INTERACTIVE: Malaysia's PCG seen to post record ’17 profit on higher output

15 August 2017 04:46 Source:ICIS News

SINGAPORE (ICIS)--Malaysia’s PETRONAS Chemicals Group (PCG) is expected to post a record earnings this year, following a strong performance in the first half, on the back of stronger olefin prices and high overall plant utilisation rates, analysts said.

Full-year profit forecasts for the company, which is a unit of Malaysia’s state-owned energy firm PETRONAS, were in the range of Malaysian ringgit (M$) 3.70bn-4.13bn ($862m-963m), representing a 26-41% surge compared with 2016.

In the first six months of 2017, the company’s net profit doubled to M$2.4bn, with sales up 38% at M$8.7bn, partly boosted by production from its Sabah ammonia urea (SAMUR) plant.

Business volumes are set to grow with the commencement of SAMUR in May…2017 is set to be a record year [for PCG],” Malaysia-based Kenanga Research said in a note.

Kenanga expects PCG’s net profit to increase to M$3.7bn in 2017.

SAMUR made it possible for PCG’s fertilizer and methanol business to post an M$849m post-tax profit in the first half of 2017 from M$411m in the same period last year.

The company’s olefins and derivatives business, meanwhile, more than doubled its post-tax net profit in the first half of this year to M$1.5bn, boosted by a M$241m write-off related to the cancellation of an elastomers project.

In the second quarter alone, the company’s post-tax profit doubled to M$1.02bn, backed by a 23.6% increase in revenue to M$3.96bn.

Better-than-expected plant utilisation rates, higher average selling prices of products, the 14% year-on-year growth in sales volumes and lower operating expenses boosted PCG’s June-quarter sales, according to Malaysia-based MIDF Research in a note to clients.

MIDF has a higher projection on PCG’s full-year net profit at M$4.13bn.

Meanwhile, Kenanga cautioned that scheduled plant turnarounds may bring down PCG’s overall utilization rate in the second half of the year, while the “high volatility of crude oils prices” poses a “challenging” outlook for the petrochemical markets.

Third-quarter production may also be hit following an unexpected shutdown at PCG’s cracker on 12 August.

PCG’s cracker in Kerteh with a 600,000 tonne/year ethylene capacity was shut because of a technical issue, and is expected to remain down for about a week, according to market sources.

Its downstream 255,000 tonne/year low density polyethylene (LDPE) No 1 plant at the site was likewise shut on the same day because of insufficient supply of feedstock ethylene.

MIDF said that for PCG’s olefins and derivatives business, prices are set to be firmer in the third quarter, but for fertilisers and methanol, the price outlook is expected to be bearish in the near term due to lower demand and oversupply conditions.

(Please view the interactive above in full screen for further details on the SAMUR project as well as the company's historical earnings)

($1 = M$4.29)

Focus article by Nurluqman Suratman

By Nurluqman Suratman