VIETNAM FERTILIZER INDUSTRY REPORT...

VIETNAM FERTILIZER INDUSTRY REPORT Q2/2018

Executive summary 4

1. Business environment 6

1.1 Macroeconomic situation 7

1.2 Legal framework 10

1.3 Trade agreements 17

2. Industry overview 20

2.1 Situation of fertilizer industry in the world 20

2.1.1 Supply demand 21

2.1.2 Import export 22

2.1.3 Price movement 24

2.1.4Production and consumption situation in some typical

countries26

2.2 Vietnam fertilizer industry situation 32

2.2.1 History of Vietnam fertilizer industry 33

2.2.2 Definition and Classification 34

2.2.3 Scale and Characteristics of market 37

2.2.4 Main activities 38

2.2.5 Input materials 40

Content

2.2.6 Production technology 44

2.2.7 Supply demand 47

2.2.8 Import export 53

2.2.9 Inventory 60

2.2.10 Price movement 63

2.2.11 Transport and distribution 64

2.3 Industry risks 65

2.4 Planning and forecast 74

2.4.1 Planning 75

2.4.2 Global forecast 78

2.4.3 Domestic forecast 80

3. Enterprise analysis 82

3.1 Top 10 enterprises 83

3.2 Target group of business results 92

3.3 Target group of finance 98

3.4 Target group of cash flow 103

4. Appendix of financial statements 105

2

3

ADB Asia Development Bank

EVN Vietnam Electricity

FAO Food and Agriculture Organization

FAV Fertilizer Association Vietnam

FDI Foreign Direct Investment

FIA Foreign Investment Agency

GDVC General Department of Vietnam Custom

Abbreviation

GSO General Statistics Office

MOT Ministry of Transport

MARD Ministry of Agriculture and Rural Development

VinacominVietnam National Coal and Mineral Industries Holding

Corporation Limited

UN comtrade United Nations Database of Trade Statistics

VIRAC Vietnam Industry Research and Consultancy

Fertilizer market continues to oversupply,

estimated supply of nutrition by fertilizer

ingredients increased to 3.4% while demand

increased slightly by 0.6%

Asia and the Americas are the largest

fertilizer consuming regions in the world,

Fertilizer prices tend to rise again due to high

demand while supply is scarce and the impact

of raw material costs and transportation (due

to rising oil, gas and coal prices).

Average supply exceeds the demand.

Vietnam fertilizer production has focused on

the single and mixed market for NPK and

DAP

Fertilizer consumption tends to decrease over

the years

Fertilizer imports have fluctuated

continuously over the years

Asian countries continue to be the main

export markets of Vietnam.

Executive summary

4

Content is intentionally removed for demo purpose

Executive summary

5

Fertilizers are in a saturated state, domestic

firms have to compete fiercely with imports,

while demand tends to fall, leading to

downward pressure in the 2016-2020 period.

In particular, Cambodia continues to be the main

export market,

Fertilizer inventories tend to increase over the

years, but the growth rate has been decreasing.


1. Business environment

1.1 Macroeconomic situation

1.2 Legal framework

1.3 Trade agreements

Content

6

7



Monthly CPI fluctuation, 2014 – 3/2018

Source: VIRAC, GSO

Source: VIRAC, GSO

GDP growth, 2012 – 3M/2018• GDP in Q1/2018 is estimated to increase by 7.38% over the same period last

year, this is the highest increase of the first quarter in 10 years.


8



Source: VIRAC

Source: VIRAC, SBV

VND/CNY exchange rate, 2016 - 3/2018

VND/USD exchange rate, 3/2015 - 3/2018




9

Source: VIRAC, GDVC

USD million

Source: VIRAC, GDVC

Export- Import by quarter, Q1/2015 - Q1/2018

Structure of export commodities, 3M/2018




1.2 Legal framework


Content

10

• Circular No. 36/2010/TT-BNNPTNT

• Decree No. 163/2013/ND-CP


1.2 Legal framework - Group of regulations on production, trading and use of fertilizers

11


• Decree No. 202/2013/ND-CP



12




13



1.2 Legal framework - Group of regulations on taxes of fertilizer import and export

14




15




16




1.2 Legal framework


Content

17

18

Vietnam's integration process since 1995 to date

As of Q1/2018, Vietnam had signed, implemented, and has been negotiating a total of 17 free trade agreements (FTAs). Accession to international trade

agreements brings opportunities and challenges for domestic firms.






