Latest news with #PetChem
The Star
21-05-2025
- Business
- The Star
Gradual recovery forecast for PetChem
Kenanga Research has cut its projected FY25 and FY26 earnings on lower polyolefin price assumptions. PETALING JAYA: Petronas Chemicals Group Bhd 's (PetChem) valuations appear lofty at the moment and could be vulnerable to any weakness moving forward. Maybank Investment Bank Research (Maybank IB) expects a profit contraction in the financial year 2025 (FY25) due to the consolidation of Pengerang Petrochemical Co's (PPC) losses into PetChem's financials. 'We believe that the worst is not over for the petrochemical sector. 'We deem PetChem's valuations rich at 22 times price-to-earnings ratio (PER) of our revised forecast FY26 earnings per share, given the cyclical nature of the industry and challenging sector outlook,' it said. The PPC registered a wider earnings before interest, taxes, depreciation, and amortisation loss of RM170mil in the first quarter on Pengerang Refining Company's (PRC) unscheduled maintenance, which was extended till June 2025 from March 2025 previously. The research house noted PetChem's recent first-quarter results appeared weak with a core net profit of RM79mil, which it said missed its and consensus' full-year estimates. Compared to its expected forecasts, its financial results were impacted by weaker-than-expected olefins and derivatives product spreads and the operational disruption in Kerteh, Terengganu in the quarter. Maintaining its 'sell' rating, Maybank IB lowered its target price on the counter to RM2.59 from RM3.06 before based on a rolled-over forecast FY26 PER of 15 times from 17.5 times, in line with its five-year mean PER valuation multiples. Meanwhile, Kenanga Research said polyolefin prices remain weak below US$1,000 per tonne due to the weaker near-term demand outlook, although the recent development in the US-China tariff war meant a relief from a potential severe global economic downturn. 'Urea prices are expected to remain firm as China still restricts exports of fertilisers. As for PPC, we do not expect a swift turnaround in profitability as it is uncertain whether its feedstock supply issue will be solved in the near term,' it said. 'In the near term, demand weakness coupled with oversupply will still plague petrochemical prices, but the bottom could be near given lower recession risks,' it added. Kenanga Research has maintained its 'market perform' rating and cut projected FY25 and FY26 earnings on lower polyolefin price assumptions. The research house raised its target price to RM3.40 from RM3.11, rolling forward its valuation to FY26 forecast price to book value of 0.7 times from 0.6 times on the tariff relief.
New Straits Times
21-05-2025
- Business
- New Straits Times
PetChem faces near-term headwinds, recovery likely in second half
KUALA LUMPUR: Petronas Chemicals Group Bhd's (PetChem) earnings are expected to remain subdued in the second quarter of financial year 2025 (2QFY25), with a significant recovery anticipated only in the second half of 2025 (2H25). Urea and methanol prices, which had earlier contributed commendably to the group's performance, have eased going into 2Q25 as earlier supporting factors, including stronger feedstock prices and supply constraints, have gradually dissipated. As such, Hong Leong Investment Bank Bhd (HLIB Research) expects the group's fertilisers and methanol segment to record softer earnings in the coming quarter. The research house also expects the olefins and derivatives (O&D) division to remain under pressure in 2Q25, as ongoing feedstock disruptions at Petrochemicals Company Sdn Bhd (PPC) and utility supply issues in Kertih continue to weigh on the segment's profitability. In addition, polyolefin prices are expected to trend lower, amid a potential demand slowdown triggered by the United States' sweeping tariffs and a recent decline in oil prices that has reduced naphtha feedstock costs. "In light of the operational hiccups in Kertih and PPC, we expect PCG's bottom line to stay depressed in 2QFY25 and will only stage a meaningful recovery in 2H25," it noted. HLIB Research has maintained a 'Sell' call on PetChem, with a lower target price of RM2.50. The firm expects the petrochemical sector to remain challenging on the back of China's aggressive capacity expansion drive, coupled with unexciting demand outlook from the downstream sectors. "Not helping is PCG's PPC operations, which contribute a substantially higher depreciation and interest cost base that is not covered by PPC's negative earnings before interest, tax, depreciation, and amortisation contribution, thus resulting in significant earnings dilution going forward," it said. In line with this, HLIB Research has also lowered its FY25 and FY26 earnings forecasts by 38 per cent and six per cent, respectively, and introduced an FY27 forecast of RM1.8 billion. PetChem recorded subdued 1Q25 core earnings of RM79 million which came in below HLIB Research's and street estimates at five per cent of FY25 forecasts. Core earnings dropped 84 per cent year-on-year (YoY) as O&D business slipped into negative territory. The earnings shortfall was attributed to extensive operational disruptions in the O&D segment, affecting both PPC and Kertih.
