PETRONAS CHEMICALS GROUP BHD
PETRONAS Chemicals’ (PetChem) earnings for third-quarter FY18 expanded by 37.7% y-o-y to RM1.26bil. The commendable profit is premised on strong revenue growth of 20.4% y-o-y to RM4.83bil.
The upbeat sales figures are a result of stronger crude oil price and higher average selling prices.
Product volume declined by 8.8% y-o-y to 2,249 tonnes for the third quarter of FY18 compared with 2,466 tonnes in third-quarter FY17 due to the turnaround activities.
However, annual production volume is forecast to be above 10,000 tonnes per annum for FY18.
The nine-month FY18 normalised earnings, excluding loss of partial divestment of subsidiary and forex losses, met MIDF Research’s and consensus expectations at 86% and 85% of FY18 full-year earnings estimates, respectively.
Overall profit after tax and minority interest margin sustained at a healthy level of 26% for the quarter.
Management continues to guide that despite the heavy turnaround activities, the average plant utilisation rate for the group is expected to remain above 90% for FY18, similar to that of FY17.
Bulk of the heavy turnaround was completed in the third quarter of FY18 while plant utilisation rate for the second half of FY18 is expected to drop to 85%.
The nine-month FY18 plant utilisation rate is currently at 91%.
In the third quarter of FY18, turnaround has been completed on its ethylene cracker and methanol Plant 2 while in the fourth quarter of FY18, turnaround will be conducted on its fertiliser facility.
“Management also guided that going forward into FY19, its growth capital expenditure will be RM2.5bil, which is 50% lower than that of FY18, due to its joint venture with Saudi Aramco.
“Meanwhile, its operational capex is to remain in the range of RM750mil to RM850mil for FY19,” said MIDF Research.
There is no change to earnings estimates as the research house is expecting product pricing to be under pressure due to the drop in crude oil price.
Demand for olefins and derivatives segment products is expected to soften, given ample supply coming from the Middle East and North Asia.
“Despite the heavy turnaround and lower plant utilisation rate albeit more than 90% for FY18, we remain upbeat on PetChem due to the continued resilient demand for its product and consistent production volume, which is expected to record more than 10,000 tonnes this year.