OMV Q4 profit down 26% on low commodity prices, ups dividend

MOSCOW (MRC) -- Austrian oil and gas group OMV posted a 26% fall in its fourth quarter core profit on Thursday, largely due to weak commodity prices and lower refining margins, and following an industry wide trend, said Reuters.

Clean current cost of supplies (CCS) earnings before interest and tax (EBIT), which exclude special items and inventory gains or losses, came in at 781 million euros in the three months through December. That was below an average forecast of 833 million euros in an OMV poll of 16 analysts, published on the company’s website.

OMV plans to increase its 2019 dividend to 2.00 euros per share from 1.75 euros the previous year.

As MRC informed earlier, in September 2019, OMV declared force majeure on supplies from its cracker in Burghausen Refinery, Germany. According to the company’s website, the Burghausen Refinery has a crude oil processing capacity of 3.8 million tons/year. OMV operates three refineries in Schwechat (Austria), Burghausen (South Germany) and Petrobrazi (Romania), with a total annual refinery capacity of 17.8 million tons.

Ethylene is the main feedstock for the production of polyethylene (PE).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers.
MRC

Mitsubishi Chemical's net profit dips on trade tensions, goodwill impairment charges

MOSCOW (MRC) -- Mitsubishi Chemical Holdings reports a 54% decline year on year (YOY) in net income for the company's fiscal nine months ended 31 December to Yen 76.27 billion (USD695.6 million), on sales that fell 4.9% YOY to Yen 2.7 trillion, reported Chemweek.

Operating income dropped 40% to Yen 160.5 billion from ?268 billion a year earlier owing to goodwill impairment charges relating to the pharmaceutical formulation materials business in the healthcare field, says Mitsubishi. The supply/demand balance for certain products, mainly for semiconductors and cars, was impacted by growing concerns over US-China trade friction, it says.

Mitsubishi's performance products business reports a 14% YOY decline in operating income to Yen 54.4 billion on sales of Yen 821 billion, down 5% YOY. Core operating income decreased primarily because of a drop in market prices for phenol-polycarbonate chain materials in advanced polymers. In functional products, revenue fell due to lower sales volumes in high-performance engineering plastics and other products for advanced moldings and composites, owing to weaker demand, principally in semiconductor and automotive applications. Sales of performance chemicals decreased, reflecting the price decline for phenol-polycarbonate chain materials in advanced polymers, which had been favorable last year, it says.

Operating profit for the chemicals business, Mitsubishi's largest, plummeted 64% to ?38.7 billion from Yen 107.7 billion a year earlier. Core operating income decreased mainly because of a decline in prices of methyl methacrylate (MMA) monomers and other products, despite higher sales volumes stemming from a reduced impact from scheduled maintenance and repairs in petrochemicals. Sales in this sector stood at Yen 826 billion, a drop of 15.3% YOY. The company says revenue decreased because of the continued deceleration of demand growth, especially in China, and lower prices of MMA and other products. In petchems, sales grew despite lower prices because of an increase in volumes stemming from a reduced impact of scheduled maintenance and repairs at ethylene plants, together with a drop in raw material costs and other factors. In carbon products, revenue was down.

Operating income in the industrial gases business increased 58% YOY to Yen 66.5 billion, on sales of Yen 732.8 billion, up 22.6% from Yen 628.2 billion in the prior-year period. This sector saw continued firmness in the overseas gases business because of the acquisition of a portion of the European business of Praxair and a portion of the HyCO business and related assets in the US owned by Linde, says Mitsubishi.

The company has cut its earnings estimate for the fiscal full year ending 31 March 2020, with net income lowered to Yen 81 billion from its previous guidance of Yen 131 billion. Operating profit is now forecast to be Yen 182 billion, compared with Yen 241 billion previously. Projected sales of Yen 3.76 trillion have also been reduced to Yen 3.63 trillion.

As MRC informed earlier, Mitsubishi Chemical has a steam cracker in Kashima with an ethylene production capacity of 564,000 mt/year. It shut one steam cracker there in 2014 - which has an ethylene production capacity of 375,000 mt/year -- following a sluggish petrochemical demand in the country.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Mitsubishi Chemical with headquarters in Tokyo, Japan, is a diversified chemical company involved in petrochemicals, polymers, agrochemicals, speciality chemicals and pharmaceuticals. The company's main focus is on three business pillars: petrochemicals, performance and functional products, and health care.
MRC

Henkel opens new manufacturing plant in India

MOSCOW (MRC) -- Henkel AG & Co. KGaA (Dusseldorf, Germany) announced that Henkel Adhesives Technologies has officially inaugurated its new production facility in Kurkumbh, India, near Pune, said.

With a total investment of about EUR50 million, the business unit aims to serve the growing demand of Indian industries for high-performance solutions in adhesives, sealants and surface treatment products. Designed as a smart factory the new plant enables a wide range of Industry 4.0 operations and meets the highest standards for sustainability.

The facility admeasures 100,000 square meters and has a built-up area of 51,000 square meters which makes it India’s largest adhesive manufacturing site. It will further increase Henkel?s capabilities to serve customers across various markets including flexible packaging, automotive, agriculture and construction equipment, general industry and metals.

