Petronas Chemicals cautiously optimistic

KUALA LUMPUR: Petronas Chemicals Group Bhd (PCG), which expects a better market in 2018, aims to perform as well as it did last year despite the heavy turnaround activities planned, said its chairman Datuk Md Arif Mahmood.
“World GDP (growth) is expected at 3.9% this year, so we see demand remaining strong. We will still focus on making sure that we produce and maintain the high utilisation rate. Our utilisation rate last year was 91% and we intend to maintain at least 91% this year,” he told reporters at its AGM today.
Md Arif said margin and demand are expected to remain strong this year. PCG’s margin last year was at 38%, in line with the 31-38% range achieved in the past, while production volume was at a record high of 10.1 million tonnes.
He said maintaining the production level would be a challenge this year due to its turnaround activities but the group will try to perform at least as well as last year. PCG carried out five turnarounds last year and has another five planned this year, with one already completed.
Managing director and CEO Datuk Sazali Hamzah said the market is expected to continue improving this year as oil price recovers in tandem with improving global economy, backed by increasing consumer demand.
“However, we need to be cautious on certain aspects such as increasing protectionism policies as well as market uncertainty. As of the first quarter of 2018, oil and petrochemical price continue to recover and we hope for another positive year for PCG,” he said.
Sazali said PCG aims to at least double its earnings in the next 20 years by expanding its specialty chemicals portfolio, which currently contributes 5% to revenue. The portfolio is envisioned to contribute 15% to revenue in 20 years’ time.
“This strategy will allow us to be less dependent on the fluctuation of crude oil price and also market volatility. This will also allow us to capture higher margin from the higher value associated to the specialty chemicals which is expected to increase the profitability of PCG,” he added.
In order to future-proof its business, Sazali said it will extend its value chain by adding value to its existing basic chemicals to downstream investment in derivatives and specialty chemicals.
It will also build a specialty platform to access technology and market via merger and acquisition, and create optionality for growth via its own research and development and corporate venture capital.
“We have a team now to look at where we want to invest further, in terms of growing the portfolio of the business,” said Md Arif.
PCG will spend RM4.3 billion over the next two years to complete the petrochemical project in the Pengerang Integrated Complex (PIC) development by Petronas. The petrochemical project is 74% completed and scheduled to be operationalised in 2019 while the overall PIC project is 87% completed.
The group will also spend RM600 million in terms of operational capital expenditure, which includes the statutory turnaround activities and maintenance of its facilities.