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Turkey

Petkim: 2Q22 review – Higher tax income led to higher-than-expected net income

  • Petkim posted TL2,509mn net income in 2Q22, significantly higher than our est. and consensus est.

  • The company posted TL1,299mn EBITDA in 2Q22, lower than our estimate of TL1,507mn (consensus estimate:TL1,415).

  • The company’s EBITDA/ton declined to US$120 in 2Q22 (ATA Est: US$149) from US$188 in 1Q22.

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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Cemal Demirtas
Cemal Demirtas

Head of Research

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ATA Invest
18 August 2022
Published byATA Invest

Petkim posted TL2,509mn net income in 2Q22, significantly higher than our estimate of TL1,217mn and consensus estimate of TL1,259mn. Despite the higher than expected financial expenses and weaker operating profit, higher than expected tax income and net other income led to higher than expected net income in 2Q22.

The company posted TL1,299mn EBITDA in 2Q22, lower than our estimate of TL1,507mn (consensus estimate:TL1,415). The company’s EBITDA/ton declined to US$120 in 2Q22 (ATA Est: US$149) from US$188 in 1Q22. Please note that the company recorded US$13mn inventory loss in 2Q22 (1Q22: +US$46mn).

Petkim will hold conference call today at 16.00 Istanbul time.

Petkim posted TL2,509mn net income in 2Q22, significantly higher than our estimate of TL1,217mn and consensus estimate of TL1,259mn. Despite the higher than expected financial expenses and weaker operating profit, higher than expected tax income and net other income led to higher than expected net income in 2Q22. • The company posted TL1,299mn EBITDA in 2Q22, lower than our estimate of TL1,507mn (consensus estimate:TL1,415). The company’s EBITDA/ton declined to US$120 in 2Q22 (ATA Est: US$149) from US$188 in 1Q22. Please note that the company recorded US$13mn inventory loss in 2Q22 (1Q22: +US$46mn).

Revenues are in-line with our estimates. Despite 1% y/y decline in sales volume, Petkim’s revenues increased by 94% y/y to TL14,369mn in 2Q22 (ATA Est: TL14,362mn) thanks to 4% higher average sales prices and appreciation of US$ against to TL by 89% y/y in 2Q22. Supported by the uninterrupted feedstock procurement from STAR Refinery, the company generated 638K gross production in 2Q22, resulting in CUR of 81% in 1Q22 (ATA Est.: 92%). The company’s total sales volume of 683K tons was 7% higher than our estimate of 639K due to higher than expected trading goods sales volume in 2Q22.

Negative outlook for core spread. Ethylene prices increased by 4% q/q to US$1,447/ton in 2Q22 while naphtha prices increased by 1% q/q to US$907 in the same period. Thus ethylene-naphtha spread increased by 9% q/q to US$540/ton in 2Q22. So far in 3Q22 the spread averaged at US$367/ton compared to our estimate of US$470/ton in our model. Thanks to increasing ethylene prices, the spread reached US$616/ton at 8 April 2022 and the spread narrowed to US$357/ton as of 5 August’22 due to declining ethylene prices. If the spread remains at recent level of US$357/ton, we foresee a downside risk to our 2022 estimates.

Net debt increased to TL12.8bn in 2Q22 from TL9.2bn in 1Q22. The company’s net debt / EBITDA ratio increased to 2.2x in 1Q22 from 1.42x in 1Q22. The company’s capex was TL425mn in 2Q22.