19

Export taxes in 2016 Export taxes applied

since 10/5/2016

Tariffs under the Vietnam-EU trade agreement


Content

2. Industry overview

2.1 Situation of fertilizer industry in the world

2.2 Vietnam fertilizer industry situation

2.3 Industry risks

2.4 Planning and forecast

20


2.1 World fertilizer market – 2.1.1 Fertilizer supply-demand

21

Demand by nutrient and nutrient supply, 2015 – 2017e

Source: VIRAC, FAO

Million tons


Over the years, urea exports have been steadily increasing, mainly from

countries in West Asia and East Asia.


2.1 World fertilizer market – 2.1.2 Import export

22

Source: VIRAC, Trademap

USD billionFertilizer exports, 2012 - 2017e


23

Top fertilizer exporting countries, 2016 - 2017

Source: VIRAC, UN comtrade Source: VIRAC, UN comtrade

China is a country in the top import and export countries


2.1 World fertilizer market – 2.1.2 Import export

Top fertilizer importing countries, 2016 - 2017

Country 2016e 2017e Growth Country 2016e 2017e Growth


Fertilizer prices tend to rise again due to high demand but supply scarcity and the impact of raw material and transportation costs (due to rising oil, gas and

coal prices).


2.1 World fertilizer market – 2.1.3 Price movement

24

USD/tonPrice movement of main fertilizers in the world, 1/2012 – 3/2018

Source: VIRAC, Worldbank



2.1 World fertilizer market – 2.1.3 Price movement

25


China - world leader in fertilizer production


2.1 World fertilizer market – 2.1.4 Situation of fertilizer industry in countries

26

Conflict in consumption and production of fertilizer in China




27

Fertilizer production in China continues to grow low

Source: VIRAC, The Wall Street Journal

USD billion

Top largest fertilizer enterprises in China, 2017




28

Source: VIRAC, Trademap

USD thousand

Export 2017 2018

Source: VIRAC, Fert

Change in fertilizer export tax rate, 2017 - 2018

Fertilizer exports in China are forecasted to continue to fall in the coming years. Import and export of fertilizers from China, 2010 - 2017




29

India

Fertilizer demand is increasing

Source: VIRAC, Centre for Monitoring Indian Economy

Million tons

Imports of fertilizers by type in India, 2015 - 2017Content is intentionally removed for demo purpose

Impact of cost of production on fertilizer industry in India



30

Perspectives on India fertilizer industry

Source: VIRAC, Fertilizer Association of India

Structure of fertilizer production in India by type, 2012 - 2017


There are also other countries that also have large-scale fertilizer production:

United States

Russia

Canada

Germany

Brazil



31


Content




2.3 Industry risks


32


2.2 Vietnam Fertilizer Industry – 2.2.1 History of Industry Development

33


Classified according to the nutrient

requirements of plants

Classified according to source


2.2 Vietnam Fertilizer Industry – 2.2.2 Definition and Specification

34

Structure of major fertilizers 2014


Name of fertilizer Chemical composition Characteristic Type of suitable land



35


Name of fertilizer Chemical composition Characteristic Type of suitable land



36



2.2 Vietnam Fertilizer industry– 2.2.3 Scale and characteristic of market

37

Fertilizer industry revenue, 2010 - 2016

VND billion

Source: VIRAC, GSO Source: VIRAC, GSO

Share by revenue, 2016



2.2 Vietnam Fertilizer industry– 2.2.4 Main activities

38



2.2 Vietnam Fertilizer industry– 2.2.4 Main activities

39


Source: VIRAC,Vinacomin

Source: VIRAC,Vinacomin

Market segment of coal consumption

Coal reserves are concentrated in the Red River Delta coal basin and the coal used in fertilizer production accounts for 4% of the coal consumption

market.


2.2 Vietnam Fertilizer industry– 2.2.5 Input material

40

Coal reserves by area




41

Million tonnes

Forecast for coal supply and demand in the period 2015-2030


The reserves of apatite ore are plentiful and meet the demand

Source: VIRAC, Vietnam Chemical GroupSource: VIRAC, Vietnam Chemical Group



42

Thousand tonnes

Thousand tonnes

Forecast for ore demand for fertilizer, 2015 - 2030Exploration ore reserves in 2014


Domestic gas production will meet demand until 2076, the annual plant consumption of 1 billion m³ to produce 1.6 million tonnes of Urea

