Earnings Call: Q2 2021

Aug 25, 2021

Good day and thank you for standing by. Welcome to Petronas Chemicals Group Analyst Briefing for Second Quarter 2021 Conference Call. At this time, all participants are in listen only mode. After speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Ms. Alya. Please go ahead. Thank you, Ajay. Hello, assalamu alaikum, ladies and gentlemen. Welcome to Petronas Chemicals Group's Berhad's earnings briefing for the Q2 financial results. For financial year end 2021. I'm Zaida Aliyah, 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 the presentation material in our corporate website or in the link 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 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. Today's briefing will be led by our Chief Financial Officer, Mr. Asli, who will give highlights of the Group's overall performance as well as a briefing on the financial results. Other speakers are Mr. Kabe, our Chief Manufacturing Officer and Mr. Shaqil, Chief Commercial Officer. Also present today are Mr. Yag Gop, our Head of Strategy, Planning and Ventures as well as Mr. Akbar, Head of Special Projects. I shall now hand you over to Azvi. Thank you, Alia. So good evening, ladies and gentlemen. Thank you for joining us today, and I hope you are doing well and staying safe wherever you are. Firstly, I would like to convey Doctor. Sathali's warm regards to all of you and his apology for not able to attend this session this evening. We rather had a long Board meeting earlier today and then he is still stuck in meeting engagement with external parties. So before we drop into the results, I would like to take a moment and update you on some of the movement in our key management team. Firstly, I would like to introduce our new Head of Strategic Planning and Ventures, Mr. Yaacob Salim who joined us on 1st of this month. Yaacob joined Petronas in 2006 as Head of Technical Assurance within the Group Technical Services and before that he spent more than 15 years outside of Petronas Group. He brings to us his experience from both technical and strategic perspective and I'm sure with his guidance and leadership we will continue to realize our growth plan. I would also like to take this opportunity to thank Mr. Akbar for his invaluable guidance, insight and support during his tenure as the Head of Strategy. Mr. Agubba now lead the Specialty Project team. Now this is a new team that will be focusing on Specialty Chemicals and Sustainability. So with his past experience and knowledge, I'm sure we will be seeing a lot of exciting things from this new team, new projects and growth projects in line with our sustainable business goals. So welcome aboard, Chia Cook and to Chia Akbar, keep up the good work in your new department. So now let's go back to the results on Page 3 of the deck. So we have enjoyed a strong growth momentum from the previous 2 quarters as business outlook remained positive following the increased vaccination rate around the world and continued easing of the pandemic related lockdown. GDP for the first half of twenty twenty one recorded significant improvement at 7.3% compared to a negative 5.8% same period last year. With the positive business outlook and demand increase, the benchmark brand crude oil averaged around 60% higher than this year at $65 per barrel compared to $40 per barrel same period last year. Following the higher crude oil prices and improved economy, petrochemical product prices also average higher on higher fixed stock costs, stronger demand amidst tight supply. So overall, it has been a steady market recovery since the Q1 of 2020. Now ladies and gentlemen, alongside the market improvement that we have seen, we are also feeling the increased interest in ESG space as the ongoing pandemic continues to remind us how crucial it is for us to not just focus on long term plan, but also ensure sustainability of the business and its ecosystem. So let me take you through some of the key indicators on sustainability that we have been tracking along this journey on Page 4 of the deck and some of you are very familiar with this sustainability metrics. Starting with our 1st pillar, people, our key programs are based on engagement with our surrounding communities and stakeholders on our focus teams on environment, community development and education. Now due to the ongoing pandemic and movement restriction, our community reach has been quite limited. Nevertheless, we have been actively in touch with key organization within our communities to support the efforts, especially to help those in need. Since last year, we have contributed product and essential items as part of PCG COVID-nineteen relief program. We have continued to provide assistance to affected communities and stakeholders. Now this existence includes medical oxygen concentrators, personal protective equipment PPE that was used by the medical officers, hand sanitizers, masks, laptop for support requirement at hospitals, clinics, vaccination and sampling centers. In addition, under the people's pillar, we are enhancing our due diligence on social and governance to ensure that our contractors are adhering to the Petronas Contractor Code of Conduct on Human Rights Principles. This allows us to monitor and mitigate the social risk on our supply chain and we are happy to see that to date our suppliers and contractors are in compliance with our human rights principle. Now next pillar is the GHG emission during the quarter was 5% higher as startup activities at the PDH plant in