KUALA LUMPUR (Nov 25): Petronas Chemicals Group Bhd's (PetChem) net profit slipped by 3.5% year-on-year for the third quarter ended Sept 30, 2022 (3QFY2022) as margin came under pressure from higher operating costs.

Net profit fell to RM1.895 billion for 3QFY2022 from RM1.96 billion a year ago, despite a 22% growth in revenue to RM7.03 billion from RM5.78 billion, due to higher product prices supported by elevated crude oil prices amid the Russia-Ukraine conflict and stronger US dollar.

“While the stronger US dollar boosted our revenue, we faced margin pressure as a result of higher operating costs,” said PetChem’s managing director and chief executive officer Mohd Yusri Mohamed Yusof.

About 70% of the group’s production volume is exported within the Asia Pacific region, of which Southeast Asia makes up approximately 40%.

The petrochemical group also recorded a higher plant utilisation rate of 97% for the quarter under review, versus 94% in 3QFY2021, mainly due to lower plant maintenance and statutory turnaround activities resulting in higher production and sales volumes.

Nonetheless, PetChem still recorded an 11% growth in net profit to RM5.84 billion for the cumulative nine-month period (9MFY2022), from RM5.29 billion in the previous corresponding period, while revenue grew 26% to RM20.25 billion from RM16.05 billion.

Going forward, the group anticipates product prices for olefins and derivatives to be moderate on weak demand due to lower downstream margin and high inflation.

Having said that, PetChem expects fertiliser and methanol product prices to be stable, supported by limited supply.

“We are seeing softened demand, particularly for polymer products, as high cost of energy persists amid extended Covid-19 lockdowns across China.

“Having declined to 2021 levels in recent weeks, the prices of olefins and derivatives are expected to moderate further until the easing of restrictions in China,” said Mohd Yusri.

However, he expects urea prices to remain high between US$550 per tonne and US$700 per tonne as energy prices remain elevated due to the ongoing Russia-Ukraine war.

Commenting on the fire incident in late October at Pengerang Integrated Complex (PIC), Mohd Yusri said it was not broken out within PetChem’s petrochemical facilities and currently no damage has been found.

“However, due to the integrated nature of PIC, the petrochemical facilities have been temporarily shut down and will resume its operations once all considerations and requirements are met,” he said.

At the time of writing, PetChem eased one sen or 0.1% to RM9.05 per share, giving it a market capitalisation of RM72.4 billion.