Petronas Chemicals still expects effective tax rate to range between 10 to 12 per cent, supported by Labuan’s Global Incentive For Trading (GIFT) incentive, as the even lower five per cent registered in 3QFY18 benefited from one-off prior year adjustments.
KUCHING: Optimism continues to reign for Petronal Chemicals Group Bhd (Petronas Chemicals) following the release of its third quarter financial year 2018 (3QFY18) results amidst a spate of corporate updates including its facilities in Pengerang to see commercial commencement by early 2019.
This comes as the group said it undertook turnaround activities at four facilities – ethylene, polyethylene and fertiliser in Kedah and Labuan’s methanol plant 2 in 3QFY18 — which caused the expected plant utilisation drop to 79 per cent from 94 in 2QFY18.
“Another turnaround is scheduled for the Bintulu urea plant in 4QFY18, which should translate to an overall plant FY18F utilisation rate of over 90 per cent – comparable to 91 per cent in 9MFY18 and FY17,” said analysts at AmInvestment Bank Bhd (AmInvestment Bank).
“While a second cracker is scheduled for a statutory turnaround and the Sabah ammonia and urea plant to undergo a one-month warranty shutdown in 2HFY19, overall FY19F plant utilisation rate is likewise expected to be above 90 per cent.”
Petronas Chemicals said it still expects effective tax rate to range between 10 to 12 per cent, AmInvestment Bank added, supported by Labuan’s Global Incentive For Trading (GIFT) incentive, as the even lower five per cent registered in 3QFY18 benefited from one-off prior year adjustments.
“Even though China’s chemical tariffs, imposed last month, are skewed against US imports and should be favourable to Malaysian manufacturers, Petronas Chemicals expects to maintain volumes earmarked to the country as market prices could be more attractive elsewhere.
“With Petronas Chemicals’ facilities in Pengerang reaching a completion stage of 89 per cent against the Pengerang Integrated Complex’s 91 per cent, commercial commencement is still expected by early 2019. However, substantive contribution will only materialise 2HFY2019 when production can reach a stable running rate.”
On the chemical maker’s performance in 3QFY18, the team at Kenanga Investment Bank Bhd (Kenanga Research) saw 3Q18 remained strong despite maintenance activities.
Although revenue inched up two per cent quarter on quarter (q-o-q) to RM4.83 billion, its 3Q18 net profit fell by wight per cent to RM1.26 billion.
This was mainly due to lower plant utilisation of 79 per cent from the four heavy turnaround activities, which reduced sales volume substantially by 16 per cent to 2.25 million metric tonnes (MT) from 2.69 million MT.
“Nevertheless, this was mitigated by the improved spread on the back of strong ASP coupled with the weakening of the ringgit against the greenback,” said Kenanga Research.
Despite strengthening of the ringgit and plant utilisation mentioned above, the group’s revenue still jumped 20 per cent in 3Q18 thanks largely to the strong average selling prices (ASP) as crude oil price recovered.
“This resulted in net profit jumping 38 per cent from RM913 million in 3Q17. Year to date, 9M18 net profit leapt 18 per cent to RM3.74 billion from RM3.17 billion on the back of a 15 per cent hike in revenue.
“This was also due to the same reasons of strong ASP, coupled with higher volume of three per cent but was negated by the strengthening of the ringgit against the US dollar.
“Plant utilisation for both 9M18 and 9M17 was comparable at 91 per cent. Meanwhile, effective tax rate was lower at 10 per cent from 14 last year.
With only one more statutory turnaround in 4Q18 for its Bintulu fertiliser, Kenanga Research believed Petronas Chemicals’ plant utilisation will recover from 79 per cent in 3Q18 to meet with its assumption of 91 per cent for FY18.
“As such, product volume is likely to improve in the coming quarter,” it said.