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OCI NV
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Ladies and gentlemen, thank you for standing by and welcome to the OCI N.V. First Quarter 2020 Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. And I would now like to hand the conference over to your speaker today, Hans Zayed, Director of Investor Relations. Please go ahead, sir.
Yes. Thank you, and good afternoon, and good morning for our audience in the U.S. Thank you for joining the OCI N.V. First Quarter 2020 Conference Call. With me today are Nassef Sawiris, our Chief Executive Officer; Hassan Badrawi, our Group Chief Financial Officer; and Ahmed El-Hoshy, our Group Chief Operating Officer. On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook. As usual, at the end of the call, we will host a question-and-answer session. 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 our disclaimers about forward-looking statements. Now let me hand over to Ahmed.
Thank you, Hans, and thank you all for joining us today. I hope you're all healthy and staying safe. I will begin with safety as this is a very big area of focus for us, compounded by the current COVID-19 developments in the last few months. We're very glad to report that all our employees have remained safe despite the global challenges, and our goal is to keep them, their families as well as those in the surrounding communities safe. To that end, we are pleased that our occupational safety performance was best in class during the quarter. Our recordable incident rate was an excellent 0.13 for the first quarter and the 12-month rolling average was 0.23 incidents per 200,000 man hours, which is, we believe, one of the lowest in our global industry and the figure we're continuing to work on bringing down. Our focus to prioritize process safety globally and reduce occupational safety incidents to ultimately 0 at all our assets across the globe, which is, of course, a leading indicator on operational performance and reliability of the plants themselves. Looking at our business in more detail, OCI continues to operate, and our production, supply chain and distribution have not been impacted by the COVID-19 challenges. Our dedicated task force for COVID-19 closely monitors developments and coordinates efforts for every aspect of our business across the group. They conduct daily risk assessments, rolling out contingency plans with the 2 to 3-month look ahead to focus on continuity of operations as well as supply chain. It is important to note that all OCI's products are deemed essential products by their respective governments and regulators in all our jurisdictions where we produce or sell to. This includes the entire supply chain, production and distribution logistics. We will therefore do everything in our power to help our communities receive the products that they need. Operationally, we've had a good quarter. We are pleased that our nitrogen portfolio continues to run at steady and high rates in Q1 2020, following the extensive turnaround last year with a large number of plants running above nameplate capacity post debottlenecking initiatives. This is despite some unscheduled downtime at one in Fertil during Q1, which has been addressed and all lines are running well again. On a like-for-like basis, excluding Fertil, given it only became part of our group in Q4 2019, our total gross ammonia production increased by 15% in the first quarter compared to the same quarter a year ago. We achieved some very significant increases at Sorfert and IFCo during the quarter, in particular. All production lines at Sorfert plant is consistently high levels since the debottlenecking in Q1, resulting in average utilization above 90% in the first quarter, an increase of more than 50% in production volumes from Q1 '19 to Q1 2020. Iowa Fertilizer Company maintained its high rates that the plant has been achieving since the turnaround last summer. And as a result, the upstream plants are achieving record volumes. For example, ammonia utilization was an average 110% of nameplate capacity in Q1 and production was up 25% year-over-year. Our methanol portfolio operationally is behind the nitrogen portfolio, but we've made substantial progress in improving performance here as well. Last year, as you know, OCI Beaumont suffered a loss of production in total of 5 months due to largely a few key issues, which were comprehensively addressed in our recent turnaround. We mentioned in our last quarterly update call that we accelerated turnaround and completed it in the first half of January for ammonia and the second half of February for methanol. Both plants have performed consistently since then. And I can confirm that Beaumont continues to run steadily, close to its max potential, with an average of 113% of the pre-debottlenecking design capacity in April. We achieved higher volumes at Natgasoline in Q1 year-over-year, even though the planned utilization rate was impacted by several setbacks during the quarter. Repairs were conducted and the plant is now currently running again. Production volumes in the Netherlands at BioMCN were relatively steady as 1 of the 2 lines within an extended turnaround. But this was offset by additional volumes from the recently refurbished second line, which has been ramping up. We expect to see the full benefits of both lines from the third quarter onwards. Our sales volumes were also up strongly. Our total owned produced sales volumes increased 62% to 2.7 million metric tons during the first quarter of 2020 compared to the same quarter last year. This has to be looked at in the context of a very late start to the season in 2019 due to extreme weather compared to much better conditions this year. We also benefited from other factors: Firstly, of course, the addition of Fertil in Abu Dhabi for our consolidated results, but also the increased utilization rates and production gave a significant boost driven by the increased ammonia production; and on a like-for-like basis, our nitrogen volumes would still have been up 40% year-over-year. Our diesel exhaust fluid business in Q1 in the U.S. continued to grow healthily versus last year. Methanol own-produced volumes were at approximately the same levels as during the first quarter of 2019 as a result of major turnarounds and some maintenance work that I just mentioned. With that, I'd like to hand it over to Hassan for the financial results.
