PKN Orlen Q4 profit falls 15%

MOSCOW (MRC)-- PKN Orlen’s fourth-quarter 2019 net profit fell 15% year on year to zloty (Zl) 771m (USD198m), with the group experiencing its lowest model petrochemical margin in nearly five years at the end of 2019, the Polish producer said.

Cleaned LIFO EBITDA before impairments came to PLN 1.4 bln, Orlen's investor relations informed market participants separately. The tally came 21% below the market consensus.

LIFO EBITDA ex-impairments fell by more than half q/q or 26.3% y/y to PLN 1.08 bln. Management cited a PLN 907 mln impact versus the prior year period from deteriorating macro factors, chiefly margins on middle distillates, heavy fractions, olefins, PTA and PVC, partially offset by better margins on light distillates, fertilizers and weakening of the Polish zloty. Increased volumes had a PLN 300 mln positive impact versus the prior year period.

Downstream sales of 8.2 mln tons were down 4.1% y/y and 5.0% q/q. Sales volumes rose in petchems, were the margin decline was mildest. Sales volumes were down across the board in fuels, even most deeply in the light distillates where margins gains could have been captured.

The upstream segment suffered a q/q decline in EBITDA LIFO to PLN 69 mln in Q4 from PLN 85 mln in Q3, while in annual terms the line was flat.

The segment results were supported by positive macro factors including an increase in crude oil, gas and NGL prices in y/y terms, which still failed to compensate for the negative impact from lower sales volumes that followed a decrease in the average production in Canada by 1.7k boe/d on an annual basis, Orlen said in the presentation. The average production in Poland grew by 0.2k boe/d y/y.

As MRC informed earlier, Polish oil refiner PKN Orlen, said it would increase monthly crude oil purchases from Saudi Aramco to 400,000 from 300,000 tons as part of its efforts to diversify supply. Poland’s biggest oil refiner, which buys most of its oil from Russia via pipeline, has been receiving oil from Saudi Aramco since 2016.

As MRC informed earlier, in H1 September 2019, Honeywell announced that PKN ORLEN had licensed the UOP MaxEne process, which can increase production of ethylene and aromatics and improve the flexibility of gasoline production. The project, for the PKN ORLEN facility in Plock, Poland, currently is in the basic engineering stage. Honeywell UOP, a leading provider of technologies for the oil and gas industry, first commercialized the UOP MaxEne process in 2013. The process enables refiners and petrochemical producers to direct molecules within the naphtha feed to the processes that deliver the greatest value and improve yields of fuels and petrochemicals.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

PKN ORLEN would be the first refining and petrochemicals company in Europe to use the Honeywell UOP MaxEne technology for molecule management of a naphtha stream to produce high-quality products including olefins, aromatics and gasoline.
MRC

MOSCOW (MRC) - Siam Styrene Monomer, has planned to bring on-stream its Styrene monomer (SM) plant following a turnaround, as per Apic-online.

A Polymerupdate source in Thailand informed that, the company is likely to complete turnaround at the plant by early-March, 2020. The plant was shut in mid-January 2020 for a maintenance turnaround.

Located at Map Ta Phut, Thailand, the SM plant has a production capacity of 300,000 mt/year.

SM is the main feedstock for the production of polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics was 46,260 tonnes in December 2019, up by 8% year on year. The estimated consumption of PS and styrene plastics totalled 500,660 tonnes in 2019, down by 1% year on year. Russian producers of PS and styrene plastics produced 44,960 tonnes of material in December 2019, up by 1% year on year.
MRC

MOSCOW (MRC) -- Militants attacked Syria’s Banias refinery near the Mediterranean coast, sending divers to plant explosives on underwater pipelines, reported Hydrocarbonprocessing with reference to Syria’s oil ministry.

The extent of the damage was not immediately clear, though state media reported that technicians were evaluating the damage and making repairs.

Petroleum Minister Ali Ghanem told state-run TV that there would be no disruption to the refinery’s operation.

Banias has capacity to process more than 130,000 barrels per day (bpd) of crude oil.

As MRC wrote previously, the Syrian oil ministry said in late November 2019 that all production sections in Syria’s Banias refinery were back to work after an explosion earlier that month.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

MOSCOW (MRC) -- Axalta Coating Systems Ltd. announced its financial results for the fourth quarter and full year ended Dec. 31, 2019, said Coatingsworld.

Net sales of USD1,098.4 million for the fourth quarter decreased 5.8 percent, including 1.3 percent negative foreign currency translation impact and a two percent impact from the sale of a consolidated Joint Venture interest in Q2 2019.

Constant currency organic net sales decreased 2.5 percent in the period, with 2.5 percent higher average selling prices and product mix with contribution from both segments, offset by a 5 percent volume decrease. Net sales reflected volume weakness in both Performance and Transportation Coatings, although the Refinish end-market remained a stable offset, with net sales growth of 3.5 percent ex-FX.

