Mitsubishi Chemical reports loss on weak demand in automotive sector, forecasts full-year net loss

MOSCOW (MRC) -- Mitsubishi Chemical Holdings reports a net loss of Yen 49.68 billion (USD474.7 million) for the company's fiscal first half ended 30 September, swinging from net income of Yen 81.3 billion a year earlier, according to Chemweek.

Mitsubishi registered a third-quarter operating loss of Yen 28.1 billion, compared with an operating profit of ?130.5 billion a year earlier. Revenue decreased 17.6% year on year (YOY) to Yen 1.5 trillion. The company says that during the first half of the fiscal year, demand was slower YOY, particularly for automotive applications, owing to the impact of the COVID-19 pandemic. Notwithstanding a recent pickup in demand, business conditions remain challenging, says Mitsubishi.

Sales decreased by 16% YOY to ?473.6 billion at Mitsubishi's performance products business. Operating income plunged 46% YOY to Yen 21.4 billion. Functional products' revenue declined because of reduced demand principally in automotive applications, despite the recent pickup in demand. Sales volumes fell for high-performance engineering plastics and other offerings for advanced moldings and composites. In performance chemicals, revenue decreased amid lower overall sales volumes to the automotive industry, including for performance polymers in the advanced polymers segment. Another downside for sales volumes was the impact of scheduled maintenance and repairs at phenol-polycarbonate chain facilities in the advanced polymers segment.

Sales decreased by 31.5% YOY to ?381 billion at the chemicals business, Mitsubishi’s largest segment. It swung to an operating loss of Yen14.6 billion from an operating profit of Yen 35.8 billion a year earlier. In the methyl methacrylate (MMA) business, revenue declined despite improving conditions in the MMA monomer and other markets. In petrochemicals, sales decreased because of a greater impact from scheduled maintenance and repairs at an ethylene plant, with selling prices down following declines in raw material costs and other factors. In carbon products, revenue was down because of lower prices in line with reduced raw material costs and a drop in sales volumes from declining demand for coke and other offerings.

Operating income at the industrial gases business was down 19.6% YOY, to Yen 35.5 billion. Sales at this division were Yen 381 billion, lower by 9% YOY. Profitability was weak amid lower domestic and overseas demand, although demand for electronics-related gases remained strong.

The company’s other units include healthcare.

Mitsubishi has downgraded its forecast for the fiscal year ending 31 March 2021. It now projects a net loss of ?34 billion, compared with a previously estimated net profit of Yen 49 billion. Sales projections have been lowered to ?3.1 trillion, versus an earlier estimate of Yen 3.3 trillion. In the first half, the company included an Yen 84.5-billion impairment loss on technology-related intangible assets in the healthcare segment.

No changes have been made to guidance for full-year operating income, which is expected to reach Yen 137 billion. This is because while market conditions for MMA and other products in the chemicals segment are likely to be less favorable than initially expected, selling, general, and administrative expenses and R&D expenditure in the healthcare and other segments are projected to decline, Mitsubishi says.

As MRC reported before, Mitsubishi Chemical Holdings Corp said in late October 2020 it had appointed Belgium-born Jean-Marc Gilson as its next chief executive officer and president, effective April 2021. Gilson, currently CEO of French plant-based ingredient maker Roquette Group, will join a short list of foreign CEOs at listed Japanese companies.

The main application, consuming approximately 75% MMA, is in the production of polymethyl methacrylate acrylic plastics (PMMA). Methyl methacrylate is also used to produce methyl methacrylate-butadiene-styrene copolymer (MBS) used as a modifier for polyvinyl chloride (PVC).

According to MRC's ScanPlast report, September total production of unmixed PVC grew to 86,000 tonnes from 75,500 tonnes a month earlier, SayanskKhimPlast and RusVinyl increased their capacity utilisation. Overall output of polymer were 718,500 tonnes in the first nine months of 2020 versus 720,500 tonnes a year earlier, only two producers raised their production volumes, and RusVinyl cut its output.

