Mesaieed Petrochemical Holding Company (MPHC) on Sunday announced a net profit of QR269 million for the three-month period ended 31 March 2023, representing a decline of 39% compared to 1Q-22.
Macroeconomic climate wavered during the first quarter of 2023, marked by several factors carried forward from last year which affected the commodity markets, including geopolitical conflicts, and recessionary fears linked to inflation related pressures and higher interest rate environment. Additionally, China’s slow paced post-COVID recovery phase, along with a recent fall in natural gas prices is bringing an additional layer of uncertainty to the commodity markets.
On overall, commodity prices for MPHC’s basket of products declined on a year-on-year basis, following last two year’s significantly high price environment mainly due to cautious approach from buyers amid macro-headwinds, coupled with comparatively lower energy prices. However, prices improved to an extent versus 4Q-22, mainly on the back of relatively better supply-demand dynamics.
MPHC’s operations continue to remain robust and resilient with total production for the current period reaching 239 thousand MTs. Production for 1Q-23 slightly declined versus 1Q-22, mainly due to a maintenance turnaround carried out at QVC facilities during 1Q-23 which affected production volumes for 1Q-23.
On a quarter-on-quarter basis production volumes for 1Q-23 declined by 17% in comparison to 4Q-22, mainly due to a decline noted in production volumes from chlor-alkali segment, linked to maintenance turnaround.
MPHC reported a net profit of QR 269 million for the three-month period ended 31 March 2023, down by 39% compared to the last year. This decline in profitability was mainly linked to lowered Group revenue, which declined by 26% and reached QR 721 million.
Decline in Group revenue was mainly linked to the decrease noted in average blended product prices, which declined by 21% compared to 1Q-22, translating into a decline of QR 224 million in MPHC’s current period net earnings as compared to the same period of last year. Subdued product demand amid macroeconomic headwinds, along with excess supply resulted in lowered commodity prices.
Sales volumes also declined by 6% versus 1Q-22, mainly driven by lowered sales volumes reported by the chlor- alkali segment, being partially offset by higher volumes reported by the petrochemicals segment. Negative movement in sales volumes translated into a decline of QR 32 million in MPHC’s 1Q-23 net earnings versus the same period of last year.
EBITDA for the current period amounted to QR 372 million with a decline of 31% versus 1Q-22, mainly due to lower revenue. EBITDA margins for 1Q-23 reached 52% versus 56% achieved during 1Q-22.MPHC’s bottom-line profitability declined by 9% versus 4Q-22, mainly due to lowered revenue where a decline of 16% was noted on a quarter-on-quarter basis.
Decline in revenue was mainly linked to lowered sales volumes which decreased by 20% versus 4Q-22, as production volumes declined mainly linked to maintenance turnaround in Chlor-alkali facilities. Lower sales volumes contributed QR 169 million negatively to the MPHC’s net earnings on a quarter-on-quarter basis.
On the other hand, selling prices increased by 5%, mainly on the back of relatively better supply-demand dynamics. This positive movement in selling prices led to a positive contribution of QR 36 million to MPHC’s net earnings for 1Q-23 in comparison to 4Q-22.
Positive variance in others is mainly relating to lower variable costs which decreased substantially due to significant decrease in volumes.
Liquidity remained robust with cash and bank balances standing at QR 3.5 billion as at 31 March 2023. Decline in cash and bank balances was mainly due to dividend payment for the financial year 2022, being partially offset by positive cash flow generation during 1Q-23. Total assets as at 31 March 2023 amounted to QR 16.8 billion and total equity amounted to QR 16.3 billion.
Segmental performance analysis – 1Q-23 vs 1Q-22 Petrochemicals segment reported a net profit of QR 225 million for the current period, down by 9% versus 1Q-22.
This decline in profitability was primarily driven by higher operating cost linked to higher production and higher sales volumes leading to unfavourable inventory movements.
Segment’s revenue was lower by 1% to reach QR 586 million for 1Q-23 versus 1Q-22, as lowered selling prices being entirely offset by higher sales volumes.
Growth in sales volumes was mainly linked to higher production which increased by 30%, as the segment carried out a large-scale turnaround at Q-Chem facilities during 1Q-22 which affected segment’s production volumes for last year’s same period. On the other hand, product prices declined by 19%, mainly due to macro-volatilities echoed from last year, which affected current period’s price trajectories for most of the commodities in comparison to the same period of last year.
Segmental performance analysis – 1Q-23 vs 4Q-22 On a quarter-on-quarter basis, segmental profits marginally declined by 1%, mainly linked to decline in segmental revenue which also declined by 12%, mainly on the back of lower sales volumes which was partially offset by slightly higher selling prices.
Selling prices improved by 2% on a quarter-on-quarter basis, as most of petrochemical market product prices increase from their 4Q-22 trough levels, mainly on the back of slightly improved macro-sentiments along with relatively better market dynamics.
On the other hand, sales volumes declined by 13% on a quarter-on-quarter basis, amid lower production. Segmental performance analysis – 1Q-23 vs 1Q-22 Chlor-alkali segment reported a net profit of QR 18 million for 1Q-23, significantly decreased by 91% compared to 1Q-22. Decline in bottom-line profitability was primarily driven by lowered selling prices and sales volumes, which decreased by 43% and 37%, respectively.