The bulk of the Group’s fertiliser business operation and market is in Indonesia. With an average annual sales volume of about 2.0 million MT, we are one of the largest fertiliser players in Indonesia.
In addition to having production lines focusing on nitrogen, phosphorus and potassium (NPK) compound fertilisers, we also engage in the trading and distribution of potash, phosphate and nitrogen fertilisers as well as secondary nutrients and trace element products. Supported by extensive logistics networks, the Group has been able to maintain substantial market shares of both potash and NPK in Indonesia, particularly in the oil palm sector. Customers of our fertiliser business are also our suppliers of fresh fruit bunches, crude palm oil and palm kernel, enabling us to tap this captive market and minimise credit risk.
At present, Wilmar’s total installed capacity of NPK compound in Indonesia is 1.2 million MT per annum, with a further 100,000 MT per annum capacity in Sabah to complement the Group’s activities in East Malaysia. We are also the appointed distributor of Canadian potash, Peruvian rock phosphate and USA borate in Indonesia.
Industry Trend and Our Performance
Despite the long-term prospects, 2019 proved to be a difficult year for the fertiliser industry, where regional fertiliser consumption in Indonesia and Malaysia declined by an estimated 25-30% in volume. The decline in volume was mainly contributed by the continued downward pressure on global commodity prices, especially palm oil, for the most part of 2019. This in turn dampened demand and buying sentiment throughout the year, with some plantations using less or even skipping some fertiliser application period. On top of a challenging first half of the year, the market suffered further in the second half where fertiliser prices saw declines across the industry. Despite the decline in annual sales volume and challenging market conditions in 2019, the Group’s fertiliser business delivered a better profitability overall compared to 2018, mainly attributed to timely purchase of raw materials as well as a more stable currency market.
Outlook and Strategy
The Group continues to remain positive on the long-term outlook for the region’s agricultural sector, given the positive sentiment in oil palm. We aim to focus on markets where we have a significant presence and competitive advantage to ensure achievable and sustainable growth. We are also actively exploring other growing markets for fertiliser and capitalising on local channels as well as global networks that the Group has.