The Star
21-05-2025
- Business
- The Star
PetChem dragged by O&D segment amid challenges
PETRONAS Chemicals managing director and chief executive officer Mazuin Ismail. PETALING JAYA: Petronas Chemicals Group Bhd (PetChem) sustained its operational performance with a plant utilisation rate of 94% in the first quarter of 2025 (1Q25), but its bottomline was weighed down by its olefins and derivatives (O&D) segment amid a challenging market landscape. 'To maintain our resilience and competitiveness amid the current industry downtrun, we remain focused on driving excellence. 'Our unwavering comitment to safe and efficient operations across all facilities continues, as we are currently undertaking repair and maintenance activities at several O&D and fertilisers and methanol (F&M) plants,' said PetChem managing director and chief executive officer Mazuin Ismail. He added that the group is closely monitoring the developments with regards to the US tariffs, and assessing their broader implications on overall market dynamics. During the quarter under review, the petrochemicals group recorded a RM18mil net loss, on the back of a revenue of RM7.66bil, which compares to a net profit of RM668mil and revenue of RM7.5bil in the year-ago quarter. The group said in a statement the O&D business had been affected by a utilities supply disruption in Kertih as well as reduced production in Pengerang Petrochemicals Company Sdn Bhd (PPC) due to feedstock unavailability. The segment subsequently reported a loss before interest, tax, depreciation and amortisation of RM43mil, primarily owing to lower contributions from PPC – mainly due to a lower plant utilisation rate and unrealised foreign exchange loss on revaluation of payables. Meanwhile, the group's fertilisers and methanol (F&M) segment saw an improvement in sales and earnings due to stronger product prices, which offset a slight decline in sales volume. 'Tight global supply and robust seasonal demand led to an increase in prices of approximately 13% and 5% for urea and methanol, respectively.' The segment's quarterly revenue rose slightly to RM2.5bil while earnings before interest, tax, depreciation and amortisation (ebitda) gained 22% quarter-on-quarter (q-o-q) to RM892mil, driven by improved product spreads. In the specialities segment, revenue rose 19% (q-o-q) to RM1.6bil on higher sales volumes. Ebitda rose to RM52mil on stronger contribution margins and sales volume.
New Straits Times
20-05-2025
- Business
- New Straits Times
PetChem swings to RM18mil net loss on forex impact, despite higher revenue
KUALA LUMPUR: Petronas Chemicals Group Bhd (PetChem) posted a net loss of RM18 million for the first quarter ended Dec 31, 2025, compared to a net profit of RM668 million in the same period last year. In a statement today, PetChem attributed the loss primarily to unfavourable foreign exchange movements. Despite this, the group's revenue rose three per cent year-on-year to RM7.7 billion in the quarter. "This is driven by higher average prices of urea, methanol, and polyethylene as well as improved sales performance in the specialties segment," it said. PetChem said its earnings before interest, tax, depreciation and amortisation (ebitda) rose 26 per cent to RM892 million. The increase was driven by improved product spreads for urea, methanol, methyl tert-butyl ether (MTBE) and olefin derivatives, alongside lower operational costs. The group said its olefins and derivatives (O&D) segment managed to recover from utilities supply disruptions that affected several plants in Kertih, as well as reduced production at Pengerang Petrochemicals Company Sdn Bhd due to feedstock unavailability. "These external issues, combined with the limited uplift in product prices amid industry oversupply, resulted in the O&D segment recording a 4 per cent decrease in quarterly revenue to RM3.5 billion," it said. Managing director and chief executive officer Mazuin Ismail said the improvement in ebitda reflects the group's ongoing efforts on operational excellence with commendable plant utilisation rate achieved by its commodities business. Moving forward, Mazuin said the group will closely monitor these developments and assess broader implications on the overall market dynamics. "To maintain our resilience and competitiveness amid the current industry downturn, we remain focused on driving excellence. "Our unwavering commitment to safe and efficient operations across all facilities continues as we are currently undertaking repair and maintenance activities at several O&D and F&M plants. "At the same time, we are strengthening customer relationships to better meet their evolving needs, while upholding strict financial discipline and prudent capital spending," he added.
