IRPC adapts business strategy to overcome 2020 challenges
Looks to increase domestic market share and hedge
published : 13 Feb 2020 at 15:10
IRPC has amended its 2020 strategy to overcome global market volatility. The measures to be taken include increasing domestic market share, expanding value-added products, managing oil price risks, and reducing crude oil imports from the Middle-East in preparation for lower petrochemical demand.
In the 4th quarter of 2019, the US-China trade war continued to impact business. However, IRPC maintained its plan to pay 0.10 baht dividend per share.
Mr. Noppadol Pinsupa, President, IRPC Public Company Limited, or IRPC, revealed that the company adjusted its 2020 strategic plan to stay competitive in the market and increase profit efficiency by increasing domestic market share and overcoming global market volatility (Domestic First). The company also planned to penetrate the value-added product market with strategic partners, improve plant reliability (Reliability Management), hedge against crude oil price volatility (Hedging Management) and reduce crude oil imports from the Middle-East (Secured Feedstock).
Oil demand was projected at around 102.1 million barrels a day, up by 1.3 million barrels a day compared to 2019. Refineries were set to resume production at full capacity in response to low-sulphur fuel oil in accordance with IMO regulations. The US-China trade war was seen easing while the Dubai crude oil price in 2020 was expected to stay between US$55-US$65 per barrel.
Following the World Bank’s forecast increase in global economic growth from 2.4% in 2019 to 2.5% in 2020, it was expected that demand in the petrochemical market would increase. Meanwhile, the COVID-19 or Coronavirus infection has increased demand for the medical supplies and delivery of related products.
However, as the economic situation remains uncertain, the ban on single-use plastic might have an impact. With new capacity coming, the company would focus on high-value product research and development with customers, forming new strategic alliances and cultivating specialty product markets, including automotive parts, pontoons for solar cells, and battery parts.
IRPC reported a net loss from operations of 513 million baht in Q4 2019. This showed improvement compared to a net loss of 1,321 million baht. The improvement was thanks to hedging transactions, although the prolonged trade war still had an impact. Moreover, the conflict between the USA and Iran upped transportation costs while new supply from China and Malaysia reduced the product spread.
To reduce the impact, the company sought out new markets, especially in AEC, where economic growth tended to increase. The company also focused on innovation development to respond effectively to customers’ demand and environmental concerns. This “human centric” concept aimed to achieve customer satisfaction. The company also aimed to penetrate the recycled plastic market with strong demand seen from Europe.
“The global market situation in 2020 will tend to improve,” Mr. Pinsupa said. “The signed agreement between the US and China will ease trade war tensions. Low-sulphur fuel oil spread will trend higher. If the market is profitable, the company can increase its production capacity from 200,000 barrels per day to 215,000 barrels per day.”
IRPC also signed a memorandum of understanding with PTT Tank Terminal Company Limited and Thai Pipeline Network Company Limited to increase sales channels. Transportation will also be improved and oil pipelines from the IRPC plant will be connected directly to Thappline to transport Euro V high speed Diesel and Jet A1.
IRPC’s Board of Directors approved a 2019 dividend payment of 0.10 baht per share, amounting to 2,043 million baht. Subject to approval by shareholders in the Annual General Meeting on 7 April 2020, the dividend will be paid from unappropriated retained earnings.