Arkema Q4 profits fall amid difficult economic environment

MOSCOW (MRC) -- Arkema reports a 13% decline year on year (YOY) to EUR102 million (USD111.6 million) in adjusted net income for the fourth quarter of 2019, on sales down 7% YOY to EUR2.05 billion, with market uncertainty “continuing to weigh heavily on demand,” it says.

Group EBITDA rose 3% to EUR295 million compared with the prior-year quarter, reflecting growth for its specialty businesses and more favorable raw materials prices, it says. The EBITDA margin increased to 14.4% from 13% a year earlier, it adds.

Arkema says the coronavirus disease 2019 (Covid-19) outbreak "has led to a number of disruptions” for the company. “Quarantined personnel and transportation restrictions in China have impacted the supply chain. Furthermore, lower activity levels have affected the level of demand of our customers in China and in Europe. Uncertainty persists concerning the evolution of the epidemic and its impact on the group’s results beyond the month of February,” it says. The company estimates the outbreak’s impact on EBITDA at the end of February at around EUR20 million.

Volumes in the fourth quarter declined 5.3% YOY, reflecting the ongoing slowdown in the transportation, oil and gas, and consumer electronics markets, as well as a high basis of comparison with the equivalent quarter in 2018 for the company’s coating solutions division, according to Arkema.

A negative 5.4% price effect is mainly due to lower propylene prices for acrylic monomers and ongoing very tough market conditions for fluorogases, which overshadowed a continuing positive price dynamic in high-performance materials, it says. The company says it was also impacted to a limited extent by the nationwide strikes protesting against pension reforms in France.

In Arkema’s high-performance materials business, sales rose 1.3% YOY to €991 million, fueled by a 5.4% positive scope effect arising from the consolidation of the ArrMaz, Prochimir, and Lambson acquisitions. Solid momentum for batteries and 3D printing was countered by ongoing weaker demand in the transportation, oil and gas, and consumer electronics sectors, as well as inventory adjustments of some customers, leading to a 7.6% decline YOY in volumes. The division’s EBITDA rose to EUR140 million from EUR125 million a year earlier, driven in particular by ArrMaz’s contribution and Bostik’s continued growth.

The company’s industrial specialties division achieved sales of EUR593 million, down 13.2% YOY, mostly due to a 10.3% negative price effect, largely attributable to market conditions in fluorogases, it says. EBITDA was EUR133 million, down 5% YOY.

In the coating solutions division, sales fell 13.9% YOY to €464 million, with the decrease in propylene prices having “a strong impact” on the overall price effect, which was a negative 12.6%. Volumes were 2.8% lower, while EBITDA declined to EUR36 million from EUR44 million a year earlier, with the company saying improved unit margins in downstream businesses failed to fully offset more challenging market conditions for upstream businesses.

For the full fiscal year 2019, Arkema reports adjusted net income of EUR625 million, down from EUR725 million in 2018, on sales of EUR8.7 billion, slightly lower than the previous year.

The company “experienced a more difficult economic climate in 2019, marked by downturns in some markets, such as the automotive and electronics sectors, as well as a general lack of visibility. In this context, the group’s performance remained at a high level and its resilience compared favorably with the sector average,” says CEO Thierry Le Henaff.

As it was written earlier, in October 2019, Arkema (Colombes, France) announced the proposed divestment of its Functional Polyolefins business to SK Global Chemical (Seoul, South Korea), a subsidiary of SK, the major South Korean corporation. With this project, Arkema continues its shift towards specialty chemicals and advanced materials.

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).
MRC

MOSCOW (MRC) -- Benchmark northwest European diesel refining margins LGOc1-LCOc1 fell by 22% to usd7.80 a barrel, their lowest since late September 2016, on the growing spread of the coronavirus in Europe, reported Reuters.

“People are trading down the virus risk,” one European trader said, in reference on the impact the virus will have on demand in Europe.

As MRC informed before, economic disruption surrounding the Wuhan coronavirus outbreak will significantly complicate petrochemical markets, not only cutting into demand globally, but also tightening access in China to feedstock and slowing capital projects, in H1 February 2020, said Dewey Johnson, vice president/base chemicals at IHS Markit. He estimates that each 1% decline in China"s GDP growth this year will translate into about 2.5 million metric tons/year (MMt/y) of lost base chemicals demand.

