Lanxess posts weaker earnings, sales on COVID-19 impacts, net profit jumps on divestment proceeds

MOSCOW (MRC) -- Lanxess says net profits in the second quarter of 2020 were almost eight times higher than in the same period of the previous year, to EUR798 million (USD943 million), said Chemweek.

This is primarily due to the sale of its 40% stake in chemical park curator Currenta to Macquarie Infrastructure and Real Assets in April, which resulted in a disposal gain of EUR740 million. Sales declined 16.7% year on year, to EUR1.44 billion, due to weak demand across many industries and lower raw material prices, the company says. EBITDA and EBIT shrank by 23.8% and 57.3%, to EUR198 million and EUR61 million, respectively.

"As expected, after the huge slump in the global economy we felt the effects of the coronavirus crisis much more strongly in the second quarter than in the first three months of the year. However, our stable positioning, strong liquidity, and high cost discipline are continuing to get LANXESS through this challenging time well. Besides, we are already seeing initial signs of a recovery in Asia. I therefore remain confident, even though a rapid macroeconomic recovery cannot be foreseen at present,” says Matthias Zachert, chairman at Lanxess.

The company’s consumer protection business posted a positive quarter with sales growing 21.9% YOY, to EUR301 million and EBITDA pre-exceptional items 41.7% higher YOY, to EUR68 million. The result was mainly due to strong business with agricultural chemicals in the Saltigo business unit and continued good demand for disinfectants in the material protection products division, the company says.

However, weak demand from the automotive industry squeezed earnings in the other three segments, especially engineering materials, which recorded a 33% YOY drop in sales, to EUR244 million, dragging EBITDA pre-exceptionals down 57%, to EUR28 million, Lanxess says. Sales of the advanced intermediates business fell by 20%, to EUR469 million, with EBITDA pre-exceptionals down 12%, to EUR100 million. Specialty additives’ sales went down 20% YOY, to EUR403 million, and EBITDA pre-exceptional items declined 29%, to EUR63 million.

The company says that its ongoing strong liquidity is helping it secure financial and operating liquidity in the uncertain environment caused by COVID-19. Operating cash flow decreased 39% YOY, to EUR52 million, and net debt at the end of June was down to EUR929 million from EUR1.74 billion at the end of June 2019. Meanwhile, in response to the impact of the pandemic the company reduced its capital expenditure by 19%, to EUR88 million, it says.

Lanxess confirms the full-year forecast it presented with its first-quarter 2020 results, and expects EBITDA pre-exceptional items to be in the range of EUR800-900 million. It anticipates business momentum to improve sequentially in the third quarter. In addition, the company does not expect the global economic environment to return quickly to the prior-year level and assumes that apart from the significant negative developments in the automotive industry, the construction, agro-industry, and chemical sectors will decline in 2020.

As MRC informed earlier, Lanxess has announced that it expects its core income to decline in 2020 as the global coronavirus epidemic is expected to damage its supply chains. The company forecasts that profit before exceptional items will slash EUR 50-100 million (USD56.4-112.8 million) as a result of coronavirus, with EUR20 million (USD22.6 million) impact projected for the first quarter. However, the company anticipates its operating business will remain stable for the year.

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) -- Citing the current economic downturn, Motiva Enterprises (Houston, Texas) said Wednesday that it will slash 10% of its workforce by 1 September, including jobs at its headquarters, terminals, and Port Arthur, Texas, facilities, said Hydrocarbonprocessing.

Motiva, which operates the 639,700-b/d Port Arthur refinery near Houston, the largest in North America, said hourly operations, maintenance, and lab team members will not be impacted by this job reduction. The company had about 2,800 employees as of December 2019, according to its website.

Motiva said the workforce reduction will not affect its licensing deals with Shell and 76. Under exclusive, long-term brand licenses for the Shell and 76 brands, Motiva supplies fuel to more than 5,000 retail gas stations.

"Motiva is undergoing a rigorous exercise to capture synergies and optimize processes across the entire organization—from our corporate headquarters, terminals, and Port Arthur facilities," the Houston-based company said.

Like other US-based refineries, Motiva has experienced historic demand destruction as lockdowns and mass-gathering restrictions related to COVID-19 have virtually wiped out transportation fuel consumption, severely cutting into product margins.

The Saudi Arabian Oil Co., or Saudi Aramco, which wholly owns Motiva, reported a profit of $6.6 billion in quarter two 2020, down 74% year-over-year (YOY) from USD24.7 billion, citing challenging market conditions due to COViD-19.

Motiva refines, distributes, and markets petroleum products throughout the US. It also operates the largest lubricant plant in the Western Hemisphere. In 2019, Motiva acquired a chemical plant that manufactures ethylene, propylene, cyclohexane, and other byproducts.

As MRC informed earlier, Motiva Chemicals, the American subsidiary of the Saudi petrochemical giant Saudi Aramco, began repair work on the compressor of the cracking unit in Port Arthur (Port Arthur, Texas, USA) on 2 August. It is currently unknown how long maintenance will continue on the compressor as part of the facility's light olefins unit (LOU) with a capacity of 620 kt ethylene and 340 kt propylene per year.

