PetGas, PetChem post lower 1Q earnings as fundamentals weaken

The drops in earnings are attributed to the unrealised foreign exchange loss and sharp decline in product prices


THE downstream listed arms of national oil company Petroliam Nasional Bhd posted weaker earnings for the first quarter (1Q) ended March 2020 as weaker demand triggered by the Covid-19 crisis, currency losses and lower pricing power took a toll on the financials of the subsidiaries.

According to separate exchange filings yesterday, Petronas Gas Bhd’s (PetGas) earnings for the period slipped 28.6% year-on-year (YoY) to RM368.12 million due to an unrealised foreign exchange loss of RM152 million.

Meanwhile, Petronas Chemicals Group Bhd’s (PetChem) net profit slipped 36.8% YoY to RM506 million due to sharp decline in product prices following the Covid-19 outbreak and price war in the crude oil market.

PetGas’ revenue for the period improved by 2.1% YoY to RM1.4 billion on higher contribution from its gas transportation and regasification segments but lower electricity offtake saw its utilities segment revenue fall by 6.7% or RM23.7 million.

The company declared an interim dividend of 16 sen per share and guided towards sustainable earnings, as it expects the transportation and regasification businesses to fare well in the 2H20 due to higher tariff rate since the start of the year and long-term supply contracts to anchor its gas processing business.

“The current Covid-19 pandemic and Movement Control Order (MCO) has caused a slowdown in energy demand and business operations in Malaysia.

“Our business model underpinned by secured income streams under long-term contracts provides us with stability and certainty of earnings,” PetGas MD and CEO Kamal Bahrin Ahmad said in a release.

The group’s gas processing plants maintained operational performance, recording close to 99% reliability, according to Bursa filing yesterday.

PetGas’ gas transportation segment contributed RM292.9 million in revenue to the group as the higher regulatory period tariff mitigated the loss of revenue following the transfer of Sabah and Sarawak gas pipeline operations to Petronas Carigali Sdn Bhd, and the transfer of Miri and Bintulu gas distribution assets to a third-party.

Its regasification segment’s revenue increased 14.1% or RM42.6 million in line with the higher tariffs while the segment results rose 4.5% or RM7.1 million due to the higher contribution from liquefied natural gas (LNG) Regasification Terminal in Pengerang, Johor (RGTP).

“The group’s LNG Regasification Terminals in Sg Udang and RGTP sustained their strong reliability performance at close to 100% during the quarter,” the company stated.

PetChem’s revenue declined 5.8% YoY to RM3.9 billion in the 1Q due to lower product prices and demand, and high supply environment. The industry downcycle has, however, deepened due to the lower crude oil prices environment.

“The group continued to demonstrate resilience in 1Q20 by maintaining our operational efficiency, customer centricity and diverse product portfolio,” PetChem MD and CEO Datuk Sazali Hamzah (picture) said in a statement yesterday.

Sazali added that the group would proceed with the commissioning and commercialisation of its chemical plants in the Pengerang Integrated Complex.

Its olefins and derivatives segment maintained a plant utilisation rate of 100% leading to higher production and sales volume but offset by lower average product prices due to a drop in crude oil prices and softer demand.

The segment’s revenue declined by 13% or RM351 million to RM2.4 billion as a result of lower product prices and pretax profit plunged by RM548 million or 74% to RM188 million due to compressed margins.

The profit announcements at Pet- Gas and PetChem come after Petronas Dagangan Bhd on Monday fell victim to virus and posted a net loss of RM29.42 million for the 1Q compared to a net profit of RM291.19 million it made in the same period the year earlier.

Petronas’ logistics arm, MISC Bhd, also posted a net loss of RM1.16 billion in the 1Q, owing to legal provisions made in the period and temporary suspension of its yard operations to comply with the MCO imposed nationwide.