Axalta releases 4Q, full year 2019 results

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

MOSCOW (MRC) -- Turkey and Algeria will jointly establish a petrochemicals plant in Adana on the Mediterranean coast, Algerian Energy Minister Mohammed Arkab told state-run Anadolu Agency, reported Kemicalinfo.

Turkey’s Ronesans Holding and Algeria’s state-owned energy company Sonatrach will take part in the project, Arkab said on the margins of the Turkey-Algeria Business Forum.

The petrochemical facility is estimated to cost around USD1.4 billion, according to the Algerian minister, who also said stakes of Ronesans Holding and Sonatrach in the project will be 66 percent and 34 percent, respectively.

The facility is planned in Seyhan industrial zone for petrochemical development and will have production capacity of 450,000 tons per year of polypropylene (PP).

The construction of the plant will be completed in two years and the facility is expected to become operational in July 2022, Arkab said.Sonatarch will supply the planned plant with 540,000 tons per year of propane that will be used to produce polypropylene, he added.

According to MRC's ScanPlast report, 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) -- SABIC, the Middle East's biggest petrochemical maker which is being acquired by Saudi Aramco, expects a fall in prices and profit margins in 2020 amid a global oversupply after it swung to a loss in the fourth quarter, reported S&P Global.

"New additional supply [is} expected to keep product prices and margins under pressure in 2020," SABIC said in the presentation posted on Wednesday on the website of the Saudi Stock exchange, known as Tadawul.

The company reported a loss of Riyal 720 million (USD192 million) in Q4 2019 due to a drop in average selling prices and impairment provision for a subsidiary.

SABIC's Q4 volumes were unchanged, but prices fell 19% from a year earlier period, the company said in the presentation. It didn't give production figures.

The company, which posted Riyal 3.22 billion profit in Q4 2018, set aside Riyal 1.3 billion for the impairment of subsidiary Ibn Rushd, it said on Wednesday in a statement to Tadawul.

Saudi Aramco, the world's biggest oil producing company, is in the midst of merging with SABIC after acquiring a 70% stake in the petrochemical producer for USD69 billion in 2019.

Both Saudi Aramco and SABIC are boosting their petrochemical footprint and inking agreements within and outside the Gulf state to gain access to feedstock and get closer to their customers.

SABIC in October said it signed an initial non-binding memorandum of understanding with Russian Direct Investment Fund, the country's sovereign wealth fund, and ESN Group to evaluate building and operating a methanol plant with a capacity of up to 2 million mt/year in the Amur region of Russia.

ExxonMobil and SABIC are also going ahead with the development of a newbuild petrochemical complex in Texas, after having received all necessary permits and approvals.

However, European specialty chemicals producer Clariant and SABIC, its top shareholder, said in July they have temporarily suspended talks to form a joint venture due to current "unfavorable" market conditions.

SABIC in September 2018 signed a memorandum of understanding to combine SABIC's specialties business with Clariant's additives and high value masterbatch offerings. SABIC's third quarter profit had plunged 86% year on year to Riyal 830 million due to a Riyal 1.5 billion impairment provision for its 24.99% stake in the Swiss firm.

As MRC wrote before, SABIC took off-stream its SABIC Olefins 4 cracker owing to technical issues on May 10, 2019. Further details on duration of the shutdown could not be ascertained. Located in beek, the Netherlands, the cracker has an ethylene production capacity of 690,000 mt/year and a propylene production capacity of 360,000 mt/year.

Besides, in the first week of September 2019, SABIC Europe, an affiliate of SABIC, started maintenance work at its cracker No.3 at Geleen site in the Netherlands. The planned maintenance is slated to last around 2 months. The company operates two steam crackers in Geleen which are capable of producing 1,250,000 tons/year of ethylene and 675,000 tons/year of propylene in total.

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.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the worldпїЅs market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

MOSCOW (MRC) -- Nouryon has completed a repricing of its Euro and US Dollar term loans, reducing its annual interest payments by approximately EUR18.5 million, as per the company's press release.

The successful repricing was enabled by the company’s solid financial performance in 2019.

The repricing, which was completed on January 24, covers the company’s currently outstanding EUR1,790 million EUR Term Loan B and USD4,197 million US Dollar Term Loan B, each due October 2025. Interest rates were reduced by 50 basis points on the Euro loan and 25 basis points on the US Dollar loan.

"This has been a very successful repricing with a high level of interest from lenders, reflecting Nouryon’s strong cash generation and growth in EBITDA," said Renier Vree, Nouryon’s Chief Financial Officer.

The repricing follows a previous voluntary debt prepayment of USD110 million (equivalent to approximately EUR100 million) on its US Dollar Term Loan B, made in the fourth quarter of 2019. That amount, combined with scheduled repayments, took the company’s total debt reduction in 2019 to USD143 million (equivalent to approximately EUR130 million).

"We will continue to look at ways to reduce our leverage while maintaining ample liquidity," Vree said. "We will also continue to invest in attractive capacity expansions and selected bolt-on acquisitions to support the growth of our customers," he added.

As MRC wrote previously, in February 2019, Nouryon (formerly AkzoNobel Specialty Chemicals) announced that it would license its innovative continuous initiator dosing (CiD) technology to Karpatnaftochim, Ukraine’s largest polyvinyl chloride (PVC) producer. Nouryon’s patented CiD technology allows PVC producers to increase reactor output by up to 40 percent, improve product quality, and make the production process intrinsically safer - all with minimum capital expenditure.

Karpatneftekhim is one of the largest enterprises of Ukraine's petrochemical complex. Currently, the plant can produce annually 300,000 tonnes of PVC, 200,000 tonnes of caustic soda, about 180,000 tonnes of chlorine, as well as 250,000 tonnes of ethylene and 100,000 tonnes of polyethylene.

According to ICIS-MRC Price report, Karpatneftekhim increased capacity utilisation in December, total PVC production had increased to 23,550 tonnes against 21,700 tonnes in November. Overall PVC production in the country was 240,400 tonnes in January-December 2019, up by 15% year on year.
MRC