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Tribune News Network
Doha
The Mesaieed Petrochemical Holding Company (MPHC) on Wednesday reported a net profit of QR330 million for the first nine months of the year. Compared to the same period last year, the profit is down 33 percent.
The same period saw the petrochemical major bring in revenues of QR1.6 billion (assuming proportionate consolidation), down 29 percent, compared to the same period last year.
MPHC recorded earnings per share (EPS) of QR0.026 for the nine months period ended September 30, 2020, as compared to QR0.039 for the same period last year.
Despite challenging macroeconomic conditions, company maintained a robust liquidity position with closing cash and cash equivalents at QR1.6 billion as at September 30, 2020. Its total assets stood at QR15.9 billion at the end of the first nine months of the year.
“Despite distressed market conditions, we remained resilient and continued to implement our business strategy to contain cost and specifically implemented OPEX and CAPEX optimization measures in order to negate the challenges arising out of the pandemic and weaker economic environment,” MHPC Chairman Ahmad Saif al Sulaiti said.
“During this year, we successfully implemented our planned turnarounds within the defined timelines and budget,” he added.
In response to contain the pandemic situation, Sulaiti said the company continued to ensure safety of its employees and spur business continuity.
“Our marketing partner worked diligently while closely monitoring the evolving situation and acted prudently to minimize the disruptions to our supply chain.
“Looking ahead, we are well positioned to solidify our market position with a focus on generating improved shareholder returns, through leveraging our competitive advantages together with our flexibility in operations and diversified portfolios, with a leaner cost base.”
During the year, macroeconomic headwinds continued to weigh on the group’s business performance amid slower GDP growth, weaker crude oil environment and trade frictions.
This negative environment was further deteriorated with the outbreak of COVID-19, which had unfavourable effects on consumer and industrial demand due to lockdowns implemented across all the major markets. This led to an increased pressure on MPHC’s product prices, and negatively affected the group’s year-to-date performance.
MPHC responded by leveraging its inherent strengths — its competitive advantage of having uninterrupted, long-term access to competitively priced feedstock, low operating cost base, stronger liquidity position, and its sales and marketing partnership with a leader in chemical product marketing and distribution which improved Group’s access to global markets.
In the current distressed situation, the dedicated sales and marketing team was able to provide MPHC wider access to geographies in the most competitive means and thereby limiting the impact of such vulnerabilities and creating several arbitrage opportunities, including successful identification of new markets to divert volumes effectively and working closely with partners, customers and other government agencies so as to ensure production, operations and supply chain activities remained uninterrupted.
The operational performance for the nine months period ended September 30, 2020, was also impacted by the planned turnaround and preventive maintenance shutdowns implemented in certain MPHC’s joint venture facilities, which caused the production volumes to decline, by 12 percent as compared to the same period last year, to reach 729,000 MT.
These preventive maintenance programs are essential to ensure HSE standards, plant life, quality assurance and reliability to maintain long-term operational efficiency targets leading towards optimum plant performance. Also, there were no plant stoppages due to any demand related reasons, nor, were there any changes to the planned maintenance timelines, amid COVID-19 spread. All of the facilities successfully completed their respective planned turnarounds within their planned timelines, with lower than budgeted CAPEX and operating expenditures.
The financial performance was impacted by current global macroeconomics, including unprecedented adversities amid COVID-19 outbreak.
These external forces, outside group’s control, exerted pressure on the product prices, and witnessed a decline by 20 percent year-on-year basis.
Group’s sales volumes declined by 11 percent, versus 9M-19, driven by a combination of reasons including lockdowns of key market geographies, weaker demand and lower production due to periodic planned maintenance shutdowns.
The decline in selling prices and sales volumes, on a combined basis, contributed to a decrease of QR659 million in the net profits for the nine months period ended 30 September 2020, as compared to the same period last year.
The group continued to benefit from the supply of competitively priced feedstock, under long-term supply agreements. These contracting arrangements are an important value driver for the Group’s performance in a competitive market environment. The feedstock cost savings on account of lowered unit prices and volumes contributed QR136 million to the bottom-line earnings of the group for the nine months period ended 30 September 2020, as compared to the same period last year.
Current year profitability was also impacted by excess tax payment over provision in Q-Chem II for 2019, recorded during Q2-20, amounting to QR 37 million, which contributed positively to the bottom line profitability.
Compared to the previous quarter of 2020, the group’s revenue and net profits increased 36 percent and 150 percent respectively.
The recovery was mainly attributed to the improved product prices in the current quarter. This sequential increase in prices across key products was noted on the back of crude price recovery, supply shortages due to back-to-back hurricanes in the US causing disruptions for many producers and an overall deferral of new capacity additions amid uncertainties as a result of the spread of COVID-19 pandemic. On the demand side, recent recoveries were evident amid continuous unprecedented stimulus and lifting of lockdown in major markets. Operating costs also have generally declined in line with the optimization initiatives implemented across the Group. Production volumes also improved during the quarter, as there were no major shutdowns during the quarter.
