Mr. Noppadol Pinsupa, President of IRPC Public Company Limited (IRPC) said, “For the operating results in the second quarter of 2019 compared to those in the first quarter, IRPC had net sales of Baht 57,702 million, increasing by 6% - products price by 4% and sales volume by 2%. The crude intake was up to 206,000 barrels per day from 200,000 barrels per day in the first quarter when RDCC unit and petrochemical plants resumed the operation after their planned maintenance shutdown for better efficiency. The Market GIM was Baht 5,429 million (USD 9.11 per barrel), increasing by 10% as a result of the increasing volume of high-value products after the RDCC unit resumed the operation though the products spread continued to decrease especially petrochemical products as a consequence of a sluggish global economy caused by prolonged U.S-China trade war. The net stock gain was Baht 491 million, mainly from oil hedging gain, declining by Baht 229 million owing to higher LCM. Hence, the Accounting GIM was Baht 5,920 million (USD 9.94 per barrel), rising by 4%. The other incomes mostly came from the warranty claim of the UHV project. The operating expenses were higher because of the new regulation about employee benefit under Labor Protection Act. Thus, the company had the EBITDA of Bath 2,304 million, decreasing by 2%. The financial cost decreased and the company had foreign exchange gain. Those resulted in the net profit of Baht 507 million in the second quarter, increasing by 231% when compared to the result in the first quarter.
The operating results in the first half of 2019 compared to those in the first half of 2018: IRPC reported net sales of Baht 111,976 million, decreasing by 11%. The main reason was the decrease of selling prices following the crude oil price. The crude intake was 203,000 barrels per day, down by 8,000 barrels per day because the RDCC unit ceased the operation for 28 days in the first quarter. The Market GIM was Baht 10,387 million (USD 8.90 per barrel), decreasing by 39% as a result of the significant decrease of both petroleum and petrochemical product spread. The spread decrease was caused by many factors including the prolonged U.S-China trade war, the new capacity in the region and the increasing crude oil production rate in the U.S. The net stock gain was Baht 1,211 million, declining by Baht 1,208 million. Hence, the Accounting GIM was Baht 11,598 million (USD 9.94 per barrel), down by 40%. The operating expenses were up, mostly because of the new regulation about employee benefit under Labor Protection Act. The Company had the EBITDA of Bath 4,659 million, decreasing by 63%. However, the net financial cost was down and the foreign exchange gain was up. As such, the company had the net profit of Baht 660 million in the first half of 2019, decreasing by 90% when compared to that in the first half of 2018.
IRPC always considers the financial stability. The company has a plan to deal with the market volatility, managing the liquidity. As of the end of the second quarter of 2019, the company had a bank balance amounting to Baht 1,915 million and a planned committed capex of Baht 71,043 million.
IRPC continues the operational efficiency improvement through Everest Forever Project or E4E which is the next step of Everest Project. In addition, IRPC 4.0 Project is the integration of digital technologies, installing new programs in the operational process.
Mr. Pinsupa added, “IRPC focuses on the sustainable growth especially the Research & Development (R&D) on specialty grade products which will create more value to the business. The R&D team developed the High Density Polyethylene (HDPE), P301GR Grade, which is suitable for the pontoons production for the floating solar. This HDPE can reduce the temperature under the solar cell. Thus, the solar cell can generate the electricity more efficiently. IRPC’s Floating Solar Project will be the model for the renewable energy project development. IRPC also aims to cooperate with Electricity Generating Authority of Thailand (EGAT) in accordance with the government’s 2018 Power Development Plan (PDP 2018).”
Besides, IRPC decided to use the waste crude oil as another option for feedstock. The company signed a contract with partners, purchasing the waste crude oil of 300,000-400,000 tons per month. This waste crude oil is actually made from the waste plastics which are processed through the Pyrolysis process. This waste crude oil shares the same property with natural crude oil and the process diminishes the plastic waste of 560 tons per month. This option aligns with the business plan to create more value while responding to the circular economy concept and following the government’s policy to manage the plastic waste sustainably.
For the crude oil situation in the third quarter of 2019, the price is forecasted to range from 60 to 67 USD per barrel. It is attributed to the OPEC and Non-OPEC’s agreement to extend the reduction of crude oil production of around 1.2 million barrels per day for 9 months which will end in March 2020, the tension in the Strait of Hormuz and the hurricane season in the U.S. which may lead to the reduction of crude oil production in the Gulf of Mexico. However, there are some factors which may push the price down. The production in the U.S. may increase. The rising supply comes from Permian gas pipeline to Mexico, which is the country’s primary crude oil export terminal and this project is expected to be completed in the second half of 2019. Moreover, the U.S – China trading negotiation is still unclear.
For the petrochemical market situation in the third quarter of 2019, the demand for the polymer will be higher for several favorable reasons. It may come to the end of tariff increase between the U.S and China after G20 meeting on 28-29 June 2019. The fire incident of the major refinery and petrochemical plant in Texas, U.S, has an effect on the olefin supply. China decided to move the manufacturing base to Southeast Asia to avoid the U.S tariff increase. China also stimulates the economy to respond to the effect from the trade war by decreasing the manufacturers’ VAT from 16% to 13% and increasing the budget for the expenses, etc. However, there might be a pressure. The demand during rainy season may lower. The additional capacity comes from the major petrochemical plant in Malaysia at the end of this year. The U.S might impose more tariff rate as they claimed that China did not buy more agricultural products as promised.