FocusMalaysia's PCG may post lower Q2 profit versus Q1 - analysts

28 May 2013 07:31  [Source: ICIS news]

Petronas Towers in MalaysiaBy Nurluqman Suratman

SINGAPORE (ICIS)--Malaysia’s Petronas Chemicals Group (PCG) is expected to post lower earnings in the second quarter compared with the first three months of the year, amid falling product prices, analysts said on Tuesday.

The company reported on Monday a 10% year-on-year increase in its first-quarter net profit to Malaysian ringgit (M$) 1.2bn ($396m), with revenue up by 2% year on year at M$4.5bn.

Improved product  margins because of higher product  prices, coupled with lower feedstock costs, helped PCG to post strong earnings in the first three months of 2013.

“We caution that PCG’s second-quarter results may be softer given that crude oil prices and polyethylene prices have fallen by 7% and 3%, respectively, from 31 March this year, said Malaysia-based AmeSecurities.

The company’s March-quarter net profit was up by 25% from the last three months of 2012, with revenue up 2% and earnings before interest tax depreciation and amortisation (EBITDA) rising 17%.

“The group’s operational performance improved with higher feedstock availability. However, sales volume was slightly lower due to the cessation of the group’s domestic vinyl operations during the quarter,” PCG said in a separate statement filed on Bursa Malaysia.

In the fourth quarter of 2012, PCG recognised once-off expenses relating to the discontinuation of its vinyl business and benefited from positive tax incentive contributions at one of its subsidiary.

In the near- to medium- term, the price outlook for olefins, polymers and methanol is clouded given uncertainties in the global economy, Ame Securities said.

Another Malaysian brokerage – Kenaga – cited a more balanced supply-demand levels as the reason for softer petrochemical prices in the current quarter.

“As such, the upcoming second quarter period is likely to be weaker quarter-on-quarter. However, this is not alarming given that the first-half is usually the seasonally low period and the first quarter was an unexpected strong quarter,” Kenaga said.

Maybank Research has calculated a 3-5% decline in petrochemical product prices since mid-March this year.

It also expects PCG to report lower utilisation rates in the June quarter from the 90% average registered in January to March, because of scheduled maintenance at the company’s facilities, it said.

“PCG was able to keep the downtime to a minimum and took full advantage of the stable feedstock supply in the period [first quarter],” it added.
PCG had said that its expects demand for olefins and derivatives products to continue outstripping supply, driven by solid economic growth in key economies in Asia.

“In the near term, the level of prices and demand may be affected by continuing economic uncertainties in Europe and US, and its impact on GDP growth in Asia-Pacific, particularly China,” the company said.

It further expects global demand for methanol to recover in line with the economic growth in key markets, PCG said.

“Subject to sufficient availability of feedstock, we expect that the results of our operations for the financial year ending 31 December 2013 to be satisfactory,” it added.

($1 = M$3.03)

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

By: Nurluqman Suratman

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