The gradual recovery of the global economy that began during later part of Q2-20 is factored in the Group’s financial and operational performance with notable price recoveries in Q3-20. However, the risk of COVID-19 pandemic has not been fully eradicated, which may hamper these early signs of recoveries.
Cost optimization
Given the current sluggish market and macroeconomic outlook due to the spread of COVID-19 pandemic, in the start of the year, MPHC kicked off several cost optimization initiatives, where the producing entities reviewed its operating expenditures and identified OPEX which are non-critical. These measures included optimizing human capital structure revisions, reducing direct costs in relation to utilities and maintenance, reducing non-production related expenditures including corporate and administrative expenses. Similarly, the producing entities reviewed their respective CAPEX programs across and identified expenditures that can either be avoided or deferred, while ensuring HSE standards remained buoyant.
Operational highlights
Petrochemicals:During the nine months period, the segment reported total revenue of QR1.2 billion, a decrease of 30 percent from 9M-19. Net profit amounted to QR237 million, with a decline of 66% compared to the same period last year. Revenue and earnings were impacted by a drop in sales volumes by 13% and selling prices by 20%.
The reduction in sales volumes was primarily due to the planned periodic turnaround of QChem-II facilities during Q1-20, while decline in selling prices was attributed to softening demand for petrochemical products arising from the current macroeconomic backdrop. Production volumes dropped by 13 percent compared to 9M-19.
Chlor-alkali segment: Segment revenue for 9M-20, declined by 25% compared to 9M-19, to reach QR377 million. The decline in revenue was due to lowered sales volumes which declined by 8 percent and selling prices by 19 percent, compared to the same period last year. Sales volumes fell due to the planned shutdown of the facilities in Q1-20 and non-availability of access to the core markets for Chlor-Alkali products, due to COVID-19 lockdowns in the first part of Q2-20. For such period, the segment continued with the production, and built inventories by holding bulk liquids via floating storage. The decline in selling prices was mainly due to the adverse macroeconomic sentiments, causing supply-demand imbalances leading to negative effects on the commodity prices.
During 9M-20, the segment reported a net profit of QR 42 million, with a decline of 70% from 9M-19 mainly attributable to the overall drop in revenue, whileproduction volumes dropped by 10% due to the periodic planned shutdowns.Earnings call
MPHC will host an IR earnings call with investors to discuss its nine-month 2020 results, business outlook and other matters on November 3, 2020 at 1:30 pm. The IR presentation that accompanies the conference call will be posted on the publications page of MPHC’s website. (TNN)
Doha
The Mesaieed Petrochemical Holding Company (MPHC) on Wednesday reported a net profit of QR330 million for the first nine months of the year. Compared to the same period last year, the profit is down 33 percent.
The same period saw the petrochemical major bring in revenues of QR1.6 billion (assuming proportionate consolidation), down 29 percent, compared to the same period last year.
MPHC recorded earnings per share (EPS) of QR0.026 for the nine months period ended September 30, 2020, as compared to QR0.039 for the same period last year.
Despite challenging macroeconomic conditions, company maintained a robust liquidity position with closing cash and cash equivalents at QR1.6 billion as at September 30, 2020. Its total assets stood at QR15.9 billion at the end of the first nine months of the year.
“Despite distressed market conditions, we remained resilient and continued to implement our business strategy to contain cost and specifically implemented OPEX and CAPEX optimization measures in order to negate the challenges arising out of the pandemic and weaker economic environment,” MHPC Chairman Ahmad Saif al Sulaiti said.
“During this year, we successfully implemented our planned turnarounds within the defined timelines and budget,” he added.
In response to contain the pandemic situation, Sulaiti said the company continued to ensure safety of its employees and spur business continuity.
“Our marketing partner worked diligently while closely monitoring the evolving situation and acted prudently to minimize the disruptions to our supply chain.
“Looking ahead, we are well positioned to solidify our market position with a focus on generating improved shareholder returns, through leveraging our competitive advantages together with our flexibility in operations and diversified portfolios, with a leaner cost base.”
During the year, macroeconomic headwinds continued to weigh on the group’s business performance amid slower GDP growth, weaker crude oil environment and trade frictions.
This negative environment was further deteriorated with the outbreak of COVID-19, which had unfavourable effects on consumer and industrial demand due to lockdowns implemented across all the major markets. This led to an increased pressure on MPHC’s product prices, and negatively affected the group’s year-to-date performance.
MPHC responded by leveraging its inherent strengths — its competitive advantage of having uninterrupted, long-term access to competitively priced feedstock, low operating cost base, stronger liquidity position, and its sales and marketing partnership with a leader in chemical product marketing and distribution which improved Group’s access to global markets.
In the current distressed situation, the dedicated sales and marketing team was able to provide MPHC wider access to geographies in the most competitive means and thereby limiting the impact of such vulnerabilities and creating several arbitrage opportunities, including successful identification of new markets to divert volumes effectively and working closely with partners, customers and other government agencies so as to ensure production, operations and supply chain activities remained uninterrupted.
