MD & A
Management's Discussion and Analysis Financial Result for the fiscal year 2010

  • Executive Summary

    In the fiscal year 2010, PTT Chemical Public Company Limited (“the Company” or “PTTCH”) and its subsidiaries reported net profit of Baht 10,290 million, up 51% from Baht 6,802 million. The operating results of the Company and its subsidiaries are shown below:

    (Unit : Million Baht)
      2010 2009 % Change
    Sales 98,656 83,952 18%
    EBITDA 16,720 15,548 8%
    Net Profit 10,290 6,802 51%
    Basic EPS (Baht) 6.83 4.54 50%

    In 2010, Crude oil price (Dubai) was recorded at 78 USD/BBL, up from that of 2009 of 62 USD/BBL due mainly to global economic recovery. This resulted in 30% rise in naphtha price to 713 USD/ton, which consequently pushed ethylene price to rise 25% to 1,076 USD/ton and HDPE price to rise 8% to 1,224 USD/ton (Cost-Push-Effect). Nevertheless, a hike in HDPE price was at a slower pace than that of naphtha price, thus, HDPE-Naphtha spread margin in 2010 was down 13% to 511 USD/ton.

    The Company has implemented several investment projects with project progress as of December 31, 2010 details are as followed:

    Project Description Progress
    1) To Enhance the Competitiveness
    1.1 Ethane Cracker Project under PTT Polyethylene Co., Ltd.  (“PTTPE”) holding 100% by PTTCH An ethylene plant with capacity of 1,000,000 tons per year, which ethane will be provided by PTT. by PTT. COD on 1 December 2010
    2) To integrate into downstream businesses and related businesses to diversify the investment risks
    POLYMERS
    2.1 HDPE Expansion under Bangkok Polyethylene PLC. (“BPE”) To expand HDPE capacity from 250,000 tons per year to 500,000 tons per year COD on 1 January 2011
    2.2 LLDPE and LDPE project under PTT Polyethylene Co., Ltd. (“PTTPE”) holding 100% by PTTCH LLDPE plant with capacity of 400,000 tons per year
    LDPE plant with capacity of 300,000 tons per year
    LLDPE : COD on 1 January 2010
    LDPE : COD on 1 February 2011
    OTHERS
    2.3 Bis Phenol-A (BPA) Project under PTT Phenol Co., Ltd. (“PPCL”) holding 30% by PTTCH A Bis Phenol-A plant with capacity of 150,000 tons per year During commissioning

  • Industry Overview

    In 2010, naphtha (SEA) price was recorded at 713 USD/ton, up 30% from 2009, which resulted from a 28% rise in crude oil (Dubai) price to 78 USD/BBL from global economic recovery. With improving naphtha price, ethylene price also rise to 1,076 USD/ton or up 25%.

    HDPE (SEA) price also rose 8% to 1,224 USD/ton. However, a rise in HDPE price was at a slower pace than that of naphtha and ethylene rate. This was due mainly to a continuous flow of additional supply from China and Middle East to the market since 2Q/2010. Thus, an average price of HDPE in 2Q-3Q/2010 was at around 1,100 USD/ton, and gradually improved in 4Q/2010 due to higher demand from converter. As a result, HDPE and naphtha spread in 2010 dropped 13% or 511 USD/ton from that of 2009.

    MEG (SEA) price in 2010 improved 43% to 984 USD/ton due mainly to a rise in Co-Feedstock: Purified Terephthalic Acid (PTA), which was used in polyester production, from higher demand. As a result, MEG-ethylene spread margin sharply rose 131% to 284 USD/ton.

    In 2011, should crude oil price sustains at around 80-90 USD/BBL, overall products price are expected to improve from Cost-Push Effect coupled with global economic recovery and improving demand from Asia, particular from China and India. MEG price, in particular, is expected to remain at relatively high level in 2011 due to sustainably high demand for polyester. Moreover, an announcement of Sabic, the world top-three MEG producer, of 8 MEG plants planned shutdown for maintenance would significantly dry up MEG supply from the market.

