Higher volumes set to lift PetChem earnings

  • Business
  • Thursday, 14 Feb 2013

PETALING JAYA: A recovery in earnings driven by higher product volumes is expected for Petronas Chemicals Group Bhd (PetChem) for its soon-to-be-released fourth-quarter financial year 2013 results.

Maybank Investment Bank Research (Maybank IB Research) in a report noted that the company’s product volume in the fourth quarter would show improvement on higher utilisation rates.

“We expect product volume to increase significantly in the fourth-quarter financial year 2012 stemming from improved plant utilisation rates across the group.

“In the third quarter, many of PetChem’s plants underwent heavy maintenance, which required prolonged closure of the production facilities.

“We understand that the maintenance requirements in the fourth quarter were minor and expect utilisation rates to have climbed to 80.4%,” it said in the report following a company visit.

It also noted that that product prices have risen some 10% quarter-on-quarter to US$1,123 per tonne (RM3,481) in the fourth quarter.

The firm forecasts a fourth-quarter financial year 2012 core profit after tax and minority interest (PATAMI) of RM1.06bil, and after taking into account the provision for the recent disposal of its vinyl business unit, a PATAMI of RM475mil is expected.

In the third quarter ended Sept 30, PetChem’s net profit had declined 38.3% to RM742mil, with revenue dropping to RM3.94bil from RM4.64bil, mainly due to both lower prices and volume.

On the outlook for 2013, the firm said it “looks promising with better global PMI (Purchasing Managers Index) numbers, a healthy supply-demand balance and high crude oil prices which supports for high petrochemical prices.”

This is opposed to the scenario in 2012, whereby most customer buying purchases were sporadic and on a consignment basis.

PetChem, according to the research outfit, aimed to achieve a 90% overall plant utilisation rate target in 2013, which it viewed as ambitious for now, considering that the global recovery still had some downside risk. PetChem had hit its highest annual utilisation rate in 2012 at 82.5%.

The firm said the market should not be concerned about the inability between PetChem and German chemicals group BASF to reach an agreement in January for a joint specialty chemicals venture within Petronas’ Refinery & Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.

This is because there were several other parties that the company could work with, plus the fact that BASF remained PetChem’s strong partner in many other ventures.

PetChem is slated to dispose of its 93.1% interest in its Vietnamese vinyl plant and is in the process of negotiations with several interested parties.

However, Maybank IB Research said that at this point, it had no indication with regards to the quantum of proceeds, and whether this would result in a profit or loss.

The discontinuation of the group’s vinyl business in Vietnam and two in Malaysia is part of the company’s portfolio optimisation. PetChem is expected to record a charge of some RM560mil in the fourth quarter of 2012.

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