Good day and thank you for standing by. Welcome to PETRONAS Chemicals Group fourth quarter results conference call. At this time, all participants are in listen-only mode. After the speaker presentation, well, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automatic message advising your hand has raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Safarah Salim. Please go ahead.
Thank you, Nadia. Good evening, ladies and gentlemen. Welcome to PETRONAS Chemicals Group Berhad analyst briefing for the fourth quarter and year-ended 2022 financial results. I'm Safarah from the investor relations team. Thank you for joining our call this evening. You should, by now be able to access and download the financial results from the Bursa website as well as the presentation materials in our corporate website or in the link provided in the event invitation. Ladies and gentlemen, our senior management in attendance today is led by our MD CEO, Encik Mohammad Yusri, our Chief Financial Officer, Encik Azli, Encik Zamri, Chief Manufacturing Officer, Encik Yaacob, Head, Strategic Planning & Ventures, as well as Ms. Debbie Chu from our new specialty segment. We also have online with us, Ms. Alia, Head of Investor Relations. Ladies and gentlemen, a quick highlight.
Today you will see a new presentation that crafted from feedback that we received from you in the past. We will only have two speakers today, namely Encik Yusri and Encik Azli. We hope this presentation format will serve you better, and we welcome your feedback for further improvements. Without further ado, I'll hand over the call to Encik Yusri.
Thank you, Safarah. Good evening, ladies and gentlemen. Welcome. Thank you for joining us today. We will begin our session today with the market highlights for the year 2020. In 2020, global economy slowed down due to recessionary and inflationary pressures amid the ongoing geopolitical crisis and COVID restrictions, particularly in China. Central banks tightened monetary policies to curb inflation, which weigh down the global markets. As a result, in 2022, average global GDP growth was lower at 2.9% as compared to 5.5% in 2021. Global PMI contracted to 48.6 in 2022, a decline from what was 54.2 in 2021, mostly due to softened demand globally for finished product, which led to lower new orders and production rates.
Nonetheless, we saw the benchmark Brent crude oil price average $101 per barrel as compared to $71 per barrel in 2021. Largely due to supply limitation amidst the Russia-Ukraine war and overall improved demand following the easing of COVID-19 related restrictions. Petrochemical prices were assessed higher across all products against the 12-month period of 2021, in line with higher energy prices, with the exception of MEG and Methanol. All in all, to us, 2022 was two very different period where we see the first half and the second half contrasting each other. The first half of the year saw strong energy prices spurred by Russia and Ukraine conflict, while the second half of the year was impacted by rising inflation, which led to slowdown in economic growth. That's our backdrop of the year for 2022.
Now let me take you through the highlights of PCG. Ladies and gentlemen, I would like to start with a quick recap on our growth strategy. With that, I would also like to introduce our new member, Ms. Debbie Chu, which was introduced by Safarah earlier. As we introduce a new segment, Specialty Chemicals, she is assuming the role of Head of Specialty Chemicals for PCG. As our growth strategy, we do have a two-pronged strategy for the business and the growth. First prong is to sustain strength in basic petrochemicals, and the second is to selectively diversify into derivatives, specialty chemicals and solutions. We have been very consistent in our execution and delivery of this strategy. We started our diversification with the acquisition of BRB to our portfolio.
In 2022, with the acquisition of Perstorp, we have further expanded the second prong strategy and realize our aspiration to establish a third operating segment that is a specialty segment comprising of both currently BRB and Perstorp, and this has been included in our fourth quarter results. With this addition, we are expecting to achieve our medium-term target of 30% additional revenue from non-traditional business ahead of our 2030 timeline. We tracked our plant utilization for our Malaysian operations. In 2022, we saw higher maintenance activities compared to 2021 with 4 turnarounds and 2 pit stops completed. Due to these major activities, our plant utilization rate for 2022 came to 89% against 93% in 2021. Our total production is comparable at 10.4 million tons, contributed by first stock production volume despite lower production from our Malaysian operation.
Sales volume was also slightly higher by 1% at 8.3 million tons, with additional volume from first stock against 8.21 million tons in the financial year of 2021. The market front, prices were higher year-over-year across all products in tandem with higher crude oil prices, except as I said earlier, methanol and MEG, as the lockdown in China saw both reduced MTO operations and reduced demand in polyester. Against this backdrop, we recorded MYR 29 billion in revenue, 26% higher than the corresponding period, driven by higher product prices, coupled with favorable foreign exchange impact and additional revenue from first stock.
EBITDA and PAT were both lower at MYR 8.09 billion and MYR 6.33 billion respectively, mostly due to higher fuel costs and energy utilities and lower profit share from our JV and associates. Subsequently, EBITDA margin was lower at 28%. I'll have Azli to take you through the details of the segmental and financial performance next. Azli.
