OCI Global (ticker: OCI) reported its third-quarter results on October 30, 2024, with CEO Hassan Badrawi and CFO Beshoy Guirguis providing insights into the company's financial health and strategic initiatives. The earnings call revealed that despite a slightly negative adjusted EBITDA from continuing operations due to high natural gas prices and lower product pricing, the company's operational performance remained strong.
OCI Global is in a better financial position, moving from a net debt situation to a net cash position, thanks to the completion of significant divestitures. The company also announced its plans for substantial shareholder distributions and provided updates on ongoing projects, including the Clean Ammonia project.
Key Takeaways
- OCI Global transitioned to a trading statement format for its Q1 and Q3 financial reports.
- The company completed divestitures of Methanol operations, IFCo, and Fertiglobe, improving its net cash position.
- OCI plans to distribute €14.5 per share to shareholders and anticipates further distributions in 2025.
- The Clean Ammonia project is on track, with management committed to safety and operational optimization.
- Despite strategic transactions generating $11 billion, the share price has not reflected the intrinsic value creation for shareholders.
Company Outlook
- OCI expects to complete the OCI Methanol transaction in the first half of 2025, pending regulatory approvals.
- The management is focused on executing ongoing projects, with a negative mark-to-market gas hedge book and $600 million in outstanding gross debt related to 2023 bonds.
Bearish Highlights
- Adjusted EBITDA from continuing operations was slightly negative in Q3 due to challenging market conditions.
- The share price has remained unchanged since the initiation of the strategic review, suggesting limited value creation for shareholders.
Bullish Highlights
- The company's operational performance was resilient, with high asset utilization at European facilities.
- OCI's financial position improved significantly, with a net cash position of $1.86 billion, up from net debt.
Misses
- The company faced high natural gas costs and lower product pricing, which impacted its adjusted EBITDA.
Q&A Highlights
- Badrawi discussed the strategic review's aim to realize the group's intrinsic value, with successful transactions and shareholder returns.
- The Rotterdam Ammonia Import Terminal is seen as a competitive asset, with expansion plans in place.
- Nitrogen Europe has a mid-cycle EBITDA potential of $150 million, contingent on normalized gas markets.
- Capital repayments are prioritized over share buybacks due to tax considerations, and the company is evaluating options for optimizing the capital structure.
OCI Global's strategic moves have positioned the company for a stronger financial future, with a focus on returning value to shareholders and optimizing operations. The completion of divestitures has bolstered the balance sheet, and the management remains committed to executing their project pipeline, despite some challenges in the market. Shareholders can look forward to significant returns, with the company's commitment to capital distribution and strategic reviews aimed at enhancing shareholder value.
Full transcript - OCI NV (OCI) Q3 2024:
Operator: Hello, everyone, and welcome to the OCI Global Q3 Results Call. My name is Nadia and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Sarah Rajani, VP of Investor Relations and Communications to begin. Sarah, please go ahead.
Sarah Rajani: Good afternoon, good morning to our audience in the Americas. Thank you for attending the OCI Global third quarter 2024 conference call. With me today are Hassan Badrawi, our Chief Executive Officer; Beshoy Guirguis, our Chief Financial Officer. On this call, we will provide an overview of OCI's Q3 trading performance, a progress report on recent transactions, and a status update on our strategic review. We will end the call with Q&A. The trading statement and investor presentation are available on our website at ociglobal.com and we will be referring to slides in the investor presentation during this call. I would like to remind you that any forward-looking statements made on this call involve risks and the actual results could differ materially from those statements. Let me hand it over to Hassan.
Hassan Badrawi: Thank you, Sarah and thank you all for joining us today. I would like to start by introducing Beshoy to the call and newly appointed capacity as Chief Financial Officer following my appointment as CEO last month. Beshoy most recently served as Vice President of Global Growth and Transformation as well as Chief Financial Officer of OCI's U.S. Nitrogen business. Previously, worth mentioning he was also the CFO of OCI Americas, including OCI prior to its delisting. Since late 2011, Beshoy has been a key part of the leadership team responsible for OCI's growth and build out in North America. And I'd also like to take this moment to wish Ahmed El-Hoshy all the success in new role in Fertiglobe. We're exceptionally proud of the enterprise that we built together with Ahmed creating a world-class platform poised for growth and leadership in its fields. Turning to Slide 3. I want to start by acknowledging the tragic passing in October of an employee of an on-site subcontractor at the Clean Ammonia facility in Beaumont, Texas. This event has deeply impacted our people on the sites, and the safety and the well-being of all of our employees and contractor employees is of paramount to us. And the company is, of course, taking steps to investigate and understand the circumstances regarding the incident, working closely with local authorities, the contractor company, and outside. We reaffirmed our strongest commitment to safety, which will always be our priority, and our thoughts and deepest condolences remain with our colleague's families, friends and local communities and we will provide further updates as necessary. Before I provide an update on the strategic review and recent transactions, I would like to hand over to Beshoy for some commentary on the Q3 trading updates.
