Urea Sales to See Mixed Trends in February 2024, Fertilizer Companies Adapt to Input Cost Hikes

Islamabad, In an anticipated turn of events for the fertilizer sector, February 2024 is expected to witness a mixed performance in urea sales, with an overall increase on a year-over-year basis but a decline compared to the previous month.

According to JS Global, urea sales are projected to reach approximately 543,000 tons during the month, marking an 8% increase from the same period last year but experiencing an 11% drop on a month-over-month basis. The production estimates for February stand at 550,000 tons, leading to an expected closing inventory of around 271,000 tons.

Diammonium phosphate (DAP) sales, however, are poised for significant growth, with a projected 27% year-over-year increase and an 85% jump compared to January 2024. Fauji Fertilizer Bin Qasim Limited (FFBL), as the sole manufacturer, is expected to account for 63,000 tons of this off-take. Engro Fertilizers Ltd (EFERT) and Fauji Fertilizer Company (FFC) are also anticipated to contribute to the DAP sales, with respective volumes of 25,000 tons and 27,000 tons. The rise in DAP sales for EFERT comes amidst successful timely imports, while FFC’s increase follows a period of low sales attributed to delayed shipments and inventory shortages.

The fertilizer sector has demonstrated resilience in the face of rising input costs, notably adjusting to the repercussions of gas price hikes. This adaptability aligns with directives from the International Monetary Fund (IMF) regarding regular gas price adjustments to address circular debt challenges. Specifically, EFERT is positioned to benefit from the new gas pricing for MARI-based plants, thanks to its advantageous gas mix under the Petroleum Policy 2012. Recent price adjustments, including a notable urea price increase by EFERT, reflect strategic responses to gas cost increases.

In light of these developments, JS Global maintains a positive outlook for the fertilizer sector, citing steady revenue and cash flow projections. Despite significant price rallies in the shares of FFC and EFERT over the past five months, both companies are highlighted for their appealing dividend yields at current market levels.

This analysis comes from JS Global’s latest research, adhering to the strict standards and qualifications set by the Research Analysts Regulations 2015. The report underscores the firm’s commitment to unbiased, independent analysis based on a comprehensive review of multiple data sources. It also emphasizes JS Global’s strict adherence to its research dissemination policy, ensuring equitable access to its insights for all clients.

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