Income from operations decreased to USD108.7 million for the fourth quarter from USD127.8 million in Q4 2018, driven principally by lower volume, headwind from incentive compensation expense, costs associated with the on-going strategic review as well as modest ongoing foreign exchange headwinds and charges of USD17.7 million primarily related to the abandonment of engineering work for aspects of the company’s China footprint project which has been adjusted due to evolving market conditions. This was partially offset primarily by improvement in overall price and product mix in the period, as well as by contribution from reduced variable costs.

Adjusted EBIT increased to USD173.5 million for the fourth quarter from USD170.8 million in Q4 2018, driven principally by improvement in overall price and product mix in the period, coupled with contribution from reduced variable costs and slightly lower operating expenditures, inclusive of a headwind from incentive compensation expense. This was offset in part by lower volume as well as modest ongoing foreign exchange headwinds. Adjusted EBIT margin increased 110 basis points for the quarter to 15.8 percent from the prior year period.

"Axalta finished 2019 with strong operating execution and financial performance, capping a solid year overall despite a backdrop of uneven demand in many markets we serve,” said Robert W. Bryant, Axalta CEO and president. “In the fourth quarter, we generated record free cash flow, expanded operating margins, and continued to strengthen our balance sheet. Despite some incremental volume headwinds during the fourth quarter, we mostly offset this with progress in price and mix enhancement as well as with aggressive cost control. Our solid quarterly results reflected our keen focus on execution and success in commercializing new products across multiple business lines."

Axalta ended the year with cash and cash equivalents of USD1,017.5 million. Its net debt was USD2.8 billion as of year-end, compared to USD3.2 billion as of Dec. 31, 2018, driven by higher cash balances. Net debt to Adjusted EBITDA was 3x at year-end versus 3.4x as of Dec. 31, 2018.

There were no share repurchases during the fourth quarter. Subsequent to year-end, Axalta prepaid USD300 million of its Term Loan debt utilizing excess cash on its balance sheet.

As MRC informed earlier, Axalta Coating Systems has completed its previously announced acquisition of the Spencer Coatings Group, a leading manufacturer of high performance industrial coatings for heavy-duty equipment, general industrial, oil and gas, and glass coatings segments.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC

MOSCOW (MRC) -- China is set to further expand its massive oil refining capacity this year, offering support to global oil prices, and US producers in particular, but its plans spell more gloom for Asia’s hard-hit refining industry, reported Reuters.

Already the world’s No.2 oil refiner after the United States, China added 800,000 barrels per day (bpd) of capacity last year - 80% of the United Kingdom’s refinery throughput - and analysts expect a further 460,000 bpd to become operational in 2020.

Domestic demand, however, has failed to keep pace. Chinese exports of diesel, gasoline and jet fuel combined jumped 20% in 2019, reaching as far as Mexico, Nigeria and Italy, and weighing on global refining margins.

Asian benchmark refining margins for diesel and jet fuel are already languishing at more than two-year lows, and any increase in Chinese shipments is expected to add further pressure.

"The growth in product supplies will far outpace the expected demand growth of transportation fuels, adding pressure to already weak regional cracks," said Chen Jiyao, oil consultant with FGE.

Analysts expect aviation fuel and gasoline to lead China’s export growth this year due to bulging supplies and slackening domestic consumption, with the coronavirus outbreak adding to concerns, pinching refining profits at regional exporters such as South Korea and Singapore.

China is already Asia’s No.1 exporter of gasoline and jet fuel, and ranks No.3 in diesel after India and South Korea.

Still, with refinery throughput set to jump by 500,000 bpd to 620,000 bpd due to expansions and new refineries, according to analysts at FGE, SIA Energy and Wood Mackenzie, China’s push will extend a bright spot for crude oil demand.

While the growth rate is down from last year’s 921,000 bpd, it will still account for nearly half the increase in global oil demand forecast by the International Energy Agency this year.

China imports around 80% of its oil needs, and crude imports are estimated to rise by 400,000-480,000 bpd in 2020, according to FGE’s Chen and Seng-Yick Tee, senior director of SIA Energy. This is down from 882,000 bpd last year, according to China customs data.

The oil will feed Sinopec Corp’s greenfield 200,000-bpd plant in Zhanjiang, Sinochem’s 60,000-bpd expansion facility in Quanzhou, and the 200,000-bpd crude unit of privately-led Zhejiang Petrochemical Corp which started operations in Zhoushan last December.

Increased purchases will be a boon for exporters like Saudi Arabia, Kuwait and the United States, which is looking to boost energy product sales to China as part of Phase 1 of the trade deal.

Last month’s Phase 1 pact means China needs to boost buying of US oil, which is mainly light and of low-sulphur, but as the new plants are geared towards processing medium high-sulphur grades, importers will have to find a balance between their refining needs and Beijing’s imperatives.

"Political fiat rather than market mechanisms will dictate flows," said Michal Meidan, director of the China energy program at the Oxford Institute of Energy Studies.

"Baseloads for the new refineries are mainly Middle Eastern grades so US flows will likely push out West African or North Sea oil (of similar quality)," she said.

As MRC informed earlier, in late December 2019, Zhejiang Petrochemical Co Ltd started up its ethylene cracker. Based in Zhejiang, China, the cracker is able to produce 1.4 million tons/year of ethylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
MRC