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Fertilizer Industry 2H2023 - “THAT SHIP HAS SAILED”

Fertilizer prices have been on a downward trend since the beginning of the year as the supportive factors in 4Q21-1H22 were gone. Although deep falling in selling prices negatively impact 1H23 business results, given the recent shift in global pricing, we anticipate a recovery in selling price and a consequently more optimistic forecast for 2H23.

The decline in selling prices and the lacking of sales export had an impact on the outcome in 1H23

• Without support from selling prices and abundant export turnover, revenue/NPAT MI of the fertilizer industry in 1H23 is down 24%/92% YoY, respectively. For detail, urea/NPK prices were down by 41%/13% YoY in 1H23, while export sales volume decreased 25% YoY. As a result, the gross margin narrowed by 20.1% bps to 9.8%.
• In 1H23, fertilizer export volume and value fall by 25%/55% YoY. When global supply increase, which primarily originates from China and Russia, we believe the opportunity for domestic fertilizer producers to increase export turnover as in 1H22 will not exist, fertilizer export in 2H23 therefore will decrease 22% YoY, and export market share is mainly concentrated in Cambodia and Southeast Asia