Fertiglobe, the world’s largest seaborne exporter of urea and ammonia, reported a slide in its fourth-quarter net profit as its revenue slumped on a drop in nitrogen product prices.
Net profit attributable to owners of the company for the three months to the end of December stood at $94.5 million, compared with $171.9 million in the same period a year earlier, Fertiglobe said in a filing on Wednesday to the Abu Dhabi Securities Exchange, where its shares are traded.
Revenue in the quarter fell about 39 per cent year-on-year to $645.9 million.
Fertiglobe will pay a dividend of $200 million for the second half of 2023, depending on shareholder approval.
Total dividends paid for last year will reach $475 million, including $275 million already paid in the final quarter of 2023, the company said.
“Looking ahead, the company’s strategy is to continue balancing dividend payments with selective investment in value accretive growth projects, supported by healthy free cash flow conversion and a robust balance sheet,” said Ahmed El Hoshy, chief executive of Fertiglobe.
The company said it achieved $25 million of run-rate savings as at the end of 2023 and that it was “on track” to realise its $50 million target by the end of the current year.
Fertiglobe's full-year net profit fell 72 per cent to $348.9 million, while revenue more than halved to $2.42 billion.
The company, a joint venture between Adnoc and the Netherlands-listed OCI, produces 6.7 million tonnes of urea and ammonia annually at four units in the UAE, Egypt and Algeria, making it the largest producer of nitrogen fertilisers in the Mena region.
In December, Adnoc agreed to purchase OCI Global’s entire stake in Fertiglobe for $3.62 billion.
The deal, which is expected to close this year, will make Adnoc the majority shareholder in Fertiglobe, increasing its shareholding to 86.2 per cent, with 13.8 per cent remaining in free float on the ADX.
“The deal … will enable Fertiglobe to further leverage Adnoc's resources, expertise, and network to pursue new growth opportunities, especially in the emerging markets of clean ammonia and blue hydrogen,” Mr El Hoshy said.
“Our priorities will be to continue to unlock potential in our core products of urea and ammonia.”
In 2023, the Urea Egypt benchmark was 49 per cent lower year-on-year at an average price of $386 per metric tonne, while the Ammonia Middle East benchmark was down 58 per cent at an average price of $415 per metric tonne, Fertiglobe said.
Fertiliser prices are linked to the prices of key feedstocks such as natural gas and coal.
Dutch Title Transfer Facility gas futures, the benchmark European contract, surged to a record high of €345 ($369.24) a megawatt hour following Russia’s invasion of Ukraine in 2022.
Prices fell significantly in 2023 on high gas stockpiles in Europe and growing imports of liquefied natural gas on the continent.
Fertiglobe said the medium- to long-term outlook for nitrogen markets would continue to be supported by limited capacity additions and healthy demand growth.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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