KUALA LUMPUR (Nikkei Markets) -- Malaysian petrochemical company Petronas Chemicals Group said Tuesday its second quarter net profit fell 22.3% due to weaker product prices even as its plants ran at full capacity.
Earnings could also remain weak in the coming quarter as product prices stay subdued, while Petronas Chemicals' plant utilization rate is expected to decline due to mandatory maintenance activities, two analysts said.
The average plant utilization could drop from 100% to below 80% due to turnaround activities for the main olefin cracker plant in Terengganu and Petronas Chemical Fertilizer Sabah plant, said AmInvestment Bank Analyst Alex Goh.
Net profit for the three months ended June 30 was 1.12 billion ringgit ($270 million) against 1.44 billion ringgit a year ago, the company said in an exchange filing. Quarterly revenue was 8.4% lower at 4.34 billion ringgit.
Petronas Chemicals, which also makes fertilizers and derivative products, reported a plant utilization rate of 100% for the second quarter mainly due to better performance at its methanol and propane dehydrogenation plants.
"Given the low demand situation coupled with new added capacities and uncertain global trade, the chemicals market is expected to stabilize at current level," Petronas Chemicals Managing Director Sazali Hamzah said in a statement.
The company's plants at Pengerang Integrated Complex are nearly completed at 98.95%, and will be ready for commercial operations by year-end, he said. "The additional capacity and range of new products will complement our ability to serve customers' diverse and growing requirements," he added.
In April, Petronas Chemicals said it had scheduled six statutory plant turnarounds this year but still aimed to maintain a 92% utilization rate for the year. The so-called statutory turnaround activity typically involves shutting down some of its refineries' operations for maintenance or upgrades.
Its plant utilization rate is expected to rebound in the fourth quarter, which could help Petronas Chemicals to achieve its targeted utilization levels of above 90%, similar to 92% in 2018, said AmInvestment's Goh.
Sean Lim, an analyst at Hong Leong Investment Bank, meanwhile, expects weak product prices to continue in the second half of 2019. "We expect product prices to remain flat or improve slightly moving forward, due to lower crude oil prices and oversupply," he said.
Shares of Petronas Chemicals, which have shed more than 20% over the past 12 months, fell 2% to end at 7.24 ringgit, while the benchmark FBM KLCI closed 1.4% down.
-- Gho Chee Yuan and Yimie Yong