3Q09 Performance
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Analyst Meeting 3Q09 Performance Friday 13 November 2009
Transcript of 3Q09 Performance
Analyst Meeting3Q09 PerformanceFriday 13 November 2009
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Agenda
3Q09 Management HighlightsIndustry OutlooksOperation PerformanceCAPEX Financial PerformanceKey Highlights
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3Q09 Highlights
Overview IMF: “The global recession is ending, the recovery has started with slow moving and the challenge is how to sustain it”.
Crude prices fluctuated resulting from the anxiety in certainty of economic recovery, capital fund flow, weaken USD, inventory reserved level and political tension between Iran and U.S.A.Outlook overview: Still under heavy pressure.
Refining: A few year challenge awaiting.Petrochemical: Balance within industry; likely & necessary
3Q09 average crude run 71% at optimum level.Market GIM in 3Q09 at 4.6 $/bbl: Refinery 1.7 $/bbl, Petrochemical 2.9 $/bbl.
Finance Total ESOP exercised until September 2009 was executed only 1.69% of total shares.
Operation New business model: Aim to be “Top Quartile Integrated Petrochemical Complex in Asia by 2014” .EPCC Contractor already awarded for CHP Project; completion in 2Q11.Appointing General Carbon Pte as consultant on carbon trading and the registration process from UN’s clean development mechanism (CDM)Cost reduction program, 9m09 cost reduced by USD 38.15 million or 1.0 $/bbl.
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Industry Outlooks
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World Economic: Recession ending, recovery starting??
GDP Growth % 2007 2008 2009 2010 2009 2010 2009 2010 2009 2010World 5.2 3.0 -1.4 2.5 -1.1 3.1 -1.7 2.3 -2.9 2.0U.S. 2.1 0.4 -2.6 0.8 -2.7 1.5 -2.4 2.0 -3.0 1.8Europe 2.7 0.7 -4.8 -0.3 -4.2 0.3 -2.7 0.9 -4.5 0.5United Kingdom 2.6 0.7 -4.2 0.2 -4.4 0.9 -0.1 0.6 -0.2 0.7Japan 2.3 -0.7 -6.0 1.7 -5.4 1.7 0.2 1.2 0.6 0.0China 13 9.0 7.5 8.5 8.5 9.0 6.5 7.5 6.5 7.5Middle East 6.2 5.4 2.0 3.7 2.0 4.2 3.3 4.3 3.1 3.8India 9.4 7.3 5.4 6.5 5.4 6.4 0.9 0.9 0.0 -0.1
IMF World BankJul 2009 Oct 2009 Jul 2009 Oct 2009
Countries Actual
Current and Forward-looking indicators:
Source: IMF, October 2009
GDP Growth and Trend (%)
Rebound in activity led by Asia
“ The recession is ending, the recovery has started and the challenge is to sustain it” – IMFEven though economy in many countries especially in Asia start recovering, the complacency must be avoided according to
The pace of recovery is expected to be slow and insufficient to decrease unemployment.
The strong public policies will be diminishing during 2010.Limits on credit availability regarding to bank deleveraging. Private demand in advanced economies remains very weak.
To achieving sustained healthy growth over the medium term will depend critically on dealing with the supply disruptions generated by crisis and rebalancing the global pattern of demand.
“The key policy requirements remain to restore financial sector health while maintaining supportive macroeconomic policies until the recovery is on a firm footing.” – IMF
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World Oil Demand/Supply
-2000-1500-1000
-5000
500100015002000
2008 2009 2010 2011 2012 2013
Demand Growth Refinery Capacity Additionskbd
World Capacity Additions and Oil Demand Growth
Source: PIRA, October 2009, IRPC team
2010 market outlook continues to look very bullish with OPEC required to increase crude production while OPEC spare capacity falling in the second half of the year.
Additional Refining capacity over the next 2 years still higher than demand growth lead to lower margins.
From 2009-2013, refining capacity expected to be commissioned around 4 M.BPD mainly from China and India.
