Good day, and thank you for standing by. Welcome to the PETRONAS Chemicals Group Analyst Briefing for Q1 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I'd now like to hand the conference over to your speaker today. First speaker for today, Miss Alia. Please go ahead.
Thank you, Annie. Hello, [Non-English content], ladies and gentlemen. Welcome to PETRONAS Chemicals Group Berhad analyst briefing for the Q1 financial results for our financial year 2021. I'm Alia, Head of Investor Relations. Thank you for joining our call this evening. We apologize for the five minutes late start. You should by now be able to access and download the financial results as well as our presentation materials from our corporate website or through the links provided in the event invitation. As a health and safety precaution, today's briefing is conducted fully virtually whereby all our management are attending remotely from our homes. As such, we would like to apologize in advance for any delays or glitches you may experience.
Ladies and gentlemen, we are pleased to have the PCG Group senior management present today, led by Managing Director and Chief Executive Officer, Datuk Sazali Hamzah, who will give highlights of the group's performance. As usual, our other speakers for today will be Azli, our Chief Financial Officer, Kabir, our Chief Manufacturing Officer, and Shakeel Khan, our Chief Commercial Officer. Also present today is Akbar , our Head of Strategic Planning & Ventures. I shall now hand you over to Datuk Sazali for the performance highlights.
Thank you, Alia. Good evening, ladies and gentlemen. Thank you for joining us today. After the lows that we saw in the H1 of 2020, it has been a relief to see the economic rebound that took place in the H2 of the last year continue into 2021. GDP for Q1 2021 was recorded at 3.31% compared to the negative 2.8% last year. Similarly, PMI expanded to 54.2 compared to 48.4 last year on positive business development, easing operation, as well as positive business outlook. With the return of business, the benchmark Brent crude oil averaged 22% higher this year at $60 per barrel compared to $50 per barrel in the Q1 last year.
It's further supported by supply reduction following voluntary production cut by OPEC+ members, supply disruption in the U.S. following extreme cold weather in the Q1 or early of this year, which also impacted petrochemical product supply and rising fears of tension in the Middle East. Following the higher crude oil price and improved economy, petrochemical product price averaged higher due to higher stock costs and healthy demand amid supply tightness. All in all, we saw a much improved market year-on-year. Ladies and gentlemen, the COVID-19 pandemic was a strong reminder on the need to focus on long-term sustainability over short-term profits. As we continue to refine our sustainability framework, we will continue to share our journey with you based on the three pillars of our sustainability agenda that we have shared earlier, people, planet, and profit.
While we are ensuring our business sustenance and growth, we measure the energy intensity or energy use against our operation. This quarter was recorded 3% lower energy intensity. At the same time, recorded 4% lower PU at 90% compared to the same quarter 2020 as we undertook turnaround activities at some of our facilities in quarter one. This was a direct reduction in energy consumption, given that we have some facilities offline during this period. Moving forward, we will continue to monitor and ensure reduction of energy used through our energy and loss management system, which aim to optimize energy use in our facilities. Next, we look at our second pillar, which is planet, where we monitor our greenhouse gas emission intensity and volume. Year-on-year, GHG volume is 8% lower, and GHG emission intensity was also lower at 4% as compared to previous quarter.
Our recycling rate fell to 72% in Q1 2021 compared to 85% in Q1 2020. This is mainly because we collect higher volume of non-recyclable waste during the plant turnaround activities at PC MTBE PDH as well as PETRONAS Chemicals Methanol Plant 1. Several recycling alternatives have been identified to ensure that we reach our year's end target of 81% recycled of the waste that we generate. On people, we focused in the early part of the year on the planning and coordination of our CSR program. The planning cycle includes a number of engagements with ministries, government agencies, NGOs, Red Association and partners to discuss the coordination of the upcoming programs, which are scheduled to kick off in the Q2 of the year. Our program continues to focus on the environment, community well-being, and development, as well as education.
Some of our key programs include our signature EcoCare, which is the mangrove rehabilitation along the river. For community development, we continue to advocate safety by sharing and educate on the safety handling of chemicals at school. Adding to this, we will continue with our community relief program.
