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Oil and petchem companies’ earnings hit by falling margins in 2019

by Başak Ceylan - bceylan@chemorbis.com
  • 11/02/2020 (13:20)
During a time of weaker selling prices and a global slowdown in economic growth, the world’s leading oil and petrochemical companies have so far reported underwhelming profits. Many producers struggled to remain profitable during the final quarter of 2019, and the financial results from several have pointed towards major losses.

In the Middle East,

Saudi Kayan’s fourth-quarter loss widened to SAR167 million ($45 million), against a net loss of SAR110 million ($29 million) in the same quarter of the previous year. The widened loss for the final quarter was driven in part by the lower selling prices despite higher production and sales.

SABIC, the Middle East’s biggest petrochemicals producer, swung to a loss og SAR72 million ($19 million) in the fourth quarter of last year, down noticeably from a net income of SAR3.22 billion ($858 million) in a year-earlier period.

As was the case with the fellow Saudi producer Kayan, the quarterly net loss was partly attributed to lower selling prices.

In East and Southeast Asia,

In the nine-month period ended on December 31 (which corresponds to the third quarter in Japan’s fiscal calendar), Mitsui Chemical Group’s sales figures were affected by a decrease in sales prices amid lower costs for naphtha and fuel as well as other raw materials.

The Japanese producer’s operating income was also down 29% compared with the same period of the previous fiscal year to 53 billion yen ($483 million), as a result of unfavourable terms of trade.

The producer also said that its performances in PE and PP were impacted as a result of slowing demand for the packaging products.

For the same fiscal period, Mitsubishi Chemicals reported a 32% year-on-year fall in core operating income at 181 billion yen ($1.7 billion). In its petrochemicals segment alone, core operating income was down by more than two-thirds at 2.8 billion yen ($25 million).The company said the recent figures were largely driven by lower raw materials costs.

Over in South Korea, LG Chem’s reported a loss of 57 billion won ($48 million) for the fourth quarter of 2019, compared with a net income of 127 billion won ($107 million) in the same quarter of 2018.

Indian conglomerate Reliance Industries said its petrochemicals profitability was impacted by a significant decline in petrochemical margins amid new capacities, inventory overhang and global demand slowdown. For the third quarter of the Indian fiscal year, Reliance’s revenue from the petrochemicals segment decreased by 19.1% year-on-year to $5.2 billion.

In Europe,

The oil and gas "supermajor” Royal Dutch Shell said its net profit for the fourth quarter plunged by 48% to$2.9 billion. The company said the results reflected weaker economic activity impacting margins, particularly in refining, and most certainly in chemicals.

LyondellBasell Industries announced net income for the fourth quarter 2019 of $612 million, down $80 million from a year earlier. The Netherlands-based producer’s intermediate chemicals results also decreased $165 million due to margin declines for all products and reduced volumes.

In the US,

Chevron and ExxonMobil, the two largest energy groups in the US, also revealed weaker performances for the fourth quarter, with the latter reporting its first loss in the chemical division since 1999.

Accordingly, ExxonMobil’s chemicals segment saw a $355 million loss against a $737 million profit in the year-ago period. The downstream segment declined $1.8 billion from the prior-year to $898 million in the final quarter of 2019 while the overall quarter earnings declined 5% from a year earlier to $5.7 billion.

Chevron Corporation reported a loss of $6.6 billion for the fourth quarter of 2019, compared with earnings of $3.7 billion in the fourth quarter of 2018. This marked Chevron’s largest-ever quarterly loss.

Although Trinseo’s fourth quarter net income was $7 million above prior year at $6 million, lower prices, mainly due to the lower raw material costs, resulted in a 13% decrease in net sales. The producer’s net sales of PS were $176 million for the quarter, 26% below prior year mainly due to lower styrene cost and lower sales volume in Europe.

Dow Chemical Company’s total net sales were also down 15% from a year-ago period at $10.2 billion, primarily due to lower local prices in all operating segments amid a decline in global energy prices.
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