Thank you, Ahmed. I'll begin by covering some of the highlights of our results that we posted this morning, focusing first on the P&L. We recorded an increase in consolidated revenues of 36% to $811 million during the first quarter of 2020 compared to the same quarter last year. This reflects what Ahmed just described, a ramp-up of production volumes, plus the turnarounds that we had in previous period, but it's partially offset by 15% to 25% lower selling prices for our main products again year-on-year compared. Our adjusted EBITDA was $193 million, which represents an increase of 49% compared to the first quarter of 2019. The main driver has been more than a 60% increase in sales volumes. This year, as Ahmed again described earlier, weather patterns have been ideal for growing crops, and the season started in a healthy way in March. We also benefited from lower spot gas prices in Europe and the U.S. This, coupled with our focus on premium products, underpinned our margin performance during the quarter. We further expect the full effect of the recent drop in gas prices to be captured from the second quarter onwards in 2020. On a segment level, the EBITDA of both our nitrogen and methanol businesses improved despite the meaningfully lower selling prices compared to the first quarter last year. Looking at a bridge from Q1 last year to the first quarter this year, it is notable that the impact of lower selling prices alone is circa $90 million, therefore, offset by the growth in volumes and the improved underlying gas pricing that we were able to achieve. The biggest increase in EBITDA was in the nitrogen segments, driven primarily by the performance of our Middle East export platform, known as Fertiglobe. We had a boost from the inclusion of Fertil in our consolidated results, of course, but a significant improvement at our Algeria or sulfate Algeria operations was also a big factor. To remind you, to reemphasize, we performed the first of 2 comprehensive turnarounds in 2019 at our Algeria sites during the first quarter of 2019, hence, the noticeable growth in volume. Our European business was down slightly as we carried over some higher cost inventory, and we did not capture the full effect of the lower gas prices yet. We are hopeful that the healthy start of the season will result in meaningful inventory reductions during the second quarter and subsequent periods. The methanol segments performed relatively well if we take the lower selling prices, the turnaround at Beaumont and associated extra costs into account. Given the contractual nature of our methanol business, we did incur some extra costs related to purchases of methanol that were procured from the market as a result of downtime during the quarter to fulfill contractual volumes. Natgasoline performed better than in Q1 -- Q1 2020 utilization rates were well above the first quarter of 2019, and despite the fact that we are still working towards improving capacity utilization, suggesting further upside to come later this year. Worth noting that our 50% share of our second insurance payment of $15 million as compensation for business interruption losses and damages incurred in the past few months is also included in the Natgasoline EBITDA for the first quarter. Turning to the balance sheet and cash flow. Free cash flow before growth CapEx during the quarter was negative $85 million. This reflects mainly an increase in net working capital of $125 million, which is a repeat feature during this time of the season -- or this year, mostly driven by higher trade receivables. This naturally translates into cash as we get into the second quarter and some potential spillover into the third quarter as well. Maintenance capital expenditures of $91 million were also higher than average as a result of some payments related to 2019 that carried over in the year but mostly due to the very comprehensive turnaround at OCI Beaumont, which was described earlier. This number should not be annualized as it is not representative for the quarterly average, and we continue to expect a consolidated CapEx of around $250 million through the year which is lower than previous guidance by $30 million, $40 million. Our net debt decreased by $94 million during the quarter to EUR 3.97 billion as of the balance sheet date of March 31, 2020. Despite this higher-than-average outflows and no cash achieved from Natgasoline during the quarter. This was mostly due to the fact that we received a cash consideration of $167 million from ADNOC in March, reflecting the closeout of net debt settlement based on closing adjustments for the Fertiglobe merger. And we also had some tailwinds in positive currency effects of around $33 million, reflecting mainly dollar-euro movement and the continued devaluation of the Algerian dinar. We believe our consolidated liquidity position of around $1.3 billion as of 31 March, 2020, which includes hedge on committed facilities, continues to be quite healthy and has been helped by our strategic and refinancing actions during the past 24 months. Importantly, as a result of our timely refinancing actions in October 2019, and the previous year, we have no debt maturities at the parent company level until the next bond maturity in April 2023. We also have very limited scheduled debt amortization of less than $200 million on average per year across the group until the end of the year 2022. Finally, some of our other larger costs, with a focus on interest expense, are also coming down this year, as we expect an interest expense reduction of between $30 million to $40 million in 2020 compared to the year 2019 as a result of our refinancing actions and decrease in base rates. We also continue to work on optimizing some opco debt, including Fertiglobe debt with a view to simplify structures and target additional savings. We, therefore, believe we are well positioned to weather the current conditions. With that, I would like to hand over to Nassef for further commentary. Nassef?
