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Petchem companies face turbulent Q1 earnings as uncertainties, volatility persist

by Başak Ceylan -
  • 09/05/2023 (07:56)
The first quarter of 2023 has been a turbulent period for petrochemicals companies, with most seeing declines in profits while a few managed to beat market expectations. The decline in profits for companies such as SABIC, Dow and TotalEnergies was attributed to various factors, including ongoing global economic uncertainties, volatile prices, lower demand and market uncertainties.

On the other hand, Chevron and ExxonMobil managed to increase their net profit in Q1, primarily driven by earnings from refining.

SABIC saw an 89.8% year-on-year drop in profit for Q1 2023 due to falling global sales prices and volumes. The quarterly net income was SAR660 million ($176 million), down from SAR6.47 billion ($1.72 billion) in the same quarter last year. CEO Abdulrahman Al-Fageeh said the company would monitor global market demand and continue to control costs. The company also stated that it expects margins to remain under pressure in Q2 2023.

Chevron Corp, one of the world’s largest oil majors, surpassed market expectations as its profit rose in the first quarter. The company reported a net profit of $6.57 billion, up 5% from the previous year. Earnings from refining compensated for the decline in energy prices as well as oil and gas production. Chevron’s refining business performed exceptionally well, with higher margins helping income surge more than five-fold to $1.8 billion.

Sinopec, the Chinese state-run energy company, reported a net profit of CNY20.1 billion ($2.90 billion) in the Q1 of 2023, down 11% from the previous year. However, the total chemicals sales volume was 20.69 million tons, a marginal increase of 0.2% year on year.

LyondellBasell Industries reported a Q1 2023 profit of $474 million, down 64.1% from the year-ago quarter. Q1 net sales were $10.25 billion, down 22.1% year-on-year. The Olefins & Polyolefins – Americas EBITDA fell 42.4% year-on-year due to lower margins, and the Olefins & Polyolefins – Europe, Asia, and international segment recorded EBITDA of $77 million, down from $214 million recorded last year.

ExxonMobil’s first-quarter financial results demonstrated a significant increase in profits that surpassed expectations, and more than doubled from the previous year’s quarter. This achievement was primarily due to the rise in oil and gas output, which compensated for the decline in energy prices from elevated levels. The company’s earnings reached $11.43 billion, compared to $5.48 billion in the same period the previous year.

Dow Chemicals reported a net loss of $73 million in the first quarter of 2023, in contrast to profits of over $1.5 billion in the same period a year ago. This loss is due to the petrochemical industry’s ongoing struggles amid a "challenging" macroeconomic environment.

Eni’s Q1 2023 adjusted profit before tax was €5.0 billion, a 5% decline compared to the same period in 2022. Versalis, Eni’s subsidiary, was negatively affected by lower demand and market uncertainties, which held back purchase decisions by resellers and continued competitive pressures of products from Middle and East Asia.

TotalEnergies, the French multinational energy company, generated revenues of $62.6 billion in the first quarter, down 8.7% from the $68.6 billion generated in the same period in the previous year. The net operating income was $6,993 million, down 26% from the previous year due to lower commodity prices.

SCG Chemicals, a Thai producer, reported a 62% year-on-year decline in Q1 profit to THB1.36 billion ($40 million) due to a soft reopening of China, a significant export market for the company. SCGC’s revenue from sales registered an increase of +8% q-o-q due to higher product prices and sales volume, while sales dropped by 32% y-o-y.

Repsol, the Spanish oil company, reported a 20% decline in net profit to 1.11 billion euros ($1.23 billion) in the first quarter of 2023 compared to the same period in 2022 due to a decrease in oil and gas prices.

Although it is difficult to predict energy companies’ future performance with certainty as various factors can influence their financial performance, it is likely that petrochemical earnings will continue to face similar challenges in the next quarter. The global economic uncertainties and volatile crude oil prices are likely to persist, and the state of demand for oil and petrochemical products may continue to affect their financial performance.

However, companies with higher exposure to refining, such as Chevron and ExxonMobil, may continue to perform better than others in the sector.
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