Hans Zayed - Investor Relations Director and Compliance Officer Nassef Sawiris - Chief Executive Officer Hassan Badrawi - Group Chief Financial Officer

Christian Faitz - Kepler Cheuvreux Henk Veerman - Kempen Frank Claassen - Degroof Petercam Evgenia Molotova - Pictet

Thank you. Good afternoon, and good morning to our audience in the U S.

Thank you for joining us on the OCI N.V. first half 2018 results conference call.

You can find all the details of our results in our press release and financial statements, which we posted on our Web site this morning. With me today are Nassef Sawiris, our Chief Executive Officer; and Hassan Badrawi, our Group Chief Financial Officer.

On this call, we will review OCI’s key operational events and financial highlights for the second quarter and first half of 2018, 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 introduce our Group Chief Financial Officer, Hassan Badrawi.

Thank you, Hans and thank you all for joining us on this call again. As Hans mentioned, this morning we posted our results for the second quarter and the first half of 2018, which we achieved another record for our sale volumes, continued to demonstrate step up in our EBITDA compared to last year and improvements in our leverage metrics.

During the second quarter of this year, our self produced sales volumes increased by 47% to 2.5 million ton, our average realized selling prices improved over the same quarter last year. Because of the higher volumes and higher selling prices, second quarter revenues increased by 43% to around $700 million.

Reported EBITDA increased by 92% to $215 million and our adjusted EBITDA increased by 22% to $204 million. That's mostly due to the release of a provision for the insurance claim received for the Sorfert shutdown for which we received the first payment of $20 million in May.

We also reported a net loss of $40 million and an adjusted net profit of $3 million in the second quarter of this year. The decrease compared to the same period last year is mainly due to the first time accounting for IFCo this year in 2018, which has resulted in higher depreciation and non-capitalization of interest.

There were also $29 million of FX translation losses that relate primarily to the appreciation of dollar debt in our euro denominated statutory financials as well as accounting representation. More importantly, on our primary measure of operational growth, we achieved a healthy free cash flow of $133 million during the quarter, representing a 62% conversion of our reported EBITDA.

This takes the total free cash flow achieved during the first half of 2018 to $247 million compared to $20 million in the same period last year. The free cash flow number excludes the trailing and of our growth CapEx plans for which we have spent $61 million in the first quarter and around $74 million in total for the first half of this year.

Turning to our balance sheet. Our net debt stood at $4.36 billion as of 30th June, 2018, a decrease -- representing a decrease of $100 million from 31st of March.

Our net debt was impacted by seasonally low EBITDA compared to Q1, total capital expenditures of $89 million, of which maintenance capital expenditure was around $38 million and the balance of the group CapEx was related mainly to BioMCN expansion in Europe. It was also impacted by the $20 million of cash received as down payment from insurance related to be shutdown at Sorfert, positive currency translation differences in the balance sheet of $73 million, which are the result of the appreciation of the U.S.

dollars against the euro and the Algerian dinar during the quarter, and other non-operating items of $44 million relating to a number of items, including debt restructuring costs such as the convertible which we retire and some short-term loans to Natgasoline. During our last conference call, we discussed our extensive and successful refinancing activities that took place in the first and second quarters.

Since then we have further improved our capital structure through the buyout of the minorities in OCI Partners. We are finalizing transaction for the 17th of July for a total cost of about $120 million and this is now 100% owned subsidiary.

This transaction allows for simplification of the group's corporate structure, streamlining of our methanol commercial operations and the elimination of public listing costs. At this point, I would like now to hand over the call to Nassef Sawiris, our Chief Executive Officer for a further commentary on the results and the outlook.

Thank you, Hassan. First of all, I would like to thank the entire team for all the progress we made during the quarter, both operationally and strategically.

I'm pleased that we reported a healthy level of operational free cash flow and a reduction in our net debt during the quarter, which reflects our large 5 billion [Technical Difficulty]. The benefits of our commercial strategy of limiting forward sales coupled with our well diversified portfolio are cleared as we achieved this improvement even with planned turnarounds at some of our plans during the quarter.

We have started the second half of the year on a strong note all our operations are running at a good utilization rates at the moment. We continue to ramp our volumes and our underlying end markets are looking increasingly positive.

