PetChem sees loss widening on several ops factors
In addition, it said foreign exchange movements and the utilisation rate of its production facilities, which is dependent on plant maintenance activities and utilities supply, also play a factor.
PetChem said it will continue with its operational excellence programme and supplier relationship management to sustain plant utilisation level at above the industry benchmark.
Releasing its results for the second quarter ended June 30 (2Q25) yesterday, the group suffered a severe downturn in performance, recording a net loss of RM1.08bil, compared to a net profit of RM777mil seen in 2Q24.
Revenue for 2Q25 also edged lower by 16.7% year-on-year (y-o-y) to RM6.44bil.
Cumulatively for the six months ended June (1H25), PetChem saw earnings dip into the red with a net loss of RM1.1bil, compared to the RM1.45bil net profit it charted in 1H24, as turnover declined 7.4% y-o-y to RM14.1bil.
Summarily, the group attributed the weaker 2Q25 performance to lower product spreads and smaller contribution from a joint operation entity due to higher unrealised foreign exchange loss on revaluation of payables, which affected earnings before interest, taxes, depreciation and amortisation (Ebitda), although this was partially offset by lower plant operation costs.
Furthermore, the group said lower product prices, weaker sales volume plus strengthening of the ringgit against the US dollar, as well as remeasurement loss arising from timing adjustment for payment of trade payables, impairment of assets at Perstorp Sdn Bhd, higher unrealised foreign exchange loss on revaluation of shareholders loan to a joint operation entity and higher depreciation and finance costs from a joint operation entity, also affected revenue and profits both for 2Q25 and 1H25.
For context, Perstorp is a wholly-owned subsidiary of PetChem that specialises in the producing and supplying of waste handling systems. Compared with 1Q25, revenue was lower by 15.9% from RM7.66bil, while net loss widened considerably from a loss of RM18mil.
Chief executive and managing director at PetChem Mazuin Ismail commented that 2Q25 had presented several operational challenges both internal and external, that impacted PetChem's plants' performance.
'Notably, internally, we proactively shut down PC Ethylene Sdn Bhd for vessel wall rectification without significantly affecting our commitments to customers.
'We also made the decision to proactively scale back operations at PC Aromatics Sdn Bhd due to unfavourable economics,' he said.
On the external front, he said the group's plant at PC Fertiliser Kedah Sdn Bhd was affected by the feedstock supply disruption following the gas pipeline incident at Putra Heights on April 1, before pointing out that the disruption has been resolved, and operation has been fully restored in June.
Addressing growth, Mazuin said: 'The commodities market remains challenging amid persistent oversupply and ongoing trade as well as geopolitical tensions. Nevertheless, demand continues to grow, particularly in Asia, driven by population and urban growth.
'Our Pengerang facility, built to support this growth, is currently operating to meet the Creditors Reliability Test by year-end.'
Commenting on strategy, he said in light of the increasingly dynamic market environment, PetChem is undertaking strategic portfolio review across its entire value chain.
Anticipating further increase in operating costs and substantial capital requirements, the group recorded an impairment loss on assets at Perstorp.
Mazuin noted: 'Although we faced market and operational challenges during the quarter, our financial position remains robust. Furthermore, our value creation and cost optimisation initiatives have led to more than RM200mil improvement in Ebitda on a year-to-date basis.
'This has enabled us to declare an interim dividend of RM240mil, which underscores our ongoing commitment to our shareholders in delivering sustainable long-term value.'
