Good day, thank you for standing by. Welcome to the PETRONAS Chemicals Group analyst briefing for Q3 2021. At this time, all participants are in 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 today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to the speaker today. Ms. Alia, please go ahead.
Thank you, RJ. Hello. [Non-English content] Ladies and gentlemen. Welcome to PETRONAS Chemicals Group Berhad analyst briefing for the financial results for the Q3 financial year 2021. I'm Alia, Head of Investor Relations. Thank you for joining our call this evening. We apologize for the late start. 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, whereby we are all attending remotely from our workstations and homes. 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's senior management present today. Our briefing will be led by our Chief Executive Officer, Datuk Sazali Hamzah.
As usual, our lineup of speakers for today, our Chief Financial Officer, Mr. Azli, our Chief Manufacturing Officer, Mr. Kabir, our Chief Commercial Officer, Mr. Shakil. Also present today are Mr. Yaakob, our Head of Strategic Planning & Ventures, as well as Mr. Akbar, Head of Special Projects. I shall now hand you over to Datuk Sazali Hamzah for PETRONAS Chemicals performance highlights. Over to you, Datuk.
Okay. Thank you, Alia.[Non-English content] Good evening, ladies and gentlemen. Thank you for joining us today. As you know that, to date, it has been a year since we started seeing economic recovery after COVID-19, which led to the recession experienced last year. The growth momentum has sustained alongside positive business outlook as we continue with pandemic-related restrictions. Over the nine-month period of this year, GDP has significantly improved compared to the recessionary numbers recorded in the same period last year. Similarly, PMI, if you see, expanded to 54.1 versus 52.3 last year as manufacturing sector remain robust. The benchmark crude oil averaged 66% higher this year at $68 per barrel as compared to $41 per barrel in the same period last year.
This has resulted from the demand, which largely returned to pre-pandemic level amid positive business development. Following the higher crude oil price and improved economy, PETCHEM product price averaged higher year on year on healthy demand amid supply tightness. Go to the next slide, Farah. Farah, move to the next slide, please. Okay. As we speak to shareholders, ladies and gentlemen, our recent interaction with various stakeholders have really shown how sustainability is a key concern at all fronts. Yeah? As we look at our sustainability agenda, we are evaluating the impact of our business on, first, on the economy, environment, as well as society. When we talk about society, we also look at the social as the added clarity of what we want to do in sustainability development.
All this economy, environment and society is covered by full governance that we have in our organization as well as in our processes. Let me talk about economy first. Our focus will remain at operational excellence, commercial excellence, as well as growth delivery excellence. Operational excellence, as we mentioned before, looks at how well we run our plants. In Q3 , 2021, utilisation was 94% lower than Q2 2021, mainly because there was maintenance work in various of our plants. Sales volume is comparable for all parameters in tandem with our production rate. On the growth delivery initiative, we are looking to stepping up into low carbon portfolio and sustainable growth projects.
The new growth portfolio will ensure that we minimize our impact to the environment with projects that are carbon neutral or those with less carbon footprint, such as bio-based products, those utilizing carbon as well as recycled materials. Moving on environment, we will continue to monitor our impact to the environment in terms of our energy use, emissions, as well as waste. Again, compared to the preceding quarter, our energy intensity was lower at 15.4 gigajoule per tonne of production, mainly due to stable plant operation with lesser operational disruption. As long as we manage to get our plants stable, so our footprint also will be lower. Our GHG emission was 6% higher compared to Q2 2021, mainly due to flaring activities during turnaround.
This has happened before and after PC Fertilizer Kedah turnaround where we do some flaring, and as a result, we have a slight increase in our GHG emissions. However, GHG intensity was higher compared to the preceding quarter on lower production due to several maintenance activities, but remained comparable against the corresponding quarter. Recycling rate improved from 77% in Q2 2023, and 74% in Q2 , 2021 to 80% in the Q3 , with higher volume of recycled waste being sent to recycle or recovery post turnaround activity. This is one of the major efforts that we made to make sure that our waste is recyclable as much as possible. On social front, we are maintaining our focus on community development and wellbeing through education and governance.
During the quarter, we rolled out more than 10 programs via both physical and visual engagement, with participation totaling over 149,000 people or stakeholders. The programs include our COVID-19 community relief programs in our various areas of operation. Each plant has its own program, and it touches a number of communities around here. Our plastic sustainability and education modules under our NPE program for teachers and primary school, as well as secondary school students, have also been continued. This is our aspiration to cover as many students as possible, such that the awareness on how to manage our waste, as well as manage our plastic waste properly. We do hope and aspire that the future generation has better awareness on waste management as well as plastic recycling.
Ladies and gentlemen, since we started our journey, we have been taking our sustainability metrics very seriously. In order to do that, we benchmark ourselves in the two areas. One is through FTSE4Good Bursa Malaysia Index, as well as Dow Jones Sustainability Index. For FTSE4Good Bursa Malaysia Index was launched at the end of 2014, and we made sure we addressed the queries in order to secure a spot as a constituent of the index. From there, actually, we guide ourselves how for us to improve in terms of sustainability. Year on year, we have ensured that we remain within the index by improving our disclosure and reporting as the requirements continue to become more and more stringent.
