Sabic swings to net loss on lower prices, volumes, impairment charge

MOSCOW (MRC) -- Sabic swung to a second-quarter net loss of 2.22 billion Saudi riyals (USD587 million) from a net profit of SR2.03 billion in the prior-year period, according to Chemweek.

The loss for the three-month period to end-June is mainly attributed to lower average product prices, lower sales volumes, and an impairment charge of SR1.18 billion related primarily to "certain petrochemical assets in the European region," Sabic says. The company, acquired by Saudi Aramco for USD69.1 billion in a deal completed in June, says the lower prices and volumes were mainly due to the impact of the COVID-19 pandemic. The adjusted net loss figure of SR1.04 billion, excluding the asset write-down, missed analysts’ consensus estimate for a profit of SR900 million. Sabic reported a net loss of SR1.05 billion in the first quarter of this year.

Second-quarter sales declined 29% year on year (YOY) to SR24.62 billion and were 18% lower than in the first quarter. Lower earnings contributions from the company's Saudi affiliates such as Yansab, Kayan, and Safco also negatively impacted earnings, it says. Gross margins declined to 14% from 22% in the prior-year quarter.

Average petrochemical prices fell 27% YOY in the second quarter and were down 18% from the previous quarter, with the company maintaining production levels over the period, it says.

Signs of recovery are already being seen at the start of the second half of the year, according to Sabic CEO Yousef al-Benyan. “We expect the third- and fourth quarters to see slight improvements” in demand, he said in a conference call. “There will be positive results as we have already seen in July and August with the slight demand improvement, in addition to a slight improvement in prices,” he said. “Hopefully this is something positive, but other challenges still persist. The future of demand is driven by uncertainties in the energy market. Market conditions are going to put pressure on the chemical industry for the remainder of this year.”

Earlier this year, Sabic suspended all capital expenditure (capex) except nondiscretionary capex for safe and reliable operations and late-stage projects.

We remind that in mid-June, 2020, state-owned Saudi Aramco bought 2.1 billion shares of Saudi Basic Industries (SABIC) on the stock market on Sunday as it completed its deal agreed last year to buy 70% of the petrochemical giant.

Aramco is scheduled to report its second-quarter earnings on 9 August.

As MRC reported earlier, Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, completed the debottlenecking of its ethylene cracker on 11 July 2020, adding another 30,000 tons/year output to its current capacity. Followed the expansion, the Tianjin based plant become the country's largest compressor unit, producing 1.3 million tons of ethylene annually.

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.

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

MOSCOW (MRC) -- Brenntag, the worldwide market leader in chemical and ingredients distribution, reports a 1.9% year-on-year (YOY) decrease in second-quarter net profit to EUR123.0 million (USD145.1 million) on sales of EUR2.8 billion, down 13.4%, mainly attributable to declining demand due to the COVID-19 pandemic. Operating gross profit slipped 1.0% YOY to EUR715.9 million and operating EBITDA rose 3.7% to EUR276.2 million, reported Chemweek.

The company says its second-quarter results were solid and demonstrate resilience. Brenntag says it had “still limited impact” from the pandemic in the quarter, but that it expects tougher conditions and high uncertainty in the rest of the year. “Although we reported solid results in the second quarter with the COVID-19 pandemic still having limited effects on our business performance, we have noticed declining demand in various customer industries, and uncertainty with regard to further developments remains high in the markets,” says Christian Kohlpaintner, CEO of Brenntag. “The positive performance in the first six months gives us a sound foundation for the second half of the year, which we expect to be even more challenging.”

Free cash flow reached EUR213.7 million in the second quarter, up from EUR179.1 million in the second quarter of 2019. This represents an increase of 19.3% and is the highest second-quarter free cash flow the company has generated since its initial public offering in 2010.

Brenntag says its business in EMEA achieved a relatively strong quarter, mainly driven by customer industries such as cleaning, pharmaceuticals, and personal care, with regional operating gross profit of EUR314.6 million, up 7.4% YOY, and operating EBITDA jumping 19.7% to EUR130.1 million. Sales fell 9.7% YOY to EUR1.2 billion.

The company says the market environment in North America remained difficult, “impacted by clear declines in the business with customers of the oil and gas industry, as well as by the COVID-19 pandemic,” with sales dropping 15.0% YOY to EUR1.0 billion. Operating gross profit in the region was down by 7.6% to EUR289.3 million and operating EBITDA fell 8.4% to EUR117.1 million.

Brenntag suspended its 2020 forecast in early April due to uncertainty over the future effects of the COVID-19 pandemic. The company says it will update its forecast “as soon as the effects on Brenntag’s further business performance in 2020 can be reliably determined.” Brenntag says that, given high uncertainty in the global economy, it cannot rule out a larger impact from COVID-19 on its business development.

Brenntag initiated a holistic analysis of the company at the beginning of 2020 as a starting point for a comprehensive transformation program to set the base for sustainable organic earnings growth. The project has entered the next phase, which consists of validating conclusions and initiatives that have been developed in recent months, the company says. Details of the program, called Project Brenntag, will be provided when the company publishes its third-quarter 2020 results in early November.

As MRC reported earlier, since 1 February 2014, Brenntag has startied distributing the cellulosic additive and latex powder portfolio of Dow Construction Chemicals in Germany and Austria.