Looking ahead, while market conditions remain challenging, he said PetChem remains confident that its strong fundamentals, combined with the initiatives currently underway will continue to strengthen its resilience.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Free Malaysia Today
3 days ago
- Free Malaysia Today
Petronas Chemicals drops 11% after RM1bil loss in Q2
Petronas Chemicals suffered its largest quarterly loss since listing with a RM1.08 billion net loss in Q2 FY2025. (Bernama pic) PETALING JAYA : Petronas Chemicals Group Bhd's (PCG) shares tumbled 11% today after posting its largest quarterly loss since its listing in 2010, at RM1.08 billion for the second quarter ended June 30 (Q2 FY2025). The integrated chemicals producer, which posted a RM777 million net profit a year ago, saw its earnings affected by lower product margins, huge unrealised foreign exchange losses, and asset impairments. The stock fell as much as 44 sen or 11% to RM3.52 in the afternoon session, following the release of its Q2 financial results. It managed to pare its losses to close 36 sen or 9.1% lower at RM3.60, valuing the group at RM28.8 billion. It was the 11th most active stock on Bursa Malaysia with 26.4 million shares traded. Year to date, the stock has fallen nearly 26%. Revenue for Q2 fell 16% year-on-year to RM6.4 billion, impacted by lower sales volumes and product prices, reduced revenue from joint operations and the ringgit's appreciation against the US dollar. For the first six months of FY2025, the Petronas Group's chemical arm posted a cumulative net loss of RM1.1 billion from a net profit of RM1.45 billion in the same period last year. Revenue for the first half fell 7.4% to RM14.09 billion from RM15.23 billion last year. Earnings before interest, tax, depreciation and amortisation (Ebitda) fell 56% to RM395 million, mainly due to weaker product spreads and reduced contribution from Pengerang Petrochemical Company Sdn Bhd (PPCSB). Forex losses widened to RM446 million from RM62 million a year earlier, largely due to the unrealised forex impact from the revaluation of shareholder loans to PPCSB. The group also recognised RM431 million in impairment losses on property, plant and equipment within its specialities segment, primarily at its Swedish unit Perstorp, which it acquired for RM7.31 billion in 2022. PCG's plant utilisation rate dropped to 77% from 94% in the previous quarter, as feedstock supply disruptions and repair and maintenance works impacted production. Among the affected facilities was PC Fertiliser Kedah, which faced feedstock shortages due to the gas pipeline incident at Putra Heights, which was fully resolved as of June 2025. Strategic portfolio review The disappointing results has prompted the group to intensify its business review, cut costs and resize its workforce. In a statement, the company also said it was reassessing investments in joint ventures and associates. Mazuin Ismail. Managing director and CEO Mazuin Ismail said in light of the increasingly dynamic market environment, PCG is undertaking a 'strategic portfolio review across our entire value chain'. 'Although we faced market and operational challenges during the quarter, our financial position remains robust. 'Furthermore, our value creation and cost optimisation initiatives have led to more than RM200 million in improvement in Ebitda on a year-to-date basis. This has enabled us to declare an interim dividend of RM240 million,' he said in a statement. The group declared a first interim dividend of three sen per share, down from 10 sen in the same quarter last year, payable in September.
The Star
3 days ago
- The Star
Challenging road ahead seen for PetChem
PETALING JAYA: Petronas Chemicals Group Bhd (PetChem) is facing a challenging path to recovery in the second half of this year (2H25). Analysts covering the company remain cautious despite expectations of operational improvements following a tough second quarter. While plant utilisation is expected to normalise and losses from joint-venture subsidiary Pengerang Petrochemical Co Sdn Bhd (PPC) could narrow, research houses see the broader petrochemical market outlook as subdued, weighed down by oversupply and weak demand across key markets. Maybank Investment Bank Research (Maybank IB Research) said the worst was likely over in the second quarter of the year (2Q25) due to company-specific issues such as unplanned downtime in Pengerang Refining Co Sdn Bhd and PPC in Johor and feedstock disruptions at a plant in Kedah. However, the research house cautioned that PetChem's valuations are rich and lofty at 32 and 21 times estimated earnings for 2025 and 2026, respectively, given the cyclical nature of the industry in a still challenging sector outlook. 