Zaida Shaari   Head of Investor Relations

Hello. Welcome to PETRONAS Chemicals Group Berhad Analyst Briefing for the Fourth Quarter and Full Year Ended 31st December 2024. [Foreign Language] I'm Zaida Alia, Head of Investor Relations; and also your event host and moderator this evening. Thank you for joining us.

You should by now be able to access and download the financial results from Bursa Malaysia's website. The same is available on our corporate website, together with today's presentation material. The agenda for today will be a short presentation, followed by Q&A. [Operator Instructions]

As a reminder, all information presented and discussed today is strictly intended for participants of the meeting. Participants are reminded that this meeting is being recorded and the recording will be made available on our website in a few days. No other parties have been authorized to record the meeting.

To lead our briefing today is our Managing Director and CEO, Mr. Mazuin Ismail, who will start the presentation with the full financial year performance highlights, after which our CFO, Azli, will provide details of the results. Also present to take questions after the presentation are the rest of the senior management, comprising of Chief Manufacturing Officer, Mr. Ahmad Rizal; Chief Commercial Officer, Mr. Bahrin; Head of Strategic Planning and Ventures, Mr. Yaacob; and Dr. Debbie Chiu, Head of Specialty Chemicals.

Let's now proceed to the highlights. Over to you, dear Mazuin.

Mazuin bin Ismail   CEO, MD & Director

Thank you, Alia. Good evening, everyone, and thanks for joining us today. Ladies and gentlemen, before we start with the performance review, I would like to introduce to you our Chief Manufacturing Officer, Mr. Ahmad Rizal Abdul Rahim, who took over from Mr. Zamri Japar, you know him from before. And this is actually effective 1st of February 2025. For your information, Mr. Zamri has been appointed as the PETRONAS' Vice President for Group Health, Safety and Environment effective on the same date, which is 1st of February.

Rizal brings over 28 years of experience in PETRONAS, having held various roles in both domestic and international operations. Rizal also has helped manage the positions in technical and operational functions. He has led critical projects and also served as the Head of Special Projects in Downstream EVP office, focusing on operational excellence.

Before assuming his current role, he served as the Head of [ Plant ] of PETRONAS Chemicals, olefin, glycols and derivatives. I believe that his experience and expertise will be invaluable in driving PCG's operational excellence and maximizing our production results. Rizal, welcome onboard.

Ahmad Rizal Rahim   Chief Manufacturing Officer

Thank you.

Mazuin bin Ismail   CEO, MD & Director

Ladies and gentlemen, now on to our performance. Throughout 2024, we saw inflationary pressures began to ease, prompting the Federal Reserve and other major central banks to gradually shift to more accommodative policies. These developments supported a global economic recovery with average global GDP growth rising from 2.09% in 2023 to 2.65% in 2024.

Albeit, we see that the pace of growth varied across regions. The average PMI for 2024 showed a slight uptick, supported by emerging market economies, particularly in Asia, which demonstrated stronger gains driven by robust domestic demand and recovery in exports. On the other hand, advanced economies such as Europe and the U.S. experienced a slower rebound due to lingering economic challenges.

Moving on to crude prices. The average benchmark Brent crude price decreased to $81 per barrel, pressured by weak refining margins and concerns over sluggish economic growth, particularly in Europe and China. While the OPEC+ production cuts provided some support to prices, persistent oversupply in key regions such as the U.S. and non-OPEC countries kept prices under pressure.

Turning to chemicals sector, the sector continued to face challenges as key markets in Europe such as construction, automotive and electronics remained weak. These challenges were reflected in the Bloomberg World Chemicals Index, which declined by 10.7% against the same period last year. In addition, oversupply of chemicals such as polyethylene and methanol, particularly from the U.S. and Asia; led to pricing pressure, further dampening the downstream industries.

For PCG, product prices performance were mixed across all the three segments. Product prices in our F&M segment was lower mainly due to lower urea prices stemming from lower Indian tender and weak crop prices.

In the O&D segment, we saw a slight improvement in product prices on stabilized energy and feedstock prices. Nonetheless, product availability limited price uptick and downstream spreads remained weak.

The Specialty segment continued to face downward pressure on sales prices as key market -- key end markets such as construction remain flat across most regions. While the automotive sector saw a slowdown, particularly in Europe, however, positive momentum was noted in the consumer goods market, driven by lower interest rates and increased holiday spending towards year end.

