LG Chem records substantial rise in net income, improved petchems performance

MOSCOW (MRC) -- South Korea’s LG Chem Ltd. reported more than doubled operating profit in the second quarter as electric vehicle demand stayed robust despite virus pandemic and further cemented the leadership of the world’s battery bestseller, with the order book packed for the third quarter, said Chemweek.

In its regulatory filing on Friday, LG Chem announced its consolidated operating profit in the April-June period reached 571.6 billion won (USD480 million), sharply up from 206 billion won a quarter ago and 247 billion won a year earlier.

Net profit ballooned more than 11-fold from the previous quarter and five-fold from a year-ago to 419.1 billion won. The three-digit gains in bottom line overwhelmed the number in the top, pushing the operating margin 8.2 percent, its best since the third quarter of 2018. Sales added 3.1 percent from three months ago and 2.3 percent against a year earlier to total 6.94 trillion won in the period.

The second-quarter operating profit was way above market consensus of 429.9 billion won compiled by Seoul-based financial data provider FnGuide on July 1. For the first six months, LG Chem’s operating profit rose 52.4 percent to 777.5 billion won from the previous year. Net profit also gained 54 percent to 455.4 billion won, and sales up 4.8 percent to 13.66 trillion won.

The stellar performance in the second quarter was mainly driven by solid demand for electric vehicle batteries despite the coronavirus spread. LG Chem which commanded 27.1 percent of the global EV battery market is expected to maintain a comfortable lead.

Battery division delivered an operating profit of 155.5 billion won on revenue of 2.82 trillion won, making the best-ever earnings for its battery business upon rising demand for EV batteries in China and Europe amid stricter environmental regulations.

During an earnings conference call, the company projected its battery sales in the third quarter would surge more than 25 percent from the second quarter on expectation for higher demand from anticipated releases of new EV models by European major customers, including Volkswagen, and small batteries amid strong demand for IT devices. The company also forecast its sales for 2020 should top 13 trillion won. Profitability of the petrochemical business also improved in the second quarter.

The petrochemical business posted an operating profit of 434.7 billion won on sales of 3.31 trillion won. Sales slid from the previous quarter due to low oil prices but operating margin recovered to double-digits of 13.1 percent for the first time in five quarters thanks to a recovering spread from expanded orders from China. The advanced materials business reported 35 billion won in operating profit, with sales of 789.2 billion won. Overall market demand for IT and displays slowed but profitability improved on lower prices of raw materials and cost-reducing efforts.

The life science business raised 14.1 billion won in operating profit on revenue of 160.3 billion won. Its pesticides and fertilizer making subsidiary Farm Hannong raised 11.6 billion won in operating profit on sales of 177.8 billion won during the same period.

"In the third quarter, the company will keep up growth momentum by maintaining profitability in the petrochemical business and brining more growth in the battery division to establish a strong business structure for stable earnings,” said Cha Dong-seok, chief financial offer at LG Chem.

As MRC wrote previously, LG Chem, a South Korean petrochemical major, reduced its operational rates of its cracker to around 90-95% starting January 2020 due to weaker economic fundamentals. Based in Daesan, South Korea, the cracker is able to produce 1.27 million tons/year of ethylene and 650,000 tons/year of propylene. The company increased capacity utilisation at this cracker to 100% on 10 March, 2020, in order to supply ethylene to Lotte Chemical.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

LG Chem Ltd., often referred to as LG Chemical, is the largest Korean chemical company and is headquartered in Seoul, South Korea. According to ICIS report, it is 15th biggest chemical company in the world in 2011. It has eight domestic factories and global network of 29 business locations in 15 countries. LG Chem is a manufacturer, supplier, and exporter of petrochemical goods, IT&E Materials and Energy Solutions.
MRC

1. ExxonMobil to ease shut-ins to 200,000 boe/d in Q3 on recovering demand

MOSCOW (MRC) -- ExxonMobil aims to ease global oil and gas production shut-ins by about 40% to 200,000 b/d of oil equivalent as demand for transportation fuels slowly recovers from a second-quarter plunge, according to S&P Global. About 70% of the shut-ins expected to persist into Q3 are from government mandates, with the rest being market-based cuts, the company said. ExxonMobil sees global gasoline and diesel demand returning to year-ago levels by Q4, while jet fuel demand will take much longer to recover.