Geping saw a slight increase in flooding activities. Nevertheless, with the higher volume produced during the quarter, GHG intensity was lower at 0.77 tonnes per CO2 equivalent per metric tonne of production compared to 0.79. Recycling rate improved from 72% to 74% in the 2nd quarter with lower volume from non recyclable products produced and collected during the plant turnaround activities. Nonetheless, with no TA in quarter 2 last year, the recycling rate was lower year on year. And finally, our pillar profit. We measure the energy intensity or energy use against our operation. So this quarter we recorded a slight 1% increase in energy intensity against our previous quarter. And moving forward, we will continue to implement our energy reduction initiative and our plans and we will continue to monitor and ensure reduction of energy use through our Energy and Loss Management System, ELMS, which aims to optimize energy use in our facilities, which is one of our cost saving measures. Ladies and gentlemen, while we have embarked on our sustainability journey for some time, changes in scrutiny from various stakeholders are pushing us to continuously assess our sustainability pillars and metrics. So in doing so, you may see changes in our 3 piece as we move along. Hence, do bear with us as we work through refining our sustainability strategy and solidify our plans towards lowering our carbon footprint in line with our aim for net zero carbon emission by 2,050. Ladies and gentlemen, moving on to our performance highlights for first half twenty twenty one on Page 5. As I mentioned earlier, we have seen steady performance improvement in the market since Q4 2020. Nonetheless, on our operations front, we started our turnaround cycle this year mostly happening in the first half of the year. During the period we completed 3 turnarounds for the PDH unit debeng in Kuantan, Methanol Plant 1 in Labuan and our fertilizer plant Kadah which had completed this quarter. All turnaround was safely conducted while observing a strict HFC and COVID-nineteen SOP on-site. As a result of the TAs and some of the corrective maintenance works in our urea unit, plant utilization for the 6 months period was lower at 94% compared to 97% in same period last year. Consequently, production volume fell by 5% year on year at 5,200,000 tonnes compared to 5,500,000 tonnes last year. As a result, our sales volume also took a slight hit. Nevertheless, I'm pleased to share that our revenue for the period rose more than 45% to RMB10.3 billion mainly driven by our higher product prices. EBITDA and PAT saw significant improvement to RMB3.9 billion and RMB3.3 billion respectively on higher product margins and higher share of profits from JV associates especially in our JV with BSF and our JV in the Astiq Asset Business. Our 6 month EBITDA margin strengthened to 37%. For future for further details on the performance, let's move on to Page 6 of the deck. So let's start with the comparison on the performance on the Q2 2021 against Q2 2020. You heard just now that the Q2 was a strong quarter supported by a rebound in global demand surpassing our own expectation. The benchmark Brent crude surged from the $30 per barrel average last year to average around $70 per barrel on positive market development pushing petrochemical product prices up. The turnaround that we started in quarter 1, 2021 continued into the Q2 and as a result plant utilization for the quarter was lower at 97% compared to 100% recorded last year. Production volume was lower by 4%, although sales volume remained comparable. Group revenue saw 77% increase from ringgit3.2 billion ringgit in Q2 last year to ringgit5.6 billion ringgit this year boosted by higher product prices. EBITDA has tripled to RMB2.2 billion against RMB695 1,000,000 last year contributed by higher spread and EBITDA margin increased from to 38% from 22% same quarter last year. PAT saw a 10 fold increase from RM185 1,000,000 to RM1.9 billion supported by higher share of profit from JV and associated companies. Moving on to the group's financial performance against preceding quarter that is quarter 1 this year. Now with the increase in vaccination rates easing of pandemic related restrictions, global GDP continued to improve quarter on quarter. Brent crude improved from $60 per barrel average in quarter 1, 2021 to $70 per barrel in the quarter under review, supporting the increase of petrochemical product prices. On the operational front, we had a lower turnaround days in quarter 2 2021 compared to quarter 1 resulting in higher plant utilization rate of 97% compared to 90%. Gross production and sales volume increased quarter on quarter. Against this backdrop of better performance, group revenue saw 20% increase from RMB4.7 billion to RMB5.6 billion boosted by higher product prices. EBITDA increased by 27 percent to RMB2.2 billion on higher spread and positive foreign exchange impact. EBITDA margin improved from 36% to 38% and PAT increased by 27% from RM1.5 billion to RM1.9 billion following the improved EBITDA. Now let's have a quick look on the group's performance for the cumulative 6 months this year. Operationally, we recorded lower plant utilization at 94% against 97% same period last year on higher maintenance and turnaround activities this year. Post production and sales volume took a slight dip. Nonetheless with the improve in product prices year on year, group revenue for the period rose 45% from ringgit7.1 billion to ringgit10.3 billion. EBITDA has more than doubled from Ringgit1.5 billion