PETRONAS Chemicals Group Berhad
27'h Annual General Meeting
No. | Question |
1. | a) What is the total amount invested in the Pengerang project? |
b) Is the depreciation cost consolidated into the balance sheet or is it only reflected in the share of profit? | |
c) The share of profit from Associates and JVs changed from a profit of RM93 million to a loss of RM107 million. Is this due to the Pengerang project? | |
Answer to Question 1 (a) - 1 (c) | |
a) PCG has 50% interest in the Pengerang Petrochemical Company Sdn. Bhd. with the total project cost of RM10 billion (PCG's 50% portion). | |
b) The depreciation cost is consolidated into the group's profit and loss rather than the share of profit. Total depreciation cost for Pengerang is around RM400 million per year. As depreciation started in July 2024, the 2024 report reflects only half of the yearly depreciation. | |
c) As the Pengerang project is a joint operating entity, its results are recorded in the group's profit and loss and does not impact share of profit movements for Associates and JVs. The loss of RM107 million is mainly due to lower financial performance from other Associates and JV companies such as BASF PETRONAS Chemicals Sdn. Bhd., LG PETRONAS Chemicals Malaysia Sdn. Bhd. and PCG PCC Oxyalkylates Sdn. Bhd., as a result of adverse market conditions as well as some of the companies are in the early stage of their operations. | |
No. | Question |
2. | a) Before the tariffs imposed by Trump, the market was already facing oversupply, margin compression, and rising energy costs. Given the new tariffs, do you feel the situation has worsened? Reports suggest China may dump its excess capacity into Southeast Asia. Additionally, do Chinese producers have a competitive advantage with cheaper Russian oil and lower production costs? Lastly, are there tariffs in place to protect the domestic market from Chinese imports? |
b) Do Chinese producers have a lower feedstock cost than PCG in general? | |
Answer to Question 2 (a) - 2 (b) | |
a) CEO: We are assessing the impact and implications of the US tariff to the market. Potentially, there will be impact to PCG and other chemical players, as some of the products may flow into our key markets, such as Southeast Asia. In response, we are focusing on maintaining competitiveness and resilience in this challenging market. Our strategy involves ensuring optimal performance of our facilities, fostering strong customer relationships, and being more reliable, flexible, and responsive to customers' needs. Chairman: At this stage, we are not aware of any tariff will be imposed in Malaysia for importing petrochemicals from other countries. | |
b) In general, PCG's feedstock cost is very competitive and what sets us apart is how we utilise that feedstock. Our key focus areas include improving consumption efficiency and reducing wastage. We ensure our feedstock is used in the most efficient way possible, ensuring every molecule is maximised. Another important factor is plant utilisation where we strive to maintain a plant utilisation rate above 90%, which will help us to stay competitive amidst challenging conditions. | |
No. | Question |
3. | a) Regarding the two process safety incidents mentioned on page 64 of the Sustainability Report, what was the volume loss involved in those incidents? |
b) Can you share more details about the fatality incident-what happened, where it occurred, and whether incident learnings and mitigation measures are available? | |
c) What is the Company's plan to get 100% certification on ISO 45001 on HSE management system? | |
d) What is PCG's plan to manage forex exposure in the future, especially considering the potential weakening of the U.S. dollar due to the current situation in the U.S.? | |
Answer to Question 3 (a) - 3 (d) | |
a) There was no material volume loss resulted from the two process safety incidents mentioned earlier. | |
b) The fatality was a result of electrocution due to contact with a live connection. It was a very serious incident, and the Company is addressing it with utmost gravity. Although strong safety processes and frameworks are in place and continuously being updated, the incident reinforces the importance of culture, awareness, and training. Having detailed procedures is not enough, employees must internalise safety principles and act proactively. Training must be continuous, and safety must always take precedence over productivity. The Company is actively working to elevate safety consciousness across its operations, recognising that even minor lapses may result in severe consequences. | |
c) It is about current management systems and the plan to move from 54% to 100% ISO 45001 certification. We acknowledge the importance of this and will respond accordingly. Note: the response has been uploaded in PCG's website on 25 April 2025 as follows: PCG facilities worldwide adopt PETRONAS HSE Management System (HSEMS) and Responsible Care (RC) Management System to foster a strong HSE culture and achieve high standards of HSE performance. These management systems are designed to develop, implement, maintain, and continuously improve our HSE practices. In addition, majority of our facilities undertook ISO certification, which is an international standard and serves as a framework for organisations to manage the risks and improve their performance. The certification is voluntary and not a legal requirement. Currently, 87% of PCG manufacturing facilities in Malaysia are certified with ISO 45001:2018 Occupational Health and Safety Management System (OH&SMS). The remaining facilities are expected to be certified by 2029. | |
