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NEWS UPDATES 5 July 2010

Thai chemical company under pressure

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PTT Chemical Plc (PTTCH), Thailand's largest petrochemical maker by market value, has started to feel the impact of falling plastic prices and spread margins, saying its performance will be under pressure for the rest of the year, according to the Bangkok Post.

Veerasak Kositpaisal, president and chief executive, said the declining spreads reflected new supply from the Middle East and Singapore.

The spread from naphtha raw materials to HDPE (high-density polyethylene) fell to a range of $450-500 per tonne in the second quarter from above $500 in the first three months. Prices have also been declining for both plastics and olefins. Even though demand has recovered in Asia, the rebound is not strong enough to absorb the influx of new supply, said Mr. Veerasak.

"We expect this decline will continue to temper our financial performance for the rest of the year," he added.

The lower revenue forecast comes despite the likelihood that some of PTTCH's suspended downstream petrochemical projects in Map Ta Phut will be able to resume operations in the fourth quarter of the year.

The sixth gas separation plant of parent PTT, also delayed by a court-ordered suspension, is also expected to resume and provide PTTCH with raw materials, allowing maximum capacity utilisation of its cracker.

The projection was made after the four-party panel headed by former prime minister Anand Panyarachun finished its work and handed its recommendations to the government to end the dispute over environmental regulation at Map Ta Phut. A list of harmful activities, the key element of the recommendations, is expected to be officially released in the third quarter. Despite the delays and falling margins, PTTCH remains confident its financial performance this year will be better than last year. The company reported 2009 sales of 88 billion baht with a net profit of 6.8 billion. In the first quarter of this year, sales totaled 23.73 billion baht, up 34 percent year-on-year, and 8 percent quarter-on-quarter. Net profit was 3.17 billion baht compared with a net loss of 393 million in the same period in 2009.

PTTCH shares closed on Friday on the Stock Exchange of Thailand at 104 baht, down 1 baht, in trade worth 434.29 million baht.

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