13:05 PM | May 14, 2020 | Natasha Alperowicz
Sibur (Moscow), Russia’s largest petrochemical producer, today announced its financial and operational results for the first quarter. The company reported a loss of 52.281 billion Russian rubles ($ 704.1 million) compared to a profit of RR46.02 billion the year before. It refers the loss to currency effects. Adjusted EBITDA decreased by 16.5% to RR39,823 billion due to lower margins for most product groups. EBITDA margin fell from 33.7% in the first quarter of 2019 to 31.0% in the last quarter, but remains consistently high against the industry average.
Revenue decreased by 7.8% to RR120.67 billion due to negative pricing dynamics in midstream ruble volumes and the plastics, elastomers and intermediates segments. This was partially offset by year-over-year revenue growth of 30.4% (YOY) in the olefins and polyolefins segment, driven by higher sales of polypropylene (PP) and polyethylene (PE).
The company has completed the start-up and commissioning work at key production facilities in ZapSibNeftekhim (ZapSib), its petrochemical complex in Tobolsk. In the first quarter of 2020, ZapSib produced 115,000 tonnes of PP and 259,000 tonnes of PE, part of which is on the way to clients, and this is not reflected in sales volumes during the reporting period. Sales of PP increased by 87.3% to 243,000 tonnes and of PE by more than 100% to 132,000 tonnes. In January 2020, Sibur completed the construction of its new thermoplastic elastomer production plant in Voronezh and launched sample production.
In his update on the next major investment project, the Amur gas-chemical project in Blagoveshchensk at the Chinese border, Sibur says Sinopec received all the necessary company approvals to enter into a joint venture for the project with Sibur; and the Russian Ministry of Finance prepared draft amendments to the Russian tax code as regards the recoverable excise duties on LPG and ethane. The two developments pave the way for the project to continue. All technologies are now selected and engineering firms are appointed.
“In terms of external factors beyond our control, the beginning of the year delivered a perfect storm for us – the unprecedented pandemic crippled the operation of entire industries around the world, limiting global economic growth. Hardly anyone was able to predict the extent of its impact, and even now it is impossible to fully assess the extent and length of the COVID-19 effect, “said Dmitry Konov, chairman of the board of Sibur Holding.
He adds that ZapSib is already helping to offset the negative effects of low hydrocarbon prices by increasing the internal consumption of raw materials, resulting in higher production of polymers. In the first quarter, the project made its first contribution to EBITDA for the olefins and polyolefins segment, which supported a stable operating result during the reporting period despite the negative pricing environment.
“To reduce the external impact of our results, we have launched a large cost optimization program and prioritized specific investment (Capex) projects. We reduced our overall capex program for this year by optimizing projects at an early stage and by implementing lean payment plans, ”says Konov.
In the first quarter, Sibur’s gas processing plant processed 5.7 billion cubic meters of copper meters with associated crude oil gas, an increase of 2.7% YY. As a result, natural gas production amounted to 5 billion cubic meters, which is an increase of 2.7% in YEAR. Crude NGL fractionation volume increased by 2.9% YYY to 2 million tonnes (MMt). Sales of LPG decreased by 29.9% to 1 MMt due to higher internal use for ZapSib operations. At 298,000 tonnes, naphtha sales were flat.
Sales of plastics and organic synthesis products increased by 5.6% YY to 200,000 tonnes, primarily supported by sales of dioctyl terephthalate following the launch of production in 2019. Sales of elastomers decreased by 21.4% to 107,000 tonnes after the sale of Togliati-based assets in November 2019.