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

MOSCOW (MRC) -- BASF Total's Port Arthur cracker in Texas remained shut for maintenance, with no known target date for restart, reported S&P Global with reference to sources' statement Aug. 11.

The company said in a June 21 filing with the Texas Commission on Environmental Quality that there would be flaring and maintenance at its BTP Cracker Complex as a result of an unplanned outage that began June 11.

The maintenance was scheduled to begin June 22 and was expected to last 744 hours through July 23, according to the filing.

The JV’s steam cracker at Port Arthur has a production capacity of more than 1 million metric tons/year of ethylene and 544,000 metric tons/year of propylene, according to IHS Markit data.

The company was not immediately available for comment Aug. 11 or June 22, but said in the TCEQ filing that "this activity is to repair the propylene refrigerant compressor."

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

MOSCOW (MRC) -- ExxonMobil has put off for a year work on its refinery expansion in Beaumont, Texas. The expansion project is now slated to be online sometime in 2023, versus the original 2022 proposal, reported Chemweek with reference to sources familiar with operations' statement to OPIS.

Bloomberg first reported the delay. ExxonMobil declined to confirm the story, noting that it does not comment on the status of individual projects. The company "is evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term as a result of market conditions caused by the COVID-19 pandemic and commodity price decreases," the company said in a statement.

Oil companies have reduced production and cut back refining runs in response to the drop in demand caused by COVID-19.

In February 2019 ExxonMobil confirmed plans to expand capacity at the Beaumont refinery by more than 65%, or 250,000 b/d. The Beaumont complex currently hosts a 366,000-b/d refinery and chemical, lubricants and polyethylene plants.

The expansion was intended to leverage ExxonMobil’s increased production in the Permian Basin.

In April 2020, however, the company announced that it was cutting its capital budget by 30% and reducing operating expenses by 15% owing to the economic disruption caused by COVID-19 and the subsequent crash in energy prices.

At the time, the company said the largest share of the planned capital spending cuts would be in the Permian Basin and would impact the pace of drilling and well completions. The company also said it would also adjust the timing of expansion plans for some downstream and chemical facilities to slow spending and bring production in line with demand.

As MRC informed before, boiler work at the ExxonMobil-operated 830,000-metric tons/year ethylene plant at Mossmorran, UK, was scheduled for completion in June, 2020. Two of the three boilers at the plant exploded in August 2019, resulting in the plant being taken offline until the end of February. OPIS sources said in May that the plant was currently able to operate at full capacity with two boilers in operation but that the third boiler would be working by June.

We remind that in September 2019, ExxonMobil announced plans to spend GBP140 million over the next two years in an additional investment program at its Fife ethylene plant, which has a capacity of more than 800,000 t/y.

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

MOSCOW (MRC) -- OxyChem, the chemical segment of Occidental Petroleum (Oxy; Houston, Texas) reports second-quarter pre-tax income of USD108 million, down 48% year-over-year (YOY) from USD208 million and 35% ahead of the company’s guidance. Sales totaled USD846 million, down 15% YOY from USD998 million, according to Chemweek.

Pre-tax income during the first quarter totaled USD186 million. Oxy attributes the 42% sequential decline to the negative impact of the COVID-19 pandemic on product demand. “Operational spending at various facilities was lower in the second quarter, offset by softening realized domestic and export (polyvinyl chloride - PVC) prices and volumes,” says the company.

Looking ahead, the company expects OxyChem to turn in pre-tax income of about USD145 million during the third quarter, down 30% YOY from USD207 million, and annual pre-tax income of USD550-600 million, versus USD799 million in 2019. Oxy has also lowered its projected capital spending in the segment to USD0.2 billion, down from original guidance of USD0.3 billion.

OxyChem is a major producer of chlor-alkali and vinyls.

Oxy’s overall net income for the quarter came to a loss of USD8.4 billion, and an adjusted loss of USD1.6 billion. Net sales totaled USD2.9 billion, down from USD4.5 billion in the year-ago period. Conditions were particularly difficult for the oil & gas segment, which reported a pre-tax loss of USD7.7 billion, down from income of USD153 million in the year-ago period, and sales of USD2.0 billion, down from USD2.7 billion. The results included pre-tax impairment charges of USD4.3 billion for unproved domestic onshore acreage, USD1.2 billion for proved domestic onshore and Gulf of Mexico oil and gas properties and USD0.9 billion for international assets.

As MRC reported previously, OxyChem, the chemical division of Occidental Petroleum, conducted a seven-day turnaround at its PVC plant in Pasadena, Texas, USA, in April, 2020. This plant's production capacity is 1 million mt/year.

According to MRC's ScanPlast report, Russia's overall PVC production reached 557,000 tonnes in the first seven months of 2020, up by 1% year on year. Only three Russian producers managed to increase their output.

Occidental Petroleum Corporation (OxyChem) is a California-based oil and gas exploration and production company with operations in the United States, the Middle East, North Africa, and South America. Oxychem is Oxy"s Texas-based subsidiary which manufacture polyvinyl chloride (PVC) resins, chlorine and caustic soda used in plastics, pharmaceuticals and water treatment chemicals.
MRC