Good day, and thank you for standing by. Welcome to the PETRONAS Chemicals Group analyst briefing for fourth quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference call is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Ms. Zaida Alia Shaari. Thank you. Please go ahead.
Thank you, Revathy. Hello. Assalamu alaikum, ladies and gentlemen. Welcome to PETRONAS Chemicals Group Berhad's analyst briefing for financial results for the fourth quarter financial year 2021. I'm Alia, Head of Investor Relations. Thank you for joining our call this evening. You should by now be able to access and download the financial results as well as presentation materials in our corporate website or in the links provided in the event invitation. As a health and safety precaution, today's briefing is conducted fully virtual. That is, we are all attending remotely from either our homes or workstations. As such, we would like to apologize in advance for any delays or glitches we may experience. Ladies and gentlemen, we are pleased to have the Group Senior Management present today and led for the first time by our newly appointed Chief Executive Officer, Mr. Mohd Yusri Mohamed Yusof.
As usual, our lineup of speakers for today are Chief Financial Officer, Mr. Azli, Chief Manufacturing Officer, Mr. Kabir, and Chief Commercial Officer, Mr. Shakeel. Also present today are Mr. Yaacob, Head of Strategy, Planning and Ventures, as well as Mr. Akbar, Head of Special Projects. For those who have yet to meet Mr. Yusri, he is no stranger to PCG. He's actually spent most of his career in the petrochemicals division of the PETRONAS Group. His last position was as Head of Manufacturing of PCG before he left in 2017 to head another division within PETRONAS. Without further ado, I shall now hand you over to Mr. Yusri for the performance highlights. Over to you, Yusri.
Thank you, Alia. Good day, ladies and gentlemen. Thank you for joining us today, and thank you, Alia, for the introduction as well. It's good to be back in PCG. The last few years I've seen the company's growth plan gradually materialize and begin to bear fruit. I'm excited to be here to help the company ensure it continues to realize its growth aspirations. Let's look at 2021, ladies and gentlemen. You know, 2021, we saw economic recovery take place at a rapid pace as countries opened up for business. Vaccine rollout saw improved customer confidence and manufacturing sector ramp up on pent-up demand despite the challenges on pandemic-related disruptions such as port congestion and limited shipping capacity.
With positive developments in the market, GDP for the year was recorded at 5.5% compared to the recessionary rate of -4% the previous year. Similarly, PMI expanded to 54.2% from 53.8% previous year on a consistent strong manufacturing sector performance. The benchmark Brent crude oil peaked in October 2021 at $86 per barrel on strong demand. For the full year, we saw Brent crude price average 69% higher than 2020 at $71 per barrel against $42 per barrel on a continued production controlled by OPEC Plus and the demand recovery following a stronger global economy. Following crude oil and market improvements, petrochemical product prices averaged higher year-on-year on healthy demand and supply tightness amidst global market disruption.
While we enjoyed a good year, it did not mean that we overlook our sustainability metrics. It is a well-known fact that the demand for ESG-linked investments went up during pandemic, and with that came increased scrutiny on our actions, our ESG practices and commitments. Let's go through some of our sustainability highlights and achievements. Starting with the economy pillar, where our focus is business operations. Within this pillar sits our business initiatives such as operational excellence, commercial excellence, and the growth delivery excellence. Operational excellence looks at how well do we run our plants. In the fourth quarter of 2021, PU or plant utilization was at 89%, lower than the third quarter of 2021 due to some turnarounds and maintenance activities at our plant. Nonetheless, for the full year, we saw plant utilization at 93% and sales volume is comparable on all parameters.
On growth delivery initiatives, aside from traditional growth from green and brown field projects, our strategy also includes optionality for growth, where research and development is key in developing applications and solutions that addresses customers needs, which includes green solutions. We have mentioned one of our research in converting biomass into differentiated chemicals before. To that effect, we built a pilot plant on our research center in Bangi to test the technology, and I'm happy to say that we have achieved our first drop of bio-MEG in December 2021. We are now further testing the technology for commercial scale-up. Moving to our environmental pillar, we will continue to monitor our impact on the environment in terms of our energy use, emissions, as well as waste.
Against both the corresponding and the preceding quarter, our energy intensity was lower at 14.5 gigajoule per ton of production, mostly due to lower plant operations. For the full year, despite heavier turnaround activities compared to 2020, energy intensity was comparable at 15.8 gigajoule per ton versus 15.7 gigajoule per ton. At 1.69 million ton of CO₂ equivalent, our fourth quarter 2021 was lower than the preceding quarter and corresponding quarter by 8% and 4% respectively. For energy emission, the full year saw a slight reduction from 7.1 million ton of CO₂ equivalent to 7.0 million ton of CO₂ equivalent on various emission reduction initiatives at our manufacturing site, coupled with the turnaround optimizations program that we did.
GHG intensity declined quarter-on-quarter, with lower number of plants in operations and lower production volume. For the full year, GHG intensity was slightly higher with lower production volume. Recycling rate was better quarter-on-quarter, with higher volume of recyclable waste being sent for recycling and recovery. Lower on a full year basis due to the higher amount of non-recyclable materials produced during the year's TA. Our third pillar looks at our social impact, where our focus remains on community development and well-being through education and governance. During the quarter, we saw that we roll out more than 25 programs via both physical and virtual engagements, with participants totaling over 290,000 people. The programs include our COVID-19 community relief program in our various areas of operation.
Our largest reach was through our plastics, through our plastics sustainability and new education module under our new plastic economy program for teachers and primary as well as secondary school students. On governance, ladies and gentlemen, we are continuously looking to enhance our code and practices. In 2021, we conducted an exercise to review the human rights risks from our contractors. The due diligence exercise was to ensure that our contractors are adhering to PETRONAS Contractors Code of Conduct on Human Rights. These assessments are based on the nine principles in PETRONAS Contractors Code of Conduct on Human Rights, which are freedom of labor, prevention of child labor, wages and benefits, working hours, grievance mechanisms, non-discrimination, freedom of association, humane treatment and foreign or migrant workers.
