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| Caveat Emptor This chart is not very accurate. |
Kochland is a great book, that I recently read. https://www.amazon.com/Kochland-History-Industries-Corporate-America/dp/1476775389
Koch Industries has a Market-Based Management system that drives innovation and growth.
Last year due to skyrocketing energy prices in Europe compared to the US OCI was very profitable.
An interesting possible use of ammonia is as a Zero-Carbon (maritime) fuel:
Burning ammonia as a fuel: The combustion of ammonia to form nitrogen and water is exothermic: 4 NH 3 + 3 O 2 → 2 N 2 + 6 H 2O(g), ΔH°r = −1267.20 kJ (or −316.8 kJ/mol if expressed per mol of NH 3)
Now they have sold some of the most important parts of the company. I have not seen a new balance sheet (guesstimate) of how things will look now after the transaction.
Very rough Graham Number value: [PASS] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. OCI has a Graham number of √(15 x €2,4 EPS x 1,5 x €12 Book Value) = €25 and just passes this test.
Conclusion: Too difficult pile now in December 2023
OLD GRAHAM analysis from early 2022 (when I thought the end of the year would be more profitable):
SECTOR: [PASS] OCI is neither a technology nor a financial Company, and therefore this methodology is applicable.
SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. OCI's sales of €6 351 million, based on 2021 sales, pass this test.
CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. OCI's current ratio €2778m/€2124m of 1.3 fails the test.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. OCI has a long-term debt of €4 178m, the net current assets are €654 million. OCI fails this test.
LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. OCI made a loss before 2021.
EARNINGS YIELD: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. OCI's E/P of 22% (using this year's estimated earnings) passes this test.
Dividend €3,55/€35 = 10% (not a fixed dividend, but a windfall payment).
Conclusion: The stock seems fairly priced. Very cyclical business.
Notes 2017 and 2018
Update October 2018, price up to 25 Euros, seems high but I don't understand this company or fertilizer at all. Booking a loss per share but positive cashflow?
2017
The OCI N.V. that is currently listed on the Euronext Amsterdam is a global producer of nitrogen fertilizers, methanol and other natural gas based chemical products.
There is not much history of the company...
Earnings are 1-2 Euros per share. There is a new plant in Iowa about to produce (and increase earnings?) . Book value is about 6 Euros per share.
Graham Number = Square root (15 x 2 EPS x 1,5 x 6 Book value) = 16 Euros per share.
Earnings are 1-2 Euros per share. There is a new plant in Iowa about to produce (and increase earnings?) . Book value is about 6 Euros per share.
Graham Number = Square root (15 x 2 EPS x 1,5 x 6 Book value) = 16 Euros per share.
Share price has increased from 11,21 Euros three months to 19,40 Euros today, February 2017.
The price has swung from under to above the Graham number value.
PS: Francisco Parames was buying OCI when the share price was EUR 10.
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