Beshoy Guirguis: Thank you, Hassan. I'm grateful for this opportunity and look forward to working with you all in the coming months. Turning to Slide 4. Given the material changes to the size, scale, and scope of OCI's continuing business this year, OCI has moved to a trading statement format for the Q1 and Q3 period starting from today's results. OCI will continue to publish full results on a semiannual and annual basis. Following the announcement of the sale of our Methanol operations to Methanex (NASDAQ:MEOH) and the closing of the sale of Clean Ammonia continuing operations now solely comprises OCI's European Nitrogen business and OCI's corporate entities. OCI Methanol is now classified as discontinued operations, along with Fertiglobe, IFCo, and Clean Ammonia. Adjusted EBITDA from OCI's continuing operations posted a slight loss in Q3 similar to Q3 last year, notwithstanding an improved sales performance year-over-year adjusted EBITDA for our European Nitrogen business decreased compared to the same period last year due to higher natural gas prices, lower product pricing, increased provisions for European emissions allowances, and other one-offs. As European natural gas prices normalize, the profitability of our European Nitrogen operations is expected to improve significantly, reverting back towards mid-cycle levels reflecting the asset's competitive positioning as some of the most energy-efficient in Europe. For context, our European ammonia lines consumed 32 MMBtu of natural gas per ton of ammonia produced compared to the EU average of 37%. We saw a resilient operating performance across both the OCI Beaumont and European Nitrogen facilities in the third quarter with the ammonia lines at European Nitrogen averaging 91% asset utilization and OCI Beaumont averaging 87% across both the ammonia and methanol lines. We've previously highlighted the premium pricing and earnings stability afforded from recent portfolio additions in the European Nitrogen portfolio, including CAN+S, AdBlue, and low-carbon melamine. These products continue to provide superior environmental benefits for our customers. And in the case of premium fertilizer products like CAN+S and UAN+S enhanced yields. Moreover, products such as AdBlue and melamine decouple profitability from the seasonality of the agricultural markets and basic nitrogen products, providing higher earnings per ton of nitrogen. This differentiated product flexibility allows OCI to efficiently respond to market dynamics by optimizing product mix and maximizing contribution margin, positioning us favorably against our peers. As a reminder, our European Nitrogen segment comprises of our nitrogen production assets in Geleen, Europe's only independent ammonia import terminal in the Port of Rotterdam and a well-established multimodal last mile distribution platform into Europe's main industrial regions. Although primarily serving third-party customers, the import terminal also supports profitability at our nitrate facility during periods of high gas prices. In 2022, this capability afforded OCI a unique advantage during a time of significant curtailment of European capacity. With regard to the import terminal, we expect current throughput capacity of 600,000 tons per annum to increase more than threefold to 2 million tons through a phased expansion in the coming years. The expanded capacity will provide a valuable competitive advantage as consumer attention shifts to the import of low-carbon ammonia supported by regulatory initiatives in Europe such as CBAM and the upcoming Red Regulation. This is likely to see a curtailment of higher carbon European ammonia production and a marked increase in ammonia consumption from new sectors such as marine power and as a hydrogen carrier. The weaker comparative year-on-year performance in European Nitrogen was partially offset by lower group costs and eliminations. Here, we continue to make substantial progress in rightsizing our corporate cost base to better serve the current structure and scale of the business. And we expect to beat our previously guided target of $30 million to $40 million of run rate corporate costs by 2025. This will be an evolving metric as we reposition the company appropriately for the future. Moving to Methanol. Adjusted EBITDA for OCI's Methanol business showed a marked improvement year-on-year, reflecting increased methanol and ammonia prices, reduced natural gas costs, and continued strong operational performance. Methanol asset utilization at OCI Beaumont and Natgasoline averaged 87% and 81% in the quarter. Following an incident in September, the Natgasoline Methanol plant in Beaumont, remains down while repairs are underway. Operations are expected to resume before the end of the year and OCI expects this to be covered by insurance less any deductibles. Turning to the balance sheet for continuing operations. We ended the quarter in a net cash position of $1.86 billion compared to a net debt position of $2.19 billion at the end of Q2. The swing reflects net proceeds received from the sale of IFCo and Clean Ammonia during the quarter and perceive the closing of the Fertiglobe transaction and the payment this week of the €14.5 extraordinary shareholder distribution, which is an equivalent amount of $3.3 billion. Based on current natural gas pricing, the future EBITDA impact from hedge losses in the Methanol business is approximately $116 million. Additionally, OCI remains exposed to $40 million of hedge losses associated with IFCo. However, due to collateral already having been posted against these future losses, the expected cash impact is approximately $86 million. Lastly, the Clean Ammonia project remains on track for start-up next year with total cash spent to-date at the end of the third quarter, just shy of $800 million. Total (EPA:TTEF) expected cash spend through project completion is estimated to be $1.55 billion, including contingency. I'll now hand it back to Hassan for a progress update on our announced transactions, the strategic review, and future capital allocation priorities.