I'm happy to say that now we are already moving into a four-star rating of FTSE4Good, the highest rating being given by this benchmark index, and we are among the top 10 in this rating. In Dow Jones Sustainability Index, we actually participated in this benchmarking exercise in 2018. During that time, the first assessment that was made by PCG, we were among number 81 among the ranking of companies, more than 2,000 companies globally. We use this DJSI to make sure that whatever we do is aligned with others, as well as we benchmark ourselves with other players in terms of sustainability development.
I would have to admit it was a rough start, but it gave us an idea of what more we needed to do and how much more we should be sharing on our sustainability effort. We have continued to benchmark our disclosure with the industry best, striving to improve with each assessment. I'm proud to say that we recently received our DJSI assessment. Effective today, we are a constituent of the Dow Jones Sustainability Index and a member of DJSI World and DJSI Emerging Markets. We are rated as top ten best company globally. This is a new milestone in our sustainability journey that we have managed to achieve ahead of our planned timeline. I'm proud of the effort from everyone who had made this possible.
By embarking or participating in this benchmarking exercise, we hope that we are fully guided and put ourself as part of the company that really serious to deliver our sustainability development result. Our sustainability framework towards our aim for net zero carbon emission 2050 is currently ongoing. We are now really assessing which are the handle that we can do in short and medium term, and also what can we do in the longer term in order to reduce our emission and align with our aspiration to reach net zero carbon emission by 2050, as announced by PETRONAS recently.
This will be part of also, contribution that we'll do while we run our business. All of this when we pursue our agenda in, environmental, economic and social pillars, we are fully supported by full governance that we have, system that we have through audit, through work process, as well as verification by a third party subject matter expert to ensure that we are all on track in terms of sustainability development. Okay, move on to the next slide, Farah. Okay. Ladies and gentlemen, moving on to our business performance highlight. Market-wise, we have been seeing so far, it has been trending positively this year. To date, we have completed the bulk of our turnaround this year, namely the PDH unit at PC MTBE, PC Methanol Plant 1 and PC Fertilizer Kedah.
We execute this effectively, safely despite the COVID-19 threat throughout the period. We have one more taking place currently, which is in Urea Facility in Bintulu, and they are currently under mechanical turnaround duration. We have ensured that all CA and maintenance work were and are being conducted while observing strict HSE and COVID-19 SOP on site. Alhamdulillah, we have done quite well so far in the three turnarounds that we have done early in the year. Year-on-year, our year-to-date plant utilization was comparable at 94% utilization rate for the nine-month period this year, again 95% last year. Production volume dipped slightly lower 2% year-on-year at 7.9 million tonnes compared to 8 million tonnes last year. Nonetheless, sales volume was unchanged at 6 million tonnes.
The remaining quarter of the year, we are going to ramp up our volume and we believe that we are going to exceed our target that we have planned for this year. I'm pleased to share that our revenue for the period rose 53% to MYR 16 billion from MYR 10 billion, driven by higher product price. EBITDA and PAT both surged to MYR 6 billion and MYR 5.3 billion respectively. This is in view of expanded product margin as well as higher share of profit from JV and associates. EBITDA margins strengthened to 37%. In order to see the further detailed breakdown of our performance, I would like now to hand over to Encik Azli for further sharing. Encik Azli, please.
Thank you, Datuk.
Thank you, Datuk.
Ladies and gentlemen. Let's start with the group performance on Slide 6. Beginning with the comparison of Q3 , 2021 against Q3 last year. As mentioned by Datuk Sazali earlier, our third quarter was strong as we continued to see positive movement in the global demand. Global GDP was recorded at 4.7% in Q3 against negative 1.4% last year. The benchmark Brent crude oil climbed to an average of $73 per barrel for the quarter against $43 per barrel on positive demand, keeping petrochemical product prices up. Our plant utilization was higher for the quarter at 94% with turnaround at PC Fertiliser Kedah completed. As a result, our production volume was higher by 4% at 2.7 million tonnes.
Although our sales volume was comparable due to the inventory build-up following the plant turnaround activities. Our group revenue grew 67% from MYR 5.3 billion in third quarter last year to MYR 5.8 billion this year, mainly due to higher product prices. EBITDA has more than doubled to MYR 2.1 billion against MYR 940 million ringgit last year, contributed by higher spread. EBITDA margin also increased to 37% compared to 26% for the same quarter last year. Our PAT jumped from MYR 452 million ringgit to MYR 2 billion, supported by higher share of profit from our JVs and associated companies. Now let's move to the group financial performance against preceding quarter, that is quarter two this year in the middle column of Slide 6.