During the second quarter, we also made good progress with positioning the organization to capitalize on this growth. We strengthened our position in North America with the start of our marketing joint venture called N-7 with Dakota Gasification Company.

This platform gives us an enhanced sales platform and extended geographical platform. We optimize our corporate structure with the buyout of the OCI Partners' minority.

If you look at our prospects in more detail first is with the respect our own volumes in 2018 compared to a year ago, we are seeing a big step up in volumes coming through from Iowa and our plants in North Africa. In addition, as I mentioned in May, we will start seeing the benefits from some productivity improvements that would help us achieve higher run rates going forward.

For example if the EBIT increase utilization rates from just over 90% to above nameplate capacity currently following the short turnaround in April. Our new methanol capacity is also staring to contribute.

We made excellent progress with the start of methanol production at Natgasoline at the end of June. The speed of the ramp-up has been impressive and exceeds the industry average for start of plant.

The plant has been running consistently above 100% in the past few weeks and we’ve already shipped significant volumes of methanol around 200,000 tons. The plant is also proving to be very efficient and has achieved gas consumption that has been better than the designed date.

We now have one growth project remaining, which is the refurbishment BioMCN second line, which we expect to start production around the end of this year. If I now look at developments in our end markets, first I will talk about nitrogen fertilizers.

Our realized selling prices increased on average during the second quarter compared to a year ago, but ammonia prices remain depressed. It is only in the past few months that prices for all our product started to turn and are now at a much higher level than a year ago.

Urea prices have moved to $310 per ton or $100 higher than a year ago and up 25% from the average urea price of $244 reported in the second quarter. Other fertilizer products prices are witnessing the same moment, price dynamics in the nitrogen fertilizer markets are looking very positive, supported by healthy supply and demand fundamentals.

We continue to believe that net supply additions have peaked and that the demand will outpace minimum global urea capacity additions over at least the next four years. We expect exports from China to see actually lower levels going forward, exports have been immaterial this year so far only 800,000 tons.

Price increases are also supported by high production costs for margin produces in China and Europe due to high coal and natural gas costs. Finally, exports from Iran one of the largest urea exporters globally are at risk of significant procurements following U.S.

sanctions. As of now, Iran is fully exporting but this situation could change.

So what we see in current prices reflects full utilization of the Iranian capacity. So if that happens and Iranian exports all production get curtailed that should have a significant result and an additional pricing of the supply demand balance.

The only product that we think has been a mismatch and has further room to grow is ammonia where ammonia staging at the same level at urea prices, which usually should not be the case. Ammonia typically trades at a premium to urea prices, given that it takes one ton of ammonia to make 1.8 tons of urea.

I'll move now to the industrial chemicals market, in the second quarter, our industrial chemicals portfolio has once again solid performance and the outlook remains positive. We have had good visibility for methanol markets for the next four years where we expect limited capacity additions relative to demand growth in the high single-digits.

Like urea some methanol capacity additions and exports from Iran may be at risk. The outlook for melamine remains healthy.

Finally, we continue to enhance and grow our diesel exhaust fuel platform, which is positioning us for growth above the 20%, which is the annual growth of that product consumption worldwide. In summary, our volume growth comes at a time when our end markets are on a positive trajectory and are more positive than most market participants are expecting for this year.

We are one of the lowest cost producers in the industry globally and as such, we believe we are best placed in the industry to take advantage of the improvement in our underlying market. I'll now open the line for questions.

First, can you speak to North Africa’s net profit versus Q1 '18, why was it down versus Q1 18?

On the segment on the specific ones, we have to go on a plan-by-plan basis, because EFC and EBIC while they're consolidated some of them had turn-arounds in the second quarter. EBIT for example had the five year turn around in the second quarter and other than that EFC also had part of the turnaround that went into -- a little bit into the right took place.

So it's mostly and as we said in the announcement today, H2 has in face some very little turn-arounds planned, limited maintenance that are sub seven days.

And in terms of the $700 million OCI N.V. revolver, could you say how much of that was drawn on June 30th and how much is drawn now post the OCIP minority takeout if that is how you finance the OCIP minority takeout?

