldn't have happened and and hence the claim from the insurance. But in general, the plans are state of the art plans. They are performing on the normal matrix, and we do not expect and we did have issues of spare parts availability. Those spare parts availability, unfortunately, a bit late by the time we follow the procedures of imports of the spare parts.
But we're looking that that situation is in a much better situation now by the end of 'eighteen with most of the spare parts being on-site that we are very optimistic about 2018 being a good production year in Nigeria. On the net debt to EBITDA, the the key question is at what price level the commodity is. And we think that today, if we are at mid cycle prices, our net debt to EBITDA would have been two times net debt to EBITDA today with our current capacity. So, you have to find a reasonable balance in a cyclical industry of where you wanna be where you wanna be on leverage, at at trough price. And I think at trough pricing, being into in in the three to four times net debt to EBITDA and and and then have the price to be deleveraging occasionally.
But this is a level I think that is acceptable for us. And our stated target of reaching investment grade is still a is still a target. It might not happen as fast as we can. But as I mentioned before, if prices recover as we expect them to do sometime in '18, your ratios will recover as a function of rising EBITDA.
Thank you very much.
There are no further questions at the moment. The next question comes from the line of Daniel Ching. Please ask your question.
Hi, guys. I was just wondering about the methanol assets in the context of your portfolio. Is there any strategic potential to spin off those assets next year? Or how do you guys think about those assets in general?
Currently, we are focused on the key initiatives of the capacity ramp up in methanol. We like the methanol space. This is a product where demand has grown between six point five percent and seven percent consistently for the last ten years. It serves well within the portfolio to balance. Having multiple products serves well in terms of balancing our cash flows.
So just like melamine, which has been doing fantastically well in the last two years, Methanol has served at times when during the summer methanol prices were going up, while urea and ammonia prices were coming down. So it serves a good purpose as part of our portfolio. We don't comment and will not comment on M and A or too much strategy in terms of doing strategic views on M and A or or assets. Our our short term priority right now is the significant ramp up, of the methanol capacity, which I think will be, behind us within six to nine months.
Got it. And then just as a follow-up to that question, can you talk a little bit about the refinancing at the OCI Beaumont plant and what kind of the structure of that refinancing might look like on the term loan?
We will not go into specifics about one of the subsidiaries refinancing. We're looking more and more at on a holistic view that is a multiple asset refinancing, including our corporate cash. The the only thing to report is that as our CapEx plan is now providing visibility of where the cash flows are gonna go, we are in a much in a very good well well positioned to refinance and extend maturities. And the priority again is cost reduction on our interest. Last year, we had close to two this year, we will have close to $270,000,000 of interest expense.
That is way too high, and we think that there is lots of opportunity to optimize that.
Perfect. Congratulations on the update.
Thank you.
There are no further questions at this time. If you wish to ask a question, please press star one and wait for your name to be announced.
Okay. Thank you everybody for joining us and looking forward to our next call.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.