"With current market conditions and policies commonly applied across the country, difficulties of businesses will be the same. However, as arising tide lifts all boats, DPM with many advantages will maintain its competitiveness with other domestic and imported products".

This is the affirmation of leaders of PetroVietnam Fertilizer and Chemicals Corporation (HOSE: DPM) when talking about its business and production activities in the future, even though the fertilizer industry is expected to keep facing many challenges in 2015.

Phu My Fertilizer Plant

Despite many fluctuationsin 2014,DPM stock remains attractive

2014 is the year of many fluctuationsto DPM, especially in the first half when the change in input gas price from the beginning of quarter 2/1014 put DPM stock under high pressure, triggering concerns to investors. However, the sharp drop of oil price from late Quarter 3 and Quarter 4 along with the news of DPM’s first shipment of Phu My Fertilizer in large-size bags exported to New Zealand and Jordan brought a positive impact on the market as DPM stock price kept increasing. The securities companies raised their recommendation for DPM to "positive" and made adjustment to increase its target price. DPM continued to be rated as a good stock, maintaining profit rates with of ROA and ROE on average during 5 years (2009-2013) at 27% and 32%, respectively.

Ms. Nguyen Thi Hien - Vice President, the spokeswoman of DPM, said: "The fluctuations in stock price are unavoidable to enterprises in their business cycle; however, DPM’s leaders will always try our best to promote production and business results of the Company to ensure attractive and long-term benefits to our shareholders."

DPM announced that it has fulfilled and exceeded production and business targets in 2014 despite difficult situation of the economy in general, fertilizer industry with many complex fluctuations, fierce competition in specific. According to DPM, Phu My Fertilizer Plant’s product output reaches 845 thousand tons, exceeding the annual plan by 5%, the highest record so far. The sales output of other fertilizer products reaches more than 380 thousand tons, exceeding the annual plan by 15%, resulting in the total sales output of 1.22 million tons in 2014, also the highest record to date. Phu My Fertilizer’s market share nationwide is still maintained at 40%.

The deployment of new investment projects is also actively pursued by DPM with new progress in order to quickly diversify its products and increase revenues and profits. In 2014, DPM’s petro-chemical workshop officially came into operation with the capacity of 4,000 tons/year (25,000 barrels). Right in the first year of operation, the workshop supplied to the market approximately 14,000 barrels of chemicals, worth VND 200 billion in revenues. The UFC85/Formaldehyde additive workshop project was commenced in Quarter 2/2014 and has completed one third of total workload so far.  It is expected to be completed and start yielding revenues by the end of Quarter 4/2015. In addition, DPM said it would soon sign an EPC contract to start the NH3-NPK combined project within this year in order to achieve further revenues from 2017. This is the key project, expected to boost DPM’s growth for the next 3 years, providing an additional annual revenues of about VND 5,000-5,400 billion and profit of about VND 600-700 billion.

Similar scenario for the year 2015

Despite positive signs from progressof investment projects and prices of input raw materials, Phu My Fertilizer’s management said that 2015 would remain a tough year and the scenario for 2015 plan would be based on influence and impact analysis of some main factors, including: new VAT policy; input gas prices and freight rates; supply and demand forecast, especially for the urea product.

Reportedly, according to the new VAT lawa pplicable from the beginning of 2015, fertilizer is exempted from VAT, meaning that fertilizer traderswill not be entitled to input VAT credits for their fertilizer production and trading. Phu My Fertilizer said that itsinput VAT amount was approximately VND 400 billion. When the amendment law is applicable, the said amount will be accounted inthe cost, resulting in a drop in the annual gross profit if output price is not adjusted accordingly.

“Falling oil price and non-creditableVAT will have conflicting impact. On one hand, low oil price will help keep downthe gas price to Phu My Fertilizer, leading to reduction inthe cost of Phu My Fertilizer’s product, on the other hand,non creditableVAT will trigger the cost increase. However, domestic fertilizer pricesareclosely associated with those of global market, therefore theywill be affected by this market,” said Ms. Hien.

Besides, a remarkable growth in fertilizer supply market is forecast for the year 2015 when Ha Bac Fertilizer Plant comes into operationafter its expansion. Expectedly, domestic fertilizer supply will increase from 2.3 million tonnes to 2.6 million tonnes, leading to oversupply of about 400 thousand tones per year.

Inthat situation, Phu My Fertilizer anticipatedthe 2015 plan scenario to be almost similar to that of 2014. Phu My Fertilizer’s management saidthat with the  domestic fertilizer oversupply, the company would keep boosting its exports in the coming time. Reportedly, in 2014, the company registered the quality of Phu My Fertilizer’s products in Japan and was awarded the registration  certificateby the Japanese Fertilizer and Feed Inspection Association. This is considered a “very favourable” condition for Phu My Fertilizer to expand its markets and facilitate customers of Phu My Fertilizer products in exporting their agricultural products to Japan.

 “With current market conditions and policies commonly applied across the country, difficulties of businesses will be the same. However, as arising tide lifts all boats, DPM with many advantages will maintain its competitiveness with other domestic and imported products,” said Ms. Hien.

Thanh Nu

Vietstock

20/01/2015
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