KUALA LUMPUR (Nov 20): Petronas Chemicals Group Bhd (KL:PCHEM) sank into the red on Wednesday for the first time ever since its listing more than a decade ago on paper losses in the third quarter. 

Net loss for the quarter ended Sept 30, 2024 (3QFY2024) was RM789 million, according to an exchange filing. Unrealised foreign exchange loss totalled RM1.1 billion in the quarter, and the company said it would have made an estimated profit after tax of RM352 million without the loss.

A sharp depreciation in the US dollar severely affected its results during the quarter, mainly due to its investment in Pengerang Petrochemical Company Sdn Bhd (PPC), said Petronas Chemicals managing director Mazuin Ismail.

“Operationally, the performance of our core business improved in 3Q as we recorded higher plant utilisation at our Malaysian operations, contributing to higher sales volumes,” he said.

In particular, Petronas Chemicals booked loss on revaluation of payables of RM536 million as PPC, a 50:50 joint venture with Saudi Aramco, mainly conducts its business in US dollar. Petronas Chemicals also had RM492 million loss on USD-denominated shareholders loan to PPC.

There were also foreign exchange losses from other operations amounting to RM86 million.

Revenue, however, rose 18% year-on-year to RM7.99 billion during the quarter from higher sales volume and product prices as well as contribution from PPC. The plant utilisation rate — a measure of actual output compared to total capacity — surged 15 percentage points to 92%.

“It is foreseeable that the start-up of these large-scale capital-intensive assets will have material impact [on] the group’s earnings, which includes currency translation effects that we saw during the quarter,” Mazuin said.

If the US dollar strengthens in 4Q, there will be “partial” reversal of the unrealised losses, he added.

Going forward, Petronas Chemicals said it expects product prices for olefins and derivatives to be soft, due to weak seasonal downstream demand and ample supply amid upcoming new capacity in Northeast Asia.

“Fertiliser and methanol product prices are forecasted to be stable, as key suppliers are focusing on term commitments, while downstream demand remains subdued,” the company flagged.

Petronas Chemicals said it also sees “signs of gradual recovery” in specific end markets for specialties but remains cautious, given the uncertain macroeconomic environment that may delay near-term recovery.

For the cumulative nine-month period of FY2024, net profit contracted 53% year-on-year to RM750 million. Excluding the impact of forex loss, the estimated profit after tax would be RM1.7 billion.

Revenue improved 8% year-on-year to RM23.2 billion as sales volumes grew though product prices were lower over the nine-month period.

The company did not declare any dividend.

Shares of Petronas Chemicals erased all of the early gains following the results announcement when trading resumed at 2.30pm. At its last price of RM4.57, the company is worth over RM36 billion.