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Engro cuts DAP price to Rs 3600 per bag.

KARACHI -- Engro Fertilizer Ltd has reduced DAP prices by Rs 150 to Rs 3600 per bag due to decline in international prices and weak domestic demand, market sources said Thursday.

According to a senior analyst at KASB Securities, Shagufta Irshad Khurram, Engro had slashed di-ammonia phosphate (DAP) prices on February 22, 2012 by Rs 310 to Rs 3750 per bag.

She said that this cut has created a pressure on Fauji Fertilizers Bin Qasim Ltd (FFBL) to reduce its DAP price to remain attractive to dealers. It may be noted that FFBL had slashed DAP price to Rs 3870 per bag in March 2012.

With the current prices, FFBL's DAP will be expensive to imported DAP by Rs 270 per bag, loosing attractiveness to dealers due to high prices and falling demand. Shagufta said she expected FFBL to notify price cut with a lag or at least time it in line with finalization of its second quarter contract prices.

"Since the cut is earlier than expected, we were expecting similar level price cut from 3rd quarter of 2012. This will be negative for our estimates for FFBL assuming 2nd 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 delay in DAP price cut announcement by FFBL is expected to further increase pressure on sales for kharif crops starting April. She said that FFBL might report a net loss of Rs 0.14 per share for the 1st quarter of 2012.
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Publication:Balochistan Times (Baluchistan Province, Pakistan)
Date:Apr 13, 2012
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