I'm happy to report that at the end of the exercise, we found that our contractors are in full compliance with those principles. Before we move on, I wanted to share with you that we have just recently completed our net zero carbon emissions roadmap as part of our commitment towards creating positive economic, environmental, and societal impact and social impacts, and while lowering our carbon footprint. This roadmap has set our carbon reduction goals and pathways with immediate aim to reduce 20% of our baseline emissions by 2030. There will be more to share on this in the near future, so bear with us as we continue to share our progress with you. Ladies and gentlemen, moving on to our business performance highlight. Market-wise, it was a strong year.
As I said earlier, economy rebounded and continued to recover despite supply chain disruptions brought by the COVID-19 pandemic. We completed all four turnarounds in 2021 at PCG unit in MTBE, PC Methanol Plant one, PC Fertilizer Kedah, and the last that we completed for 2021 was our plant in Bintulu, ASEAN Bintulu Fertilizer. We have maintained our zero tolerance policy with regards to safety in the workplace. As such, we have ensured that all our TAs and maintenance works were and are being conducted while observing strict HSE and COVID-19 SOPs on site. Accounting for all the TAs, our full year of 2021 plant utilization was, I've mentioned this earlier, comparable at 93% against 94% the previous year. Production volume fell 3% against 2020 at 10.4 million tons compared to 10.7 million tons last year.
Nevertheless, we sustained sales volume at about 8.1 million tons. For the full year 2021, we recorded our best financial performance to date with revenue of MYR 23 billion, driven by the surge in the product prices. EBITDA and profit after tax both climbed to MYR 8.3 billion and MYR 7.3 billion respectively on expanded product margins and higher share of profits from JV and associates. EBITDA margin is healthy at 36%. I do have Azli next who take you through the details and more colors on financial performance. Azli.
Thank you, Mohd Yusri Mohamed Yusof. Ladies and gentlemen, a very good evening, and thank you for joining us. Let's start with the group performance on slide number six, beginning with the comparison of the fourth quarter 2021 against fourth quarter 2020. As mentioned by Mohd Yusri Mohamed Yusof, 2021 was a good year. In fact, the best year for PCG so far. We finished strong in the fourth quarter 2021 as the pandemic-related constraints eased up with the rising vaccination rates as well as business adaptations. The global GDP recorded 4.04% in quarter four 2021 against negative 3.2% in quarter four, 2020. The average Brent price increased by $36 per barrel to $80 per barrel with positive market development.
Tight global energy supplies and rising demand ahead of the winter season provided a boost to the price, subsequently keeping petrochemical product prices very high. Our production volume was slightly lower, deriving from the lower plant reservation due to the statutory plant turnaround activities at ABF in Bintulu. Nevertheless, our sales volume was comparable as we draw down our inventories towards the year-end. The group's revenue grew 82% from MYR 3.8 billion in quarter four, 2020, to MYR 7 billion this year on higher product prices. EBITDA has more than doubled to MYR 2.3 billion against MYR 1.1 billion last year, contributed by higher spreads. EBITDA margin increased to 33% from 30% in the same quarter last year.
Profit after tax surged from MYR 456 million - MYR 2 billion on higher product operating profits by higher share of profit from JV and associated companies, especially our JVs with BASF for the acrylic acid and OXO product and INEOS for the acetic acid product. Now, moving on to the group's financial performance against preceding quarter, that is, quarter three this year. Global GDP decelerated in quarter four 2021, compared to quarter three 2021, as the economic recovery felt the impact of ongoing disruption from COVID-19 pandemic, especially on the Omicron variant resurgence. The Brent price increased by 9.6% at $80 per barrel, mainly contributed by rising demand following the winter season. During the quarter, petrochemical product prices were assessed higher than preceding quarter on higher feedstock costs and healthy demand amid supply limitation.
We also witnessed the price for urea shot up to $1,000 per ton and methanol at $600 per ton, and ammonia prices continued to climb and breached the $800 per ton in December. On the manufacturing front, with the statutory plant turnaround at ABF in Bintulu, plant utilization rate was lower at 89% compared to 94% in the last quarter. Despite the lower production, sales volume was higher as our commercial team pushed more volume into the market and drawing down from our inventories. Group revenue improved 21% to MYR 7 billion, with higher product prices mainly due to urea, methanol, and ammonia.
EBITDA also improved by 10% from MYR 2.1 billion - MYR 2.3 billion in view of wider spread, mainly for urea and ethane-related products, though EBITDA margin was lower at 3.3% due to higher fixed costs arising from maintenance and manpower. Profit after tax was comparable at MYR 2.0 billion. Now let's take a quick look at the group financial performance for the cumulative 12 months, 2021. We saw some strength in the year as the world economy moved and the recovery to expansion. Oil and business sentiment have been positive. Crude oil prices movement remained positive and stronger than anticipated and expected to remain strong. The demand for petrochemical product has been solid alongside recovering global economy and manufacturing sector.
Operationally, we recorded comparable plant utilization at 93% for the 12 month period this year against last year, despite the four separate plant turnaround activities that we have conducted. Production volume was slightly lower at 10.4 million tons against 10.7 million tons last year. Sales volume remained unchanged at 8.1 million tons. Nonetheless, with the improvement in product prices year-on-year, group revenue for the period rose 60% from MYR 14.4 billion - MYR 23 billion. EBITDA surged from MYR 3.5 billion - MYR 8.3 billion on expanded spread, and EBITDA margin was recorded at 36% against 24.5% in the same period last year. PAT has more than quadrupled from MYR 1.6 billion - MYR 7.3 billion.
