Source: Bnews.vn
Many fertilizer enterprises set business plans with increased revenue but a sharp decrease in profit.
The increase in oil prices makes many enterprises in the oil and gas industry profitable, but in the opposite direction, many fertilizer enterprises are being negatively affected when profits may be narrowed, because according to the fertilizer industry value chain, Input gas price is the main raw material for fertilizer factories to produce.
*Fertilizer prices soar
According to an expert from FPT Securities Joint Stock Company – FPTS, fertilizer consumption is expected to grow positively thanks to the recovery of domestic agricultural production.
Agricultural production in 2021 is boosted by favorable weather and climate factors and high prices of agricultural products.
The La Nina phenomenon lasts until April 2021, reducing the impact of drought in the Central and Central Highlands and saline intrusion in the South. From May, the neutral state remains, bringing favorable weather to most agricultural areas across the country.
According to a forecast of the World Bank (World Bank), the world rice price in 2021 will average $498/ton, 21.8% higher than the 5-year average from 2016-2020. is maintained at a high level.
The price of agricultural products increases and the weather in 2021 is forecasted to be more favorable, creating good conditions for agricultural cultivation. Demand for fertilizer is forecasted to recover significantly.
According to Vietnam Market Analysis and Forecast Joint Stock Company (AgroMonitor), the total fertilizer demand in 2021 is expected to reach approximately 10.3 million tons, up 5.5% compared to 2020.
Specifically, in 2021, the consumption of most fertilizers will increase, especially DAP fertilizer will increase by 12% compared to 2020, phosphate fertilizer will increase by 8.7% and NPK fertilizer will increase by 4.6%. Urea fertilizer consumption is forecasted to be more stable with a slight increase of 0.5% compared to 2020, while potassium fertilizer increased by 2.4% and other fertilizers increased by 10.3%.
In 2021, it is expected that fertilizer demand in the Mekong Delta (the largest fertilizer consuming area in the country) will recover by 4-6% over the same period; in which, mainly increased consumption of DAP, NPK fertilizers and other types such as phosphate fertilizers, organic fertilizers…
World fertilizer prices also increased sharply from the beginning of 2020, thanks to the support from the recovery of demand. World agricultural production was restored, fertilizer demand increased in Europe, the US, Brazil and some Asian countries. At the same time, high energy prices and transportation costs caused the prices of most fertilizers to rise to record levels.
World fertilizer prices are forecasted to remain high in the short term due to increased demand and unresolved transportation costs. Specifically, with Black Sea Urea fertilizer, the price is forecasted to remain at $280-340/ton in the second quarter of 2021, in the third quarter, it will temporarily decrease slightly to $270-290/ton and maintain at $290-310/ton. tons by the end of the fourth quarter of 2021. On average, in 2021, the world urea price is forecast to reach 305 USD/ton, approximately 33% higher than in 2020.
According to Mr. Phung Ha, Vice President and General Secretary of the Vietnam Fertilizer Association, from the end of the fourth quarter of 2020 to the first quarter of 2021, all fertilizer prices increased.
Specifically, the fertilizers DAP, NPK, urea have increased by about 40,000 – 100,000 VND/bag (50 kg) compared to about 1 month ago.
Mr. Ha said that according to the World Bank, in the past time, the price of raw materials has increased a lot, such as the price of sulfur, ammonia, etc., which has increased sharply, leading to an increase in the selling price of fertilizers. Besides, the world agricultural product prices have also continuously increased.
In addition, due to the rapid increase in freight rates, for many industries and not only for fertilizers, the price of shipping by containers increased.
China – the world’s largest fertilizer producer has recently suffered from a shortage of gas, leading to a shortage of production in this country… All this leads to an overall increase in fertilizer prices by about more than 20%, such as DAP up 28%, urea nearly 20%…
*Can’t keep up with oil price increase
According to FPTS, the world oil price is forecast to recover strongly in 2021. In March 2021, the average Brent crude oil price reached 65.3 USD/barrel, nearly doubling over the same period in 2020.
