DuPont surpasses Q3 estimates and raises full-year forecasts and cost-cutting targets

MOSCOW (MRC) -- DuPont forecasts higher-than-expected annual profits on Thursday as industrial material manufacturers’ quarterly results exceeded expectations due to rigorous cost checks and a recovery in the auto industry, one of the largest markets, said Reuters.

Manufacturing everything from brake fluid to fabrics used in protective clothing, the company has cut costs to combat the weak demand in some industries due to the COVID-19 pandemic.

DuPont has raised its cost-cutting target by renegotiating several contracts and speeding up headcount reduction plans, saying it expects to save USD280 million annually, USD100 million more than previously predicted.

The company, which is heavily exposed to the auto industry, has also benefited from the resurgence of automaker sales after the blockades in several economies have been eased.

Third-quarter sales in the transportation and industry business were down 14%, but up 20% from the previous quarter.

Sales in the electronics and imaging businesses increased 7%, supported by the construction of semiconductor technology prior to the launch of some premium smartphones.

Full-year earnings are projected to be between USD3.17 and USD3.21 per share, well above the estimated USD3.03, according to Refinitiv data. Net sales forecasts range from USD20.1 billion to USD20.2 billion, a midpoint, just above the estimated USD20.1 billion.

DuPont’s adjusted earnings per share is 88 cents, above the quarterly estimate of 75 cents. Sales of USD5.1 billion also exceeded analysts’ estimates of USD5 billion.

It was erlier reported, DuPont is investing USD400 million in the production capacity of Tyvek nonwoven fabric made from high density polyethylene (HDPE) at its site in Luxembourg. A new building and a third work line at the production site will be constructed. The launch of new facilities is scheduled for 2021.

As per MRC ScanPlast, September HDPE imports were 18,600 tonnes, which corresponds to the figure a month earlier. Overall imports of this PE grade totalled 202,500 tonnes in January-September 2020, down by 27% year on year. The largest decrease in supplies was due to film and pipe HDPE.

The DuPont Corporation, founded in the USA in 1802, operates in more than 70 countries. The company produces specialty chemicals, offers goods and services for agriculture, food production, electronics, communications, security and protection, construction, transport and light industry. In Russia, DuPont has 100% control over the DuPont Khimprom plant since 2005, and in 2006 established a joint venture between DuPont - Russian Paints and Russian Paints.

COVID-19 - News digest as of 29.10.2020

1. Crude falls on bearish API data, concerns over coronavirus restrictions

MOSCOW (MRC) -- Crude oil futures took a dive during the mid-morning trade in Asia on Oct. 28, erasing most of their overnight gains, as the market grew anxious over a large build in the US crude inventories and over prospects of nationwide lockdowns in Europe, where countries are struggling to contain the second wave of the coronavirus pandemic, reported S&P Global. At 9:53 am Singapore time (0153 GMT), ICE Brent December crude futures were down 67 cents/b (1.63 %) from the Oct. 27 settle to USD40.53/b, while the NYMEX December light sweet crude contract was down 75 cents/b (1.90%) at USD38.82/b. Both markers had jumped 1.83% and 2.62% to settle at USD41.20/b and USD39.57/b, respectively, on Oct. 27, after Hurricane Zeta shuttered 55.35% of US Gulf crude output.


Oil climbs as Hurricane Zeta takes more US output offline

MOSCOW (MRC) -- Energy prices settled higher Oct. 27 as US Gulf of Mexico operators shut in crude production ahead of Hurricane Zeta, tightening supply outlooks, reported S&P Global.

NYMEX December WTI settled USD1.01 higher at USD39.57/b and ICE December Brent climbed 74 cents to USD41.20/b.

Roughly half of all the oil and gas production from the US Gulf of Mexico was shut in Oct. 27 ahead of Hurricane Zeta, which is expected to make landfall in southeastern Louisiana.

