PhosAgro swings to loss, revenue down

11:30 AM | May 14, 2020 | Natasha Alperowicz

PhosAgro (Moscow), a leading phosphate fertilizer producer, today reported a net loss of 15.588 billion Russian ruble ($210.6 million) in the first quarter of this year, compared with a net profit of RR21.136 billion in the year-earlier quarter. EBITDA rose 25.3% to RR18.5 billion while EBITDA margin was down to 28.9% from 34.3% in the first quarter of 2019. Revenue was 11.4% lower at RR64.058 billion. During the first quarter of this year, PhosAgro sold 2.087 million metric tons (MMt) of phosphate fertilizers, an increase of 8.2%. Nitrogen fertilizer sales rose 13.9% to 703,000 metric tons.
PhosAgro CEO Andrey Guryev says all the company’s production assets are operating uninterrupted and at full capacity and that global market conditions in the first quarter of this year were favorable for fertilizer producers. “The seasonal recovery in demand in our primary sales markets contributed to an increase in fertilizer prices from their lows at the end of 2019 and enabled us to increase sales volumes in key markets; the share of our priority Russian market increased to nearly 40% of the company’s total revenue.”
Since the beginning of this year, phosphate fertilizer prices rose by an average of $40–50/metric ton from their low point, reaching highs of more than $300/metric ton FOB Tampa/Baltic by mid-March. The price increase was driven by production cutbacks announced at the end of 2019 in Morocco and the US aimed at stabilizing the market; DAP/MAP production cuts in China; as well as reduced exports, due to quarantine measures related to the coronavirus disease 2019 (COVID-19) pandemic. According to preliminary estimates, DAP/MAP production in China in the first quarter of 2020 decreased by 1.9 MMt, accounting for a 25% year-on-year reduction.
However, as the COVID-19 pandemic developed and production recovered at capacities that had previously been shut down, global DAP/MAP prices stabilized, and prices decreased slightly in early April. The average price for DAP in the first quarter was $296/metric ton FOB Tampa, compared with $284/metric ton in the fourth quarter of last year and $400/metric ton in the first quarter of 2019.
PhosAgro in its outlook says it does not see significant disruptions in sales in connection with the introduction of quarantine measures, as fertilizers are classified as essential goods in many countries. However, currency fluctuations in key fertilizer sales markets, price volatility in markets for major agricultural crops, and supply chain disruptions in light of ongoing complications caused by the COVID-19 situation throughout the world may continue to have a negative impact on demand and prices for fertilizers.
Since the beginning of April, there has been a downward trend in all fertilizer markets, which is attributed to the off-season period in a number of key regions, including Europe, Latin America, the US, and Russia. An additional negative factor will be the expected increase in supply from China, where production rebounded following the lifting of quarantine measures, which, combined with export support measures and low energy prices, will see more Chinese fertilizers in global markets.
Factors that will help stabilize prices in the near future may include an increase in seasonal demand in two main fertilizer markets—India and Brazil—along with continued measures to ensure that fertilizers remain affordable relative to major agricultural products, PhosAgro says.