Thank you, Chin Yusri. Ladies and gentlemen, very good evening and thank you for joining us. As mentioned by Chin Yusri earlier, we have realized our aspiration to have a specialties segment. With the addition of the new segment, we have re-looked at how best we can better serve and better share our performance with you. I will now take you through the group performance by segment. Let's start with the Olefins & Derivatives segment on page three of the deck. I will be focusing on the year-over-year changes, comparing fourth quarter 2022 against fourth quarter 2021. The market has declined against the corresponding quarter, with GDP growth declined to an average of 1.5% and PMI moved into a contrary territory as demand has softened and the manufacturing sector has slowed.
While the benchmark Brent crude oil prices averaged 11% higher in Q4 2022 at $89 per barrel, petrochemical product prices within our O&D segment were largely lower, with the exception of paraxylene and MTBE that has recorded higher prices due to higher crude oil price. We recorded a strong plant utilization at Q4 2022 at 99%, albeit slightly lower than Q4 2021, as we experienced a slowdown at our aromatics and glycol plants. Our production volume was slightly lower, but nonetheless, our sales volume had improved by 12% for the quarter. Following that, the revenue for the segment increased 2.6% to MYR 3.5 billion on higher sales volume, namely ethylene and polymer, and backed by favorable ForEx impact.
EBITDA was lower year-on-year at MYR 372 million compared to MYR 732 million, a decline of 49%. This is Higher fuel costs and higher fixed costs at the back of maintenance costs at some of our plants, as well as lower spread, mainly from the Ethylene related products. Our PAT for the segment declined significantly in line with lower EBITDA, compounded by the share of loss from our JV and associate, namely our JV with BASF for the Acrylic Acid and Oxo product, as well as our JV with Idemitsu for the Styrene Monomer business. Now let's move to Fertiliser & Methanol segment on page 4 of the deck. The Russian-Ukraine war that began in March 2022 saw a sudden spike of crude oil and natural gas prices on supply concerns following restriction of Russian oil and gas.
As producers found alternative sources, Europe faced a milder winter. Natural gas prices declined on lower demand. Subsequently seeing prices for urea also decline, even while ammonia prices remained elevated on supply shortage due to the sanction of Russian products. Methanol prices declined year-on-year on lower demand following reduced methanol to olefins operations in China on continued lockdown and the decline in the European demand following high electricity charges affecting their production costs. Our PU improved to 100% against 83% on the corresponding quarter on lower turnaround days and overall better plant performance, seeing both production and sales volume improved.
In line with improved sales volume and favorable ForEx impact, our revenue for the segment increased by 8% to MYR 3.5 billion. EBITDA declined 12% from MYR 1.6 billion to MYR 1.4 billion, largely due to lower spread on product prices, high variable costs and sales tax, particularly in Sabah, as well as positive ForEx impact. Moving forward, from fourth quarter of 2022, we will now have established a new specialty segment that houses our specialty chemical business for PCG. That will be on page 5 of the deck. For the performance of the specialty segment, we will compare the performance for fourth quarter 2022 against fourth quarter 2021. It is important to note that the contribution from Perstorp acquisition are only consolidated officially from October 2022 onwards.
In quarter four, 2022, we saw as the specialty segment recorded lower revenue and lower EBITDA attributed to lower demand, as well as high energy costs, particularly in the European region, as well as higher raw material costs that eroded the margin. However, looking back at 2022 as a whole, the performance of the specialty chemical segment was still commendable compared to 2021 with higher revenue year-on-year following increased product prices despite lower sales volume but lower EBITDA due to weaker margins from higher costs. The change in trend was particularly visible with the market dynamic changing since summer 2022, whereby higher sales price were offset against higher energy costs and long market in second half of the year, leading to weaker demand and margin.
In general, the sales volumes and product mix was lower in second half of 2022 due to lower end market demand and aggressive customer inventory de-stocking. For the animal nutrition market segment, higher feedstock costs and lower customer pro-profitability has led to lower sales to customers. Next, let's look at our group performance for the full year of 2022 on page 6 of the deck. As highlighted by Encik Yusri earlier, our PU was lower compared to the same period last year at 89% versus 93% due to 4 turnarounds and a couple of pit stop activities at various sites, namely our aromatics plant, our derivative plant in Kertih, methanol plant in Labuan, as well as our fertilizer plant in Sipitang, Sabah.
Nonetheless, with the inclusion of Perstorp on the fourth quarter, our total production and sales volume were comparable at 10.4 million tons and 8.3 million tons respectively. Market was weaker on the second half of the year compared to the first, group revenue surged 26% to MYR 29 billion. At MYR 8.1 billion, EBITDA was 2% lower against last year, mainly due to higher fuel, energy and utilities costs, as well as higher plant maintenance costs. EBITDA was also impacted by higher feedstock costs and margin compression, which also impacted our European subsidiaries. Correspondingly, EBITDA margin declined from 36%-28%.
