Workers load fertiliser at the Lam Thao Fertilisers and Chemicals Company’s factory in Phu Tho Province (Photo: VNA) Hanoi (VNS/VNA) - Rising input production costs, unfavourable weather conditions, a saturateddomestic market and stiff competition are causing difficulties for fertiliserbusinesses.
Lam ThaoFertilisers and Chemicals JSC (LAS) reported net revenue of 1.53 trillion VND (65.4 million USD), down 17.3 percent compared to the same period in 2018.Pre-tax profit reached 16.5 billion VND, down 82.1 percent, the lowest level thecompany has ever recorded.
LASattributed the poor business results to the saturation of the domesticfertiliser market and tough competition from foreign rivals.
Thedecline in sales volume led to an increase in inventory, so LAS had to delaydebt payments. By the end of the second quarter of 2019, short-term andlong-term debt reached 1.19 trillion VND, up 18.2 percent compared to thebeginning of the year and accounting for 38.3 percent of the company’s totalcapital. As a result, loan interest in the first half of 2019 rose by 77.6 percentover the same period in 2018.
At the2019 General Meeting of Shareholders, LAS set a plan to achieve 162 billion VNF in pre-tax profit this year, an increase of 4 percent year-on-year.
Binh DienFertiliser Joint Stock Company (BFC), specialising in producing NPK fertiliserof the 'Dau Trau' brand, also experienced unsatisfactory business results in thefirst half of 2019.
BFC sawrevenue drop 9.7 percent and pre-tax profit fall 86 percent year-on-year. Withthis result, BFC completed just 8.5 percent of the annual profit plan.
Amongurea fertiliser producers, revenue of PetroVietnam Ca Mau Fertiliser JSC (DCM)was somewhat better as it rose by 5.9 percent compared to 2018, financialexpenses decreased by 54 percent. But pre-tax profit dropped by 25.6 percent to 325 billion VND.
Duringthe first half of this year, Petrovietnam Fertiliser & ChemicalsCorporation (DPM) had to halt production for routine maintenance for more thantwo months and returned to work in May.
Thiscaused the urea output in the first half to decrease by 38 percent compared to2018. However, the company still had to pay fixed costs and interest on loans,leading to a 26-per-cent decrease in revenue and a 78-per-cent drop in netprofit.
Difficultbusiness activities have negatively affected the price of many fertiliserstocks.
From thebeginning of the year until now, LAS has lost more than 30 percent and this isalso the 3rd year of continuous decline, resulting in the decline in marketcapitalisation of nearly 50 percent.
Similarly,the capitalisation of BFC also fell by 40 percent, while those of DPM decreasedby 30 percent and DCM declined by 20 percent.
Van Dien Fused Magnesium Phosphate Fertiliser Joint-stock Company (VAF) and Ninh BinhPhosphate Fertiliser JSC (NFC) are the rare stocks that saw no decrease instock prices. But the reason was not due to positive business results butmainly due to low liquidity of these stocks.
Fallingstock prices not only affected investor sentiment and businesses but also madeit difficult for the State to divest capital. For example, in the auction of13.9 million shares, or 29 percent of charter capital, of the Vietnam ChemicalGroup (Vinachem) at the Southern Fertilizer JSC (SFG) in July 2019, noinvestors registered.
Stillattractive
Accordingto experts, fertiliser stocks are going through the most difficult period inrecent years, but this group of stocks still has some attractive features.
Fertilisersare a basic material, essential for farming activities. Consumers care aboutbrand, product quality, soil conditions and prices. Businesses that do well inbranding and quality enhancement will have advantages in raising consumption.
Enterpriseswho have good financial capacity can adequately meet investment needs andmaintain a high ratio of cash dividend payment.
Forexample, at Petrovietnam Fertiliser & Chemicals Corporation (DPM), theratio of short-term and long-term loans accounted for only 11.5 percent of thetotal assets (as of June 30, 2019).
Abundantcash reserves help reduce the dependence of DPM's business activities on loans.In the second quarter of 2019, financial revenue was higher than financialexpenses. In recent years, DPM has maintained a cash dividend ratio of 10-20 percentper year.
Enterpriseshave also made efforts to reduce costs and improve production and businessactivities, and at the same time promote research and development of highvalue-added fertiliser products.
Anotherfactor that can help fertiliser stock prices is the divestment of statecapital. Vinachem is planning to sell capital in LAS, BFC and SFG from now to2020, while the Vietnam Oil and Gas Group (PVN) plans to lower ownership at DCMand DPM to below 51 percent.
