PCG net profit reduces significantly in 2Q20

by BERNAMA/ pic by MUHD AMIN NAHARUL

PETRONAS Chemicals Group Bhd’s (PCG) net profit reduced significantly to RM186.0 million in the second quarter ended June 30, 2020 (2Q20), from RM1.12 billion in the same period a year earlier.

In a filing to Bursa Malaysia today, the group attributed the lower earnings in the quarter to lower earnings before interest, taxes, depreciation, and amortisation (EBITDA) and lower income generated from fund placement.

During the quarter, EBITDA decreased by RM826 million or 54 per cent to RM695 million mainly due to lower product spreads and compressed margin.

For the quarter, PCG’s revenue eased to RM3.18 billion from RM4.34 billion year-on-year, largely due to lower product prices and sales volume.

Managing director/chief executive officer Datuk Sazali Hamzah (picture) said overall, the group delivered a resilient performance despite operating in an extremely challenging environment.

The domino effect of COVID-19 has brought down petrochemical prices to historical lows, particularly in April and May, he added.

“We mitigated the impact by focusing on operational efficiency and capitalising on our strong market presence in this region.

“Coupled with our close collaboration with customers, we were able to maximise production to meet sales and delivery commitments with minimal disruption even during these tough times,” he said in a statement today.

PCG recorded lower plant utilisation rate, production volume and sales volumes in the second quarter as compared with the corresponding quarter.

Its plant utilisation was at 97 per cent, lower than 99 per cent in the corresponding period, mainly due to the higher level of maintenance activities undertaken, resulting in slightly lower production and sales volumes.

Overall average prices for the group decreased from the corresponding quarter in tandem with declining crude oil prices arising from the OPEC+ fallout and softer demand following the global COVID-19 pandemic.

Sazali said PCG is cautiously optimistic as the market is showing signs of improvement with the reopening of economies, but a meaningful recovery is only expected to occur gradually towards end-2020 into 2021.

“In PCG, we are committed towards enhancing our operational and commercial capabilities, as well as cost reduction efforts, towards softening the impact of persistently low product prices.

‘Our team continues to be vigilant of potential risks or disruptions and simultaneously responsive to market changes,” he added.

Moving forward, PCG said the results of its operations are expected to be primarily influenced by global economic conditions, petrochemical products prices particularly for the olefins and derivatives segment, the utilisation rate of production facilities, and foreign exchange rate movements.

The COVID-19 pandemic continues to adversely affect the global economy and PCG has also not been spared, it added.