Ladies and gentlemen, as you may have read in our media release and Bursa announcement, the board has today approved the declaration of second interim dividend of MYR 0.23 cent per share, totaling MYR 1.84 billion. Combining with the first interim, which is declared in August, a special dividend declared in November 2021, PCG has declared a total dividend of MYR 4.5 billion with payout ratio of more than 60% of PAT. This is the highest dividend declared so far by PCG, both in terms of amount and payout ratio. Ladies and gentlemen, as always, the segmental performance slides are provided at the end of the deck for your own consumption. Should you have any queries with regard to their performance, I'll be happy to address them during the Q&A.
Now let's move on to the balance sheet and cash flow on slide seven and eight. We first look at the balance sheet on slide seven. Quarter-to-quarter, our total asset increased from MYR 44.8 billion - MYR 46.6 billion, primarily due to the higher cash and cash equivalent by MYR 1.4 billion, contributed by higher cash flow from operation. Now, let's turn our attention to cash flow at slide number eight. Cash generated from operating activities increased by MYR 425 million - YR 2.7 billion, mainly due to higher profit generated during the period. During the period, net cash used in investing activities were lower by MYR 72 million at MYR 418 million. This is mainly due to purchasing of property, plant, and equipment.
Net cash used in financing activities for the period was lower by MYR 1 billion at MYR 783 million. This is mainly due to the payment of special dividend of MYR 800 million made in December 2021. At the end of the period, our cash balance remained strong at MYR 16.4 billion. That's all for the financial performance for the fourth quarter 2021. I would like to hand over the session to Kabir for the manufacturing highlights. Over to you, Kabir.
Okay. Thank you, Azli. Good afternoon, everyone. Kabir here. Just overview briefly on quarter four performance for manufacturing. Alhamdulillah, we managed to deliver 2.5 million tons of production volume, with 89% plant utilization in quarter four, which is above our plan despite having turnaround activity at ABF and some maintenance activities at PC Methanol. We also recorded highest ethylene production volume in quarter four, as well as the highest ethylene production since 2017, despite pit stop activity in 2021. We conclude 2021 with 10.4 million metric tons of production volume at 93% plant utilization above world-class industry standard of 90%, while undertaking four turnaround activity and one pit stop of five of our production sites. For olefin and derivative.
Moving on the segmental review, which improved feedstock supply in quarter four, supported by smooth operation of our downstream plant, such as PC Derivatives and PC LDPE, we were able to record the highest production volume of 1 million tons with 101% utilization rate in quarter four. On the full year basis, the Olefins and Derivatives segment plant utilization rate was at 100%, with total production volume of 3.9 million tons. This great achievement was contribute with more than 1 million tons ethylene production, which is the highest production volume since 2017, attributed by improved ethane feedstock supply. Next, we go to the fertilizer and methanol. For the Fertilizer and Methanol segment, which we achieved 83% plant utilization rate in fourth quarter of 2021.
With reliable operation at PC Fertiliser Kedah and PC Fertiliser Sabah, we were able to realize higher urea volume in quarter four as compared to the previous quarter, despite undertaking turnaround activities at our plant in Bintulu. Methanol recorded lower quarterly volume as a result of proactive maintenance activities during the quarter to manage the plant throughput. On the full-year basis, the fertilizer and methanol segment recorded a production volume of 6.5 million tons, with a plant utilization rate of 89%, mainly due to turnaround activities undertaken during the year at PC Methanol Plant 1, PC Fertiliser Kedah, and most recently, ASEAN Bintulu Fertilizer. Moving on to the progress of our project. With regard to PIC Petchem, to date, PIC Petchem has achieved excellent HSE performance, with no lost time injury and fatality recorded. At this point, we continue our activities towards the integrated startup.
Our current focus is to strengthen equipment reliability and readiness prior to start-up, with implementation of Asset Integrity Confidence Enhancement, what we call AICE program, in December 2021. In summary, our manufacturing team has done well for the year. We have sustained high PU of 93% and several turnaround activities. Moving forward, we aim to continue our operational excellence initiative to ensure that we are able to achieve above 90% PU for 2022. We have four turnaround plans for 2022 and two pit stops. We are currently carrying out turnaround activity for the O&D segment, namely for PC Derivatives and PC Aromatics. In the second quarter of 2022, the turnaround activity will be within the F&M segment. This will affect two of our largest manufacturing units, PC Methanol Plant Two and PC Fertilizer Sabah.
As COVID-19 remains a threat, we will ensure that all our TA and maintenance activities strictly follow the COVID-19 SOP while observing others' HSE requirements. That's all I have for the operational highlight. I would like to hand over to Mr. Shakeel for the market performance and outlook. Hand over to you, Shakil.
Thank you, Kabir. Good evening, everyone. Shakeel here. Let's proceed with the market highlights. In quarter four 2021, product prices were mostly higher compared to previous quarter amid strong crude and naphtha markets, tight supply and prolonged logistics issues. Demand was generally stable for F&M products, while O&D products were impacted by China's power rationing and slower year-end demand. Furthermore, markets were also cautioned by the emergence of the new COVID variant, Omicron. The three-month outlook, ethylene price is forecasted to be firm on the back of stable supply despite regional cracker startup, while demand may be affected due to downstream production restriction during the Winter Olympics in quarter one 2022. Furthermore, crude prices forecast to be on growth as market kicked off 2022 on positive note despite the resurgence of new COVID-19 variant. Moving on to polymers.
Polymer prices are expected to be firm in Q1 as demand likely to improve post-Lunar New Year when buyers start to restock their inventories. Supply tightness will remain in the short term due to slow import activities in Asia following persistent logistic issues. Next, for MEG. Ethylene glycol price is forecasted to be firm on the back of balanced supply supported by strong feedstock prices. Downstream demand, especially in polyester operations, typically peaks before Lunar New Year despite concerns over the Omicron variant. As for paraxylene. Paraxylene price is forecasted to be firm, supported by balanced supply amid stable demand. New China mega plant startup will mitigate potential supply disruption following plant turnaround in Q1 2022. Now let's proceed to fertilizer and methanol segment, starting with urea. Urea price is forecasted to soften following price correction and volatile natural gas price.
