Tuesday, October 26

PetChem on track to record high FY21

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PetChem is likely to deliver robust earnings in 2H21 on the back of its O&D and F&M core segments driven by resilient polyethylene product prices, and elevated urea and methanol prices due to the cost-push effect from elevated feedstock prices. — Bernama photo

KUCHING: Petronas Chemicals Group Bhd (PetChem) is on track to delivering a record high financial year 2021 (FY21), driven by stable polyethylene product prices (HDPE, LDPE and LLDPE) and skyrocketing urea and methanol prices.

“We expect PetChem to deliver robust earnings in the second half of 2021 (2H21) on the back of its olefins and derivatives (O&D) and fertiliser and methanol (F&M) core segments driven by resilient polyethylene product prices, and elevated urea and methanol prices due to the cost-push effect from elevated feedstock (natural gas) prices.

“We believe that PetChem is also on-track to record its best-ever annual profits in FY21,” the research team at Hong Leong Investment Bank Bhd (HLIB Research) highlighted in a report.

It noted that both urea and methanol prices continued its uptrend in 3Q21, up 16 and six per cent respectively from 2Q21.

Cumulatively for the first nine months of 2021 (9M21), urea prices were up 75 per cent y-o-y while methanol prices increased 66 per cent y-o-y.

“We believe that urea prices will continue its uptrend in the near-medium due to the cost-push effect from elevated feedstock (natural gas) prices. Hence, we expect PetChem’s F&M segment to buoy the group’s overall performance in the next few quarters,” the research team opined.

Based on its tabulation from Bloomberg data, it also found that the average polyethylene product prices remained somewhat firm, with a slight decline of around three to nine per cent in 3Q21 from 2Q21.

“With that, we will not be surprised should there be a slight decline in profit contribution q-o-q from PetChem’s O&D segment in 3Q21,” it said.

However, it highlighted that product prices were up 37 to 61 per cent y-o-y in 9M21.

“We also noticed a decent uptick and recovery in product prices in early-October 2021, which we believe would augur well into the rest of 4Q21,” it added.