Despite the slight slowdown, the Brent crude price averaged 6% higher for the quarter at $73 per barrel compared to $69 per barrel on strong demand. Petrochemical product prices were mixed during the quarter, though as a group we saw improved prices supported by the strong Fertilisers and Methanol segment. On a manufacturing front, we carried out maintenance work at PC Fertiliser Kedah and various other facilities, resulting in lower plant utilization of 94% compared to 97% last quarter. As a result, both production and sales volume declined slightly quarter-on-quarter. Nevertheless, the group revenue improved 3% to MYR 5.8 billion from the previous MYR 5.6 billion, in line with higher product prices, mainly from urea, ammonia and methanol.
Our EBITDA was comparable on narrowed spread, partially negated by a positive ForEx impact. Our EBITDA margin slipped from 38% to 37%. PAT improved by 6% from MYR 1.9 billion to MYR 2 billion, which is followed by a higher share of profit from JV and associates. Now let's look at the group's performance for the cumulative nine months this year. As Datuk has mentioned earlier, it's been a quite robust year so far, with the world economy coming back from the COVID-19-led recession. Operationally, we recorded similar plants turnaround at 94% for the 9 months period this year against 95% last year. Production volume was slightly 2% lower at 7.9 million tons versus 8 million tons last year, though sales volume was comparable at 6 million tons.
Nonetheless, with the improvement in product prices year-on-year, group revenue for the period rose by 53% from MYR 10.5 billion to MYR 16 billion. EBITDA surged from MYR 2.4 billion to MYR 6 billion on expanded spread, and EBITDA margin was recorded at 37% against 23% in the same period last year. PAT has more than quadrupled from MYR 1.1 billion to MYR 5.3 billion. Now, ladies and gentlemen, as always, the segmental performance slides are provided at the end of this deck for your assumption. Should you have any queries with regards to their performance, each segment, I'll be happy to address them during the Q&A.
As you are aware, ladies and gentlemen, PCG has also announced a special dividend of 10 sen per share, amounting to MYR 800 million, after the deliberation and approval from our board, this morning. This special dividend is to commemorate our tenth anniversary of our listing, which we celebrated last year in 2020. This is also a way of PCG to record our appreciation to our shareholders, especially for those who have been with us since our IPO in 2010. Let's move to balance sheet and cash flow on Slides 7 and 8 respectively. First we look at the balance sheet on Slide 7.
Quarter- on- quarter, our total assets increased from MYR 44.2 billion to MYR 44.8 billion, primarily due to higher other non-current assets, mainly from investment in associates arising from higher share of profit, especially from our JV with BASF. Also contributed to this is due to higher other non-current assets, mainly from trade inventories, in line with higher inventory costs driven by higher feedstock prices. Now let's look at our cash flow at slide 8. Cash generated from operation, CFFO, increased by MYR 411 million to MYR 2.3 billion, mainly due to higher profit generated during the period. During the period, the net cash used in investing activities was higher by MYR 200 million to MYR 490 million due to purchase of property, plant equipment and payment of deferred consideration.
Cash used for financing activities for the period were also higher by MYR 1.8 billion, mainly due to the dividend that we paid to the shareholders on September 30 this year. At the end of the period, our cash balance remains strong at about MYR 15 billion. That is all on the financial performance for the Q3 of 2021. I would like to hand over the session to Mr. Kabir to cover the manufacturing highlights. Over to you, Mr. Kabir.
Thank you, Encik Azli. Good afternoon, everyone. Kabir here. I will share the operational highlight for Q3 . [Non-Englishcontent], our operation in Q3 was stable with reliable feedstock supplied to our facilities. We recorded group plant utilization at 94% for the quarter, having undertaken one plant maintenance activity at PC Ethylene and also PC Polyethylene in Kertih and completed turnaround in PC Fertilizer Kedah. Like before, we had ensured that all turnaround and maintenance activities were carried out with strict COVID-19 SOP in place. For fertilizer and methanol segment, we recorded highest quarterly volume of methanol product since end of 2019. Following collaboration effort between PCG and upstream on the deferment of our supplier facilities, especially Sabah Oil and Gas Terminal SOGT, plant shut down to 2022.
This resulted in continuous gas supply that supported the continuous running of our urea and methanol plant in Sabah and Labuan. Our operation at Olefins & Derivatives segment in quarter three was stable, sustaining high plant utilization despite plant maintenance activity at PC Ethylene and also PC Polyethylene. Okay, next. For Olefins & Derivatives. For Olefins & Derivatives segment, our utilization for quarter was able to sustain at 98% despite plant maintenance activity at PC Ethylene and Polyethylene, supported by reliable ethane supply. Alhamdulillah, successfully completed of shutdown activity ahead of schedule contributed of higher Olefins & Derivatives volume as compared to previous quarter. Looking at current improved and reliability plant performance, we are confident that we were able to deliver targeted volume for O&D segment for this year. Okay, next. Go to next. Fertilizer and methanol segment.
