National Petroleum Chemicals (Petronas Chemicals Group) posted a quarterly loss for the first time since its IPO, with a huge loss of 0.79 billion.

PetroChina Petrochemical $PCHEM (5183.MY)$ With the massive increase in forex losses, PetroChina Petrochemical's financial performance in the third quarter of the 2024 fiscal year (ending in September) turned from profit to a significant loss of 0.789 billion ringgit, compared to a net profit of 0.424 billion ringgit in the same period last year.

This is also the first quarterly loss PetroChina Petrochemical has incurred since going public.

Nevertheless, PetroChina Petrochemical recorded revenue of 7.986 billion ringgit in the third quarter, a year-on-year increase of 17.72%.

In the first 9 months of the current financial year, Petronas Chemicals Group recorded a net profit of 0.656 billion ringgit, a drastic 58.59% year-on-year decline, while revenue rose 8.20% year-on-year to 23.213 billion ringgit.

Petronas Chemicals stated that due to the weakening of the US dollar against the ringgit, the company incurred unrealized foreign exchange losses when revaluing the accounts payable of its subsidiary, Polypropylene Corporation (PPC), and revaluing shareholder loans granted to PPC, becoming the main reason for the third quarter's profit turning into a loss.

"PPC is a USD-denominated company. With the recent weakening of the US dollar against the ringgit, there was a foreign exchange loss of 0.536 billion ringgit when revaluing accounts payable, and revaluation of shareholder loans also resulted in a foreign exchange loss of 0.492 billion ringgit."

The total foreign exchange loss amounted to 1.1 billion ringgit.

Together with foreign exchange losses from other business operations, Petronas Chemicals faced a total foreign exchange loss of 1.1 billion ringgit in the third quarter.

Under the impact of the aforementioned foreign exchange losses, Petronas Chemicals experienced a significant increase in other expenses in the third quarter, soaring from 2 million ringgit in the same period last year to as much as 1.102 billion ringgit.

PPC is a joint venture company owned 50% by Petronas Chemicals and 50% by Saudi Aramco, with 4 polymer plants and 1 alcohol plant, with a total annual production capacity of 3 million tons. The relevant plants have completed operational testing in the third quarter of this year and are scheduled to be officially commissioned by the end of this year.

Excluding foreign exchange losses, Petronas Chemicals expects a net profit of 0.352 billion ringgit for the third quarter.

The Managing Director and CEO of Petronas Chemicals Group, Mazu, stated in a press release that the exchange rate of the US dollar against the ringgit sharply depreciated from 4.721 ringgit on June 30 to 4.107 ringgit on September 30, resulting in foreign exchange losses for the investment made in PPC, significantly impacting the third-quarter performance.

"In any case, initiating a large-scale project requiring substantial funding will have a significant impact on the group's profitability. If the US dollar continues to rebound in the final quarter, we can reverse some of the unrealized foreign exchange losses."