Thailand's PTTGC Q4 net profit surges on strong margins as prices spike

Author: Nurluqman Suratman


SINGAPORE (ICIS)--PTT Global Chemical's (PTTGC) fourth-quarter net profit surged to Thai baht (Bt) 6.41bn from the same period last year on the back of higher product prices, with sales up 3% year on year.

Its full-year 2020 results, however, reflected a general weakness in demand caused by the coronavirus pandemic, with a 20% decline in sales nearly wiping out its profit.

Thai baht (Bt) million Q4 2020 Q4 2019 % change  2020 2019 % change
Sales 87,555 85,003 3% 326,270 409,688 -20%
EBITDA* 10,539 4,344 143% 20,291 27,802 -27%
Net profit 6,405 374 1,613% 200 11,682 -98%

*Earnings before interest, tax, depreciation and amortization

The company's EBITDA margin rose to 12% in the fourth quarter of 2020 from 5% in the same period of 2019, supported by strong margins at the olefins and derivatives business.

Its olefins and derivatives business for the period posted an adjusted EBITDA margin of 23%, more than double 10% registered in the same period a year earlier.

PTTGC's average polyethylene (PE) prices in the last three months of 2020 were up 22% year on year at $1,074/tonne.

Its paraxylene (PX) to condensate spread fell by 25% year on year to $191/tonne while its benzene to condensate spread increased by 28% at $161/tonne.

For the full year of 2020, PTTGC's net profit shrank to Bt200m as average product prices slumped due to poor demand amid the coronavirus pandemic.

The PX market was under pressure from weaker demand from downstream purified terephthalic acid (PTA) and polyester markets, it said.

Some demand support was provided by downstream polyethylene terephthalate (PET), mainly for food packaging and single-use bottles.

In terms of supply, global PX capacity rose by 8.1m tonnes in 2020 to 64.5m tonnes, mainly via new additions in China.

China’s move toward PX self-sufficiency has weighed on the market last year and would likely hit PTTGC’s exports of the material to the country.

For the full-year 2020, PTTGC's PX to condensate spread was down by 35% year on year at $229/tonne.

The company’s earnings may see improvement in the first three months of 2021 over the preceding quarter on the back of the increase in PE prices, Japan's Nomura Global Markets Research said in a note.

PTTGC's refining margin may also recover mildly, while aromatic spreads may also see improvement, it said.

"We also expect strong overall utilization trends in Q1 for PTTGC on very light planned turnaround activities during the quarter," Nomura said.

For 2021, company earnings will be supported by an expected increase in average chemical prices and contributions from its new naphtha cracker which is expected to commence commercial operations in the first quarter, it added.

The new cracker in Map Ta Phut which can produce 500,000 tonnes/year of ethylene and 260,000 tonnes/year of propylene, has started trial operations, according to market sources.

Focus article by Nurluqman Suratman

($1 = Bt29.87)

Photo: A PTTGC facility (Source: PTTGC)

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