    Product price, feed stock price and product to feed margins
    Unit: $/MT NAPHTHA
    CFR SING.
    ETHYLENE
    S.E. ASIA
    ETHYLENE MTP PROPYLENE
    S.E. ASIA
    PROPYLENE MTP HDPE (FILM) SEA MEG SEA LLDPE (SEA) CFR SEA LDPE CFR SE ASIA HDPE-MOPS MEG-0.65
    ETHYLENE
    ETHYLENE-MOPS PROPYLENE-MOPS
    2009 547 864 847 883 869 1,134 685 1,124 1,181 587 123 317 336
    1Q-10 712 1,266 1,215 1,176 1,263 1,319 1,022 1,399 1,494 607 199 554 464
    2Q-10 699 1,088 1,077 1,138 1,290 1,187 1,030 1,227 1,383 488 323 389 439
    3Q-10 649 903 940 1,063 1,198 1,120 852 1,150 1,320 471 265 254 414
    4Q-10 793 1,047 1,095 1,153 1,247 1,271 1,032 1,349 1,604 478 351 254 360
    2010 713 1,076 1,082 1,132 1,250 1,224 984 1,281 1,450 511 284 363 419


    Production Efficiencies
    Details of 2010 production volumes compared to that of 2009 are as follows:
    1. In 2010 olefins production volumes were 1,377,116 tons, down from 1,715,588 tons or down 20% due to olefins plants shutdowns as follows:
      1. Olefins plant I-1 planned shutdown for maintenance for 39 days (24 Feb.-3 Apr.)
      2. Oleflex unit of olefins plant I-1 planned shutdown for maintenance for 61 days (5 Feb.-7 Apr.)
      3. Olefins plant I4-1 and I4-2 unplanned shutdown for 10 days (10-19 Feb.) and 12 days (10-21 Feb.) respectively due to a technical problems of utilities and steam plant of Glow Energy Public Company Limited (GLOW)
      4. Olefins plant I4-1 planned shutdown for maintenance for 41 days (1 July-10 Aug.) In addition, during 1 Jan.-30 Nov., the Company had also transferred natural gas feedstock to PTTPE’s cracker for its commissioning, which the revenues of PTTPE olefins sales had not yet been able to recognize as revenues in financial statement. This led to olefins utilization of 71% in 2010, down from 92% in 2009.
    2. HDPE production volumes (Olefins plant I1+BPE) were 462,930 tons, down from 527,967 tons or down 12% due mainly to a planned shutdown of HDPE unit of olefins plant I1 for 12 days (28 Feb.-11 Mar.) and HDPE unit of BPE for 21 days (6-26 Feb.) to comply with olefins plant shutdown as mentioned in 3.1. The HDPE utilization rate in 2010 was 93%, down from 106% in 2009.
    3. PTTPE’s LLDPE production volumes were 255,194 tons (LLDPE started COD on 1 January 2009), which led to a utilization rate of only 64%. This was because PTTPE’s cracker was under test-run and commissioning and could not produce ethylene at full capacity. (PTTPE cracker started COD on 1 December 2010).
    4. MEG production volumes of TOCGC were 310,869 tons, down from 396,722 or 22% due to a seizure of an operation of MEG expansion capacity of 95,000 tons regarding Map Ta Phut case. In addition, MEG plant was also shutdown (unplanned) for 18 days (1-18 July 2010). Thus, the utilization rate of MEG in this year was 79%, down from 100% in 2009.
    Products Sales
    Details of 2010 sales volumes compared to the same period of last year are as follows:
    1. Olefins sales volumes were 1,256,513 tons, down 193,403 tons or down 14% due to lower production volumes
    2. HDPE sales volumes (Olefins I1+BPE) were 458,008 tons, down 71,157 tons or down 14%
    3. PTTPE’s LLDPE sales volumes were 283,488 tons from a commercial operation on 1 January 2010.
    4. MEG sales volumes of TOCGC were 308,984 tons, down 87,669 tons or down 22% due to lower production volumes from a seizure of an operation of MEG expansion capacity of 95,000 tons regarding Map Ta Phut case.
  • Financial Results
    Unit : Baht Million
      2010 2011 %Change
    Sales Revenue 98,656 83,952 18%
    Feedstock Cost (67,003) (56,456) 19%
    Gross Margin 31,653 27,497 15%
    Processing Cost (12,339) (9,939) 24%
    Other Revenue 2,933 2,266 29%
    S&A Expenses (5,527) (4,275) 29%
    EBITDA 16,720 15,548 8%
    Depre.&Amort. (5,353) (4,690) 14%
    EBIT 11,366 10,859 5%
    Financing Expenses (Net Interest Earned) (2,076) (2,040) 2%
    FX Gain(Loss) 1,476 646 128%
    Share of Gain from Investment 1,362 144 846%
    Earning to Minority (450) (479) (6%)
    Corporate Tax (1.388) (2,329) (40%)
    Net Profits 10,290 6,802 51%
    Earnings Per Share (Baht/Share) 6.83 4.54 50%