An estimated 914,811 b/d of crude production and 1,500 MMcf/d of natural gas production was shut in, reflecting 49.45% and 55.35% of US Gulf output, respectively, according to the US Bureau of Safety and Environmental Enforcement. About 25% of the Gulf's platforms and rigs, or 157 facilities, have been evacuated thus far, BSEE said, with more underway.

Chevron, Shell, BP, BHP, Murphy Oil and Equinor all confirmed they've shut down platforms and production ahead of the storm. BP and Chevron count among those shutting in all of their operated platforms.

NYMEX November RBOB settled 3.18 cents higher at USD1.1434/gal and November ULSD was up 3.559 cents at USD1.1577/gal.

"Crude prices are rallying as Hurricane Zeta triggers further disruptions to crude output in the Gulf of Mexico," OANDA senior market analyst Edward Moya said in a note. "Risk aversion took a break today and that gave oil a chance to stabilize a bit before the lower boundaries of its two-month trading range."

Zeta, which weakened to a Tropical Storm after making landfall on Mexico's Yucatan Peninsula Oct. 26, was expected to regain hurricane status later on Oct. 27 and make a second landfall late Oct. 28 near southeastern Louisiana, according to the National Hurricane Center.

The current path of the hurricane targets roughly 2.7 million b/d of refining capacity, mostly in Louisiana.

Refiners continue to monitor the storm, based on their hurricane readiness and response plans. Decisions to slow or shut down plant depending on the intensity, location and timing of landfall of the storm are likely to be made within the next 24 hours, sources familiar with operations at several refineries said.

The Platts USGC unleaded 87 gasoline front-month crack against WTI climbed to USD6.504/b, up 48 cents from the session prior and the strongest since Oct. 14. The USGC ULSD crack against WTI jumped 51 cents to a 12-session high USD7.088/b.

As MRC informed previously, at least five Louisiana oil refineries in the path of Tropical Storm Zeta plan to remain operating as it makes a US landfall. Oil and gas producers evacuated offshore production platforms and shut wells as the storm moved across the Gulf of Mexico. Zeta could strike the Gulf Coast between Louisiana and Alabama at or near hurricane intensity, forecasters said.

Thus, Exxon Mobil Corp’s 517,700 barrel-per-day (bpd) Baton Rouge, refinery, Royal Dutch Shell Plc’s 227,400 bpd Norco and 211,146 bpd Convent, Louisiana, refineries are proceeding with normal operations. Exxon’s Baton Rouge plant is about 110 miles (177 km) northwest of the forecast path while Shell’s Convent and Norco refineries are 78 miles and 54 miles northwest of the latest storm track. Exxon and Shell are monitoring the storm, spokes people said. Shell also said it is prepared to take action as appropriate.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

BASF forges ahead with USD10-billion China project, battery material investments despite COVID-19

MOSCOW (MRC) -- BASF will “energetically pursue” it’s USD10.0-billion (USD11.7 billion) petrochemical project at Zhanjiang, Guangdong Province, China, as well as its investments in the production of battery materials, despite taking a more cautious approach to capital expenditure (capex) as a result of the COVID-19 pandemic, reported Chemweek with reference to chairman Martin Brudermuller's statement.

Speaking Wednesday on a conference call with analysts following the release of BASF’s third-quarter results, Brudermuller said that the company had cut capex by EUR600 million in 2020 to EUR2.8 billion and that over the next five years it would “strictly review projects and focus our spending,” which would involve “some postponements” to capacity additions. However, the company is not slowing the China project - a phased investment due for completion in 2030 - or battery-material investments because of the bright outlook for the two strategies. “The pandemic does nothing to change these two large growth opportunities,” he said.

China is making a V-shape recovery from the crisis and BASF’s sales volumes in the country grew at double-digit rates in the third quarter, Brudermuller said. “Market expectations for growth in China are even better than before the pandemic,” he said. “This gives us confirmation that our long-term assumptions about China are right.”

