Fertiliser companies expect higher earnings ahead

A storehouse of Phú Mỹ Fertiliser Plant. Phú Mỹ Fertiliser's profit is forecast to reach VNĐ1.8 trillion in Q1, up 10 times over the same period last year, mainly thanks to the strong increase in fertiliser selling prices. VNA/VNS Photo Anh Nguyễn

Fertiliser companies reported profit up by 5-10 times in the first quarter of this year compared to the same period in 2021, mainly thanks to the strong increase in average selling prices.

Đức Giang Chemicals Group (DGC) achieved profit of VNĐ1.5 trillion (US$65.5 million) in Q1 this year, 7.1 per cent higher than the figure of VNĐ1.4 trillion recorded in the fourth quarter of 2021 and more than 5 times higher than the same period last year, at VNĐ292 billion.

According to estimates by SSI Research, this year, DGC's revenue will increase by 22 per cent and profit by 25 per cent. Last year, DGC's profit spiked by 352 per cent. On the market, DGC shares have increased 53 per cent since early this year.

Petro Việt Nam Cà Mau Fertiliser JSC (DCM) and Phú Mỹ Fertiliser (DPM) have not announced business results for the first quarter of 2022, but according to SSI Research's estimates, in the first quarter of this year, DCM's pre-tax profit will reach VNĐ1 trillion, up 6.6 per cent and Phú Mỹ Fertiliser's profit will reach VNĐ1.8 trillion, up 10 times over the same period last year, mainly thanks to the strong increase in average fertiliser selling prices.

In 2021, world commodity prices and fertilisers increased sharply. Since the beginning of this year, the conflict between Russia and Ukraine has pushed up fertiliser prices because Russia - one of the major fertiliser exporting powers - has been subject to economic sanctions. Therefore, domestic fertiliser enterprises continue to benefit.

This year, DCM sets a revenue target of VNĐ9.05 trillion, consolidated profit after tax of VNĐ513 billion, down 10 per cent and 72 per cent respectively compared to 2021. This prudent plan was due to DCM's concern that the Russia-Ukraine tension will continue to negatively affect the global financial market, making oil and freight prices increase, thus supply may become scarce.

However, according to SSI's forecast, this year, DCM's revenue will increase by 31 per cent, profit will rise by 40 per cent. Last year DCM's revenue and profit increased by 31 per cent and 190 per cent.

This year, DCM will complete transition projects including conversion and supply of raw CO2, research and development centre and a project to produce complex fertiliser from molten urea. In order to ensure the production expansion and product persification for long-term development, Cà Mau Fertiliser also plans to invest in a Long An wholesale warehouse, a micro-organic fertiliser factory, a coal gasification plant and communications station headquarters in HCM City this year.

With DPM, SSI Research also forecasts that DPM's revenue and profit this year will increase by 22 per cent and 25 per cent, respectively, up 65 per cent and 352 per cent last year. Previously, Rồng Việt Securities Company also forecast that DPM will have positive business results in the first quarter of 2022 and may last until the second quarter of 2022 thanks to the short-term shortage of urea supply due to tensions between Russia and Ukraine, leading to higher fertiliser prices.

Although the outlook for the fertiliser industry is very bright, analysts recommend that investors buying fertiliser stocks keep a close eye on fertiliser price movements in relation to geopolitical fluctuations amid the Russia-Ukraine war. If there is a positive change in Russia's export activities, world fertiliser prices may reverse sharply. Besides, restricting exports to ensure domestic fertiliser supply is also a potential risk to fertiliser companies’ business activities.