Net Profit Forecast
Petronas Chemicals is anticipated to report a net profit of 2.17 billion ringgit ($454.2 million) for 2023, as per data provider FactSet’s survey of analysts. This is a decrease from the MYR6.32 billion profit recorded in 2022. The company posted a net profit of MYR1.58 billion for the first nine months of 2023. Analysts expect fourth-quarter earnings to remain subdued due to soft product spreads.
Revenue Forecast
For the full year, revenue is forecasted to be MYR27.85 billion, a slight decline from MYR28.95 billion in the previous year. However, revenue for the first nine months of 2023 saw a 6% year-on-year increase, reaching MYR21.45 billion.
Key Points to Monitor:
Olefins & Derivatives Insights
Prices of olefins and derivative products remained soft in the final three months of 2023, mainly due to lower downstream demand. Analysts from Affin Hwang Investment Bank noted that the segment could see weaker on-quarter earnings, driven by off-peak demand. However, they also mentioned that reduced regional production might help offset the impact of lower ethylene and polyethylene prices.
Fertilizers & Methanol Market Overview
In contrast, fertilizers and methanol product prices are expected to have stabilized in the fourth quarter, thanks to limited supply in the region. Affin Hwang’s analysts highlighted that regional urea prices have not reacted significantly to uncertainties surrounding China’s fertilizer export restrictions since mid-November. Meanwhile, Citi analysts anticipate that segment profitability could have improved quarter-on-quarter due to higher shipments, steady methanol prices, and stronger ammonia prices.
Foreign Exchange Dynamics
The strength of the U.S. dollar compared to the ringgit in the fourth quarter likely contributed to the company’s profits. The ringgit has been weakening against the greenback in recent months, with 12-month USD/MYR gains standing at 7.7%.
Petronas Chemicals Shares Facing Volatility
Petronas Chemicals shares have seen a rollercoaster ride in recent months, with a substantial 12% decline since October last year. As of now, they are sitting at a 2.8% decrease for the year. This dip in performance is mainly due to the challenging market conditions characterized by weak average selling prices of petrochemical products and subdued demand amidst global economic uncertainties.
Looking Ahead
Despite these challenges, Petronas Chemicals remains resilient and is working towards navigating through these turbulent times. Investors are keeping a close eye on how the company adapts to the changing landscape and strategic decisions it makes to bounce back from this period of volatility.