OCI N : Q2 2022 Results Report

Q2 2022 Results Report

Amsterdam, The Netherlands / 2 August 2022

OCI N.V. Reports Second Quarter 2022 Adjusted Net Income of $528 Million, Adjusted EBITDA of $1,290 Million

Highlights:

Financial and Outlook

• Q2 2022 revenues increased 95% to $2.9 billion and adjusted EBITDA increased 141% to $1.3 billion compared to the same period a year ago
• Q2 2022 adjusted net income increased 322% to $528 million versus $125 million in Q2 2021
• H1 2022 revenues were $5.2 billion, adjusted EBITDA $2.3 billion and adjusted net income $882 million
• OCI generated free cash flow of $928 million during Q2 2022 and $1.5 billion during H1 2022
• Net debt declined by $553 million during Q2 to $708 million as of 30 June 2022 after cash distributions to OCI and Fertiglobe shareholders (combined $490 million), or net leverage of 0.2x based on an LTM EBITDA of $3.8 billion
• OCI distributed cash to shareholders of €1.45 / share ($320 million) in June and proposes €3.55 / share (c.$765 million) to be paid in October, bringing the total cash return to shareholders in 2022 to €5.0 / share (c.$1.1 billion)
• Favourable farm economics and low global grain stocks, combined with high gas prices in Europe, provide support for nitrogen selling prices to remain above historical averages

Corporate Updates

• OCI has locked in c.50% of its US gas requirement for the 2023 - 2029 period at a WAP of $4.3 / mmBtu, giving - together with Fertiglobe's gas supply contracts - visibility on more than 90% of OCI's long-term gas requirement

Ahmed El-Hoshy, CEO of OCI N.V. commented:

"We are pleased with these financial results that have enabled us to accelerate our shareholder cash returns to almost $1.1 billion this year, while also substantially reducing gross debt and further lowering leverage to well within our investment grade financial policy parameters. This also positions us favorably to selectively pursue value-creative growth opportunities including organic expansions below replacement cost.

The outlook for the fundamentals of our nitrogen end markets continues to be underpinned by tight supply, healthy farm economics and decades low grain stocks globally that incentivize the use of nitrogen fertilizers. Forward curves imply that natural gas prices in Europe will remain at elevated levels through at least 2023, setting ammonia, urea and nitrates breakeven pricing well above historical averages.

Many European producers cannot recover cash costs due to high gas prices, especially those that cannot import ammonia. We benefit from our leading position in global ammonia markets and our flexibility to replace locally produced ammonia with imported ammonia shipped from our operations in North Africa and the US through our Rotterdam terminal.

We are now running our ammonia production platform in Europe at c.40% of capacity because of the high gas prices, but are able to operate our downstream production profitably with support from our imported ammonia. As a result, we remain able to satisfy the demand of our agricultural and industrial customers in Europe.

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Q2 2022 Results Report

With the reduced ammonia production in Europe and as our methanol facility in the Netherlands remains shut due to the high gas prices, our European operations accounted for only 9% of our global natural gas consumption, but the nitrogen business in Europe represented c.24% of our total revenues during H1 2022. Our overall European business also benefits from the sale of excess EUAs, including $88 million recorded during the second quarter as part of adjusted EBITDA.

We continue to strengthen our competitive position in Europe: earlier this year we increased throughput capacity of our ammonia import terminal in Rotterdam to c.400,000 tons and are on track to expand to 1.2 million tons during 2023. We can leverage this unique supply chain in the future by importing low and no carbon hydrogen in the form of ammonia and methanol, which can help decarbonize the EU and reduce its reliance on imported natural gas.

In addition, with the prospect of increasing LNG exports from the US in coming years, we have hedged c.50% of our gas requirements in the US for the period 2023 - 2029 at a weighted average of $4.3 / mmBtu. For the period August - December 2022 we are hedged c.60% at a weighted average price of c.$5.3 / mmBtu, which compares to the Henry Hub US benchmark of on average $8.1 / mmBtu in Q2 2022.

As a result, we now have price visibility on more than 90% of our global natural gas requirements as a result of favourable gas supply agreements at Fertiglobe and the hedge position in the United States. With less than 10% of our natural gas supply exposed to market fluctuations in Europe, we have further enhanced our cost resiliency.

Separately, we are pleased that OCI was included in the MSCI World Index and STOXX 600 Index, some of the world's leading global equity indices, in June 2022.

Finally, we aim to help address potential grain shortfalls and food security concerns by focusing on operational excellence and producing as much product as possible to fill supply gaps that may arise. I would like to thank the whole team for their efforts to make this happen and their focus on safety. We look forward to continuing to create value to all our stakeholders."

