Fertiliser stocks which suffered a dismal 2016 are expected to rebound this year given long-term rising demand as well as global price hikes, according to industry estimates.

Shares of three of the four biggest listed fertiliser manufacturers on the two national stock exchanges tumbled in 2016, led by Lam Thao Fertilizers and Chemicals JSC (LAS), down 55.2 per cent for the year.

PetroVietnam Fertilizer and Chemicals Corporation (DPM) and PetroVietnam Ca Mau Fertilizer JSC (DCM) lost 23.2 per cent and 21.3 per cent, respectively.

Only Binh Dien Fertilizer JSC (BFC) gained 9.3 per cent in 2016 with positive earnings.

Fertiliser manufacturing encountered difficulties in recent years with fertiliser prices continuously falling due to oversupply. In 2016, droughts and salt intrusion in the south negatively affected agricultural production which drove down demand even further.

In addition, fiercer competition from China and ASEAN countries, as well as fake and poor-quality products hurt domestic fertiliser companies.

Both PetroVietnam Fertilizer and Chemicals and PetroVietnam Ca Mau Fertilizer had to lower their business targets following poor performance in the first nine months of last year.

PetroVietnam Fertilizer and Chemicals cut its revenue target by 13.4 per cent for 2016, from VND9.1 trillion (US$402.7 million) to VND7.9 trillion, and decreased its net profit by 18 per cent to VND1.14 trillion.

PetroVietnam Ca Mau Fertilizer trimmed its 2016 revenue target by 13 per cent from VND5.85 trillion to VND5.1 trillion and net profit from VND648 billion to VND620 billion.

Lam Thao Fertilizers and Chemicals performed worst when its nine-month revenue and net profits dropped 18.3 per cent and 57 per cent, respectively year-on-year.

Binh Dien Fetilizer saw its revenue and profit go up 15 per cent and 19 per cent, respectively.

Opportunity in 2017

The end of the El Nino phenomenon is expected to improve weather conditions to support agricultural production in the south and drive demand for fertiliser.

In addition, the global fertiliser market is starting to firm up in 2017 amid expectations that demand in Europe, the US and Latin America will pick up after five years of decline. Prices of major products like ammonia, urea, phosphates and potash began rising early this year.

With a positive outlook on the global market, Vietcombank Securities Co has suggested investors consider investing in fertiliser stocks this year.

According to analysts at VNDirect Securities Co, fertiliser companies often pay high and stable dividends and stock prices have declined steeply. With high expectations of rising demand and prices, fertiliser stocks are forecast to pick up  this year.

However, they said fertiliser prices can only rise drastically if the sector receives the Government’s support through tariff protection measures to compete with imported products. Besides, domestic companies hope the Government will exempt fertiliser products from VAT. — VNS