4 Feb 2025Wrong
Subsidy reform would compress fertiliser margins through 2025 as the sector lost its cost advantage faster than it could reprice.
Post-mortem — what I got wrong
- What I argued
- That subsidy reform would compress gross margin below 28% within four quarters, because the sector would lose its feedstock cost advantage faster than it could raise urea prices.
- What actually happened
- Reform landed on the announced timetable, but gross margin rose to 33.2% in FY2025. Prices reached the farmgate in roughly two quarters, faster than assumed, and offtake held.
- What I missed
- I treated pricing power as an open question when the company's own ten-year record already answered it. The pass-through lag was in the data I had; I did not look for it because the reform narrative felt like the more important fact.
- What I'd check earlier next time
- Before arguing that a cost shock compresses margin, measure how the last three cost shocks actually passed through, and how long each took.