Plant utilization for quarter was 92%, lower compared to preceding quarter, but higher than corresponding quarter. For F&M, volume was supported by high methanol production, which were above the quarter average and the highest so far since end of 2019, supported by collaboration effort between PCG and upstream to defer Sabah Oil and Gas Terminal shutdown to 2022. For Fertiliser Kedah, underwent turnaround activity started in June until end of July 2021 successfully. Okay, next. Moving on to the progress of our project. With regard to PIC PETCHEM, to date, PIC PETCHEM have achieved excellent HSE performance with no lost time injury and fatality recorded. Alhamdulillah. With completion of PIC vaccination program, PIC PETCHEM is now strengthening the pre-startup activities in preparation for startup, which will commence in January 2022 onwards. We'll observe strict COVID-19 related SOP.
To summarize quarter performance, we sustain high group plant utilization of 94% for the quarter. We successfully delivered our average quarterly methanol volume following improved plant operation and strong collaboration with our feedstock supply on deferment of shutdown activity at SOGT to 2022. At this time, we are in the midst of carrying out the turnaround at our fertilizer plant in Bintulu. We started in October 2021. That's all I have for the operation highlight. I would like to hand over to Shakil for the market performance and outlook. Over to you, Shakil.
Thank you, Shakil. Good evening, Shakil here. Let's proceed with the market highlights. Olefins and Derivatives. In Q3 2021, product prices were generally higher compared to previous quarter amid strong crude and naphtha markets, tight supply and prolonged logistics issues. Downstream demand, however, was generally mixed, with some markets supported by startup of new capacities, while others were limited by the resurgence of COVID-19, particularly in key markets. Now, let's move on to the market outlook. Ethylene price is forecasted to be stable amid balanced supply and demand. The market in the short term will be supported by strong crude oil price, which has reached above $80 per barrel. Supply balance will improve with the restart of Southeast Asia cracker and startup of key producers in Northeast Asia.
However, prolonged tightness of vessel space and power cut operations may affect production rates throughout Q4. Demand in Northeast Asia is expected to be boosted by downstream capacity growth in Q4, however, subject to feedstock cost and recovery of derivative operations. Moving on to polymers. Polymer prices are expected to be soft as buyers are not keen to build high stocks with the year-end approaching. Supply is still largely affected by the persistent global logistics issues, such as high freight, port congestion and container shortage. However, this will be balanced by additional supply from upcoming new capacity in China in the next quarter. Next, for MEG. MEG price is expected to be soft despite reduced supply, as we may see a decline in downstream demand, especially in polyester operations.
With no solid support from the demand side, Ethylene Glycol price is seeing a drop following the feedstock coal market plunge. Tight supply situation is anticipated to improve as China moves to curb coal price and ease the shortage in the domestic market. As for Paraxylene, PX price is forecasted to be stable, mainly supported by crude and naphtha prices amid reduced operating rates. Supply will be balanced with plant turnaround in Q4, coupled with rising production costs. Downstream demand will be uncertain as China customers navigate through the dual control policy, with potentially reduced appetite to purchase and restock. Now, let's proceed with fertilizer and methanol segment, starting with Urea. Urea price is forecasted to be firm in the next quarter on persistent tight global supply and reduced China export volume. In the C region, major producers will be on plant maintenance, further adding to the supply tightness.
India's rabi season from November to March will require major volume from exporters as the country is still short on urea. Demand will also be strong in Southeast Asia, with Thailand and Myanmar stocking up for their main planting season starting in October. Moving on to ammonia. Ammonia price is forecasted to be stable on sufficient supply as Saudi Arabia producer, the Ma'aden, resumed operation at end of September, while a key producer is undergoing turnaround. Downstream demand will be supported by steady industrial consumption of caprolactam and acrylonitrile. Lastly, on methanol. Methanol price is anticipated to be stable on the back of tight global supply, further supported by strong China market, which was impacted by the new energy efficiency policy and persistent high coal prices. India demand also continues to be strong as high gas price becomes uneconomical to manufacture their own.
Tight supply situation is anticipated to improve as China moves to curb coal prices and ease the shortage in the domestic market. Okay, that's the end of market outlook for me. Over to you, Datuk .
Okay. Thank you, Shakil. Ladies and gentlemen, the economic recovery we have seen so far has been well above our expectation. In fact, looking back in the third quarter of last year, it has been a whole year of robust recovery and the outlook is positive. Even so, as we continue to see economic growth in the most countries, we are also seeing the resurgence of COVID-19 infection in various economies, which is continuously keeping us on our toes. This thing has yet to be stabilized. As such, we will continue to leverage on our solid business fundamental moving forward, especially in operational and commercial excellence. Our operational and commercial excellence initiatives have proven to be our strong suit seeing the business through the worst of the pandemic and continuously generating value for the business.
Manufacturing business like ours will always need to ensure strong HSE culture to ensure the health and safety for our employee and uninterrupted operation. In fact, earlier this month, we have begun returning to work in the office after more than a year of working from our home. To minimize the potential spread of COVID-19 and to ensure safe distancing measures are adhered to, we are keeping the capacity at 50%, rotating our staff on weekly basis, with many of our interaction remaining online on all virtual. On our growth commitment, I'm happy to share that startup progress at the Pengerang Integrated Complex is on schedule, and we expect the refinery and cracker to be up before the end of the year, and our petrochemical will follow accordingly.