"India is one of the most important emerging markets with tremendous growth opportunities for our adhesives business”, said Jan-Dirk Auris, Executive Vice President Henkel Adhesive Technologies. “Our trusted brands and leading solutions based on our unmatched portfolio of 40 technologies create sustainable value for our customers. With the launch of this state-of-the-art, multi-technology manufacturing facility, we have created capacities to meet the demands for our high impact solutions in this dynamic market. This investment will enable us to further drive profitable growth."

The new site is equipped with state-of-the-art technologies to ensure traceability and transparency and to exceed the high standards for quality and safety in the industry. Designed as a smart factory with a high level of process automation it enables a wide range of Industry 4.0 applications. The end-to-end digitalization of the plant operations also ensures digitized workflows for a high efficiency in manufacturing.

The new Kurkumbh site also meets the highest standards of sustainability. It is among the very few chemical manufacturing sites to be awarded the LEED Gold certificate by the US Green Building Council based on a holistic energy efficiency concept.

Henkel are also partnering with Borealis and plastics solutions company Borouge to develop flexible packaging solutions for detergents containing both virgin polyethylene (PE) and high amounts of post-consumer recyclate (PCR) in efforts to increase sustainability.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers.

Henkel operates in three business units, including laundry and home care, beauty care and adhesive technologies.
MRC

Shell boosts crude output in top U.S. shale field to 250,000 bpd

MOSCOW (MRC) -- Royal Dutch Shell, which plans billions of dollars in spending on shale drilling projects, boosted output in the top US shale field to 250,000 barrels per day in December, reported Reuters with reference to the company’s Permian Basin head.

Shell plans to spend about USD3 billion per year for the next five years on shale projects, said Amir Gerges, vice president of Permian assets for Shell, at the Argus Americas Crude Summit in Houston. Its Permian Basin production rose more than 100,000 barrels per day in the last year.

"We continue to ramp up our production from our core acreage," Gerges said.

Shell and rival oil majors Exxon Mobil, Chevron and BP are spending billions in the Permian Basin of Texas and New Mexico. The companies see shale as a short-cycle asset that complements projects such as deepwater wells that take years to bring into production.

The Permian has 30 years of so-called “tier one” high quality drilling inventory and will remain at the heart of U.S. oil growth, Gerges said. But the industry faces challenges in the region, ranging from too much natural gas flaring to inadequate infrastructure and “even today’s investor sentiments,” he said.

Previously, Shell indicated it might seek a way to expand its presence in the Permian, but during last week’s earnings call, Chief Executive Officer Ben van Beurden indicated the timing is not right for an acquisition.

"I think anything inorganic would not be the right thing to do," van Beurden said.

Oil and gas companies of all sizes have been under pressure to produce more free cash and return it to investors through share buybacks and dividends.

The industry also faces pressures to reduce emissions, especially from prolific gas flaring, deliberately burning gas produced as a byproduct to oil. The practice can worsen climate change by releasing carbon dioxide.

The US drilling industry flared or vented more natural gas in 2019 for the third year in a row, as soaring production in Texas, New Mexico, and North Dakota have overwhelmed regulatory efforts to curb the practice, according to state data and independent research estimates.

"The flaring and emissions in the Permian Basin have become famous and it’s not something we would like to be recognized for," Gerges said.

The region needs more infrastructure such as natural gas pipelines, but it is more important to have "robust, fit-for-purpose policies and regulatory requirements that incentivize reduction in flaring," Gerges said.

As MRC wrote before, Shell Singapore restarted its naphtha cracker in Bukom Island this week following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

US polyethylene exports surge 44% in 2019

MOSCOW (MRC) -- US polyethylene (PE) exports rose 11% in December to 858,634 metric tons, a new monthly high, reported Chemweek with reference to US Commerce Department data released yesterday.

PE exports from the US totaled 9.33 million metric tons (MMt) for the whole of 2019, up 2.84 MMt, 44%, over 2018.

The export boom is a result of the dramatic expansion of North American PE capacity in recent years and the abundance of low-cost feedstock that has made PE exports competitive in the global market.

US PE export volumes to China fell by 9% to 584,157 metric tons last year, bucking the overall trend because of the trade war. However, US suppliers adjusted by selling more into markets in Southeast Asia. Of the four fastest-growing PE export destinations in 2019, three were in Southeast Asia: Singapore, Malaysia and Vietnam, which collectively took in 845,888 metric tons more PE in 2019 compared to the previous year.

Belgium was the second-fastest-growing PE export market for the US by volume, accounting for about 10% of additional exports in 2019. Brazil was the fifth-fastest-growing destination.

US PE export volumes will likely need to continue growing in 2020, with three new PE plants with a total of 1.32 MMt of production capacity scheduled to come online over the next few months and limited growth prospects for the domestic market. Domestic demand weakened in 2019, according to preliminary data published in January by the American Chemistry Council. Domestic sales by US and Canadian producers in 2019 totaled 31.6 billion pounds, or 14.3 MMt, down from 32.7 billion pounds, 14.8 MMt, in 2018.

We remind that, as MRC wrote before, in early November 2019, LyondellBasell began the commissioning works of its new high density polyethylene (HDPE) plant in La Porte, Texas, USA. The brand new plant will utilize LyondellBasell’s patented Hyperzone technology to produce 500,000 tons/year of HDPE. Sales volumes from the plant are expected to increase during the first quarter of 2020.

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.
MRC