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Petroleum Product D/S: Supply override the demand regain
0
100
200
300
400
500
600
700
1995 2000 2005 2010 2015 2020 2025 2030
Other
Industrial
Power
Bunker
M.Ton
World marine bunker demand increasing
Source: IMF, PIRA October 2009, IRPC team
0
50
100
150
200
250
300
350
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Korea
China
IndiaThailand
Malaysia
Asian Financial Crisis
Motor Vehicles per 1,000 people
Real per capita GDP (PPP Terms)
Demand improve around 1.7MMB/D throughout the year 2010
Products demand recover as well as
refinery upgrading capacity addition
World marine banker demand increasing as overall fuel oil demand decline
Transport oil demand growth
has considerable upside potential
especially by China and India
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Crude Price & Margins: Tough time awaiting
-4-3-2-10123456
1985 1990 1995 2000 2005 2010 2015 2020 2025
S’pore Hydrocracking
S’pore Hydroskimming
Forecast in 2009 $/bbl
Singapore margins remain weak with recovery beyond 2013
Source: PIRA October 2009, CMAI, IRPC team
Three Major Drivers of Oil Prices
Financial Market
Economic GrowthU.S. DollarInflationAsset Values
Medium-Term D/S
Emerging Market DemandNon-OPEC Conventional crude PeakOPEC Price Objective / Spare capacityPolitical Risks
Short-Term D/S
Inventory Levels/ChangesOPEC Objectives/DisciplineDemand/Economic RecoveryNon-OPEC Supply/Reduce CapexPolitical Risks
Oil Prices rebound as reduced OPEC spare capacity, economic recovery, and continued increases in financial investment push oil prices higher
Margins are still under heavy pressure in the near term and expect to recover beyond 2013
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Petrochemical: Bottom shifted with the soft landing
Weak demand/supply fundamental will cause margin compression. The duration of downturn depend on speed of economic recovery and speed of capacity additions and rationalizations.
Petrochemical downturn is better than expected and bottom expectation shifting to year 2011
New Expectation
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Petrochemical: Feeble light at tunnel end
New Expectation
New Expectation
Asia Global Demand Growth Propylene AvailabilityAsia
90 92 94 96 98 00 02 04 06 08 10 12 14
Americas Europes/CIS/Baltics Middle East/Africa90 92 94
Forecast
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Million Tons
Propylene Capacity Addition & Demand
Source: CMAI Conference March 2009, IRPC team
72
75
78
81
84
87
90
0
20
40
60
80
100
120
90 92 94 96 98 00 02 04 06 08 10 12 14
Demand Capacity Utilization Rate
Forecast
Percent, Operating RatesMillion Metric Tons, Global Propylene Supply/Demand
Propylene Supply/Demand
Demand recovery in Asia in 1H09 resulting from inventory replenishment, China stimulus package and speculation.
ME and China continue to build large capacity volumes in 2009-2011 while some high cost crackers will likely shutdown.
Low utilization rates and profit margins expected to continue until 2012.
Demand quickly improve as seen in Asia.
Light cracker feedstocks and cracker operating rate cutbacks temporarily tightened propylene availability.
Some on-purpose propylene; PDH and metathesis, being added in Asia especially in China, Singapore and Thailand.
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Operation Performance
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89% 89% 89%83%
87%91% 93%
88%
82% 85% 83%88%
79%
51%
29%
73% 70% 70% 71% 68% 65%
90%85% 85%
80%74%73%78%
76%66%
85%86% 78%
68%
0
20
40
60
80
100
120
140
160
180
200
JAN FEB MAR APR MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC. Y. AVG.0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 Crude run 2008 Crude run 2009 Crude run2007 % utilization 2008 % utilization 2009 % utilizationKBD
Refinery Capacity
Utilization
Capacity Utilization
Petrochemical and Lube
0
100
200
300
400
500
600
700
800
Ethyle
nePro
pylen
eBut
adien
eBen
zene
To
luen
eMixe
d Xyle
ne
SM
HDPE PPABS/A
S
PS
EPS Lu
be B
ase O
il
Asp
halt
0
20
40
60
80
100
120
140
160
Nameplate Capacity (LHS) Utilization 2008 (LHS) Utilization 2009 (LHS)
%Utilization 2007 (RHS) %Utilization 2008 (RHS) %Utilization 2009 (RHS)
Capacity Utilization
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3Q09 GRM & PTF
Note: Based on Production
4.1 4.5
1.1
3.10.6
0.5
0.11.0
1.7
3.6
5.1 4.5
0
1
2
3
4
5
6
1Q09
2Q09
3Q09
9m09
233 232 202
321270 210 262
125
219225
246189
0
100
200
300
400
500
600
1Q09
2Q09
3Q09
9m09
0.8-1.2
1.10.2
0.60.70.2
1.5 0.91.7
2.3
-1.0
-2-1012
3456
1Q09
2Q09
3Q09
9m09
LubeRefined
Gross Refinery Margin$/BBL. MKT GRM A/C GRM$/BBL.