Our growth projects such as the silicone blending plant facilities in Gebeng, the lubricant facilities in Netherlands, the EnviloTech plant in Pengerang, as well as the ethylene oxide plant in Kerteh are all progressing as per planned. As a matter of fact, the silicone blending facilities in Gebeng has been completed and currently undergoing performance test run and on track for our first commercial operation in December. Moving forward, we will continue to evaluate our business opportunities to expand our specialty chemical portfolio, including green and eco-friendly chemical in line with our sustainability commitment. This being leads to the end of our presentation today. Thank you very much and let's open for question and answer. Alia, back to you.
Thank you, Datuk. Ajay, we are now ready for the Q&A. Over to you.
Certainly. As a reminder, to ask a question, please press star one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press the pound or hashtag star followed by one to ask a question. The first question comes from the line of Alex Goh from AmBank. Please go ahead.
Yes. Thank you very much for the presentation. I have a number of questions. First is, could you guide us in terms of is there any further turnarounds in the fourth quarter and how long would that be? And can you give us a bit of guidance on the next year as well? Any plant maintenance and what would be the plant utilization targets that you're looking at? My second question is on PIC. It was supposed to start in the fourth quarter. Just wondering what level of production do you manage to achieve so far? Or have you even or is there even something that you can actually put a number to? And yeah, just a bit of update on the actual progress there.
My third question is regarding looking at the. You have already crossed October and we are already in middle of November now. That means half of the quarter is already gone. Would you say that your fourth quarter would be as strong as your third quarter?
Okay, Alex, thank you very much for the question. There are four questions. Let me try to answer and if necessary, Jakari will help me. First is on TA in Q4 . What we have is ABF which is currently ongoing, which should be completed in 40 days. That's the only turnaround left for Q4 2022 . That's question number one. Going to question two, what is the target for utilization in 2022? As I mentioned, we always put our numbers above 90%. When we are targeting 2022 overall around more than 90%. There will be how many turnarounds? Let me see. One, two, three, four.
four turnaround plan for next year, which is PC Aromatics, PC Derivatives, Methanol Plant 2, as well as PC Fertiliser Sabah in that plant. Correct me if I'm wrong, Jakari.
Yeah. True, Datuk.
Okay. Thanks. Thanks, Jakari. Then number three, your question is PIC, what level of production has been achieved so far? What is the progress in PIC? As this is a very complex unit, as I mentioned earlier, that we have gone through a very thorough evaluation to ensure that our plant is safe to be recommissioned back. This is highly integrated. Where we are now, we are actually already completed all the necessary checking and we are in the preparation of gas in. Gas in means to say to bring the hydrocarbon in. This process will start step by step. It will take about at least one and a half months before the plant can be ready to be commissioned. We are in that current stage.
We start with the front unit first, which is a CDU and associated facilities utility. This is currently in progress. Talking about production, there is still none. The production will be expected in next year. Last question, fourth quarter earnings. This is a very good question and very difficult to tell. We believe the market is still strong, but what we observe, it may not be as strong as Q3 , but it's still considerably a strong quarter. That's what I can say. We are actually looking forward to have a good year-end performance. Okay, I hope I answer that, Alex.
That's wonderful. Just to squeeze in, just following on your mention on the four turnaround plans for next year, would your repair and maintenance be higher than this year? Could you give us a number for us to be looking at?
This year we have four plants. About the same now, I would say.
The cost-
Because-
Your plant maintenance cost would be about the same, is it? This next year and this year.
I believe it's not much different in terms of the cost. Alia, if you can correct me.
Yeah. It should be comparable with this year, Datuk.
Yep.
To talk a bit more on your green agendas, I understand PETRONAS is looking at hydrogen prospects using natural gas as well as, well, including in some petrochemical processes as well. Would PETRONAS Chemicals be involved in this? What could you give us a bit of, you know, a bit more color on that?
Okay. For the green agenda, it's actually for the hydrogen, when you talk about hydrogen, it's mainly driven by our midstream business, which is GNE, Gas and New Energy. However, those initiatives actually link with us when we are also working closely to support that initiative. One of the area that where we're also looking at that, in Kerteh facility we have hydrogen production plant that can be categorized as blue hydrogen. As a transition from gray hydrogen to blue hydrogen, we may have some volume, and we can work whether it can be economically justified to work based on that initiative. The green hydrogen or green energy is still far ahead, but the process of developing is currently ongoing by our midstream business, which is GNE, Gas and New Energy.
I hope I answer that question, Alex.
Okay. I know the GNE is probably under PETRONAS, directly.
Yes.
For your blue hydrogen, what are the chances of commercializing that? You know, would it lead to a new income stream or, you know, will it be taking away from other parts of your business?
If actually it go back to business, it will be unplanned. There is a value behind it, we'll put the value. However, at this moment it is very difficult to determine the value, what is the right value, because even the carbon tax has not been declared by any government yet. As far as what our focus is to make it technically feasible and in term of cost structure it is work well. The price will go back to the market and definitely will be unplanned negotiation between us and other sister company as well.