PAT was lower at MYR 6.3 billion against MYR 7.3 billion last year in line with lower EBITDA, but most importantly due to lower share of profit from JV associates and unrealized ForEx loss. Let's proceed to the cash flow and balance sheet statement. We first take a look at the cash flow on page 7 of the deck. Year to date for CFFO, net cash generated from operating activity was lower by MYR 137 million at MYR 8 billion, mainly due to a higher taxation paid and partially offset by higher interest income received.
Next, on the right side of the consolidated cash flow, net cash used in investing activity was higher at MYR 11.4 billion, mainly due to payment for acquisition of Perstorp and higher purchase of property, plant and equipment for the turnaround that we have incurred this year. At the end of the period, our cash balance remained healthy at MYR 8.9 billion with ample credit headroom and stable gearing ratio at 7%. This puts us in a financially strong position to continue pursuing our growth strategies. Looking at our balance sheet on page 8 of the deck. Total asset was higher by MYR 9 billion at MYR 55 billion, mainly due to higher intangible asset due to recognition of trademark, patents, technology know-how and goodwill arising from the acquisition of Perstorp.
Also contributed to higher total asset or higher property, plant and equipment, project costs incurred in the Pengerang, as well as PC Isononanol, including capitalization of turnaround costs related. Total equity was higher contributed by profit generated during the year and ForEx translation reserve due to the weakening of Ringgit Malaysia against the dollar, partially offset by the dividend that we have paid during the period. As you will know and notice from our Bursa announcement, the board of the company has also declared an interim dividend today at MYR 0.16 per share, amounting to MYR 1.3 billion, which will be payable on 23rd March 2023. The total dividend declared for the full year 2022 amounts to MYR 3.3 billion, representing 52% of PAT, which is in line with our dividend policy. That's all from me.
I'm handing back to Yusri for the sustainability and way forward.
Thanks, Azli. Let's move on to our sustainability-related progress and development. Our sustainability program, as we've been talking previously, are always built upon 3 main pillars: economy, environment and social with strong foundations of governance. As a responsible chemicals producer, we are committed to our pledge of Net Zero Carbon Emissions 2050 roadmap that we rolled out last year. Sets our reduction goals and pathways. Our commitment on carbon footprint reduction not only focuses on reducing our emissions, but we are also progressively pursuing our new plastic economy agenda. A circular approach to rethink plastics by turning problems into opportunities to our 4 keyword streams. Innovation, infrastructure, education, and community involvement in all our green campaigns.
Looking at the year 2020, we have enhanced our sustainability agenda and made sustainability at the core as our focus in order to better embed the practices within our organization. One of the key enhancements that we made was adopting a more strategic approach towards driving sustainability, including consolidating environmental topics, renaming focus area, aligning selected UN SDGs, and even providing a different platform. Spoken at length earlier on our operational details, commercials and financial performance, let's focus on the other two pillars, starting with the environmental pillar. That's the middle piece of the slide that you are seeing. In 2022, we mainly focus on first, climate focus agenda with our operational unit implementing initiative to realize our Net Zero Carbon Emissions roadmap.
Setting the aspiration to reduce our emissions, we had earlier set a cumulative target to reduce 100,000 tons of CO2 equivalent from our Malaysian operation by 2024. With continued focus on operational optimization at all our operating units, I'm happy to report that this year we have actually achieved a total reduction of Scope 1 and Scope 2 of about 108,000 tons of CO2 equivalent by the year end of 2032. Well ahead of what we were planning, we will continue driving these reduction efforts moving forward. Extending our review into Scope 3 emissions, we have initiated a detailed assessment in 2022 to basically develop a baseline for all 15 Scope 3 categories of emissions.
This is expected to enable us to better calculate the accuracy of Scope 3 emissions of our operations and identify opportunities to further reduce our carbon emission and our carbon footprint across our supply chain. Our waste recycling rate for the year was higher than 2021 at 77% versus 75%, mostly due to high amount of waste sent for recovery post the turnaround that we did. Moving on to the social pillar, our corporate social responsibility plan and implemented to support PCG sustainability agenda. Through various programs such as Be Green, our ecoCare Mangrove Rehabilitation Program, Community Development and Wellbeing Program, and the Plastic, Sustainability and You education program, at our various operating units, we are able to reach to over 300,000 community members. On governance, aligns our call for sustainability at the core, we have ensured board oversight for sustainability matters.
This was achieved through the enhancement of our risk management committee to sustainability and risk management committee for the board. These reports for the management committee and this reports to the new board sustainability and risk committee, previously known as Board Risk Committee. Additionally, a sustainable development steering committee was formed to steer our sustainability agenda across all our operating units to include the sustainability in their day-to-day activities. We have also been active in closing the social risk assessment gaps identified in 2021. At the end of 2022, 88% of the identified gaps have been closed, and the remaining relates to the enhancement of contractors' code of conduct on human rights implementation in our supply chain. We expect to close this by the end of quarter one this year, 2023.
