Petronas Chemicals’ operations to normalise from 2Q14 onwards
KUCHING: Petronas Chemicals Group Bhd’s ( Petronas Chemicals) operations is expected to normalise from the second quarter of 2014 (2Q14) onwards after its financial year 2013 (FY13) earnings was hit by the longerthanexpected downtime at its major plant.
To note, Petronas Chemicals reported a full-year core net earnings of RM3.22 billion which was below expectations.
According to RHB Research Sdn Bhd ( RHB Research), this was largely caused by the major statutory turnaround maintenance activities at Petronas Chemicals’ olefins and derivatives ( O& D) division’s main cracker.
This maintenance was undertaken throughout the second half of 2013 (2H13), of which the research firm said was longer than expected.
Petronas Chemicals’ plant utilisation rate had averaged to 78 per cent in FY13, which was lower than the 90 per cent initial target by the management, the research firm noted.
“Its fertiliser & methanol (F& M) business was hit by depressed urea and ammonia prices caused by the influx of supply from new facilities. Meanwhile, production difficulties at the group’s Labuan methanol facility rendered it closed for most of 2H13,” it noted.
Meanwhile, its Sabah Ammonia and Urea ( Samur) project also hit a snag when the vessel transporting pertinent equipment caught fire.
“We understand that the incident is still under investigation and the impact of the damage is still undetermined. We opted to be conservative and, hence, did not account for any contribution from Samur in FY15.
“Unless new developments surface, we believe this project will be delayed, with commercial production only starting in FY16,” the research firm viewed.
All in all, RHB Research kept its FY14 and FY15 forecasts unchanged as it expected operations to normalise throughout those two years.
“We expect operations to begin normalising by 2Q14 and the utilisation rate to hit near management’s 90 per cent internal target by then.
“Having said that, we do not discount the fact that prices of certain products will remain at depressed levels on supply and demand imbalances,” it said.
RHB Research maintained its ‘neutral’ call with an unchanged RM6.48 per share fair value based on an unchanged 14-folds target FY14 price earnings.