to Ringgit3.8 billion and EBITDA margin has recorded at 37% against 21% in the same period last year. PAT saw an almost 5 fold increase from Ringgit RM to Ringgit 3.3 1,000,000 Ringgit. Now ladies and gentlemen, in the interest of time, so I will not go through the group performance by segment as much of the analysis overlaps with the group. So as it's our practice, we have provided the slides on the group performance by segment at the end of the deck for your own consumption. So should you require further clarification, I will gladly provide your clarification at the end of the presentation. So now let's move to the balance sheet and cash flow on Page 78. First, the balance sheet on Page 7. From quarter 1 this year total asset increased by RMB3 1,000,000,000 to stand at RMB44 1,000,000,000 mainly due to higher cash and cash equivalents by RMB1.6 billion due to profit generated during the period. There's also higher property, plant and equipment, mainly related to capital investment relating to our petrochemical project in Phang Nara. This also in line with higher revenue during the quarter as we saw higher trade receivable. Now let's turn to our cash flow at Page 8. Our CFFO saw significant improvement to RMB3.3 billion primarily contributed by higher profit generated and our net cash inflow for the quarter stood at RMB2.2 billion giving a strong cash balance at 30th June at about RMB15 1,000,000,000. Now as you are also aware, Q2, 2021 is our best quarter ever and we managed to achieve this despite the challenging operating environment. Now given the stellar performance that we have achieved, I'm pleased to share that the Board of PCG has approved a dividend of RMB0.23 per ordinary share equivalent to RMB1.8 billion being the 1st interim dividend for 2021 payable in September. As you may notice, this is our highest dividend that we have declared since our inception and we would like to share the fruits of our excellent performance with our esteemed shareholders. So that's all for the financial performance for Q2 2021. I would like to hand over the session to Kabir, our Chief Manufacturing Officer for the manufacturing highlights. Over to you, Kaveh. Thank you, Jie Azli. Good afternoon, everyone. Kaveh here. Let's share the operational highlights for the quarter. Alhamdulillah, group plant utilization for quarter 2 was at 97, higher than the preceding quarter. Our operation at Olefins, Derivative, Fertilizer and Metamos segment in quarter 2 was stable despite turnaround activity at Gae Bank, Labuan and Kedah. This resulted in higher production volume against the preceding quarter, but was slightly lower than the same quarter last year due to the turnaround activities. In addition to that, we were able to continue running despite total lockdown imposed by the government in June. Effective engagement with reliable government authorities with full compliance to the SOP in controlling and containing the spread of COVID-nineteen. Continuous collaboration with our supplier helped in ensuring reliable and improved fixed stock supply for the quarter. Next, let's see the segment of the Olefin and Derivative. O and D segment operated at the plant utilization of 98% in quarter 2, slightly lower than 100% achieved in quarter 1. We recorded comparable ethylene production with preceding quarter, but with slightly lower volume for the segment due to the some challenges we required maintenance activities at the downstream unit, namely LDPE and aromatic plants. We were able to complete the repair work as per schedule. Next, for segment fertilizer and methanol, we achieved higher plant utilization rate in quarter 2 at 96% as compared to 84% achieved in previous quarter. Both urea and methanol production volume were above the quarterly average. High urea production at PC Fertilizer Sabah had contributed a significant volume to the Group's total production, 329 KMT in quarter 2 and 259 KMT in quarter 1. As for methanol, improved plant reliability were contributed by better performance of PC methanoplan, supported by reliable feedstock supply resulted in higher methanol volume for the quarter as compared to quarter 1. Next, moving on to the progress of our project, PIC Pet Camp. As for PIC Pet Camp, the objective remains to achieve safe and successfully start up and ultimately stable and sustainable operation. To date, PIC Pet Camp had achieved excellent HSE performance with no lost time injury and fertility recorded, alhamdulillah. In order to keep start up progress on track, PIC Pet Camp has worked together with Petronas Pandemic Preparation and also Respawn Team, PPRT, to enhance the requirement before entering the facilities, which consists of PIC entry requirement and PIC vaccination program. This initiative will continue as to provide confidence to workers and family members that PIC is a safe and great workplace to work. We have one on the conclusion. To wrap up the quarter performance, we sustained high group plant utilization of 97 for the quarter. We successfully delivered above average quarterly products volume of ethylene, urea and methanol, reliable plant operation of both olefin and derivative and fertilizer methanol segments. We also successfully completed turnaround at PDH plant, PC methanolabuan, PC fertilizer Kedah and plant maintenance activity at PC Ethylene Polyethylene. We are confident to deliver the targeted volume of ethylene of more than 1,000,000 tonnes per annum as well as targeted volume for methanol and urea comparable for preceding year. We are confident to deliver