Thank you, Hassan, and thank you all for joining the call today. Let me start by thanking all our OCI team members for their dedication and resilience and staying safe. I'm impressed that during these challenging times, we have been able to demonstrate levels of global corporation we have not seen before and achieved best-in-class safety records. Despite all the challenges the world is facing, the outlook for the majority of our markets is still looking good and OCI's asset base, commercial capabilities and financial standing are well positioned to manage near-term volatility. If I start with the nitrogen markets. I'm pleased to confirm that on the fertilizer side, we haven't seen any material impact from COVID-19 during this ongoing application season. If anything, we had a very vigorous start to the season across all our end markets, and our order book for the second quarter is looking very healthy. In the U.S., spring planting is well ahead of last year with the latest USDA data at the beginning of May showing corn planting at 50% complete compared to 21% last year on the same date. It's well publicized that in March, the USDA came out with a bullish estimate of 97 million acres for this application season. Market observers currently believe that this will pan out slightly lower, maybe up to 94 million acres, but we will know more in the coming weeks. This is still a very healthy increase of around 5% from last year. The direct application ammonia season in April has already been the strongest in many years, helped by very favorable weather. And the combination of an increase in acres and lagging urea imports into the U.S. compared to last year is pointing to a very strong season for urea and UAN as well. As a result, the industry should be ending the season with minimal carryover inventory of nitrogen fertilizer. In Europe, we are seeing very strong demand for May and June deliveries in our core Northern European nitrate markets. So we expect a healthy performance of our European operations in Q2 as well and a lower inventory level starting into the softer summer months. Our export platform, Fertiglobe, is sold out until mid-June, and we are benefiting from ongoing demand in major importing regions, and we have been selling significant volumes into Southern Europe, East Africa, India and Australia to mention a few, including some new markets for us. So all in all, we feel good about the current season and the current outlook for our fertilizer business, albeit with some weakness on the industrial side of nitrogen projects, be it DEF or melamine. If I now look at our methanol business, methanol prices have come down as a result of COVID-19 and its effect on the sharply or lowering of oil prices. We have limited visibility on the length and full economic impact of COVID-19 crisis, but looking forward oil prices, we believe the second half of the year should start seeing some recovery in methanol pricing. But I want to reiterate that a large proportion of our methanol production is already committed to end users that need the product or they're down in production and that we are a bit insulated due to our advantageous geographical locations close to our customers. There are also several factors that mitigate a drop in global demand. Most importantly, several producers have already shut down high-cost production facilities which will help support the balance in the market, and we expect more to come if the methanol prices stay lower for longer. We, of course, are on the very low end of the cost curve. At current methanol and natural gas prices, our businesses has a strong competitive cost advantage and still generate healthy margins. This brings me to our outlook. While selling prices have been lower in both nitrogen and methanol, we remain fully focused on what is within our control. i.e., operational and commercial excellence, controllable costs and volume growth. With regard to operational excellence, we are fortunate that we finalized our heavy-scope turnarounds for the nitrogen business last year and that we have brought forward and finalized our major methanol turnaround activity to the first quarter this year before the escalation of the COVID-19 pandemic. We have already seen the positive effects coming through in the first quarter performance of our nitrogen business, helped by the strong execution and efficiency on sales and distribution. In the last few months, we have also addressed certain areas of our methanol operation, and we expect methanol volumes to ramp up through 2020. As a result, we expect higher and more efficient asset utilization rates across the platform in 2020, also achieving better conversion economics. We believe our cost structure is already one of the best in the industry, but we continue to look for opportunities to optimize further. For example, we have identified an additional $20 million of cash savings at Fertiglobe to be realized over the next 3 years. Finally, with cost under control and our plans moving toward to their full potential, we see no reason today why we should not see double-digit volume growth this year. With that, we will open the line for questions.
