Reliance petchrochemical earnings fall amid weak demand

MOSCOW (MRC) -- Reliance Industries Limited announced fall in petrochemical earnings for full-year 2019-20 due to lower margins and weak demand in the last quarter due to COVID –19 pandemic, according to Kemicalinfo.

4Q FY20 revenue from the Petrochemicals segment decreased by 24.1% Y-o-Y to Rs 32,206 crore (USD4.3 billion) due to lower price realizations along with disruptions in local and regional markets.

Petrochemicals segment EBIT was at Rs 4,553 crore (USD0.6 billion), down 42.8% Y-o-Y, with significant decline in margins. The impact of lower product margins was mitigated to some extent by optimizing feedstock mix during the quarter.

Full-Year: FY20 revenue from the Petrochemicals segment decreased by 15.6% to Rs 145,264 crore (USD19.2 billion) due to lower price realizations with weaker demand in well-supplied markets.

Petrochemicals segment EBIT was at Rs 25,547 crore (USD3.4 billion), down 21.1% as compared to previous year, due to lower margins in key products - Paraxylene, MEG, PET, polypropylene and polyethylene.

Reliance Industries Ltd (RIL) earlier said its board has approved hiving off its USD75 billion worth oil-to-chemicals business into a separate division to enable the sale of 20% stake in the unit to Saudi Aramco.

“RIL Board approved a Scheme of Arrangement for transfer of O2C Undertaking of the company to Reliance O2C Ltd as a going concern on slump sale basis for a lump sum consideration equal to the income tax net worth of the O2C Undertaking as on the appointed date of the Scheme”, the company said in its fourth-quarter earnings statement.

The hiving off will be subject to the approval of the National Company Law Tribunal. After the approval, the oil-to-chemical (O2C) business will become a separate vertical with independent balance sheet.

O2C undertaking of the company comprises entire oil-to-chemicals business of the company consisting of refining, petrochemicals, fuel retail and aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities.

In August last year, RIL announced initial agreements to sell a 20% stake in the oil-to-chemical business to Saudi Aramco for an asking of USD15 billion. The deal covers all of Reliance’s refining and petrochemicals assets as well as the remainder of stake the firm has in fuel retailing business after selling 49% to BP Plc of UK for Rs 7,000 crore (USD924.2 million).

As MRC informed previously, in late April 2020, it became known that Saudi Aramco’s plan to buy USD15-billion stake in Reliance Industries hydrocarbon business may not go through due to the rising risk of collapsing oil prices, US-based brokerage Bernstein has warned. The unique combination of excess crude oil global supply, 30% drop in demand due to coronavirus crisis and continuous price fall weighed heavily on Aramco’s investment plans.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.

COVID-19 - News digest as of 22.05.2020

1. Refiners pin hopes on gasoline for post-lockdown demand recovery

MOSCOW (MRC) -- Global oil refiners, battling weak profit margins, are pinning their hopes on a recovery in gasoline demand as coronavirus lockdowns start to ease in many countries around the world, reported Reuters. Gasoline was one of fuels the hardest hit by the lockdowns as restrictions on mobility cut demand for the motor fuel by more than 50% in several regions. “Even a slight uptick in gasoline demand will provide support to overall margins,” a source at a trading firm said.


SIBUR successfully closes order book exchange-traded bond placement

MOSCOW (MRC) -- SIBUR Holding, Russia’s largest integrated petrochemicals company, has successfully closed the order book for its BO-01 and BO-02 exchange-traded bond issues, worth RUB 10 bn and RUB 5 bn, respectively, said the company.

The final semi-annual coupon rate was fixed at 5.50% per annum, which is the lowest coupon among market placements by Russian corporate issuers historically. The par value of the bonds is RUB 1,000 each. The offering price is 100% of the par value. With a coupon period of 182 days, the bonds have a tenor of 10 years and a put option after 2.5 years.

The placement enjoyed a strong interest from investors, with demand reaching around RUB 45 bn. Leading Russian public and private banks, institutional investors and asset managers, brokers and retail investors participated in the placement.

Alexander Petrov, member of the Management Board and Managing Director for Economics and Finance at SIBUR, commented: "We keep a close eye on opportunities to optimise our debt portfolio, and now see the market as favourable for rouble bond offerings, with the aim of diversifying our borrowings and reducing the weighted average rouble borrowing rate. The proceeds will be used to refinance existing debt. Strong investor appetite attests once again to SIBUR’s robust financial policy and our reputation as a reliable borrower, which is underpinned by high credit ratings from the leading rating agencies."

The placement was organised by Gazprombank and Sberbank CIB, with Gazprombank also acting as the placement agent. The technical listing of the bonds on the Moscow Exchange will take place on 28 May 2020, and they are expected to be included in the Level 2 List.