MRC

MOSCOW (MRC) -- Evonik Industries says its net profits in the second quarter of 2020 were 50% lower on a year-on-year (YOY) basis, at EUR114 million (USD134 million), on sales of EUR2.83 billion, 14% down on the same period of the previous year, said Chemweek.

This result is attributed to significantly weaker demand in some markets, the company says. Adjusted EBITDA beat analysts’ consensus estimate by 9.5%, but was 19% lower YOY, at EUR456 million, it says. Adjusted EBIT fell 41% YOY, to EUR202 million, Evonik says.

"In the second quarter we felt the effects of the pandemic. However, the strategic portfolio changes and the implementation of our efficiency programs contributed to the fact that we got through the first half of the year better than initially expected. This is especially true for our strong growth segments," says Christian Kullmann, chairman of Evonik.

The company’s nutrition and care business recorded a 4% YOY decline in sales, to EUR1.09 billion, and adjusted EBITDA rose by 14%, to EUR217 million, Evonik says. Higher selling prices and increased demand benefited essential amino acids for animal nutrition, it says. The healthcare segment “once again recorded a pleasing development in pharmaceuticals and food ingredients, as well as pharmaceutical polymers. However, additives for polyurethane foams experienced a decline in demand,” Evonik says.

Sales of the resource efficiency business fell by 14%, to EUR1.24 billion compared with EUR1.44 billion in the second quarter of 2019, the company says. Adjusted EBITDA declined 22% YOY, to EUR255 million. Most of the business’s segments were significantly affected by the decline in demand, Evonik says. With the exception of crosslinkers and active oxygen products, “the global economic slowdown and cutbacks in production by customers, especially in the automotive sector, led to a decline in sales volumes of high-performance plastics, silica, and silanes for the tire industry. Demand for oil additives also declined while others remained stable," the company says.

The performance materials business posted a significant YOY drop in sales of 42%, to EUR319 million that led to an 85% decrease in adjusted EBITDA, to EUR11 million, the company says. The massive drop in the oil price had an overall negative impact on the business, and the decline in demand, especially from the automotive and oil industries, hurt functional solutions, with performance intermediates the segment affected the most, Evonik says.

"Free cash flow was significantly positive at €96 million. Lower bonus payments and tax reimbursements more than compensated for the effects of lower operating profit and an increase in net working capital," the company says.

During the crisis, "we have shown high cash- and cost discipline," says Ute Wolf, CFO at Evonik. "We are starting to see initial signs of recovery in some markets. However, there is still no question of a general economic recovery. The corona crisis is not yet over," Wolf says.

For the full year 2020, Evonik has confirmed its outlook published on 7 May and expects sales of EUR11.5-13.0 billion as well as adjusted EBITDA of EUR1.7-2.1 billion.

We remind that Dow plans to install a new furnace in its steam cracker at Fort Saskatchewan, Alberta, Canada, increasing its ethylene capacity, currently 1.42 million metric tons/year (MMt/y), by 130,000 metric tons/year. Dow will split the cost of the project and the incremental volume equally with an unnamed regional customer, according to CEO Jim Fitterling, who announced the news during the company's fourth-quarter earnings call. Start-up is slated for the first half of 2021.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.

Evonik is one of the world leaders in specialty chemicals. The focus on more specialty businesses, customer-oriented innovative prowess and a trustful and performance-oriented corporate culture form the heart of Evonik’s corporate strategy. They are the lever for profitable growth and a sustained increase in the value of the company. Evonik benefits specifically from its customer proximity and leading market positions. Evonik is active in over 100 countries around the world with more than 36,000 employees.
MRC

MOSCOW (MRC) -- Occidental Petroleum said that its chemical division earned USD108m in pretax income during the second quarter, down 48% from first quarter, mostly on coronavirus impact on product demand, the company said in its quarterly earnings filing with the Securities and Exchange Commission (SEC), said Bloomberg.

For Occidental, the pullback is particularly humbling. The Anadarko deal was supposed to create a Permian giant to rival the majors, with strong cash flows and enormous growth potential. But the pandemic, combined with the debt, means that Occidental is now shrinking, both in terms of production and market value.