Mitsubishi Chemical, a Japanese integrated chemical company, was established on October 1, 1990 through the merger of Mitsubishi Kasei and Mitsubishi Petrochemical Co. Due to its wide range of activities, it is one of the ten leading chemical companies in the world.
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MOSCOW (MRC) -- Mitsubishi Chemical says that its affiliate Lucite International will end the production of methyl methacrylate (MMA) and methacrylic acid (MAA) at Beaumont, Texas, and will close the facility, reported Chemweek.

It plans to terminate production on 28 February 2021. The site has a production capacity for 135,000 metric tons/year of MMA.

Mitsubishi says that to boost competitiveness and optimize its supply chain in keeping with demand and supply trends for raw materials, it decided to shut down the site.

The company for the fiscal year ending 31 March 2021 has factored an impairment loss of about USD230 million to cover the shutdown of the Beaumont MMA and MAA facility, and related costs.

As MRC wrote before, Mitsubishi Chemical Holdings Corp said in late October, it had appointed Belgium-born Jean-Marc Gilson as its next chief executive officer and president, effective April 2021. Gilson, currently CEO of French plant-based ingredient maker Roquette Group, will join a short list of foreign CEOs at listed Japanese companies.

The principal application, consuming approximately 75% of the MMA, is the manufacture of polymethyl methacrylate acrylic plastics (PMMA). Methyl methacrylate is also used for the production of the co-polymer methyl methacrylate-butadiene-styrene (MBS), used as a modifier for polyvinyl chloride (PVC).

According to MRC's ScanPlast report, Russia's overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.

Mitsubishi Chemical, a Japanese integrated chemical company, was established on October 1, 1990 through the merger of Mitsubishi Kasei and Mitsubishi Petrochemical Co. Due to its wide range of activities, it is one of the ten leading chemical companies in the world.
MRC

1. Indiian October gasoline, gasoil sales exceed pre-coronavirus levels

MOSCOW (MRC) -- India’s gasoil consumption in October rose 6.6% from a year earlier, the first such increase since COVID-19 restrictions were imposed in late March, preliminary data showed on Sunday, signaling a pick-up in industrial activity, reported Reuters. Diesel sales by the country's three state fuel retailers totaled 6.17 million tons in October, according to provisional data compiled by Indian Oil Corp (IOC), the country's biggest refiner and fuel retailer. Sales of gasoil, which account for about two-fifths of India’s fuel demand, rose 27.5% from September.



MRC

MOSCOW (MRC) -- Saudi Aramco is sticking with plans to pay a bumper third-quarter dividend of USD18.8bn despite the pandemic cutting the group’s earnings by 45%, said FT.

The kingdom’s state energy company on Tuesday reported third quarter net income of USD11.8bn, down from USD21.2bn in the same period in 2019. The figure, however, beat the USD10.6bn that analysts forecast, according to a consensus compiled by the company.

“We saw early signs of a recovery in the third quarter due to improved economic activity,” chief executive Amin Nasser said in a statement.

Government-imposed lockdowns and travel bans this year triggered a drop in oil demand, crude prices and refining margins hurting profits in the three months to September 30. Market turmoil has rocked the entire sector with big oil companies forced to cut thousands of jobs, increase debt and slash dividend payouts.

Although the state-controlled oil company has reported results that are better than its international peers, Saudi Aramco, which made its stock market debut in December 2019, is facing its toughest year in decades.

Mr Nasser warned of “headwinds” still facing global energy markets. The quarterly payout of USD18.8bn, the vast majority of which goes to the government, Saudi Aramco’s largest shareholder, is in line with a commitment to hand back USD75bn to investors this year.

However, the dividend exceeds the free cash flow of USD12.4bn that Saudi Aramco generated in the period, meaning the group’s borrowings are likely to have to rise to pay for it. Gearing, which it defines as a measure of the degree to which operations are financed by debt, has already risen from minus 4.9 per cent in the first quarter to 21.8 per cent.

This is far greater than the company’s target of 5-15 per cent, which Neil Beveridge at Bernstein said “raises questions of sustainability”. Saudi Aramco attributed the huge increase largely to its acquisition of a majority stake in Saudi chemicals player Sabic, from the kingdom’s public investment fund, this year for USD69bn.

