PTT Chemical to up overseas focus

The plan is in line with the company's plan to invest more overseas, president and CEO Aditheb Bisalbutr said yesterday.

"Domestic investment contains a number of limitations, ranging from environment, the difficulty in acquiring new land and low revenue growth," he said.

At present, the overseas market contributes 20 per cent or Bt20 billion of the company's revenue.

PTT Chemical has several investment projects worth about Bt700 billion in its five-year plan starting this year. The plan aims to enhance its competitiveness in the petrochemical business, ensure sustainable long-term growth and stabilise overall margins.

"We want to reduce the risk from the downturn of petrochemicals, which is expected to be from next year until 2011. We have to seek synergy by focusing on overseas investment," Aditheb said.

The company will enter into more downstream petrochemical products through mergers and acquisitions.

"We have to find investments in downstream petrochemical products to fulfil our global plan," he said.

PTT Chemical recently agreed to acquire a 50-per-cent stake in Cognis Oleochemicals, a deal worth Bt5.5 billion, from German chemicals-maker Cognis. Malaysia-based Cognis Oleochemicals is a producer and distributor of various types of basic oleochemicals and speciality oleochemicals such as fatty acids, fatty alcohol and glycerin.

Aditheb said the deal would be the first step in proving that PTT Chemical is ready to invest overseas. The acquisition will be completed this month and the firm will realise revenue from Cognis's investment in the last quarter.

The company forecasts the acquisition will boost revenue this year to Bt100 billion, up from the previous expectation of Bt99.7 billion. That would represent revenue growth of 15 per cent from Bt77.11 billion last year. PTT Chemical forecasts similar growth in the next two years.

PTT Chemical has the advantage of low gas feedstock costs compared with naphtha-based producers. However, the increasing gas price is eating into its profit in the second half of this year, so its net profit is expected to be similar to last year's at Bt19.16 billion.

Kiatnakin Securities said in its research that the increased cost of purchasing gas from PTT, lower product spreads from new supply and a lower utilisation rate would cause the company's second-half earnings to be weak. PTT Chemical's revenue will be weak until 2010.

The securities house revised down PTT Chemical's net profit this year by 4.3 per cent, from Bt16.99 billion to Bt16.3 billion, and revised down net profit next year by 14.2 per cent, from Bt16.06 billion to Bt14.06 billion.

Kiatnakin has underweight views of the petrochemical industry because the industry is facing a slowdown in demand in line with the global economy, while the influx of new supply in 2009 and 2010 will pressure product prices.