Markets

Nitrogen outlook supported by crop fundamentals and high gas prices in Europe

Nitrogen product prices are supported by several market factors which suggest a structural shift to a multi-year demand driven environment .

1. Nitrogen pricing has support to remain significantly above historical averages. European nitrogen producers are currently the marginal producer with the forward curve for natural gas implying elevated input costs for the medium term:

1. Gas price futures in Europe currently indicate c.$60 / mmBtu for the balance of 2022 and $36 / mmBtu for 2023 and 2024, compared to $5 / mmBtu in the 2016 to 2020 period.

1. At these higher feedstock prices, the costs for marginal producers in Europe imply support levels for ammonia at >$2,000/t for the balance of 2022 and >$1,300/t in 2023 / 2024 (excluding CO2 costs), which is 6-9x higher than the c.$230/t support level during 2016 - 2020.

1. This translates into price support of >$1,200 / ton for the balance of 2022 for urea and €800 / ton for CAN (and >$780 / ton and €600 / ton respectively for 2023)

1. 1. Prices can drop below such floors particularly during off-season periods, but economics have historically prevailed when margins for producers remain negative for a longer period, triggering shutdowns as has been occurring in Europe over the past 12 months.
2. Nitrogen supply is expected to be structurally tighter over 2022 - 2026, resulting in an estimated market deficit of
   c.7 million tons for urea. In addition:

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Q2 2022 Results Report

1. In Europe, c.7 million tons of ammonia capacity out of a total 19 million tons is currently shut due to the high gas prices. Given elevated gas price futures and risks related to Russian gas supply, more capacity may be shut down should selling prices remain below gas-based production costs.

1. Russian ammonia exports from the Black Sea are limited due to logistical constraints (impacting c.2 million ton ammonia or c.10% of global trade)

1. Urea exports from China, needed to balance the markets, are expected to remain low over the medium term, with controls to curb exports in place until H2 2023 at least and prioritization for domestic supply.

iii. Crop fundamentals remain supportive for nitrogen demand:

1. Global grain stock-to-use ratio remains at decade lows and it will take at least until 2024 to replenish stocks

1. Grain futures (US average corn futures at $6.0 and wheat at $8.0 / bushel from H2 2022 to the end of 2024) remain at levels that incentivize farmers globally to maximize yields by using more nitrogen

1. Disruptions to agricultural supply chains with reduced fertilizer application in some regions, dry weather, and a late US season is expected to defer demand into 2023 given relative inelasticity of nitrogen demand

Methanol fundamentals remain healthy with significant upside in the hydrogen economy

Methanol market fundamentals remain supportive for the medium to longer term with expected continued demand growth and limited supply additions. Methanol is also supported by high oil prices: it is currently significantly cheaper than LNG and gasoline and can be used as a lower cost and cleaner alternative for multiple fuel applications worldwide including heating and transportation.

Over the period 2022 through 2026, we continue to expect tighter methanol market fundamentals with incremental demand expected to exceed new supply by c.8 million Mt, and no new major supply expected to come onstream in 2022. This does not consider the meaningful additional upside from hydrogen fuel demand, notably for road and marine fuel applications.

Dividends / capital allocation

In July, OCI announced a semi-annual distribution for the period H1 2022 of €3.55 per share, or c.$765 million at current exchange rates, consisting of a $200 million base return of capital and a variable element. This will bring the total cash distribution during calendar 2022 to €5.00 per share, or c.$1.1 billion.

OCI has scheduled an extraordinary shareholders meeting (EGM) on 19 August 2022 to request shareholder approval for the H1 2022 distribution through a repayment of capital. The convening notice and other materials can be found on our website at www.oci.nl.

The ex-dividend and record date for the distribution will be confirmed following the statutory two-month creditor opposition period, which lapses on 21 October 2022. In case of no objections, the ex-dividend date will be 26 October, the record date 27 October, and payment date 31 October.

Separately, Fertiglobe, which is 50% owned by OCI and fully consolidated, announced today, in line with its dividend policy of distributing excess free cash flows to its shareholders, a cash distribution of $750 million for H1 2022 payable in October 2022. OCI's share of the dividend will be $375 million.

