KARACHI - Fauji Fertiliser has decreased urea price by Rs145 to cut the differential of Rs50 per bag with imported urea after which its price has been settled at Rs1,650 per bag. Engro has followed the suit by cutting the same amount from its prices. “The reduction in prices is due to huge urea inventory pile up in the market 0.8 million tons, inclusive of 0.264 million tons of imported urea,” said the analysts at InvestCap.
As per managements of both companies, Fauji and Engro, the price reduction will be reverted back to previous levels in June this year as local producers believe that the demand of both urea and DAP fertilisers will pick up by mid-May with the start of Khariff season. Developments on further .03 million tons of urea imports and prospects of barter trade with Iran for wheat (export) vs urea (import) seems to be losing pace with government deemed poised to buy from local producers to build their inventory which will be sold through NFML.
The phos acid contract of FFBL has settled at $905 per ton for the period of Apr-Jun 2012, declining by $55 per ton (six per cent) from $960 per ton contracted for the period of Feb-Mar 2012. The company is of the view that international phos acid prices will remain in downward pressure due to strong demand of Indian fertilizer manufacturers to decrease the phos acid prices. On the other side, local DAP prices are expected to remain stiff at the level of Rs3,700 per bag owing to better demand expected for the coming Kharif season. The FFBL held analyst briefing on Thursday to discuss 1Q-CY12 performance in which company posted the net loss of Rs0.41 per share. The management viewed that decline in earnings was due to low production as DAP plant remained shutdown for 20 days, while urea plant remained shut down for 50 days due to turnaround activities.
As a result, urea production remained low declining by 69 per cent YoY to 26,000 tons and DAP production also declined by 28 per cent YoY to 87,000 tons. Urea off-takes of the company declined by 90 per cent YoY, while DAP off-takes also followed the suit declining by 76 per cent YoY.
Relatively off season during 1Q-CY12 along with low cost imported urea piled in the market, the delay in inventory purchase by dealers in line with expectations of decline in urea prices was a major reason for low urea off-takes from local producers, industry urea and DAP off-takes declined by 16 per cent YoY and 46 per cent YoY to 1.03 million tons and 86,000 tons, respectively. During 1Q-CY12, the company generated the revenue of Rs1.9 billion compared to Rs8.0 billion during corresponding period last year, showing decline of 76 per cent YoY. The company posted the gross loss of Rs265 million compared to the gross profit of Rs2.7 billion during corresponding period last year. The repairs and maintenance cost posted the increase of 21 per cent YoY due to expense on turnaround activity conducted during the period. After tax loss of the company stood at Rs387 million (LPS of Rs0.41) compared to PAT of Rs1.5bn (EPS of Rs1.67) during same period last year.