    Comparing 2010 and 2009 operating results
    1. The Company reported sales revenues of Baht 98,656 million, up 18% with details in different value centers as follows:
      1. Olefins sales revenues increased Baht 87 million due mainly to 25% rise in ethylene (SEA) price to 1,076 USD/ton and 28% rise in propylene (SEA) price to 1,132 USD/ton, which resulted from a 30% increase in naphtha feedstock price to 713 USD/ton (Cost-Push Effect). However, olefins sales volumes dropped 14% to 1,256, 513 tons due to planned and unplanned shutdowns of olefins plants (details as mentioned in 3.1 olefins production efficiencies). In addition, during 1 Jan.-30 Nov., the Company had also transferred natural gas feedstock to PTTPE’s cracker for its commissioning, which the revenues of PTTPE olefins sales had not yet been able to recognize as revenues in financial statement.
      2. Polymers sales revenues increased 45 due mainly to a rise in sales revenues of LLDPE, which started commercial operation on 1 January 2009. In addition, HDPE (SEA) price also rose 8% to 1,224 USD/ton, resulted from higher demand from an improving economy. However, HDPE sales volumes dropped 14% to 458,008 tons due to a shutdown of HDPE plants to comply with a shutdown of olefins plants (details as mentioned in 3.2 HDPE production efficiencies).
      3. EO/MEG sales revenues increased 8% due mainly to a 43% hike in MEG (SEA) price to 984 USD/ton. This was resulted from a rise in feedstock ethylene price and co-feedstock PTA price. However, MEG sales volumes were down 22% due to an inability to operate its 95,000-ton expansion unit regarding Map Ta Phut case.
      4. Oleochemicals sales revenues were up 20% due to a rise in average product price of TOL/TFA and Emery, mainly driven by higher CPO and CPKO feedstock price (Cost-Push Effect). A rise in feedstock CPO and CPKO was also led by an insufficient supply in the market due to climate change. In addition, sales volumes of TOL/TFA and Emery also increased due to higher demand from global economic recovery. TOL/TFA sales volumes were up 5% to 210,520 tons and that of Emery rose 11% to 731,414 tons.
    2. Feedstock cost were Baht 67,003 million, up Baht 10,547 million or 19% due mainly a rise in feedstock cost of LLDPE of 9,200 million, which started commercial operation since 1 January 2009. LLDPE feedstock cost was recorded of around 87% of total incremental cost and the other 13% was from a rise in other feedstock cost, which driven by an improving economy.
    3. Processing cost was Baht 12,339 million, up Baht 2,400 million or 24%. This was due mainly to a rise in LLDPE processing cost of Baht 2,044 million (Butene cost of Baht 860 million and other processing cost of Baht 1,184 million). LLDPE processing cost was recorded at around 85% of total incremental cost while the other 15% was from a rise in plant turnaround and staff expenses of the Company and subsidiaries.
    4. SG&A expenses were Baht 5,527 million, up 29% due mainly to rise in staff expenses, consultant fees, SG&A expenses of LLDPE, which wholly booked in 2009, and SG&A of subsidiaries.
    5. Depreciation and amortization was Baht 5,353 million, up 14% due mainly to an increase in LLDPE and PTTPE’s cracker depreciation, which started commercial operation on 1 January 2009 and 1 December 2009 respectively.
    6. FX gain was Baht 1,476 million, up 128% due to an appreciation of Baht currency of 3.22 Baht/ 1 USD (From 33.52 Baht/ 1 USD as of end of 2009 to 30.30 Baht/ 1 USD as of end of 2010), which resulted in lower amount of US bond and swap items of USD 442 million when converted to Baht currency.
    7. Share of gain from investment was Baht 1,362 million, up 846% due mainly to a significant rise in associates’ net profits.
  • Financial Status

