The 25 fertilisers companies posted 95% year on year growth in their aggregate net profit at Rs 889 crore for the first six months (April to September) of current financial year 2016-17 (H1FY17). These companies had a combined net profit of Rs 456 crore during the same period previous fiscal.
According to ICRA Research, overall, the outlook for the fertiliser sector continues to remain stable with favourable agro-climatic conditions and liquidation of high systemic inventory.
Although the profits in October-March (H2FY17) should be relatively better due to a further softening of raw material prices, the overall profits for FY2017 should remain weak due to overwhelming impact of weak H1 performance, the rating agency said in recent report.
Overall, for the year FY2017, the upside in the overall volumes is likely to be limited at 2-4% due to high systemic inventory levels at the beginning of the year. Also, the recent government of India move of demonetization could negatively impact demand in the short term for fertiliser as it coincides with the sowing season for the winter crop.
Hence, volume growth is likely to be at the lower end of the expected band. The urea industry would also benefit from subdued energy price environment, which is likely to drive the cost of production lower, added report.