Another element of human rights that we worked on in 2022 is diversity and inclusion. To that effect, we have adopted PETRONAS' diversity and inclusion statement towards fulfilling our commitments to uphold diversity and inclusion in our workplace. Now, let me take you briefly to our immediate market outlook. Generally, on the immediate term, we view fairly high level of feedstock prices, geopolitical tension, and progress of China's border reopening as the key factors to be monitored in the market space. Just as the announcements of loosening of COVID-19 restriction and China's opening came in, we saw a slight uptick for the O&D segment from buying and restocking activities prior to the Lunar New Year recently. Recently, we have seen buyers returning on refreshed demand as China plants and downstream units resume operations.
From this segment remains stable, while Ethylene is seeing some firmness on strong spot demand. Both Polymer and MEG are also seeing some improvement post the Lunar New Year. Paraxylene is also expected to be stable, despite we see some short supply due to regional turnaround, but the demand for the downstream PTA remains limited. The F&M segment is expecting Urea prices to be bearish, with oversupply and planting season yet to kick in. Demand is expected to pick up in March, as markets anticipate an Indian tender by the end of February. Meanwhile, in South East Asia, buyers are delaying new purchases until after the raining season.
Methanol price is expected to be firm, mainly due to tight supply, with some plant maintenance in Southeast Asia and the potential support on Indonesia's new biodiesel blending mandate to increase the use of methanol. For our specialty segment, improvement in the macroeconomics environment and management of feedstock will be key to its performance. While elevated gas prices are seen globally with the Russia-Ukraine war ongoing, the European region is particularly vulnerable. We expect modest recovery within the first quarter of this year as most inventory destocking activities completed. Nonetheless, the uncertainty of China's reopening and its impact on supply chain and the inflation remains a key concern affecting the demand of specialty chemicals. All in all, the outlook remains challenging with uncertainty and volatility playing in a mix of concerns.
We will continue our focus on our pricing excellence and managing our product mix in this challenging environment. Ladies and gentlemen, before we go to Q&A, let me share with you our focus area for 2023. As a start, our goals remain. We aim to achieve 50% improvement in cash flow by 2025 by developing new sources of revenue. To ensure sustainability of the company, we aim to achieve 30% additional revenue from non-traditional business, such as specialty chemical and sustainable solutions by 2030, and our Net Zero Carbon Emissions target by 2050 in doing our part to fight climate change.
On the 50% improvement in cash flow by 2025, we continuously are refining our initiative for operational and commercial excellence to ensure a profitable business and our growth through delivery excellence and diversification initiatives, like our green and bio agenda. The acquisition of Perstorp brings us closer to achieve our target of creating 30% additional revenue from non-traditional business and deliver on our growth commitment to diversify into specialty chemicals and solutions. Our way forward with Perstorp is to continue preserving and growing the business and to ensure completion and deliveries of current ongoing projects, namely our project in India. Being a conscientious player in the petrochemical industry, PCG recognizes our responsibility to balance out the risk of climate change with a mandate to produce and operate in sustainable manner.
This includes actively mitigating the effect of climate change and other sustainability risks by reviewing our growth projects and opportunities. We will continue to do this with in earnest in 2023. On growth projects, the focus is to ensure project that is currently ongoing, the melamine plant in Gurun, the Nitrile Butadiene Latex plant in Pengerang, and the specialty phthalates and polyol plants in Kertih, will be progressing as per their schedule and plan, so that we can deliver our growth commitment as we have stated before. On our net zero aspiration, we have spoken about our achievement earlier. This is namely within our Malaysian operation. With Perstorp, we now have entered in the landscape has matured. We are expecting new challenges in the areas of regulations and disclosure requirements.
We aim to align the disclosure of PCGs and Perstorp's environmental data and targets to ensure compliance with all reporting requirements and global EESB benchmarks and work toward improving our own disclosure.
That concludes what I have today. Let's go to Q&A.
Thank you. Dear participants, as a reminder, to ask a question you need to press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. This will take a few moments. Now we're going to take the first question. The question comes from the line of Desmond Loh from Citi. Your line is open. Please ask your question.
Hi, management. Can you hear me?
Yes.
All right.
Go ahead, Desmond.
Thank you. Yes. Thank you for the opportunity to ask question. I have a few questions for you. The first one is given the ethane feedstock contract for optimal cracker will come into expiry in November 2023, right? What is the process of negotiation with the parent? Do you expect any gas price increase similar to previous contract expiry in 2016? Secondly, would you mind providing the Perstorp standalone revenue and EBITDA contribution in the fourth quarter? What do you expect for 2023 EBITDA margin for Perstorp?
Desmond-
For RAPID downstream.
Sorry, Desmond.
Right.
Des-
Right.
Desmond. Sorry, we lost you earlier.
Yes, yes.
Can you repeat your question again? We only got Ethane to optimize, and that's. After that we lost you.
Okay. All right. Can you hear me now?
Yes. Yes.
