28 April 2009 06:42 [Source: ICIS news]
By Bohan Loh
SINGAPORE (ICIS news)--PetroChina’s sharp decline of 35% in first quarter net profits - its worst performance in the past two years - should be the lowest point for the company in 2009, analysts said on Tuesday.
“Prices of oil and oil derivatives have been steadily recovering through the whole of March and we have seen improvement in economic statistics,” said Wang Aochao, an analyst with brokerage UOB Kay Hian Shanghai.
He said he was expecting the year-on-year drop for the company’s second quarter to be capped at 30%.
Prices of the basic chemicals the company produces such as ethylene and propylene have recovered over 22% and 54% of their values since the beginning of the year respectively, according to data from global chemical intelligence service, ICIS pricing.
Late on Monday the Chinese oil, gas and petrochemicals giant reported a 35% drop in net profits, under international financial reporting standards (IFRS), to yuan (CNY) 18.96bn ($2.77bn) for the three months to 31 March. Based on China accounting standards, the decline in net profit would show as 36%.
The steep decline was largely due to the “spread and intensification of the global financial crisis”, low international crude prices and declining domestic demand for oil products.
Turnover for the period dropped 30% to CNY181.6bn as sales volumes for most products declined year-on-year, PetroChina said.
“The improvement of demand for chemicals and fuels on a quarter-on-quarter basis coupled with the management’s strict cost control measures for this year should narrow any drop in earnings for the second quarter,” said Grace Liu, an analyst with Guotai Junan Securities.
“The drop in production volumes during the period was higher-than-expected but things should improve in the second quarter,” Liu added.
PetroChina’s chemical production volume for the quarter was down as a whole with the manufacturing of synthetic fibre raw materials and polymer output posting the largest drop at 15% to 373,000 tonnes.
Ethylene production dropped 6.5% year-on-year to 663,000 tonnes, while synthetic resin was down 3.5% to 1.04m tonnes.
Liu also said that the earnings for PetroChina should have bottomed out for the year under the assumption of an average crude price of $60/bbl.
“However, we might have to revisit our crude price assumption due to the swine flu. The effect of the flu is still unclear, we do not know if the western economy would recover as we originally thought,” she added.
NYMEX light sweet crude fell more than $2/bbl on Monday over fears of the virus having the potential to turn into a global pandemic. The flu had already killed more than a hundred people in ?xml:namespace>
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($1 = CNY6.85)
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