'We reiterate our bearish view on the olefins and derivatives subsector due to the ongoing regional oversupply glut, mainly from China,' Maybank IB Research said. It maintained its 'sell' call on PetChem, with an unchanged target price of RM2.59. TA Research slashed its 2025 to 2027 earnings forecasts for PetChem by between 35% and 42%, citing weaker O&D spreads, continued foreign exchange headwinds and sustained losses at PPC. 'Persistent oversupply in polyethylene and monoethylene glycol markets and soft downstream demand are expected to keep overall margins under pressure,' the research house said. TA Research downgraded its recommendation on PetChem to 'sell' from 'hold' and cut its target price for the counter to RM3.51 from RM4.11 previously. Hong Leong Investment Bank Research (HLIB Research) said PPC's utilisation rate has reached about 80% to 90% since commencing its creditor reliability test on June 26, with losses narrowing slightly quarter-on-quarter. However, it said: 'We expect PPC to remain loss making due to subdued product prices amid persistent regional oversupply, weak downstream demand across key end markets, and sustained margin compression from unfavourable paraxylene–naphtha spreads.' The speciality-chemicals segment is also expected to be weighed down by weak residential construction demand, rising costs and oversupply, with further impairments possible if market conditions remain soft. HLIB Research reiterated 'sell' call on PetChem, with a lower target price of RM2.18, compared with RM2.50 previously. CIMB Research trimmed its 2025 to 2027 earnings estimates for PetChem by up to 11.8% following weaker-than-expected results from operational disruptions and extended downtime. 'We anticipate a material recovery in 2H25, supported by the normalisation of operations and the absence of major unplanned outages,' it said, expecting PPC's losses to narrow. The group is awaiting regulatory approval to defer the turnaround of its second cracker in Kertih to 2Q26, which could optimise output later this year. Nonetheless, the research house flagged that subdued global demand and new US tariffs may further dampen sentiment in export markets. CIMB Research kept its 'hold' rating on PetChem, but cut its target price to RM3.45 from RM3.53. Meanwhile, Kenanga Research reduced its 2025 to 2026 earnings forecasts by 75.3% and 40.1%, respectively, driven by larger speciality-segment losses and lower fertilisers and methanol plant utilisation. While noting signs of bottoming polyolefin prices and PetChem's strong balance sheet, it said PPC's ramp-up is still a concern due to feedstock supply disruption, and polyolefin price recovery remains uncertain. Kenanga Research trimmed its target price for PetChem to RM3.36 from RM3.40, while maintaining its 'market perform' call on the counter. PetChem posted a net loss of RM1.08bil in 2Q25 compared with a RM777mil profit a year earlier, as revenue fell 16% year-on-year to RM6.44bil. In the first half, it recorded a net loss of RM1.1bil against a RM1.45bil profit in the same period last year.
New Straits Times
4 days ago
- New Straits Times
PetChem faces ongoing oversupply, HLIB cuts earnings forecast
KUALA LUMPUR: Petronas Chemicals Group Bhd is expected to continue facing an oversupply environment, with muted downstream demand putting pressure on ethylene prices. Hong Leong Investment Bank Bhd (HLIB) said the group's specialty segment is also likely to be weighed down by weak residential construction demand, rising costs, and persistent oversupply. "The creditor reliability test for Pengerang Petrochemicals Company Sdn Bhd (PPC) commenced on June 26, with the plant currently operating at a utilisation rate of around 80–90 per cent. "Quarterly losses before interest, taxes, depreciation and amortisation at PPC narrowed slightly in the second quarter of 2025, improving from RM140 million to RM135 million. "Ongoing impairment testing could further result in asset write-downs if market conditions fail to improve, reflecting lower projected cash flows and diminished asset recoverable values," it added. As such, HLIB slashed its financial year 2025 (FY25), FY26 and FY27 forecasts by 43 per cent, 27 per cent, and 20 per cent, respectively, factoring in lower plant utilisation and sales volumes for the olefins and derivatives segment. The firm expects the segment to remain loss-making due to subdued product prices amid persistent regional oversupply, weak downstream demand, and continued margin compression from unfavourable paraxylene–naphtha spreads.
