Engro Fertiliser Ltd on Thursday reduced DAP prices by Rs150 to Rs3,600 per bag, attributing the cut to a decline in international prices and weak domestic demand. According to a senior analyst at KASB Securities, Shagufta Irshad Khurram, Engro had slashed di-ammonia phosphate (DAP) prices on February 22 this year by Rs310 to Rs3,750 per bag.
She said that this cut pressed the Fauji Fertilisers Bin Qasim Ltd (FFBL) to reduce its DAP price to remain attractive to dealers. FFBL had slashed DAP price to Rs3,870 per bag in March this year. With the current prices, FFBL's DAP would be expensive than imported DAP by Rs270 per bag, loosing its attractiveness to dealers.
Shagufta said she expected FFBL to notify a price cut with a lag or at least time it in line with finalisation of its second quarter contract prices.
"Since the cut is earlier than expected, we were expecting a similar level price cut from third quarter of 2012. This will be negative for our estimates for FFBL assuming second quarter phosacid prices are not reduced in similar proportionate.
"We highlight, FFBL is currently facing serious pressure on sales (both urea and DAP) from weak farm application impacted by decline in cotton prices, leading to carrying over of high cost inventories."
She noted that the delay in DAP price cut announcement by FFBL is expected to further increase pressure on sales for Kharif crops, scheduled to start in April.
She said that FFBL might report a net loss of Rs0.14 per share for the first quarter of 2012. The results for first quarter are due to be announced on April 17 this year.