You've been muted. To unmute yourself, press star six
Where we focus on cultivating responsible and sustainable plastic and waste management practices. Our aim is to reach at least 10,000 community members by end of the year. This also includes the assistance that we also give throughout the pandemic COVID-19 period. While continuing with the program we have identified, we are also working to develop our net zero emission by 2050 roadmap in line with PETRONAS sustainability agenda. This will play a big part of our sustainability journey moving forward. This roadmap we target to complete at least by end of this year. Ladies and gentlemen, moving on to our performance for the quarter, as I have mentioned earlier, improvement we saw in the H2 of 2020 has continued into the Q1 of this year. As guided late last year and even earlier this year, in 2021, we begin another three-year cycle of heavy turnaround annually.
During the quarter, we started the turnaround operation for the PDH unit at PC MTBE and PC Methanol Plant. For PDH unit, we coordinate closely with our partner, BASF, for BPC Plant, where they also shut down at the same time to reduce the amount of total duration of the whole value chain. Both turnaround were conducted while observing strict HSE and COVID-19 SOP on-site. As you're aware, this turnaround was conducted during the peak period of COVID-19, where a lot of effort had been made to ensure that the disruption is not severe to execute our turnaround. As a result of the two turnaround and corrective maintenance work at our urea unit, plant utilization for the quarter was recorded at 90% compared to 94% in the corresponding quarter. Consequently, production volume fell 5% year-on-year at 2.5 million tons due to this turnaround of the two plants.
Sales volume was comparable year-on-year as bad weather caused some December 2020 shipment to spill over into 2021. Following that, I am very happy to share that our revenue for the quarter rose 20% to MYR 4.7 billion, mainly due to higher product prices. EBITDA and PAT more than doubled to MYR 1.7 billion and MYR 1.5 billion respectively, on expanded product margin and higher share of profit from JV and associates. We recorded a healthy EBITDA margin of 36% for the quarter. For further detail of the financial performance, I would like now hand over to Azli to further elaborate on our financial performance. Azli?
Thank you, Datuk Sazali. Ladies and gentlemen, a very good afternoon and thank you for joining us. Let's start with the group financial performance on slide number six. Let's start with the comparison for the performance for the Q1 2021 against Q1 2020. As previously mentioned by Datuk Sazali Hamzah, Q1 2021 was an exceptionally better quarter overall. At plant utilization of 90%, we were lower compared to the same period last year, mainly due to the maintenance activities undertaken during the quarter. Although production volume was lower, our sales volume was comparable. In light of this, group revenue increased by about MYR 800 million, or 20%, to MYR 4.7 billion, boosted by higher product prices. Our EBITDA surged to MYR 1.7 billion, mainly contributed by higher spread and write-back of inventory value.
As a result, our EBITDA margin increased to 36% compared to 20% in the same quarter last year. Our PAT, profit after tax, tripled to MYR 1.5 billion following higher EBITDA. Moving on to group's financial performance against the preceding quarter, that is Q4 2020. On the operation front, our group recorded a lower plant utilization rate of 90% compared to 94% in the preceding quarter, mainly due to maintenance activities undertaken during the quarter. As a result, both our production and sales volume were decreased. Nevertheless, if you will compare quarter-to-quarter, our group revenue increased by more than MYR 800 million or 22%, boosted by higher product prices. Our EBITDA improved by close to half, close to 50%, to MYR 1.7 billion again due to higher spread, lower maintenance cost, and write-back of inventory due to higher net realizable value.
Our profit after tax increased more than 100% quarter-over-quarter at MYR 1.5 billion, following higher EBITDA. Ladies and gentlemen, in the interest of time, I will not go through the group's performance by segment, as much of this analysis overlaps with what I've just mentioned within the group. As is our practice, we will provide the slides on the group performance by segment at the end of the deck for your own consumption. If you have any further clarification, I will gladly provide further information at the end of this presentation. Moving on to the balance sheet and cash flow on slides seven and eight. There's not much major changes with regards to our balance sheet. A few things I want to mention, at least what happens within the quarter, is the total asset increased by MYR 1.5 billion.