Source: VIRAC, Vietnam Gas Corporation



43

Market segment of natural gas consumption


Technology Advantage Disadvantage Using businesses

Production technology of NPK


2.2 Vietnam Fertilizer industry– 2.2.6 Production technology

44


Production technology of Urea



45


Production technology of DAP

Production technology of Phosphate



46



2.2 Vietnam Fertilizer Market – 2.2.7 Supply demand

47

Million tonsSupply - Demand, 2012 – 3M/2018e

Production and consumption of domestic producers,

2012 – 3M/2018e

Source: VIRAC, GSO, MARD, GDVC

Source: VIRAC, GSO, MARD, GDVC

Million tons




48

Fertilizer production, 2012 – 3M/2018e

Source: VIRAC, GSO

Million tons




49

The impact of tax policies on domestic production




Source: VIRAC

50

Fertilizer production capacity of big domestic enterprises, 3/2018




51

Source: VIRAC

Factory Capacity




52

Million tons

Source: VIRAC, GSO, MARD

Demand and consumption of fertilizer, 2012 - 3M/2018e


Source: VIRAC, GDVC, MARD


2.2 Vietnam Fertilizer Market – 2.2.8 Import export

53

Fertilizer imports, 2012 – 3M/2018e

Fertilizer imports have fluctuated continuously over the years as a result of domestic demand - supply and import and export tax policies as well as

major import markets.

Thousand tons




54

Source: VIRAC, MARD, GDVC


Thousand tonsFertilizer imports, 3M/2017 / 3M/2018e

Fertilizer imports by type, 3M/2018e




55


Import structure of fertilizer by countries, 3M/2017 – 3M/2018




56

Prices of some types of imported fertilizer 3M/2018

Type of fertilizer Average unit price

3M/2018

Unit: USD

Source: GDVC

Structure of importing fertilizer enterprises, 3M/2018

Source: GDVC




57

Million tons

Fertilizer exports, 2012 – 3M/2018e





58

Source: VIRAC, GDVC

Thousand tons

Source: VIRAC, GDVC

Fertilizer exports by country, 3M/2018e Fertilizer exports by country, 3M/2017 - 3M/2018e




59

Temporary import for export by type, 3M/2017

Type of fertilizer Share

Source: VIRAC, GDVC

Source: VIRAC, GDVC

Type of fertilizer Share

Vietnam fertilizer exports by type, 3M/2017

Fertilizer exports by origin, 3M/2018


Fertilizer inventories tend to increase over the years, causes are:


2.2 Vietnam Fertilizer Market – 2.2.9 Inventory

60

Source: VIRAC, GSO

Million tons

Fertilizer inventories, 2010 - 2017e


Ure and DAP prices have been fluctuating much in the first three months of 2018, specifically:

Source: VIRAC, VIETRADE- MOIT


2.2 Vietnam Fertilizer Market – 2.2.10 Price movement

61

* Price movements of main products (highest price) from Tran Xuan Soan market

VND

Price movement, 2014 - 3/2018



2.2 Vietnam Fertilizer Market – 2.2.10 Price movement

62



2.2 Vietnam Fertilizer Market – 2.2.11 Transport and distribution

63

Key seaports in Vietnam



2.2 Vietnam Fertilizer Market – 2.2.11 Transport and distribution

64


Content




2.3 Industry risks


65

Source: VIRAC, Worldbank

USD/ton


2.3 Industry risks

66

Coal, oil prices, 7/2011 – 3/2018

• Coal prices in Australia

• Average oil prices of Dated Brent, West Texas Intermediate and Dubai Fateh

Risk of input material prices


Weather influences the direction of impact and efficiency of fertilizer.


2.3 Industry risks

67


Risk of output sector

Source: VIRAC, MARD


2.3 Industry risks

68

Thousand ha

Structure of cultivation area, 2017 Area of paddy land for years, 2010 - 2014

Source: MNRE



2.3 Industry risks

69

Main agricultural products exports, 3M/2017 – 3M/2018

Source: VIRAC, MARD 2013

Thousand tons USD million

Source: VIRAC, MARD

Demand for fertilizer by crop


70

Source: VIRAC, MARD

Source: VIRAC, MARD

Thousand ha

Source: VIRAC, MARD

Thousand tons


2.3 Industry risks

Area of rice cultivation by season, 2017

Rice output by season, 2012 - 2017

Area of rice cultivation by region, 2012 - 2017



2.3 Industry risks

71



2.3 Industry risks

72



2.3 Industry risks – 5-forces analysis

73


Content




2.3 Industry risks


74

1. Planning the fertilizer production system

Decision No. 6868/QD-BTC approving the master plan for the development of the fertilizer production system and distribution system in the 2011-2020

period, with a view to 2025.


2.4 Planning and forecast – 2.4.1 Planning

75


2. Planning the fertilizer distribution system

3. Group of support solutions



76




77



2.4 Planning and forecast – 2.4.2 Global forecast

78

Forecast supply and demand of fertilizer by nutrients, 2017e - 2020f

Million tons

Source: VIRAC, FAO, IFA



2.4 Planning and forecast – 2.4.2 Global forecast

79

Fertilizer prices tend to decrease over the years mainly due to oversupply, which is caused by oversupply and falling prices of raw materials.