Meanwhile, “extreme growth” is still expected for battery materials, even though it will be a little slower than previously expected over the next few years, Brudermuller said. “The volumes needed for all the (electric) cars to be produced is a positive for BASF,” he said. Electric vehicles have increased their share of the overall market even during the sharp decline in the automotive industry this year caused by the pandemic, he added. BASF expects an overall 20% decline in worldwide light vehicle production in 2020.

BASF CFO Hans-Ulrich Engel said during the call that completion of the previously announced €1.15-billion divestment of BASF’s pigments business to DIC Corp. (Tokyo, Japan) had been delayed from the fourth quarter of 2020 to the first quarter of 2021, because of impacts from COVID-19. Meanwhile, the planned initial public offering (IPO) of the Wintershall DEA upstream oil and gas joint venture, originally planned for the second half of 2020, will likely take place in 2021, “subject to market conditions,” Engel said.

Following the pigments and Wintershall DEA deals, there will be “no urgent need” for major portfolio adjustments at BASF over the next three years, Brudermuller said. “We will focus on organic growth. Don’t expect big portfolio measures although in the smaller part (of the portfolio), there is always work that has to go on,” he said.

BASF has also delayed, until 2021, 10% of the 6,000 job cuts it had announced by the end of 2020, “due to labor effects caused by the pandemic,” Engel said. The job cuts form part of BASF’s “excellence program” that is on course to deliver a positive EBITDA contribution of €2 billion by the end of 2021, he said. The program is expected to generate EUR1.4 billion of the contribution by the end of 2020 with associated costs this year of about EUR300 million. The 2,000 job cuts announced recently at BASF’s global business services unit are not included in the 6,000 in the excellence program.

BASF included EUR2.8 billion of impairments in its third-quarter accounts to reflect the impacts of COVID-19 as well as restructuring. About EUR1 billion were in BASF’s surface technologies business and a combined EUR1.3 billion were in the company’s chemicals and materials businesses, Engel said.

Brudermuller told analysts that average daily order entries registered by BASF are “slightly lower” in October year on year. “Customers remain very cautious and are ordering lower volumes more regularly,” he said. About 80% of all BASF’s orders on hand will be booked in the next two months, according to Brudermuller. “We continue to have no clear view beyond that,” he said.

As MRC informed before, in September 2020, BASF-YPC Co., Ltd. (BYC), a 50-50 joint venture between BASF and SINOPEC, expanded the production capacity of neopentylglycol (NPG) at the state-of-the-art Verbund site in Nanjing, China. The plant was established in 2015 with an annual capacity of 40,000 metric tons. With the completion of the expansion in August 2020, the annual capacity will reach 80,000 metric tons.

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.

BASF-YPC Company Limited (BASF-YPC) is a 50-50 joint venture between BASF and Sinopec, founded in 2000, with a total investment of approximately USD5.5 billion. The integrated petrochemical site produces about three million tons of high-quality chemicals and polymers for the Chinese market annually. The products serve the rapid-growing demand in multiple industries, including agriculture, construction, electronics, pharmaceutical, hygiene, automotive and chemical manufacturing. All BASF-YPC plants are interconnected in order to use products, by-products and energy in the most efficient way, to save cost and to minimize the environmental impact. BASF-YPC posted sales of approximately CNY 19.6 billion in 2019 and employed 1,942 people as of the end of the year.

OMV and Mubadala complete Borealis transaction

MOSCOW (MRC) -- OMV, the international integrated oil and gas company headquartered in Vienna and Mubadala Investment Company, the Abu Dhabi-based strategic investment company, have today completed the transaction for OMV to acquire an additional 39% stake in Borealis, a leading, global chemicals company, from Mubadala, said the companies.

Following the initial agreement announced in March this year, the transaction was completed in line with the expected timeline and in accordance with all regulatory requirements. OMV now holds a 75% interest in Borealis and Mubadala retains a 25% interest in the company.

