Fitch downgrades Saudi Aramco rating after September 14 oil attacks

MOSCOW (MRC) -- Fitch Ratings downgraded Saudi Aramco's long-term issuer default rating (IDR) to A from A+ following the September 14 drone and missile attack on two key oil facilities that temporarily slashed its output by half, reported S&P Global.

Fitch last month downgraded Saudi Arabia's rating also to A due to the "vulnerability of Saudi Arabia's economic infrastructure and continued deterioration in Saudi Arabia's fiscal and external balance sheets," it said at the time. The downgrade followed the attack on the company's Abqaiq plant, the world's largest oil processing facility, and Khurais, the country's second largest oil field.

"We have downgraded Saudi Aramco's IDR to 'A' given the rating is capped by that of the sovereign to reflect interdependency between the two and the influence the state exerts on the company through strategic direction, dividends and taxation," Fitch said in a statement on Monday, adding that it has maintained a stable outlook for the company. Aramco didn't immediately respond to an email seeking comment.

Saudi Arabia is currently preparing Aramco for a local and international listing of up to a 5% stake, a sale that is expected to take place between 2020 and 2021.

Aramco, the world's most profitable company and the biggest oil producer, issued its first debut international bond of USD12 billion in April, which was heavily oversubscribed with orders exceeding USD100 billion.

"The (Aramco) downgrade also took into account rising geopolitical tensions in the region, but also the country's continued fiscal deficit, among other factors," Fitch said.

The attack on Abqaiq and Khurais, the biggest ever disruption to Saudi Arabia's crude oil production, was claimed by Yemen's Iranian-aligned Houthi rebels. Saudi officials have said the attack was sponsored by Iran, which denied being involved.

The September 14 incident slashed Saudi Arabia's production by 5.7 million b/d, but the country's energy minister said last week that production was restored to pre-attack levels of around 9.9 million b/d, with oil output capacity returning to 11.3 million b/d. The country aims to restore full oil capacity to 12 million b/d by the end of November.

Attacks on Saudi Arabia's Abqaiq processing facility and Khurais field caused its crude output to plummet to 8.45 million b/d in September, according to the latest S&P Global Platts Opec survey.

Fitch said the attack will not dent Aramco's 2019 profitability. Aramco posted a 12% drop in first half profit to $46.9 billion, its first ever disclosure of earnings.

"We estimate the attack will have a very limited impact on Saudi Aramco's operational and financial performance in 2019," Fitch said.

Fitch also said the IPO will not have an impact on Aramco, which is trying to lure investors with commitments to increase dividend payments to at least USD75 billion a year in 2020 and beyond.

"The IPO itself is unlikely to have any major effect on Saudi Aramco's financial position," Fitch said. "However, the company has already benefited from lower taxes, the domestic oil product price equalization and other initiatives put forward by the government in anticipation of the IPO."

As MRC informed before, McDermott International has announced that it has been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.

Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,436,390 tonnes in the first eight months of 2019, up by 9% year on year. Shipments of all PE grades increased. At the same time, the PP consumption in the Russian market was 909,260 tonnes in January-August 2019, up by 10% year on year. Shipments of PP block copolymer and homopolymer PP increased.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
MRC

BASF operating profit decreased 24% in the third quarter of 2019

MOSCOW (MRC) -- BASF Group sales in the third quarter of 2019 declined slightly year on year and amounted to EUR15.2 billion on lower prices in the Materials and Chemicals segments, said the company.

The uncertainties in the market and cautious ordering by customers also played a role. Demand from key customer sectors did not recover. Nevertheless, BASF was able to keep its sales volumes at the level of the prior-year quarter thanks mainly to higher volumes in the Agricultural Solutions and Surface Technologies segments.

