INTERNATIONAL MARKET

The global fertilizer market in 2023 was significantly impacted by geopolitical turmoil and export restrictions in certain countries, leading to a rapid decline in fertilizer prices compared to 2022. Ongoing conflicts such as Russia-Ukraine and Israel-Hamas raised concerns about potential escalation in the Middle East, a major fertilizer production region. Following record-high prices in 2022, fertilizer prices plummeted from the fourth quarter of 2023, with Urea prices dropping by approximately 64% and Potash prices by 67%.

DOMESTIC MARKET

In 2023, the domestic fertilizer market faced significant adverse impacts:

1

Firstly, the domestic fertilizer market in 2023 encountered heightened competitive pressures stemming from increased imports. Vietnam’s economy, characterized by extensive participation in various free trade agreements, faced constraints in terms of scale, resilience, and competitive capabilities.

2

Secondly, unresolved inconsistencies persisted in fertilizer tax policies. A 5% export tax diminished the competitiveness of domestic enterprises.

3

Thirdly, a notable surge in inventory levels escalated competition among local enterprises. Early in 2023, inventory management challenges triggered a climate of fire sales and price undercutting, notably affecting NPK products. Furthermore, there was a notable emergence and proliferation of substitute products, characterized by lower quality or counterfeit attributes, such as N21-25% as a Urea substitute and Ammonium as a Potassium substitute.

4

Fourthly, the increased cost of production materials, particularly the price of gas for Urea production, posed challenges. For PVFCCo, the price of gas for Phu My Urea production increased by 18% in 2023 compared to 2022 (gas price with VAT was 10.51/8.88 USD/ MMBTU). The heightened cost of raw gas material resulted in additional production expenses of over VND 1,000 billion for the entire year compared to 2022.

In conclusion, given these circumstances, the production and business outcomes of fertilizer enterprises in the market witnessed substantial declines compared to the corresponding period.

OUTSTANDING FACTORS AND TARGETS IN PRODUCTION AND BUSINESS OPERATIONS IN 2023

Against the backdrop of 2023, PVFCCo persisted in capitalizing on various advantageous factors. These included the esteemed reputation of the Phu My fertilizer brand and the expansive geographical reach of its distribution network. Operations at the Phu My Fertilizer Plant remained steadfastly stable, operating at high capacity levels with ample gas supply. Financial health remained robust, bolstering both production and business endeavors, thereby attaining a range of notable performance targets:

Production output

816

thousand tons of Urea

120

thousand tons of NPK

55

thousand tons of NH₃
(for trading)

Sales volume

879

thousand tons of Urea

138

thousand tons of NPK

64

thousand tons of NH₃
(for trading)

266

thousand tons of
other fertilizers

Contribution to the State budget

VND 565 billion

completing 235% of the year plan

Investment disbursement

VND 220 billion

completing 100% of the year plan

SUMMARY ON BUSINESS PERFORMANCE IN 2023

Production and business statistics for the Corporation’s leading products over 2014-2023 period

Production and sales targets (thousand tons)

• Urea Production
• Urea Consumption
• NPK Production
• NPK Consumption

• Revenue
• Profit before tax
• Profit after tax

INVESTMENT AND PROCUREMENT DISBURSEMENT SITUATION IN 2023

According to the 2023 plan, total capital for investment in construction and procurement was VND 220.58 billion. PVFCCo disbursed over VND 219.74 billion, achieving nearly 100% of the plan according to the actual progress, an increase of 84% compared to 2022.

PERFORMANCE OF SUBSIDIARIES AND DEPENDENT UNITS

FINANCIAL PERFORMANCE

Unit: VND billion

FINANCIAL INDICATORS

ASSESSMENT ON PERFORMANCE

In the actual situation and conditions of production and business activities in 2023 as reviewed and evaluated above, on the basis of the tasks and targets of the annual plan approved by the General Meeting of Shareholders, PVFCCo’s Board of Management evaluated the implementation of timely, synchronous and flexible solutions, helping the Corporation achieve business results in 2023 for each specific field as follows:

PRODUCTION

With the experience accumulated in periodic maintenance, in 2023, PVFCCo quickly handled arising issues, reducing machine downtime. The review, adjustment, and application of the requirements were clearly effective, as total energy consumption of production progress in 2023 was lower than targets, and overall fuel, energy savings in the production sector reached VND 220 billion. In particular, there were numerous measures to increase the quality and output of NPK.

Phu My Fertilizer Plant achieved a production output of 800,000 tons of Urea 13 days in advance, the whole year’s output reached 815,859 tons, 4% higher than the plan. The NH3 Revamp - Phu My NPK Complex was operated and taken advantage of stably. In 2023, the project complex continued to contribute nearly VND 2,300 billion in revenue, equivalent to 18% of the total revenue of the Corporation.