Ladies and gentlemen, moving on to our operational performance. Last year, we completed 4 turnarounds involving PETRONAS Chemical Fertilizer Kedah, PC Methanol, which is in Plant 1; and recently, PC Ethylene and Polyethylene, which were completed at the end of November 2024.

In addition to the turnaround, we experienced some unexpected downtimes, mainly in the fertilizer and methanol plants in the second and third quarter of last year, due to some mechanical issues, which have been resolved. In the last quarter, there was a minimal unplanned downtime as the issues were promptly addressed.

Not withstanding the setbacks, we doubled down and continue to focus on operational discipline, which resulted in a full year group plant utilization rate of 91%, a significant improvement compared to 85% in 2023.

Commodities production was higher, coupled with higher production from the Specialty segment. We saw a total production volume increased to 8% year-to-year to 11.2 million tonnes. Subsequently, sales volume improved across all segments. This is further strengthened by added volume from PPC, which is included in our O&D segment and additional volume from strategic sourcing. As a result, we recorded 7% improvement in group revenue at MYR 30.7 billion.

Group's EBITDA, however, decreased by 7% to MYR 3.5 billion, due to negative EBITDA contribution from PIC-PETCHEM, mainly from unrealized ForEx loss from revaluation on payables and higher operating costs at PPC. These were further accelerated by lower product spreads. And consequently, EBITDA margin slipped to 12% compared to 13% in the same period last year.

The group's PET declined to MYR 1.3 billion from MYR 1.8 billion, mainly due to lower EBITDA, higher depreciation and finance costs at PPC, net unrealized ForEx loss on revaluation of shareholder to PPC and share of loss in associates and JVs. This was partially offset by high -- higher finance income arising from adjustment of timing of payment of trade payables at PPC.

Ladies and gentlemen, next, I will have Azli to take you through the details of our financial performance.

Mohd Bin Ishak   CFO

Thank you, Mazuin. Ladies and gentlemen, thank you for joining us this evening. Let's drop into the fiscal highlights, starting with Olefins & Derivatives segment on Page 3 of the deck, where we will compare the results of fourth quarter 2024 against third quarter 2024.

As Mazuin mentioned, the global PMI in fourth quarter 2024 showed limited growth compared to third quarter 2024, reflecting stagnant performance in the manufacturing sector. Despite supportive policy measures, particularly in China, these efforts were unable to fully offset the weakened demand, including demand in the downstream sector. Consequently, O&D product prices were impacted, and average product prices in PCG's O&D segment was down by 7% against preceding quarter.

On the operational front, our planned utilization rate for the segment was lower quarter-on-quarter at 89%, mainly due to the scheduled plant turnaround at PC Ethylene and PC Polyethylene, as Mazuin has mentioned earlier. As a result, our production and sales volume were lower by 8% and 6%, respectively.

On the financial performance, the segment revenue decreased by 14% quarter-on-quarter, mainly due to lower sales volume and lower product prices. EBITDA for the segment was at MYR 100 million, reversing the loss before interest, tax depreciation and amortization in the preceding quarter. This is mainly due to higher contribution from PPC, which is largely coming from the unrealized ForEx gain from revaluation of payables. As such, the O&D segment posted a lower loss after tax at MYR 86 million.

Moving on to Fertilizers and Methanol segment on Page 4. This quarter saw positive development in the F&M segment, particularly for urea and ammonia. The ammonia prices increased by [ 12% ], driven by tighter supply on plant outage stemming from scheduled maintenance in the Middle East, as well as supply constraint in the Caribbean, U.S. Gulf and North America due to gas curtailment.

Meanwhile, urea saw a slight price improvement of 2% due to tighter supply after Indian tender concluded in the fourth quarter amid Middle East tension, while China maintained its no-export policy.

On the operational front, plant utilization rate increased to 99% due to better plant performance, particularly at PC Fertiliser Sabah. Our sales volume improved by 14% to 1.6 million tonnes, contributed by higher volumes of methanol and urea.