We remind that Dow Chemical began major maintenance on the LHC 1 cracker at Terneuzen, Netherlands from 9 September, 2019. More than 1,500 extra employees from various external companies carried out maintenance work in the subsequent period. LHC stands for Light Hydro Carbons, or hydrocarbons. The cracker splits naphtha - a derivative of crude oil - into hydrocarbons such as ethylene and propylene. These are the raw materials for the other Dow factories that make chemicals and plastics from them. Together with two other naphtha crackers, LHC 1 forms the heart of the Terneuzen Dow site.

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.

Brenntag is the global market leader in full-line chemical distribution. Linking chemical manufacturers and chemical users, Brenntag provides business-to-business distribution solutions for industrial and specialty chemicals globally. The value-added services include just-in-time delivery, product mixing, formulation, repackaging, inventory management, drum return handling as well as extensive technical support. Headquartered in Mulheim an der Ruhr, Germany, the company operates a global network with more than 400 locations in 70 countries.
MRC

MOSCOW (MRC) -- Textile fiber manufacturer Lenzing reports a steep fall in net profit for the first half of 2020, to EUR1.5 million (USD1.8 million) from EUR78.8 million in the first half of 2019, on revenue down 25.6% from EUR1.09 billion to EUR810.2 million, said Chemweek.

The company says it “faced a historically difficult market environment with increased pressure on prices and volumes resulting from the COVID-19 crisis.” EBITDA dropped 46.6% year on year to EUR96.7 million and EBITDA margin decreased from 16.6% to 11.9%. Second-quarter figures have not been disclosed.

The immediate effects of the COVID-19 crisis increased price pressure on textile fibers across Lenzing’s entire product range, the company says. It also saw declining demand for textile fibers in all regions, mitigated partly by slightly higher demand for fibers in the medical and hygiene segments.

"The COVID-19 crisis has an impact on the entire textile and apparel industry and further increased the price and volume pressure on the global fiber market. Likewise, Lenzing was also confronted with this historically difficult market environment and focused on the health and safety of their employees, the continuation of long-term partnerships, and ensuring their sustainable business development," says Stefan Doboczky, CEO of Lenzing.

Lenzing says that the implementation of measures for structural earnings improvements in all regions and making use of the short-time work model, which was temporarily introduced by the Austrian government, also mitigated the negative effects of the pandemic. Lenzing adjusted its production volumes and sales prices “to market reality” in the first half, it says.

Lenzing’s capital expenditure roughly tripled in the first half to EUR268.7 million. The increase is a consequence of progress made on major projects in Brazil and Thailand, the company says. Meanwhile, Lenzing says that its previously announced Hygiene Austria joint venture (JV) with Palmers Textil, founded in late April, has been producing and selling mouth-nose and FFP2 masks since May. The JV can produce up to 12 million masks per month, Lenzing says.

Lenzing in March suspended its forecast for 2020 as a consequence of the COVID-19 crisis and resulting limited visibility. At that time, the company expected its 2020 results to be below 2019 levels. Lenzing says it remains difficult to give a precise full-year outlook, but the company expects that its revenue generation and operating performance in the remaining two quarters of 2020 will exceed those of the second quarter. The company also assumes that its previously announced sCore TEN performance-improvement strategy “will yield a significant contribution to earnings starting from 2022."

As MRC informed earlier, Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.
MRC

MOSCOW (MRC) -- Royal Dutch Shell Plc began restarting the large crude distillation unit (CDU) at its 318,000 barrel-per-day (bpd) Deer Park, Texas joint-venture refinery, said sources familiar with plant operations, said Reuters.

Shell plans to begin restarting the small CDU at the Deer Park refinery later this week, the sources said.

As MRC wrote before, Shell will announce a major restructure by the end of the year as the company prepares to accelerate its shift toward its net-zero emissions goal by 2050, said CEO Ben van Beurden to employees. The restructuring will include workforce reductions as part of broader cost-cutting measures, although no figures have been decided yet, the CEO reportedly said during an internal webcast.

We remind that Royal Dutch Shell Plc plans to idle a sulfur recovery unit (SRU) at the joint-venture Deer Park, Texas, refinery in 2021, said Shell spokesman Curtis Smith in July 2020. Currently, the refinery is operating at about 75% of its 318,000 barrel-per-day capacity because of reduced demand due to the COVID-19 pandemic.

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.

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

MOSCOW (MRC) -- Independent US refiner HollyFrontier plans for its five refineries to run up to 81% of their combined throughput of 457,000 bpd in the third quarter of 2020, reported Reuters with reference to Timothy Go, executive vice president and chief operating officer.

The refineries’ combined crude oil throughput will range between 340,000 and 370,000 bpd in the third quarter, Go said on a conference call with Wall Street analysts to discuss the company’s second-quarter results.

As MRC informed earlier, CVR Refining and HollyFrontier Corp have cut their workforce in late June, as demand falls due to the ongoing coronavirus pandemic. Thus, CVR Refining laid off approximately 50 salaried employees and HollyFrontier cut at least 12 jobsd. HollyFrontier previously said it would lay off about 130 workers at its Cheyenne, Wyoming, refinery as it converts to a renewable diesel facility.

We remind that Valero Energy Corp’s Memphis, Tennessee, crude oil refinery is operating at two-thirds of its 180,000 barrel-per-day (bpd) capacity because of low demand in the COVID-19 pandemic. The Memphis refinery cut production by as much as 50% in early April and has been raising production gradually since then.

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