Supply is sufficient to cater to term commitment despite limited China export volume, as most SEA and Middle East plants are running at normal operating rate. Soft demand globally, as buyers are cautious and purchasing on need-to basis in current downturn market. Furthermore, end of planting season in main markets such as India and Thailand will dampen demand until next application season. Moving on to ammonia. Ammonia price is forecasted to soften on improving supply as production resumes and normalizes from plant shutdowns. Lastly, on methanol. Methanol prices are forecasted to be stable with reduced supply from Iran and China due to winter feedstock diversion. High crude and LNG prices amid the winter season will further support methanol prices at current level. Demand is largely stable due to gradual easing of movement control in the region despite uncertainties surrounding the new COVID-19 variant.
That's the end of market outlook from me. Back to Mohd Yusri Mohamed Yusof for his closing remarks.
Thanks, Shakeel. Coming to the end of our presentation. Before that, allow me to share some brief updates on our growth commitments and achievements. In December 2021, our silicone blending facility in Gebeng, Pahang, has commenced commercial operation. This state-of-the-art facility has a capacity of 8,000 tons per annum, and this facility will further strengthen our DVGs offering in three product portfolios: silicone gum blend, silicone antifoam, and silicone emulsion. Target market for these products are here in Asia Pacific and the MEA, where demand is on the rise. Earlier this year, in 2022, we also announced that we will be developing and constructing a melamine plant in Gurun, Kedah, adjacent to our existing fertilizer plant at PC Fertilizer Kedah. This project is part of our S-10 value chain lever to optimize our existing production.
This project will be executed and implemented by our subsidiary, PC Fertiliser Kedah, with the feedstock being the existing urea. This plant is expected to be ready in 2024 to serve the domestic market and the Southeast Asian region in segments like laminates, coatings, molding compounds and dinnerware, to name a few. We will have more updates for you as the project progress. Another key in our growth strategy is Pengerang Integrated Complex. The refinery and cracker is now scheduled to start up in the second quarter of 2022, and our petrochemical units will follow accordingly. In terms of financial contribution, we do not expect Pengerang Petrochemical to have material contribution to our 2022 earnings. Ladies and gentlemen, the last two years we have experienced uncertainties and lockdowns due to the pandemic.
With the rollout of vaccine, economic recovery gains speed and momentum alongside rapid vaccination rate. Despite the positive movement, the sustainability of recovery remains uncertain, with mutating variants of COVID-19 causing resurgence of infections, sparking concerns and disrupting recovery. In running our business, we will ensure that we will continue to maximize value through our operations and commercial excellence initiative by improving production and sales volume, as well as ensuring that we maximize our value in our sales. All of these will be underpinned, obviously, by our strict HSE culture to continuously ensure the health and safety of our employees and contractors, and to ensure uninterrupted operations. With the recent spike in COVID-19 infections, we are maintaining our working arrangement for split teams, taking a maximum of only 50% of our staff capacity on site to maintain strict SOP measures.
We will also require that staff coming to site will be fully vaccinated. On the growth front, our team is continuously evaluating business opportunities to expand our specialty chemicals portfolio, including green or eco-friendly chemicals in line with our sustainability commitment. We are looking at a portfolio of projects in various stages of studies and approvals, and we look forward to share them with you once we reach FID. That brings me to the end of our presentation, and let's go to the Q&A. Thank you.
Thank you, Mohd Yusri Mohamed Yusof. Revathy, we can now proceed to the Q&A.
Thank you. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please pound or hash key. Please stand by while we compile the Q&A roster. Once again, to ask a question, it's star one on your telephone. The first question comes from the line of Alex Goh from AmBank. Please go ahead.
Thank you very much, Encik Yusri, for the opportunity. I have a number of questions. The first is regarding what it would be your CapEx this year. Just looking at your cash flow, last year, your spending on plant and equipment is only about MYR 1.5 billion. Your earlier guidance given was about over MYR 2 billion. Just wanted to find out why is there a difference? And also, does the over two billion CapEx include the effective stake from PIC? My second question is regarding your turnaround schedules activity now for this year. How would it affect your plant utilization for 2022 compared to last year? And also a bit more guidance in 2023 would be much appreciated.
My second question is regarding your dividend payout is over 60%, with your last with the MYR 0.23 declaration for fourth quarter. I'm just wondering, is this the kind of level we should be looking at? Or should we be looking at nearer towards that 50% range?
Okay. Maybe Azli will take some of the questions.
Thank you, Chin Chin. Hi, Alex. Thank you for your questions. I spotted three or four questions there. In terms of CapEx, yes, if you look at the pro forma estimate, you can see the cash flow from the investing activity is MYR 1.5 billion. Typically, our guidance, Alex, is, you know, our CapEx between MYR 2 billion-MYR 2.5 billion. That has also always been our CapEx estimates. But over time, sometimes, you know, there's some adjustment to the CapEx program. Because of COVID especially, there may be certain projects be deferred to another period.
That basically explains some of the variance compared to our first guidance. I hope that explains the CapEx. Moving forward, Alex, our guidance continue to be, you know, MYR 2 billion-MYR 2.5 billion in terms of CapEx spend for 2022. Okay? Now, to address your second question with regard to the turnaround schedule. In fact, as we speak, there's two plants undergoing the turnaround. PC O&D in Kertih, and then soon it will be PC Aromatics, but also in Kertih.
In May, there will be two, like Kabir mentioned, additional plants, especially in the fertilizer methanol segment, undergoing statutory turnaround, which are PC Fertiliser Sabah in Sipitang as well as plant two for methanol in Labuan. That is basically four statutory plant turnaround that we have planned for 2022. With all these statutory plant turnaround, as usual, we will expect our plant utilization rate to remain above 90%, as what we desire, which is above the industry benchmark. Your maybe final question with regard to the payout ratio.
