PETRONAS CHEMICALS Group Bhd (PCHEM) continues to operate in a volatile environment, shaped by ongoing geopolitical developments, supply chain disruptions and softer downstream demand.
PCHEM reported net profit of RM401 mil in quarter one 2026 (1Q26), and after adjustments, core net profit stood at RM216 mil.
“This marks a return to profitability after three consecutive loss-making quarters – supported by higher utilisation, sales volume and better average selling price (ASP)s,” said Hong Leong Investment Bank (HLIB).
PCHEM’s revenue grew +6%, driven by stronger contributions across all key segments, including O&D (+5%), F&M (+3%) and Specialties (+17%). Despite lower utilisation rates in the O&D segment, higher sales volumes and improved ASPs led to a narrower LAT of -RM401 mil.
The F&M division achieved a utilisation rate of 103%, though sales volume slipped 4% as the company built up urea inventories ahead of a scheduled plant maintenance exercise in the third quarter of 2026.
At the same time, the Specialties segment returned to profitability with a LAT of RM121 mil, driven by stronger sales volumes and a more favourable product mix with higher margins.
Overall, PCHEM’s revenue fell 8%, weighed down mainly by weaker contributions from the O&D segment, which declined 16% due largely to the ringgit’s strength against the US dollar. Revenue from a joint-operation entity under the Specialties division also dropped 14%.
Still, the softer performance was partly cushioned by a 6% increase in F&M segment revenue, supported by improved sales volumes.
“We understand that PCHEM’s PPC plant was shut down around end-Mar 2026 due to the unavailability of naphtha feedstock,” said HLIB.
However, management guided that alternative feedstock supply has since been secured from other countries, with operations expected to resume by June 2026.
Based on their observations, PE prices have surged by more than 70%, while urea and ammonia prices rose >74% and >54%, respectively, since the onset of the US-Iran war.
“We believe PCHEM’s O&D and F&M segments are well positioned to benefit from higher ASPs, supported by its favourable feedstock cost structure throughout 2026,” said HLIB, maintaining their Hold Rating over the stock. —May 22, 2026
Main image: petronas.com