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Q2 2022 Results Report

Consolidated Financial Results at a Glance1

Financial Highlights ($ million unless otherwise stated)

$ million unless otherwise stated		Q2'22		Q2 '21		%		H1'22		H1 '21	%
Revenue		2,857.7		1,462.9		95%		5,185.5		2,582.5	101%
Gross Profit		1,169.4		404.6		189%		2,032.9		745.0	173%
Gross profit margin		40.9%		27.7%				39.2%		28.8%
Adjusted EBITDA2		1,289.9		535.4		141%		2,260.0		987.2	129%
EBITDA		1,229.2		502.7		145%		2,164.9		933.5	132%
EBITDA margin		43.0%		34.4%				41.7%		36.1%
Adjusted net income attributable to shareholders2		527.5		125.1		322%		881.7		227.5	288%
Reported net income attributable to shareholders		476.7		146.3		226%		886.4		244.9	262%
Earnings per share ($)
Basic earnings per share		2.269		0.697		226%		4.218		1.167	261%
Diluted earnings per share		2.256		0.693		226%		4.194		1.160	262%
Adjusted earnings per share2)		2.510		0.596		321%		4.196		1.084	287%
Capital expenditure		74.1		30.7		141%		125.5		87.6	43%
Of which: Maintenance Capital Expenditure		45.1		29.5		53%		89.3		85.4	5%
Free cash flow2, 3		928.4		397.7		133%		1,537.7		723.3	113%
		30-Jun-22		31-Dec-21		%
Total Assets		10,283.4		9,811.6	5%
Gross Interest-Bearing Debt		2,805.4		3,800.8	(26%)
Net Debt		708.0		2,220.5	(68%)
		Q2'22		Q2 '21		%		H1'22		H1 '21	%
Sales volumes ('000 metric tons)
OCI Product Sold4		3,061.5		3,231.3	(5%)	5,650.0	6,221.9	(9%)
Third Party Traded		900.0		803.0		12%	1,754.6	1,335.2	31%
Total Product Volumes		3,961.5		4,034.3	(2%)	7,404.6	7,557.1	(2%)

1. Unaudited
2. OCI presents certain financial measures when discussing OCI's performance, that are not measures of financial performance under IFRS. These non- IFRS measures of financial performance (also known as non-GAAP or alternative performance measures) are presented because management considers them important supplemental measures of OCI's performance and believes that similar measures are widely used in the industry in which OCI operates.
3. Free cash flow is an APM that is calculated as cash from operations less maintenance capital expenditures less distributions to non-controlling interests plus dividends from equity accounted investees, and before growth capital expenditures and lease payments.
4. Fully consolidated, not adjusted for OCI's proportionate ownership stake in plants, except OCI's 50% share of Natgasoline volumes

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Q2 2022 Results Report

Operational Highlights

Highlights

• 12-monthrolling recordable incident rate to 30 June 2022 was 0.37 incidents per 200,000 manhours
• OCI reported a 141% increase in adjusted EBITDA in Q2 2022 compared to Q2 2021 due to higher selling prices year-on-year for all products
• Own product sales volumes were 3.1 million metric tons during Q2 2022:
• • Total own-produced nitrogen product sales volumes were up 2% compared to Q2 2021
  • Total own-produced methanol sales volumes declined 38% largely as BioMCN remained shut down due to the high gas price environment in Europe
• Selling prices improved for all products in Q2 2022 compared to Q2 2021
• Higher gas prices in Q2 2022 versus Q2 2021 in Europe, the US and MENA resulted in a total negative impact of c.$307 million before natural gas hedges, with the biggest impact in Europe

Product Sales Volumes ('000 metric tons)

	'000 metric tons		Q2'22		Q2 '21	%	H1'22		H1 '21	%
	Own Product
	Ammonia		547.6		517.9	6%	934.3		1,104.9	(15%)
	Urea		1,192.7		1,137.6	5%	2,234.8	2,240.8	0%
	Calcium Ammonium Nitrate (CAN)		276.8		318.4	(13%)	568.2		646.8	(12%)
	Urea Ammonium Nitrate (UAN)		426.1		443.9	(4%)	755.7	723.8	4%
	Total Fertilizer		2,443.2		2,417.8	1%	4,493.0	4,716.3	(5%)
	Melamine		30.1		32.8	(8%)	61.1		67.0	(9%)
	DEF		217.7		186.0	17%	443.9		336.8	32%
	Total Nitrogen Products		2,691.0		2,636.6	2%	4,998.0		5,120.1	(2%)
	Methanol1)		370.5		594.7	(38%)	652.0		1,101.8	(41%)
	Total Own Product Sold		3,061.5		3,231.3	(5%)	5,650.0		6,221.9	(9%)
	Traded Third Party
	Ammonia		61.4		80.2	(23%)	118.6	121.2	(2%)
	Urea		403.4		501.9	(20%)	853.2	722.4	18%
	UAN		58.7		6.9	751%	83.0	20.5	305%
	Methanol		74.2		20.7	258%	218.3	99.4	120%
	AS		191.7		114.1	68%	285.8		232.6	23%
	DEF				79.2	40%	195.7		139.1	41%
		110.6
	Total Traded Third Party		900.0		803.0	12%	1,754.6	1,335.2	31%
	Total Own Product and Traded Third Party		3,961.5		4,034.3	(2%)	7,404.6	7,557.1	(2%)

1) Including OCI's 50% share of Natgasoline volumes

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