The rapid increase in the price of Brent oil in the first quarter reflects the recovery of world fuel demand and the reduction of crude oil supply by the Organization of the Petroleum Exporting Countries (OPEC) and its partner countries (OPEC+).
In April, world oil prices climbed to a new four-week high in the April 15 session on the back of positive economic data from the US and higher demand forecasts from the International Energy Agency (IEA) and the International Energy Agency. Petroleum Exporting Countries (OPEC) in the context of countries starting to recover their economies after the COVID-19 pandemic.
North Sea Brent oil price is at 66.94 USD/barrel (closing session on April 15) These are the highest closing levels of two major oil contracts since March 17.
In Asia, oil prices continued to rise in the afternoon session of April 16, on track towards a 7% increase this week on the prospect of improved oil demand and a strong economic recovery in China. China and the United States help ease investors’ concerns about the sudden increase in the number of COVID-19 cases.
Brent oil futures prices rose 30 US cents (or 0.5%) to 67.24 USD/barrel at 12:51 pm (Vietnam time), after gaining 36 US cents in the previous session.
In fact, at the end of the first trading session of the year, the price of Brent oil hovered around 51 USD/barrel. Thus, since the beginning of the year, the price of Brent oil has increased by nearly 38%.
According to the US Energy Information Administration (EIA), the average price of Brent crude oil in 2021 is forecast to increase to USD 60.7/barrel, up 45.5% compared to 2020. FO (fuel oil) price The average is expected to reach USD 343/ton, up 37.7% compared to 2020.
Therefore, the price of input gas for the Urea fertilizer segment is also forecasted to increase accordingly because it is anchored to the world FO oil price, a rather high increase compared to the output urea price.
According to the fertilizer industry value chain, input gas price is the main raw material for fertilizer factories to produce. Therefore, the price of input materials will directly affect the gross profit margin of these enterprises, especially when the input gas price has been applied according to the market mechanism.
On the stock exchange, the two leading companies in the fertilizer industry are PetroVietnam Fertilizer and Chemicals Corporation – JSC (stock code: DPM) and PetroVietnam Ca Mau Fertilizer Joint Stock Company (stock code: DCM). . Cost of goods sold accounts for a large proportion of the total revenue of these enterprises; which is mainly the cost of input gas.
In 2020, although DPM’s revenue increased only 1% to nearly 7,762 billion dong, its profit after tax increased by 80.5% to 702 billion dong. This number is achieved because in 2020, businesses benefit greatly from the record low oil and gas prices.
However, the situation is different, according to analysts from FPTS, the converted gas price increased faster than the urea fertilizer price, so the gross profit margin of DPM 2021 is expected to decrease slightly.
Information from DPM, on April 27, 2021, the company will hold the Annual General Meeting of Shareholders in 2021. Currently, DPM has announced the document expected to submit to the meeting.
According to published documents, in 2021, DPM aims to reach 8,331 billion VND in total revenue, up 5.9% compared to the revenue achieved in 2020. However, the target of profit after tax is only 365 billion VND, down to 48% compared to the profit achieved in 2020.
For Ca Mau Fertilizer, similar to DPM, this business has very impressive business results in 2020 thanks to low input material prices.
Specifically, in 2020, net revenue of Ca Mau Fertilizer increased by 7% to VND 7,563 billion. Profit after tax reached more than VND 665 billion, up 55% compared to 2019.
However, Ca Mau Fertilizer sets a very modest profit target for 2021. In 2021, the company expects total revenue of VND 7,839 billion, profit after tax of VND 197.4 billion, up 1 in turn. .8% and a decrease of 70.2% compared to the implementation in 2020.
On the stock exchange, DPM shares are priced at 19,000 VND/share (closed on April 16), almost unchanged from the first session of the year. Meanwhile, DCM stock priced at 17,100 (closed April 16) increased by more than 21% compared to the close of the first session of January 4.
