According to Abdulla Salatt, chairman of the company’s fertilizer unit (QAFCO), Industries Qatar–the country’s largest firm by market cap–will increase production of urea (used as a nitrogen-release fertilizer) and related products to supply growing global demand with a specific focus on South America, and in particular, Brazil. “We are thinking of sending more products to Brazil because it is a big agriculture country, consuming a lot of urea, and we see their appetite for urea opening up year after year,” Sowaidi told reporters. The company is currently contemplating a proposed $610 million plant which would increase urea production to 5.6 million tons/year by 2012, up from the current rate of 3 million. Upon completion the fertilizer unit would hold 15% of global urea production, say analysts. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in common use (46.7%).
The company overall is still reeling from recession, as last month it announced a 47% drop in 9 month profit due largely to decreased demand for petrochemicals, fertilizers and steel, as well as new capacity across the region. In 2008, the fertiliser unit alone accounted for almost half of the firm’s total profitability. That said, the future looks bright. Bloomberg noted that petrochemical production in Qatar, which is the holder of the world’s third-biggest natural gas reserves, is expected to rise to 4.3 million tons a year by 2015, an increase that would parallel an increase in natural gas output to 23 billion cubic feet by 2014. Moreover, analysts maintain that by 2013, income from the natural gas sector and the petrochemicals business will be more than double that of Qatar’s oil revenue. As for urea, it could be the lynchpin for the company’s ROE going forward: “If Qafco can guarantee the sale of this new urea capacity, this should be very positive for the company’s revenues and bottom line,” said Hala Fares, an analyst for Shuaa Capital, an investment bank, on Thursday. “Fertilizer prices are relatively stable currently, so any increase in sales volumes should reflect positively on revenues. Any improvement in fertilizers prices should further increase revenues.” Additionally, Last month EFG Hermes, an Egyptian investment bank, projected that it remained “positive” on fertilizer price estimates for 2010.