Revenue increase contributed by higher sales volume and higher revenue from strategic sourcing, particularly offset by the strengthening of Ringgit measure against the U.S. dollar. As a result, EBITDA for the segment rose by 21% to MYR 733 million due to higher sales volume, particularly from methanol and urea. EBITDA margin saw a slight improvement at 30% compared to 29% in the previous quarter. In line with higher EBITDA, PAT for the segment increased by 41% quarter-on-quarter to MYR 492 million.

Moving on to Specialty segment on Page 5 of the deck. On fourth quarter 2024, the Specialty segment recorded lower EBITDA, mainly attributable to lower sales volume, following unfavorable market dynamics. Other than lower sales volume, contribution margins were also lower for most segments. For Resins & Coatings, it was mainly hit by lower demand resulting from slower recovery in the construction industry.

For Advanced Materials, it was mainly impacted by lower demand for PVB films as well as PVC polymer additive due to higher availability of products in the market. For Engineering Fluids, Silicones and Animal Nutrition, they were influenced by lower demand for key products from all regions. However, overall, lower product contributions are partially offset against higher contribution margin from Lube Oil Additives as well as Chemicals.

Next, let's look at the fourth quarter performance for the group against third quarter 2024 on Page 6. Against the preceding quarter, our Malaysian operation plant utilization rate improved to 95% from 92%, and this is mainly due to better plant performance, particularly at PC MTBE and PC Fertiliser of Sabah despite the scheduled plant turnaround at PC Ethylene and PC Polyethylene.

Our total sales volume was higher by 4% at 2.8 million metric tons contributed by higher sales volume from the commodity segment, including volumes from PPC. Group revenue decreased by 7% to MYR 7.5 billion due to lower product prices, lower revenue contribution from Perstorp as well as the strengthening of ringgit against the U.S. dollar. Nevertheless, EBITDA was higher by MYR 156 million or 28% at MYR 710 million, contributed by net unrealized ForEx gain on the revaluation of payables at PPC.

In line with EBITDA, we recorded a profit after tax of MYR 539 million due to unrealized ForEx gain on revaluation of shareholder loan to PPC as compared to unrealized ForEx loss in the preceding quarter. Additionally, there was also a finance income arising from adjustment of timing for payment of trade payables at PPC in the fourth quarter.

Now let's proceed with the cash flow and balance sheet on Page 7 and 8. In 2024, we generated cash flow from operations at MYR 4.6 billion, and most of our cash used for investing are incurred for CapEx investment as well as project -- growth projects. Most of our cash outflow for financing are dedicated to payment of dividend to our shareholders.

On the balance sheet, at Page 8 of the deck, our total assets were lowered by MYR 186 million at MYR 60 billion, mainly due from decrease in intangible assets due to the strengthening of ringgit against euro and Swedish krona. The decrease also resulting from a decrease in investment in JV and associates, mainly due to redemption of preference shares as well as a loss -- share of loss incurred by the associates and our JVs.

Total equity was lower by MYR 2.1 billion, mainly due to strengthening of ringgit against the dollar as well as the payment of the second interim dividend and first interim dividend for 2024.

That's all for the financial breakdown I'm handing back the session to Mazuin for the way forward.

Mazuin bin Ismail   CEO, MD & Director

Thank you, Azli. Ladies and gentlemen, now let's have a look at the market outlook. The global market conditions are expected to remain unchanged in 2025, as the changing geoeconomic policies, product overcapacities as well as geopolitical events continue to influence the market dynamics. In the immediate term, demand in the chemical sector is expected to be stable.

For O&D segment, ethylene prices are expected to be stable on modest recovery in the downstream sector and several planned cracker outages in Southeast Asia and South Korea. MEG prices are forecasted to be stable despite fluctuating polyester demand, and supply is expected to be short due to the turnarounds in U.S., China and also the Middle East.

For polyethylene, prices are expected to be stable, following the end of Lunar New Year celebration and commencement of inventory replenishment in preparation for the upcoming festive seasons of Ramadan and Eid in March and April. For paraxylene, prices will be supported by increased PTA demand from the polyester fiber industry, new PTA capacities and improving gasoline market.

Ladies and gentlemen, now let's have a look at the F&M market. We expect that product prices for the F&M segment will be firm, supported by improved demand and limited regional supply. Urea price is anticipated to be stable, driven by limited availability amidst supply cuts in Iran, coupled with emerging seasonal demand from India and Southeast Asia.