2.4 Planning and forecast – 2.4.3 Domestic forecast

80

Million tons

Source: VIRAC

Forecast of supply and demand, 2010 - 2020f



2.4 Planning and forecast – 2.4.3 Domestic forecast

81

The trend of developing high quality mixed fertilizers, organic fertilizers, replacing for low-tech fertilizers.


3. Enterprise analysis

3.1 Top 10 enterprises

3.2 Target group of business results

3.3 Target group of finance

3.4 Target group of cash flow

Content

82

Enterprise name AddressChartered capital

(VND million)

Total assets

(VND million)

Net revenue

(VND million)

1

2

3

4

5

6

7

8

9

Top 10 businesses with largest revenue in 2017

Source: VIRAC



83


Phu My Fertilizer Plant - PetroVietnam Fertilizer and Chemicals Corporation



84


Binh Dien Fertilizer Joint Stock Company



85

BFC’s fertilizer plants

Source: VIRAC


Ca Mau Petroleum Fertilizer Joint Stock Company



86


Lam Thao Fertilizers and Chemicals Joint Stock Company



87


Ha Bac Nitrogenous Fertilizer & Chemicals Joint Stock Company



88


DAP – VINACHEM Joint Stock Company



89


Quảng Bình Import Export Company



90


Southwest Petrovietnam Fertilizer and

Chemicals CorporationSoutheast Petrovietnam Fertilizer and

Chemicals Corporation

Central Petrovietnam Fertilizer and


North Petrovietnam Fertilizer and


3. Business analysis

3.1 Top 10 businesses

91







Content

92

Source: VIRAC



93

VND billionNet revenue




94




95

Source: VIRAC

VND billion

Gross profit margin, 2016 - 2017


Source: VIRAC



96

Self-financing rate, 2016 - 2017




97

Source: VIRAC

Source: VIRAC

Selling expenses, 2016 - 2017

Administrative expenses, 2016 - 2017







Content

98

Source: VIRAC



99

Fixed asset turnover, 2016 - 2017


Source: VIRAC

Day



100

Producing enterprises Trading enterprises

Days in inventory, 2016 - 2017


Source: VIRAC



101

DayDays of sales outstanding, 2016 - 2017




102

Source: VIRAC

Profit Ratio, 2016 - 2017






3.4 Target group of payment

Content

103


3.4 Target group of payment

104

Source: VIRAC

Index of payment, 2016 - 2017


4. Appendix

Content

105

106

Phu My Fertilizer

BALANCE SHEET

Unit: VND 2016 2017

A. SHORT-TERM ASSETS

I. Cash and cash equivalents

II. Short-term financial investments

III. Short-term receivables

1. Short-term receivables of customers

IV. Inventories

B. LONG-TERM ASSETS

1. Long-term receivables

2. Fixed assets

TOTAL ASSETS

A. LIABILITIES

I. Current liabilities

1. Short-term borrowings and liabilities

2. Taxes and other payables to the State budget

II. Long-term Liabilities

1. Long-term borrowings and liabilities

2. Provision for long-term payables

B. OWNER’S EQUITY

TOTAL CAPITAL RESOURCES

INCOME STATEMENT

Unit: VND 2016 2017

Net revenue from goods sold and services provided

Cost of goods sold and services provided

Gross profit of goods sold and services provided

Revenue from financing activities

Financial expenses

Interest expenses

Selling expenses

Administrative expenses

Net profit from business operations

Total accounting profit before tax

Costs of current corporate income tax

Costs of deferred corporate income tax

Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017

I. Cash Flow From Operating Activities

Depreciation of fixed assets

Unrealized foreign exchange gain (loss)

Net Cash Flow From Operations

II. Cash flow from investing activities

Expenditures on purchase and construction of fixed assets

and long-term assets

Net cash flow from investing activities

III. Cash flow from financing activities

Net cash flow from financing activities

Effect of foreign exchange differences

Net cash flow during the fiscal year

4. Appendix

Financial statements


107

4. Appendix


Binh Dien

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














108

4. Appendix


Ca Mau Fertilizer

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














109

4. Appendix


Lam Thao Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














110

4. Appendix


Ha Bac Fertilizer

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














111

4. Appendix


Dinh Vu DAP

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














112

4. Appendix


Quang Binh Import Export

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














113

4. Appendix


Southwest Petroleum Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














114

4. Appendix


Southeast Petroleum Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














115

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produced this report for private circulation to professional clients only. All information and statistical data herein have been obtained from sources we believe to

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