PetChem 2Q18 earnings increase on higher prices and volumes

The firm’s profit jumped by 42.3% for the period as overall average product price was higher partly due to higher crude oil prices


Petronas Chemicals Group Bhd (PetChem) noted that higher product prices and volumes helped it rake in bigger net profits in the second quarter ended June 30, 2018 (2Q18).

The downstream arm of national oil company Petroliam Nasional Bhd (Petronas) made a net profit of RM1.37 billion, or a jump by 42.3% year-on-year (YoY) for the period, as overall average product price increased YoY partly due to higher crude oil prices.

Revenue increased by 19.6% YoY, or RM774 million more, to RM4.7 billion, but was partially offset by the stronger ringgit against the US dollar.

The olefins and derivatives segment achieved higher revenue by RM215 million, or 8% YoY, to RM2.8 billion.

The segment’s pretax earnings were comparable to last year’s corresponding quarter at RM945 million due to lower sales volumes of ethanebased products, PetChem’s exchange filing yesterday noted.

Plant utilisation for the segment was lower at 88% from 91% a year earlier mainly due to higher maintenance activities at its cracker.

In the fertilisers and methanol segment, revenue rose by 39%, or RM557 million to RM2 billion, despite weaker ammonia prices in line with improved supply situation, coupled with softer downstream demand.

The segment achieved a plant utilisation of 99% compared to 88% in the corresponding quarter last year, supported by a lower level of maintenance activities at its ammonia and urea plants.

Plant utilisation rate is one of the determinants to PetChem’s results, which are dependent on plant maintenance activities and sufficient availability of feedstock, as well as utility supply.

“The group will continue with its operational excellence programme and supplier relationship management to sustain plant utilisation level at above industry benchmark,” PetChem noted in its Bursa Malaysia filing.

Its olefins and derivatives segment is expected to be stable in the near term, drawing support from healthy downstream demand and firm feedstock prices.

However, PetChem said supply is expected to meet demand as major producers have started up after their scheduled turnarounds.

The group sees the fertiliser and methanol segment to be firm in view of tight supply due to the turnaround in the Middle East region and US sanctions on Iran.

“Methanol prices are forecast to be firm primarily owing to short supply due to upcoming planned turnarounds in China and South-East Asia, supported by healthy demand in line with the resumption of methanol-to-olefins plants from turnarounds,” it added.

PetChem has declared an interim single-tier dividend of 14 sen per ordinary share, payable on Sept 20, 2018. Earnings per share for the period was 17 sen.