Yes. Given the ethane feedstock contract for optimal cracker will come into expiry in November 2023, what is the progress of negotiation with parents? Do you expect any gas price increases similar to previous contract in expiry in 2016? Second question, would you mind providing Perstorp standalone revenue and EBITDA contribution in the fourth quarter? What do you expect for the 2023 EBITDA margin for Perstorp? Thirdly, for projects for the RAPID downstream complex, when do you expect to start commercial production and recognizing revenues? Lastly, for the SAMUR Urea project, how do you plan to use the cash proceeds of 25% disposal of it? Any chance of special dividend? Thank you.
Thank you, Desmond. That's a lot of list of questions there. Let's tackle the first question with regards to our ethane contract. Currently PCG is in discussion with PETRONAS with regards to the expiry of the C two and C three gas contract. Currently we have yet to have a final lending and based on the past expansion of our C two contract back in 2016, we expect that the renewal of the contract to be no material different from what we have right now. That is our expression as PCG. I just want to reiterate that our negotiation with PETRONAS has yet to be formalized or finalized. On the second question, we do not disclose a standalone EBITDA EBITDA margin of Perstorp.
That contribution of Perstorp will be embedded as part of the specialties segment, the new segment that we have introduced. The sole contributor of this specialty segment will be BRB and Perstorp. Moving forward, we believe and what we have seen in quarter four, the performance of Perstorp are in line with their peers, for quarter four, as well as for the full year of 2022. On Pengerang, we are expecting COD for the whole site to be by hopefully, end of quarter three, early quarter four this year, as we are starting up the complex currently. I think the refinery and cracker has been running quite well, stably, at the rate of plan is being started up. We have currently 5 plants.
They are various stage. 3 plants are already at the rate of maybe 80%. 2 more plants are being started up. As we get those plants running within this or next quarter, we will be going through our performance test run and post-performance test run, then targeting by quarter 3, and then we will be declaring COD. On your final question with regards to the disposal of 25% interest in our fertilizer plant in Sabah, we are still in a discussion with the Sabah State Government with regards to the final definitive agreement, the SPA. Currently that particular agreement is still in negotiation, and we will make the announcement if required on the terms of the transaction. Currently, there's no plan for any dividend arising from this transaction. I hope we answered your question, Desmond.
Yes. Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Now we're going to take our first question. The next question comes to line of Vivek Rajamani from Morgan Stanley. Your line is open. Please ask your question.
Hi, sir. Thank you for this opportunity. Just 1 question. For 2023, just want to check how many plant turnarounds do you plan for the next 4 quarters? Thank you.
For 2023, we do have a couple of plant turnaround, I think mainly, PC Ammonia and PCM MTBE. We do have a few pit stops, scattered across the year, for 2023. That's why our guidance for volume is still about 10 million tons, PU of around 90-91%.
Got it, sir. just to clarify, you said PC Ammonia, and what was the second one?
PCM MTBE.
Got it, sir. Thank you so much.
Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Now we're going to take our next question. The next question comes to line of Ahmad Maghfur Usman from Nomura. Your line is open. Please ask your question. Excuse me, Ahmad, your line is open. Dear participants, once again, if you wish to ask a question, please press star one one. Now we're going to take our next question. The next question comes to line of Vivek Rajamani from Morgan Stanley. Your line is open. Please ask your question.
Hi, sir. Thank you for taking my question again. You did touch upon this briefly in your management comments, but just wanted a bit more color in terms of the demand trends that you're seeing in the first 2 months of this year, particularly for your key products. Have you seen, obviously, you've mentioned you've seen a bit of improvement, but some more color and what kind of trends you're seeing so far would be appreciated. Thank you.
Thanks. I think on O&D side, demand especially Polymer, starts to come back post-Lunar New Year and post-China opening as again, inventory. As I mentioned earlier, glycol remains subdued from that perspective. Same with aromatics. On F&M, we saw on Urea itself, a slight overhang of supply as compared to demand. We see customer are not picking up yet, mainly because of season. We believe that people are expecting, waiting for planting season and here, especially in this region, are expecting post the rainy season that we're seeing today. We do expect that a bit tender will be coming out from India, and we'll start once that comes out and then the planting season comes in towards the second quarter.
We are expecting a bit more increase in demand for urea. Methanol remains tight in supply, so demand is still quite good. Price is another thing that we need to look out for, though. That's what we see today, Vivek.
Thank you so much, sir. Just one clarification. I think we were reading that, particularly in the chemical side, we did see quite a bit of inventory build-up in some of the products, and you did see a number of chemical players take meaningful utilization rate cuts over the last quarter or so. Just wanted to check if you're starting to see both these factors, at least slowly turn around with the margins. Thank you.
As I said, O&D, as China's open, we start seeing that. We start seeing rates started coming up. We're not seeing that on the urea side yet because the demand has not been coming in as what we expected currently. That's, you know, it's same thing of what I was explaining before. If you want to look a bit on specialty, we still believe that they are still a bit lagging. We are expecting restocking will come back maybe towards the second half, second later part of quarter one, maybe more towards quarter two.
