Petronas Chemicals Group Bhd (PetChem) reported a challenging third quarter in 2024, swinging to a net loss of RM789 million (approximately S$236.1 million) due to forex losses stemming from its joint venture in Pengerang. Despite revenue growth, currency fluctuations and lower demand in some segments weighed heavily on the company’s financial performance.
Petronas Chemicals Group Bhd, a subsidiary of Malaysia’s national oil company Petronas, faced significant challenges during its Q3 2024 performance. The US dollar’s depreciation against the Malaysian ringgit resulted in a RM789 million loss, reversing a net profit of RM424 million from the same period in 2023. Revenue, however, increased to RM7.99 billion (approximately S$2.39 billion). The forex losses were primarily tied to the Pengerang Petrochemical Company (PPC), a joint venture with Saudi Aramco, underscoring the volatility of exchange rates in major capital-intensive projects.
The forex loss was largely due to PPC’s exposure as a US dollar-functional currency entity. PetChem recorded a RM536 million unrealized forex loss on payables revaluation and a further RM492 million loss linked to US dollar-denominated shareholder loans. Despite these challenges, operational performance showed some resilience, with plant utilization averaging 92% and improved production volumes in its commodities segment.
Over the first nine months of 2024, PetChem’s net profit fell to RM656 million (approximately S$196.5 million), a sharp drop from RM1.58 billion in the same period last year, though revenue rose to RM23.21 billion (S$6.95 billion). PetChem’s specialty chemicals segment experienced lower production and sales due to softened demand amidst heightened product availability.
Looking ahead, PetChem’s CEO Mazuin Ismail highlighted the expected start-up of petrochemical units within PPC at year-end, acknowledging that the scale of operations would materially impact earnings. He noted that a potential rebound in the US dollar during Q4 could partially offset forex losses. However, the company remains cautious about market conditions, especially in the olefins, derivatives, and specialty segments.
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Petronas Chemicals’ challenges serve as a reminder of the risks tied to currency volatility and market dynamics in large-scale projects. Singapore-based investors and businesses interacting with the region’s petrochemical supply chains may need to factor in ongoing macroeconomic uncertainties impacting production and profitability.
Petronas Chemicals faced a Q3 net loss of RM789 million (S$236.1 million), primarily due to forex losses linked to its Pengerang joint venture with Saudi Aramco. While revenue increased, operational improvements were overshadowed by challenges in currency valuation and market demand. The company anticipates a partial recovery if the US dollar rebounds in Q4.
Sources: The Star, Bernama (2024)
Keywords: Petronas Chemicals, financial loss, forex challenges
