PhosAgro H1 net profit down 56%, DAP prices still under pressure

22 August 2013 13:42  [Source: ICIS news]

LONDON (ICIS)--PhosAgro's first-half net profit fell 56% year on year to rouble (Rb) 4.8bn ($145.0m, €108.4m) from Rb10.8bn in the same period last year as diammonium phosphate (DAP) prices remained under pressure, the Russian phosphate-based fertilizer producer said on Thursday.

Revenue rose 7% to reach 53.7bn compared to 50.4bn a year ago, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 22% to Rb13.4bn from Rb17.1bn, the company added.

“We are in the third consecutive year of DAP prices being under significant pressure, with FOB [free on board] Tampa prices dropping another 10% from an average of $539[/tonne] in H1 2012 to an average of just $486[/tonne] in H1 2013,” said PhosAgro CEO Andrey Guryev. 

“As a low cost producer during a time when DAP prices are substantially below the cash cost of marginal producers, PhosAgro managed to generate a 25% EBITDA margin and to maintain almost 100% production capacity utilisation, which I believe distinguishes us from our peers,” he added.

In the first half, low demand from India and significantly delayed domestic US demand drove DAP prices down a further 10%, noted PhosAgro.

The period also saw Brazil continuing to increase its consumption of phosphate-based fertilisers, with its monoammonium phosphate (MAP) imports increasing by 43% and its nitrogen phosphate/nitrogen phosphate and sulphur imports up 66% year on year, the company added.

“We believe that fertilizer demand will strengthen and that DAP prices will stabilise closer to the levels of marginal phosphate producer cash costs,” Guryev said.

“Although in the short term we might see additional price pressure, in the longer term industry fundamentals remain strong, and we continue to be in the best position to deliver any type of phosphate-based fertilizer to farmers either in concentrated or in complex triple [nitrogen phosphorous potassium] (NPK) and even quadruple (NPKS) nutrient form,” he added.

Global supply of phosphate-based fertilizers remained at very low levels due to significant cash costs faced by most producers, and no significant new capacities were expected to be added in the near future, minimising pricing pressures from the supply side, PhosAgro said in a commentary on the market outlook.

“On the demand side, India remains a question mark given the significant weakness of the local currency; at the same time, imbalanced fertilization for the third consecutive year (over-application of nitrogen versus phosphate) may eventually force delayed purchases to be made,” the commentary added.

With not just the Indian currency, but currencies across the emerging markets, weakening – the Brazilian real has depreciated against the dollar by 15% since the start of 2013, noted PhosAgro – customers would be cautious in the short term about importing fertilizers, the company said.

($1 = €0.75, $1 = Rb33.11, €1 = Rb44.27)


By: Will Conroy
+44 20 8652 3214



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