Petronas Chemicals’ 4QFY18 earnings could experience sharp drop
KUCHING: Petronas Chemicals Group Bhd’s (Petronas Chemicals) fourth quarter of financial year 2018 (4QFY18) earnings could experience a sharp drop, analysts project in a company report.
According to AmInvestment Bank Bhd (AmInvestment Bank), this is in tandem with the recent fall in product prices together with excess capacity from the Middle East and China amid easing global demand growth expectations.
The research firm recapped that Petronas Chemicals’ 3QFY18 core net profit dropped eight per cent quarter on quarter (q- o- q) to RM1.257 billion mainly from plant utilisation rates falling to 79 per cent from 95 per cent in 2QFY18 due to turnaround activities for the methanol and Asean Bintulu Fertiliser plants.
“This was partly offset by higher product prices as crude oil prices rose six per cent during the quarter, higher plant maintenance costs during the statutory turnaround activities and a four percentage point ( ppt) drop in effective tax rate to five per cent due to a higher proportion of income benefiting from Labuan’s Global Incentive For Trading (GIFT) incentive,” it said.
“The group’s product prices have a strong correlation to Brent crude oil prices which have fallen by 20 per cent since September 30, 2018 to US$ 66 per barrel currently.
“Likewise, benzene has dropped by 28 per cent, naphtha and ethylene down by 20 per cent, methanol by seven per cent and polyethylene five per cent.
“However, urea appears to be resilient, rising 10 per cent, due to plant turnaround activities.”
Looking ahead, AmInvestment Bank’s Petronas Chemicals’ financial years 2018-2020 forecasts ( FY18F-FY20F) earnings were maintained, with core net profits at RM4.451 billion, RM4.618 billion and RM4.941 billion respectively.
This was despite Petronas Chemicals’ first nine months of FY18 ( 9MFY18) core net profit of RM3.847 billion, excluding a 1QFY18 exceptional loss of RM153 million from the RM3.8 billion disposal of a 50 per cent equity stake in PRPC Polymers Sdn Bhd to Saudi Aramco, appearing to be significantly above expectations.
The group’s 9MFY18 core net profit of RM3.847 billion accounted for 86 per cent of the research firm’s FY18F earnings and 93 per cent of consensus, versus 67 per cent-76 per cent for 9MFY15-FY17 against their respective years.