The coronavirus could also affect the pace of capital investment in China. "There"s significant amount of capacity being added today in China," Johnson notes. "Labor may be a key bottleneck in this period, and the question is, how does that affect the (engineering, procurement, and construction) schedules and plant start-ups?"

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).
MRC

MOSCOW (MRC) -- Borealis announces a net profit of EUR 138 million for the fourth quarter of 2019, compared to EUR 94 million in the same quarter of 2018, said the company.

While the 2018 result was impacted by a one-off impairment charge of EUR 92 million, the result in the fourth quarter of 2019 was driven by a soft polyolefins market in Asia, lowering the contribution from Borouge. At the same time, the improved performance of the Fertilizer, Melamine and Technical Nitrogen Products segment partially mitigated the negative impact of weakening integrated polyolefins margins in Europe during the last quarter of 2019.

For the full year 2019, the company recorded a net profit of EUR 872 million, compared to EUR 906 million in 2018. The 2019 result was negatively impacted by a lower polyolefins price environment in Asia, which affected the contribution from Borouge. However, the negative impact was limited due to healthy integrated polyolefins margins in Europe together with improved results in the Fertilizer, Melamine and Technical Nitrogen Products segment.

In the fourth quarter, net debt rose by EUR 212 million. Over the full year 2019, net debt increased by EUR 241 million, driven largely by the high investment level related to growth projects and the payment of a EUR 525 million dividend for 2018 and a EUR 300 million interim dividend for 2019 to Borealis shareholders. The cash inflow from the solid business result and dividends from Borouge enabled Borealis to keep its financial position strong, with a gearing of 24% at year-end 2019.

Earlier it was reported that Borealis plans to stop the production of phenol and acetone on April 12 at a site in Porvoo (Porvoo, Finland) for scheduled repairs. This enterprise with a capacity of 195 thousand tons of phenol and 120 thousand tons of acetone per year will be closed for repairs until May 27.

According to MRC's ScanPlast, Russia's HDPE production amounted to 868,500 tonnes in 2019, down 10% year on year. All manufacturers reduced operating loading, primarily due to long repair shutdowns.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals, fertilizers and melamine. With its head office in Vienna, Austria, the company currently has 6,900 employees and operates in over 120 countries. Borealis generated EUR 8.1 billion in sales revenue and a net profit of EUR 872 million in 2019.

MRC

MOSCOW (MRC) -- Overall imports of general purpose polystyrene (GPPS) and high impact polystyrene (HIPS) to Belarus rose in 2019 by 13% year on year to 38,800 tonnes, according to MRC's DataScope report.

GPPS and HIPS imports into the country were at 34,200 tonnes in 2018.

December 2019 imports of material to the Belarusian market decreased by 3% from the previous month to 3,300 tonnes. At the same time, December GPPS and HIPS shipments into the Republic of Belarus increased by 15% year on year (2,800 tonnes a year earlier).

GPPS and HIPS imports from Russia into the country accounted for 82% of the total imports in 2019 or 31,800 tonnes, up by 4,700 tonnes year on year.

December 2019 imports of Russian material into Belarus grew by 48% year on year to 2,600 tonnes from 1,800 tonnes a year earlier, November 2019 shipments were 3,000 tonnes.

MRC

MOSCOW (MRC) -- Imports of expandable polystyrene (EPS) into Belarus dropped in 2019 by 2% year on year, totalling 12,900 tonnes, according to MRC's DataScope report.

December 2019 EPS imports into the country fell by 18% from November to 900 tonnes from 1,100 tonnes. Imports of material into the Republic of Belarus were 1,000 tonnes in December 2018.

Russia is the main EPS importer to Belarus.

Imports of Russian material to the Belarusian market decreased in 2019 by 15% year on year: from 9,300 tonnes in January-December 2018 to 7,900 tonnes. The share of EPS imports from Russia in the total shipments to the country also decreased last year to 61% from 70% in 2018.

December 2019 shipments of Russian EPS to the region were 506 tonnes versus 537 tonnes in November, whereas imports of material were 459 tonnes in December 2018.

At the same time, the share of imports of Dutch material almost doubled last year: from 6% (800 tonnes) to 11% (1,500 tonnes).

MRC