PTT net profit declines by 54 per cent while recovery in third quarter still challenging

PTT PCL, the largest oil and gas company in Thailand, has encountered a drop in demand for both petroleum and petrochemical products, leading to a slump in their earnings amid the COVID-19 pandemic in the second quarter.

PTT and its subsidiaries reported its net profit in the second quarter of 2020 with an amount of 12,953 million baht, decreased by 53.5 per cent compared to 25,938 million baht of the same period in 2019.

The Earnings before Interest, Tax, Depreciation and Amortization (EDITDA) of PTT in the second quarter of 2020 were 54,208 million baht, decreased by 26.6 per cent or 19,596 million baht year-on-year.

According to PTT’s quarterly report, the main reasons why the company had a decline on its earnings compared to that of 2019 are lower selling prices and the overall sales volume of the gas, oil, exploration and production (E&P) businesses. 

An increase in loss on derivatives and the asset impairment of E&P business in this quarter also negatively affected the earnings despite an increase in gain on the foreign exchange rate from foreign currency loans.

First half of 2020 

In the first half of 2020, PTT and its subsidiaries reported EBITDA of 86,593 million baht, declined by 67,734 million baht or 43.9 per cent year-on-year. 

While the net profit for the first half of 2020 stood at 10,499 million baht, shrinking by 81 per cent or 44,751 million baht from 55,250 million baht compared to the first half of 2019.

This was primarily from the stock loss in petrochemical and refining businesses in the first half of 2020. The crude oil price also sharply dropped (from US$ 67.3 per barrel to $ 42.1 per barrel) due to the oil price war, oversupply and lockdown measures.

As of June 30, 2020, PTT groups had the total assets amounting to 2,449,277 million baht, decreased by 37,688 million baht or 1.5 per cent from the end of 2019.

PTT shares 

According to the TISCO securities’ report on Tuesday, PTT’s earnings were below their expectation. 

TISCO said the recovery in the third quarter of 2020 would remain a challenging prospect as gas demand is expected to stay low due to seasonally lower power demand.

Also, the contribution from PTTEP in the third quarter could be offset by weaker results from the chemical and refining affiliates.  

Oil marketing appears to be the only clear bright spot for the third quarter as backed by an expected pick-up in volume and margin, according to TISCO.

TISCO maintains the ‘hold’ rating at the target price of 37 baht on PTT shares. 

Key upside risks are a sharp rise in crude oil and petrochemical prices; whereas, key downside risks are unplanned interruptions at its facilities and negative changes in the regulatory environment. 

On Tuesday morning at 10:35 a.m., PTT shares stood at 38.25 baht per share, rising by 0.5 baht or +1.32 per cent from its prior closing price, with a high at 38.50 baht per share and a low of 38 baht per share.