[Operator Instructions] The first question comes from the line of Tom Wrigglesworth from Citi.
Three, if I may. Firstly, just on the U.S. season, if you could ask you to help paint the picture a little bit more. Obviously, how much is going to be second half versus -- sorry, second quarter versus first quarter, I guess, is what I'm asking. And could you help us understand what the mix shift to urea means versus UAN? Any additional color there would be helpful. The second question is on European gas prices. I think you noted -- you've said that at current rates, there'd be a $100 million benefit for the full year, and you just highlighted that there wasn't much benefit in the first quarter. So what kind of run rate was it in the first quarter, noting we should be obviously at $25 million a quarter if we spend that evenly? And the third question is on CapEx. Obviously, you've had some maintenance come through in the first quarter. But what should we expect for full year CapEx?
Ahmed, do you want to answer those questions?
Absolutely. So on the first question, Tom, with regards to the movement this year, we've seen a lot of it coming actually in Q2 versus Q1. We've had a record April for ammonia movement in the Midwest, and then we expect to see and has started seeing because of the acceleration of crop planting, very strong urea and UAN demand as well. With regards to your second question around natural gas, as Hassan mentioned during the earlier remarks, we've seen natural gas prices come down precipitously in Europe actually, TTF, which is what we buy off of trading below Henry Hub into Q2. But as Hassan mentioned, in Q1, we had not gotten the physical benefit of that because of some of the inventory that was sold in Q1 was at the higher gas prices of Q4. So leave that $100 million number reflects balance of the year benefits mainly when compared to the prior year. And also, as you recall, the gas prices in Q1 still were favorable 2020 relative to 2019. Can you remind me your third question?
Yes. Third question was on the CapEx for the full year and obviously...
Yes. So we've basically been reviewing CapEx naturally over the last several months, particularly with the COVID-19 phenomenon. And as stated, we're fortunate that a lot of the CapEx that we needed to do, the urgent ones, whether it was the OCI Beaumont turnaround, which we accelerated or last year, Sorfert and IFCo, one of the OCI Nitrogen lines, a lot of that is behind us now. So looking at our CapEx guidance, which we had in the prior call, which was in the high $200 million to around $280 million, we found an ability to remove at least $30 million of CapEx for the balance of this year via postponements mainly for noncritical activities that could wait until later time to be executed. This is not -- this is without sacrificing safety or reliability and each of the project managers -- or the plant managers, as the plants have been working with the central team, to identify those projects and reduce capital expenditures during this time, which is for 2 reasons. One is to, obviously, execute projects during times of less activity -- sorry, times of increased activity unless COVID-19 social distancing restrictions. And secondly, because we look to maximize free cash flow generation through the year.
Next question comes from the line of Christian Faitz from Kepler.
Yes. Three questions if I may. The first one. Can you remind us again on to the turnaround schedules that you see over the next few months, if there is any? Second, I guess, more or less, a philosophical question. In your prepared statements, you mentioned the drag that the low oil price might have on corn demand. Would you see any repercussions for fertilizer demand at this point in time, if the U.S. farmer really goes above 90 million acres? And then third question. How is COVID-19 impacting DEF demand in the U.S., if at all, assuming that the trucking activity continues?
