Malaysia’s PCG Q1 net profit shrinks 74% on margin pressure

SINGAPORE (ICIS)–PETRONAS Chemicals Group’s (PCG) first-quarter net profit shrank by 74% year on year to Malaysian ringgit (M$) 536m ($117m) on margin pressure as production costs increased.

Q1 earnings before interest, tax, depreciation and amortization (EBITDA) margin declined to 14%, while plant utilization rate during the period averaged 96%, the Malaysian producer said on Monday.

In million ringgit (M$)	Q1 2023	Q1 2022	% change
Sales	7,557	6,634	13.9
EBITDA	1,083	2,422	(55.3)
Operating profit	592	2,097	(71.8)
Net profit	536	2,072	(74.1)

EBITDA slumped 55% over the period due to lower product spreads and higher energy and utilities costs.

“Though we saw some positive movements in selected regions in the first quarter, the overall chemical sector remains cautious given the still volatile energy prices,” PCG managing director and CEO Mohd Yusri Mohamed Yusof said.

“There has been some uplift in demand from China post-Chinese New Year for selected chemicals, but we have yet to see meaningful recovery,” he said.

Operating expenses were driven up by energy and utilities cost “adding pressure on margins”, he said, but noted that this cost should ease in the coming quarters.

“We continue to be cautious of the outlook for 2023, given the recent developments of the US banking sector and its potential impact to the global economy, the prolonged Russia-Ukraine conflict as well as slower than expected China recovery,” Mohd Yusri said.

On the company’s operations within the Pengerang Integrated Complex (PIC), he said: “We resumed gradual plant start up at the end of last year. So far commissioning works are progressing well, and we expect to bring the plants on board in the fourth quarter of the year.”

In the long term, Mohd Yusri said that the chemical industry is expected to continue growing at an annual pace of about 3% on the back of rising consumption across industries including pharmaceuticals, automotive and construction.

($1 = M$4.60)