Gulf News - ADNOC’s churning out a real winner in Fertiglobe

ADNOC has its ways when it comes to creating milestones. After ADNOC Drilling’s groundbreaking IPO, the joint venture between ADNOC and Netherlands’ OCI - Fertiglobe - started trading on ADX in October last. It thus became the first free zone company to be traded on an onshore stock exchange in the UAE.

It raised about $795 million during its IPO last year amid strong demand from regional and international investors. Fertiglobe has a market cap of Dh 41.59 billion, and because of higher demand for its products, it reported an increase in profit of more than eightfold in the fourth quarter. As a leading export-oriented nitrogen fertilizer supplier, Fertiglobe has a combined production capacity of 6.5 million tons of urea and merchant ammonia.

Inflation-indexed

One of the key components of manufacturing nitrogen fertilizer is natural gas, prices of which are skyrocketing. The long-term contracts of Fertiglobe secure a supply of natural gas at favorable prices because they are indexed to inflation rather than driven by market forces. In January, the company announced a collaborative development agreement with Abu Dhabi's Masdar and France's Engie to build a green hydrogen plant in the UAE to produce ammonia. The three companies will work on developing, designing, financing, procuring, constructing, operating, and maintaining a green hydrogen plant in Al Ruwais that is globally competitive.

Handsome dividend payout

The project aims to accelerate Fertiglobe's decarbonization roadmap, strengthening its position as a globally leading producer of green ammonia. Fertiglobe delivered a solid set of results in the fourth quarter of 2021, further underpinning its growth potential. Net profit came to $702.7 million in 2021 compared to $74.3 million in 2020. According to a recent bourse filing, revenues were $3.31 billion last year, up from $1.55 billion. The free cash flow increased in 2021 by 162 per cent to $1.18 billion.

Second-half 2021 dividends were $340 million, which are payable this month, and above the guidance of at least $240 million communicated in November 2021. Its cashflow performance supports Fertiglobe’s potential for attractive future dividends. In addition, by the end of Q1 2022, Fertiglobe is expected to be approximately net debt-free, supporting more growth opportunities.

The rise in ammonia and urea prices in the second-half of 2021, specifically in Q4-2021, indicates the continuing structural shift towards a demand-driven market for nitrogen products. Fertiglobe's strategic asset base will benefit from a healthy demand backdrop amid supply constraints in key exporting regions. Producers in other regions, meanwhile, suffer from high feedstock prices. The success of Fertiglobe emphasizes ADNOC's prominent role in supporting diversification of the UAE economy and strengthening Abu Dhabi’s increasingly vibrant capital market.