No we're not going to comment on numbers for June 30 and not quite comment -- few details of the Q3 you'll have to wait for the Q3 quarter. But you can extrapolate from the free cash flow generation in Q2 at significantly lower price so Q3 pricing environment is significantly improved from Q2.

So yes, we have that OCIP payment but we also have higher cash flow generation in July and August as expected.

And the revolver, the $700 million OCI N.V. revolver at June 30th, what was the outstanding amount?

We don't segregate each significant credit line, in general, so you have our net debt. But basically the revolver we use as one facility that has the most flexibility of course, so we reduced it as cash comes in and we tap into in when there are needs.

There is also a big impact of the gross debt versus net debt and that is work in progress, it's improving now, we expect close to 20% acquisition of the Beaumont minorities and other milestones and some other plans that we will have significantly lower gross debt by year end in relationships to the net debt and that would be a positive also for bringing down the revolver. We are handling daily treasury in a completely different approach than we were when we had to take care of certain minorities, or we had to take care of certain covenants like in Iowa during construction and all that.

So you'll see a collapse between the growth debt and the net debt. And overall our aim is to finish the year with a significantly improved net debt number and significantly lower interest expenses moving forward for 2019.

I guess I have a request for you to consider is quarterly maybe consider providing us with the detail of your debt components each quarter, and also why you give sales by segment entities if it is possible to give DNA and EBIT by segment entities. I know you give that on an annual basis, but it'd be interesting to get that on a quarterly basis.

You do provide the net profit, which gives some indication, but it'd nicer to have EBIT D&A. Just for your consideration to provide more color around your business….

First of all, can you give us sales bridge in terms of your volume price and development in Q2 versus Q2 '17. I'm just trying to get my head around the price increases you saw of -- I would believe some 10% or so in the mix, and to your volume…

So on what product…

Yes.

On which product, I didn’t hear you?

No, I would believe if I look at your mix sold, I would believe your prices would have been up probably in the high single digits percentage range, and your volumes I believe were up 47%. So I'm just trying to get my head around the plus 43% group sales development.

And then I'll follow-up with another question.

Some of the negative that affected that could be the higher gas costs in Europe for quarter one that took a bit of wind out of the second quarter earnings, so that came as that's -- the volumes included also some of the experiments own produced --you are talking about own produced volumes or total volumes including [Multiple Speakers]. We primarily the key highlight is the -- first of all, the higher gas in Europe and then on the net profit basis, you see also the start of the impact of the depreciation in Iowa, which at the latter part of last year was still producing but it wasn’t capitalize, the capitalization on accounting was [Multiple Speakers] starting from '18.

Then as another question or basket so to speak. Can you give us an update on the performance of the couple of your plants like for example how is IFCo running at the moment, the methanol facilities in Beaumont, including maybe comment on the Natgasoline rents.

And then finally do you see any draughts related impact in Q3 in Europe, simply because we were so tried that farmers couldn’t apply any fertilizers in late Q2 potentially early Q3, so especially in the late stage crops?

First, I'll start by the operational performance of the plant. We're very happy with the Iowa plant actually we are excited about a lot of the potentials of improvements that continue to exist.

To give you an example, on an average daily -- we produce about 115% of the nameplate of Urea, which goes down to the downstream DEF and Granular Urea, as well as UAN. We also see a higher nameplate performance on ammonia around 110% with a lot of rooms to improve, especially once the weather gets colder after the summer on the ammonia side, so we're very pleased with that plant.

We are actually doing very small investments in Iowa as we speak with adding more storage capacity in DEF. DEF is our highest margin product by far, and our intent is to grow that production platform.

We have also introduced almost 300 rail cars to be able to access more destinations for DEF. The beauty of DEF also is that that product disappears from the ag market.

So it tightens the ag market, while it goes down into the trucks and disappears. So we're very excited about DEF as a products in general and the growth that we're seeing in new usage for DEF in construction, equipment and agricultures, so it's not just trucks and private diesel passenger cars.

So on the Iowa side, there is a lot of work being done on the DEF front. We're very happy with where the plant is performing.