I think, as usual, my normal script with this regard, Alex, anytime we declare dividend, we always be guided by our dividend policy of 50% payout. Of course, from time to time, we look at our performance, as you noticed, when we declare our dividend, as well as when we declare our special dividend in November last year. That is basically the guidance principle for PCG. We are not changing our dividend policy, so that will remain intact. I hope that in a way answers your questions, Alex.
Yeah. Thanks. Regarding your CapEx, could you give a bit of clarity on how much the melamine plant is going to cost? Also, how much was spent for the silicone blending facility?
Okay. I may not be able to divulge the exact CapEx amount, Alex, to be fair. In terms of the melamine plant, you probably heard it on the release from other sources, dialogue and Technip. They have already disclosed in some of the publications the EPC amount. It will be around that range, around MYR 150 million-MYR 200 million. Okay. For the silicone blending, that basically slightly lower in terms of CapEx. It's basically around MYR 50 million. Because its capacity is 8,000 tons per annum, but it's typical scale of a specialty chemical plant. They're not big.
They are basically produced to market and then respond to the market dynamics. They are more of margin-driven as opposed to volume-driven.
Okay. Coming back to your CapEx, sir, the fact that you spent less last year, MYR 1.5 billion last year, compared to your normal MYR 2 billion-MYR 2.5 billion range, does that mean this year it's all going to be back-loaded into this year? I mean, suddenly you may actually see the CapEx shoot up to what? MYR 2 billion, MYR 2.5 billion, or maybe even MYR 3 billion. Would that. Is that gonna happen?
No. Actually, it should be on the contrary. As the Pengerang complex start up, you will see less of CapEx spend in 2022. It'd be more of new projects. For example, the new projects that we are embarking in Kertih for the specialty polyols, our JV with PCC of Europe. And also the project we have in Pengerang for the nitrile butadiene latex, our JV with LG Chem. The good thing is, all these two projects, they receive financing, so not everything is financed via equity injection.
I see. Okay. That MYR 2.2 billion-MYR 2.5 billion, does that include an effective stake of CapEx from Pengerang as well?
Very minimal.
Yeah. I see. Okay, great. Regarding Pengerang, you indicated that integrated startup is still commencing and that's been delayed, I think almost two years, right? I remember the original timeline was back in 2020, and then there was a fire and explosion. I'm just wondering, what is the actual outlook now? I mean, all prices where it is, it's definitely. Do you expect, when this integrated startups commences, you will be able to break even or at least make a profit this year itself?
As with any startup of a new project, Alex, I think we will go through the gradual increase of capacity and stabilization period. We expect that we have to go through that. Our first measure is we will be looking at positive contribution margin from those operations.
I see. What would be your expected plant utilization for this year, the first year itself?
In the first year, I think we'll be very gradual, so we are targeting that as we stabilize, you know, the ramp-up rate for the subsequent years will be towards the 80%-90%. But this year, depending on the stabilization, you know, it will be something that may be of a lower rate. Maybe we will see.
I see. I mean, you mentioned positive margin, your expectation. Are you looking at the EBITDA level or on the pre-tax level?
No, we're looking at contribution margin, like.
Yeah. I see.
That's our planning.
Yeah. Okay. Just-
I think, Alex, just add. Yeah, just to add to you, Yusri. I think he mentioned earlier in his presentation that for 2022, we don't expect the Pengerang will contribute material contribution to our 2022 earnings plan. And then, we only depreciate the plant once it achieve a commercial operation. That will relieve some of our expenses.
Yeah.
I see. Okay, great. Now, what would be your level of maintenance cost this year? Would it be similar to last year at? Is it around 400 level?
Maintenance or depreciation?
Maintenance cost.
Similar.
Yeah, it will be similar to last year.
Similar.
Okay, great. Thanks. That's all for me for now. Thank you.
Thank you, Alex.
Thank you. The next question comes from the line of Ahmad Maghfur from Nomura. Please go ahead.
Hi. Good evening. Can you hear me?
Yes, Ahmad.
Yeah.
I have a quick question with regards to your melamine plant, right? The capacity is about 60,000 metric tons per annum. Feedstock will be urea. How much of a feedstock of urea would it require to produce that 60,000?
It's about 180,000, Ahmad.
Okay. All right.
It's ton.
Okay. Does that mean your current existing urea production run rate will still be maintained, so but then you just supply internally, basically?
Yes, yes.
O-okay.
It's a lever of value addition to the urea.
Okay. Because it's very hard to get data points for melamine, right? What would be the lever in terms of leverage from the urea input we're talking about here in terms of price?
I think, Ahmad, thank you for your question. That one is a bit too specific. When we look our economics, when we FID this project, there's always a positive margins producing melamine out of urea.
Mm.
What Yusri has mentioned, we are not sacrificing in terms of our production run rate for urea. At any point that we can optimize more value for selling more urea as opposed to melamine, and we will do so. Typically, and historically, melamine has been generating sufficient margins over urea, hence why we FID this project.
Yeah.
Okay. It was mentioned somewhere in the press release that it will be the first melamine plant in ASEAN, right?
Southeast Asia, yes.
Yes.
Okay. All right. Okay.
We are a big importer of melamine and there's no production capacity in this region.
Okay. So that basically it can be 100% utilized from day one itself. I mean, not day one, from year one itself.
We believe the economics of the project, and it is a good project. I think that's why, you know, we sanctioned the project, leveraging on our existing urea capacity.
Okay.
Yeah.
All right.
I think also just to add, Ahmad.
Okay.
