Company Quarterly Earnings Update – DPM VN – 2018 Q3

Summary of the 9M 2018 results of Phu My Fertilizer (DPM VN) 

 

9M/2018 results: highlights
  • Net revenue rose by 7.9% thanks to higher urea sales. However, the gross margin declined due to higher input gas prices. The new NPK factory went into commercial operation in August and received good feedback from customers. However, production and sales were still low.
  • Selling and administration (SG&A) expenses, as a percentage of sales, declined significantly to 11.6% from 16.2% as a result of the Board of Director´s (BOD) efforts to eliminate redundant expenses. Net profit fell by 6.9% yoy to VND 551bn.
  • The new NPK factory was completed with a capex amount of VND 4,077bn. Despite these investments, DPM retained a strong balance sheet: cash and cash equivalents of VND 2,909bn, accounting for 25.0% of total assets.
Outlook
  • Urea selling prices in Vietnam should be supported by increasing production costs of other regional urea producers and by the expected end of global oversupply by 2020.
  • The NPK factory’s utilization rate is projected to improve to 90% and to 100% in 2019 and in 2020 respectively. We expect the EBITDA margin to be around 32% once the factory operates at full capacity.
  • DPM´s 2018 net profit should rise by 2.0% yoy, while we project a faster increase of 21.4% for 2019 thanks to higher urea selling prices and better margins from in-house NPK products.
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