Going back to Texas, both Beaumont has continued to run extremely well, and Natgasoline was a nice surprise after start-up, we had practically very little downtime from the day we started the plant with the -- actually exceeding nameplate capacity and with a good potential to do so on a sustainable basis. In addition to a very important thing that we look at very clearly is energy efficiency in the plant is below our calculations for how many MMBtu of gas been used to produce a tunnel of methanol.

And we think that number also going to be improving further with the colder weather.

And that as I said -- finally, do you see any draught related impact in terms of volumes in late Q2 or having run Q3 in Europe?

No, it was actually more from Q1 to Q2, but -- so winter came late in Europe as judging by your accent, I assume you know. So the…

Yes, winter came late summer came soon, so that's why I’m asking at the back end of the growing seasons. Is there any volume impact that you would have seen in your numbers?

No, because I mean a lot of it is quite normalized volume but we did have a turnaround in OCI Nitrogen in Q2. So obviously with the turnaround we dispatch less, we keep some for future commitments.

So I wouldn't call it because of the weather, but the turnaround -- and the turnaround to be very honest, we opportunistically didn't shed a lot of tears on a prolonged turnaround on ammonia in Europe at higher gas prices, given that we have excess export ammonia at competitive pricing within our systems. We actually brought from our cargo and we’re not the only ones who's doing that, other producers are also curtailing some ammonia production and importing ammonia.

So yes while it has some effect on the OCI standalone but you can also look at what happens on end of June till today, you can see almost as 20% some price improvement in ammonia. And we think that ammonia prices have need to go even higher to justify continued production and to justify the arbitrage between ammonia and urea.

First question just around the movements that we've seen in the urea markets after $300 of ton seaborne, obviously, you're indicating that there's potential for scarcity pricing in this market. The prices today reflects just trade speculation around that scarcity or is it sinking into the farming community as well now that there could be a shortfall really for next application season?

And I guess another corollary to that, does that mean that actually we'll see urea prices disconnect from crop prices, which haven’t actually done very much year-to-date.

Obviously, crop prices are something that everybody watches but that is more on the U.S. side.

And local emerging markets surprisingly became larger consumers or fertilizers post the currency devaluation, because in terms of total costs of the agricultural production, like for example in the Russia, we so of course the big devaluation of the ruble, a higher increase in domestic consumption of fertilizers. We’re seeing more demand in some Lat-Am countries post devaluation.

So because the other non-important components of fertilizer, labor, ag, land and all that, our thinking -- and the proceeds from exporting, their products are becoming much more attractive in domestic currency terms. So, that is one issue that is a bit different in emerging markets and interesting statistic is that for the first time and the last 100 years that Russia exported more act products in 2017 than military sales.

So, that’s a key milestone to look at, we’re seeing that also in the emergence of very aggressive new markets and interest and increase agriculture activity in East Africa. Now, Ethiopia is growing it’s fertilizer imports, they have a population to feed, so they two options, import the finish agriculture product or import fertilizers and do it at home and create jobs in the economy.

So, East Africa is going to be a significant new market. Now back on whether the prices that reflect speculation or reflect dynamics, we don’t know the answer, but what we know for sure is that historically the levels of fertilizers within the system and storage are extremely low.

You have significantly lower fertilizers in India which is a big market. You have significantly lower imports this year in Latin American than last year and the same applies to Europe and that is a key indicator.

A country like Pakistan for example had 80,000 tons in inventory a few weeks ago and they’re considering how to deal with such a situation. So, what’s clearly is that the system in storage is not reflecting any kind of speculation.

Typically when you have speculation you would increase inventory in the corps and in the farmers are always of anticipation. We are entering this part of the summer with significantly lower inventory than we had last year.

Second question if I may on methanol and just how -- well two parts, how you see that the market outlook into year end and into 2019? And secondly, noting that Natgasoline is a world scale facility, are you going to -- would you take a price over the volume strategies you ramp that?

Or is the market there in your opinion to actually to ramp aggressively, not the right word, but ramp quickly without too much price impact?

First of all, I mean methanol is a product that has been growing between 6% and 7% in terms of the demand in the last 10 years, on average. So, the emergence of the big demand pocket in MTO plants in China created even a new dynamic and increased the dependence on methanol pricing correlation with oil price.

