PetChem sees 84.% decline in Q2 net profit from compressed margins

PETALING JAYA: Petronas Chemicals Group Bhd’s (PetChem) net profit fell 83.4% to RM186 million for its second quarter ended June 30, 2020 from RM1.12 billion reported previously due to compressed margins and lower interest income generated from fund placement.

Revenue for the period stood at RM3.18 billion, a 26.7% decline from RM4.34 billion reported previously.

According to the group’s Bursa disclosure, its olefins and derivatives segment saw its profit after tax (PAT) decline by 93% to RM31 million.

On the other hand, its fertilisers and methanol segment reported a 71% decline in PAT to RM198 million.

PetChem stated that the overall average prices decreased from the corresponding quarter in tandem with declining crude oil price arising from OPEC+ fallout and softer demand following the global Covid-19 pandemic.

In regards to its prospect ahead, the group noted that its operations are expected to be primarily influenced by global economic conditions as petrochemical products prices have a high correlation to crude oil price, particularly for the olefins and derivatives segment, utilisation rate of its production facilities and foreign exchange rate movements.

It acknowledged that the pandemic continues to have an adverse impact on the global economy PetChem is not spared.

With its olefins and derivatives business, the group anticipates product prices to recover towards the end of the year as downstream demand continues to improve from ease of lockdowns post Covid-19, albeit the increase in product prices is not expected to reach 2019 level.

As for its fertilisers and methanol segment, it expects product prices to remain stable moving towards the year end, as fertiliser demand is less impacted by the pandemic and it is supported by major planting seasons.

Meanwhile, PetChem projected methanol demand to improve gradually with crude oil price recovery and improvement in downstream derivatives demand.

For the six month period ended June 30, 2020, the group’s net profit stood at RM692 million, a 63.9% decline from RM1.92 billion.

The period saw its revenue fell by 16.5% to RM7.07 billion from RM8.47 billion reported previously.

With that PetChem has declared an interim single tier dividend of 5 sen per share, amounting to RM400 million payable on Sept 25, 2020.

source https://www.thesundaily.my/business/petchem-sees-84-decline-in-q2-net-profit-from-compressed-margins-HA3552823