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OCP Reports Earnings for Third Quarter and First Nine Months of 2016

CASABLANCA - Morocco, December 8, 2016 – OCP S.A. (“OCP” or the “Group”), a global leader in the fertilizer industry, today reported results for the third quarter and the nine-month period ending 30 September 2016

 Key Figures

Year to Date 2016

  • Revenues have reached MAD 31,973 million (US$ 3.3 bn), below 2015 level of MAD 37,137 million (US$ 3.8 bn)
  • EBITDA amounted to MAD 9,170 million (US$ 940 million), down from MAD 13,923 million (US$ 1.4 bn) for the first nine months of 2015
  • EBITDA margin improved to 29% (vs. 27% in H1 2016), below last year’s comparable of 37%
  • Adjusted operating cash flow: MAD 3,520 million (US$ 361 million), compared to
  • MAD 8,521 million (US$ 882 million) for the same period in 2015

Third Quarter 2016

  • Revenues: MAD 10,317 million (US$ 1.05 bn) – vs. MAD 13,242 million (US$ 1.3 bn) for Q3 2015
  • EBITDA: MAD 3,254 million (US$ 334 million) – vs. MAD 5,289 million (US$ 541 million) for Q3 2015
  • EBITDA Margin: 32% - vs. 40% for Q3 2015

Results Overview

OCP’s performance over the first nine months of this year demonstrated the Group’s ability to deliver sound financial results in competitive market conditions, as well as strong resilience among the industry.
While consumption for phosphate-based fertilizers increased in the first nine months of the year, this consumption has been mainly derived from inventory drawdowns after significant stockpiling in 2015 in our key markets. As a consequence, main consuming regions have lowered their imports, driving phosphate products prices down. Therefore, revenues in the first nine months of the year amounted to MAD 31,973 million (US$ 3.3 bn) down from MAD 37,137 million (US$ 3.8 bn).
The decrease in prices has been partially offset by lower raw material costs, as a result of favorable market conditions and an efficient procurement strategy.
Hence, gross profit decreased year-over-year, reaching MAD 21,544 million (US$ 2.2 bn) compared with MAD 25,905 million (US$ 2.6 bn) in the same period of 2015.
OCP’s EBITDA for the first nine months was MAD 9,170 million (US$ 940 million) down from
MAD 13,923 million (US$ 1.4 bn) in 2015. Despite challenging market conditions, EBITDA margin improved to 29% by end of September 2016. This resilient profitability level reflects the Group’s ability to perform in a weaker global market environment, as a combined result of OCP’s sustainable competitive advantages:

  • OCP is taking advantage of the large-scale investment program initiated in 2008, resulting in significant cost efficiencies. For instance, the ramp-up of the slurry pipeline led to cost savings of MAD 705 million in the first nine months of the year (vs. MAD 504 million for the year ago period)
  • OCP’s commercial agility allowing the Group to sell its products in the regions that provide the highest margins. This advantage combined with a geographically diversified client base has been a key asset this year as imports from some major consuming regions have declined. This has been notably offset by fertilizers exports to Sub-Saharan Africa that increased to 24% of the Group’s total fertilizers exports
  • OCP keeps diversifying its product offer, through innovative and specialty products. In the third quarter, OCP licensed the Shell Thiogro technology, through which will be produced highly concentrated sulfur-enhanced fertilizers combining crop yields increase with improvement of soils health. Newly developed products represented 26% of total fertilizers sales volume

Capital expenditures reached MAD 7,546 million (US$ 776 million) in the first nine months of 2016, with the Group’s modular investment program running according to plan.

Adjusted cash generated by operating activities amounted to MAD 3,520 million (US$ 361 million) in the first nine months of 2016, compared to MAD 8,521 million (US$ 882 million) for the same year-ago period.

Management Commentary

“Despite softer market conditions and a contraction of total revenues for the whole fertilizer industry, we were able to sustain good profitability levels throughout this period. Our profitability improved substantially compared to the previous quarter and has been stable since the beginning of this year. This performance was notably driven by lower input costs, improvements in our operating efficiency, market and product diversification and higher fertilizer sales in high growth markets.
This performance demonstrates OCP’s resilience across the cycles and paves the way for outstanding performance under more favorable market conditions.” said Mr. Mostafa Terrab, Chairman and Chief Executive Officer of OCP.

Summary and Outlook

“We anticipate the market environment to remain stable for the remainder of the year as well as for the beginning of 2017. We base our expectations notably on current signals of growing demand from key consuming regions, the inventory rebuilding taking place after the significant draw-downs observed in 2016, and expected moderation in Chinese exports levels.

“OCP recently completed several long term agreements that should reinforce our leadership, such as a joint-venture with Kribhco in India and partnerships with the Ethiopian government and Dangote group to develop joint integrated fertilizer platforms respectively in Ethiopia and Nigeria. OCP is leveraging a century of industrial expertise and its successful organic development strategy to take full advantage of selected growth opportunities to secure competitive raw materials supply and strengthen our leadership position” Mr. Terrab noted.

Conference Call

OCP senior management will host a conference call at 10 a.m. EST and 3 p.m. Morocco/London time on December 8, 2016, to discuss the financial results. Qualified institutional buyers, bondholders, securities analysts and market makers are invited to participate in the call. Conference call details are available at OCP’s Investor Relations portal on the Intralinks website. Eligible parties that have not already registered for access to the Intralinks portal may do so by contacting Mrs. Ghita Laraki, Investors Relations at g.laraki@ocpgroup.ma.

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