The operational performance for the nine months period ended September 30, 2020, was also impacted by the planned turnaround and preventive maintenance shutdowns implemented in certain MPHC’s joint venture facilities, which caused the production volumes to decline, by 12 percent as compared to the same period last year, to reach 729,000 MT.
These preventive maintenance programs are essential to ensure HSE standards, plant life, quality assurance and reliability to maintain long-term operational efficiency targets leading towards optimum plant performance. Also, there were no plant stoppages due to any demand related reasons, nor, were there any changes to the planned maintenance timelines, amid COVID-19 spread. All of the facilities successfully completed their respective planned turnarounds within their planned timelines, with lower than budgeted CAPEX and operating expenditures.
The financial performance was impacted by current global macroeconomics, including unprecedented adversities amid COVID-19 outbreak.
These external forces, outside group’s control, exerted pressure on the product prices, and witnessed a decline by 20 percent year-on-year basis.
Group’s sales volumes declined by 11 percent, versus 9M-19, driven by a combination of reasons including lockdowns of key market geographies, weaker demand and lower production due to periodic planned maintenance shutdowns.
The decline in selling prices and sales volumes, on a combined basis, contributed to a decrease of QR659 million in the net profits for the nine months period ended 30 September 2020, as compared to the same period last year.
The group continued to benefit from the supply of competitively priced feedstock, under long-term supply agreements. These contracting arrangements are an important value driver for the Group’s performance in a competitive market environment. The feedstock cost savings on account of lowered unit prices and volumes contributed QR136 million to the bottom-line earnings of the group for the nine months period ended 30 September 2020, as compared to the same period last year.
Current year profitability was also impacted by excess tax payment over provision in Q-Chem II for 2019, recorded during Q2-20, amounting to QR 37 million, which contributed positively to the bottom line profitability.
Compared to the previous quarter of 2020, the group’s revenue and net profits increased 36 percent and 150 percent respectively.
The recovery was mainly attributed to the improved product prices in the current quarter. This sequential increase in prices across key products was noted on the back of crude price recovery, supply shortages due to back-to-back hurricanes in the US causing disruptions for many producers and an overall deferral of new capacity additions amid uncertainties as a result of the spread of COVID-19 pandemic. On the demand side, recent recoveries were evident amid continuous unprecedented stimulus and lifting of lockdown in major markets. Operating costs also have generally declined in line with the optimization initiatives implemented across the Group. Production volumes also improved during the quarter, as there were no major shutdowns during the quarter.
The gradual recovery of the global economy that began during later part of Q2-20 is factored in the Group’s financial and operational performance with notable price recoveries in Q3-20. However, the risk of COVID-19 pandemic has not been fully eradicated, which may hamper these early signs of recoveries.
Cost optimization
Given the current sluggish market and macroeconomic outlook due to the spread of COVID-19 pandemic, in the start of the year, MPHC kicked off several cost optimization initiatives, where the producing entities reviewed its operating expenditures and identified OPEX which are non-critical. These measures included optimizing human capital structure revisions, reducing direct costs in relation to utilities and maintenance, reducing non-production related expenditures including corporate and administrative expenses. Similarly, the producing entities reviewed their respective CAPEX programs across and identified expenditures that can either be avoided or deferred, while ensuring HSE standards remained buoyant.
Operational highlights
Petrochemicals:During the nine months period, the segment reported total revenue of QR1.2 billion, a decrease of 30 percent from 9M-19. Net profit amounted to QR237 million, with a decline of 66% compared to the same period last year. Revenue and earnings were impacted by a drop in sales volumes by 13% and selling prices by 20%.
The reduction in sales volumes was primarily due to the planned periodic turnaround of QChem-II facilities during Q1-20, while decline in selling prices was attributed to softening demand for petrochemical products arising from the current macroeconomic backdrop. Production volumes dropped by 13 percent compared to 9M-19.
Chlor-alkali segment: Segment revenue for 9M-20, declined by 25% compared to 9M-19, to reach QR377 million. The decline in revenue was due to lowered sales volumes which declined by 8 percent and selling prices by 19 percent, compared to the same period last year. Sales volumes fell due to the planned shutdown of the facilities in Q1-20 and non-availability of access to the core markets for Chlor-Alkali products, due to COVID-19 lockdowns in the first part of Q2-20. For such period, the segment continued with the production, and built inventories by holding bulk liquids via floating storage. The decline in selling prices was mainly due to the adverse macroeconomic sentiments, causing supply-demand imbalances leading to negative effects on the commodity prices.
During 9M-20, the segment reported a net profit of QR 42 million, with a decline of 70% from 9M-19 mainly attributable to the overall drop in revenue, whileproduction volumes dropped by 10% due to the periodic planned shutdowns.Earnings call
MPHC will host an IR earnings call with investors to discuss its nine-month 2020 results, business outlook and other matters on November 3, 2020 at 1:30 pm. The IR presentation that accompanies the conference call will be posted on the publications page of MPHC’s website. (TNN)
