The Egyptian government plans to dispose of a further stake in Abu Kir Fertilizers, Reuters has reported minister of public enterprise Hisham Tawfik as saying. His comments came on the same day that the cabinet decided to raise the administratively determined price of nitrogenous fertilizers from EGP3,290 ($210) per tonne to EGP4,500 per tonne.
Majority state-owned fertilizer producers in Egypt are directed by the government to channel 55% of annual nitrogenous fertilizer production, estimated at 3.7mn tonnes, to local farmers at the subsidised price. The producers are allowed to export the remainder of their production at the international price. A few days ago, the government raised the price of natural gas supplied to fertilizer producers to $5.75/mmBtu, up from $4.5/mmBtu previously.
At EFG-Hermes, an investment bank, analysts said they believed the natural gas price hike would have a negative impact of EGP600-650mn annually on Abu Kir’s bottom-line earnings. However, the increase in the local market urea price to EGP4,500 per tonne is expected to translate into an ammonium nitrate price of EGP4,000 per tonne, which could positively boost Abu Kir’s earnings by EGP750-800mn per year.
Abu Kir is one of few regional fertiliser players offering growth. It should come via two projects. Firstly, the Abu Kir 3 expansion is likely to see a construction start in 2022 with start-up operations expected in 2023. The project will cost $80mn-100mn and Abu Kir plans to finance it via debt. Secondly, Abu Kir has also established the Misr Methanol and Petrochemical Co. The management holds a 30% ownership stake.
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