d) For businesses other than Pengerang, we are well-hedged against forex risks. The forex loss in Q3 2024 was mainly due to the Pengerang venture, where the functional currency is USD. It is related to transactions with other resident entities, which needs to be transacted and paid in RM. When the USD weakened in Q3 2024, Pengerang needed more USD to pay the same amount in RM, resulting in an unrealised forex loss. Since PCG holds a 50% interest in Pengerang Petrochemicals Company Sdn. Bhd., we consolidated the loss in our financial statements. We are taking steps to mitigate this unhedged position to minimise the forex exposure. | |
No. | Question |
4. | a) What is our competitive advantage in operations compared to LC Titan? |
b) How does PCG maintain its advantage over time, particularly in terms of feedstock? | |
c) I have a question regarding parking. The administrative guide you provided stated that parking is available at the Kuala Lumpur Convention Centre (KLCC) on a first-come, first-served basis. However, I was under the impression that parking would be complimentary based on previous years. The guide also mentioned that if a parking token is lost, it would be complimentary, which led me to believe that all parking would be free. Could you clarify this? | |
Answer to Question 4 (a) - 4 (c) | |
a) PCG has several key competitive advantages over our competitors. Firstly, PCG has a long history of customer loyalty, with some customers having been with us for more than 30 years. Our ability to adapt and meet changing customer requirements is a significant strength to our business. In Southeast Asia, we hold a leading market position in several jurisdictions, which is driven by our reliable operations and sales commitment. This includes delivering both the required volume and consistent quality, which our customers greatly value. Price management is also crucial on maintaining healthy margins, ensuring that we offer competitive prices while maximising profitability. Additionally, our solid and reliable feedstock sources, especially in Malaysia, gives us a strong competitive edge. | |
Together, these factors help PCG maintain its market position, reduce costs, and ensure access to feedstock at competitive rates, allowing it to stay ahead of our competitors. | |
c) Thank you for your feedback. Currently, the parking at the KLCC is not complimentary, but we do provide a RM100 SETEL voucher. We take note of your suggestion for the future. | |
No. | Question |
5. | a) Can you provide a breakdown of the contributions from Perstorp and the DVG side, and how much each is contributing to the business? |
b) What is the Board's and management's assessment of Perstorp's performance post-acquisition? Shareholders are concerned that Perstorp is not meeting expected returns, even though the rationale for acquiring Perstorp was clear. | |
Answer to Question 5 (a) - 5 (b) | |
a) We do not disclose the specific contributions of Perstorp and DVG in our reports, as they are reported under the Specialties segment. However, as a general guide, around 80-85% of the contribution comes from Perstorp, while the remaining 15-20% comes from DVG. | |
b) When we acquired Perstorp, our goal was to enter the specialty chemicals market, with a strong platform for growth. Perstorp gives us access to important intermediate products such as Polyols and Oxos. While specialty chemicals are generally more robust, intermediate products can be fluctuating, but niche specialty products - which are our focus - are where we see the future growth. So far, we have been expanding into markets outside of Europe, particularly in East Asia. We have also set up manufacturing plants in India and China to support the growth. Additionally, we are focused on pro-environmental products, such as SynmerseTM DC, which is used for thermal management in data centres. We are also working with a renowned brand to ensure its validation for such use. Another key product is Akestra™, an innovation that allows Polyethylene Terephthalate (PET) bottles to withstand hot food or beverages, replacing Styrofoam, which is difficult to recycle. This product contributes to sustainability and is gaining traction. Although the market is challenging, we are confident in our ability to weather the difficulties and capture growth in these high-demand areas. So, while the market is tough, we are seeing innovation and growth, and we expect these efforts to lead to better margins and stronger performance in the future. | |
No. | Question |
6. | a) On page 120 of the Integrated Report on Board Sustainability and Risk, misconduct cases are mentioned. While it is encouraging that the Board is addressing this, the report lacks detail-such as number of cases, outcomes, and resolutions. In future reports, could this be made more substantive? Additionally, can you share what root causes have been identified in misconduct cases and how they are being addressed? |
b) Regarding the financial statements, segmental reporting appears to be limited. IFRS typically requires disclosure of segmental assets, liabilities, and operations. Given the company now operates across multiple businesses and geographies, why is this not fully disclosed? Could this be considered for future reports? | |
c) On page 51, there is RM3.1 billion in goodwill, but no explanation is provided. Can you clarify what this amount relates to? | |