Hassan Badrawi: Thank you, Beshoy. With the Slide 5 in the background, it's helpful. During the third quarter and the quarter-to-date, we announced significant milestones in a compared seven-week period. On the 9th of September, we announced a landmark sale of Methanol to Methanex for a gross purchase consideration of just over $2 billion, which includes $9.9 million of Methanex shares to be issued at closing. We announced the success of transaction closings, including the $3.6 billion divestment of IFCo Iowa facility, the Koch Industries, the $3.6 billion divestment Fertiglobe to ADNOC, and the $2.35 billion sale of Clean Ammonia to Woodside (OTC:WOPEY). We continue to expect the transaction with Methanex to close during the first half of 2025 subject to regulatory work streams. A few important note to highlights as mentioned there. With approximately just under $9 billion of gross proceeds from the closed transactions, we have taken the following allocation actions. Firstly, for gross debt reduction at OCI, to-date, we have repaid just over $1 billion of short-duration debt comprising the RCF and bridge facilities that was utilized during the transition period. We've also redeemed our $698 million 2025 senior secured notes at par. We have also settled around $70 million of our securitization program, bringing total those debt repayments to-date to just under $1.8 billion. Secondly, we first move to the announced sale of our OCI Methanol business to Methanex, we announced a repurchase in September the 15% stake in minority -- 15% of minority stakes in OCI Methanol from Abu Dhabi Holding and ADQ for a total consideration of $355 million, including the release of some final dividends due. Thirdly, until next time, OCI will distribute circa or $3.32 billion or the equivalent of €14.5 per share of capital to shareholders day -- a repayment of capital or shareholders prefer as a cash dividend as they elect for the adoption. Looking forward, we would highlight that based on early shareholder election indications in the current slide process, OCI expects to end up with a fiscal reserve of at least €1.2 billion post the €14.5 distribution, providing additional capacity to return capital to shareholders via the same distribution channel. We are guiding for further extraordinary distribution with approximately $1 billion to be done via repayment of capital targeting the first half of 2025, which is, of course, subject to continued progress on the execution of the announced transactions, the ongoing strategic review and the completion of the usual ECM process. Lastly, we note that the company is actively engaged in the evaluation of strategic alternatives for its European production terminal and distribution assets, as previously described. And OCI, of course, will provide updates to the market if and when appropriate to do so. With Slide 6 in the background. This slide shows the evolution of our balance sheet, as Beshoy mentioned earlier, from a net debt position of $2.2 billion as of 30th of June 2024 to a net cash position of around $1.9 million as of 30th of September. The swing to net cash principally reflects the receipt of proceeds from the divestment of IFCo and OCI Clean Ammonia, the latter of which comprised the 80% consideration due at closing with 20% of the consideration deferred to be received at profit completion, which is stated for the second half of 2025. Notable cash outflows in the quarter include liabilities related to the IFCo transaction where a further $61 million liability remains outstanding for certain transaction costs and GAAP hedges. Additional outflows in the period included the repurchase consideration for the OCI Methanol minorities as well as $139 million spent on the key ammonia facility during the quarter. Turning to Slide 7. The left-hand side of this slide will retrace the status of OCI today post the announced transactions and adjusting for the announced use of proceeds to-date at Fertiglobe, closing was executed on the ATX Stock Exchange on the 15th of October with a gross transaction value of around $3.6 billion. We redeemed, as I mentioned earlier, 2025 senior secured notes at par on the 15th of October. And of course, we have the distribution of the $3.32 billion to shareholders for -- happening this Thursday. We also include here incremental $1 billion distribution guidance that we provided today. On the right-hand side of the slide, it shows the remaining assets and expected future receivables offset by the company's existing ongoing liabilities and obligations. Firstly, we expect the close of OCI Methanol transaction in the first half of the year, subject of course to the regulatory approvals, notwithstanding the resolution of the Proman