KUCHING: Petronas Chemicals Group Bhd (Petronas Chemicals) registered lower earnings and turnover for the second quarter of 2016 (2Q16).
The company in a filing to Bursa Malaysia yesterday said revenue for 2Q16 decreased by 3.1 per cent year-on-year (y-o-y) to RM3.2 billion from RM3.3 billion in 2Q15.
The lower revenue was attributed to lower average selling prices offset by the impact of higher sales volume and stronger US dollar sales, it said.
Meanwhile, net profit for 2Q16 declined by 17.1 per cent y-o-y to RM462 million from RM557 million recorded for 2Q15.
“The lower earnings for 2Q16 as compared with 2Q15 was due to assets write-off amounting to RM241 million in relation to the cancellation of the elastomers project,” it recapped.
On April 14, 2016, the company has announced the cancellation of the proposed elastomers project which were part of the Refinery and Petrochemicals Integrated Development (RAPID) project in Pengerang, Johor.
Due to the cancellation of the project, the group has recognised a write-off on total assets during 2Q16 amounting to RM241 million. Excluding the write-off, profit after tax for 2Q16 would have been higher by RM136 million or 21 per cent at RM774 million.
Meanwhile, Petronas Chemicals added the group recorded strong operational performance during 2Q16, with higher plant utilisation of 95 per cent as compared with 78 per cent in 2Q15.
The company explained that the higher plant utilisation was driven by improved feedstock supplies and plant reliability as well as lower level of statutory turnaround activities.
Correspondingly, Petronas Chemicals said both its production and sales volumes were higher.
Overall, the company observed the average selling prices of its products were lower in tandem with the sharp decline in crude oil price.
Nonetheless, Petronas Chemicals said its earnings before, interest, tax, depreciation and amortisation (EBITDA) was higher by RM121 mil or 11 per cent at RM1.2 billion on the back of higher sales volumes, particularly ethane-based products, and stronger US dollar sales.
For the olefins and derivatives segment, Petronas Chemicals said the segment has achieved higher plant utilisation of 93 per cent as compared with 84 per cent in 2Q15 on the back of higher ethane supply which offset the impact of statutory turnaround at its aromatics plant during 2Q16.
The company noted the production volume was higher, particularly intermediary products which were subsequently consumed by downstream facilities.
In spite of that, the group noted the sales volume was slightly lower.
The company also noted the average product prices were lower following sharp decline in crude oil price and subdued market demand.
Petronas Chemicals said 2Q16 revenue for the olefins and derivatives segment decreased by RM219 million or nine per cent to RM2.1 billion as a result of lower sales volumes and average product prices.
However, the company observed that EBITDA grew by RM99 million or 13 per cent to RM867 million due to higher volumes of ethane-based products, which was further supported by stronger US dollar sales.
Despite that, Petronas Chemicals said the profit afte tax for the olefins and derivatives segment declined by RM93 million or 23 per cent to RM312 million following assets write-off amounting to RM241 million (USD59 million) in relation to the cancellation of elastomers project in 2Q16.
For the fertilisers and methanol segment, Petronas Chemicals noted the operation of the segment has recorded a significantly higher plant utilisation of 96 per cent as compared with 73 per cent in 2Q15 on the back of higher methane supply at the group’s methanol facilities.
The company explained that the lower plant utilisation in 2Q15 was a result of the group which undertook a statutory turnaround at its Gurun urea facility in Kedah.
With a statutory turnaround at the urea facility, Petronas Chemicals noted both production and sales volumes increased in line with higher plant utilisation.
Nevertheless, the company observed urea prices declined in 2Q16 due to ample supply amidst softer demand in key markets while methanol prices were affected by weaker demand for methanol-based derivatives due to lower energy prices.
In spite of that, Petronas Chemicals said its revenue for the fertilisers and methanol segment rose by RM111 million or 11 per cent to RM1.1 billion as a result of higher sales volumes and stronger US dollar sales, offset by lower average product prices.
Similarly, it noted the EBITDA for the segment increased by RM41 million or 12 per cent to RM373 million.
Nonetheless, Petronas Chemicals noted profit after tax for the segment in 2Q16 was slightly lower by RM3 million or one per cent at RM219 million.
Looking ahead, Petronas Chemicals said the financial results of the group’s operations are expected to be primarily influenced by global economic conditions, utilisation rate of its production facilities and petrochemical products prices which have a high correlation to crude oil prices, particularly for the olefins and derivatives segment.
“With improved plant maintenance programme and supplier relationship management, the group aims to achieve better plant utilisation for 2016 as compared with the previous year.
“For the olefins and derivatives segment, the group anticipates the market to be stable given the tight supply in the region amidst weak economic outlook and slow end-product demand.
“As for the fertilisers and methanol segment, the group expects the segment’s feedstock supply reliability for 2016 to improve with additional gas supply from upstream via a new pipeline.
“(Nonetheless), the fertiliser market is expected to remain challenging in view of ample supply coupled with weaker demand.
“Methanol price may also remain challenging as a result of weak crude oil prices,” the company opined.