ACRA expert: ‘Record financial indicators of the petrochemical sector will stay until the fourth quarter of 2021’

Peak of standard thermoplastic elastomers in April

“Prices for standard thermoplastic elastomers (according to a price index estimated by Plastinfo) in the Russian market have stabilised,” notes Director of ACRA corporate rating group Vasily Tanukov notes in a comment for Realnoe Vremya. He adds: “Prices in the domestic market on average rose by 25,3% in rubles in the second quarter of the year compared to the first quarter (after 27,8% growth in the first quarter against the fourth quarter of 2020). In the third quarter (July-August), the prices remain stable — a slight decline (by 2,7% in July-August compared to the second quarter) is linked mainly to some reinforcement of the ruble during this period.”

Annually, production output in Russia’s petrochemical sector demonstrated a greater growth pace rather than after the first quarter. “Partly, this happened because of a low-base effect due to a fall in production in the second quarter of 2020,” the expert explains. According to Vasily Tanukov, in numbers this looks the following way: “Plastic production increased by 12,8% in the first quarter of 2021 compared to the first quarter of 2020, rubbers climbed by 18,3%. In general it can be considered the second quarter confirmed the positive forecasts made after the first quarter,” the expert concludes.

He also assumes that the positive dynamics in the sector will stay. “According to the data for July-August, we can expect record-high financial indicators of the industry to stay. Some reduction in prices can be expected only in the fourth quarter due to a recovery of stock and the launch of new production capacities in the world.”

At a board meeting of Tatneftekhiminvest-holding in late July, which was chaired by Tatarstan President Rustam Minnikhanov, Director General of the holding Rafinat Yarullin also noted that financially the first half of the year became record high for backbone enterprises of the Tatarstan gas and petrochemical complex.

Gross profit of Kazanorgsintez triples

In the first half of 2021, with 52 billion 676 million rubles of revenue, which was 31 billion 324 million during the same period in 2020), the gross profit of Kazanorgsintez PJSC more than tripled: to 22 billion 23 million (against 7 billion 281 million in 2020). The complex’s profit also increased 3,6 times: it totalled 14 billion 690 million in two quarters of 2021 (the number in the first half of 2002 was just 4 billion 95 million rubles).

It is also noted current and non-current assets of Kazanorgsintez PJSC grew. Their total amount in money terms reached 83 billion 579 million as of 30 June 2021. By late 2020, they were assessed at 75 billion 83 million rubles.

Compared to the first half of 2020, Kazanorgsintez notably increased sales. If last January-June, the complex sold petrochemicals for 31 billion 319 million rubles, in 2021, it did for 52 billion 659 million. The percentage ratio of Russian sales and exports changed too. A year ago, it was about 1 to 3,4 (7 billion 221 million rubles is the value of exports and 24 billion 98 million rubles is shipping in Russia). In 2021, exports accounted for just 15,8% of the total amount (products for 8 billion 357 million rubles were exported abroad, commodities for 44 billion 302 million rubles were shipped to Russian consumers).

Plastics hold a bit less than 90% of the sales pattern at Kazanorgsintez PJSC. Other petrochemicals and products account for the rest. “After key Russian public petrochemists (Kazanorgsintez and NKNK) published reports for 2020, I had the following expectations in 2021:

In 2021, we expect a total recovery of financial results of the company to approximately the level of 2018, which was better than both 2020 and 2019. At the moment, world polyethylene prices are some 20-25% higher than in early 2020, while the financial results of Kazanorgsintez will additionally support the weak ruble.

However, after half-year reports were published, my expectations were conservative because prices for polyethylene, polypropylene and most other petrochemical stabilised at levels higher than the beginning of 2020. The same can be said about the dollar remaining in the diapason of 73-75 rubles, which additionally backs up the results in the sector. Against this backdrop, we can assume that both NKNK and Kazanorgsintez will show record revenue and profit during the year. Moreover, the results of the remaining part of the year will probably be close to the numbers of the second quarter amid some relative stabilisation in the market,” analyst of FINAM Financial Group Sergey Kaufman expressed his opinion for Realnoe Vremya.