Malaysia’s PCG seen to post better H2 results on higher output
Nurluqman Suratman
12-Aug-2014
Focus story by
Nurluqman Suratman
SINGAPORE (ICIS)–Malaysian producer PETRONAS
Chemical Group (PCG) is expected to post better earnings in
July to December 2014 on the back of increased production,
after a dismal performance in the first half of the year,
analysts said on Tuesday.
For the first six months of the year, the company’s net
profit fell by 37% year on year to Malaysian ringgit (M$)
1.3bn, with its operating profit down 39% at M$1.8bn.
“We believe the acceleration of PCG’s earnings momentum from
second half of 2014 to 2015, when the olefins margin is
expected to peak, is a key driver for PCG, thanks to its
highest competitive gas cost feedstock,” CIMB Equities
Research said.
In most of Asia, the more expensive naphtha is the widely
used petrochemical feedstock.
“Another growth driver is aromatics earnings which should
recover sharply from the losses in 1H14 [first half of
2014],” CIMB Equities Research said.
PCG’s second-quarter revenues declined on the twin effects of
lower volumes and weaker average selling prices of its
products, according to Malaysia-based Maybank Research.
Average utilisation rates at PCG plants declined to 65% in
the June quarter from 97% in the first three months of 2014,
with scheduled turnarounds at the company’s ethane cracker
and derivative units, according to Malaysia-based CIMB
Equities Research.
During the same period, PCG’s fertilizers and methanol
segment managed to operate at a higher rate of 85%, as
production issues at the company’s methanol plant No 2 that
“had plagued the group for the past three quarters has been
resolved”.
PCG’s overall revenues declined 14% year on year in the three months to June, with
net profit tumbling 42% year on year to M$555m.
During the period, major turnaround was conducted at its
polyethylene (PE) plant and methyl tert-butyl ether (MTBE)
plant.
June-quarter revenue at PCG’s olefin and derivative segment
fell 14% year on year to M$5.1bn, while that of fertilizers
and methanol segment’s dipped 12.9% to M$2.06bn, according to
Malaysia’s RHB bank.
CIMB Equities Research said that higher olefins margins,
boosted by higher oil prices and tight supply, as well as an
expected improvement in monoethylene glycol (MEG) margins,
will help boost PCG’s earnings in the second half of
2014.
Maybank Research expects PCG’s utilisation rates to peak in
the fourth quarter.
“[PCG’s] Management expects a pickup in olefins and
derivatives activity in the second half of 2014, supported by
an expected increase in ethylene prices as several major
producers, particularly from Japan and South Korea, will be
undergoing scheduled major plant turnarounds, which may lead
to a supply shortfall,” according to RHB Bank.
Meanwhile, production at PCG’s methanol plant No 2 was affected by
a power failure in mid-July that cut its supply of gas
feedstock. PCG expects this issue to be rectified by
mid-August, according to RHB.
PCG is actively growing its petrochemical capacity by
pursuing new projects.
Construction of its Sabah Ammonia and Urea (SAMUR) plant is
currently in full swing, with project commissioning expected
in first quarter of 2016.
The Sabah government has expressed interest in taking up a
stake in the SAMUR project, according to RHB.
The company is also expected to announce the final investment
decision on Petronas Refinery and Petrochemical Integrated
Development (RAPID) early next year.
($1 = M$3.2)
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