Income from operations (EBIT) before special items was EUR1.1 billion, down by 24% compared with the level of the third quarter of 2018. This was primarily due to significantly lower contributions from the Materials and Chemicals segments. As expected, isocyanate prices declined considerably. In addition, there were scheduled turnarounds at the steam crackers and falling margins for cracker products. These factors had a significant negative impact on earnings in the two segments. “In our downstream divisions, we were successful despite the difficult market environment and posted a considerable improvement compared with the prior-year quarter,” said Dr. Martin Brudermuller, Chairman of the Board of Executive Directors of BASF SE, at the presentation of the financial results for the third quarter of 2019. In the Industrial Solutions segment, EBIT before special items increased considerably primarily due to lower fixed costs. In the Surface Technologies segment, EBIT before special items also rose considerably in all three divisions. In the Nutrition & Care segment, EBIT before special items grew considerably as a result of significantly higher earnings in the Care Chemicals division. In the Agricultural Solutions segment, EBIT before special items increased considerably, driven mainly by higher sales. One reason for this was the good start to the season in South America.

EBITDA increased to EUR2.3 billion, compared with EUR2.2 billion in the third quarter of 2018. EBITDA before special items was down by 8% to EUR2.1 billion.

EBIT amounted to EUR1.4 billion, nearly matching the prior-year level. Special items in EBIT totaled EUR257 million, compared with minus EUR75 million in the prior-year period. A considerable disposal gain from the sale of BASF’s share of the Klybeck site in Basel, Switzerland, more than offset special charges for restructuring measures, for the integration of the businesses acquired from Bayer and for divestitures.

Net income amounted to EUR911 million, compared with EUR1.2 billion in the third quarter of 2018. Earnings per share in the third quarter of 2019 fell to EUR1.00 from EUR1.31 in the prior-year quarter. Adjusted earnings per share were EUR0.86, compared to EUR1.51 in the prior-year quarter.

Cash flows from operating activities amounted to EUR2.0 billion, compared with EUR2.9 billion in the third quarter of 2018. Free cash ?ow declined to EUR1.1 billion as a result of lower cash flows from operating activities.

As MRC informed earlier, BASF would expand the capacity of ethylene oxide and ethylene oxide derivatives at its Verbund site in Antwerp, Belgium. The total investment adds about 400 000 tpy to BASF’s production capacity for the corresponding products with an expected investment amount exceeding EUR500 million.

Ethylene is a feedstock for producing polyethylene (PE).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,255,800 tonnes in the first seven months of 2019, up by 9% year on year. Shipments of all PE grades increased.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.
MRC

AkzoNobel Q3 net income falls by 46%

MOSCOW (MRC) -- AkzoNobel, the Dutch paints and performance coatings multinational, has reported net income falls by 46% to EUR162.0 mln, said the company.

AkzoNobel's third-quarter net income fell on a year-on-year basis on the back of higher contributions from discontinued operations in the same period of 2018. The company's third-quarter 2018 net income from discontinued operations stood at €152m. The company did not post any net income from discontinued operations in the third quarter of this year.

The Amsterdam-based company credited its Q3 performance to selected price hikes and cost savings. It said it is on target to achieve a 15% return on sales in 2020, up from 13.8% this year. An increasing ROS means a company grows more efficiently.

"We are delivering toward our 15% by 2020 strategy," said AkzoNobel CEO Thierry Vanlancker.

He added the Q3 profit “was a year-on-year increase for the fifth quarter in a row. Our profit improvement of 23% in the third quarter was strong, even though we had to deal with softer end market demand."

Vanlancker also announced his company will buy back EUR500m of its own shares, an investor-pleasing move bound to boost the value of their shares in the company.

AkzoNobel is active in several markets, including boatbuilding. It recently unveiled Awlgrip HDT (High Definition Technology), a new single-stage repairable topcoat.

Vanlancker says the global market is relatively “subdued” except in aerospace and powder coatings. He said that “continued pricing initiatives and cost-saving programs are in place to address the current challenges.” In recent years, AkzoNobel implemented cost savings of EUR19m.

As it was written before, AkzoNobel finalized the acquisition of BASF’s global Industrial Coatings business, which supplies a range of products for industries including construction, domestic appliances, wind energy and commercial transport, strengthening its position as the global number one supplier in coil coatings.

As MRC informed earlier, BASF would expand the capacity of ethylene oxide and ethylene oxide derivatives at its Verbund site in Antwerp, Belgium. The total investment adds about 400 000 tpy to BASF’s production capacity for the corresponding products with an expected investment amount exceeding EUR500 million.

