FocusBetter demand, strong crude to drive Thai PTTGC '13 earnings

19 February 2013 06:42  [Source: ICIS news]

By Nurluqman Suratman

A PTT petrochemical facility in ThailandSINGAPORE (ICIS)--Thailand’s PTT Global Chemical will likely see higher earnings this year, after posting a baht (Bt) 34.0bn ($1.14bn) net profit in 2012, with strong crude prices and improved demand as growth drivers, analysts said on Tuesday.

Its net profit in 2012 increased by 18% on total sales of Bt562.8bn, representing a 12% rise from 2011.

“PTTGC is set for another good year because of favourable supply and demand conditions, said Naphat Chantaraserekul, analyst at DBS Vickers Securities.

“The expected improvement in economic conditions in the EU, the US and moreover in China will help boost demand for the company’s olefins as well as paraxylene and benzene,” he said.

Thailand-based brokerage Krungsri Securities is forecasting a 6.71% net profit growth for PTTGC in 2013 to Bt36.3bn.

In the fourth quarter of 2012, PTTGC – the flagship chemical firm of Thai oil and gas giant PTT – more than doubled to Bt10.4bn from the previous corresponding period, aided by “fatter aromatics spreads and higher sales volumes”,  according to another brokerage, Bualuang Securities.

PTTGC’s sales in the December quarter last year increased 13.1% year on year to Bt145.4bn.

The company’s aromatics business benefitted from the surge in demand for paraxylene (PX) towards the end of 2012, as well as higher benzene prices, the company said.

Benzene prices increased by 63% year on year to $1,207/tonne (€905/tonne) in 2012, while olefins prices also rose, in line with strong crude gains.

Both high density polyethylene (HDPE) and low density PE (LDPE) prices increased by 1% last year to average $1,380/tonne and $1,354/tonne, respectively,  PTTGC said.

Brent crude oil prices hit a high of $128.40/bbl on 1 March last year, before easing down to $111/bbl level in end-2012.

“At the end of 2012, the demand for paraxylene increased from new PTA capacities in China coupled with refinery shutdowns in [the] US, Europe, and East Asia which led to PX feedstock shortage in the latter half of 2012,” PTTGC said.

PX price and spreads increased significantly in the last months of last year  as supply could not keep pace with demand in Asia, especially in China, the company said.

These trends are expected to continue into this year, as PX production capacity is not growing as strongly as the downstream PTA, and China is a major export market for PTTGC, analysts said.

“The supply of PX [paraxylene] should remain tight and this will favour PTTGC for at least the first-half of this year as new capacities will only come on stream in the second half of 2013,” Chantaraserekul said.

Utilization of PTTGC’s olefins facilities in 2013 is expected to be higher, with fewer turnarounds set for the year, Bualuang Securities said.

“The recent rise in crude oil prices will also boost PTTGC’s earnings in the first quarter with the refinery business expected to make a positive contribution,” DBS Vickers’ Chantaraserekul said.

At 06:16 hours GMT, April Brent was 10 cents lower at $117.28/bbl, while March NYMEX WTI was down 43 cents at $85.42/bbl.

($1 = Bt29.90 / $1 = €0.75)

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

By: Nurluqman Suratman

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