CEO Morning Brief

Petronas Chemicals’ 3Q Net Profit Came in Lower on Unfavourable Product Spreads, Energy Costs

Publish date: Wed, 29 Nov 2023, 08:47 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 28): Petronas Chemicals Group Bhd’s (PetChem) net profit fell 77.6% to RM424 million in the third quarter ended Sept 30, 2023 (3QFY2023) from RM1.89 billion recorded in the same period last year, as unfavourable product spreads and energy costs dented earnings.

During the quarter under review, earnings before interest, tax and depreciation (Ebitda) was lower by RM960 million or 49% at RM1 billion, mainly due to lower product spreads and higher energy & utilities costs.

Earnings per share decreased to five sen, from 24 sen in 3QFY2022.

On a quarter-on-quarter basis, PetChem’s net profit dropped 32.48% from RM628 million in 2QFY2023, due to lower unrealised foreign exchange gain and higher tax expense, while revenue reduced 4.62% from RM7.11 billion previously.

Quarterly revenue slipped 3.53% to RM6.78 billion from RM7.03 billion, amid lower product prices and sales volume, but this was partially offset by revenue contribution from Perstorp.

PetChem told Bursa Malaysia that the group recorded a lower plant utilisation rate of 77% as compared to 97% in 3QFY2022, mainly due to higher statutory turnaround and plant maintenance activities during the quarter, resulting in lower production and sales volume.

For the cumulative nine months of FY2023 (9MFY2023), PetChem’s net profit shrank 72.88% to RM1.58 billion from RM5.84 billion, although revenue increased by 5.95% to RM21.45 billion, from RM20.25 billion in 9MFY2022.

In a separate statement, PetChem’s managing director/chief executive officer Mohd Yusri Mohamed Yusof said the group undertook scheduled plant turnaround at its ammonia plant in Kerteh, Terengganu; and planned shutdown at the fertiliser plant in Bintulu, Sarawak.

In addition, PetChem faced an unscheduled shutdown at its methanol plant in Labuan, as well as its methyl tert-butyl ether (MTBE) and propane dehydrogenation (PDH) plants in Gebeng, Pahang.

“These activities have since been completed and the group is now operating normally at above 85% utilisation. On the market side, we observed slight demand recovery in several chemicals, but overall margins are still compressed,” he said.

Compared against 2QFY2023, he said the olefins and derivatives segment saw average product prices decline by about 4% on weak demand and ample supply, whereas the fertiliser and methanol segment saw improvement in prices, particularly for urea, due to limited spot supply and China’s export ban.

”The brief rally in selected chemical product prices have levelled off, as the year end approaches. A seasonal slowdown is anticipated for olefins and derivatives, with most buyers managing their term commitments. Fertilisers might see some support from the expected Indian urea tender shipment in December, in conjunction with the winter crop season in South Asia. The specialties segment continues to be affected by ongoing macroeconomic uncertainties, with some recovery in the automotive and transportation sectors, underpinned by travel and tourism industry rebound,” Yusri explained.

“In October, we reached a key milestone in our New Plastics Economy agenda, with the final investment decision to construct an advanced chemical recycling plant in Pengerang, Johor. Targeted to be operational in 2026, the plant will convert end-of-life plastic waste into pyrolysis oil, which will be used as feedstock in the production of sustainable plastics. We are proud to be able to play our part in the nation’s Plastic Sustainability Roadmap 2021-2030, and contribute toward creating an ecosystem that promotes plastics circularity,” he added.

At Tuesday’s noon break, PetChem’s share price was four sen or 0.56% lower at RM7.05. At this price, the group was valued at RM56.4 billion.

Source: TheEdge - 29 Nov 2023

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