the targeted volume for both Methanol and Urea. Moving forward, we are going to carry out turnaround at fertilizer plant in Vindaloo in quarter 4. We remain focused in strengthening our PIC startup activities and at the same time complying to the strict SOP in containing of the spread of COVID-nineteen. That's all I have for the operating highlights. I would like to hand over to Sheikha for the market performance and outlook. Thank you, Jack Harbin. Good evening, Shatin here. Let's proceed with the market highlights. In Q2 2021, product prices were generally higher compared to previous quarter amid the continued selling of crude and naphtha markets, tight supply and the continued logistic issues. Downstream demand was also generally healthy with most major economies slowly recovering as destination rates intensify and sometimes we see the relaxation of pandemic related activity restrictions by governments. Now let's move on to the market outlook. Ethylene price is expected to be stable despite increase of supply from Northeast Asia region with new China tracker start up. The market is seen to be supported by the firm oil prices, which has reached about $70 per barrel, cracker turnaround in the sea region and bidding in startup of South Korean crackers. Moving on to Polymers. Polymer prices are expected to be bullish in the next 3 months on the back of stable supply in the region due to new capacity startup, balanced by the lack of export activities caused by high freight costs, port congestion and prolonged shortage of containers globally. Demand expected to gradually increase in August 21 September as buyers continue to restock their inventories prior to Golden Leaf Holiday in China from October 21 onwards. Next for energy, Energy price is expected to be stable supported by the firming oil prices despite the rising supply from new plant startups in China, returning supply from South Korea's Notte Chemical. On the downstream demand side, China demand is expected to improve on the seasonal zoom in quarter 3. There is growing optimism that orders from made in China apparel will be positive. As for Paradigm, DX price is forecasted to be stable to stop mainly in anticipation of new capacity in China, which is expected to begin start up in the July and will lengthen the supply. However, near term supply is unlikely to reflect a drastic change as the company is not expected to run at optimal rates due to the lack of crude import quota and further balanced by several turnaround in the region. Now let's proceed with fertilizer and methanol segment starting with Yuria. Yuria price is forecasted to be stable on the high side as tight global supply remains coupled with China's minimal export volume. Yuria has been unable to buy its required volume on supply constrained by Chinese government to export, forcing up prices from other origins. On demand side, India is expected to continue issuing tenders in the coming months as the country's supply remains to be in a shortfall of around $3,000,000 for July to September volume. Moving on to ammonia. Ammonia prices is projected to be stable on the high side as site supply continues to limit activity in the market on volume shortage from Saudi Arabia due to its planned disruptions. Healthy demand in India as buyers continue to purchase to support the country's EAP production. Lastly, on methanol. Methanol price is expected to be stable with sufficient supply as most producers are running at optimum risk despite few planned outages. Metronal demand in China and South Korea are stable with Taiwan market well covered by its commitments. Additionally, improved COVID-nineteen situation and drier weather conditions in India have supported downstream consumption in the country. That's all from me. Thank you. Over to Alia. Thank you, Saket. So, ladies and gentlemen, to conclude, let's move on to Page 15 of the deck. So as you may notice that the robust global economic recovery in the first half of the year have well surpassed our own expectation. Nonetheless, we also see many smaller developing economies continue to grapple with COVID-nineteen as resurgence in infectious continue to limit their recovery efforts. As the pandemic continue to flare up putting its mark on the ongoing economic recovery, we will continue to remain vigilant in our business decision and approach to continuously build on our strong business fundamental as we move forward. We will continue to our own initiative towards operational and commercial excellence to ensure the sustainability of our operations and business. Our strong HSE culture remains key to support these initiatives as we continue to advocate the safety of our employees and the operations even more during this ongoing pandemic. Despite the improved performance we have seen this year, we will continue our strict adherence to the prudent financial management including prioritizing our projects and continuing our cost optimization initiatives. On our gross commitment, we are concluding our efforts to ensure that PIC will start up by end of this year. Other growth projects such as the silicon blending facility in Geping, Kuantan, the natural butadiene latex plant, the JV that we have with LG Chem in Punarang, the OxyAclete plant in Curtin as well as the building of our own pilot plant for bio based chemical, all these projects are progressing well within their timeframe. So moving forward, we will continue to evaluate business opportunities to expand into Specialty Chemical portfolio including green chemicals in line with