Fundamental analysis of Zagros/ government’s imprudence rang the alarm bell – Tejaratnews
According to Tejarat News, since all the feed consumed by Zagros Petrochemical is natural gas and the variety of production products is limited, it will suffer the most from the increase in the gas feed rate. The two products of Zagros are methanol and steam, which steam is not so effective in making Zagros profitable due to its conditions.
Looking at the sales pattern and applying a rate of 7000 Tomans for food, 38000 Tomans for remittance dollars and assuming 45% inflation for 1402, Zagros Petrochemical will incur a net loss of 4,368 billion Tomans at the end of this year. Of course, it is possible that in the rest of the year, the government will withdraw from its policies due to the possibility of shutting down petrochemical plants, but the current numbers will leave Zagros with no other way than losses.
Zagros at the end of spring
Reviewing the monthly performance report of Zagros Petrochemical shows that the company’s production volume has experienced a good jump in April this year. But after that, in the last two months, the company’s production has been decreasing. Although the downward slope of the company’s production has been reduced in June.
As can be seen in the graph below, the production amount of the company in June 1402 reached 472 thousand tons from 516 thousand tons in May with a decrease of about 9%.
This process was repeated in other cases of the Zagros report. So that the amount of sales of Zagros in June was greatly reduced and faced a drop of about 37%. Based on this, Zagros managed to sell 217,580 tons of its products this month. It should be mentioned that this number was 343 thousand tons in May.
In this way, Zagros Petrochemical managed to earn 1,492 billion Tomans from the sale of its products, which is less than half compared to May of this year. The strange drop in the company’s income, in addition to the decrease in the sales volume, is due to the cheaper sales rate of the company’s products.
It should be noted that a large part of the company’s income came from exports. So that the company managed to earn about 1,377 billion tomans from its foreign sales. So that the sales rate of methanol, which is considered the main product of Zagros, has decreased in both domestic and foreign markets.
One thing that should be noted is the discussion of increasing the feed rate of petrochemicals up to 7000 Tomans. If the company’s production and sales continue to decline, and taking into account the increase in production costs, one should expect losses for Zagros. Because the most important factor in the cost of the company is the feed it receives, and the current price of the feed will cause a big jump in the company’s production cost.
It should also be said that currently the company’s costs have increased in line with inflation, and the feed received is calculated with 50 thousand tomans dollars. Meanwhile, Zagros and other petrochemical companies are required to exchange their dollar income from exports at the rate of 37,510 Tomans (remittance rate).
The government’s pressure on the income generation of petrochemicals is not new and it has been threatening the profitability of methanol producers for several years. So that the net profit of Zagros in 1401 was even lower than in 1997. It is important to mention that in 1997, the price of the dollar was around 12 thousand tomans.
Finally, the analysis of these figures shows that the intrinsic value of Zagros’ profit is decreasing day by day, and if it continues in the same way and the government does not stop its pressure, the Zagros train will soon reach its loss-making destination.
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