IRPC expects to return to profitability this year
Despite adverse impacts from the weak baht, IRPC expects to reap some profits this year as opposed to the loss it incurred last year, thanks to improved oil-refining rates amid an improving global economic situation and the rise of crude-oil prices, coupl
IRPC, a maker of petrochemical products, incurred currency-exchange losses from the weak baht after it converted its debts into US dollars. However, the impact was not significant, according to company president Atikom Terbsiri.
The company expects to meet its targets this year by reverting back to profitability of about Bt288 billion after incurring a Bt958-million loss last year. Supporting factors in the second half of the year comprise the improving global economic situation, which is raising demand for oil, and the improved gross refining margin of about US$8 (Bt260) a barrel, up from $6-$7 in the first half, amid rising oil prices.
Moreover, after the installation of a mercury-elimination device, IRPC can now refine more crude oil locally from the previous 6,000-7,000 barrels per day to 20,000bpd in the second half. When this improvement is combined with the higher world crude-oil price, the profits for this year should improve.
IRPC has boosted its annual styrene monomer (SM) production capacity by 60,000 tonnes, for a total of 260,000 tonnes per year. The production line is currently operating at 100-per-cent capacity amid rising market trends for SM.
Moreover, IRPC earned additional revenue of Bt1 billion from the sale of vacant land in Rayong province.
For the second half of 2013, the company sees the Dubai crude-oil price staying around $105-$107 a barrel, up from $104 in the first half.
IRPC predicts that in the current third quarter, revenue and profits will be in better shape. Earnings before interest, tax, depreciation and amortisation (EBITDA) will rise thanks to supporting factors, despite the mediocre oil-refining margin especially for petrol, which dropped in the second half from $14-$15 a barrel to $8-$9, and $13 a barrel for kerosene. However, the company has hedging contracts to lessen the impact of weak kerosene prices, Atikom said.
In the current half, IRPC must record Bt44 billion in forex losses from the weak baht after the company converted its debts to 54 per cent in US dollars and 46 per cent in baht.
However, the fact that IRPC also has revenue in US dollars means this forex loss will not have a significant impact on the company’s overall operations. When the baht weakens, IRPC tries to use more dollars for its investments.
The company’s revenues are derived from oil refining (65 per cent) and petrochemicals (35 per cent), with an EBITDA ratio of 50:50 for the two arms of its business.