Got it, sir. Thank you so much for the clarification.
Thank you. Now we're going to take our next question. The next question comes to line of Sumit Samant from JP Morgan. Your line is open. Please ask your question.
Yeah. Thank you so much for the detailed presentation. I have a few questions actually, and I'll go one by one. Firstly, on your specialty chemicals business, can you guide us broadly on your volumes growth as well as EBITDA margin? I think 2022 is around 12%. Can you please guide us volume and margin number on this? Thank you. That's my first question. I'll go one by one.
I think, Sumit, thank you for your question. I think your question is more of the group volume growth and EBITDA margin for 2022, right?
Sorry, 2023, yeah? Yeah.
For 2023?
Yeah. Okay.
Okay. I think what QC has mentioned earlier, we expect modest recovery for volume for specialty chemical, because we believe that destocking activities that happens in quarter four in 2022 has completed. Our guidance is basically a modest recovery with regards to sales volume moving forward. We have disclosed in our analyst briefing deck, the sales volume for specialty segment quarter by quarter. Perhaps you can build up on your valuation model on that front. In terms of EBITDA margin, I think our EBITDA margin, when we compare Perstorp and BRB at EBITDA margin, they tend to behave in line with their peers. I mean, I cannot provide what the profit forecast, guidance and we believe both Perstorp and BRB will perform in line with their peers.
Just on that. I think for the full year last year it is around 11% - 2%, I think. Should we assume that it might be similar throughout this year? If, even if you can't provide us a quarterly or exact guidance.
Yeah, I think for the full year 2022, the both BRB and Perstorp combined, they contributed to 13.5% EBITDA margin. When we compare with the listed peers, they are outperforming their listed peers, which for the full year recorded around 10%-11% EBITDA margin. We will, you know, as we have experienced before, these specialty companies will historically record in the range of 15% EBITDA margin. That would be, you know, what we aspire for Perstorp. I think that would be remain to be seen for based on the market dynamics.
Understand. Thank you for that. My second question is on the comments that were mentioned on the waterfall that there was a Sabah sales tax. Was there any tax paid on the Sabah assets?
This is basically a sales tax for our Urea, that's produced out of Sabah. That's a 5% sales tax on the revenue, which is additional cost of business for us. For PCG, we managed to, you know, have a deliberation with the Sabah tax authority that we only pay the sales tax on the incremental value. Basically, Urea prices minus the gas, that we procure from PETRONAS, that would be the amount that will be subjected to a Sabah sales tax. The amount.
Oh, interesting.
The amount in comparison.
Yeah. Sorry.
Is not too material compared to our total tax.
Okay. Is it fair to say that the taxation is being done only on the EBITDA or EBIT level?
It's, yes, it will be on incremental basis because PETRONAS is also paying a Sabah sales tax for the gas that they are selling to us.
Understand. It's a tax on incremental value added. I understand.
Correct. Correct. Yeah.
Okay. Okay. That's, that's actually very useful. I just want to understand, in the, in the last quarter, fourth quarter, I understand there was a Perstorp refinancing as well. Correct me if I'm wrong, and if that's the case, was there any one-off cost for refinancing?
It's not refinancing, Sumit. It's basically for us, we replace the external financing with our own shareholders loan to Perstorp. That is part of the deal where upon completion of the deal, we will replace the external borrowing with our own funding. Based on the agreement and the financing agreement, we do not have to pay any penalty on early payment of the debt.
Okay. Okay, I understand. Just my last question is actually on dividends. I mean, what we clearly saw was dividends came down year-over-year, although the company still has plenty of cash and the cash flows are still quite good. Just want to understand the rationale behind cutting dividend. Thanks.
we're not cutting dividend, Sumit. As you notice, our dividend, second interim was also in line with our dividend policy. If we add up the dividend that we paid, the first interim and the second interim is total up to 52%. This is in line with our dividend payout history, if you notice, throughout the past 10 years, and also our dividend policy. we stand guided by the policy, Sumit.
No, well noted. I was just comparing to last year, but I understand there was a special as well. Anyway, thank you so much for your answers. I appreciate it.
Thank you. Now we're going to take the next question. Just give us a moment. The next question comes from line of Ahmad Maghfur Usman from Nomura. Your line is open. Please ask your question.
Hi. Sorry, I couldn't connect earlier. Can you hear me?
Yes. Yes.
Okay, great. I just wanted to get more color with regards to the sustainable methanol project. What is the medium to longer term story on that particular project? Aside from the modest recovery in volumes that you're expecting for 2023, are there any capacity expansion? Because I understand there is a new plant in India, if I'm not mistaken. How much would that be on the incremental volumes for on a full year basis, you roughly reckon? Those are my two questions. Thank you.
Thanks, Ahmad. I let our new Debbie to take your question.
