>FERTILISER SECTOR

Fertiliser sales hit by lower production 

Key points

• Lower production of non-urea fertilisers weighed on total fertiliser sales: In July 2012, the aggregate sales of fertilisers (by 15 leading manufacturers) declined by 24% year on year (YoY) led by a steep decline in the sales of the non-urea fertilisers. In July 2012 the production and import of non-urea fertilisers, mainly di-ammonium phosphate (DAP), and complex fertilisers declined drastically on account of the non-availability of phosphoric acid and price negotiation by the Indian importers for DAP (imported). The imports of DAP and complex fertilisers decreased by 59% and 43% respectively during July 2012 mainly on account of lower production and lower imports by Coromandel International, India Potash and IFFCO. The imports of MOP and urea were higher by 69% and 48% respectively in the same month.
• YTD sales of fertilisers decline: The year-till-date (YTD) sales of fertilisers declined by 17% as compared with the sales in the same period of the previous year. The decline in the fertiliser sales volume was largely driven by the lower both production and import of non-urea fertilisers on account of a tight supply of phosphoric acid and the expiry of the contracts for the import of DAP. The sales of DAP, urea and complex fertilisers were lower by 59%, 1% and 43% respectively whereas the sales of MOP increased by 69% mainly due to higher imports by the Indian importers (potash plays an important role in a drought-type scenario). The imports of urea on a YTD basis declined by 50% to 2.71 lakh tonne as compared with that in the same period of FY2012. 
• Outlook: We maintain our cautious outlook on non-urea fertiliser manufacturers mainly due the lacklustre demand for these fertilisers on account of price hikes, margin pressure due to higher raw material cost and a demand shift towards cheaper fertilisers like urea and SSP. We prefer a pure urea manufacturer like Chambal Fertiliser as well as SSP manufacturers like Rama Phosphates and Liberty Phosphate in view of the existing demand-supply scenario.

RISH TRADER