231141 163
291
280
153236
106
184145
247
155
0
100
200
300
400
500
600
1Q09
2Q09
3Q09
9m09
Styrenics
Olefin
Product to Feed$/Ton MKT PTF A/C PTF$/Ton
2.3-1.0
1.7 0.9
3.04.2
2.9 3.4
4.33.25.3 4.6
-202468
10121416
1Q09 2Q09 3Q09 9m09
Refined Petchem
$/BBL
Gross Integrated Margin
5.1 4.51.7
3.6
3.3 4.6
4.74.3
7.96.4
8.49.1
0
2
4
6
8
10
12
14
16
1Q09 2Q09 3Q09 9m09
Refined Petchem
$/BBL
MKT GIM
A/C GIM
14
58%67% 67% 64% 67%
42%33% 33% 36% 33%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3Q08 2Q09 3Q09 9m08 9m09
64% 64% 66% 64% 66%
36% 36% 34% 36% 34%
0%10%20%30%40%50%60%70%80%90%
100%
3Q08 2Q09 3Q09 9m08 9m09
1% 2% 1% 1%
70%74% 70% 72% 73%
28%26%25% 27%28%
2%
0%10%20%30%40%50%60%70%80%90%
100%
3Q08 2Q09 3Q09 9m08 9m09
Petroleum Petrochemical Others
3Q09 Product Sales Value by Market
55%67% 67% 63% 67%
45%33% 33% 37% 33%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
3Q08 2Q09 3Q09 9m08 9m09
50,845 28,349Unit:M.Baht
16,999 11,300 12,860Unit:M.Baht
Unit:M.Baht39,649 Unit:M.Baht
Sales Proportion 40,29568,727
Domestic Export
203,724 114,244
149,436 79,976 51,956 32,353
Total Products Sales: Local vs Export
Oil products: Local vs Export Petrochemical products: Local vs Export
201,39247,873 112,32947,14067,844
34,280
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3Q09 Petroleum Product Sales
10
6
25
3
26
6
10
0
94
20
1
19
3
8711
9
28
8
17
9
92
3
22
4
10
1
26
684
7
19
9
87
0
0
100
200
300
400
500
600
700
800
900
1,000
Diesel Mogas ATB/LR Naphtha Lube Others
3Q08 2Q09 3Q09
2,99
2
534
998
297
297 61
6
2,37
8
598 698
206
283 57
3
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Diesel Mogas ATB/LR Naphtha Lube Others
9m08 9m094,
637
3,20
2
1,44
8
1,91
2
2,61
46,72
6
3,76
8
1,64
3
2,22
5
2,86
2
3,78
0
3,73
2
3,12
96,44
3
5,29
3
28,4
6814
,536
17,0
56
0
5,000
10,000
15,000
20,000
25,000
30,000
Diesel Mogas ATB/LR Naphtha Lube Others
3Q08 2Q09 3Q09
M. Liters M. Liters
M. Baht
15,4
96
7,49
6
9,63
7
9,80
2
4121
7
1396
6
8587
3091 6051
7064
88,4
95
18,5
10
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Diesel Mogas ATB/LR Naphtha Lube Others
9m08 9m09
M. Baht
Volume: M.Liters
Value: M.Baht
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3Q09 Petrochemical Product Sales4
0,3
06
37
,59
3
50
,80
5 65
,20
5
15
,22
2
36
,42
8
27
,52
4
39
,33
4
50
,54
7
60
,82
8
16
,76
4
14
81
8
74
37
6
48
08
0
34
47
0
19
14
5
29
21
9 85
42
3
25
,95
8 10
6,6
23
10
9,5
19
0
20000
40000
60000
80000
100000
120000
HDPE,CD1 ABS PP PS,EPS Olefin BTX Others
3Q08 2Q09 3Q09
109,
480
69,5
71
118,
802
156,
899
44,6
50
115,
424
76,9
15 105,
632 15
6,15
6
179,
071
41,0
25
326,
352
234,
911
305,
013
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
HDPE,CD1 ABS PP PS,EPS Olefin BTX Others
9m08 9m09
1,5
07
1,1
98
4,1
58
1,3
53
1,1
87
1,5
26
37
1
1,5
69
1,3
64
4,6
77
1,5
52
1,6
77
1,5
86
43
5
1,3
60
66
8
2,8
35
2,9
39
1,9
85
5,4
79
1,7
31
0
1000
2000
3000
4000
5000
6000
HDPE,CD1 ABS PP PS,EPS Olefin BTX Others
3Q08 2Q09 3Q09
5,9
17
4,4
17 6,0
67 8,0
00
8,1
06
1,6
904
,278
3,5
15
11,7
06
3,7
30
3,9
60
4,1
52
1,0
13
17,7
59
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
HDPE,CD1 ABS PP PS,EPS Olefin BTX Others
9m08 9m09
Tons Tons
M.Baht M.BahtValue: M.Baht
Volume: M.Tons
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CAPEX
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2007-2012 Projects: Progress
As of September 2009
CAPEX Amount
(Million USD)
Start Complete Progress
Phase I
Power Plant * 220.00 2Q07 1Q11 48%
Safety Improvement 39.00 2Q07 2011 41%
Total 259.00
Phase II
ABS Expansion 6 * n/a
New Reg_EURO IV n/a
Propylene Booster * 88.00 2009 2011
Port Dredging
Total 88.00
Grand Total 347.00
Progressing
On Revision
Application phase
* Note: Projects financed by THB 10,000 local bank term loan