Okay, great. Sorry to hold you up. Coming back to PIC, would you say that, given your wonderful, fantastic performance now, I mean, it's record, right? I don't think you've ever achieved this kind of numbers. Would you say that, next year when, supposing everything all runs on as scheduled, that you will be able to break even?
I think it's very too early to say that, Alex, because my worry that this plant is very complex. As I mentioned in the past experience, we require system stabilization. As you're aware also, this plant has been stay idle for more than a year. We are not sure what kind of challenges that we are facing. Definitely, we prepare for that, but sometime there will be a lot of things that beyond our control. Probably that we have a better picture sometime in quarter two or end of quarter one in term of prospect.
Okay, great. Thanks very much. That's very helpful.
Okay, thanks, Alex.
Thank you. Your next question comes from the line of Benny Lee from Citigroup. Please go ahead.
Hey. Hello, hello. You hear me?
Yep.
Hello. Thanks for the opportunity to ask questions. Two questions from me. On Page 3 of the slides, it showed the F&M average spread is declining steadily from July to September. Why is that the case given the global urea price is strengthening? Is this spread indicative of PCG's actual profitability into Q4 ? Second question is, what tax rate should we assume for fourth quarter and next year, given the one-off impact from the Prosperity Tax? That's it. Thank you.
Benny Lee, I think you want to take up that question.
Okay. I think I will answer the two questions. The first question, I think those are on Slide 3 , is basically the market spread. It's declining especially on the effect of fertilizer and methanol average spread decline, mainly because of the higher natural gas, as you can witness in Europe. That does not reflect our own spread. We have, if you know, as part of our investment, or IPO that it is safe we have a slightly more attractive arrangement with PETRONAS. Well, in a way, our feedstock arrangement with PETRONAS is quite competitive against our peers. You know, that particular slide does not reflect our business spread.
As you can witness in our performance, especially in our fertilizer and methanol EBITDA, as well as, you know, our contribution. Your second question regards to the Prosperity Tax. Yes, I think it will be too early for us to assess the impact because it will be based on a chargeable income for 2022, and this will be based on the product prices and spread in 2022. As a guidance for analysts and a few others in the call, if you were to simulate the impact of this Cukai Makmur or Prosperity Tax on our actual performance in 2020, yeah. If you recall, our tax expense in 2020 was around MYR 271 million.
If you were to simulate the Cukai Makmur in 2020, our tax expense increased by around 4%-5%, tax expense. Mainly because there's not many of our company are subjected to this Cukai Makmur. Yeah. I guess you know better, Lee, for 2022, it will be you know a very you know premature for us to assume what tax rate that would be. It will be you know not as great impact for us tax tax-wise, if you were to compare like what I just simulate for 2020. I hope that answers you you know provide you some guidance for 2022 moving forward.
Okay. Got it. Thank you. Thank you very much.
Thank you. Your next question comes from the line of Homin Kang from UOB. Please go ahead.
Hi, guys. Thanks for the call. I just have a couple of questions, all related to the same topic, i.e., related to inflation cost and things like that. Yeah, I know that you have really well guided on your fixed cost potential with PETRONAS and things like that. Just want to check with you, how about the other cost components that may affect your business? For example, manpower cost and especially logistics costs, you know, container rates.
I mean, I read from a consultant report where container rates this time versus one year ago because it's very high now that translates to about $500 per metric tonnes of polymers for those that's involving transporting petrochemical products. So I just want to know what's your comment, and if you see any material risk on any of these cost components, are you able to pass them down to the end users? That's my question. Okay. Right. Thank you. Thank you for Homin Kang, yeah. So I'll probably talk about the logistics and manpower cost. The manpower cost, I think relatively comparable, and even I think for 2021 if it's higher it's only due to bonus.
In terms of base cost, maybe it's even slightly lower I think compared to last year because we are now also distributing our people forcefully as to exercise. On logistics cost, yes, we have seen an increase in cost in our logistics. However, on a total percentage basis, I think Azli can chip in here. I believe it will be not much a great difference. There is slightly higher if there is. Azli, you want to talk about more on it.
You're right. In terms of logistic costs, although we see some increase in the supply and distribution costs, but in terms of proportionate to our total cost, it's quite minimal. Most of our product and most of our market are not affected, unlike you see in the ports of the U.S. We didn't supply to those markets. Most of our product distribution majority does not impacted from this higher logistic cost. Even if it is impacted, it will not be materially impact to our bottom line.
Okay. Are you able to quantify roughly how much is approximate percentage in your overall cost component arising from this kind of logistic cost? I mean, you mentioned very small amount, but what's the range like? Yeah.
In terms of our production cost, if total product cost curve, it will be less than 5%.
I see. Okay. That's great. Second question is, I mean, it's also my last question. It's just a follow-up question from what Alex asked earlier. In terms of the hydrogen, right, can I just double-check, technically wise, from your own assets you are already producing blue hydrogen as a by-product. Is that correct? Just from my understanding.
