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Petronas Chemicals reports lower sales and earnings on COVID-19, deepening industry downcycle

May 21/2020

MOSCOW (MRC) -- Petronas Chemicals (Kuala Lumpur), Malaysiaís leading petrochemicals player, today reported a drop in first-quarter sales and earnings citing the coronavirus disease 2019 (COVID-19) pandemic, according to Chemweek.

The sharp decline in petrochemical product prices following the outbreak of COVID-19, the deepening industry downcycle as crude oil prices collapsed due to the OPEC+ fallout, and the recessionary global economic outlook have hurt results, the company says.
Profit after tax was down 39.4% to 493 million Malaysian ringgit (USD113.2 million), while operating profit slipped 36.4% to RM606 million. Lower product spreads and margin compression led to a decline in EBITDA margin to 20%. EBITDA stood at RM764 million, 39% down on the first quarter in 2019. Revenue was down 6% to RM3.89 billion.
Despite the unprecedented environment, Petronas Chemicals recorded high plant utilization rates and sales volume. Plant utilization rates averaged 94% and were comparable with the year-earlier quarter. Commenting on the results, Sazali Hamzah, CEO of Petronas Chemicals, says that despite the pandemic and the OPEC+ fallout, the group continued to demonstrate resilience in the first quarter by maintaining operational efficiency, customer centricity, and a diverse product portfolio. "Our solid operational and commercial capabilities allow us to be responsive to market changes. We have been able to circumvent the disruptions from lockdowns that are happening worldwide and sustain our business," he says.
He adds that despite operating in a challenging period, Petronas Chemicals continues to be focused on its growth strategy. "In 2020, we will proceed with the commissioning and commercialization of our chemical plants within the Pengerang Integrated Complex (PIC)."
The ramp-up and commercialization of Petronas Chemicalsí chemical plants within the PIC, a 50/50 joint venture (JV) between Petronas and Saudi Aramco, are continuing. The complex, at Pengerang near Singapore, is designed to produce polyethylene, polypropylene, and ethylene glycol. It was built downstream from a refinery and steam cracker, also a 50/50 JV between Aramco and Petronas Chemicalsí parent, Petronas. Construction of the steam cracker was completed earlier this year. It is designed to produce 1.291 million metric tons/year of ethylene, 630,000 metric tons/year of propylene, 185,000 metric tons/year of butadiene, 660,000 metric tons/year of pyrolysis gasoline, 175,000 metric tons/year of benzene, and 550,000 metric tons/year of methyl tert-butyl ether.
Sazali in his outlook for the rest of the year says, "The COVID-19 pandemic and OPEC+ fallout have heightened economic as well as market uncertainties. Product prices will generally remain under pressure in this difficult environment. It is imperative that we remain resilient as we face the full impact of the pandemic and subsequent economic downturn. We are confident that our business continuity plan will ensure that we overcome these challenging times."

As MRC informed earlier, a fire killed five people at a refining and petrochemicals complex in southern Malaysia owned by Petronas and Saudi Aramco, reported Reuters with reference to authorities' statement on 16 March 2020. It was the second fire in less than a year at the USD27 billion Pengerang Integrated Complex (PIC) in Malaysiaís southern state of Johor. Petronas and Saudi Aramco each have a 50% stake in the PRefChem joint venture, which owns and operates the refinery and some petrochemical plants at PIC.

We remind that PRefChem abruptly shut down its cracker in Pengerang, Malaysia, on 25 October 2019, due to an unspecified technical issue. The naphtha cracker produces 1.2 million tons/year of ethylene and 600,000 tons/year of propylene. Sources with knowledge of the matter said then that it might take roughly ten days for the cracker to come back online.

We also remind that the company received commercial ethylene and propylene at its new cracker in Pengerang on 13 September, 2019.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

Petronas, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company wholly owned by the Government of Malaysia. The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
Author:Margaret Volkova
Tags:Asia, PP, PE, LLDPE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, Petronas, Saudi Aramco, Malaysia, Rossiya.
Category:General News
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