Ammonia is expected to be stable despite rising natural gas prices as most producers, including those in the Middle East and Indonesia, are fulfilling their term commitments and domestic demand.

Methanol prices are expected to remain stable despite new capacities entering the market. This stability is driven by active restocking after the festive season, while Middle Eastern suppliers redirect their volumes to regions with higher netbacks such as India and Europe and therefore, limiting supply availability in Southeast Asia as well as Northeast Asia.

Methanol spot market demand is expected to increase to support the production of acetic acid, for which China alone, new facilities with a total annual capacity of 6 million tonnes have been built.

Moving on to Specialty segment. The performance of our Specialty segment [ touched ] back to the variations of the end-market demand that largely track the macroeconomic environment. As we start the year of 2025, specialty chemicals market is not spared from the overall prolonged slowdown demand growth that we see in the chemicals industry. Demand recovery will be fragmented across major economies like the U.S. China and Europe remains a factor impacting the specialty chemicals demand across target end markets.

The construction sector ended 2024 on a soft note and is not expected to improve drastically, given the persistent headwinds, as seen with the persistently low construction confidence indicator in Europe, while China's stimulus package and policy easing is still finding its ways to improve the local situation.

The automotive sector is expecting a softer start as OEMs are reporting slower demand recovery in more -- in most geographies besides China, which is further supported by renewed trade-in programs introduced back in last year or 2024.

Consumer goods and retail, on the other hand, are expected to maintain the positive momentum from the fourth quarter of 2024 with moderately robust consumer spending across most geographies, led by the U.S. as well as Europe. As such, first half of 2025 is expected to remain challenging for our Specialty segment, and we retain our cautiously optimistic view for the demand recovery in specific end markets while navigating the evolving business landscape.

Ladies and gentlemen, moving on to our sustainability updates. We are improving our data collection across all our plants to enhance our GHG history reporting accuracy with an in-depth focus on data quality. Our carbon reduction initiatives continue to be supported by operational optimization such as energy efficiency enhancement, flare reduction measures and the subscription to Tenaga Nasional Berhad green electricity tariff, as well as Sarawak Energy Berhad renewable energy certificate.

As a result, we recorded a GHG emission reduction of more than 295,000 tonnes of CO2 equivalent at our Malaysian operations. We have enhanced our GHG accounting and have begun Scope 3 disclosures in line with the International Financial Reporting Standards or IFRS framework.

On social and governance, PCG Board has approved the adoption of PETRONAS human rights policy, reinforcing our commitment to a structured and consistent human rights as PCG adopting PETRONAS human rights policy. At this time, we are finalizing our sustainability report for the year 2024, and this will be made available to you on our website in about a month's time with more details of our sustainability progress and journey.

Ladies and gentlemen, before we move on to Q&A session, I would like to briefly touch on our key priorities and focus areas going into 2025.

In 2024, we saw several challenges such as operational hurdles, foreign exchange fluctuation and persistent inflationary pressures. Despite these obstacles, we effectively navigated these challenges, reinforcing our steadfast commitment to long-term growth and diversification.

We have maintained our commitment to operational excellence, which resulted in improved plant utilization of 91% while successfully executing our planned maintenance and turnaround activities in 2024. Into 2025, we aim to maintain at least this level of performance despite the higher maintenance schedule. Our focus, as always, is to execute the turnaround effectively and ensure the safety of all our employees and contractors.

On growth delivery, our Penta and [ Kerteh ] plant in Sayakha India was inaugurated in February 2024. The plant is currently commissioning. And to date, first samples have been dispatched to our customers in December 2024. In fact, the first batches of Penta are scheduled for delivery from Sayakha site in the first quarter of this year.

At the end of 2024 through Perstorp, we fully acquired 100% of shares in OQ Chemicals in Netherland B.V., and this acquisition allows us to -- the option to manufacture a new range of synthetic esters, strengthening the Engineering Fluids segment within our Specialty segment.

On the commercial side, we continue to focus on commercial excellence initiatives and improve our agility and response to market dynamics, while leveraging our market knowledge to expand the market reach in line with our growth strategy.

Ladies and gentlemen, we remain committed to optimize our value chain and maintain competitive cost management to navigate the challenging economic landscape and anticipated slow market recovery.

Ladies and gentlemen, that concludes my update for today. And now let's open the floor for the questions and answers. Thank you.

