30 April 2009 07:55 [Source: ICIS news]
By Bohan Loh
SINGAPORE (ICIS news)--Global petrochemical players are bracing themselves for a tough second quarter as the first earnings report season of the year proved to be largely dismal, industry sources said on Thursday.
“There is currently no sign of a reversal of this trend and we do not consider temporary topping up of inventories in some regions and industries to be signs of a sustainable upturn,” said Jürgen Hambrecht, chairman of German chemical giant, BASF.
BASF reported a 68% slump in its first quarter net profit on Thursday on “persistently weak demand” and announced that it was expecting an overall decline in sales for the full year despite the recent acquisition of Ciba and Revus Energy.
Most major chemical makers in Europe reported steep declines in earnings year-on-year with one industry executive describing the severity of the global economic downturn as “unprecedented”.
Netherlands-based paint and chemicals, AkzoNobel, similarly booked its second-straight quarter of net deficits due to “tough trading conditions” and said that a profit guidance for the year was too difficult to predict with any certainty.
Specialty chemicals maker, DSM, had said it was prepared to slash an additional 250 jobs on top of the previously announced 1,000 names that it would remove from its payroll after it booked a 92% plunge in its first quarter net profits on a poor material science division.
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The outlook for Asian petrochemicals was not much brighter than those of its Western counterparts as Thai petrochemical major and conglomerate, SCG, said that achieving any demand growth would be a “major challenge” and the global chemicals industry was due to enter a cyclical trough by the second half of 2009.
The company posted a 27% year-on-year drop in its first-quarter net profits and said that it would continue to “stick to financial stability” and reinforce its financial fundamentals.
“SCG’s second quarter earnings are poised to be softer from low seasonality from its chemical, cement and paper units, as well as muted dividend income and equity income contributed by its automobile and chemical businesses due to the economic slowdown,” said Sirima Dissara, an analyst from KGI Securities.
“Second half earnings are set to weaken [further] due to a flood of new chemical supplies while demand is fragile,” she added.
Chinese giant, Sinopec, was one of the few whic had reported a 85% surge in earnings but analysts said it was largely due to improvements in refining margins and outlook for its chemicals operations remained bleak for the rest of the year.
Analysts also warn that the recent emergence of the swine flu could threaten or slow down any potential recovery in the western economies upon which Asian petrochemical firms place great importance on.
"I am not optimistic about the petrochemical industry for this year, as it really depends on the recovery of the global economy,” said Yan Beina, an analyst with Guosen Securities.
With additional reporting by Judith Wang
($1 = €0.75)
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