Engro reduces DAP prices by PkR 150 per bag

Karachi: Engro Fertilizer Ltd, a fully owned subsidiary of Engro Corporation, has reduced the prices of Di-ammonium Phosphate (DAP) by PkR 150 per bag from PkR 3,750 per bag and after which the product would now be sold at PkR 3,600 per bag to the farming community.

According to Alfalah Securities Limited, Engro Fertilizers has reduced DAP prices on account of a reduction in the international fertilizer prices and weaker application of fertilizer products by farmers due to a drop in cotton prices. During February 2012, the company had also made a reduction of PkR 310 bag to PkR 3,750 per bag. A reduction in DAP prices is likely to have no impact on Engro Fertilizer’s DAP margins since it imports DAP from international producers and sells it in the local market.

However keeping in view the local fertilizer market where prices of DAP are set accordingly to its import price, a reduction in Engro’s DAP price would compel Fauji Fertilizer Bin Qasim Limited (FFBL) to cut it’s DAP prices, currently at PkR 3,870 per bag, in order to maintain its attractiveness in the market. Alfalah Securities Limited believes a reduction in DAP prices would shrink the margins of FFBL as the contract prices of phos-acid are likely to stay firm. Alfalah Securities Limited recommends a “Hold” on FFBL and a “Buy” on Engro at current levels.