Maybe I can start with just on the turnaround question. We don't -- I mean for obvious competitive reasons, we don't highlight to the market, to the public markets, what our turnaround schedule is for the balance of the year. Do not communicate that into the market. So we're not going to be able to comment on information around future turnarounds, but we will be able to identify turnarounds as they occur each quarter and the results. With regards to your third question on DEF demand, we have seen some softness in the April-May time frame, obviously, with some reduction in DEF demand. But we still have a good base level of flow of DEF. And I think you're correct to point out that DEF in the U.S., unlike AdBlue in Europe, DEF in the U.S. is largely focused on trucking heavy industry, the ag market and movements there. So passenger vehicle reductions, where we've seen a lot less passenger vehicle movements, that's more an effect on gasoline consumption, not affecting as much DEF because it's a much more gasoline, non-diesel-driven market. So we've seen some softness, I mean, something kind of in the 10% to 20% range but we -- with our customers, I believe that we're able to -- we'll be able to recover that later this year. And also it happened to happen during Q2, which has allowed us to flexibly change our production profile from diesel-exhaust fluids to granular urea, for example, and sell at a higher price right now anyway because of the dry urea markets in the Midwest holdings steady.
Okay, great. And on the other one -- can you just...
So, the corn ethanol, we've seen obviously, ethanol demand in the very near term -- with what's happened in the reduced gasoline demand come down, it's hard to say when that eventually recovers in terms of just when transport demand picks back up. But some factors around that, that are important, obviously, to keep in mind is government mandates towards the ag sector, which has gotten significant financial aid for the corn planters as well as on ethanol blending and the biofuels mandate in the United States. So naturally, if we see oil price -- oil demand and kind of transportation demand go up, we see that happening more naturally without external forces, resulting in more ethanol demand and higher corn consumption. But even short of a very large recovery in that, we do anticipate some support to help mitigate the reduction in ethanol demand.
Next question comes from the line of Lisa De Neve, Morgan Stanley.
A couple of questions from my side. Just following on the previous analysts'. So on the maintenance, I really understand you cannot comment on maintenance CapEx and turnaround for competitor reasons, but could you at least give us a little bit of high-level comments, whether at least majority of maintenance rounds are completed for this year or at -- or whether -- so 50% is to come? That's the first question. Secondly, related to the conference call last month, so you mentioned that at the dense spot rates and contract prices of methanol, you were basically generating about 30% methanol profit margin in Europe and about 50% still in the U.S. Could you provide us with a little bit of an update with current lower contract prices in methanol and maybe the potential for higher natural gas prices in U.S. towards the end of the year, what the sort of average or the exit rate may be in terms of profit margins in U.S. and Europe? And then thirdly is on the commercial partnership. So over the last 2 years, you've entered into a number of commercial partnerships or even more explicit with ADNOC and Dyno Nobel. Could you provide us with some granularity of where you have achieved synergies and where you see further opportunities for synergies with these partners?
I'll answer the partnership question first, and then Ahmed will get to the turnaround the question. So basically, there's completely 2 different types of partnerships. What we have in the U.S. is a partnership aimed at consolidating sales forces and providing our customers with multiple supply points and to improve on logistics and reduce freight costs. So what we have done with N7 is that we created for our customers numerous points where they can access DEF supply points and generated redundancy. And the joint venture with ADNOC, it involves actually an equity participation. So it's a share swap and a full merger. So there, we are also, in addition to the logical commercial synergies, where, for example, it makes no sense for plants in North Africa, like Algeria to go to India and for 13 to ship into the U.S. or western hemisphere. We have already seen a big chunk of the commercial synergies materialize from the last quarter. So now we are targeting much more efficient distribution channel, which is resulting in a higher netbacks and higher margins. In addition, there are multiple additional areas of synergies that we are already benefiting from, one of them being operational, cooling the plant has a similar technology, best practices and certain cost reductions that are underway to actually exceeding our announced synergies target for Fertiglobe. As you have seen in our press release today, we have announced an additional $20 million of potential savings that we are targeting for materialization in the coming few years. And some of these initiatives have already started. We also mentioned that we are undergoing an effort to streamline our debt for the Fertiglobe assets, and this should result also in a similar saving in our interest expense for the 3 Fertiglobe assets. Ahmed, you can comment on the turnaround.
