(MENAFN- The Peninsula) The Peninsula
Mesaieed Petrochemical Holding Company (MPHC), one of the region''s premiere diversified petrochemical conglomerates, yesterday announced a net profit of QR1.2bn for the last financial year ended December 31, 2019, which was down by 15 percent compared to the previous year, amid declining selling prices and declining sales volumes.
Global economic uncertainty, slowing GDP growth and trade conflicts all weighed on demand for MPHC products, with a rising surplus capacity, which created an imbalance in supply-demand dynamics and pressured the group''s product prices.
After reviewing the year''s financial performance in light of current macroeconomic conditions, the group''s liquidity position and future investing and financing needs, the Board of Directors proposed a total annual dividend distribution for the year ended December 31, 2019 of QR0.9bn, equivalent to a payout of QR0.07 per share and representing a payout ratio of 74 percent.
Commenting on the financial results, Ahmad Saif Al Sulaiti, Chairman of the Board of Directors at MHPC, said: ''In a difficult market, we successfully navigated challenging macroeconomic headwinds to increase operational reliability and efficiency, while laying the groundwork for future growth.
Entering 2020, we remain focused on our five-year business strategy to strengthen MPHC''s market position, while driving cost optimisation and generating improved shareholder value.
During the year, selling prices declined by 15 percent and sales volumes fell by 5 percent as compared to the previous year, both translated into a decrease in revenue of 19 percent.The production drop of 3 percent resulted from maintenance shutdowns.
These shutdowns are part of the group''s commitment to HSE, ensuring plant life, quality and reliability standards, which ultimately improves and maintains group operational efficiency.
In the fourth quarter, the group reported a net profit of QR698m, which was a 270 percent increase from QR189m profit reported in the third quarter of 2019.
The increase was mainly due to the adjustment for income tax exemption, which was effective retrospectively from January 1, 2019 for the full year. However, selling prices, group revenue and profits all reflected the downward trend against the backdrop of challenging macroeconomic conditions.
Liquidity remained robust throughout the year and the group''s balance sheet strengthened. Cash held by MHPC (including proportionate share of joint ventures) at the end of December 31, 2019 reached QR1.8bn and total assets stood at QR15.5bn, compared to QR15.3bn at the end of 2018, after accounting for dividend pay-outs for the financial year 2018.
MPHC''s business performance in 2019 reflected the challenging conditions affecting the region and global markets. The company responded by leveraging its inherent strengths: its competitive advantage of having uninterrupted, long-term access to competitively priced feedstock, and its partnership with Muntajat, a leader in chemical product marketing and distribution, which aided maintaining the sales volumes at 1.1 million MT per annum, and improved group''s access to global markets.
In addition, MPHC launched a series of major new cost optimisation initiatives across its businesses that will generate efficiencies for years to come, while maintaining its exemplary HSE record, the company said in a statement.
In 2019, the petrochemicals segment reported revenue of QR2.2bn, a decrease of 18 percent from 2018. Net profit reached QR874m, compared to QR1.1bn in 2018, with a decline of 16 percent. Revenue and earnings were primarily impacted by the drop in selling prices, which declined by 16 percent as compared to the last year.
This was mainly due to softening demand for petrochemical products in key markets, combined with overcapacities in various regions, which created an imbalance in supply-demand curves and led to declining commodity prices.
During 2019, production dropped by 2 percent, which led to a decline in sales volume of 2 percent.
The drop in production volumes resulted primarily from maintenance shutdowns, which are necessary to maintain plant life and ensure HSE standards.
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