DCM - Declining urea prices dampen Q1 2023 results

- DCM announced weak Q1 2023 results with revenue of VND2,735bn (USD116mn; -33% YoY) and NPAT-MI of VND229bn (USD10mn; -85% YoY).

- We attribute the 33% YoY lower revenue in Q1 2023 to the average urea selling price declining 32% YoY (per our estimates) and urea sales volume dropping 13% YoY (per our estimates), which are partly offset by higher revenue from the trading segment. However, the trading segment is a low-margin business, leading to a significant 85% YoY decline in NPAT-MI despite 20% YoY lower input gas prices (per our estimates).

- The average Middle East urea price was USD372/tonne in Q1 2023 (-55% YoY & -36% QoQ). We expect global urea prices will bottom in H1 2023 before recovering in H2 2023, which should support higher profits in H2 2023.