Sure. So Lisa, thanks for your question. The turnaround, I mean we -- as I said, we don't go into detail, but I mean, as we mentioned, Q1 shouldn't be annualized, right, because it had a lot of cash payments for late Q4 CapEx and the OCI Beaumont turnaround and the ongoing turnout for BioMCN. So I think just given the picture and some of the deferrals we have, I mean, I think that can directionally give you a sense of the intensity of CapEx for the balance of this year, and we do have one, at least, confirm turnaround that we're moving to next year on the nitrogen side. With regards to -- you had another question on the update on what do the margins look like for our methanol group because we've given some guidance around that previously. So despite, obviously, the fall in spot and contract pricing that we've seen in the U.S. and the fall in spot pricing, while contractors remain fixed in Europe, we're still seeing margins north of 35% when you -- when the plants are running full utilization, even at the levels we're talking about here, and that reiterates what Nassef had said in the earlier comments, which is our focus throughout on having well positioned assets at the low end of the cost curve where we can distribute into a customer base that's close by a reasonably strong netbacks. And we've gotten the additional push by having natural gas prices fall precipitously in Europe to levels sub-$2 MMBtu and even projected natural gas price in Europe staying in the low 2s for the next several months, at least during this volatile time. For the U.S., you could probably just do some math around that and see if you had another $0.20, $0.30 increase or $0.40, $0.50 increase in Henry Hub, what that does to the margin. But I would say that the phenomenon where Europe is trading below Henry Hub on a like-for-like basis does suggest that there could be some other market effects like demand destruction for LNG exports or additional gas supply coming to markets when you're approaching the $3 an MMBtu with global LNG prices where they're at in Europe and Asia.
Next question comes from the line of Rikin Patel from Berenberg.
Just firstly on pricing. We've obviously seen urea prices come under a bit of pressure during April, May. Given we had the Indian import tender last week, I'm just curious what that could add for momentum in the coming weeks and whether you think from a global context, we'll see more Indian import tenders in light of the current COVID-19 pandemic. And secondly, just a follow-up on natural gas. Can you just remind us what your hedging policy is in the U.S. and in Europe and how that's changed given what's going on in the energy markets right now?
So the Indian tender will serve primarily to lower the inventory levels for most producers coming into June. So with the shipment made by mid-June, you can almost fairly assume that everybody outside North America will have very little volumes to sell post the shipments to India, including what we're seeing in China, where they are favoring domestic sales than lower-priced Indian destinations. So what this will do is that it will enable the summer to start from a much better inventory level than last year, for example, where we believe that we will go into the summer with minimal inventory applying for us and for many others of our producer -- other producers and competitors. So this is -- and the Indian tenders will continue at a rate of a tender every 4 to 6 weeks. Domestic demand has been very strong. So that will continue into the summer while you start seeing more Latin American demand starting in July as well. So prices have come down, yes, in the last few weeks, but that is normal as you approach the tail end of booking for the season with most suppliers now looking for late June shipments. But pretty much the second quarter is identified in terms of where most of the suppliers know where they're selling the product. What was your other question, sorry?
In natural gas. Can you just remind us what the hedging policy is in the U.S. and Europe?
So in the U.S., I think we have a collar that protects us from gas prices going much higher. That applies for a portion of Natgasoline. Other than that, I think, starting from March, we have very little hedges in place, if at all, in most plants.
Next question comes from the line of Steve Byrne from Bank of America.
Yes. The comment about one of the strongest ammonia application seasons in April than you've seen in a long time. I was curious if you had a view as to whether that may have cannibalized some demand for urea and UAN, i.e. where growers just taking advantage of the favorable weather. And then the pricing on the ammonia to shift more of the nitrogen load towards ammonia, could that mean less urea and/or UAN as throughout the rest of the spring season?