OMV is entitled to all dividends in relation to the additional shares in Borealis distributed after December 31, 2019. OMV will fully consolidate the results of Borealis in its financial statements. In 2019, Borealis generated total sales of EUR 9.8 bn and a net profit of EUR 872 mn. The operating cash flow of Borealis – including dividends from its joint venture Borouge –amounted to EUR 1.5 bn in 2019. In the first nine months of 2020, Borealis achieved an operating cash flow including Borouge dividends of EUR 1.1 bn, 6 percent higher than the same period of last year, despite the difficult market environment due to the COVID-19 pandemic.

Musabbeh Al Kaabi, CEO, Petroleum & Petrochemicals, Mubadala Investment Company: “This transaction is well aligned with our strategy as a responsible investor and we are confident in the value this partnership will create for all three companies. Both OMV and Borealis are champions of the Mubadala portfolio, and this decision is consistent with our asset management model and our commitment to partner with like-minded players."

Rainer Seele, Chairman of the OMV Executive Board and CEO: “This transaction is another milestone in the implementation of our strategy. We are thus establishing an integrated and sustainable business model extending OMV’s value chain towards higher value chemical products and recycling, thereby repositioning the Group for a lower carbon future."

The purchase price of the transaction amounts to USD 4.68 bn. Based on closing adjustments, the cash-out for OMV, net of cash acquired, is EUR 3.8 bn. The adjustments include the first quarter dividends to which OMV is entitled based on the increased shareholding, currency effects, and the cash position of Borealis at closing. Following the successful issuance of senior and hybrid bonds of EUR 4.5 bn Euros, OMV paid the entire amount in full at closing. As a result of the synergies identified in the last few months, OMV is increasing the synergy potential from EUR 700 mn to more than EUR 800 mn. In addition, OMV has successfully started its divestment program, which will realize EUR 2 bn by the end of 2021. The sale of the 51-percent share in OMV’s gas logistics subsidiary Gas Connect Austria has already been signed and will have a deleveraging effect of EUR 570 million for OMV.

With its head office in Vienna, Borealis currently has more than 6,800 employees and operates in over 120 countries. The company provides services and products to customers globally, both directly and in collaboration with Borouge, a joint venture with the Abu Dhabi National Oil Company (ADNOC) and with Baystar™, a joint venture with Total in Texas, USA.

Global demand for monomers and polymers is growing rapidly. The purchase of a controlling majority in Borealis makes OMV a leading provider of polyolefins and base chemicals. The joint production capacities make OMV and Borealis the number one producer of ethylene and propylene in Europe and one of the top 10 polyolefin producers worldwide. The acquisition is a strategic extension of OMV’s value chain into high value chemicals. This provides a natural hedge against the cyclicality of each value chain step with respect to both volumes and market spreads, de-risking OMV’s exposure to volatile markets.

Furthermore, OMV and Borealis will jointly expand their know-how and activities in the plastics circular economy. Borealis’ activities in plastics recycling, through its subsidiaries EcoPlast (Austria) and mtm plastics (Germany), Project STOP (Ocean Waste) and the Design For Recycling (DFR) initiative are a perfect addition to OMV’s ReOil technology for the chemical recycling of post-consumer-plastic. The proprietary ReOil® technology converts hard-to-recycle plastic waste into high-quality feedstock for its refineries, substituting the need crude oil.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. With Group sales of EUR 23 bn and a workforce of around 20,000 employees in 2019, OMV Aktiengesellschaft is one of Austria’s largest listed industrial companies.

Mubadala Investment Company is a sovereign investor managing a global portfolio, aimed at generating sustainable financial returns for the Government of Abu Dhabi. Mubadala’s USD232 billion (AED 853 billion) portfolio spans six continents with interests in multiple sectors and asset classes. We leverage our deep sectoral expertise and long-standing partnerships to actively source deals. In the UAE, we are driving sustainable growth by optimizing scale and efficiency, supporting the continued diversification and global integration of the local economy while growing our shareholder value. Headquartered in Abu Dhabi, Mubadala has offices in London, Rio de Janeiro, Moscow, New York, San Francisco and Beijing.