The sharp drop in fertilizer prices compared to the same period last year has led major companies in the industry to report lower profits in the third quarter, a stark contrast to their previous peaks.
After 11 consecutive quarters reporting profits in the hundreds of billions to trillions of dong, Ca Mau Petroleum Fertilizer Joint Stock Company (DCM) recorded after-tax profit below this level for the first time, reaching 74 billion dong, only about 10% compared to the same period last year and the lowest level in the past four years.
Similarly, the business results of Ha Bac Fertilizer and Chemical Joint Stock Company (DHB) also declined, experiencing losses for three consecutive quarters. DHB incurred a loss of approximately 309 billion VND this quarter, compared to a profit of 347 billion VND in the same period last year. Cumulative after-tax profit from the beginning of the year to date has been negative nearly 790 billion VND.
Not only fertilizer companies, but also businesses dealing in chemicals have recorded less favorable results than before. Duc Giang Chemical Group (DGC) recently reported a profit of over 800 billion VND in the third quarter, a decrease of nearly half compared to the same period in 2022. Previously, this company had earned profits of thousands of billions of VND for five consecutive quarters (from Q4/2021 to Q4/2022).
Lower-than-expected quarterly results have caused many fertilizer stocks to fall sharply. In the three trading sessions ending October 25th, DCM's share price has dropped by more than 10%. DGC's stock fluctuated but overall it has also decreased by about 8.5% over the past week. Even Phu My Fertilizer, which hasn't yet announced its business results, has seen its share price affected, falling by more than 7% in the last three sessions.
The sharp drop in selling prices is the main reason for the fertilizer industry's poor profit outlook . Statistics from SSI Research show that urea prices bottomed out in June, fluctuating between 9,000 and 10,000 VND per kilogram, and continued to remain stable in July. Ha Bac Fertilizer reported that the average selling price of its urea products in the third quarter decreased by 36% compared to the same period in 2022.
DGC noted a price drop due to the downturn in both domestic and international markets. This resulted in a nearly 40% decrease in revenue from key chemicals and a 14% decrease in fertilizer sales. Similarly, according to Ca Mau Fertilizer, while sales volume increased, the sharp drop in fertilizer prices severely impacted revenue.
According to September statistics from the Plant Protection Department, the price of urea fertilizer was approximately 9,900-11,200 VND per kilogram. This figure represents a 32-45% decrease compared to the same period last year, and is 50-60% lower than the record high set in April 2022. The prices of DAP, potassium, and other fertilizers are also lower than a year ago.
Urea fertilizer prices bottomed out and remained stable in June-July, before starting to rise from August 2023. Source: SSI Research
However, fertilizer prices are showing positive trends following China's ban on urea exports. By the end of September, urea prices had increased by over 10% in just one month and by 24-30% compared to July. Other fertilizers also increased by 300-800 VND per kilogram. Besides the influence of the global market, prices of these commodities are also being supported by the early start of the winter-spring crop season and forecasts of increased rice acreage and other agricultural products, driving up fertilizer demand and prices.
Forecasting an upward trend in fertilizer prices from the last quarter of the year, securities companies have successively expressed positive views on the prospect of improved profits for businesses. However, according to experts, fertilizer prices are unlikely to skyrocket as domestic and global supply is not overly strained.
Tat Dat
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