In terms of the melamine, before we even FID, we do a customer validation, and majority of the product will be off-taken locally. Because like what Yusri mentioned, previously and currently, most of these manufacturers on you know feedstock for melamine have been importing. There has been-
Mm
a lot of pain points that they have encountered, especially due to lower quality from imported products. This is basically solving their pain points while also preserving our margin.
I see. Okay. All right. The off-takers are pretty much predominantly local. That's encouraging. How about with regards to the silicone blending? That would be. I understand that it will be mostly export, right? I remember, I mean, half of it is export at least.
Correct. Correct, Ahmad. Most of the demands are, as what KUC mentioned, Southeast Asian as well as North Asia, because this goes into a lot of product application, including food and beverages and personal care.
Okay. All right. Okay. Last question on my side with regards to Pengerang. Just to get my understanding right, the reason for the delay is basically because of the COVID and possible new variants being disruptive to your operations. Is that how I should put it?
I think, you know, the incident that happened in the refinery.
Yeah.
We have to rebuild some portions of the refinery. In the course of the rebuild, obviously, COVID-19 hits and that created some, what we call this? Some constraint-
Okay.
How we manage the rebuild.
Okay.
Because of heavy construction and that is some tight constraint for that construction.
Okay. Yeah, I'm just trying to understand this because, I mean, the last briefing you said it's December and everything looks pretty much on track. Why the delay again, you see? I'm just trying to understand whether there's still a technical issue that needs to be solved or something, or is it the contract agreement with Aramco that has yet to be finalized, whatever the commercial agreement is. I'm just trying to understand.
Yeah. Okay. There's no contractual issues. In fact, both shareholders, both our side, Aramco and PETRONAS are focusing to have a successful and safe startup. The important point here is to have a safe and successful startup. As we rebuild the refinery and as we're putting it back into operation, there are certain things that we still need to sort out to ensure that we achieve our objective of safe and successful startup. Yes, there are some activities that we need to do to ensure that the rebuild is complete.
Okay. Second quarter will be what? Till end of the quarter or early second quarter?
Yeah. I would think so. I would think towards the third end of second quarter.
Okay. June. Okay. All right. Okay then.
Yeah.
Yeah. At the moment, there is no cost incurred, currently from the Pengerang side. Basically, you will only start incurring costs, when operationally commence day one, right?
Correct.
In terms of precision and whatnot. Yeah.
Yes, correct.
Okay. All right. Okay. All right. That's all from my side. Congratulations on the good set of results.
Thank you, Ahmad.
Thank you.
Thank you. The next question comes from the line of Raymond Yap from CGS-CIMB. Raymond, thank you. Please go ahead.
Yes. Good evening, gentlemen. My question is on the Olefins and Derivatives division. In the fourth quarter, the profit after tax in the O&D was MYR 649 million, as disclosed on page 12 of the Bursa release. In the immediately preceding quarter, which is ended 30 September, the profit after tax for O&D was MYR 955 million. There was a steep drop in the profit after tax during the quarter between the third quarter and the fourth quarter. Whereas if you look at the revenues, it actually increased. Revenues increased in the fourth quarter compared to the third quarter for O&D, but profits went into the reverse direction. May I understand a bit more why this is the case? Thank you.
Okay. Thank you, Raymond. As you know, we'll notice that the revenue increase is in line with the higher product prices. In terms of the EBITDA, it's mainly due to higher feedstock prices, especially for the propane and butane. Yeah. That's basically the main reason for that. As you know, for the ethane part, our cost structure is relatively flat. I think this is more of a contribution from higher feedstock from the propane and butane.
Naphtha as well, right?
Yeah. Yeah.
Because-
For the aromatics, product. Yeah.
Right. I'm surprised that would make such a big impact on your earnings for one quarter.
Yeah. Because the composite spread of paraxylene and benzene over naphtha is quite softening. That is basically the impact of the spread.
Mm.
Over the aromatics earnings call.
Okay.
I think if you track crude prices, you see quarter four crude prices and quarter three crude prices. You see two tranches, Raymond, and it tracks that.
The paraxylene spreads have started to widen again in the first quarter of this year. We should expect the O&D profits to improve again, right, in the first quarter?
Typically, it's like a lagging effect, Raymond, before we can realize. There's always the catch up in terms of pricing and feedstock costs. You're right.
Mm-hmm.
We hope in first quarter this year that particular spread is widened, and we can see a full impact of that in quarter one.
Okay. My last question is on urea. The market price for urea seems to have come down very sharply in the past couple of weeks. China is still not exporting urea yet, so the fact that urea prices can come down very sharply, is this mostly due to seasonal factors, the fact that the planting season is over? When is the planting season expected to come back again? Sorry, I'm not very good in agriculture. Maybe you could help me on this one.
I think, Raymond, maybe I can first take a stab on this. Maybe Chee Hoe Lee and Shakeel could help me. As you know, the recent spike in the urea price that breached $1,000 per ton, that's mainly due to the price shock arising from higher gas prices in Europe that forced a lot of producers, especially Yara, in Europe, to curtail their production and hence giving a lot of flexibility arbitrage for Middle Eastern producers diverting their cargos to Europe. That basically resulting a lot of vacuum in Southeast Asia, hence the benefits to PCG. Right now, as the gas prices also starts stabilizing and then the producers globally are ramping up, you see the stabilization of urea prices.
I think, as we speak, the urea prices is still hovers around $550-$600 per ton, which is still above the historical rate that we've seen previously.
Right.
Chee Hoe Lee and Shakir.
Mm-hmm.
Yeah. It is more that supply and demand balance. I think the supply has always been there. The demand was restricted because of the curtailment, because of the high feedstock prices in Europe. The prices that you saw previously, I think those are very unusual, abnormally high prices. I think though it dropped now, it's still, as Lee said, you know, 20%-30% higher than what the typical average urea prices that we saw previously.
Right. Okay. Sure. Thank you very much, gentlemen. Have a good evening.
Thank you.
Thank you. Thank you, Raymond.