All right. Thank you for the question. The first one you're asking about is the green methanol, which is our Project Air. We're very happy to share the information with you guys that we actually get recognized by the European Union. We get fundings from that. This is gonna be a great move forward for us because this is a collaboration between Perstorp and also Uniper of the number one German energy company that we're gonna go together in producing the green and green methanol. That's gonna be our first plan.
Our medium to long term is we're gonna take what we have learned and also, you know, with our commitment to the sustainability, we're gonna look into how can we take the learning and replicate in some other places if we see, you know, the path moving forward. All right. On the second question, you're asking about the volume recovery for the specialty area. What we have seen so far in the specialty segment is the largest impact, at least for us, is coming from the energy impact and also the geopolitical. The good news is so far it seems like we see some relief for us, but we're taking a very pessimistic, optimistic look at this.
We're expecting that this stocking probably gonna be ended probably by end of first quarter or maybe the second quarter. We do expect some modest sales recovery in 2023. We're very excited that we're gonna have our Indian plant get started in the second half of this year, and which gonna be helping us to supply this part of the world in order to helping us to gain our market growth.
How much?
Thank you.
Sorry, just to follow up. How much is the incremental volume from the India plant that will commence in the second half, if I may ask?
Yes. The name capacity for that plant is 40,000 tons for coming from our India plant.
Ahmad, I mean, for us, it's not about the capacity.
Correct
... this business segment. This is another manufacturing base in Asia Pacific, so we would be optimizing our manufacturing hub in Europe and Asia Pacific and supplying the market worldwide. We'll be rejigging some of our, what you call this? network production and supply and we will balance our productions according to the demand and the recovery that we see. I think that is more the game in this case rather than add volume and I sort out the volume.
Exactly. Thank you, Yusri. Yes, that's exactly it, because here we're looking not only to add the manufacturing of site. We're also looking how can we have a better flexibility and to optimize our supply network. Thank you.
Okay. Okay. Understand. That's very helpful. Just one last follow-up question on Project Air. Do you so based on whatever ongoing studies that is being conducted, it is not a certain confirmed yet whether it's feasibility on the commercialization of this methanol. Is that supposed to say?
We lost you, Ahmad, mid-sentence. Can you repeat again your question?
My question is whether, based on the ongoing studies, it has not been finalized whether it will be commercially viable for mass production. Is that?
Yeah. Yeah.
Okay. All right.
It is currently on the, what you call this, initial stage of engineering feasibility study. We will have to come to a decision later this year whether this is feasible to progress beyond feasibility study into engineering. There are still a couple of milestones to go before we can safely say there is a project that we can FID.
Okay, great. Okay. I wish you all the best on that. Thank you so much.
Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad. Now we're going to take our next question. The next question comes to line of Raymond Yap from CGS-CIMB Securities. Your line is open. Please ask your question.
Hello. Hello, everyone. Good evening. just sound check. You can hear me, right? Okay.
Yes, yes, we can.
I'm good. Carry on. Okay, thanks. Thanks. Okay. I'll just ask one by one. The Olefins & Derivatives, if I'm looking at the nine-month result, the segment profit for the nine months, which was on note 89 of the third quarter result, the O&D, the cumulative profit for nine months was MYR 2,531 million. As we go to the full year, it's only MYR 2,577 million, so that's only, like, less than MYR 50 million increase. If I look at the third quarter for O&D, it was actually MYR 843 million, but if I exclude the MYR 276 million item, it's actually MYR 567 million.
How did MYR 567 in the third quarter fall down to only MYR 47 million in the fourth quarter? I don't think the EBITDA fell by that much. It's like almost nothing already. What happened?
I think, Raymond, thank you for the very detailed, investigative, you know, question. The, the PAT for O&D includes the contribution from JV BPC. For the quarter of quarter four, the both BPC and Idemitsu Styrene (M) , they've recorded loss for the quarter. That basically drives down the profit for the quarter compared to quarter three 2022. That basically, you know, the main contribution of that, including a lower EBITDA generated from our O&D plants.
Wait, hang on a second, because the associate line for the fourth quarter was only a MYR 27 million loss, right?
Yeah.
That couldn't have accounted for the steep drop in the O&D profit after tax.
That's on top of the lower EBITDA, Raymond.
Yeah.
the corporate-
I think the EBITDA.
Okay.
Okay, the O&D, profit after tax or the segment profit for O&D in the third quarter was about MYR 843. In the fourth quarter, it went down to MYR 47. There's no way that the EBITDA fell by that much. I think the EBITDA fell about MYR 300+.
Mm.
This is like a decline of, you know, about 800.
Okay. Yeah.
I just can't reconcile it.
Yeah. I think one thing peculiar for quarter four is also a ForEx loss, for the loans, of Pengerang, which is form part of our, O&D segment. That ForEx impact has a impact to our bottom line for O&D, PAT, but not our EBITDA.
Okay. The ForEx loss. Okay. The ForEx loss falls under the EBITDA line?