Ethylene is a feedstock for producing polyethylene (PE).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,255,800 tonnes in the first seven months of 2019, up by 9% year on year. Shipments of all PE grades increased.

Akzo Nobel N.V., trading as AkzoNobel, is a Dutch multinational, active in the fields of decorative paints, performance coatings and specialty chemicals. Headquartered in Amsterdam, the company has activities in more than 80 countries, and employs approximately 55,000 people.
MRC

Sinochem Hongrun shut its new PX plant in Shandong province owing to technical issues

MOSCOW (MRC) -- Sinochem Hongrun's new 800,000 mt/year PX plant in the Weifang Binhai economic development zone in Shandong province was shut down last week, sources said, attributing the shutdown to technical issues, reported S&P Global.

Market sources said Hongrun had been selling MX cargoes in the domestic market, after the PX plant was shut down.

The shutdown is expected to last for two weeks, but that could not be immediately confirmed. The new PX plant was started in June.

Hongrun is expected to sell about 30,000 mt/month of PX to Yisheng Petrochemical, China's largest purified terephthalic acid (PTA) producer, which will be delivered by ship to the latter's PTA plants at Dalian.

As MRC informed before, China's Fuhaichuang Petroleum and Petrochemical, formerly known as Dragon Aromatics, shut one of its two PX lines at Gulei, Fujian province on 14 October also due to poor margins. The company has two lines that both can produce 800,000 mt/year of PX.

PX is a feedstock for the production of purified terephthalic acid (PTA). PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's DataScope report, Chinese bottle grade PET deliveries to Russia increased 34% in the first eight months of 2019 to 95,600 tonnes. China accounted for 90% of the total imports, compared to 85% a year earlier.
August imports of material from China decreased by 41% to 7,600 tonnes from 12,800 tonnes in July. Jiangsu Sanfangxiang, Yisheng, Wankai and Sinopec were the leading Chinese suppliersof material to the Russian market.
MRC

Dow posts lower profit, sales

MOSCOW (MRC) -- Dow Inc. reported lower quarterly profit and sales, citing a decline in global energy prices, said the company.

An oversupply of ethylene and polyethylene as well as the impact of U.S.-China trade tensions on demand for chemicals forced Dow in July to forecast lower-than-expected third-quarter revenue and cut its targets for full-year spending.

The company, which makes chemicals used in paints, cosmetics and plastics, said it had now saved about USD1.37 billion as part of a previously-announced cost reduction program, and had cut an additional USD40 million in expenses in the latest quarter.

Its main indicator of operating profit fell 32% to 91 cents per share but that was still 18 cents per share better than consensus forecasts.

It said sales volumes fell 2% in the third quarter, while prices declined 12%. Sales in EMEAI and the U.S. and Canada were down respectively 17.5% and 15.6%, while those in Asia-Pacific fell just 7.5%.

As MRC informed earlier, Dow Chemical's propylene dehydrogenation (PDH) unit in Freeport, Texas, is offline for a turnaround. Sources said the PDH unit went offline for scheduled maintenance September 26, and the work is expected to last 45-60 days. Originally, sources expected the turnaround to begin in early September, but then learned it had been delayed.

As MRC informed previously, Dow Chemical began major maintenance on the LHC 1 cracker at Terneuzen, Netherlands from 9 September, 2019. More than 1,500 extra employees from various external companies will carry out maintenance work in the subsequent period.

Propylene is a feedstock for producing polyprolypele (PP).

According to MRC's ScanPlast report, the estimated PP consumption in the Russian market was 796,120 tonnes in January-July 2019, up by 11% year on year. Shipments of PP block copolymer and homopolymer PP increased.

Dow believes that plastic waste has value and can be transformed into new products and energy. In addition to plastic roads, Dow is working with key partners in South America to use recycled plastics to develop construction materials for schools in Colombia. Dow is also at the forefront of developing and scaling chemical recycling technology to take recycled plastic waste back to feedstock for the creation of new products. By reimagining new ways to reuse, recycle and repurpose plastic waste, Dow and its partners are leading the way in the development of innovative circular economy solutions.

MRC