    Assets

    As of 31 December 2010, the Company recorded total assets of Baht 168,022 million, up Baht 7,771 million or 5% due mainly to:

    1. An increase in cash and cash equivalent of Baht 3,787 million from operation.
    2. An increase in account receivables of Baht 1,739 million, mainly from higher volumes sales of LLDPE, which started commercial operation on 1 January 2009.
    3. An increase in inventories of Baht 2,547 million, mainly from Baht 477 million increase in inventories of LLDPE, Baht 1,001 million increase in spare parts of LLDPE and PTTPE’s crackers, and Baht 650 million increase in olelochemicals inventories.
    4. A decrease in VAT-tax receivable of Baht 1,021 million, mainly from tax credit received from subsidiaries.

    Liabilities

    As of 31 December 2010, the Company recorded total liabilities of Baht 60,059 million, up Baht 901 million or 2% due mainly to:

    1. An increase in short-term loans from financial institutions of Baht 688 million, mainly from short-term loans of affiliates.
    2. An increase in account payables of Baht 1,954 million, mainly from a rise in the Company and subsidiaries feedstock account payables.
    3. An increase in current portions of long-term loans and debentures of Baht 1,852 million, mainly from the Company’s refinancing program and an increase in Emery’s current portion of long-term loan.
    4. A decrease in income tax payable of Baht 911 million, mainly from lower net profit of non-BOI operating units.
    5. A decrease in long-term loans from financial institutions of Baht 2,517 million, mainly from loan repayment and a transfer of long-term loans to current portions of long-term loans.

    Shareholders' Equity

    As of 31 December 2010, the Company had total shareholders’ equity of Baht 107,963 million, up Baht 6,870 million from end of 2009. This was due mainly to an increase in issued and paid-up share capital of Baht 148 million, share premium from ESOP warrant exercised of Baht 835 million and 2010 net profit of Baht 10,740 million (including earning to minority) while the Company and subsidiaries’ dividend paid to shareholders were Baht 4,761 million.

    Cash Flows

    As of December 31, 2010, the Company had cash flows from operations of Baht 15,270 million while cash flow from investments was recorded at Baht 6,479 million, resulting in the cash flow before financing activities (Free Cash Flow) of Baht 8,791 million. The Company also recorded negative cash flow from financing activities of Baht 4,983 million due to interest payment, long-term loan repayment, and dividend paid. This resulted in cash and cash equivalent of Baht 3,808 million. When concluded with beginning cash on hand of Baht 11,050 million, the Company’s ending cash and cash equivalent was Baht 14,838 million as end of 2010.

  • Important Financial Ratios
      2010 2009
    Current Ratio 2.31 2.29
    EBITDA to revenue 16.44% 18.02%
    Net Profit to revenue 10.12% 7.88%
    Return on total assets 6.12% 4.24%
    Return on equity 9.53% 6.73%
    Interest Bearing Debt to equity 0.42 0.45
    Net debt to equity 0.28 0.34
    Net debt to EBITDA 1.82 2.20

    Note :
    Current ratio = Current assets divided by current liabilities
    EBITDA to revenue = EBITDA divided by total revenue (exclude profits/ (losses) from exchange rates and equity in net income of subsidiaries & associated companies)
    Net profit on revenue = Net profit divided by total revenue (exclude profits/ (losses) from exchange rates and equity in net income of subsidiaries & associated companies)
    Return on total assets = Net profit divided by average total assets (Calculated on the past four quarters)
    Return on equity = Net profit divided by average total shareholder's equity (Calculated on the past four quarters)
    Interest Bearing Debt to equity = Interest Barring Debt divided by shareholder's equity to equity
    Net Debt to equity = Interest Barring Debt net from cash and cash equivalent and current investments/ dividend by shareholder's equity
    Net Debt to EBITDA = Interest Barring Debt net from cash and cash equivalent and current investments divided by EBITDA

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