litigation, where we continue to remain confident of our legal position. We further expect to receive the deferred consideration in respect to the Clean Ammonia transaction upon successful completion of the projects. On the liability side, OCI has a contractual commitment to complete the projects, the Clean Ammonia project and with a successful handover to Woodside, for which we mentioned earlier that we expect the investment cost to reach around $1.5 million, including contingencies. We continue to expect a certain quantum of transaction a little costs and other one-offs and potential transaction-related indemnities to be quantified in due course. Thus, of course, we have our currently negative mark-to-market gas hedge book, which is held between corporate entities and the Methanol -- OCI Methanol group. And we have our outstanding gross debt of $600 million representing the outstanding 2023 bonds. In the periods to come, our focus as a management team is on progressing the announcements base, working on the strategic review, and fulfilling, of course, all our existing obligations, the most important of which is, of course, the completion of the Clean Ammonia projects. In conclusion, we're guiding the market to-date with an additional $1 billion of distribution versus capital -- via capital repayments, which takes us -- which would take us to a $6.4 billion in cash returned over the course of a four-year period, and we will continue to keep you updated on any future strategic actions. In closing, I wish to extend my thanks to the entire OCI team for the valued contribution across our subsidiaries and corporate organization. And with that, we conclude our prepared remarks, and we'd like to open the line for questions. Thank you.
Operator: Thank you. [Operator Instructions] And the first question goes to Aron Ceccarelli of Berenberg. Aron, please go ahead.
Aron Ceccarelli: Hello, hi, good afternoon. Congratulations both of you on your new position, first of all. I have three questions. So, the first one, if you can talk a little bit about your degree of confidence about the positive conclusion of the lawsuit filed by Proman on Natgasoline? The second question regards the sale of Fertiglobe. And I remember when you announced that there was a -- you mentioned a potential cash earn-out coming from Fertiglobe. And I would like to understand if you can elaborate a little bit on that? My final one, you mentioned a multibillion equity investments coming potentially. What would prevent OCI to pursue investments in industries other than fertilizers or energy? Or in other words, what could prevent OCI from reinventing itself in a completely different sector like it did in the past? Thank you.
Hassan Badrawi: Thanks to the questions. I'll address in order. First of all, thank you. Secondly, in terms of the litigation, we remain -- as I mentioned during the prepared remarks, we remain confident in our legal position and see the situation as a minimal risk, but that's all we can say at this time. But what's important is that we will reach -- we expect to have some kind of conclusion that is consistent with the pace of the transaction with Methanex. With regards to your second question, at this time, we're not estimating any proceeds from the earn-outs based on the market conditions that we see. But of course, that could take a turn but at this time, it's not something that we incorporate into our calculations. In terms of your third question, like we -- obviously, this has been a topic of discussion that's been reached since we started announcing the transaction and the -- including the transformative nature. At this time, we continue to be focused on executing a significant amount of work. As you can appreciate, we've announced a lot of transactions in a short period of time. We still have a pretty large transaction to get through in 2025. We have to execute a landmark project in Texas in the form of Clean Ammonia on a very determent schedule. And we continue to do some thinking around the future strategy. But of course, we have taken note of all the inbound comments and considerations that investors have in this regard. And as soon as we feel we can share more insights into our thinking, we will do so. I believe what's important today is that we have efficiently returned a significant amount of capital to shareholders with the $1 billion of guidance that we expect to distribute hopefully, in the first half of 2025. This will really take the number up significantly over a period of four years. And -- but of course, we do not preclude any future distributions as well.
Aron Ceccarelli: Thank you.
Operator: Thank you. The next question goes to Charlie Bentley of Jefferies. Charlie, please go ahead.
