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Published on August 9, 2007

PTT Chemical has reported a disappointing second-quarter net profit, with earnings down 28.55 per cent year on year due to lower sales revenue. Quarterly consolidated net profit stood at Bt2.94 billion, compared with Bt4.16 billion in the corresponding period last year, according to a filing with the Stock Exchange of Thailand.

However, PTT Chemical stock closed at Bt105 yesterday, up 0.96 per cent on the day.

The company said its sales in the second quarter had dropped from Bt17.18 billion to Bt16.2 billion.

The slump in earnings can also be ascribed to a decrease in its utilisation rate, product-to-feed margin and higher maintenance expenses.

In the second quarter, the olefins utilisation rate of PTT Chemical was 79 per cent, down significantly from 96 per cent a year earlier.

The lower utilisation rate resulted in a 14.1-per-cent year-on-year slump in olefins production volume.

"The reduction in olefins production volume comes from the unplanned shutdown of olefins plant I1 (olefins nameplate capacity of 461,000 tons per annum) for 46 days (May 28-July 12) for equipment maintenance due to its heavy utilisation (104 per cent) in 2006," the company said in a statement.

In addition, PTT Chemical's olefins plant I4-1, which has increased its olefins capacity by 250,000 tonnes per annum under the de-bottlenecking I project since the beginning of the second quarter, could not run at full capacity because it is in the process of fine-tuning the production parameters after the capacity expansion.

The company's maintenance expenses in the second quarter increased by Bt92 million, due to the unplanned shutdown of olefins plant I1.

For the first six months of the year, PTT Chemical saw its net profit fall 34.98 per cent from Bt8.32 billion in the corresponding period a year ago to Bt5.41 billion.

Despite the weak earnings, Kim Eng Securities (Thailand) has maintained its "buy on weakness" recommendation on PTT Chemical's stock, with a fair value estimate of Bt113 per share.

The broker believes PTT Chemical will see recovery in its earnings in the second half, due to an expected rise in sales of olefins after the upgrade of production capacity in the first half.

The production rate should also be running at its peak, as there will be no further shutdowns this year.

The broker forecasts that PTT Chemical will post a Bt15.46-billion net profit this year, down 11 per cent.