Thursday 28 Mar 2024
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KUALA LUMPUR (April 22): Petronas Chemicals Group Bhd (PetChem) is upbeat on better performance this year, on the back of high product prices, stable production and further cost optimisation in the pipeline.

“We are quite optimistic, as we have seen much-improved prices and demand in the first quarter,” said chairman Datuk Md Arif Mahmood.

“If things [go smoothly] with the Covid-19 vaccine roll-out and optimism in economic growth, in this region especially, you should see a better year,” Md Arif told reporters at a virtual press conference after the group’s 23rd annual general meeting today.

Since its record performance in the financial year ended Dec 31, 2018 (FY18), PetChem has seen two consecutive years of decline in profit and bottom line as the industry grappled with low oil prices and stiff competition.

The first quarter has seen rebound in prices across all PetChem products especially olefins, urea and methanol, supported by China-led demand to replenish inventories, as well as the cold snap in the US which curbed supply.

“Moving forward, we believe the trajectory is still strong, but the levels seen in the first quarter will not be sustainable. It may reduce by a bit, but still at a higher range — mainly because of the inventory catch-up,” said PetChem managing director and chief executive officer Datuk Sazali Hamzah.

Prices for olefins — one of PetChem’s main segments — are tied very closely to naphtha, which is in turn tied to crude oil prices.

Things will “look good for the year” if crude prices stay above US$65, the company said. The benchmark Brent crude oil price has been trading above the US$60-per-barrel mark since early February.

On production, it “would be a stretch” for PetChem to achieve its record volume of 10.7 million tonnes per annum (mtpa) seen last year, said Md Arif, as the group has five major plant turnaround activities in the pipeline.

“But the plan for this year’s volume will be close to that number,” he said. PetChem is committed to maintaining utilisation at above 90% amid the turnaround activities.

It is also expecting the commissioning of Pengerang Integrated Complex in the second half of 2021, which will run at 0.7 mtpa initially before increasing to full capacity of 1.8 mtpa by 2022 if the commissioning goes smoothly.

The Pengerang operations will increase production capacity to 14.6 mtpa, from 12.8 mtpa presently, the company said. At full utilisation, it will add around 10% to 15% to the overall revenue, it added. In FY20, PetChem's net profit fell 42% to RM1.63 billion from RM2.82 billion in FY19, while revenue slid 12% to RM14.36 billion from RM16.37 billion.

Meanwhile, the group also expects to generate additional ebitda of RM300 million this year by optimising costs. "This is on top of our KPI target this year," said Sazali. 

"Covid-19 has really taught us how to optimise our costs, and we are going to maintain that and be better in 2021," he added.

At midday break today, PetChem rose 1.54% or 12 sen to RM7.91, valuing it at RM63.28 billion.

Edited BySurin Murugiah
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