FocusThai PTTGC Q4 profit to slump on weak petrochemical margins

02 February 2012 06:53  [Source: ICIS news]

By Nurluqman Suratman

Mab Ta PhutSINGAPORE (ICIS)--Thailand’s PTT Global Chemical (PTTGC) is expected to report a sharp fall in its fourth-quarter 2011 earnings on the back of weaker-than-expected petrochemical margins and one-off expenses related to the company’s amalgamation process, analysts said on Thursday.

PTTGC, which came into being from the merger of PTT Chemical (PTTCH) and PTT Aromatics & Refining (PTTAR), will likely see a 25% year-on-year fall in its December-quarter net profit to Thai Baht (Bt) 5bn ($162m), said Pongtham Danwungderm, an analyst at Thailand-based brokerage KGI Securities.

On a quarter-on-quarter basis, PTTGC’s net profit for October-December 2011 would record a 20% decline, Danwungderm said.

Thanachart Securities analyst Youssef Abboud is projecting a more moderate quarterly decline of about 10% in PTTGC’s December quarter earnings.

PTTGC could not be immediately reached for comment.

For the whole of 2011, however, PTTGC net profit is expected to nearly double to Bt30.9bn, said Danwungderm, using the combined earnings of PTTCH and PTTAR as comparative in 2010.

Abboud projected a higher full-year net profit for PTTGC at Bt31.99bn.

A one-off expense of around Bt1bn was incurred in the fourth quarter, during the merging process of PTTChem and PTTAR.

But a revaluation of the PTTGC’s assets, on the other hand, is expected to cut its amortisation expenses by Bt500m on an annual basis, said Abboud.

The shares of PTTGC went public on the Stock Exchange of Thailand on 21 October 2011, while PTTCH and PTTAR ceased trading.

“PTTGC’s long-term earnings should remain intact as the utilisation rate of its olefins facilities is expected to increase to 90% in 2012, while aromatics spread should start to improve towards the end of the first quarter,” said KGI Securities’ Danwungderm.

The company’s market refining margins are expected to decline 16.1% quarter on quarter to $5.20/bbl in the October-December period of last year, weighed partly by a decrease in jet fuel and diesel margins, he said.

Its refineries, meanwhile, may have remained running at 105% during the fourth quarter of last year, Danwungderm said.

For its aromatics facilities, the utilisation rate dropped to 80% in the fourth quarter from 86% in preceding quarter, he said.

PTTGC’s olefins facilities ran at a rate of 76% in the fourth quarter, affected by scant supply of feedstock gas to support production, according to Danwungderm.

PTTGC was forced to increase its gas feedstock allocation for energy generation during the fourth quarter following the devastating floods, which affected a third of the country, according to Abboud of Thanachart Securities.

The firm’s olefins margins are expected to drop, as percentage of gas feedstock decreased and liquid feedstock increased, Danwungderm said.

Looking ahead, PTTGC’s olefins utilisation rate is expected to increase to average above 90% in 2012, from 80% in 2011, while its overall petrochemical spreads are forecast to improve starting the second quarter of this year, he said.

But a stronger baht, combined with lower oil prices, gross refining margins and petrochemical spreads would likely shave PTTGC’s net profit this year by 20% to Bt25.9bn, according to Abboud of Thanachart Securities.

($1 = Bt30.87)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Nurluqman Suratman

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