SALES, MARKETING AND PRODUCT RESEARCH

In the face of fierce competition, the Phu My Urea brand maintained its solid position and market share in the domestic market, through its progress towards the goal of developing foreign markets. In 2023, the Corporation exported 100 thousand tons of Phu My Urea. Furthermore, it has established a market presence with the quality of Phu My NPK, Potassium, and DAP, and continues to expand chemical production and business activities. The Corporation was flexible in implementing changes and improvements in transportation, distribution, sales, and inventory policies, among others, to improve the business effect and expand the customer segment. The Corporation has effectively traded nearly 1.3 million tons of fertilizers (879 thousand tons of Phu My Urea; 138 thousand tons of Phu My NPK; 266 thousand tons of other fertilizers) and over 118 thousand tons of chemicals.

CAPITAL CONSTRUCTION INVESTMENT AND PROCUREMENT PROJECTS

Total disbursement for investment and procurement projects is over VND 220 billion.

ORGANIZATION, HUMAN RESOURCES, HUMAN RESOURCE DEVELOPMENT AND RESTRUCTURING

The Remuneration Policy Improvement project and KPI project have provided motivation for employees to promote creativity and improvement in their work and assisted the Corporation in retaining highly skilled personnel.

SAFETY-HEALTH &ENVIRONMENT POLICIES

Security, safety, fire prevention, and rescue were always appreciated and strengthened by the business units, especially during holidays, Tet, etc. As a result, in 2023 the Corporation did not have any accidents happen affecting labor safety, production and business activities.

Limitations and solutions, details as follows:

PRODUCTION

Phu My Fertilizer Plant, after many years of operation, despite regular maintenance, engineering and technical issues have surfaced in fixed equipment, which affected or threatened the stability of the whole Plant’s operation, many outdated systems need to be upgraded.

BUSINESS

Fertilizer business has become more and more difficult when facing the challenges in unstable prices, economic slowdown and climate changes. Therefore, the analysis and forecast of market need to be strengthened to grasp future opportunities and optimizing business efficiency.

RESTRUCTURING

management structure is still cumbersome and does not satisfy our expectations. The restructuring project for the next stage has been RESTRUCTURING submitted to the proper authorities for approval.

CAPITAL CONTRIBUTION TO ASSOCIATED COMPANIES

The planned divestments and withdrawal of capital from associated companies, such as: VNPOLY, PVC Mekong, and Ut Xi Aquatic Products Processing Corporation were delayed, etc., the operations of these companies continued to deteriorate.

FINANCIAL ANALYSIS

Assets and Capital

Total assets according to PVFCCo’s consolidated financial statements as of 31 December 2023 were VND 13,309 billion, a decrease of 25% compared to the beginning of the year (13,309/17,699). PVFCCo’s cash and cash equivalents decreased by 40% compared to the beginning of the year (VND 1,242/2,084 billion). This reduction is primarily attributed to the Corporation’s cash dividend payout for the year 2022 (at a rate of 70% of the par value of shares, equivalent to VND 2,739 billion).

Liabilities

• PVFCCo’s liabilities as of 31/12/2023 were VND 1,764 billion, a decrease of 52% compared to the beginning of the year (VND 1,764/3,681 billion).
• Total liability to total assets ratio and total liability to equity ratio decreased compared to those of 2022, but the current ratio and quick ratio in 2023 remained higher than 1. This demonstrates a good capacity to pay debts, and the Corporation is not under any pressure on due debt, ensuring good production and business activities.
• Given the closing balance of Cash and Cash equivalents of VND 1,242 billion, there is sufficient funding for manufacturing, trading and investment projects as planned.

Profitability

PVFCCo’s profitability ratios such as ROE and ROA drastically decreased compared to the same period mainly due the decrease in 2023 profit after tax, by 90% from 2022, leading to the decrease in ROE and ROA.

IMPROVEMENTS IN ORGANIZATIONAL STRUCTURE, POLICIES, AND MANAGEMENT

The Corporation has developed and executed a restructuring plan and roadmap for the 2021-2025 period. This includes ongoing review, adjustment, and updating of department/unit functions and tasks. Additionally, efforts are underway to enhance internal regulations, risk management, and salary policies, while accelerating the digital transformation journey.

DEVELOPMENT PLAN FOR THE FUTURE

Board of Management is executing strategic development plans, including mid-term production and business plans approved by General Meeting of Shareholders and Board of Directors.

MAKING ASSESSMENTS ON ENVIRONMENTAL, STAFF AND SOCIAL RESPONSIBILITIES

Details of the assessment on environmental, staff and social responsibilities are presented in Chapter 5 – Sustainable Development Report pages 80-105.