Fertiliser producers grapple with lower prices and higher costs

Tuesday, Feb 27, 2024 10:29

A truck loaded with PVFCCo's products. — Photo dpm.vn

2023 was not a favourable year for fertiliser producers, with many companies experiencing significant declines in profits due to lower prices and the high cost of input materials.

In the fourth quarter of 2023, PetroVietnam Fertiliser and Chemicals Corporation (PVFCCo), a leading producer of urea fertilisers, posted a net revenue of over VNĐ3.38 trillion (US$137.4 million), down VNĐ500 billion from the same period in 2022.

An increase in financial revenue and cuts in operational expenses were insufficient to offset the profit decline. As a result, PVFCCo's profit after tax plummeted to just VNĐ107 billion, a decrease of nearly 95 per cent year -on-year.

For the whole of 2023, PVFCCo's net revenue amounted to nearly VNĐ13.6 trillion, representing a fall of over VNĐ5 trillion over the previous year. This only fulfilled 78 per cent of the company's planned target. Its profit after tax also dropped by more than 90 per cent to VNĐ543 billion, meeting only 24.1 per cent of the set target.

Similarly, PetroVietnam Cà Mau Fertiliser JSC (PVCFC)’s revenue fell 21 per cent to over VNĐ12.6 trillion year-on-year. The company’s profit after tax plunged by 74 per cent on-year to VNĐ1.1 trillion.

In 2023, PVCFC achieved a total consumption of over 1.3 million tonnes of various fertilisers, up 20 per cent from 2022. Notably, urea comprised the largest portion, accounting for 866,000 tonnes.

The company successfully entered and expanded its presence in the NPK fertiliser market, with a remarkable 92 per cent growth in consumption volume.

Đức Giang Chemicals, a major player in the chemical industry, faced a decline in its financial performance. In the fourth quarter of 2023, their net revenue reached nearly VNĐ2.4 trillion, a 23 per cent decrease from the same period of the previous year. Their profit after tax also saw a significant drop of 34 per cent to VNĐ746 billion, the lowest level in nine quarters.

For the entire year 2023, Đức Giang Chemicals recorded a net revenue of over VNĐ9.7 trillion and a profit after tax of VNĐ3.35 trillion, down 33 per cent and 46 per cent over the previous year, respectively.

The company attributes the poor business results primarily to the decrease in market prices, which resulted in a 38 per cent decline in revenue from their key products, such as phosphoric acid and H3PO4. Revenue from phosphoric acid decreased by 28 per cent, while revenue from various types of fertilisers dropped by 12 per cent.

Workers of PVCFC loading products for export. — Photo pvcfc.com.vn

In contrast, DAP - Vinachem JSC experienced positive performance in the last quarter of 2023. They posted a net revenue of over VNĐ835 billion, a 3.45 per cent increase from the same period in 2022. Profit after tax was 8.8 per cent higher, at nearly VNĐ62.5 billion.

It said that the significant increase was attributed to higher DAP consumption of over 61,600 tonnes, representing a nearly 20 per cent increase. However, despite the rise in consumption, the average selling price experienced a decline of over VNĐ2 million per tonne, down 13.5 per cent year-on-year.

Despite the positive results in the fourth quarter, DAP - Vinachem’s performance for the entire year 2023 was lower. The company achieved a revenue of VNĐ3.2 trillion and a profit of over VNĐ70 billion, marking a 2 per cent and over 80 per cent decrease from last year, respectively. These figures represent the lowest performance in the past three years for the company.

In 2023, the company had set a revenue target of VNĐ3.24 trillion and a profit after tax target of VNĐ92.2 billion. With the achieved results, the company reached 99 per cent of the revenue target and 70.5 per cent of the profit after tax target.

Another company specialising in urea production, Hà Bắc Nitrogenous Fertiliser and Chemicals JSC, said that the unexpected profit in the fourth quarter of 2023 contributed to its full-year profit of VNĐ860.8 billion, with a net revenue of VNĐ4.4 trillion. These figures were down 51 per cent and 31 per cent on-year, respectively.

Nevertheless, this marks the third consecutive profitable year for the company since 2021.

It has also made significant progress in reducing its accumulated losses over the years. As of December 31, 2023, the accumulated losses amounted to over VNĐ2.1 trillion, and the equity capital improved from a negative VNĐ252 billion to a positive VNĐ614 billion.

On the contrary, there are still companies that reported year-on-year growth in net profits for the whole year, although their size is relatively small. These include Lâm Thao Fertilisers and Chemicals JSC with a 68 per cent increase in net profit to VNĐ149 billion, Southern Fertiliser JSC with a gain of 26 per cent to VNĐ57 billion, and Bình Điền Fertiliser JSC with a 5 per cent increase to VNĐ148 billion.

These positive results were mainly driven by stricter management of debts and operational costs.

Prices, demand improvements

According to Vietcombank Securities (VCBS), global fertiliser prices this year are expected to rise slightly from 2023 due to tighter supply conditions.

In the domestic market, fertiliser consumption is seen to grow at a slower rate than in 2023. Anticipated domestic consumption during the fourth quarter of 2023 and the first quarter of 2024, coinciding with the winter-spring crop season, has, however, been delayed with this year's crop season starting in late November.

Meanwhile, the global fertiliser consumption growth rate will decelerate in the medium term, dropping from 4 per cent in the fiscal year 2023 to 1.3 per cent in the fiscal year 2027, said the International Fertiliser Association.

VCBS highlights that the price of input gas is a challenging factor to predict, as a fluctuation in oil prices and the allocation of gas sources would significantly impact the gross profit margin of businesses. — VNS

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