SouthernFertilizer JSC (SFG)'s stock price soared by nearly 50 percent in the firsthalf of this year when Vinachem decided to divest capital there, despite thedecline in business results. This stock may only reverse when the divestmentresults did not meet expectations./.
Lam ThaoFertilisers and Chemicals JSC (LAS) reported net revenue of 1.53 trillion VND (65.4 million USD), down 17.3 percent compared to the same period in 2018.Pre-tax profit reached 16.5 billion VND, down 82.1 percent, the lowest level thecompany has ever recorded.
LASattributed the poor business results to the saturation of the domesticfertiliser market and tough competition from foreign rivals.
Thedecline in sales volume led to an increase in inventory, so LAS had to delaydebt payments. By the end of the second quarter of 2019, short-term andlong-term debt reached 1.19 trillion VND, up 18.2 percent compared to thebeginning of the year and accounting for 38.3 percent of the company’s totalcapital. As a result, loan interest in the first half of 2019 rose by 77.6 percentover the same period in 2018.
At the2019 General Meeting of Shareholders, LAS set a plan to achieve 162 billion VNF in pre-tax profit this year, an increase of 4 percent year-on-year.
Binh DienFertiliser Joint Stock Company (BFC), specialising in producing NPK fertiliserof the 'Dau Trau' brand, also experienced unsatisfactory business results in thefirst half of 2019.
BFC sawrevenue drop 9.7 percent and pre-tax profit fall 86 percent year-on-year. Withthis result, BFC completed just 8.5 percent of the annual profit plan.
Amongurea fertiliser producers, revenue of PetroVietnam Ca Mau Fertiliser JSC (DCM)was somewhat better as it rose by 5.9 percent compared to 2018, financialexpenses decreased by 54 percent. But pre-tax profit dropped by 25.6 percent to 325 billion VND.
Duringthe first half of this year, Petrovietnam Fertiliser & ChemicalsCorporation (DPM) had to halt production for routine maintenance for more thantwo months and returned to work in May.
Thiscaused the urea output in the first half to decrease by 38 percent compared to2018. However, the company still had to pay fixed costs and interest on loans,leading to a 26-per-cent decrease in revenue and a 78-per-cent drop in netprofit.
Difficultbusiness activities have negatively affected the price of many fertiliserstocks.
From thebeginning of the year until now, LAS has lost more than 30 percent and this isalso the 3rd year of continuous decline, resulting in the decline in marketcapitalisation of nearly 50 percent.
Similarly,the capitalisation of BFC also fell by 40 percent, while those of DPM decreasedby 30 percent and DCM declined by 20 percent.
Van Dien Fused Magnesium Phosphate Fertiliser Joint-stock Company (VAF) and Ninh BinhPhosphate Fertiliser JSC (NFC) are the rare stocks that saw no decrease instock prices. But the reason was not due to positive business results butmainly due to low liquidity of these stocks.
Fallingstock prices not only affected investor sentiment and businesses but also madeit difficult for the State to divest capital. For example, in the auction of13.9 million shares, or 29 percent of charter capital, of the Vietnam ChemicalGroup (Vinachem) at the Southern Fertilizer JSC (SFG) in July 2019, noinvestors registered.
Stillattractive
Accordingto experts, fertiliser stocks are going through the most difficult period inrecent years, but this group of stocks still has some attractive features.
Fertilisersare a basic material, essential for farming activities. Consumers care aboutbrand, product quality, soil conditions and prices. Businesses that do well inbranding and quality enhancement will have advantages in raising consumption.
Enterpriseswho have good financial capacity can adequately meet investment needs andmaintain a high ratio of cash dividend payment.
Forexample, at Petrovietnam Fertiliser & Chemicals Corporation (DPM), theratio of short-term and long-term loans accounted for only 11.5 percent of thetotal assets (as of June 30, 2019).
Abundantcash reserves help reduce the dependence of DPM's business activities on loans.In the second quarter of 2019, financial revenue was higher than financialexpenses. In recent years, DPM has maintained a cash dividend ratio of 10-20 percentper year.
Enterpriseshave also made efforts to reduce costs and improve production and businessactivities, and at the same time promote research and development of highvalue-added fertiliser products.
Anotherfactor that can help fertiliser stock prices is the divestment of statecapital. Vinachem is planning to sell capital in LAS, BFC and SFG from now to2020, while the Vietnam Oil and Gas Group (PVN) plans to lower ownership at DCMand DPM to below 51 percent.
SouthernFertilizer JSC (SFG)'s stock price soared by nearly 50 percent in the firsthalf of this year when Vinachem decided to divest capital there, despite thedecline in business results. This stock may only reverse when the divestmentresults did not meet expectations./.
VNA
