29 October 2012
Details
PETRONAS Chemicals Group Berhad (PCG)
announces its plan to
discontinue the Group's vinyl business (VCM and PVC),
as part of portfolio optimisation.
PCG will record a charge of RM 560 million
in the fourth quarter of 2012, mainly relating to
- provision for decommisssioning and
- site remediation expenses,
- provision for contract termination dues and
- impairment expenses
Other parts of the business will not be affected by
the discontinuation of the vinyl business.
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The vinyl business in PCG consists of 3 plants located in
- Malaysia, the Kertih Integrated Petrochemical Complex
- Vietnam, Vung Tau
VCM and PVC Plants in Malaysia
- The Vinyl Chloride Monomer (VCM) and
polyvinyl chloride (PVC) plants in Kertih are owned by
Vinyl Chloride (Malaysia) Sdn Bhd (VCMSB),
a wholly owned subsidiary of PCG,
- VCMSB will cease operation from 1 January 2013 and
its plants will then be decommissioned.
- Current VCMSB staff will be relocated to
other parts of the Group's business activities.
PVC Plant in Vietnam
- The PVC plant in Vietnam is owned by
Phu My Plastics and Chemical Company Limited (PMPC),
a subsidiary of PCG.
- The group will also initiate a divestment process for
the sale of its interest in PMPC
- The current staff of PMPC is expected to continue under
management of the new owners, in compliance to
any applicable laws and regulations in Vietnam
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REASONS
- The vinyl business is not as closely integrated witin
the Group's product value chain as
it obtains its ethylene di-chloride (EDC) feedstock from
the open market.
- The vinyl business has not been able to capture
the full value chain and synergies of
the Group's integrated business model whereby
the product of one plant is used as feedstock in another,
thus maximizing margins along the value chain.
- Instead, the Group's vinyl business is
highly susceptible to the cyclicality of its feedstock market.
- In addition, the VCM plants require high annual spending to
operate and maintain the facilities.
- With the discontinuation, PCG will have additional flexibility to
divert ethylene, currently committed to VCMSB, towards
production of higher margin products within the Group's portfolio.
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