No, in the PAT line.
It's the PAT line, but not in the EBITDA line.
Correct.
Well, it's a massive impact. Could you quantify that?
I think for the quarter, the one that impacts unrealized effects loss on loans to Pengerang, which is about MYR 120 million just for the quarter. That impact.
Okay.
-the PAT.
Okay.
Of course it's unrealized, Raymond, it's due to timing and, you know, because of translation.
Right. It does not fully account for the decline. Never mind, I'll take it offline. Okay. In terms of Specialty and Others, I think in the third quarter, you don't break down Specialty and Others. You just give Others, which I presume includes Specialty. And in the third quarter, it was a cumulative of MYR 354 million. If I look at the fourth quarter, I'm getting minus MYR 300. How did we get from plus MYR 354 to minus MYR 300 in just one quarter? That's a swing of more than MYR 600 million.
Can you repeat that question again, Raymond? If you don't mind referring to the page that you are referring the numbers from.
Okay, sure. If I look at the Bursa Malaysia announcement on note 9.2-
Yep.
Note 9.2, the segment profit for the year, Specialty and others added together is MYR 113 minus MYR 433. That's minus MYR 320.
Yep.
The very same note in the September result, cumulative nine months is MYR 354. That's under described as others, which I presume includes specialty and others, because you did not break down specialty in the September result.
Yes.
Nine months cumulative, +MYR 354. Full year, -MYR 320. That's a negative swing of more than MYR 600 million. Where does that come from?
If you notice in the Bursa announcement, under others, there's earn-out costs amounting to MYR 177 million, arising from the acquisition of BRB Group back in 2019. That's one of the reason. The other most important part is the loss that the loss after tax that the specialty segment have recorded during the period of Q4.
Yeah. Could you quantify that loss?
I may need to get back on you on this, Raymond. Do you have any questions in the meantime?
Yes. Can you explain what this earn-out cost is?
This earn-out cost is basically arising from our acquisition of BRB. Back in 2019, BRB consists of, you know, is owned by a private equity firm, also some key members of the organization. As part of the deal, as part of the transaction, we bought back the shares of these individuals. As part of the deal, we also offer, as part of the retention package, an earn-out cost that we first payable upon the third year of completion of the deal.
Okay. Understand.
The earn-out cost.
And the-
Go ahead.
Yeah. Why isn't the earn-out cost special classified under Specialty? Why is it classified under others?
Because this is basically form part of the transaction. If you notice our others, including inclusive of investment holding. Any part of the investment holding activities, which is acquisition, will be part of others. For your information, all our amortization of intangible is part of others. Any activities relating to investment holding is part of others. So that we do not affect the operational performance, financial performance of the company arising from this one-off activities, especially this earn-out.
Okay. The specialty loss in the fourth quarter, was it BRB or Perstorp? I presume it's Perstorp. I've never seen BRB make a loss before.
Yeah. It's, Perstorp.
Right. That's quite a dramatic swing from the first half. What's the outlook for Perstorp in the second... sorry, in 2023?
I think if you look at Perstorp full year, because you only saw quarter four. Quarter four last year for, not just Perstorp, for specialty, the bottom fell off. Quarter four was quite bad. For the full year, if you look at specialty, as Azli mentioned earlier, EBITDA margin still remains about 13 and half percent. For us, if you take Perstorp full year, it's still outperforming their peers. What we see, what we're seeing this year, that's what we're expecting. We would be at least maintaining that level of performance for both BRB and Perstorp.
You expect the Perstorp tough conditions to remain in the first half and then possibly recover in the second half?
That's what.
Yeah.
That's what we believe. That's what we're seeing.
Okay.
'Cause last year, as I said, a very strong first half and gradually weakening and worsening to the second half.
This is demand related, right? The worsening.
Okay. Going from the first half to the second half, there's a couple, the turning of factors. One is with the Ukraine and the Russian war, right? That started in the end of February last year. The other thing was because most of Perstorp production plants are in Europe, and they are in a, you know, the less favored position compare the energy cost to the U.S. or to China. That's another big factor. The cost position is worse. The third one is actually coming from the China zero tolerance. China has the zero tolerance, a lot of the Chinese product actually flow out to the U.S. and the European market, which kind of bring the entire market pricing, you know, lower.
With those combined reason, that's why we see a drop in the performance of the second half of Perstorp. Going forward, like we talked, we do see some relief coming from 2023 with everything we have seen so far. We're pessimistic, optimistic looking at 2023. We believe with the whole year, the Perstorp should be performing in line with its peers and like what it has shown in 2022.
Okay. Thank you very much.
Thank you. There are no further questions. I would now like to hand the conference over to the speaker, Mr. Yusri, for closing remarks.
All right. With that, I think we conclude our quarter four performance and 2022. We thank everybody for listening, and also we thank every for those who post their questions. Should you need further information or clarification, please contact Alia, our investor relation. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.