Homin Kang. Actually, technically. Can you hear me?
Yeah. Yes, can. Yes.
Okay, sorry. Technically, yes, our plant in Kerteh, portion of our hydrogen can be considered blue. However, for us to qualify this blue hydrogen, we definitely have to go through the certification body. At the same time, we think having this, we identified, we're also looking at option to utilize this, for future, green energy requirement or green, option, even in chemical, upgrading. I think that all on the table for us to capitalize in the future.
Is it correct to say that to qualify as, you know, a clean blue hydrogen product, you may have to most likely consider installing carbon capture kind of CapEx for that?
No, because the existing unit that not all the hydrogen that we produce is green. Only a portion of it. The facility itself is already able to produce at very low carbon footprint.
Okay. All right. Got it. Okay. Thank you very much. That's all I have.
All right.
Thank you. Your next question comes from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Hi, sir. Thank you for the call. A few questions from my end. First was, in terms of your, sales mix for on the petrochemical side, I think you have seen a lot of your peers report much higher exports because of the lockdowns in Southeast Asia last quarter. Can you just give us a sense of how has been your export volumes versus the normalized levels in the third quarter?
Okay. Shakil, you may,
Especially on petrochemicals. Yeah.
Yeah. Shakil, do you have that data to share, the sales mix? I believe that, yes, we are able to shape our volume to optimize the return for us. On O&D, Shakil, you have that data? I don't have it with me.
Yeah. I would say about 70%, Datuk, in the SEA region.
Yep. 30% locally and 70% is the in the region, yeah?
70% domestic plus SEA, 30% is outside the SEA market, Datuk.
I see. Okay. Right.
That's like the normal range you always do, or your normal range is different?
Yeah. Typically, 65%-70% is our SEA market.
Got it. Okay. The second question was more related to associates. Acetic acid prices have been extremely strong. I just wanted to get a sense of what's happening on BASF PETRONAS, and also if you can just help us in terms of contribution with the other associates that have been ramping up.
As you pointed rightly, these ventures have been in difficult times since 2019. When China have curbed their production, we see a rebound of price. At the same time, there is not much additional facilities in the past few years. As a result, there is a shortage of this kind of product. We can see that a good margin happened this year. In term of quantum, Azli, probably you can share with Mayank. Yeah. Well, Mayank, I think you when you mentioned about acetic acid, that's our JV with INEOS, where we own 70%-30%. So that acetic acid
In terms of product prices also benchmark with the increase in methanol. That's why, you know, in terms of outlook, we foresee the prices will move in tandem with the methanol prices. With regard to the JV with BASF, PETRONAS Chemicals, I think the good performance that they recorded so far mainly due to the highest spread that they have generated from the acrylic acid as well as the oxo alcohol products. Those are the two main segment that they are driving the super performance of BASF. We believe, you know, this will continue to be in the next quarter.
Yeah. Just one point, sir, if you can just help me understand on the flavor and the fragrances side. Anything in terms of EBITDA contribution you've got or earnings contribution on that front yet?
In terms of aroma and fragrance at our JV with BASF, you mean?
Yeah, that's correct.
I think in terms of a percentage total of the JV, it will contribute less than 10% of the JV's profitability. Most of it was still driven by the acrylic acid as well, oxo alcohol product.
It's fair to say it's at least positive contribution, correct?
I think as of the year to date, nine months year to date, they have few complexes. I think I would say 100% of the complexes, each of the units are registering positive EBITDA.
Got it. Okay, perfect. Thank you. That's all the questions I have.
Thank you. Your next question comes from the line of Raymond Yap from CGS-CIMB. Please go ahead. Yeah. Hi. Good evening, everyone. My questions have been answered. Thank you. Thank you. Your next question comes from the line of Arvind Jayaraman from Maybank. Please go ahead.
Hi. Good evening. Can you hear me?
Yes.
Okay. My question is actually regarding the fertilizer and methanol market. I noticed a spike on Friday in urea spot prices in the Indonesian market. It was a very significant spike. I believe for two to three months prior, it was trading at around $500 per metric tonnes, whereas on Friday it hit $900. If we look at ammonia, the prices have gone up about 50% in the past one month as well. Can I just get the average price, average selling price of both these two products so far in the quarter to date? Is there any indication that these elevated prices could stay for a lengthy period of time?
Probably, Shakil, if you can, share your information on it.
Yeah. Okay. Thank you, Datuk Sazali. Mr. Arvind Jayaraman, I think you're right. We have been seeing prices in the last two weeks for the SEA region hovering around $900 in the spot market. We know the energy crisis in Europe and also China's move to ban the export of fertilizers are among the main factors pushing the prices high. I think the fact that there's also strong demand for the Indian planting season and also towards the end of the year improved demand for planting season in Southeast Asia, Thailand, Myanmar. The likelihood of the price to stay strong for the next month or two is still there. The quantum we will not be able to say because it also depends on the overall you know oil price scenario.
Right. Okay. Understand.