So, you have to take a view, if current oil prices are sustainable or have room to grow to determine the methanol. We don’t want to speculate on oil price and hence we’re not going to speculate on methanol price, but what we can talk about is that the introduction Natgasoline and putting that product into the market had minimum impact despite its happening in the summer and despite a lot of MTO shutdowns in China.

So, in the foreseeable future, we see the methanol pricing as continuing to be very strong. The market observed the volume.

There is no drama there in the launch, so we neither need to -- we will sell a 100% of our production by virtual of being the lowest cost producer with $2.60 or $2.70 gas in America and most efficient newest plan. So, we don’t need to make that debate and in general methanol is quite tight at the moment.

Hi. Good afternoon gentlemen, thank you for taking my questions.

I still have quite some questions left actually. And I hope we can go through them one by one.

Firstly, beyond the extent already discussed on your -- on your debt position. I mean now that the expansion phase has been nearly completed de-levering is obviously quite an important strategic pillar for you.

And given the -- given the dynamics in the first half of the year, can we still more or less expect you guys to sort of de-lever from 4 to 4.5 times net debt EBITDA towards let's say approximately 2 times net debt EBITDA in 2020 and then obtaining the investment grades? Has anything changed in that respect?

In terms of your expectations or maybe you could also give us a little bit of a feeling, how that trajectory into the end of '18 to '19 how it will look like?

So, I'll start with some of general items and if you have specifics, I'll pass them on to Hassan. But our view is that we could -- given the trajectory of the second half, we could see a situation where by the end of the year, we're net debt to EBITDAS below 4 times already by the end of '18.

And that would be a very positive milestone. And looking forward, you can see our free cash flow generation at reduced prices in Q2.

You can make the assumptions at current prices without doing too much we could see a generation of significant free cash flow in '19. So, there're also some issues that we will talk about when we issued the bonds.

Natgasoline is over capitalized and there's a lot of focus on the improvements that will happen. So, I would say, if anything that trajectory has improved and might be shortened in terms of return to investment grade.

I think as demonstrated by the free cash flow conversion is due on the second quarter which is a seasonally lower quarter, as prices improve that conversion will only be bolstered further contributing to the deleverage impact. We still remain committed to achieving that deleveraging trajectory as we've highlighted in every quarter so far.

The investment grade is not just reducing the debt, but actually increasing more the free cash flow generation. So, we're hitting it by reducing the growth number, but we'll -- you going to see in '19 or later in this date of this year a run rate that reflects an improvement in the credit matrix.

Okay, very good to hear, that's all running sort of out of expectations at least out of my expectations. Maybe zooming in one part of your cash, cash generation, which is working capital I mean we've seen a partial reversal in Q2 versus Q1.

How like -- how big is that sort of source of cash for you still in the upcoming years? Do you see a lot of room for improvement in your working capital?

Maybe you could give some more color on your working capital movements in the -- let's say as you now fully ramped up in the remainder for year or into 2019 dependent on what you can say, what you can't say, but just to give some more color on the long-term opportunities in your working capital position?

We have changed our sales and marketing policy. We started in Europe last year.

Basically, we're not rushing to sell in July and August. We look at pricing movements in the last 20 years and with the exception of 2008, there has been a huge gap between the pricing in 2 to 3 months and the remainder of the year the 2 to 3 summer months.

And we looked at where the product was going, the product was not going to the farmer, it was going to an intermediate whether it's a crop or whether it's a trade house. And we said we don't need to be selling three months forward and two months forward and booking in a lot of orders in June for July and August.

We're going to be prudent about what we sell in those low-price environment months. And the stockers and the traders that buy your products on the cheap in the summer become your competitors later in the year, so that product hasn't actually sold.

You've just obtained refinancing at almost 20-30% cost by selling it early. So that obviously does play on the working capital management.

But two months later, you discovered that was an increasingly very attractive business preposition because what you didn’t sell -- I'll give you an example CAN in June was at €170 to €165. Today, its closer to €210 to €220 and these are only two to three months and while part of the rationale is that we are not going to be giving the product to anyone who once provide three month forward and four months forward on storage.

