Major fertilizer firms' profits drop sharply in Q1

Twenty six listed fertilizer companies in Vietnam posted a combined after-tax profit of VND1.38 trillion ($58.6 million) in the first quarter of the year, down 81% year-on-year, according to KIS Vietnam Securities.

The companies recorded total revenue of VND21.38 trillion ($911.2 million) in the period, down 18% from the previous quarter and nearly 30% year-on-year.

Petrovietnam Fertilizer & Chemicals Corporation (PVFCCo) led the pack in terms of net revenue with VND3.27 trillion ($139.2 million). The figure, however, was a 44% decrease compared to the same period last year.

Due to high capital costs, PVFCCo, listed on the HoSE as DPM, reported post-tax profit of only VND262 billion ($11.2 million), down nearly 88% year-on-year.

As of March 31, DPM's assets had stood at VND15.77 trillion ($672.3 million), down 11% compared to the beginning of the year, of which inventory accounted for VND3.5 trillion ($149 million), down 9%.

DPM targets consolidated revenue of VND17.4 trillion ($741.76 million) and consolidated pre-tax profit of nearly VND2.7 trillion ($115.1 million) for 2023.

The DPM share price hit VND33,300 ($1.42) per unit at Friday's closing session.

Meanwhile, PetroVietnam Camau Fertilizer JSC (PVCFC) reported a profit of VND230 billion ($9.8 million) in Q1, a decrease of 85% year-on-year, marking its lowest quarterly profit in the past two years. In Q1/2022, PVCFC made a profit of nearly VND17 billion ($724,500) per day thanks to record-high fertilizer prices.

The firm's after-tax profit last year hit VND4.28 trillion ($181.36 million), up 2.3 times year-on-year.

PVCFC, also known as Ca Mau Fertilizer with the stock market sticker DCM, saw revenue in Q1/2023 decline by 30% to VND2.8 trillion ($119.33 million).

At the end of March, PVCFC's total assets had increased by VND405 billion ($17.26 million) to VND14.57 trillion ($621 million) compared to the beginning of the year, of which short-term assets accounted for 85%. Cash and cash equivalents increased by 12% to VND2.39 trillion ($101.68 million).

PVCFC, a subsidiary of state-run Petrovietnam, early this year set very low business targets for 2023 after a year of record profits.

It set an after-tax profit target of VND1.38 trillion ($58.59 million) in 2023, down 67% year-on-year, on a revenue of VND13.46 trillion ($570.17 million), up 15%.

DCM closed Friday's session at VND24,250 ($1.03), up 2.74% from the day before.

Habac Nitrogenous Fertilizer & Chemicals JSC posted a loss of over VND129 billion ($5.5 million) in Q1, while in the same period last year it made a profit of VND868 billion ($37 million). This marked the first quarterly loss after a series of six profitable quarters.

The company, registed on the unlisted public company market UPCoM as DHB, earned net revenue of nearly VND1.19 trillion ($50.5 million), down 39%.

DHB said that it had faced many difficulties because domestic prices of urea and NH3 fertilizer have continuously fallen sharply in line with world prices, and sales volume was down. Revenue in Q1 also decreased sharply year-on-year.

Meanwhile, the price of oil, coal as well as other input materials remained high.

As of the end of March, DHB's assets had been nearly VND7.47 trillion ($318.5 million), down 1% compared to the beginning of the year. Of which, cash and cash equivalents reached VND349 billion ($14.9 million), up 68%, and inventory hit VND757 billion ($32.3 million), down 11%.

This year, the company expects to reach total revenue of VND6.13 trillion ($261.2 million), and VND683.1 billion ($29.1 million), down 4% and 61% year-on-year, respectively.

This year, the company expects to reach revenue of VND6.13 trillion ($261.2 million), and profit of VND683.1 billion ($29.1 million), down 4% and 61% year-on-year, respectively.

Closing Friday's session, DHB was traded for VND8,900 ($0.38) per share.

KIS Vietnam Securities commented that the fertilizer industry's profit declines in Q1 were due to the low season and some unfavorable factors this year. Fertilizer prices have fallen due to low demand in the low season and the recovery of fertilizer supplies from China and Russia. In addition, fertilizer export volume in Q1 fell 21% year-on-year to around 400,000 tons.

The KIS analysis team believes that Q2/2023 may be brighter thanks to the new season helping to increase selling prices, but not as high as Q4/2022.

According to KIS, company leaders should take full advantage of these opportunities to maximize profits. Moreover, a healthy balance sheet with ample cash flow would generate efficient financial income and an attractive dividend yield.

In an interview with Theinvestor, Phung Ha, vice president and general secretary of the Vietnam Fertilizer Association, said that fertilizer prices in the coming time depend on a lot of factors, particularly market disruptions, from escalating global tensions to supply chain disruptions.

"Due to input market volatilities and trade restrictions continuing to affect the fertilizer market, it is difficult for fertilizer prices to recover in 2023, they may continue to decline slightly, according to the World Bank," he said.