Advanced’s expansion plan for PP plant “key” to its performance: Falcom

Advanced Petrochemical Co.’s (Advanced) net profit jumped 5.4% YoY and 10.8% QoQ to SAR 213.1 million in the third quarter of 2019, beating market estimates of SAR 180.8 million, as the company benefitted from low feedstock prices, Falcom Financial Services said in a report.

The company’s expansion plan for the Polypropylene (PP) plant is key to its performance and ability to pay quarter dividends in the future.

On the operational front, the company’s utilization rate remained healthy and is likely to continue given the recent plant maintenance activity.

“We maintain a neutral rating on the stock,” Falcom noted, but cut its target price to SAR 51.5 from SAR 52.27.

Advanced’s revenues declined 13.1% YoY to SAR 647 million on account of lower PP prices. On a quarterly basis, revenues shrank due to lower sales volume and lower PP prices.

Lower feedstock costs and higher sales volume have positively affected the company’s financial results, nevertheless the topline suffered due to lower PP prices.

In addition, the strong performance at the gross level is unlikely to continue as feedstock prices are expected to rise from its Q3 2019 level.