Thank you, Raymond.
Thank you. As a reminder, if you would like to ask a question, you will need to press star one on your telephone keypad. The next question comes from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Thank you for the presentation, sir. A couple of questions. One, if I can just start with, digging a bit more deeper into Pengerang. Can you just highlight in terms of how much has been the interest cost capitalized for Pengerang in 2021?
You’re basically referring to interest during construction capitalized in 2021?
That's correct.
Okay. Maybe you can proceed with that with your other questions first, Mayank, before I search around for the answer.
Sure, sure. Do you think?
I don't have it, right now handy with me.
Okay. You can just come back to me later. That's perfectly fine.
Okay.
The second question on Pengerang was more related to, in terms of you talked about the technical issues on the refining side, but can you just highlight the technical issues on the cracker side? Are you all okay on that front, or even there you need to still test? How will this ramp up? Will can have issues if you kind of go slowly and steadily as you test the equipment on the cracker side.
With the cracker, as far as we understand, we have been doing a lot of checks and reassurance, Mayank, on all the what you call this, all the plants there in addition to the refinery. We believe that the cracker, which has been started up, has to reach-
Mm-hmm
... a certain level of utilization before the issues with the refinery. We believe that, though it has to be fully ramped up and stabilized, we believe that in terms of integrity, in terms of reliability, we are in a better shape than what we are in the refinery.
Got it. At the PETRONAS Chemicals side on the downstream polyethylene and polypropylene side of things, has that been also in the same story like the cracker that you have tested and the reliability?
Yes
Is reasonably okay?
Yes. There are still a couple of plants that we haven't started up, which is still under the care and custody of the contractor.
Mm-hmm.
Those have to go through the same process. The plant that have been started up, that have done the performance test run, that is under our care and custody, they are under preservation. We're waiting for feedstock.
Mm-hmm. Got it. Is it fair to say once you start, assuming everything goes fine, by end of second quarter. Yeah, and you kind of get your ethylene feedstock in. From your perspective, you should be able to ramp up it at least to 50% quite easily by the end of the year. Is that a fair comment?
We believe so.
Got it. Okay. The second question, related to non-Pengerang side was on the fertilizer front. If you look at, I think, your operating costs per ton has kind of moved up quite a bit on the third, fourth quarter level for fertilizer. What is really causing that? Is it just some turnaround costs or is it something more than that?
Basically, it's more turnaround costs, Mayank, especially our cost for early preparation for the turnaround.
Okay. You have not capitalized those costs, that is again expensed right now?
Yeah.
Got it. Okay.
Some of it also to do with plant maintenance.
Okay. Because normally the plant maintenance has to happen on, it has been going on pretty much almost every second quarter. I thought that is there some special cost because of which this number is going a bit high?
No. There is no unusual item or unusual expenses occurred there during quarter three and quarter four.
Got it. I think the last-
Mayank, I mean,
Sorry. Go ahead.
Sorry for interrupting you. I finally got the answer for your first question.
Mm-hmm.
The IDC, Interest During Construction, for the Pengerang petrochemical site is around $250 million. Our portion will be 50% of it.
Okay. That is for 2021, correct?
That has been accrued thus far.
Okay. Overall till now. Okay.
Yeah. Yeah.
Yeah. Okay. I think the other question, sir, was more on terms of any inventory gains, et cetera, that you have booked in the current quarter.
No. Actually, if you look at our Bursa announcement, we do actually have, you know, provision for write-off and, you know, provisions for inventory write-down, but it's very negligible.
Okay. Because you have seen a big increase in pricing across the board on most products. I was just thinking, is there any booking at all, or you have kept inventory levels reasonably low, I suppose then?
Yeah. Yes.
Okay. I think the final question from me was in terms of your associate BASF PETRONAS, as well as your other smaller plants around on the JV side that you have. Can you just give us an update in terms of how's been the operations and earnings in the fourth quarter for those plants?
Okay. I think if you compare quarter-to-quarter, Mayank.
Mm-hmm
Quarter four, the share profit from the JVs are slightly lower than quarter three.
Okay.
I think you can see this from the Bursa announcement itself.
Yeah.
Mainly due to some technical challenges at the JV with BASF. They have some slight production matters which have now been resolved mainly on the acrylic acid production. In terms of overall, if you look at our PAT, 10% of our PAT on a year basis contributed by the share of profit from the JV. Moving forward, we believe that this contribution will continue to be significant for PCG.
Okay. Sorry, sir, just last one. Sorry, I've just realized the tax rate has been pretty low as well. Do you think it sustains?
Well, that is basically the tax jurisdiction that we are subjected to. As you know, we are subjected to the Income Tax Act as well as the Labuan Tax Act. As you note from the Bursa announcement, our effective tax rate stands at 5% for 2021 as well as for quarter four of 2021. That effective tax rate will eventually be subjected to the movement of prices as well as the spread, as you may have noticed year-over-year for PCG.
Okay. I think the numbers have been lower because I suppose the contribution from fertilizers is higher, I suppose. If that-
Yeah
Kind of swings back, that number could be more closer to 8%-9% which you used to do before.
Yeah. Yeah.
Even in 2022, no real changes in this tax rate as such, even in 2022, correct? You will be able to kind of do the similar up and down depending on which contribution comes in from where, correct?
Yeah. Correct. Yeah.
Yeah. Okay.
If you look at 2022, if you know that imposition of prosperity tax.
Cukai Makmur. Yeah.
Cukai Makmur in Bahasa.
Mm-hmm.
I think, while we cannot provide you some guidance for 2022 tax, but if you were to simulate the impact of prosperity tax based on 2021 results.
Mm-hmm
I would say that it will not have material impact to our tax expenses. If you look at our tax expenses for the full year, which is about MYR 391 million, we only anticipate slight increase arising from the prosperity tax and then slight increase in our effective tax rate. To recalculate our simulation, the effective tax rate only increased from 5%-5.2%, so not as much.