Our total asset stood at MYR 41.3 billion. This is primarily driven by two things. One is the higher cash and cash equivalent generated mainly due to profit generated during the period. Our cash balance adds close to about MYR 700 million over this period. Secondly, there's a higher property, plant, and equipment, mainly due to CapEx spent on the Pengerang Integrated Complex Petrochemical, as well as the turnaround cost incurred during the quarter. Also to note that our trade receivable balance increased slightly in line with higher revenue. Nevertheless, our overdues in terms of total trade receivable balance is about 1%-2% of total receivable balance, which is very manageable. In terms of cash, moving on to slide number eight. Our cash generated from operation, CFFO, stood at MYR 1.4 billion, which is 80% higher compared to the same period last year.
In terms of net cash in investing activities, it was primarily driven for the CapEx spent on turnaround as well as the turnaround activities. For the cash flow used in financing activities, primarily due to the interim dividend that we paid in March amounting to MYR 560 million. At the end of the three-month period, our cash balance remains strong at approximately MYR 13.4 billion. That is all on the financial performance for the Q1 2021. I would like to hand over the session to Mr. Kabir to highlight on the manufacturing segment. Over to you, Kabir.
Thank you, Mr. Azli. Good afternoon, everyone. Kabir here. Let me share the operational highlight for the quarter. Our operation in quarter one was stable despite turnaround at PDH plant in Gebeng and Methanol Plant 1 in Labuan. We recorded a quarter performance of 90% plant utilization following good reliability in Olefins and Derivatives segment. Ethylene producer, namely PC Olefin and PC Ethylene, sustained high reliability without any shutdown activity for the quarter. However, the Q1 of 2021 utilization rate at Fertilisers and Methanol segment was impacted as our urea facilities required corrective maintenance. Through plant threat and bad actor management program, this corrective maintenance activity has been completed. With current focus is to continue running towards sustainable operation. We are expecting greater urea volume in the following months. Next.
For Olefins and Derivatives segment, plant utilization performance for the quarter was high at 100%, despite plant turnaround at our PDH plant. The turnaround was executed in compliance with standard operating procedure, SOP, following movement control order, MCO. We are very strictly follow the procedure in case of the COVID-19 happening seriously in Malaysia. High Ethylene production was recorded at PC Ethylene. The PC Olefin and PC Ethylene were operating well, with reliable ethane supply, resulting in commendable ethane volume for the quarter. Next. For Fertilisers and Methanol, plant utilization for Fertilisers and Methanol segment for the quarter was at 84%, which was lower compared to preceding and corresponding quarter. This was due to several activity conducted at our facilities during the quarter, such as turnaround at PC Methanol Plant 1. Started since early March, turnaround was conducted with no serious safety incident recorded.
Next was maintenance activity at all urea plant, namely ABF, PC Fertiliser Kedah, and PC Fertiliser Sabah. Moving on the progress of our project, PIC PETCHEM. As for PIC PETCHEM, the objective remains to achieve safe and successful startup and ultimately stable and sustainable operation. This is the most critical milestone in completing the project. In order to achieve this, PIC management implemented targeted green bubble, called TGB initiative, with the intent to protect everyone in PIC, including their family members, by proactively detecting COVID-19 cases during the quarantine phase and prevent the spread to work areas. The targeted green bubble initiative provided confidence to workers and family members that PIC is safe and a great workplace to work. Next. For conclusion, quarter performance, we sustained 90% plant utilization for the quarter. We achieved strong performance for Olefins and Derivatives segment without any shutdown activities at our ethylene production facilities.
We also successfully completed turnaround at PDH plant in Gebeng and methanol plant in Labuan, together with completion of corrective maintenance activity at urea plant. We are expecting greater production volume for the group in the following months. Lastly, we are strengthening our PIC startup activities by implementing targeted GreeBlue initiative without neglecting our process safety rules. Moving forward, we are going to carry out our plant turnaround at fertilizer plant in Kedah and Bintulu and plant shutdown activity at one of our ethylene plant in Kerteh. That's all I have for the operational highlight. I would like to hand over to Mr. Shakeel for the market performance and outlook. Over to you, Mr. Shakeel.
