Morning Call about Urea sales declines by 11% YoY due to lower availability in July’11 – Arif Habib Limited

Karachi: National Fertilizer Development Corporation (NFDC) has released fertilizer numbers for the month of July’11.

According to Arif Habib Limited, during the period, Urea offtake registered a decline of 9% YoY to 482 kT whereas DAP sales recorded a phenomenal jump of 171% YoY to 132kT. On a MoM basis, DAP sales posted an increase of 93% whereas Arif Habib Limited sees Urea sales were down by 2%. Lower Urea offtake is attributed to lower production whereas DAP sales exhibited a stupendous rise due to Rabi season round the corner where DAP sales normally takes off.


Fertilizer offtake (’000 tons) 7MCY11 7MCY10  YoY July’11 Jun’11 MoM
Urea 3,161 3,565 -11% 482 492 -2%
DAP 448 375 19% 132 68 93%


Company offtake (’000 tons)
FFC 1,354 1,436 -6% 207 205  -9%
FFBL 256 305 -16% 36  49 -27%
ENGRO  684  569 20% 114 120  -5%



FFBL 302 174 74% 97 22 340%
ENGRO 131 116 13% 34 8 323%



Average Price July’11 Jun’11 YoY  MoM
Urea 1,507 1,407 71%  7%
DAP  4,007 4,031 53% -1%




In 7MCY11 Urea offtake is down by 11% YoY to 3,161 kT mainly hit by lower production and delay in imports. Urea production is down by 7% YoY in 7MCY11 However, DAP sales registered a rise of 19% YoY to 448kT. This is despite phenomenal rise in the product price. Company wise DAP sales breakup shows that FFBL sold 302 kT (rise of 74% YoY in 7MCY11); similarly Engro’s offtake stood at 131 kT tons compared to 116kT, an increase of 13% YoY. Total fertilizer offtake has dropped by 4% YoY in 7MCY11 to 4.3mn tons.

Fertilizer Prices to stay firm in 2HCY11

Average retail Urea prices for 7MCY11 stood at PKR 1,220/bag, a rise of 46% YoY. DAP prices stood at PKR 3,673/bag, an increase of 44% YoY. In 2HCY11, Arif Habib Limited believes both Urea and DAP prices are estimated to remain firm on account of healthy demand and the gas curtailment issue. In CY11 Arif Habib Limited anticipates total DAP sales would be ~1.5 mn tons whereas Urea offtake for similar period is likely to be 6.5mn tons.

Gas curtailment may ease off going forward

Currently all plants on SNGPL network are being provided ~80% gas contrast to earlier when Arif Habib Limited sees continuous plant shutdown of one or more plants. Fertilizer plants on Sui network would be closed when Qadirpur starts its annual turnaround by end of August 2011 for a period of one month as planned. Gas situation could ease going forward if OGDCL gets its Kunnar Pasaki field online by October end 2011 as planned.

Stance on the sector

Arif Habib Limited maintains his positive stance on the sector. Arif Habib’s top pick of the sector is FFC. At current price level of PKR 153.8/share, FFC is trading at attractive discount of 26% to Arif Habib’s Dec’11 DCF based target price of 194.0/share.

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