Charlie Bentley: Great. Thanks for taking my questions. I've got a few. So, just the first one is on your comment around at least $1.2 billion of remaining fiscal reserves. By my math, that would suggest that almost above basically 100% of your shareholders have elected to take a capital repayment. So, can you just confirm that's the case? Secondly is just on the slide where you've got transaction and hedging costs -- gas hedging costs, just any form of sizing there? I mean transaction costs, those kind of sizing as something like $400 million. Is that about the total for that bucket, maybe something like $400 million. Is that too high? It'd just be good to kind of get a sense on that. Third question is just -- I mean, maybe I missed it, is there any kind of status update on the operational status of Natgasoline after obviously the tragic incident? And then very finally, I mean, just I guess taking a step back a bit, I mean, following on to my own question is, I mean you started the strategic review to realize the intrinsic value of OCI as a group. The current share price, basically no value has been realized versus the kind of share price as the date the strategic review is initiated. Just in your thoughts around kind of what you think are is the most value accretive way to kind of unlock the discount to what is kind of an EV that is mostly based on cash? Thanks very much.
Hassan Badrawi: Yes, thanks. It's a lot of questions to get to, so I will do my best. On the fiscal reserve, we're guiding based on the indications that we've received in terms of election that this is the minimum balance that we think we'll end up with going forward based on the information we received in the life process. Historically, we have seen that predominantly shareholders have elected for capital repayments versus cash dividends. So, we don't expect this to be any different in this current process. It does give us another -- it does provide us with the reserve to effect the $1 billion of distribution that we've guided for in the same way through a capital repayment and potentially even more. In terms of your second question -- sorry, can you elaborate the question on the hedging again?
Charlie Bentley: Just the transaction costs, I mean the bucket on the post Q3 liabilities of transaction costs and gas hedging, like what's the overall cash impact still expected like residual transaction costs still to be paid and any hedging cash impacts from here just on that Slide 7?
Hassan Badrawi: We mentioned during the prepared remarks that based on the current natural gas pricing, the future EBITDA impact from the hedge losses on the methanol business is around $160 million and we're exposed for another $40 million in IFCo. So, that's kind of the effect of those hedges. However, due to the fact that we have posted collateral already, the cash impact of that is a bit lower at just over 80 -- I think around $86 million. In terms of transaction costs, we -- naturally, in M&A, such as this, there are various transaction expenses, including auditors, bankers, and lawyers. It's worth noting, though, that the effective transaction was predominantly was managed in-house. So, we have managed to be quite efficient in terms of managing the transaction expenses overall, and we'll provide more details in due course, but it's nowhere close to the number that you suggested, if that's helpful. In terms of your third question on the status update, I believe Beshoy mentioned during the prepared remarks that we expect the plan to be -- the repairs to be completed and back running during Q4, late in Q4. So, that's something we continue to monitor. But it's also important to mention here that as per our previous experience, our insurance kicks in and a large part of that -- of those repairs will be covered by the insurance proceeds. In terms of your last question -- can you repeat the last question again, sorry?
Charlie Bentley: I mean it was basically the strategic review was initiated to realize the intrinsic value of the group on a basically since the day it was initiated after kind of generating $11 billion of proceeds from these transactions. The share price is basically what it was on the day it was initiated. So for shareholders, not much value has been created even though the EV is more than 80% underpinned by cash. So, just what your thoughts are around the most value-accretive way to realize the discount to cash?
Hassan Badrawi: I mean, yes, I mean there's quite a bit in that discussion. I mean the discount will continue to close as we execute on closing and give visibility and effect distributions and continue delivering on our plans, which we believe we have been doing quite well. There are obviously separate moving parts that contribute to today's discounts. We believe the strategic review has to a large degree closed much of the NAV discounts. The buyer spectrum willing to pay a premium for these assets tells you that we were right about our thesis that they're better held by owners with greater relevance and synergies than help collectively within the OCI grouping. We beat expectations on IFCo. We did very well in terms of our valuation on Fertiglobe. We've achieved quite a healthy premium on Clean Ammonia despite being in project bid because we had the benefit of first-mover advantage and took a lot of calculated risks and deployed our experience there. The MetCo transaction is providing us with some upside optionality as well in terms of form of shares. And again, it's an ideal home for that business going forward. And in terms of individual transactions, we've achieved -- whether it's double-digit multiples or IRRs that have exceeded expectations, I think we've done well. We've executed the deals with crystallized premiums, and we've gone through a lot of the monetization. And we have -- and the goal, of course, has been to return as much capital as possible, which we have duly done so with $3.4 billion, another $1 billion of guidance. And mind you, I also -- since the commodity uptick that we've had when other companies chose to deploy a lot of CapEx back into the business, alongside buybacks and some distributions, we really prioritized distribution to shareholders and distributed $2 billion around that time as well. So, in totality, I think OCI has exceptionally -- has been exceptionally focused on returning capital to shareholders and closing that discount as much as possible. But it's obviously something we can't control at this exact moment. I hope that answers your question.
