· Petkim posted TL1,702mn net income in 3Q21, higher than our estimate of TL959mn and consensus estimate of TL980mn. Operating results were inline but net income was higher than expected thanks to higher than expected one-off income from investing activities related to fixed asset revaluation and higher than expected deferred tax income in 3Q21.
· The company posted TL1,335mn EBITDA in 3Q21, slightly lower than our estimate of TL1,383mn and consensus estimate of TL1,385mn. The company’s EBITDA/ton declined to US$243 in 3Q21 (ATA Est: US$248) from US$323 in 2Q21 due to higher feedstock prices and slightly declining avg. product prices. Please note that the company recorded US$13mn inventory gain in 3Q21 (2Q21: US$11.3mn).
· We believe that the initial reaction to the results will be positive thanks to strong performance in 3Q21.
· Petkim will hold conference call today at 16.00 Istanbul time.
Lower than expected revenues. Petkim’s revenues increased by 122% y/y to TL6,735mn in 3Q21 (ATA Est: TL6,937mn) boosted by 86% higher average sales prices and appreciation of US$ against to TL by 18% y/y in 2Q21. Supported by the uninterrupted feedstock procurement from STAR Refinery, the company generated 807K gross production in 3Q21, resulting in CUR of 100% in 3Q21 (ATA Est.: 100%, 3Q20: 102%). The company’s total sales volume of 644K tons was 2% lower than our estimate of 655K due to lower than expected trading sales volume in 3Q21.
Normalization in the core spread. Ethylene prices declined by 3% q/q to US$1,203/ton in 3Q21 while naphtha prices increased by 12% q/q to US$658 in the same period. Thus ethylene-naphtha spread declined by 16% q/q to US$545/ton in 3Q21. So far in 4Q21 the spread averaged at US$490/ton compared to our estimate of US$494/ton in our model. We expect US$577/ton and US$456/ton spread for 2021 and 2022, respectively (2020: US$338/ton).
Net debt declined by 6% q/q to TL4.65bn in 3Q21 from TL4.97bn in 2Q21. The company’s net debt / EBITDA ratio declined to 0.9x in 3Q21 from 1.1x in 2Q21. The company’s capex was TL263mn in 3Q21