The country’s biggest revenue earner is under increasing pressure to cut outgoings to help buffer the kingdom, which faces a ballooning budget deficit. The company is scaling back foreign expansion plans, dramatically cutting costs, extending project timelines and suspending drilling activity. It has also cut hundreds of foreign staff.

Capital spending in the three-month period fell to USD6.4bn from USD8.1bn a year ago. Although Saudi Arabia believes the worst of the crisis is behind it with oil prices rebounding from April’s lows below USD20 a barrel, Brent crude has failed to hold consistently above USD40 a barrel.

The kingdom, the world’s largest oil exporter, is part of an alliance of producer countries, including Opec nations and Russia, that seek to bolster a fragile market through record production cuts. The curbs of 9.7m b/d, which came into effect in May, have since eased to 7.7m b/d and producers are due to decide whether they can afford to unwind the curbs further in January. Saudi Aramco shares rose 0.4 per cent in early trading on the domestic Tadawul stock exchange.

As MRC wrote befire, in June, Aramco said it had completed the share acquisition of a 70% stake in SABIC from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyals 259.125 billion (USD69.1 billion). Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty products.

Ethylene and propylene are feedstocks for producing polyethylene (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.

MRC

MOSCOW (MRC) -- Japan's biggest oil refiner Eneos Holdings Inc said last Tuesday it planned to stop production of petrochemical products at its Chita plant in central Japan in October next year, said the company in its press release, citing falling local demand and stronger competition in Asia.

The company will hold talks with rival Idemitsu Kosan Co Ltd to transfer some of its production facilities at the plant, including those for paraxylene (PX), to Idemitsu, it said in a statement.

The end of production at the Chita plant would reduce Eneos' PX capacity by 400,000 tonnes a year, leaving it with a total paraxylene output capacity of more than three million tonnes a year, Eneos executive vice president Junichi Iwase said.

"We will continue to review our production and supply structure to reflect changing environment," Iwase told reporters in Tokyo, without elaborating further.

Eneos plans to keep all employees of Chita plant through transfer to other locations, he added.

Four of Japan's biggest refiners have merged into two in recent years and cut operations as they seek business from a shrinking, aging population that consumes less fuel because of more efficient vehicles and gasoline-electric hybrids.

The COVID-19 pandemic has piled on the pressure, collapsing fuel demand, especially in jet fuel.

Eneos Chairman Tsutomu Sugimori said a week earlier that demand of crude products could decline more rapidly than it had anticipated as a result of the pandemic and refiners would need to think about their production capacity and structure to reflect the change.

Eneos, formerly JXTG, unveiled last year its long-term strategy with an assumption that domestic oil demand would halve by 2040, or fall 2% annually.

As MRC reported earlier, Eneos Corp, permanently shut the 115,000 barrels-per-day (bpd) crude distillation unit at its Osaka refinery on September 30 as planned. The refiner, which was formerly known as JXTG Nippon Oil & Energy Corp and is now under Eneos Holdings Inc, is shifting its joint venture with PetroChina Co to Eneos’ Chiba refinery after shutting the venture’s Osaka refinery.

PX is a feedstock for the production of purified terephthalic acid (PTA). PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to ICIS-MRC Price report, consumption of PET chips by Russian converters decreased in October, which is generally in line with the current season. Market participants reported weak demand in the Russian PET chips market at the end of last month and expect its further decline in early November. The revival of the domestic PET market is expected in the second half of November, before the New Year holidays.

Eneos Holding (formerly known as JXTG) is Japan's largest oil company. Its activities include the exploration, import and refining of crude oil; production and sale of petroleum products (ethylene, propylene, butadiene, styrene, paraxylene, orthoxylene, etc.), including fuels and lubricants. In recent years, the company has been expanding its production facilities in other countries. Its products are sold under the ENEOS brand. On June 25, 2020, JXTG, founded in April 2017 after the merger of two Japanese companies, JX Holding and TonenGeneral, changed its name to Eneos Holdings, while its subsidiary JXTG Nippon Oil & Energy changed its name to Eneos.
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