12 February 2002 14:29 [Source: ICIS news]
LONDON (CNI)--UK energy giant BP warned on Tuesday that short term demand for its chemicals products is unlikely to improve after unveiling a massive decline in fourth quarter and full year chemicals profits.
BP blamed weaker market conditions and lower plant utilisation for a 72% slump to $39m (Euro45m) in fourth quarter operating profits from the chemicals division after adjustments for special items. Turnover was down 10% at $2.48bn compared with $2.75bn in Q4-2000.
Full year operating profits adjusted for special items plunged 77% to £242m on turnover 2.4% up at $11.52bn. BP said the decline in full year earnings reflected the weaker trading environment, operational problems in the first half and restructuring to improve the efficiency of underlying operations.
BP said special items of $106m in the fourth quarter and $114m for the full year included charges for restructuring at its Grangemouth petrochemicals complex and the cost of integrating the Erdolchemie petrochemicals and Solvay polypropylene (PP) operations.
In addition, BP's chemicals business booked rationalisation costs of $36m and $102m in Q4 and 2001 respectively. Portfolio rationalisation moves announced by BP in the fourth quarter include the sale of its butyl and isopropyl business in Antwerp, Belgium; closure of a high density polyethylene (hdPE) facility at Grangemouth; mothballing of a PP line in Texas; and the cessation of alcohol production to concentrate on production of linear alpha olefins (LAO) in Pasadena, US.
BP produced 6.05m tonne of chemicals in the final three months of last year, slightly above the previous quarter. It attributed the small improvement to its high density polyethylene (hdPE) joint venture with Solvay plus organic growth from the LAO, vinyl acetate monomer (VAM) and ethyl acetate plants coming onstream.
BP's weighted chemicals indicator margin* was $108/tonne in Q4 this year, according to two months' actual data and one month's provisional figures. This compares with final figures of $117/tonne a year ago and $114 in Q3.
After adjustments for special items, the overall BP group made a Q4 operating profit of $2.20bn on sales of $37.11bn. This compares with $4.09bn and $44.85bn in 2000. For the full year, earnings after adjustments for special items were $13.18bn against $14.20bn in 2000. Turnover last year was $175.39bn compared with $161.83bn.
In the exploration and production division, Q4 operating profits fell 49% to $2.37bn on sales down 40% at $5.34bn. Full year operating profits decreased 7.7% to $14.50bn on sales down 8.8% at $28.23bn.
For the gas and power division, Q4 operating profits decreased 42% to $106m on sales down 12.9% at $7.45bn. Full year operating profits dropped 8.8% to $521m although sales rose 86.6% to $39.21bn.
Fourth quarter operating profits from the refining and marketing division fell 41% to $785m on sales down 18.95% at $26.53bn. However, full year operating profits grew 6% to $4.83bn on sales up 11.4% at $120.23bn.
*The chemicals indicator margin is a weighted average of externally-based product margins. It is based on market data collected by consultants Chem Systems in its quarterly market analyses, then weighted on the major components of BP's product portfolio.
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