Zaida Shaari   Head of Investor Relations

[Operator Instructions] Raymond, please go ahead.

Raymond Yap  

Okay. So my question is, first and foremost, some housekeeping matters addressed to Azli. So on the MYR 748 million net ForEx gain, can you help us split up between the gain on the payables of Pengerang and the gain on the revaluation of the shareholder loan and also the gain from other operations not related to those two?

Mohd Bin Ishak   CFO

You are referring to the Bursa not report, right?

Raymond Yap  

Yes.

Mohd Bin Ishak   CFO

I mean just for the benefit of the rest in the call, right?

Raymond Yap  

Yes. The MYR 748 million is the net pricing that is reported in the notes of the accounts.

Mohd Bin Ishak   CFO

Yes. Okay. Thank you for the question. The -- for everyone's benefit, if you refer to Page 18 of the quarterly report in the [ P4 ], that's MYR 748 million net gain on foreign exchange. Almost 90% of this gain relates to Pengerang.

So in terms of the details, almost half of this gain basically relates to the unrealized gain for PPC's payable. And the other half is basically the unrealized ForEx gain on revaluation of shareholders loan to PPC. So it's about 50-50. I hope that answers your question, Raymond.

Raymond Yap  

So I take MYR 748 million minus 10% and divide by 2, is it?

Mohd Bin Ishak   CFO

Yes.

Raymond Yap  

Okay. And there was also another gain from the deferment of the payables as well, that's amounted to about MYR 214 million?

Mohd Bin Ishak   CFO

Yes.

Zaida Shaari   Head of Investor Relations

Next question is from Sumedh from JPMorgan.

Sumedh Samant   JPMorgan Chase & Co

This is Sumedh from JPMorgan. Perhaps I have a couple of questions. So firstly, correct me if I'm wrong, but I understand that some of your gas contracts for F&M business are going to have a revaluation this year. Let me know if that's correct. And if that's the case, then what are going to be the -- what are your negotiations? Is there going to be any change in the structure formula? Would be great to know that.

Secondly, my other question is, I read on, I think, one of the consultants news that Pengerang complex is indefinitely shut. Is that correct? And if that's the case, do you have any strategy as to when to start it again?

Mohd Bin Ishak   CFO

Okay. Thank you, Sumedh. The first question, gas contract for F&M, maybe perhaps you're asking whether as opposed to reevaluate it or whether it's coming to expiry, is it?

Sumedh Samant   JPMorgan Chase & Co

Yes, coming to expiry. Sorry, that was the correct one. Yes.

Mohd Bin Ishak   CFO

Yes, yes. Yes. There's one contract for ABF [ SLB ] fertilizer coming on -- that will expire not -- end of this year. But we expect that contract will be renewed on the same terms, just like our other contracts.

Sumedh Samant   JPMorgan Chase & Co

I understand.

Mohd Bin Ishak   CFO

Okay. On the second question, I think this is maybe a rumor or anything that I think for us, our new -- the project in Pengerang is progressing -- ramping up. If you refer to our media release, refer to our analyst briefing and what Mazuin has mentioned earlier, I think we are in the process of ramping up the production. So that's basically the status as we speak right now.

Sumedh Samant   JPMorgan Chase & Co

Got it. Just a follow-up then. Would you be able to tell us what's the utilization rate currently on the Pengerang complex?

Mohd Bin Ishak   CFO

It's currently very, very low because there's a feedstock disruption at the refinery. There's issues at the refinery and cracker, which we don't own. But it provides ethylene and propylene into our PETCHEM plan. So there are some maintenance activities currently undergoing. And we expect that maintenance activities to be completed soon, and it will be for the PETCHEM plant to be up and running end of quarter 1. And post running, then we expect the plant utilization rate to hover around 60% to 70% for 2025.

Sumedh Samant   JPMorgan Chase & Co

Okay. So 60% to 70% for second quarter to fourth quarter '25 or the full year '25?

Mohd Bin Ishak   CFO

Full year '25.

Sumedh Samant   JPMorgan Chase & Co

Okay. So basically, you can go up to 80%, right?

