Urea price on the world market is expected to keep going down, imposing significant pressure upon the domestic fertilizer industry, especially in the context of increasing oversupply this year. Securities Investment Newspaper has talked with Mr. Le Cu Tan, Chairman of PetroVietnam Fertilizer and Chemicals Corporation (PVFCCo – stock code: DPM) about a business year full of challenges.
Could you please tell us your basis for PVFCCo business plan in 2015?
The development of a business plan must be based on practical conditions. Oil prices will cause adverse impact upon Vietnam"s economy if remaining at low as present.
In 2015, the urea price is forecast to fall accordingly and settle on a new low price level, which will be a challenge to our targets. Meanwhile, the domestic urea supply source keeps increasing, resulting in a surplus of 400 thousand tons /year when Ha Bac Fertilizer Plant completed its project to raise capacity to 500 thousand tons/year in early 2015. In addition, new VAT law also causes remarkable impact upon the input costs of fertilizer producers and traders, including PVFCCo.
On its part, PVFCCo is in the process of investment of some new projects. Therefore, we will carefully consider adjusting our forecast and submit to AGM the business plan most suitable to the actual situation in 2015. In addition, we will actively implement solutions to achieve best results. As in 2014, PVFCCo has exceeded the profit plan by 22%.
Now, the reserved potentiality in fertilizer production is gone, what business sectors will PVFCCo be focused on in order to achieve revenue and profit growth?
To solve the problem of growth, determined to aim at innovation and creativity, in recent years the leaders of PVFCCo have focused all resources to promote R&D, product diversification activities, implementing key investment projects in the fields of fertilizer and chemical production, petro-chemistry according to the development strategy.
We will maintain Phu My Urea production output at the average of 800,000 tons/year in order to firmly protect our domestic urea market share and remain optimal business efficiency, and also seeking opportunities to expand sales to foreign markets.
On the other hand, we will improve the productivity and business performance of the other brands of Phu My fertilizers, chemical products and make more aggressive effort in R&D activities of new products. PVFCCo has inaugurated the Petro-chemicals Production Plant in Vung Tau in early 2014 – the first specialized plant invested by a member company of PetroVietnam, to provide international standard specialized chemicals on site to oil & gas companies and contractors operating in Vietnam. The Plant has been put into stable operation from 5/2014 and supplied 15,000 drums of petrochemical products in 2014, generating over VND 200 billion in revenue.
Regarding to fertilizer, we will keep diversifying packaging forms, such as Jumbo-sized bags of 500kg/bag, 1,000kg/bag for export to high-demanding markets such as New Zealand, Jordan, Japan, etc. at high price. Especially, the chemical trading sector is proved very potential, so we set the target of selling 100% of our produced chemicals and achieving the revenues gradually increasing to be equal to and exceeding those in the fertilizer sector. PVFCCo will soon complete the large-scale chemical production projects with the first advanced technology such as NH3, UFC-85/Formalin, H2SO4, SBR synthetic rubber, SM/PS plastics, etc.
Could you tell us where these new projects are up to and if PVFCCo can speed up the progress?
The UFC85/Formaldehyde Project has started since April 3/2014 and is scheduled for completion at the end of this year. UFC85 or Formalin are products with their full consumption ensured, directly supplied to the urea plants in the country. We are also preparing to start construction of the complex project of NH3 workshop and NPK production in this year. Currently, NH3 product is imported in the volume of approximately 100,000 tons / year, so, when the project is in operation, its NH3 output is expected to be sold out quikcly. In addition, Vietnam has to import about 300,000 – 500,000 tons of high-quality NPK every year, therefore the NPK fertilizer produced with chemical technology - the most advanced technology in the world - will be able to meet this demand.
In addition to above short-term projects, we also prioritize many medium and long-term projects, expected to go into operation in 7 to 10 years. Some typical projects include: petrochemical complex project with a capacity of 1.2 million tons of Methanol/year, using input stock being natural gas discovered in Ca Voi Xanh oilfield; Polystyren project with capacity of 300 thousand tons of PS per year from Monostyren stock; and Ammonia Complex project (NH3) + Ammonium Nitrate (NH4NO3).
Accordingly, we are confident that, in the near future PVFCCo will soon complete its goal of becoming a leading company of Vietnam and the region in fertilizer and chemical production and trading.