Thank you, Kabir . Good evening, Shakeel here. Let's proceed with the market highlights. In Q1 2021, product prices were higher compared to previous quarter amid improved energy market, plant outages mainly from Middle East feedstock shortages, and U.S. experiencing intense polar storm, as well as regional production cuts. This is further supported by healthy downstream demand as global economy slowly recovers. Now let's move on to the market outlook. The three months forecast. Ethylene price is expected to stabilize as supply is seen to be sufficient, balanced by startup of crackers in Northeast Asia, which is expected to take place between May and July 2021. Furthermore, despite restart of U.S. plants from previous shutdowns due to the U.S. storms, there is still lack of deep-sea supply as West to Asia arbitrage remains closed.
Demand is expected to be supported from large capacity growth in China domestic downstream, MEG, and styrene monomer sectors. Moving on to polymers. Three months forecast. Polymer prices have climbed up drastically in Q1, especially for LDPE, where it reached 10-year historical high at $1,700 per metric ton level. However, prices are now gradually undergoing correction and stabilizing in view of increasing supply due to capacity additions in Southeast Asia and China between Q2 and Q3 2021. Regional demand was temporarily subdued due to Ramadan and Eid holiday. However, it is expected to improve as buyers slowly replenish inventory after Eid holiday, as well as continued economic market growth on the back of COVID-19 vaccine rollout. Next, for MEG. Three months forecast. MEG price is expected to be stable due to ample supply as Middle East producers are ramping up production after completion of maintenance activities.
Further adding to the supply is start-up of two new plants in China with total capacity of 2.6 million metric ton. On the demand side, downstream polyester operation was higher amid improving sales and falling inventories, providing support to the prices. As for paraxylene, three months forecast. PX price is forecasted to be stable as many PX units in Northeast Asia and India will undergo turnaround with estimated production loss of about half a million MT. Demand is also expected to be reduced as downstream PTA plants will be also undergoing plant turnaround. However, three new downstream PTA facilities in China are expected to start up, which may help to keep PX demand healthy.
Next
Now let's proceed to Fertilisers and Methanol segment, starting with urea. Three months forecast. Urea price is forecasted to be stable on the back of sufficient supply as Middle East producers are running at optimal rate after turnaround. In India, MMTC, which is Metals and Minerals Trading Corporation of India, is expected to issue tender for estimated 1.5 million MT for July shipment. Demand is expected to improve as India prepares for its main application season in the coming months. Apart from India, demand will also be supported by upcoming planting seasons in Thailand, Australia, and New Zealand. Moving on to ammonia, three months forecast. Ammonia price is projected to be firm as limited supply remains amid plant turnaround in Middle East.
A strong downstream demand is expected in South Korea as producers of acrylonitrile and caprolactam are up and running well, while applications of ammonia ramped up in the U.S. for its spring season, especially for corn planting. Lastly, on methanol, three months forecast. Methanol price is expected to be stable with sufficient supply as most producers are running at optimal rate despite few plant outages. In China, MTO demand is expected to be stable with the return of its MTO plants in May, and higher operating rates may continue in upcoming months. Likewise, in South Korea, as its formaldehyde and MTBE units are running well. Over to you, Alia. Thank you. That was from my side, commercial. Thank you.
Thank you to Shakeel. We can now proceed to the Q&A session. Annie, over to you.
Sure. Thank you.
Okay, forgive me, Alia. I repeat first.
Oh, sorry Datuk'. Yeah.
Okay. Thank you, Alia, and thank you, Shakeel. Ladies and gentlemen, we have had a good start to the year and so far with positive news on the vaccination rollout globally. If efficacy, it looks like that we should be in a better year. Although concern remain as we see countries such as India and also Malaysia continue to fight against rising COVID-19 infection. Even here, we are now going into a third lockdown. Therefore we will continue to remain cautious in our business approach to continuously build on our strong business fundamentals as we navigate our way forward. Our continued focus on operational excellence have ensured strong operation and sales delivery even in the toughest time. We will continue and refine these initiatives as the business grow. Supporting the operation and commercial excellence is our strong HSE culture where the safety of employee takes precedence.
As well as we continue to be committed to strictly control our, to apply our financial discipline and the cost optimization throughout the period. Despite the setback partly caused by the pandemic, we are committed to ensure the Pengerang Integrated Complex will be ready for start-up in the H2 of this year. We are working towards smooth execution of our growth projects that have been FID so far, and as well as building our first pilot plant for bio-based chemical in PETRONAS Research Center. We will continue to evaluate business opportunities to expand our specialty chemical offering as well as looking into more R&D in the green chemical space in line with our sustainability commitment. That brings me to the end of our presentation. I would like now open for Q&A. Back to you, Alia.
Thank you, Datuk'. Apologies, Alia. Annie, over to you for the Q&A.
Yes. Thank you. Please stand by while we compile these. Our first question comes from the line of Bennett Lee of Citigroup. Line is open. Please go ahead.
Hi. You hear me?
Yes.
Okay. Thank you. Thank you for the opportunity to ask questions also congratulations on the solid results. I have a couple of questions. First one is for the RAPID project. What is the latest startup timing expected for crude to fit in into CDU? How long will the naphtha cracker or PChem's downstream start after the CDU starts? Second question is how much higher will the CapEx go up as compared to the original budget given the extended delay? Third question is could you remind me again, what was the unit under turnaround in Q1, and what will be the key units under turnaround for second, third, Q4 separately? Final question is how much inventory gain were recorded for the segment O&D and F&M in Q1? Thank you very much.
For the first question, thank you for the question. I would like to apologize for the bit of hiccup at the beginning because this is the first time that we use online market analytics. Hopefully, we learn something from it and improve going forward. Your first question is on RAPID. We talk about when is the latest timing scope of CDU. We are working on the H2, around the month of June to August. We working into this timeframe. However, bear in mind that we still have some challenges in terms of COVID-19 pandemic cases. At the same time, also closure of some of the rectification work that we need to do. We put the target is still within the H2 of this year. Your second question is when actually we can start the cracker after we start CDU.
It will take about three weeks, between 2 to 3 weeks. After CDU start, we will be able to start the cracker, provided that the plant is running smoothly. Bear in mind that this plant has been idle for some time, more than one year, and when we start up back the unit, we may face some tweaking issues. Depending on how smooth the startup is, it can drag further if there is some issue that we face along the way. We still targeting also to start the petchem within the H2 of this year. In terms of CapEx, what I would say is that we still work within the IC number that we have allocated at the beginning of the project.
It's still manageable, and at this moment, I would say that other than the extended cost, other than that, I think it's all within the control. The extended cost mainly because of we need to do preservation before we can do the O&M. That is on the second question. The third question is on the turnaround. You asked what is the turnaround in Q2, Q3 , and Q4. Q2 , we don't have any turnaround. We are going to have quarter three late. It is actually Q2 late or early Q3 . Our PCFK plant, we target to do the turnaround sometime end of June. Then another plant of ethylene in Q3 . Another one, Kabir, if you can add, what is the other one, Kabir?
ABF, Datuk'. Petrochemical.
October. October, did they?
Yeah.
I think that's the three turnaround that we are going to do the rest of the year. The fourth one, I forgot the question. Can you repeat again the question, number four?
I think the question is about how much is the inventory gain.
Okay.
If you can refer to the announcement that we published today, our inventory write back to the NRV for the quarter is MYR 34 million. I hope that answers all four of your questions, Bennett.
Thank you. For the inventory gain, can you split it into segments, O&D and F&M?
Mostly due to O&D.
Okay, got it. Thank you. Thanks.
Thank you, Bennett.
Thank you. Next question is from the line of Alex Goh of AmBank. Please go ahead, line is open.
much for the opportunity. I have a number of questions. First, I just run through one at a time, so it's easier for you to also respond. My first question is regarding your associate and JV contribution. It was a significant turnaround to MYR 133 million profit. I'm just wondering what is causing that? Is that largely a function of the improved product prices? Was there any lumpy items in them, or was there in any way any Pengerang contribution here? I understand you are starting off in a second, but was there anything coming from that?
Okay.
Okay. Datuk', you want me to answer that?
I think you can answer that.
Thank you, Alex. That's a very good question. I think the share of profit from associates and JV, there are two main contributors for the increase. One is the profit from BASF PETRONAS Chemicals, PPC. The majority of the improvement is due to PPC. If you compare with quarter four 2020, we have a loss in terms of contribution from the JV because of the closure of VDO as well as impairment on some of the units. That improvement in the BASF PETRONAS Chemicals is mainly due to improvement in products. The key two products that contributed to the better results for PPC is the acrylic acid as well as oxo alcohol. That majority derived from PPC. The second part is basically also improved margin from acetic acid. In terms of profit, it was double compared to quarter four 2020.
That's why you see in terms of in total, our share profit for associate and joint venture improved significantly compared to last quarter, as well as the same period last year. It's mainly due to the better spread in product. I hope that answers your question, Alex.
That's wonderful. Can I say that this MYR 133 million is going to be recurring, which is the main point I want to get. I'm just trying to figure out, was there any lumpiness? Given the fact that oil prices have gone even further up after this Q1 numbers, should we expect a stronger JV and associate contribution?
In terms of outlook, I think yes, we expect in terms of price and spread, it will be on an upward trend, at least for the coming quarter. In terms of the H2 of the year, I think it is safe to say that we remain cautious on the outlook because in light of the recent resurgence of COVID-19. We are remaining vigilant on the outlook because we want to assess the impact of this resurgence to the market, just like how we have been doing so far.
Okay. All right. Coming back to PIC, you mentioned that you are now looking at a H2 startup. During the previous quarter, you've indicated you are looking to start off in the Q1. Which month are you looking at in actually starting off the actual commercial operation? What is the outlook now, given that product prices have gone up? Would you expect this division now to be able to break even, at least on a net profit level?
Okay. As we have mentioned earlier, the outlook for this year, I would say that the contribution from PIC will be none, because one is we are in the startup mode, and the startup will happen a bit mid or late of the H2 of this year. That is also dependent on the situation of, as I mentioned, the completion of the mechanical verification as well as the readiness of the plan that we modified after the incident. We are quite confident that we will start it within this H2, sometime in the middle or late of this H2. The impact of the contribution from PIC will be negligible this year. When you talk about commercial operation, I would say that it is good to assume that starting next year we will reach the stable commercial operation.
I hope that can give the lead. This question can be posed again in the next quarter review, then we have a better picture of the situation of PIC.
Okay.
Azli, do you want to add anything?
Go ahead, Alex.
Yes. Given the fact that product prices have done so well since the beginning of this year, are you revisiting your earlier expectation that you will probably make a loss on your net profit after including depreciation and interest cost next year? Let's say your PIC actually is fully launched.
This is talking about PIC, right? PIC, if it does not reach really stabilized at more than 90%, I think it's still quite tough because at this moment, the bigger portion of PIC is also on the refining side. Refining margin, if you see, have improved but not as it was before the crisis. We still have to observe the price trend. If you see the lockdown of situations all over the world have resulted also the demand of petroleum fuel have yet to pick up as what we expect. That's one portion that I think is still a big factor for us.
I see. Okay. Now, given the fact that you have so much turnaround programs this year, are you still expecting your overall plant utilization to be above 90% for this financial year?
Yes. This year we're still targeting above 90%. As I mentioned, our aim now during heavy turnaround, even we will target for more than 90%. As of now, we believe that it's still doable. That will require also the benefit when the market is good in quarter one, quarter two.
I see. Could you also guide us now, what is your CapEx for this year and next year?
Azli, if you can confirm about this one quickly.
Yeah. As usual, I think in terms of our CapEx runway, it's about MYR 2.5 billion-MYR 2.6 billion. I think from year to year, that would be our number as a guidance for moving forward.
All right. Just coming back again to your inventory gains of about MYR 34 million. Can I assume that this entire MYR 34 million was a complete profit for you in this quarter?
Could you repeat that again, the second part of your question?
The inventory gain of MYR 34 million that you recognized in this Q1, did you fully pass down to the PAT level?
Yes.
I see. Okay, great. Thank you very much. That's all from me. Congratulations for the amazing set of numbers.
Thank you.
Thank you. Next question is from the line of Yayati Tyagi of UBS. Please go ahead, line is open.
Hi, thank you for the opportunity. I just have left with one question now after the previous question. I want to know for the effective income tax rate. Despite the profit that has increased in this quarter, the effective tax rate is quite lower compared to the previous quarter. What would be the reason for that, please? Thank you.
I think, Yayati, thank you for that question. Our effective rate for the year, we expect our effective rate is between 10%-15%. Of course, as our product prices get better yield, better net back, and better margin. Some of those profits are being taxed at Labuan as such lower tax. That's why as a guidance moving forward for 2021, our ETR is within 10%. Okay. The way I understood is that the units that are tax efficient or maybe tax-exempt are contributing more volume on revenue. Is that it? Yeah, because our tax rate is a blend between a Labuan tax and a corporate tax regime. Depending on the market condition, some income that we generate from our marketing, which is Labuan-based, will impact the effective tax rate accordingly.
In a situation where product prices are low and income generated by Labuan declines, our ETR will get higher proportionally. In this case, where product prices are higher, our income generated at Labuan gets higher. That's why our effective tax rate will be lower because the Labuan has a lower tax rate as opposed to corporate tax regime.
I understand. Thank you so much.
Thank you, Yayati.
Thank you. Our next question is from the line of Raymond Yap of CIMB. Please go ahead, line is open.
Hi, good afternoon, everyone. Just one question from me. In terms of the polymer prices, we have been seeing a gradual trending downwards over the past couple of weeks. Generally, if I see spot prices trending down, how quickly does it get reflected into your sales figure? Thanks.
Yeah. Khan probably can help us on this. Shakeel.
Yeah, Raymond. Shakeel here. Okay. Just to have a bit more clarity, you're saying that price is trending down. In fact, it's-
Yeah. Because I'm trying to get a sense of how quickly spot prices get reflected into your revenue and sales lines. That would depend on whether you are selling with a lag, as in whatever that you sell this month is based on last month's prices or things like that, some kind of commercial arrangement which might delay the impact of reducing spot polymer prices onto your actual P&L.
Okay. I think what's happening now is after we see the first four months of the year, four or five months, we see high price of polymer. I think, yes, you are right, it's trending down, but we do have our mix of term contract and spot contract to address the market. Basically, in anticipation of price declining, so we have basically the flexibility to maximize on term so that we can protect our volume from being impacted by the swing in price. I think similarly, when the prices move up, we maximize more on spot. We have that flexibility.
Okay.
Does that give you a clear statement?
Yes, roughly. If you could just give me a little bit more clarity on the duration of the term contract, how often is it rolled over?
Our contract, annual contract, so basically it's Jan to Dec, yearly contract.
Okay. This is a term contract for volume, not for price. Am I right?
Yeah. It's a volume contract. Yes, you're right.
Okay. I'm specifically trying to pin down on the pricing aspect. If spot prices are dropping, let's say if it dropped this month relative to last month, how quickly would that drop this month get reflected into your P&L? Will it get reflected next month or two months later or something like that?
It's a retroactive, right? Raymond, if you understand, I think depending on market, because you don't look at just one quarter. I think when you talk about retroactive, it's about four quarters in a year. It gets adjusted by itself along the year.
Okay. Some companies I know they basically sell, let's say whatever they sell for May is based on April prices. Basically it's a one-month lag. Does it apply to PChem as well?