Mohd Bin Ishak   CFO

Yes. I mean as we mentioned earlier in our previous analyst briefing, there is this requirement for the integrated complex to achieve reliability test required by the project financing arrangement, and they are gearing up for that. So part of the requirement is they need to achieve a certain level, which is high, high level of utilization rate for a certain number of days. So they are gearing up for that. So once we do that, then you will see the plant utilization rate for the PETCHEM will go up.

Sumedh Samant   JPMorgan Chase & Co

Got it. But in the fourth quarter, did you face that problem that the cracker is facing? Or did the fourth quarter was okay, it's just sort of the first quarter where there are issues?

Mohd Bin Ishak   CFO

The fourth quarter is okay.

Sumedh Samant   JPMorgan Chase & Co

So what was the utilization in fourth quarter, if I may ask?

Mohd Bin Ishak   CFO

I don't have the number with me. But if you compare in terms of volume, it was from -- PETCHEM plant in Pengerang, it was higher in quarter 4 compared to quarter 3. So that is basically a higher utilization rate in quarter 4 versus quarter 3.

Sumedh Samant   JPMorgan Chase & Co

No, that's very helpful. And just one last thing. Can you please remind me again the fixed cost, the depreciation and interest expenses on PPC?

Mohd Bin Ishak   CFO

Sure. As a guidance, our 50% interest in PPC. The depreciation for 2025, our guidance is about MYR 400 million. And for the interest expense, our guidance will be around MYR 280 million for the full year, right?

Zaida Shaari   Head of Investor Relations

We have a question -- since we're talking about PIC, we have a question from the box. Is the PIC product spread positive in fourth quarter '24?

Mohd Bin Ishak   CFO

I think in terms of the market for the PIC product spread, if you were to look at selling price versus the direct variable cost, it's still positive. In terms of contribution margin, it is still positive. Yes. Maybe I will argue that in terms of certain selected products, for example, MEG, that contribution margin could be lower or even negative.

Zaida Shaari   Head of Investor Relations

We shall go next to Vivek from Morgan Stanley.

Vivek Rajamani   Morgan Stanley

Just with respect to -- you mentioned there's going to be a higher level of maintenance turnarounds for 2025. Would it be possible to give some color with respect to the key units? And over the 4 quarters, how we should think about the maintenance being spread out?

Mazuin bin Ismail   CEO, MD & Director

Right. Insofar as the plant maintenance for 2025, we will have a turnarounds for our PC Fertiliser in Sabah for our PC LDPE, PC Olefins and PC Glycols. On top of that, we have some other pit stops in some of our other plants as well. So 4 turnarounds.

Mohd Bin Ishak   CFO

Yes. And then maybe to add, the first era will happen in quarter 3, and that will be for PC Fertiliser Sabah. And the other 3 is in quarter 4 because they are integrated with one another.

Mazuin bin Ismail   CEO, MD & Director

That's around November, December this year.

Vivek Rajamani   Morgan Stanley

Okay. Super helpful. So basically, the first half, barring any issues, should be normal. And both of the -- I mean all 4 of them would happen in the second half, correct?

Mohd Bin Ishak   CFO

Yes. Like what Mazuin mentioned, there's no plant turnaround we expect in the first half, but that also does not preclude that we do have scheduled maintenance and feedstock as other plants.

Vivek Rajamani   Morgan Stanley

Sure. And I think just to clarify, you mentioned you will be maintaining the same level of operating rate vis-a-vis 2024, correct, even though you have these turnarounds in 2025? Is that...

Mazuin bin Ismail   CEO, MD & Director

That's the aim.

Zaida Shaari   Head of Investor Relations

Next is Raymond from CGS International.

Raymond Yap  

Okay. So a question on the O&D thing. Because O&D benefited from the ForEx gain on the translation of PPC's payables as well as the deferment of the trade payables, which also gave rise to a finance income, so if I total up those two, it will amount to more than MYR 500 million.

Mohd Bin Ishak   CFO

No, the one that in fair value deferment is -- doesn't hit EBITDA. It basically is the PAT, right?

Raymond Yap  

Yes. Okay. So the EBITDA was disclosed at MYR 100 million for O&D in the fourth quarter. And the ForEx gain from the translation of the PPC payables, based on what we discussed, is now it amounted to about MYR 300-over million. So if I take MYR 100 million EBITDA minus MYR 300-over million, does that implies a loss?