our sustainability commitment. So now that brings the end of our presentation. Let's open up the floor for Q and A. Over to you, Alia. Thank you, Azvi. Ajay, we can now proceed with the Q and A. Certainly. Your first question comes from the line of Raymond Yap from CJS CIMB. Please go ahead. Hi, good evening guys. Thank you for your presentation. So my first question is about the F and M division and I noticed that the 2nd quarter revenues have been extremely strong compared to the immediately preceding Q1. So revenues went up by 43% against the Q1, but production went up by 15% quarter on quarter. So the difference must reflect a price impact I presume that so second quarter realized prices much higher than the Q1. However, if I look at the spot prices in the market, I think most of the urea and methanol price increase actually happened in the Q1 and not so much in the Q2. So I'm quite curious as to why the Q2 revenues and the realized prices actually became well, you achieved much higher realized prices in the Q2 rather than the Q1 per se. Is there some kind of delay that usually happens under these circumstances? So, Raymond, that's your first question. You mentioned that you have few questions? Okay. The next question is a financial question in terms of the CapEx. I think last quarter, you guided for an annual CapEx of ringgit2.5 billion ringgit, but for the first half of this year so far, you only have just slightly over RMB600 1,000,000. So is there some kind of delay there? And or are you still keeping to your full year guidance of SEK2.5 billion? And the other thing, the last question I'd like to address is about the transfer pricing arrangement between the naphtha cracker and the downstream plants in Penangarang. Is the transfer pricing arrangement still intact? Is it still based on a favorable pricing perhaps below market price? Just wanted to double confirm that arrangement is still intact as you bring your Pengerang online? Thank you. Thank you, Raymond. So let us answer the first question with regards to Fotelizimethanol. I think like what Shakil mentioned earlier in quarter 2, we witnessed the price has increased more so for urea and cornea for quarter 2. So I guess Raymond you're asking comparing with your own readings and research, the increase in price more so in quarter 1, right. So maybe perhaps Shaqeel can put some additional light on this, Shaqeel? Thank you, Charlie. I think just to add to what we have seen just now, I'll give an example here we have seen how ammonia average price in the quarter 2 was about 5.27 compared to ammonia quarter 1 price at 3.36. We have also seen urea year 42 price average at 3.77 compared to 13.45. I mean basically those are the main contributors from the supplier's side. I think it's supporting the pilot's implementation in 41. Yes. I think Shatin, do you sell ammonia directly or is that largely converted into urea? The price of ammonia that I've given you is selling absolute ammonia in the market? Yes. I mean do you actually sell ammonia assets or is it largely converted into urea to be sold at urea? No, we do have ammonia being sold in the market apart from U. S. Okay. Thanks. Yes. I think, Raymond, as you were aware, we have 3 ammonia plants. I think we have one dedicated ammonia plant in Curti. So that will produce ammonia as ammonia. Okay. On your second question, Raymond, CapEx, now I think we still stand guided by with our annual CapEx program of ING2.5 billion. Yes, you correctly pointed out that the first half of the year, we only spent ING600 million. That's not an intention. So that we do have few CapEx program and project in quarter 3 and quarter 4. So you will see that this coming quarters there will be CapEx realized spend and bid in quarter 3 and quarter 4. Now, with regard to your 3rd question, structural pricing, I think I've mentioned earlier and separately during our various engagement on Investor Relations, The integrated facility, petrochemical and the refinery and cracker were meant to run on an integrated basis. So for the petrochemical plant to run, it must be incentivized with favorable feedstock of ethylene and others from the refinery and crackers. So to answer you, those profit pricing arrangement are still intact even though there's still there's a slight delay on the start up. So yes, it's still intact. Okay. Yes, Azeeli, just wanted to pin you down on the commencement date. You mentioned by the end of 2021. Is it all the plans or is it spilling over into 2022 or everything will be up by 2021? Our aim is to start up the plant by end of the year. So as you recall in our previous quarter, I think the first plant to start up will be the CDU for the refinery and then maybe within 1 month the PAC Chem plant will start to start up. So the idea is for the entire integrated complex to start up by end of the year. Okay. Thank you, Azli and Shaki. Thank you, Raymond. Thank you. Your next question comes from the line of Bennett Lee from Citigroup. Please go ahead. Hello. You hear me? Hello? Yes, Vadad, we can hear you. Yes, thank you. Thanks for the opportunity to ask question. And I have three questions. So basically the first one is actually on the latest update in terms of the refinery startup plan. Has the company started to CDU and produce naphtha already? And what about the naphtha cracker and downstream? And are there any further delay due to lockdown? Second question is, what is the latest status of the BASF Petronas JV given the forced majority for acrylics in late June? Has the plan restarted yet? And