Occidental slashed its capital budget by more than half to USD2.5 billion for the year. That’s below the USD2.9 billion per year it needs to sustain production going forward. As such, output is declining quickly, with a 13% drop to 1.23 million barrels a day expected in the current quarter and a further 5% in the fourth.

Occidental Petroleum is the largest on-land petroleum producer in the US and a leading offshore producer in the Gulf of Mexico.

It also has significant operations in the Middle East, Africa and Latin America.

Occidental Petroleum chemical division produces chlorine, caustic soda, polyvinyl chloride (PVC), ethylene dichloride (EDC) and vinyl chloride monomer (VCM), along with other chemicals, including hydrochloric acid (HCl).

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Major US competitors include Olin, Westlake Chemical, Shintech and Formosa Plastics.
MRC

MOSCOW (MRC) -- Crude oil futures were rangebound during mid-morning trade in Asia Aug. 6 as the continued spread of COVID-19 worldwide weakened sentiment, overturning some of the gains from the overnight rally which was spurred by the larger-than-expected drawdown in US commercial crude inventories, reported S&P Global.

At 10:44 am Singapore time (0244 GMT), the ICE Brent October crude futures was up 9 cents/b (0.2%) from the Aug. 5 settle at USD45.28/b, while the NYMEX September light sweet crude contract was down by 1 cent/b (0.02%) at USD42.18/b.

"Oil prices rose to their highest since early March on Wednesday after a large decline in US crude inventories and the US dollar weakened, but mounting COVID-19 infections had market participants worried about the demand outlook," a UOB analyst said in an Aug. 6 note.

US commercial crude inventories fell 7.37 million barrels to 518.6 million barrels for the week ended July 31, and narrowed the surplus to the five-year average to about 16%, US Energy Information Administration data released Aug. 5 showed.

This was significantly higher than the market's consensus of a 3.35 million barrels decline, but slightly below the American Petroleum Institute's expectations of an 8.6 million-barrel draw released on Aug. 4.

Nonetheless, it marked the second week in a row that US inventory stockpiles fell, indicating a clear downtrend after the 10.61 million-barrel decline the previous week, and helped to push the Brent marker past $46/b during the US trading session.

However, gasoline stocks rose for a second consecutive week, climbing 420,000 barrels to 247.81 million barrels, while nationwide distillate inventories were also up 1.59 million barrels at 179.98 million barrels. Total motor gasoline supplied, a proxy for demand, was also down 190,000 b/d on the week at 8.62 million b/d, leaving it nearly 11% behind year-ago levels.

This provides "warning signs that the recovery in demand remains fragile, and comes as the US driving season, the world's biggest seasonal demand period comes to an end," ANZ analysts said in a note Aug. 6.

Meanwhile, the continued downtrend in the US dollar had helped to support investor appetite in the broader commodities sector and crude prices, given the strong inverse correlation between the US dollar and crude prices.

At 10:44 am (0244 GMT), the US dollar index stood at 92.8, down 0.06% from 92.82 at the close.

However, the continued spread of COVID-19 worldwide remains the key drag on market sentiment and recovery in oil demand. Global COVID-19 cases stand at 18,727, 700, while total deaths had exceeded the 700,000 mark, latest data from John Hopkins University showed. While the number of daily infections globally has eased, it remains high with a confirmed 257,911 cases on Aug. 4.

"The recent surge in virus cases and the reimposition of some virus control measures will moderately slow the economic recovery in the near term, but expect the recovery to get back on track in September, assuming virus developments don't prompt the reimposition of widespread lockdown," Stephen Innes, chief global markets analyst at AxiCorp, said in a note Aug. 6.

"But ultimately, traders will continue to train their eyes on the ultimate vaccine prize," he added.

As MRC informed before, US crude oil inventories moved sharply lower during the week ended July 24 as exports and refinery demand climbed to multi-month highs, US Energy Information Administration data showed July 29. Commercial crude stocks fell 10.61 million barrels to 525.97 million barrels that week, EIA data showed. While the draw pushed stockpiles to 14-week lows, they remained more than 17% above the five-year average for this time of year.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC