Hello, welcome to PETRONAS Chemicals Group Berhad's end-year briefing for the fourth quarter and full year ended 31st December 2024. Assalamualaikum, I'm Zaida Alia, Head of Investor Relations. I'm also your event host and moderator this evening. Thank you for joining us. You should by now be able to access and download the financial results from Bursa Malaysia's website. The same is available on our corporate website together with today's presentation material. The agenda for today will be a short presentation followed by Q&A. I shall go over a few housekeeping rules. To avoid any noise interruptions, kindly always ensure your mics are on mute. To post questions during the Q&A, please raise your hands. Once I call your name, please unmute yourself, introduce your firm, and then proceed to ask your question. We estimate this session will take about an hour so that we can end at 7:00 P.M.
In the interest of time, we invite you to use the question box function should you already have questions prepared. As a reminder, all information presented and disclosed today is strictly intended for participants of the meeting. Participants are reminded that this meeting is being recorded and the recording will be made available on our website in a few days. No other parties have been authorized to record the meeting. To lead our briefing today is our Managing Director and CEO, Mr. Mazuin Ismail, who will start the presentation with the full financial year performance highlights, after which our CFO, Azli, will provide details of the results. Also present to take questions after the presentation are the rest of the senior management, comprising of Chief Manufacturing Officer, Mr. Ahmad Rizal, Chief Commercial Officer, Mr. B ahrin, Head of Strategic Planning and Ventures, Mr. Yaacob, and Dr.
Debbie Chiu, Head of Specialty Chemicals. Let's now proceed to the highlights. Over to you, Chief Mazuin.
Thank you, Zaida. Good evening, everyone, and thanks for joining us today. Ladies and gentlemen, before we start with the performance review, I would like to introduce to you our Chief Manufacturing Officer, Mr. Ahmad Rizal Abdul Rahim, who took over from Mr. Zamri Japhar. You know him from before, and this is actually effective 1st of February 2025. For your information, Mr. Zamri has been appointed as PETRONAS's Vice President for Group Health, Safety, and Environment, effective on the same date, which is 1st of February. Rizal brings over 28 years of experience in PETRONAS, having held various roles in both domestic and international operations. Rizal also has held managerial positions in technical and operational functions. He has led critical projects and also served as the Head of Special Projects in Downstream EVP Office, focusing on operational excellence.
Before assuming his current role, he served as the Head of Plant of PETRONAS Chemicals Olefins, Glycols, and Derivatives. I believe that his experience and expertise will be invaluable in driving PCG's operational excellence and maximizing our production. Rizal, welcome on board.
Thank you, Chief Mazuin.
Ladies and gentlemen, now on to our performance. Throughout 2024, we saw inflationary pressures begin to ease, prompting the Federal Reserve and other major central banks to gradually shift to more accommodative policies. These developments supported a global economic recovery, with average global GDP growth rising from 2.09% in 2023 to 2.65% in 2024. Albeit, we see that the pace of growth varied across regions. The average PMI for 2024 showed a slight uptick supported by emerging market economies, particularly in Asia, which demonstrated stronger gains driven by robust domestic demand and recovery in exports. On the other hand, advanced economies such as Europe and the US experienced a slower rebound due to lingering economic challenges. Moving on to crude prices, the average benchmark Brent crude price decreased to $81 per barrel, pressured by weak refining margins and concerns over sluggish economic growth, particularly in Europe and China.
While the OPEC+ production cuts provided some support to prices, persistent oversupply in key regions such as the U.S. and non-OPEC countries kept prices under pressure. Turning to the chemical sector, the sector continued to face challenges as key markets in Europe such as construction, automotive, and electronics remained weak. These challenges were reflected in the Bloomberg World Chemical Index, which declined by 10.7% against the same period last year. In addition, oversupply of chemicals such as polyethylene and methanol, particularly from the U.S. and Asia, led to pricing pressure, further dampening the downstream industries. For PCG, product prices performance were mixed across all the three segments. Product prices in our F&M segment were lower, mainly due to lower urea prices stemming from lower Indian tender and weak crop prices. In the O&D segment, we saw a slight improvement in product prices on stabilized energy and feedstock prices.
Nonetheless, product availability, limited price uptick, and downstream spreads remained weak. The specialty segment continued to face downward pressure on sales prices as key markets and markets such as construction remained flat across most regions. While the automotive sector saw a slowdown, particularly in Europe, however, positive momentum was noted in the consumer goods market driven by lower interest rates and increased holiday spending towards year-end. Ladies and gentlemen, moving on to our operational performance. Last year, we completed four turnarounds involving PETRONAS Chemicals Fertilizer Kedah, PC Methanol, which is in Plant One, and recently PC Ethylene and Polyethylene, which were completed at the end of November 2024. In addition to the turnaround, we experienced some unexpected downtimes, mainly in the fertilizer and methanol plants in the second and third quarter of last year due to some mechanical issues, which have been resolved.
In the last quarter, there was a minimal unplanned downtime as the issues were promptly addressed. Notwithstanding the setbacks, we doubled down and continued to focus on operational discipline, which resulted in a full-year group plant utilization rate of 91%, a significant improvement compared to 85% in 2023. Commodities production was higher, coupled with higher production from the specialty segment. We saw a total production volume increase of 8% year-to-year to 11.2 million tons. Subsequently, sales volume improved across all segments. This is further strengthened by added volume from PPC, which is included in our O&D segment, and additional volume from strategic sourcing. As a result, we recorded a 7% improvement in group revenue at RM 30.7 billion. Group EBITDA, however, decreased by 7% to RM 3.5 billion due to negative EBITDA contribution from PIC, PetChem, mainly from unrealized forex loss from revaluation on payables and higher operating costs at PPC.
These were further exacerbated by lower product spreads, and consequently, EBITDA margins slid to 12% compared to 13% in the same period last year. The group's PAT declined to RM 1.3 billion from RM 1.8 billion, mainly due to lower EBITDA, higher depreciation, and finance costs at PPC, net unrealized forex loss on revaluation of shareholder loan to PPC, and share of loss in associates in JVs. This was partially offset by higher finance income arising from adjustment of timing of payment of trade payables at PPC. Ladies and gentlemen, next, I will have Azli to take you through the details of our financial performance.
Thank you, Chief Mazuin. Ladies and gentlemen, thank you for joining us this evening. Let's delve into the fiscal highlights, starting with Olefins and Derivatives segment on page three of the deck, where we will compare the results of fourth quarter 2024 against third quarter 2024. As Chief Mazuin mentioned, the global PMI in fourth quarter 2024 showed limited growth compared to third quarter 2024, reflecting stagnant performance in the manufacturing sector. Despite supportive policy measures, particularly in China, these efforts were unable to fully offset the weakened demand, including demand in the downstream sector. Consequently, O&D product prices were impacted, and average product prices in PCG's O&D segment were down by 7% against the preceding quarter.
On the operational front, our plant utilization rate for the segment was lower quarter on quarter at 89%, mainly due to the scheduled plant turnaround at PC Ethylene and PC Polyethylene, as Chief Mazuin has mentioned earlier. As a result, our production and sales volume were lower by 8% and 6%, respectively. On the financial performance, the segment revenue decreased by 14% quarter on quarter, mainly due to lower sales volume and lower product prices. EBITDA for the segment was at MYR 100 million, reversing the loss before interest, tax, depreciation, and amortization in the preceding quarter. This is mainly due to higher contribution from PPC, which is largely coming from the unrealized forex gain from revaluation of payables. As such, the O&D segment posted a lower loss after tax at MYR 86 million.
Moving on to the fertilizers and methanol segment on page four, this quarter saw positive development in the F&M segment, particularly for urea and ammonia. The ammonia prices increased by 12%, driven by tighter supply from plant outages stemming from scheduled maintenance in the Middle East, as well as supply constraints in the Caribbean, U.S. Gulf, and North America due to gas constraints. Meanwhile, urea saw a slight price improvement of 2% due to tighter supply after Indian tender concluded in the fourth quarter amidst Middle East tension, while China maintained its no-export policy. On the operational front, plant utilization rate increased to 99% due to better plant performance, particularly at PC Fertilizer Sabah. Our sales volume improved by 14% to 1.6 million tons, contributed by higher volumes of methanol and urea.
Revenue increase contributed by higher sales volume and higher revenue from strategic sourcing, partly offset by the strengthening of the Malaysian ringgit against the U.S. dollar. As a result, EBITDA for the segment rose by 21% to MYR 733 million due to higher sales volume, particularly for methanol and urea. EBITDA margins saw a slight improvement at 30% compared to 29% in the previous quarter. In line with higher EBITDA, PAT for the segment increased by 41% quarter on quarter to MYR 492 million. Moving on to the specialty segment on page five of the deck. In fourth quarter 2024, the specialty segment recorded lower EBITDA, mainly attributable to lower sales volume following unfavorable market dynamics. Other than lower sales volume, contribution margins were also lower for most segments. For resins and coating, it was mainly hit by lower demand resulting from slow recovery in the construction industry.
For advanced materials, it was mainly impacted by lower demand for PVB films as well as PVC polymer additive due to higher availability of products in the market. For engineering fluids, silicone, and animal nutrition, they were influenced by lower demand for key products from all regions. However, overall, lower product contributions are partially offset against higher contribution margins from lube oil additive as well as chemicals. Next, let's look at the fourth quarter performance for the group against third quarter 2024 on page six. Against the preceding quarter, our Malaysian operation plant utilization rate improved to 95% from 92%, and this is mainly due to better plant performance, particularly at PC MTBE and PC Fertilizer Sabah, despite the scheduled plant turnaround at PC Ethylene and PC Polyethylene.
Our total sales volume was higher by 4% at 2.8 million tons contributed by higher sales volume from the commodity segment, including volumes from PPC. Group revenue decreased by 7% to MYR 7.5 billion due to lower product prices, lower revenue contribution from Perstorp, as well as the strengthening of Ringgit against the US Dollar. Nevertheless, EBITDA was higher by MYR 156 million or 28% at MYR 710 million contributed by net unrealized forex gain on revaluation of payables at PPC. In line with EBITDA, we recorded profit after tax of MYR 539 million due to unrealized forex gain on revaluation of shareholder loan to PPC as compared to unrealized forex loss in the preceding quarter. Additionally, there was also a finance income arising from adjustment of timing for payment of trade payables at PPC in the fourth quarter.
Now, let's proceed with the cash flow and balance sheet on page seven and eight. In 2024, we generated cash flow from operations at MYR 4.6 billion, and most of our cash used for investing is incurred for CapEx investment as well as project growth projects. Most of our cash outflow for financing is dedicated to payment of dividends to our shareholders. On the balance sheet at page eight of the deck, our total assets were lower by MYR 186 million at MYR 60 billion, mainly due to decrease in intangible assets due to the strengthening of Ringgit against Euro and Swedish Krona. The decrease also resulted from a decrease in investment in JV and Associates, mainly due to redemption of preferred shares as well as the share of loss incurred by the Associates and our JVs.
Total equity was lower by MYR 2.1 billion, mainly due to the strengthening of the Ringgit against the dollar as well as the payment of the second interim dividend and first interim dividend for 2024. That's all for the financial breakdown. I'm handing back the session to Ismail Mazuin for the way forward.
Thank you, Azli. Ladies and gentlemen, now let's have a look at the market outlook. The global market conditions are expected to remain unchanged in 2025 as the changing geoeconomic policies, product overcapacities, as well as geopolitical events continue to influence the market dynamics. In the immediate term, demand in the chemical sector is expected to be stable. For O&D segment, ethylene prices are expected to be stable on modest recovery in the downstream sector and several plant cracker outages in Southeast Asia and South Korea. MEG prices are forecasted to be stable despite fluctuating polyester demand as supply is expected to be short due to the turnarounds in the US, China, and also the Middle East.
For polyethylene, prices are expected to be stable following the end of Lunar New Year celebration and commencement of inventory replenishment in preparation for the upcoming festive seasons of Ramadan and Eid in March and April. For petroleum jelly, prices will be supported by increased PTA demand from the polyester fiber industry, new PTA capacities, and improving gasoline market. Ladies and gentlemen, now let's have a look at the F&M market. We expect that product prices for the F&M segment will be firm, supported by improved demand and limited regional supply. Urea price is anticipated to be stable, driven by limited availability amidst supply cuts in Iran, coupled with emerging seasonal demand from India and Southeast Asia. Ammonia is expected to be stable despite rising natural gas prices, as most producers, including those in the Middle East and Indonesia, are fulfilling their term commitments and domestic demand.
Methanol prices are expected to remain stable despite new capacities entering the market. This stability is driven by active restocking after the festive season, while Middle Eastern suppliers redirect their volumes to regions with higher netbacks, such as India and Europe, and therefore limiting supply availability in Southeast Asia as well as Northeast Asia. Methanol spot market demand is expected to increase to support the production of acetic acid, for which China alone, new facilities with a total annual capacity of six million tons have been built. Moving on to the specialty segment, the performance of our specialty segment ties back to the variations of the end market demand that largely track the macroeconomic environment. As we start the year of 2025, the specialty chemicals market is not spared from the overall prolonged slowdown demand growth that we see in the chemicals industry.
Demand recovery will be fragmented across major economies like the U.S., China, and Europe, remains a factor impacting the specialty chemicals demand across target end markets. The construction sector ended 2024 on a soft note and is not expected to improve drastically given the persistent headwinds as seen with the persistently low construction confidence indicator in Europe, while China's stimulus package and policy easing are still finding their ways to improve the local situation. The automotive sector is expecting a softer start as OEMs are reporting slower demand recovery in most geographies besides China, which is further supported by renewed trade-in programs introduced back in last year or 2024. Consumer goods and retail, on the other hand, are expected to maintain the positive momentum from the fourth quarter of 2024, with moderately robust consumer spending across most geographies led by the U.S. as well as Europe.
As such, the first half of 2025 is expected to remain challenging for the specialty segment, and we retain our cautiously optimistic view for the demand recovery in specific end markets while navigating the evolving business landscape. Ladies and gentlemen, moving on to our sustainability updates. We are improving our data collection across all our plants to enhance our GHG reporting accuracy with an in-depth focus on data quality. Our carbon reduction initiatives continue to be supported by operational optimizations such as energy efficiency enhancement, flare reduction measures, and the subscription to Tenaga Nasional Berhad's green electricity tariff, as well as Sarawak Energy Berhad's renewable energy certificate. As a result, we recorded GHG emission reduction of more than 295,000 tons of CO2 equivalent at our Malaysian operations. We have enhanced our GHG accounting and have begun Scope 3 disclosures in line with the International Financial Reporting Standards or IFRS Framework.
On social and governance, the PCG Board has approved the adoption of PETRONAS Human Rights Policy, reinforcing our commitment to a structured and consistent human rights as PCG adopting PETRONAS Human Rights Policy. At this time, we are finalizing our sustainability report for the year 2024, and this will be made available to you on our website in about a month's time with more details of our sustainability progress and journey. Ladies and gentlemen, before we move on to the Q&A session, I would like to briefly touch on our key priorities and focus areas going into 2025. In 2024, we saw several challenges such as operational hurdles, foreign exchange fluctuations, and persistent inflationary pressures. Despite these obstacles, we effectively navigated these challenges, reinforcing our steadfast commitment to long-term growth and diversification.
We have maintained our commitment to operational excellence, which resulted in improved plant utilization of 91% while successfully executing our plant maintenance and turnaround activities in 2024. In 2025, we aim to maintain at least this level of performance despite the higher maintenance schedule. Our focus, as always, is to execute the turnaround effectively and ensure the safety of all our employees and contractors. On growth delivery, our Penta and calcium formate plant in Sayakha, India, was inaugurated in February 2024. The plant is currently commissioning, and to date, first samples have been dispatched to our customers in December 2024. In fact, the first batches of Penta are scheduled for delivery from Sayakha's site in the first quarter of this year.
At the end of 2024, through Perstorp, we fully acquired 100% of shares in OQ Chemicals Netherlands B.V., and this acquisition allows us the option to manufacture a new range of synthetic esters, strengthening the engineering fluid segment within our specialty segment. On the commercial side, we continue to focus on commercial excellence initiatives and improve our agility and response to market dynamics while leveraging our market knowledge to expand the market reach in line with our growth strategy. Ladies and gentlemen, we remain committed to optimize our value chain and maintain competitive cost management to navigate the challenging economic landscape and anticipated slow market recovery. Ladies and gentlemen, that concludes my update for today, and now let's open the floor for the questions- and-a nswers. Thank you.
Thank you, Encik Mazuin. Ladies and gentlemen, we shall now begin the Q&A session. To post any questions, please use the raise hand function. Please unmute once I call your name, introduce yourself, and then proceed to ask your question. You may also post questions in the Q&A function. Raymond, please go ahead.
Yes, good evening, everybody. Okay, so my question is, first and foremost, some housekeeping matters addressed to Azli. So on the $748 million net forex gain, can you help us split up between the gain on the payables of Pengerang and the gain on the revaluation of the shareholder loan, and also the gain from other operations not related to those two? Thank you.
You're referring to the Bursa report, right?
Yeah.
I mean, just for the benefit of the rest in the call, right?
Yes. The $748 million is the net forex gain that is reported in the notes of the accounts.
Yeah. Okay. Thank you for the question. For everyone's benefit, if you refer to page 18 of the quarterly report in the Bursa, there's a $748 million net gain on foreign exchange. Almost 90% of this gain relates to Pengerang. So in terms of exact details, almost half of this gain basically relates to the unrealized gain for PPC's payable, and the other half is basically the unrealized foreign gain on revaluation of shareholder loan to PPC. So it's about 50-50. I hope that that answers your question, Raymond.
So I take $748 million - 10% and divide by two, is it?
Yes.
Okay. And there was also another gain from the deferment of the payables as well. That's amounted to about $240 million.
Yes.
Okay. Sure. Thanks. I'll just stop here for now.
Thank you, Raymond.
Next, we have Sumit from JPMorgan. Please go ahead, Sumit.
Yeah, hi. Thank you. This is Sumit from JPMorgan, and thanks for the presentation. Perhaps I have a couple of questions. So firstly, and correct me if I'm wrong, but I understand that some of your gas contracts for F&M business are going to have a revaluation this year. Let me know if that's correct, and if that's the case, then what are going to be your negotiations? Is there going to be any change in the structure? Formula would be great to know that. Secondly, my other question is, I read on, I think, one of the consultants' news that Pengerang Complex is indefinitely shut. Is that correct? And if that's the case, do you have any strategy as to when to start it again? Thank you.
Okay. Thank you, Sumit. The first question, gas contract for the F&M, maybe perhaps you're asking whether as opposed to re-evaluated or whether it's coming to expiry, is it?
Yeah, coming to expiry. Sorry, that was the correct one. Yeah.
Yeah, yeah. Yeah. Yes, there's one contract for ABF, ASEAN Bintulu Fertilizer, that's coming on that will expire at the end of this year. But we expect that contract will be renewed on the same terms, just like our other contracts.
Understand.
Okay. On the second question, I think this is maybe a rumor or anything that I think for us, our new project in Pengerang is progressing as ramping up. You refer to our media release, refer to our analyst briefing, and what Encik Mazuin has mentioned earlier. I think we are in the process of ramping up the production. So that's basically the status as we speak right now.
Got it. Just a follow-up then. Would you be able to tell us what's the utilization rate currently on the Pengerang Complex?
It is currently very, very low because there's a feedstock disruption at the refinery. There's issues at the refinery and cracker, which we don't own, but it provides ethylene and propylene into our PetChem plant. So there are some maintenance activities currently undergoing, and we expect that maintenance activities to be completed soon. And it will be for the PetChem plant to be up and running end of quarter one. And post-running, then we expect the plant utilization rate to hover around 60%-70% for 2025.
Okay. So 60%-70% for second quarter to fourth quarter 2025 or the full year 2025?
Full 2025.
Full year 2025. Okay. So basically, you can go up to 80%, right?
Yeah. I mean, as we mentioned earlier in our previous analyst briefing, there is this requirement for the integrated complex to achieve reliability tests required by the project financing arrangement, and they are gearing up for that. So part of the requirement is they need to achieve a certain level, which is high, high level of utilization rate for a certain number of days. So they are gearing up for that. So once we do that, then you will see the plant utilization rate for the PetChem will go up.
Got it. But in the fourth quarter, did you face that problem that the cracker is facing, or did the fourth quarter was okay? It's just the first quarter where there are issues.
The fourth quarter is okay.
So what was the utilization in fourth quarter, if I may ask?
I don't have the number with me, but if you compare in terms of volume, it was from PetChem plant in Pengerang, it was higher in quarter four compared to quarter three. So that is basically a higher utilization rate in quarter four versus quarter three.
No, that's very helpful. And just one last thing. Can you please remind me again the fixed cost, the depreciation, and interest expenses on PPC? Thank you.
Sure. As a guidance, our 50% interest in PPC, the depreciation for 2025, our guidance is about MYR 400 million. For the interest expense, our guidance will be around MYR 280 million for the full year.
Got it. Thank you so much.
Thank you.
Thank you.
Thank you, Sumit.
We have a question since we're talking about PIC. We have a question from the box. Is the PIC product spread positive in fourth quarter 2024?
I think in terms of the market for the PIC product spread, if you were to look at selling price versus the direct variable cost, it's still positive. In terms of contribution margin, it's still positive. Yeah. Maybe I will argue that in terms of certain selected products, for example, MEG, that contribution margin could be lower or even negative.
We shall go next to Vivek from Morgan Stanley. Please go ahead.
Thank you so much. Just with respect to you mentioned there's going to be a higher level of maintenance turnarounds for 2025. Would it be possible to give some color with respect to the key units and over the four quarters, how we should think about the maintenance being spread out? Thank you.
Right. Insofar as the plant maintenance for 2025, we will have turnarounds for our PC Fertilizer in Sabah, for our PC LDPE, PC Olefins, and PC Glycols. On top of that, we have some other pit stops in some of our other plants as well. So four turnarounds. Yeah. And then maybe to add, the first turnaround will happen in quarter three, and that will be for PC Fertilizer Sabah. And the other three is in quarter four because they are integrated with one another. That's around November, December this year. Thanks.
Okay. Super helpful. So basically, the first half, barring any issues, should be normal. And both of the, I mean, all four of them would happen in the second half, correct?
Yes. Like what Encik Mazuin mentioned, there's no plant turnaround we expect in the first half, but that also does not preclude that we do have some scheduled maintenance and pit stop at other plants.
Sure. And I think just to clarify, you mentioned you'll be maintaining the same level of operating rate vis-à-vis 2024, correct? Even though you have these turnarounds in 2025. Is that?
Yes. That's the aim. That's the aim. Yeah.
Okay. Got it. Thank you so much.
Thank you. Next is Raymond from CGS International again. Go ahead, Raymond.
Yeah. Hi. Okay. So Azli, a question on the O&D. I think because O&D benefited from the forex gain on the translation of PPC's payables as well as the deferment of the trade payables, which also gave rise to a finance income. So if I total up those two, it will amount to more than $500 million. And it seems that the EBITDA for O&D is negative for fourth quarter.
No. The one that in the fair value deferment doesn't hit the EBITDA. It basically hits the PAT.
Yeah. Okay. So the EBITDA was disclosed at $100 million for O&D in the fourth quarter. And the foreign gain from the translation of the PPC payables, based on what we discussed just now, it amounted to about $300 million. So if I take $100 million EBITDA minus $300 million, does that imply a loss?
Yes. I mean, for O&D, if we were to exclude, I think we need to for EBITDA purposes, if we were to exclude the impact on the forex, it would be the impact of forex on PPC payables, which is around maybe $350 million. So $350 million minus the $100 EBITDA, then it would be around $250 million.
$250 million loss.
So if you were to, of course, there's other adjustment as well. So it would be around minus $200 negative EBITDA for O&D. But then again, yeah. But then again, I think the reason for this is because we have a scheduled plant turnaround at PC Olefins and PC Polyethylene. They were down for close to two months in quarter four. And as you know, our ethylene cracker are one of the cash-generating outfits. So they were down for close to two months. So that's basically the reason for the lower EBITDA in O&D, excluding the forex impact.
So in the third quarter, you told us before that Pengerang generated an EBITDA loss of $130 million. What was it in the fourth quarter?
$140 million in the third quarter for Pengerang, excluding forex. Remember?
Yeah, yeah.
So if you were to use that same basis, for the fourth quarter, it generates around negative EBITDA of $100. So slight improvement.
It narrowed a little bit.
Yes.
Okay. But just talking about what you said about the turnaround for PC ethylene and PC polyethylene, at the end of the day, O&D still generated a fourth quarter plant utilization of 89%. And that's actually higher than your first quarter utilization of 87%. And you did actually manage to make a good profit in the first quarter.
Yeah. I think other than the scheduled turnaround at PC polyethylene and PC ethylene, the other market-driven impact is because of our aromatics product. If you track the prices for paraxylene and benzene, they're pretty much down by around 10% compared to the third quarter, while you see the heavy naphtha prices remain flattish. So that is basically a very low spread for aromatics product that really hits the O&D.
Okay. Given that in the first half of this year, you'll be not performing any turnarounds, do you think that the O&D will go back to normal? As in, we've never seen before a loss like this for O&D in a single quarter.
I mean, if you look at similar quarter 2023, there's also a negative EBITDA, but small. But I think what we see now, yeah, you're right. In the first half of the year, there will be no scheduled turnaround. Right now, we are seeing the spread for aromatics slightly improve compared to quarter four. So that's hopeful that the spread for O&D is improving. But then again, so it's our other peers experiencing, right? So our result is basically, if I could compare, much better than our other O&D peers.
Okay. Thank you. Thank you for your comments.
Thank you, Raymond.
We have a question from Hakimi of KAF, The Box. Would the ongoing discussion between Petros and PETRONAS have an impact to PetChem's gas price arrangement? And does PetChem and Perstorp price impact on PetChem's gas price arrangement with PETRONAS and also PetChem Perstorp price with Saudi Aramco?
Okay. So the first part of the question is actually between PETRONAS and Petros, would have any impact to PCG? In this area, the only plant impacted is actually ABF. And currently, we are still having our GSA ongoing between PCG and PETRONAS, and that will continue. As discussed earlier, it may be extended as well. So that's the status. Insofar as gas arrangement with Aramco, we don't believe there's any impact. Thank you.
Next question from Yong Liang Por . Please go ahead.
Hi. Hi. Thank you. Just two questions. First question is looking at your selling expense. Fourth quarter was up quite a lot, I think, year- on- year, and then administration expense as well. Is this the new level of expenses, or is this just high in fourth quarter? That's a question. Yeah.
Yeah. I think thank you, Yong Liang Por , for the question. I think moving forward, these will be our guidance for our S&D expenses. And it's higher because in line with higher sales volume. Not just we have higher volumes for O&D, but we also have higher volumes for our strategic sourcing and higher volumes from we're starting to take methanol from Sarawak PetChem in Bintulu. And then that particular arrangement, we will also incur S&D costs to deliver those methanol.
Okay. So $570 per quarter is about the right level now for this year?
Yeah. That could be the right guidance.
Got it. Got it. And administrative expense as well, $420 is also about the right level per quarter?
Per quarter. Okay. Because in quarter four, there are certain administrative expenses that are specific to quarter four. So I think in terms of administrative expense, it will be higher, but you can't use quarter four as a basis. What I will guide you is if you can average out the quarter three and quarter four, and that will be the guidance for the full year.
Okay, so the second half is the level.
Correct.
Okay. And so I think, obviously, going through a pretty tough time right now, the gross profit level is pretty low. And there are, I think, some products where you look at the global supply-demand balances, and then you do think that, oh, maybe something needs to be done. So my question is, are you considering closing down any plants or reducing capacity of any products today? Thank you.
I think you're right. The market dynamics dictate the return, and we actually look at all our value chain keenly, and we continue to assess market dynamics. Insofar as whether adjustment is needed, we continue to assess. If adjustment is needed insofar as how much of our molecules flow into certain products, we always assess that, and we'll continue to assess that. When it comes the time for us to actually stop certain production, we will do that. When it comes to actually call the shots to actually high-grade our portfolio, we will also do that. We continuously monitor. At the end of the day, it's about creating the best value out of all our molecules that we have.
I mean, yeah, specifically, I was looking at [PX] , and I've never in my life seen such low margins, and I am concerned that maybe, yeah, something has structurally changed there, right, for instance.
We will not push product just because we push product and suffer losses for sure, so our financial discipline would have to be there, but at the same time, we are finding ways to actually look at our cost optimization, efficiency of our plants, and of course, our folks at Commercial Excellence would find ways how to get the best position in the market.
Thank you.
Thanks.
We should now go to Raymond of CGS again. Go ahead, Raymond.
Yeah. Encik Baharin, can I ask you about the status of the special feedstock arrangement, special discount arrangement with the Pengerang Refining Company?
Maybe I can answer that, Raymond. I think as we discussed earlier in previous analyst briefing, the special discount arrangement between PPC and PRC, it will be implemented upon the PRC making money. So as I alluded earlier, the PRC has challenges in terms of ramping up. And then they are also margin-wise also affected. So they are also not making money. So because of that, that special discount has yet to be triggered. And we're hopeful that once the operation starts to ramp up, and then the PRC will generate enough sufficient money. And after meeting the relevant transfer pricing guideline by the IRB, they can provide that additional discount to PPC.
Okay. So there wasn't any contribution from that special Perstorp discount in the fourth quarter?
No.
None at all, right? Okay.
No.
How about the outlook for specialties in the first quarter?
I can defer to Dr. Debbie, who can provide you more color on that.
For the first quarter in 2025, the general consensus, we expect a similar performance continuing from 2024, even though there is a slight expectation the market may start picking up. But we're pessimistically optimistic looking into the 2025.
Okay. Thanks very much, Debbie, for that comment. Just going back to Azli. Azli, the special feed-start arrangement, that arrangement, has it been formalized already?
There's already an agreement between PRC and PPC about the provision of this special discount. But in terms of how much, that will be determined between the two entities once that discount is going to be triggered. So in terms of principle, that's already there, between the parties. But implementation mechanics, it will be once that can be triggered.
I see. Okay. Thanks.
Thank you, Raymond. So we don't have any more questions in queue. That will be the end of our briefing today. Once again, thank you, ladies and gentlemen, for your time and participation. Please reach out to us should you have any follow-on questions. We look forward to receiving your reports once published. Good evening and have a great weekend ahead.
Thank you, everyone.
Thank you.