third question is on first half effective tax rate, because we see very low effective tax rate of around like 6%. What is the reason behind and what is the guidance into second half and next year as well? Thank you. Vinay, if you don't mind, can you elaborate on the second question with regards to the JVBSF on acrylonitrileic acid? Yes. That is the force majeure. So has the plan restarted yet? Okay. All right. To answer your question, the first one, I think similar to my response to Raymond's question, I think the entire CDU and NAFTA and the integrated petchem complex will start by end of this year. So that remains our agenda, that remains our commitment together with PETRONAS and Saudi Aramco. So I think the definite date we will potentially can be made available to you once there is a progress in terms of exact date and maybe in the quarter 3. So I think on the latest updates on BASF JV, I think that plan is already operating at full capacity. In fact, most of our PAT also contributed from the stellar performance from this JV. So I think in terms of I know there's a good price realized from ethylene acid as well as oxo alcohol business that adds up to our bottom line and improve our share of profit. On your last question, effective tax save, I think so far our effective tax save if you look at the wholesale announcement is around 6% to 7%. So just to give you guidance for the rest of 2021 and the full year of 2021, our effective tax rate will be ranging between 7% to 10%. Does that answer your question, Biren? Yes. Thank you. What about next year's guidance on the tax rate? Well, that will depend, Vannette, in terms of the market prices and product prices. As you know, as product prices improve and as spread improves, most of these revenues and product margin will be captured in our marketing arm, which is enjoying a loved one tax initiative. So effective tax rate will be much lower as the product prices get increased. So our guidance on 2022 will be based on the outlook for the product prices. Okay, got it. Thank you. Thank you for that. Thank you. Thank you. Your next question comes from the line of Alex Kirk from AIM Bank. Please go ahead. Thank you very much and congratulations on the fantastic set of our results in the second quarter. I have a number of questions. The first question is regarding some guidance for this Q3. Do you think that such a strong performance in the Q2 is able to be repeated in the Q3 given the fact that you are looking at a flattish oil price outlook and for most of our products and you are looking actually higher prices in terms for the Polymer segment. So and also in terms of the kind of plant utilization that you are looking at, would it be fair to say that we should be looking at something that's similar in the Q3 compared to the Q2 of this year? Right, that's my first question. My second question is regarding your OpEx and your maintenance for in the second quarter. Was there anything unusual about it that caused the margins to improve? And what sort of trajectory should we look at for the second half of the year? Right? And my third question is regarding the PIC. Given the current high prices that you're seeing, right, and looking at the Q2 results for the whole group, Do you think that Penghorang is able to breakeven on the pretax level, right? And could you give some sort of guidance on what sort of plant utilization rate should we look at next year when the plant starts kicking in completely, right? And my 4th question is on your ESG side, looking on your Page 4, it looks like your numbers appear to be slightly deteriorating, especially for your GAG admissions, the water recycling rate and your energy intensity, it seems to be deteriorating. Could you give a bit of explanation on why is that? All right. Thank you, Alex. So let's tackle your first question regards to the Q3 guidance. So as Shakil has mentioned, I think for Q3, we expect the price and spread to be moderate. But good thing is that for quarter 3, there will be no plant turnaround. So in terms of plant utilization, we expect to see higher plant utilization in quarter 3 barring any unplanned, plant hiccup or slowdown. So with that, we hope to see a slightly better quarter in Q3. So on your second question, with regards to OpEx and repairs and maintenance for quarter 2, there is no unusual R and M or OpEx expenditure for quarter 2 or quarter 1 that deviate in terms of the numbers. So with regards to PIC, I think we have mentioned in the last quarter in this briefing that we expect the PIC to breakeven when we reach 60% to 70% plant utilization. And we hope this 60% to 70% will be happening once the plants start to ramp up upon starting of commencement of operations in by end of this year. So 60% to 70% may happening in 2022 throughout the year. So on the first question, Alex, I think I probably need some for you to clarify again which particular metric that you're referring to? I understand it's GHG emission or is it energy intensity? Yes. I'm looking at the GAG. The numbers seem to be increasing. Also your waste recycling rate seems to have come down in the Q2. How should we look at this? All right. I think when I mentioned earlier during this presentation, the GHG emission increased slightly compared to last quarter mainly because there's a lot of flaring activities as a result of completion of turnaround and plants starting to start up. So upon start up there is a lot we can expect a lot of synergies that contribute to the CGAG emissions. And because of the plant turnaround