As MRC informed earlier,SIBUR has completed the start-up and commissioning work at key production facilities at ZapSibNeftekhim (ZapSib), its flagship petrochemical complex at Tobolsk. ZapSib in the first quarter of 2020 produced 115,000 metric tons of PP and 259,000 metric tons of PE, part of which is en route to clients and was not reflected in the sales volumes for the reporting period. Sales of PP grew by 87.3% to 243,000 metric tons and of PE by more than 100% to 132,000 metric tons. In January 2020, Sibur completed construction of its new thermoplastic elastomers production facility at Voronezh and launched trial production.

Ethylene and propylene are feedstocks for producing PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.


Berry to establish first meltblown production line in South America

MOSCOW (MRC) -- Berry Global Group (Evansville, Indiana) says it will establish its first meltblown nonwoven fabric production line in South America by the first quarter of 2021, said Chemweek.

The latest capital investment in its worldwide meltblown manufacturing capacity, based on its Meltex technology, will be made to support continued demand for health and wellness products such as face masks, it says. The investment will add more than 400 metric tons of meltblown nonwoven material to the region, which will enable production of over 500 million surgical-grade masks per year, according to the company.

The new asset will be operational in the first quarter of next year and be sited at an existing company production facility, although it does not clarify the country location. The company has existing premises in Brazil and Argentina, according to its website. The new line will focus on the production of materials for ASTM L2, L3, and N95 masks, and will be upgraded with Berry’s patented charging technology post-installation, it says.

“As customers prepare for future outbreaks or protection demands, we will be ready to serve,” says Daniel Guerrero, executive vice president and general manager/Latin America in Berry’s health, hygiene, and specialties segment.

Earlier this week Berry revealed plans to invest USD8 million to expand production capacity of spunmelt nonwovens at its Statesville, North Carolina, facility. Earlier in May it also said it would expand its melt-blown nonwovens capacity in Europe with the addition of a new production line in Germany to help meet demand for protective face masks due to the coronavirus disease 2019 (COVID-19) pandemic, in addition to announcing in April an upgrade to a melt-blown production line at its manufacturing facility in Biesheim, France.

As MRC informed earlier, Berry Global Group announced a collaboration with SABIC to drive the innovation and use of polyolefin resins made from chemical recycling. The companies boast a long partnership and focus on their shared values of sustainability and promotion of a circular economy. The partners will focus on innovation and use of polyolefin resins from chemical recycling. The move is a part of Berry’s sustainability strategy Impact 2025 announced earlier this year.

According to a MRC's DataScope report, April PP imports to Ukraine decreased to 8,100 tonnes under the pressure of quarantine restrictions due to coronavirus against 10,500 tonnes a month earlier.Due to the partial shutdown of capacities, local companies have seriously reduced purchases of all types of propylene polymers. Overall imports of propylene polymers reached 39,100 tonnes in January-April 2020, compared to 45,000 tonnes a year earlier.
Only supplies of stat propylene copolymers (PP random copolymers) increased, while the demand for propylene polymers decreased.

Broanmain Plastics sees increase of new enquiries for its Trudec tile system

MOSCOW (MRC) -- Broanmain Plastics has seen a significant number of new enquiries for its flexible interlocking Trudec floor tile system as manufacturers, educators, retailers, offices, the hospitality sector and gyms start taking tentative planning steps to emerge from lockdown, said Britishplastics.

Used in indoor areas, including factories, warehousing, corridors, shop floors, changing rooms, garages and even high footfall dining areas, such as work and school canteens, employers can swiftly introduce directional messages, reinforce two-metre distancing measurements and safety warnings, which can be easily changed as COVID-19 guidelines evolve.

The bespoke, REACH-compliant interlocking Trudec floor tile system can be designed to meet the most stringent Health & Safety and wellbeing requirements. Available in multiple colours and textures, leaders and facility managers can clearly mark out one-way walkways and queuing systems. Colour zones can also be used to delineate collaborative workspaces.

Made to order in the UK from hygienic, easy clean polyvinyl chloride (PVC), providing the existing flooring is level, the Trudec tile system can even be laid on top of existing tiles and hard surface areas - even heritage tiles and parquet flooring.

The use of interlocking translucent tiles means that as social distancing messages change, the tiles can be lifted, new instructions or directions printed and inserted, and each tile re-laid. By using it successfully in its own production facility, Broanmain staff have continued to operate productively throughout the entire crisis while maintaining social distancing.

Sustainable eco-friendly options are available, using reground plastic materials within the PVC mix that doesn’t compromise the robustness or durability of the tiles’ performance. When the flooring reaches the end of its lifespan, the tiles are fully recyclable.

Broanmain’s managing director Jo Davis, said: “Clearly people need a sign that their employers are invested in their wellbeing. And flooring is one of the first visual things that people see.”

According to MRC's ScanPlast report, Russia's estimated consumption of unmixed PVC was 249,190 tonnes in January-March 2020, up by 5% year on year. Shipments of emulsion and suspension PVC to the market grew both due to domestic producers and higher imports.