Does that answer your question, Arvind Jayaraman?
Yep, it does actually. Thank you for clarifying. I just wanted to confirm if what I'm seeing from other sources corroborates with what Pchem is also seeing. I also have a second question regarding the F&M market. During the presentation, you mentioned that there was a postponement with one of your feedstock suppliers in this. I can't remember if it was this quarter or this financial year. Can I know what will the impact of this be in the coming financial year? Like how many the impact in terms of your production for the F&M segment, if you can provide some color on that.
Cik Kabe, if I'm not mistaken, it was related to the gas supply in Borneo Island. Yeah. Sabah, Sarawak.
Mm-hmm. Mm-hmm.
So-
Yep, correct.
Because of that postponement, we managed to continue. We have shifted also our turnaround to next year for Methanol 2. It will be in tandem during that period, if I'm not mistaken. Mohd Kabir , can you confirm that, please?
Yeah. I think that is the collaboration between the upstream. We go and see the regulatory government body to make sure that we align together. Instead of this year, we postpone everything for the next year. By having that, we already get the approval and also both parties agree. That's why this year we have a very supply-
I think to continue with what Mohd Kabir said, that basically if you look at next year plan, methanol two and also fertilizer Sabah
will happen about the same time. This is when upstream gas supply also will do the maintenance. By doing that, actually we are capturing the best market price during this time. Imagine that if we shut down now, we are going to lose a lot of opportunity. We grab that opportunity, then we bring it forward to next year. By doing that, basically we require a lot of lobbying to convince the authority, DOSH, to agree with us that the plant is okay to run for another six months. That's what's actually happening. I hope that answers, Arvind.
Yes, it does answer. Can I just get some idea on how many days this turnaround will be for? Is it a major turnaround?
Yeah, it's major turnaround. It's about 60 days.
60 days, yeah? Okay.
Yeah.
All right. Thank you so much. I think that answers all my questions.
Right. Thank you.
Thank you. Once again, participants who wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from the line of Anshu Singh, please. From JP Morgan. Please go ahead.
Hi, can you hear me?
Yep.
Yeah. I had a couple of questions. Firstly, about the plant utilization and O&D. You mentioned you had some pit stock activities. What exactly are these and were these unplanned or related to something else?
Okay. Anshu, for the Derivatives plant, it is not unplanned. It's mainly because the catalyst is reaching its end of life. We need to change every two-three years. For this particular plant also we have pushed to the limit, basically to the end of the catalyst life. That's why we plan early in the next year to change this catalyst.
This stock activity, how long are these for?
I think roughly it's about, Kabir, can you share the duration, please?
Okay. For this derivative, it's about 55 days. We need to unload the catalyst and then put the new catalyst.
Okay. The PC Polyethylene and Kerteh, it was shut down for 55 days.
Yes.
Okay. The PC Ethylene?
Almost the same.
Okay. Almost the same for both of them.
Yeah.
My next question is, as we discussed.
Yeah.
There's high urea prices in Southeast Asia. Are you able to translate those high spot prices into the performance for the quarter, or is there a mismatch, like those high spot prices and for the quarterly performance, fourth quarter?
I believe so. While this good price product that available being sold at that kind of price level, so in return it translate into our profit. As much as possible, that's why we try to optimize our shipping volume. We are also working at our bus target to work at most optimum level so that we can capitalize or utilize this volume that we have at high market.
Okay. My last question is, you mentioned next year there are four turnarounds. Could you mention the number of days and which quarter are these in? PC Aromatics, Derivatives, Methanol 2 and Fertiliser Sabah.
We are mainly. Yeah. Kabir, you can
Okay. For Derivatives it's quarter one. PC Methanol and PC F&M is quarter two. PC Aromatics also is about quarter two.
How many days?
Okay. PC methanol is about 60 days. PC FF is about 42 days. PC derivative is about 55 days. Aromatics is about 52 days.
I'm sorry, I missed it. Aromatics is in which quarter? Is it in second quarter?
Yeah.
Okay. Q2 for 52 days.
Yeah. 52 days.
Okay. Great. Thank you so much.
Welcome.
Anshu, for aromatic, we are also looking whether it is in Q3 or Q2 , but we have not yet finalized. At this moment, probably second quarter, but see how it goes.
Okay. No. Perfect. Great. Thank you. I get it.
Thank you. As there are no further questions at this point of time, I would like to hand the call back to Alia for any closing remarks. Thank you. Over to the management.
Once again, my-
Alia, over to you.
Thank you. Thank you, Ajay. Sorry I was offline for a moment there. We have reached the end of the briefing for today. Thank you everyone for your participation and as well as for your questions and answers. We look forward to the reports that you will publish, that you'll be publishing and we look forward to them. Please send us those as soon as they're ready. If you have further questions, please reach out to us. Thank you very much. Have a good evening.
Thank you. Thank you all.
Thank you all.
Thank you all.
Thank you everyone. Thank you.
Thank you. This concludes today's conference call. Thank you for your participation. You may all disconnect now. Thank you.