Isocyanate Manufacturers Saw a Decline in Q3 Results
2018-11-13    [Source:PUdaily]
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PUdaily, Shanghai-- As the global economic environment becomes increasingly harsh, its impact on the businesses begins to appear. Isocyanate manufacturers are no exception. Recently, many listed companies reported their third quarter 2018 results. As the MDI and TDI prices dropped under downward pressure, the earnings of many companies’ isocyanate units declined compared with last year. The third quarter results of individual companies are as follows:

1.BASF: sales increased while earnings fell in Q3

In the third quarter of 2018, BASF Group's sales rose 8% year on year to €15.6 billion .This was primarily attributable to higher sales prices in all segments. Volumes growth and the acquisition of the Bayer businesses in August 2018 also contributed to the sales increase. Negative currency effects had an offsetting impact. Income from operations (EBIT) before special items declined by €232 million to €1.5 billion, mainly due to the significantly lower contribution from the Chemicals segment. EBIT before special items also decreased considerably in the Functional Materials & Solutions and Agricultural Solutions segments, but fell only slightly in the Performance Products segment. This was partially offset by improved earnings in other segments.

Sales in the Chemicals segment rose by 7% compared with the prior-year quarter to €4.3 billion. This a result of higher prices in all divisions, especially in Petrochemicals. At €851 million, income from operations (EBIT) before special items was down by €251 million versus the strong third quarter of 2017. This was primarily due to lower margins for isocyanates in the Monomers division and steam cracker products in the Petrochemicals division. Earnings were also negatively impacted by higher fixed costs due, among other factors, to increased maintenance expenses. Improved earnings in the Intermediates division were unable to compensate for this.

2. Covestro: solid results in an increasingly challenging market environment

Covestro continued its positive business performance in 2018 with a solid third quarter in an increasingly challenging market environment. Group sales grew by 4.8% to EUR 3.7 billion over the same quarter in 2017 thanks to higher selling prices and volumes sold. Core volumes were up marginally by 0.2%, remaining at last year’s level despite limited product availability. At EUR 859 million, the Group’s EBITDA also matched the prior year period. Declining margins in the Polyurethanes segment were offset by higher margins in the Polycarbonates segment. Net income rose slightly by 1.0% to EUR 496 million. Earnings per share advanced by 6.6% to EUR 2.59, supported by the ongoing share buyback. Free operating cash flow (FOCF) was down 12.2% to EUR 578 million due to increased investments.

In the Polyurethanes segment, sales decreased marginally in the third quarter of 2018, by 1.2% to EUR 1,849 million. A decline in sales in the EMLA and APAC regions was balanced out by an increase in the NAFTA region. Price changes, currency effects, and unplanned plant downtime had negative effects. Core volumes in the Polyurethanes segment dropped by 2.0%. EBITDA in the segment was down 21.5% to EUR 432 million. This was attributable mainly to rising purchase prices for raw materials.

3.Wanhua Chemical: EPS for Q3 was 0.76 yuan due to downward pressure on PMDI price

On October 23, the Company announced its Q3 results and operating data. For the first 3 quarters, it earned revenues of 45.923 billion yuan, up 9.37% year over year. Net profit attributable to the shareholders of the parent company amounted to 9.021 billion yuan, up 15.49% year on year. Net profit after deduction of non-recurring profit or loss stood at 8.462 billion yuan, increasing 9.23% compared with the prior year. EPS stood at 3.30 yuan and operating net cash flow at 15.519 billion yuan. For Q3, the company earned revenues of 15.869 billion yuan, up 9.19%. Net profit attributable to the shareholders of the parent company amounted to 2.071 billion yuan, down 29.79% year on year. EPS stood at 0.76 yuan.

Both production and sales fell; revenues from the PU business declined: For the production and sales in Q3, the two figures for the polyurethane series fell 8.53% and 5.69%; for the petrochemical series were down 11.12% and 2.31% and; for the fine chemicals and new materials series dropped 24.99% and 4.68% month on month, respectively. As for the revenues, the figures for the polyurethane series fell by 13.34% due to a drop in MDI prices; for the petrochemical series rose 12.52% due to the rise in prices of petrochemicals driven by price increase of oil; for the fine chemicals and new materials series fell by 6.12% month on month.

4. Cangzhou Dahua: revenues edged down in Q3

The financial report for Q3 released by Cangzhou Dahua shows that during the reporting period (January-September 2018), the company earned revenues of 3.55 billion yuan, up 13.47% from a year earlier. The net profit attributable to shareholders amounted to 1.029 billion yuan, up 6.63% year on year. The basic earnings per share stood at 2.4981 yuan/share, compared with 2.3428 yuan/share. As of September 30, Cangzhou Dahua’s assets totalled 4.741 billion yuan, up 9.14% from the end of last year. Net cash flow from operating activities for the period amounted to 1.029 billion yuan, compared with 971 million yuan for the same period last year.

For the third quarter, due to the decline in TDI prices Cangzhou Dahua’s revenue reached 1.056 billion yuan, falling 0.3% slightly. And because the oil prices rose, which drove up the raw material costs, the net profit for the third quarter fell 19% to RMB 280 million.


Note: as Huntsman’s quarterly report is still not available by the time the article is published, its results are not presented here.

The polyurethane businesses witnessed good results in 2017. But this year’s economic situation is severer. So it is natural that they saw declining results. In the near future, competition will become fiercer as global new capacities for isocyanates will be put into production steadily. This may bring change to the industry.

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