CHP Plant
CHP Project
High Voltage Cable
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Financial Performance
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Financial Highlights
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Balance Sheet:
62,311
58,191
12,673
92,777
21,945
18,454
64,276
30,848
8,988
69,195
8,190
26,728
63,753
46,263
7,419
72,456
18,402
26,576
2007 2008 9m09
Interest Bearing Debt
Other Liabilities
Equities
Cash & S/T Investment
Other Assets
PP & E
Treasury policy :
Net Debt/Equity < 1.0x
Net Debt/EBITDA < 2.0x
133,175
117,435
Current Status
= 0.26x
= 3.61x
Unit: Million Baht
104,112
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Key Financial Ratios
Note: EBITDA before LCM
3Q09 3Q08 2Q09 9m09 9m08
Liquidity & Leverage Ratio (Times)Quick Ratio 0.86 0.87 1.02 0.86 0.87 Total IBD / Equity 0.37 0.31 0.32 0.37 0.31 Net IBD / Equity 0.26 0.23 0.23 0.26 0.23 Liabilities / Equity 0.62 0.55 0.56 0.62 0.55 Net IBD / EBITDA 3.61 1.51 9.20 3.61 1.51 IBD / EBITDA 5.01 2.02 13.03 5.01 2.02 EBITDA / Interest Exp. 9.55 3.33 9.84 3.87 10.64
Profitability RatioGross Profit Margin 9.1% 3.1% 11.1% 5.9% 6.3%EBITDA Margin 7.3% 1.9% 8.6% 3.9% 5.2%Net Profit Margin 5.4% N/A 6.6% 6.1% 1.2%ROE 11.7% 3.5% 11.3% 11.7% 3.5%ROCE 8.5% 2.6% 8.5% 8.5% 2.6%
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Key Highlights
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Business Model Changed
Need changes to be competitive and become leading integrated refining and petrochemical company
Financial analysis:
• Performance tracked with refiningmargin cycle but weaker
• Strong balance sheet due to low gearing but better EBITDA neededfor interest coverage
• Improved profitability performance but still behind in the league inROCE performance
• Petrochemical outperformbenchmark but other businesseslagging
Environment change:
• Environment compel IRPC to review business model
• Under optimization of plant affecting margins
• Potential operational improvement
• Unearned / Under utilization of assets
• Port is sub-scale• Over 80 plots of idle
real estate
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Strategic Directions
Top Quartile Integrated Petrochemical Complex in Asia by 2014
PetroleumPetroleum• Deliver on operational and optimization improvements• Invest as standalone only to stay in business e.g. Euro IV• Debottleneck and invest to support Petchem growth
PetchemPetchem• Invest in efficiency improvement • Add capacities in higher margins, high growth/niche
products, e.g. PP, CD1, Butadiene, Specialty ABS• Potential JV and divestment of weak products
PortPort& &
TankTank
• Commercialize container port through JV investment• Focus liquid port and tank usage on improving efficiency
to free up capacity for other bus development
Tightly integrated: Refinery and Power supporting Petchem growth
Run professionally and extend service to external customer
• Focus on industrial complex development professionally• Earmark to sell land without industrial development potential
RealRealEstateEstate
To reach top quartile ROIC ~23%, preliminary capex cost approximately $1.2 Bn
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Transformation Roadmap
2011-2014
2015 onwards
2010-2011
“Operational Excellence”
• Increase efficiency• Improve optimization• Effective procurement
“Investment for utilization and growth of existing businesses”
• Debottleneck assets• Invest to commercialize
more• Invest in petrochemical
facilities
“Growth and expansion”
• Invest in new energy and petrochemical related businesses in relevant/ transferable capabilities
Top Quartile Integrated Petrochemical Complex in Asia by 2014
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