We were going to manage to sale months-by-months. We started that last year to good results, we've done that in the U.S.

where us and Dakota Gasification did not participate in the fill program, we sold only almost one month ahead. That's regular sales so with that you kind of assume a slightly higher working capital during late spring and early summer.

That goes away starting September or October, so that management is not going to be strictly on autopilot it's going to have to do also with our new very strict policy that we would not going to be, we don’t call it defensive season we call it the full season.

So, basically what we as analyst can conclude is that you will conclude is that that you guys have been let's say compared to the previous year is more strict on working capital movements and that we can expect at least like some positive numbers there or at least let's say as a more efficient working capital management. Is that correct?

Actually, we prioritize free cash flow over multiple quarters, rather than quarter-per-quarter. So we are not going to fixate about working capital at the end of June.

And then -- and dump a lot of product that the market doesn’t need in July and August. We are going to manage it to what is best for the full-year and not months-by-months.

You also see working capital going up when you're producing more and when the cost of production in euro goes up. So it's not only that one strategic shift, it has also to do with the cost of the product.

Then on interest costs, it was already discussed during the during the comments being made earlier, but the hundred and 182 million when I sort of exclude the FX movements, it looks a bit high and I understood there are some one-offs in there such as debts settlement expenses, but now that all the let's say that facilities are in place. Could you share with us what's your expectation is, of let's say, this line item and once again like if we can exclude sort of the FX impact because you have continues movement there?

But what is the underlying let's say interest expenses for the full-year or at least maybe you can share with us what has been the interest expense on an underlying basis in the first half of the year?

It's a good point, I think maybe just focusing on the first half which is the result that are out there in the market. You are correct that the interest line was a little bit artificially during the first half by a number of one-off primarily related to the debt restructuring costs across the system whether it's the convertible and other facilities that we have addressed in our last call, as part of the successful refinancing.

We estimate that's up to our 30 million of that line item was associated with the debt restructuring cost, including the convertible, the facilities in Egypt, some of the N.V. facilities and some cost of other bridge facilities that we had to put in place as we transitioned into our new capital structure.

So that's a correct insight. Overall, our average interest rate on our grow debt for 2018 should be around 6% for this year, but obviously we are very focused on as not as mentioned earlier on opportunities to further optimize our balance sheet and look for further deduction, as we generate a lot of cash flow that the absolute numbers would also come down next year.

Another question I had which maybe a bit of a longer shot, but with the prices across your end markets moving up bit by bit, and many of your peers have actually discussed also during that course, that said the earnings potential they have in a more or less mid cycle scenario or at least the sense sensitivities they see on their earnings when it comes to different prices. And I think many of your shareholders also looking at this when they invest in OCI.

So maybe, maybe you could comment on what you guys see as they appropriate mid cycle level? Or what you guys regarded as a mid cycle level?

And what could be in steady state OCI platform? What could be the EBITDA potential in such a scenario?

Quite significant, I don’t want to give a number yet because we are still working on the new tweaking which are quite significant at higher prices, if we produce 200,000 tons more of methanol as a result of optimization. All 200,000 more in Iowa you get the effects of that at higher prices become meaningful numbers, but I think we are well ahead of the prices in a 19 continue the trajectory that we’re expecting them to do.

We’re expecting significant improvements in EBITDA next year with our share of net gasoline with that would be sizably more than 50% jump in EBITDA and a significant increase in free cash flow.

I think the lot of comments to one of the things that we've highlighted consistently in our previous interaction with our investors is that having a relatively young asset base, which means that your low -- your maintenance costs are quite low going forward, and that even in the neighborhood of $150 million to $200 million and without effective tax is also being competitive. This allows us even in the seasonally low quarter like the second quarter we're able to demonstrate 62% conversion of EBITDA to free cash flow.

So, above that anything upside in the prices, that's addition conversion into our free cash flow and obviously feeding into our trajectory of deleveraging.

One of our key metrics that we monitor is conversion of EBITDA to free cash flow, and that's something we take very seriously, and I think we have one of the best maintenance organizations, particularly in North Africa where we do everything in-house so at a very reduced cost and plus the fact that the plants are young. So I turned around that cost that to North Africa a $10 million with cost $30 million in Europe and equal number in U.S.