Mohd Bin Ishak   CFO

Yes, I mean for O&D, if we were to exclude, I think we need to -- for EBITDA purposes, if we were to exclude the impact of the ForEx, it would be the impact of ForEx on PPC payables, which is around maybe MYR 350 million. So MYR 350 million minus MYR 100 million EBITDA, so it would be around...

Raymond Yap  

Around MYR 250 million, MYR 250 million loss?

Mohd Bin Ishak   CFO

So if you were to -- of course there's other adjustment as well. So it will be around minus MYR 200 million negative EBITDA for O&D. Yes. But then again, I think the reason for this is because we have a scheduled plant turnaround at PC Ethylene and PC Polyethylene. They were down close to 2 months in quarter 4. And as you know, our ethylene crackers are [indiscernible] and generating [ feedstock ]. So they were down or close to 2 months. So that's basically the reason for the lower EBITDA in O&D, excluding the ForEx impact.

Raymond Yap  

So in the third quarter, you told us before that Pengerang generated an EBITDA loss of MYR 130 million. What was it for the fourth quarter?

Mohd Bin Ishak   CFO

MYR 140 million in third quarter for Pengerang, excluding ForEx, remember?

Raymond Yap  

Yes.

Mohd Bin Ishak   CFO

So if you were to use that same basis for the fourth quarter, it generates around negative EBITDA of MYR 100 million.

Raymond Yap  

So narrowed a little bit?

Mohd Bin Ishak   CFO

Yes. Yes.

Raymond Yap  

Okay. But just talking about what you said about the turnaround for PC Ethylene and PC Polyethylene, in the end of the day, O&D still generated a fourth quarter plant utilization of 89%, and that's actually higher than your first quarter utilization of 87%. And you did actually manage to make a good profit in the first quarter.

Mohd Bin Ishak   CFO

Yes. Other than the scheduled turnaround at PC Polyethylene PC Ethylene, the other market-driven impact is because of our aromatics product. If you track the prices for paraxylene and benzene, and they're pretty much down by around 10% compared to the third quarter, while you see the heavy naphtha prices remained flattish. So that is basically a slightly -- very low spread for [indiscernible] product that really hits the O&D.

Raymond Yap  

Okay. So given that in the first half of this year, you'll be not performing any turnarounds, do you think that the O&D will go back to normal as it has never seen before a loss like this for O&D in a single quarter?

Mohd Bin Ishak   CFO

I mean you look at a similar quarter 2023, that's also a negative EBITDA, but small. But I think what we see now, yes, you're right, in the first half of the year, there will be no scheduled turnaround. Right now, we are seeing the spread for aromatic slightly improved compared to quarter 4. So that's hopeful that the spread for O&D is improving. But then again -- so it's our other peers experiencing, right?

Zaida Shaari   Head of Investor Relations

We have a question from [indiscernible] from the box. Would the ongoing discussion between Petros and PETRONAS have an impact of PETCHEM's gas price arrangement? And does [ PETCHEM ] stock price has impact on [ PETCHEM ] gas price arrangement with PETRONAS and also [ PETCHEM ] feedstock price with Saudi Aramco?

Mohd Bin Ishak   CFO

Okay. To answer the first part of the question is actually between PETRONAS and Petros, would have any impact to PCC, in this area, the O&D plan impacted is actually ABF. And currently, we are still having our GSA ongoing between PCG and PETRONAS, and that will continue. As discussed earlier, it may be extended as well. So that's our other states. Insofar as gas arrangement with Aramco, we don't believe there's any impact.

Zaida Shaari   Head of Investor Relations

Next question from [ Yong Yang ] Paul.

Unknown Analyst  

Just two questions. First question is looking at your selling expense, fourth quarter was up quite a lot, I think, year-on-year and then administration expense as well. Is this the new level of expenses? Is this like just high in fourth quarter? That's the first question.

Mohd Bin Ishak   CFO

Yes. I think -- thank you, for the question. I think moving forward, this will be our guidance for our [ SMB ] expenses. This is higher in line with higher sales volume, not just we have higher volumes for O&D, but we also have higher volumes for our strategic sourcing and higher volumes from -- we're starting to take methanol from [indiscernible] PETCHEM in [indiscernible]. So -- and then that particular arrangement, we will also incur [ SMB ] costs to deliver those methanol.

Unknown Analyst  

Okay. So like 570 per quarter is about the right level now for this year?