Yeah, we have flexibility depending on products. Some products basically will take three or four weeks prior to the lifting. Some are around the end. I think we have F&M and also O&D. The pricing approach are slightly different between products, but in the end, when it averages out, it is good for the company.
Sorry, if you average it out, what kind of delay are we expecting?
I mean, in the end, I think it's about how you price your cargoes. I mean, to answer exactly.
How about if we just look at polymers?
Okay
What kind of delay should we expect in terms of whatever price today being reflected into the P&L?
You see now, between the time you conclude the price and also delivery, it takes between 2-4 weeks, right?
Okay.
Like I said earlier, in a price upward market, you will have, basically when you do an assessment, what you achieve will be lower than when the market is on the uprise. On the other way, when the market goes down, what you have achieved the month before will be reflected higher in the following month. Which is why I said it is adjusted quarter-to-quarter.
Okay. Sure. It sounds to me like it's about three or four week delay, right? Between the time you contract the price and the time to deliver. You only record the sale in your P&L when you deliver. It's essentially going to be a one-month lag, approximately. That's what I think I understand from what you said. Yeah. Okay, sure. Thank you.
Okay. No problem. Thank you.
Thank you.
Thank you.
Thank you. Yes, we have a question from the lineup. Ashok Singh of J.P. Morgan, please go ahead.
Hi, can you hear me?
Yes.
Yeah, for sure.
Yeah. I had a couple of questions. The first one is, you've mentioned that there are three turnarounds left for the year. Could you tell us how many days will those last, each one of them?
Azli, you have that, the data? Yeah.
Yes. In terms of turnaround, typically our turnaround, the number of days range between 40 days, Ashok.
Okay. This is for the ethylene plant as well as the ABf, the fertilizer plant in October. All these are going to be around 40 days?
Yeah, 40 days.
40 days.
Kabir, can you share the-.
Okay
the remaining three?
Okay. For PCFK, we're about 40 days. For ABF, actually we have 50 days, but for during quarter one, we already do the major overhaul on the compressor, so we will reduce the numbers of days. About 40 days. For our PCOGD, we already deferred to next year. PDH is about 40 days, already completed. Methanol, about 45 days, already completed.
The Ethylene plant?
Ethylene plant, this is the pit stop, is about 27 days in June.
Okay. 27 days in June. Okay.
Yeah.
My last question is, could you give us an update on the specialty chemical projects which are ongoing right now, under construction. What's the progress on those?
At this moment, Ashok, our branch project, basically this is the blending silicone plant in Gebeng. This is now under construction. Another project is on the ethoxylate plant in Kerteh. That also, EPCC contract already award, now under construction. Civil construction already started. The third project is our Nitrile Butadiene Latex, our partner with LG. For this project, we just award the EPCC contract recently. They go ahead with the detailed engineering and also construction at site as well. These 3 projects is currently ongoing for our specialty chemical.
When are they supposed to COD, the Gebeng and the Kerteh?
The Butadiene, correct me if I'm wrong. Akbar is here. Akbar, can you give the timeline?
For the Butadiene latex project down in Dungun, we are looking at initial acceptance in 2023. We're talking about the Q1. Then, for Harumanis EV, sorry, the ethoxylate plant in Kerteh, that will also be completed by Q4 of 2022. For the plant in Kuantan, the silicone blending plant, Sorry, the commissioning will start towards the end of this year.
Okay. Got it. Thank you so much.
Yeah.
All right. Thank you.
Thank you, Ashok.
Thank you. Thank you. As there are no further questions, I'd now like to hand the conference back to the presenters. Please continue.
Thank you, Annie. Thank you, ladies and gentlemen, for participating today. We apologize deeply again for the glitch we had earlier. We apologize for the inconvenience caused. Please reach out to us if you have any follow-up questions. We look forward to receiving the earnings reports once published. Thank you, everyone, and good evening.
Thank you. Thank you, everybody.
Take care.
Thank you.
Thank you.
Thank you.
Ladies and gentlemen, this concludes today's conference call, and thank you for participating. You may now disconnect.