So that's also part of the free cash flow conversion is that you don't have even better operating cost plus you’re maintaining cost which is highly labor-intensive is benefiting from some of the locations we have plus the energy efficiency a younger plants right.

Thank you, I mean if you look at these sensitivities or some of the order or let's say like or likewise companies and I sort of apply these numbers in OCI and sort of assuming that the operational gearing on higher prices works in the same way. I mean, I can imagine it would be quite exciting for you guys know the prices creeping already since the beginning of Q3.

And that is supposed I think you said it well the large optionality have on cash generational on EBITDA. So, yes, I mean that’s good.

Maybe last question on debt, you mentioned that you are aiming to increase your market share in the business as demand is growing about 20%. You mentioned then you plan to outgrow the market in that sense.

Just from my understanding that does not involve huge CapEx investments rights, those are marginal investments?

Mostly logistics, and all the railcars are leased and the leasing is very efficient because again, DEF is our highest margin product, especially in the in Iowa. I would give you an example we replaced one major truck stop a source that was importing DEF from Poland, shipping 50% water across the ocean.

So that's not efficient because DEF was sold with a lot of water so logistics in DEF are key and the fact that we are the largest DEF producer in the Midwest gives us access to the Chicago hub and all the Midwest traffic and all that, that's very positive. So we are very excited about that product because every time we shipped the product from UAN all urea to DEF our margins expand.

So it's a very some of the decisions that we made have a payback of six months. So it's not a CapEx issue it's more of a logistics management to be able to reach more customers of DEF.

Frank Claassen of Degroof Petercam. Just one question left on DEF as well.

How far you with the plans in Europe to launch DEF? And you talked about run rate volumes in Europe, especially, what is your targeted for DEF?

And how and when do you expect to achieve this?

In Iowa, we are increasing DEF to where it could be in '19 our largest product sold in terms of margin contribution. So, we are going in Iowa to the maximum, Holland given we're going to combine that with a turnaround in '19 to avail DEF out of the Geleen plant.

That's not a big CapEx, and we've already made some experimental shipments four or five so far of DEF produced in Egypt to Southern Europe. So, we're taking DEF as a core product that we like DEF is growing at 20% per annum that the fastest growing product and that demand has to be filled ideally with plants that are new and young.

It is very difficult to produce DEF from old plants.

Okay. Thank you and maybe one small question, you already received 20 million on the insurance payment for Sorfert.

What is the way forward? Can we expect more in the second half?

That's correct. The $20 million was an upfront payment on the claim, which is part of normal procedure.

We are aiming for finalization of the claim of the insurance claim in its entirety or the balance sometime between Q4 and possibly early Q1.

Evgenia Molotova of Pictet. Just one on Midwest premium, obviously now when there is more production in Midwest actually, what do you think is going to happen to premium, which was quite considerable in the past?

There is no production coming in the Midwest, at least, there is no hole in the ground in the Midwest for someone constructing a fertilizer plant in the Midwest. And I would be surprised if we see someone digging a hole in general for a fertilizer plant in the U.S.

given the high cost of CapEx required. Yes, you have an attractive gas price, but the entry ticket is painful, in terms of CapEx, in terms of project finance availability and in terms of access to labor.

So, I think the premium in the Midwest is actually on the right trajectory and expanding. It's not just because of the supply demand you have other issues.

The river is playing closer. People cannot have access to products from imports in the New Orleans.

The fact that also these long dated trader contracts from the Arab Gulf, they don't make sense any more for the Arab Gulf producers, they were done in the past when the U.S. was exporting two to three times -- sorry, was importing more than double what it was going to be importing moving forward.

So, right now, the Arab Gulf has more demand in Asia, more demand in East Africa. They can achieve much higher net backs than sending it on a blind formula to New Orleans and have a trader also sell two barges and lose money and manipulate the price, and the Arab Gulf producer can lose significant amount of optionality as opposed to get a fixed price and go east.

So, we expect that moving forward there will be less product coming from the Arab Gulf, none has arriving from China, very little arriving from Venezuela and the traditional exporters into the U.S. So with that, that will also affect the Midwest premium.

Thank you, ladies and gentlemen, and looking forward to our next call in three months.