Mohd Bin Ishak   CFO

Yes, that could be the right guidance.

Unknown Analyst  

Got it. Got it. And administrative expense as well, 420 is also about the right level per quarter?

Mohd Bin Ishak   CFO

Per quarter -- in quarter 4, there are certain admin expenses that are specific [ to the core ]. So I think, in terms of administrative expense, it will be higher, but it's not -- you can't use quarter 4 as the basis. What I will guide you is if you can average out the quarter 3 and quarter 4, and that will be the guidance for the full year.

Unknown Analyst  

Okay. So the second half is the level?

Mohd Bin Ishak   CFO

Correct.

Unknown Analyst  

Okay. And so I think, obviously, going through a pretty tough time right now. The gross profit level is pretty low. And there are, I think, some products where you look at the global supply-demand balances, and then you do think that maybe something needs to be done. So my question is, are you considering closing down any plans or any reducing capacity of any products today?

Mazuin bin Ismail   CEO, MD & Director

I think you're right. The market dynamics dictate the return, and we actually look at all our value chain keenly. And we continue to assess market dynamics. Insofar as well the adjustment is needed, we continue to assess if adjustment is needed. Insofar as how much of our molecules flow into certain products, as we always assess that and we'll continue to assess that.

When it comes to time for us to actually stop certain production, we will do that. When it comes to actually call the shot to actually high grade our portfolio, we will also do that. We continuously monitor at the end of the day, it's about creating the best value out of all our molecules that we have.

Unknown Analyst  

Yes, it is specifically, I was looking at [ BX ], and I've never in my life seen such a low margins. I am concerned that maybe there something that's structurally changed there, for instance.

Mazuin bin Ismail   CEO, MD & Director

We will not push product just because we push product, and suffer losses for sure. So our financial discipline would have to be there. But at the same time, we are finding ways to actually look at our cost optimization, efficiency of our plants. And of course, our folks at commercial excellence would find ways with how to get the best position in the market.

Zaida Shaari   Head of Investor Relations

We should now go to Raymond of CGS again.

Raymond Yap  

Yes. Mazuin, can I ask you about the status of the special feedstock arrangement, special discount arrangement with the Pengerang refining company?

Mohd Bin Ishak   CFO

Maybe I can answer that, Raymond. I think as we discussed earlier in other -- in previous briefing, the special discount arrangement with between PPC and PRC, it would be implemented upon the PRC making money.

So as I alluded earlier, the PRC has challenges in terms of ramping up. And then they are, margin-wise, also affected. So they are also not making money. So because of that, the special discount has yet to be triggered. And we're hopeful that once the operations start to ramp up, and then the PRC will generate in sufficient money. And after meeting the relevant transfer pricing guideline by the IRB, they can provide that additional discount to PPC.

Raymond Yap  

Okay. So there wasn't any contribution from that special feedstock discount in the fourth quarter?

Mohd Bin Ishak   CFO

No.

Raymond Yap  

Not at all, right?

Mohd Bin Ishak   CFO

No.

Raymond Yap  

How about the outlook for specialties in the first quarter?

Mohd Bin Ishak   CFO

I can refer to Dr. Debbie, who can provide you more color on that.

Debbie Chiu   COO of Specialty Chemicals

For the first quarter in '25, the general consensus, we expect a similar performance continuing from 2024, even though there is a slight expectation, the market may start picking up, but we're pessimistically optimistic looking into the 2025.

Raymond Yap  

Okay. Just going back to Azli, the special feedstock arrangement, that arrangement, has it been formalized already?

Mohd Bin Ishak   CFO

There's already the agreement between PRC and PPC about the provision of this special discount. But in terms of how much, and that will be determined between the two entities once that discount can be triggered. So in terms of principle, that's already been -- that's already there between parties. But implementation of mechanics, it would be once -- that can be tricky.

Zaida Shaari   Head of Investor Relations

So we don't have any more questions in queue. That will be the end of our briefing today. Once again, thank you, ladies and gentlemen, for your time and participation. Please reach out to us if you have any follow-up questions. Look forward to receiving your reports once published. Good evening, and have a great weekend ahead.

Mazuin bin Ismail   CEO, MD & Director

Thank you, everyone.

Mohd Bin Ishak   CFO

Thank you.