See decline in DAP, NPK segments going forward: RCF

State run Rashtriya Chemicals and Fertilisers reported (RCF) reported 65% rise in net profit to Rs 6.52 crore for the quarter ended June 30, 2012. Its net profit stood at Rs 3.95 crore in the year-ago period.

Total income increased 71% to Rs 1,481.86 crore in the reported quarter from Rs 867.46 crore in the same quarter of the 2011-12 fiscal. RG Rajan, chairman and managing director, RCF expects urea sales to be similar to last year. However, sales of di-ammonium phosphate (DAP) and nitrogen, phosphorus and potassium and muriate of Potash (MOP) may fall going ahead on the back of poor monsoon and high prices of these products. Below is the edited transcript of Rajan’s interview with CNBC-TV18. Q: It has been a strong quarter for RCF, but your trading segment has seen 200% increases on year on year basis. Can you take us through what exactly happened in the trading segment and what can we expect in FY13? A: Trading segment has gone up because we had some stocks in the last quarter, which have been disposed off in this quarter and therefore it has gone up. Coming to the entire year, there will be some decline in the sales of di-ammonium phosphate (DAP) and Nitrogen, Phosphorus and Potassium and Muriate of Potash (MOP) in view of the weak monsoon and higher prices of the products. Q: Although the trading revenues were high because you had a lot of inventory, you booked a trading loss? Are the losses over or some of it will creep in the second quarter as well? A: The losses are over. Q: Can you give us an idea of how sales will pan out. You said that the sub par monsoon is going to impact offtake. What in your estimate will be a volume growth or a revenue growth in the current year? A: I see the sales of urea almost at same level of the last year, but for the DAP, NPK and MOP there maybe a decline in sales. So far in the Kharif season we are seeing 30% decline in the sales of DAP and NP. Depending on the rabi season we have to see how performance will pan out for the entire year. Q: Are you compensating complex fertilizer sales with urea. Is there higher offtake for urea at this point? A: Obviously because sales of urea are almost at the same level like last year and the sales of DAP and NPK have come down, so there is a higher use of urea. The ratio of NPK, the urea use is much more than phosphorus (P) and potassium (K) fertilizers (P&K). _PAGEBREAK_ Q: Where exactly does the subsidy requirement by the fertilizer industry from the urea space stand at? What sort of FY13 estimate would you be working for in terms of fertilizer subsidy for the fertilizer industry? A: In view of lower sales of DAP and NPK whatever is there in the budget maybe more or less okay or something more may required, but not much more. Q: We understand that you are looking for potash sources around the world. Can you give us an update on whether you have secured supplies? A: We are still in a preliminary stage. We are looking for potash sources in Canada. Numbers of options are being studied now and it will take some time before we decide on the final option. Q: Would subsidy be complete cash compensation or would there be a bonds issue like earlier? A: I do not think there will be any bond issue. It will be completely cash. Q: Since you say that fertilizer intake is likely to be lower this year and you already seeing it in kharif, will therefore the subsidy requirement also be lower? A: There was some rollover from last year, so there will not be much subsidy levels as given in the budget. A little more maybe required but not much more. Q: Have you heard anything from the government in terms of progress on Nutrient Based Subsidy (NBS) for urea or is it just completely at the backburner at this point? A: There is no NBS for urea. We are now looking at is NBS modified for the urea industry for the existing plant. Q: When is that likely to be announced? A: Difficult to tell, but we are expecting it to happen in couple of months. Q: Have you heard anything in terms of revision of gas prices with regards to KG-D6? Could you just give us a sense in terms of any disruptions you faced etc. or is everything on track? A: There have been some shortfall, but I do not think there is any price rise in the near future. As of now nothing is on the horizon on the price point front for gas. Q: You would be aware of normally patterns in the rabi season as well when you see a drought in the Kharif season, you noticed a 30% drop in demand in the kharif season for fertilizer, normally what does it translate. Does it impact rabi at all and if it does then to what extent? A: Basically it depends on monsoon in August, September and the north east monsoon. So only then we can have a final picture on the rabi outlook.