impact the quarter 2 the 3 plant turnaround PDH plant and in Geping, plant 1 methanol ending in both end in early May and plant fertilizer in Qatar, but that turnaround in June. So we have 3 plant turnaround during the period. So you see a lot of recycling rate higher. So I hope those have answered your question, Alex? Yes, thank you. But just going back on the 3rd question regarding the breakeven of 60% to 70%, you are talking about a plan pretax level, right, on a pretax level? Yes, that's our aim, but again it will depend on the market price outlook, Alex. Yes, I mean taking today's prices into consideration, yes, so it looks like you can actually be slightly profitable, right, if I'm not wrong? We hope so, yes. Okay. Yes. And you mentioned that you will need to you are looking at this level of 60% to 70% by the end of this year itself. That means in Q4, should we be seeing some sort of contribution coming in already for BIC? No, no, I think I mentioned 60% to 70% throughout 2022. So as the plant start up in the next year, so you will expect a slightly smaller percentage of flight utilization and it will continue to ramp up and averaging around 60% to 70% in 2022. I see. Okay. And your depreciation and interest charges is going to be spread out evenly as your different segments of your plants come into operation, right? So you largely spread out the cost in that case in that way, am I right? Correct. As per accounting principle, we will start to charge the project in progress into our fixed assets and start to depreciate as soon as we achieve the commencement of operations. Okay, great. Thank you so much. Thank you. Your next question comes from the line of Ahmed Makpour from Nomura. Please go ahead. Hi, Jazz Lee. Thank you for giving me the opportunity to raise question. So I just have one question with regards to your Specialty Chemicals. At the moment, based on the first half numbers, what is the revenue and EBITDA contribution from Da Vinci? And with the can you give us remind us on the time line on the commencement of the 3 plants again, whether and whether there has been a deferment because of the current lockdown imposed here in Malaysia? And what would be the expected earnings contribution roughly from those 3 plants, especially the one I think I believe the silicon plant in Geobank is the first one to come up. What should we be linked into our assumptions for from that plant? Thank you. That is all. Thank you, Ahmad. Okay. I think you have two questions there. The first one is the contribution of EVG, our silicon business in Europe, to go about online. So as we mentioned earlier, the contribution in some of EBITDA of EBG for our group, EBITDA remains very low at below 5%. And we expect with this our new ambitions to go big into Specialty Chemicals, we can increase this portfolio to much larger pie to contribute to our bottom line. But nonetheless, I think over the 6 months period, our friends in the DVG or BRB have also improved in terms of their financial performance and recorded significant contributions to EBITDA to our bottom line. So in terms of the timeline for the 3 plants, let me go 1 by 1. In terms of the silicon plant, we anticipate the plant in Dibing will start to commence operation in quarter 4 this year. And then the second plan which is the Nantime Rotor Denali Stack, our JV with LG Chem, So we expect those the plant will be commencing operation in Q2, 2023. And for the other plant, our top fleet JV with PCC plant rotator in KFC that we expect to also start up in Q2, 2023. So that plan remains unchanged and the timeline remains the same as what we mentioned to you in the last quarter. So the effect of this pandemic did not impact the timeline and milestone of this project. I hope that answers your question, Ahmad. Okay. All right. Thanks so much. Congrats on the good set of results by the way. Thank you, Ahmad. Thank you. Your next question comes from the line of Piyen Pinchuk from UBS. Please go ahead. Thanks for the opportunity. I have three questions. The first question is regarding your associate income. Could you elaborate what drives the big increase this quarter? Secondly, on the FX impact on your margin and on your business, could you remind me how many percent of your raw feedstock cost is in local currency? And what the FX sensitivity to EBITDA, please? Finally, thanks for the nice dividend announcement. I wonder if we could think about this dividend as a sustainable dividend base going forward. What would management say on that? Thank you. Thank you, Piaan. Let's tackle your first question. The share of profit from our JV associates. I think I mentioned earlier during my presentation that 2 particularly JV if you were to single out that contributed the most to our bottom line. This is first is a JV with DSF, the plan in Dibing. So I think the improved performance is mainly due to the favorable spread that they have realized on acrylacids as well as Akzo Alcohol Business that contributes significantly to the JV and hence our 40% portion of that. The other JV is the JV that we have with INEOS, formerly it was held by BP. This is a stick asset business. So in terms of performance compared to last quarter, the net profit quite significantly increased and also contributed to a lot of our bottom line. So to your second question, I think in terms of currency denomination, for us, we most of our feedstock are denominated in dollar and it provides a natural hedge because it's also our revenue is also predominantly in the US dollar. So the rapid