Okay. No, that's very helpful. Thank you for this, sir.
Thank you.
Thank you. The next question comes from the line of Anshul Singhvi from JP Morgan. Please go ahead.
Hi. Good evening. Can you hear me?
Yes.
Yes.
Yes. I have a couple of clarifications. You mentioned there were two maintenance turnarounds in this quarter and one 2022, and then two more in 2Q 2022. Could you just mention how many days they are for?
Kabir, correct me if I'm wrong. Typically our turnaround will take between 40-50 days. Is that correct, Kabir?
Yeah, yeah. I think that is normally our turnaround days.
PC, Aram and Tekat take 40-50 days each. Turnaround will take 40-50 days.
Yeah. Yes, yes.
Okay. My last question is about the contribution from the silicone blending facility. You mentioned it started in December 2021. Any guidance for its contribution for this year?
Okay. The contribution will be very minimal, Anshul. As you know, the contribution of those BRB, the specialty chemical arm of PCG, is less than 5% of our EBITDA. This is a starting point platform for us as we continue to grow into specialty chemical. The silicon blending plant is the first testament, and in fact this is the first plant in Southeast Asia to have food grade silicone. Once we see the reception from the market, which so far has been very encouraging, we have the opportunity to, you know, increase in terms of volume and capacity. We hope that this contribution for specialty chemical will improve towards the 20% of our EBITDA from specialty chemical.
Currently it's around 5% and you expect it to increase to 20%?
Yeah. I mean, as what we mentioned in the other analyst briefing, that's our ambition.
Yes.
To have a meaningful-
Yeah
... sizable, desired portfolio from specialty chemical.
Yes. My last question is regarding the PIC. Both the refinery side and the cracker side are expected to start in end of 2Q 2022? Or is there a time difference between the startup for the respective equipment?
I mean, PIC is an integrated complex, Anshul. So,
Yes
All the startups are staggered in a sense that you would need to get at least a stable flow rate first from refinery to get a sustainable naphtha to the cracker. Now you stabilize the cracker, they will start the downstream, either the polymer or the glycol, once we have a certain rates of olefins coming out from the cracker. It will start first with the refinery. We expect within 2 weeks - 4 weeks of each other will start the subsequent plan put it online. I think that's the plan.
Like, correct me if I'm wrong, so the refinery is expected to start at the end of June, and then 4 weeks-6 weeks after that.
Yeah
... will be the transition to-
Yeah
... of-
We expect.
Okay
For example, the polymer plants maybe start in July.
Got it. Perfect. Thank you so much.
Thank you, Anshul.
Thank you. We have a follow-up question again from the line of Ahmad Maghfur Usman from Nomura. Please go ahead.
Hi. I have a follow-up question. On your BASF side, right, what can we expect in terms of quantum of earnings in the subsequent quarter or year? Could it be at similar levels as well? That's one. Then number two, probably can you give some remarks with regards to the current Ukraine and Russia development, and how could that possibly impact fertilizer prices, whether it's urea and ammonia? Because I understand on possible sanctions imposed and whatnot. That's question number two. Question number three, would you say that given the current oil price spike and which would impact your naphtha feedstock, how do you think Q1 performance would be so far on a Q&Q basis? That's all. Those three questions.
Your questions are all forward-looking. I'll try to answer the BASF part. Yes, I think in terms of 2021, the contribution from the performance and financially for BASF has been remarkable. Mainly due to the higher spread, especially on the acrylic as well as OXO. They do have other complexes, aroma complex, HRP and another. The main contributor is OXO and acrylic acid. We hope for the
How much does that contribute to BASF?
In terms of the total top line or bottom line contribution, those two
For the two products, yeah?
Yeah.
From the two product, it's basically more than 50% of their EBITDA.
Okay.
Sorry.
Got it.
Yeah.
Okay.
Those are the main driver for BASF of our earnings. For the Ukraine and then, the third question, I think, Yusri, can you see to answer?
First and foremost, I think you saw crude oil prices spike up today, you know. There's it breached $100 per barrel Brent, both for physical and futures. That obviously will impact petrochemical prices moving forward. Especially, you know, if you see naphtha-related products, namely for us, aromatics would be, I think, under pressure. You also have other naphtha-linked products, though we are not 100% naphtha users. I mean, the prices would be impacted.
We wouldn't be able to give you an outlook of quarter two, quarter one, but we feel that as we say that crude oils spike, we start seeing some pressure on the pet chem prices. Urea, I think it's a bit of. It's very difficult to say because it is aligned more on the gas rather than crude. If you saw gas prices spike as what we saw two, three quarters back in Europe, you know, and then you start seeing urea producers in the Europe side shutting down, then we might see the same impact. We have not seen any of those yet. The only reaction from Ukraine for now is on crude, you know.
Yeah. Okay. Understood.
Maybe to add to what you see, Ahmad, if you maybe not too forward-looking, if you were to trace back our performance against the movement of crude oil, so we tend to benefit more from crude oil price increase as opposed to our other years.
I understand. Yeah, because you're predominantly ethane-based. Okay, that's fine.
Yeah.
Yeah, I think that's all. Thank you so much for the answers. Thank you so much.
Thank you, Ahmad.
Thank you. Ladies and gentlemen, it's star one if you would like to ask a question. Thank you. I would like to hand the conference back to Ms. Zaida Alia Shaari for any closing remarks. Thank you.
Thank you, Revathy. We have now reached the end of today's briefing. Once again, thank you, ladies and gentlemen, for your kind participation. Please reach out to us should you have follow-up questions. We look forward to receiving the reports once published. Good evening, and have a great week ahead. Assalam alaikum. Thank you.
Thank you all. Stay safe.
Thank you.
Thank you. That concludes our conference for today. Thank you for your participation. You may all disconnect your lines now. Thank you.