Charlie Bentley: That’s wonderful. Thanks Hassan.
Operator: Thank you. The next question goes to Christian Faitz of Kepler Cheuvreux. Christian, please go ahead.
Christian Faitz: Yes, thanks. I had some technical difficulties joining the call earlier, so that question might have been asked. But can you elucidate a little bit the -- your view of the value of the Rotterdam Ammonia Import Terminal? I mean it was worth a lot to you that you still had an international business. But can you elucidate that a bit? My understanding is you own the asset, which is sitting in the Rotterdam port. Is that correct?
Hassan Badrawi: Yes. Sorry, sorry, I was on mute. I mean the European business does -- comprises of OCI nitrogen production facilities in Geleen, and it also includes the only -- one of the only independent ammonia terminals in Europe, which is solely dedicated to third-party sales as opposed to other terminals that are vertically integrated with incumbent fertilizer plants. And it does provide us with a competitive advantage as consumers shift attention to import of low-carbon ammonia going forward. So, the tanks are -- the existing tanks are owned by us. We do have permits secured for additional expansion that will take some time. So we are looking at phase expansions that hopefully get us to 2 million tons per annum over time, allowing the scale up of the operations there. And we have been building our distribution business as well because we regard this complex as a distribution hub -- as a crucial distribution hub into Europe. I can't really comment on value in this exact moment for obvious reasons. But it is definitely one of the -- it's one of the most integrated sites in Europe. It's one of the most energy-efficient facilities. And it's one of the unique distribution import terminals, and we believe it has a lot of strategic value.
Christian Faitz: Okay. Thanks very much. Very helpful. Thanks Hassan.
Operator: Thank you. The next question goes to Stijn Demeester of ING. Stijn, please go ahead.
Stijn Demeester: Yes, good afternoon. Thanks for taking my questions. First one is on Nitrogen Europe as well, can you elaborate on the mid-cycle potential that you mentioned in the prepared remarks? Can you also comment on the strategic alternatives for the asset, which you mentioned in the slide deck? And then secondly, given the discount to fair value, is a buyback in your toolbox currently? Is it contemplated? Thank you.
Hassan Badrawi: Yes, I believe the number that we last shared around the mid-cycle for that business, which, of course, is based on various assumptions and considerations was in the ordinance of $150 million plus EBITDA. But that, of course, reflects a normalized gas markets, which unfortunately is not the case today as of today despite decent reserves in Europe. There is a bit of a geopolitical component reflecting the pricing even though the curve does go down in time, reflecting a more stabilized environment. In terms of the strategic alternatives, I mean, we just wanted to be transparent about the fact that going forward, consistent with how we've approached our business in the past, we're doing some -- we're currently engaged in some thinking around the appropriate strategy for our European platform going forward in a manner that unlocks the most value for shareholders, and that's all we can say at this time.
Stijn Demeester: And on the buyback?
Hassan Badrawi: Sorry, there was a question about the share buyback?
Stijn Demeester: Yes, indeed, whether a buyback has been complicated given that fiscal reserves are likely to be depleted after the upcoming $1 billion repayment.
Hassan Badrawi: No, I mean -- I think for the time being, that is based within the framework of the guidance we provided. We think the capital repayment route could be the most optimal for our shareholders. Also, as reflected by the high rejection rate that we get through the cash distributions, the share buyback, obviously, is disadvantaged in terms of reporting tax compared to the capital repayment. So, at this time, I think this is the primary avenue for returning capital to shareholders.
Stijn Demeester: Understood. Thank you.
Operator: Thank you. We have no further audio questions. I will now hand back to Sarah for any webcast questions.
Sarah Rajani: Thank you. We have a question from Manjit Saini [ph]. Can you talk about your existing 6.7% bonds outstanding? This doesn't appear to make sense in the context of the run rate EBITDA earnings for European Nitrogen. Why would you not just take out all of the remaining debt?
Hassan Badrawi: Thanks for the question. We were assessing alternatives for the remaining debt in the business in the context of our future capital strategy. And while the outstanding bonds could remain attractive financing for the company, we may consider further optimization of our capital structure as we think about our business going forward. So, we'll continue to do some thinking and share our thoughts in the future in this regard.
Sarah Rajani: There are no further questions on webcast at this time.
Operator: I'll hand it back to Hassan for any closing comments.
Hassan Badrawi: Thank you very much. Thank you all for participating and we look forward to our next call.
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