Fertiliser companies expect higher earnings ahead

Hanoi (VNS/VNA) - 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.

Duc Giang Chemicals Group (DGC) achieved profit of 1.5 trillion VND (65.5 million USD) in Q1 this year, 7.1 percent higher than the figure of 1.4 trillion VND recorded in the fourth quarter of 2021 and more than 5 times higher than the same period last year, at 292 billion VND.

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

Petro Vietnam Ca Mau Fertiliser JSC (DCM) and Phy My 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 1 trillion VND, up 6.6 percent and Phu My Fertiliser's profit will reach 1.8 trillion VND, 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 9.05 trillion VND, consolidated profit after tax of 513 billion VND, down 10 percent and 72 percent 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 percent, profit will rise by 40 percent. Last year DCM's revenue and profit increased by 31 percent and 190 percent.

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 diversification for long-term development, Ca 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 percent and 25 percent, respectively, up 65 percent and 352 percent last year. Previously, Rong Viet 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./.