PetChem to gain from higher capacity, product prices

by AZALEA AZUAR / pic source:

ALTHOUGH the Russian-Ukraine war has caused some instability in the stock prices in the petrochemical industry, Petronas Chemicals Group Bhd (PetChem) believes the event is temporary. 

PetChem MD and CEO Mohd Yusri Mohamed Yusof said sales of its gas-derived products such as urea has skyrocketed in the first quarter of 2022 (1Q22) due to the fallout of the Ukraine-Russia conflict. 

“We believe this will be temporary and at this time, we are benefitting. But it will not be a norm and will stabilise over a period,” he said during a press conference after the company’s 24th AGM. 

Mohd Yusri said China remains a key market and demand from there remains strong despite the country’s zero-Covid policy. 

“If you talk from the perspective of a Covid-19 lockdown that is happening in China, we are managing that through distributing to other parts and also to channel some of the products to other areas that are not within the affected area.

“So, we believe China will continue to remain our key market for us moving forward this year,” he said.

Although the global economy has continued to be impacted by different challenges such as supply chain constraints, price shocks, effects of climate change and Covid-19 related restrictions, recovery efforts have intensified. 

PetChem continues to focus on its plant operations and safety, and it managed to sustain the best-in-class plant utilisation rate of 93%. 

Its production volume has increased to 10.4 million tonne per annum and maintained an excellent safety record. 

PetChem recorded its highest profit after tax of RM7.3 billion last year since its incorporation. 

“Our two-pronged strategy of sustaining our strength in basic petrochemicals and diversifying into derivatives, specialty chemicals and solutions continued paving the way towards a strong performance. 

“Our competitive advantage from our integrated facilities, logistical edge, diverse portfolio, regional footprint and strong customer relationships were key to this performance,” he added. 

PetChem declared its highest dividends per share of 56 sen for financial year 2021 which includes a special dividend of 10 sen per share. 

The total dividend amounting to RM4.5 billion represents a dividend payout ratio of 61% of earnings, which was above its dividend policy payout rate of 50% of earnings, Mohd Yusri added. 

PetChem’s wholly-owned subsidiary, BRB International bv, has strengthened its presence in the Pahang region as a key silicone manufacturer with the start-up of its new silicone blending facility in Gebeng. 

It can produce 8,000 metric tonne and has a diverse product range which will enable the group to grow its specialty portfolio and gradually expand its product offerings to its customers. 

PetChem has also achieved final investment decisions to build a melamine plant in Gurun, Kedah, making it the sole melamine producer in South-East Asia. 

“Our Pengerang Integrated Complex (PIC), which is now in the final stages of start-up readiness, provides another platform to strengthen our position in both basic and specialty chemicals. 

“We expect to commence start-up in 2Q22. With PIC, we will increase our production capacity from 12.8 million tonne up to 14.6 million tonne per annum,” Mohd Yusri mentioned. 

As for the group’s strategy, PetChem has been making good progress in embedding sustainability at whatever the group has transitioned to a broader scope aligned to the economic, environmental and social pillars underpinned by strong governance. 

PetChem has established its own Net-Zero Carbon Emissions 2050 Roadmap last year which is catered to the chemical industry. 

The group will base its longer-term strategic decision-making on climate impact, business resilience, as well as opportunities from climate change and circular economy and it is also aligned to Petroliam Nasional Bhd’s net-zero aspirations. 

It has set a new carbon-reduction target of 20% by 2030, another 60% by 2040 and finally, net-zero by 2050. 

The group will also continue being a social corporate citizen by investing in employees and community wellbeing through initiatives that have benefitted more than 300,000 individuals. 

This includes distributing Covid-19 relief package to aid those affected by the pandemic, flood-relief initiatives, public education on plastic and effective waste management, mangrove conservation and biodiversity programmes, among others. 

“As we transition to an endemic phase this year, we remain cautious of the rising oil and commodity prices as well as geopolitical tensions that may impact the global economy. 

“We will continue our operational and commercial excellence, cost optimisation efforts and pursue growth opportunities in 2022,” Mohd Yusri added.