volatility in currency, it may have impact on us, but not significant impact because in a way we are quite naturally hedged in thermal currency. So, with regards to I think your third question, can you repeat that Piren? I may have lost into my notes. Yes. The dividend announcement, would you maintain the amount per share of dividend going forward? Or should we think about it as a percentage of our earnings? Okay. Thank you. I think we will remain in terms of dividend when we put out the proposal to our Board, we remain guided with our current dividend policy of 50% out of our Patan C. Yes, we do acknowledge the request from our shareholders as well as the request and the current economic condition. And that's why for this particular interim dividend, we're quite generous in terms of our dividend also due to our stellar performance and we would like to share the fruits of our excellent performance with our esteemed shareholders. So moving forward to answer your question P and L, I think we will still be guided by our existing dividend policy. Of course, it will be deliberated at the Board and the Board will take all these factors into account whenever we decide on dividend. I hope that answers your question, Piren. Thank you. Thank you. Your next question comes from the line of J. Y. Tan from Fen Huang. Please go ahead. Hi, good evening everyone. Just to have a bit of clarity on the JV process, apart from the fact that the ASP trend continued to be on our trajectory, was there any reason for the stronger JV profit? Okay. Is that your only question, Thanh? Yes, that's my only question. Thank you. Okay, all right. There's no abnormality in terms of the JV that we have and simply the stellar performance from our JV are mainly due to the spread that they have realized during the quarter and during quarter 1, 2021. So you also notice that in quarter 1, 2021 there's also a significant contribution from our JV. So it's just that during quarter 2 they realized product spread and margin as even significantly increased. That's basically the main reason for the strong profit that they have generated. Okay. Thanks for explaining. Perhaps I could do a follow-up. What about in terms of the spread in the Q3, has this been stable or deteriorated in any way? For the quarter 3 this year, for this quarter? Yes. Okay. I think the similar goes to our other products in terms of outlook, these products, if you're talking about acrylic acid, oxal alcohol and acetic acid, they tend to be very in terms of outlook tend to be very moderate for Q3 and Q4. Okay. Thanks for that. Thank you so much. Thank you, Thanh. Thank you. We have your next question from the line of Anshul Singh from JPMorgan. Please go ahead. Hi, can you hear me? Yes, Anshul, can hear you. Hello. So I had a couple of clarifications. The first thing is, you mentioned that the plant utilization rate for PIC is expected to be around 60% to 70% in FY 2022. So is that for the whole year? Or are we going to see it ramp up to 60%, seventy percent by the end of the year? And my second question was about your 5% EBITDA contribution from DVG. So that's for the first half twenty twenty one EBITDA contribution. That's all. Okay. Thank you for your question, Anshul. I think for the PIC, the plant utilization, as I mentioned earlier, it starts to creep up as when they start operation by end of the year. So it's typically 60% to 70% will be a good benchmark for any plant starts to ramp up after commencement of operation. So that's why we expect a full year 2022, it will be between 60% to 70%. So in terms of contribution of Da Vinci, I mentioned it's below 5% EBITDA contribution to our bottom line. So I think the idea is for us to continue looking at business opportunity to grow into Specialty Chemicals to increase this portfolio of Specialty Chemicals contribution to our general EBITDA. So the idea is to have it more than 5% currently. Just for the half year or next 2021? Yes, that is currently the contribution of DPG into our group EBITDA, less than 5%. Thank you so much. Thank you, Andrew. Thank you. We have a follow-up question from Alex Goh from AM Bank again. Please go ahead. Yes. I just have one question on your plant utilization for the whole group. In your first half, you achieved 94%, and you've indicated in the Q3, there will be no turnaround. So should we look at second half of this year, where your plant utilization will be higher than 94% in the first quarter sorry, the first half of the year? That's the guidance, I think, Alex, because there'll be no flat turnaround in quarter 3, although we have few pit stop on some of the fronts happening in quarter 3. But in quarter 4, we have 1 plant turnaround. As we mentioned in the last quarter's NS briefing, that plant is our Asia Beetulu fertilizer plant in Vintulu. That will happen sometime in November. Okay. With that in October I think just to conclude, overall for the year, we hope to our client relationship to achieve around 93%, 94%. I see. Okay. Thank you very much. Thank you. As there are no further questions at this point of time, I would like to hand the call back to Olje for any closing remarks. Thank you. Thank you, Ajay. Thank you, everyone, for participating today and thank you for all your questions. Do send us your reports once they are published. If you have any more questions, do get in touch with me or Safara through call or e mail. Thank you everyone and good evening. Thank you everyone. Stay safe. Thank you. That concludes our conference for today. Thank you for participating.