Sure. I can take that. So I mean it's a good point because, obviously, as they applied ammonia, it can -- in certain areas, and there's not as much switching because people have equipment for ammonia versus UAN versus urea. You could have some switching happen. I'll note, Steve, that also, obviously, Q4 last year, the fall application for ammonia was a disappointment. So there were some needed nutrients that needed to get into the ton -- get it into the ground to compensate for a difficult fall application season here in the spring application. Also, I think some of the producers with flexibility, including ourselves, have switched a little bit some production from UAN into urea, DEF and ammonia production because UAN tends to convert more nitrogen tons at the same time. So there was a bit more ammonia in the system, and this helps take in some of the slack of ammonia in the system. The -- from what we're seeing on the ground, there may have been some incremental switching from UAN in the Eastern Corn Belt, but largely, we continue to see good application of UAN in -- starting up in the last few weeks. And then we expect to see a strong sidedress from the customer base later in May and into June for UAN, which is our primary product.
The comment about inventory levels likely to be at very low levels at the end of the spring season seems very well reasoned. I was curious as to your view as to maybe any changes in the sentiment of your buyers this summer, given the summer, the forward futures contracts for corn are likely to be at $1 a bushel below where they were last summer. Is it something that you're concerned about, about whether or not there could be a deferral of that purchasing demand this summer?
It's too early to tell, and part of it is also speculation around what will happen with the ethanol in the second half of the year. So with the COVID-19, the world is starting to open up for business and more consumption. And you must have just said that an hour ago, Saudi announced another 1 million barrel cut in oil production. So we're not assuming that the second half will see the same, at least that's what the forward markets are saying on the oil price. And hence, you will have less drama on the ethanol side and should bring in some corn price recovery. So we're not too concerned about farmers making significant shifts. Remember, last year, we had the question of what will the China trade war do to farmers positioning for corn and soybeans. And at the end, I mean, it stand out almost not materially different than what was expected.
And if I may just squeeze one more in here. I was curious as to your view on globally lower energy prices, particularly natural gas as a feedstock for nitrogen. Are you seeing any meaningful increases in global supply as a result of the lower energy costs?
Actually, we believe that every plant that can produce is currently producing. We don't know of any plants, barring one isolated plant in Ukraine or China, or -- but the Chinese plants have also been shut down primarily for environmental reasons. So you can say that most plants are now operating at full capacity. Despite that, we're seeing prices that are probably 10%, 15% lower than last year going into the summer. But -- or yes, so any improvement in demand with no major capacities coming on stream in the coming 3, 4 years should accelerate the balance of supply demand.
Next question comes from the line of Faisal Azmeh from Goldman Sachs.
This is Faisal Azmeh from Goldman Sachs. Just a few questions on my end. Starting off with kind of how to think about volume growth in Q2 versus last year. I know you don't like to give targets on production. So just kind of maybe if you can point us again through the outages that you had last year and in Q2, if any, on how we should think about the turnaround there. The second question I have is when looking at the Fertiglobe business, we always see like-for-like growth in EBITDA, excluding Fertil, if that's something you can share? And then the second question I have relating to Fertiglobe is when looking at the quarter-on-quarter revenue growth, you've had a bit of growth in revenues but then EBITDA decline Q-on-Q. Is it possible to kind of share the reason behind that?
So on the Fertiglobe side, I think the main issue there is pricing. So you had some pricing differentiation and also at Fertil an outage that happened. I think we will have good volumes -- production volumes in Q2, but I don't want to go into specifics and comparisons with Q2 last year. But we are now in mid-May, and we're seeing a continuation of the trend of the good volume production in most of our plants. Sorry, what was the other question?
Yes. So the third question is just -- when thinking about what was the like-for-like growth in Q1 for Fertiglobe, excluding the ADNOC contribution?
So, we had a good quarter in terms of production. We have highlighted that in the release that production was up 50%. So you'd have to do the math on your own. I think Hans can get you that offline, give you some more color on that.
There are no questions at this time. Please continue.
Okay. I want to thank everybody for participating in the call and look forward to our next call. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may all disconnect.