Chemanol’s 2014 net profit down 55% to 32.2 mln

Methanol Chemical Company (Chemanol), a producer of Methanol and Formaldehyde, reported 2014 net profit of SAR 32.2 million, a 55 percent decrease compared to the same period in 2013.

A net loss of SAR 182.2 million was reported for Q4-2014 compared to a net profit of SAR 10.3 million in Q3.

The Company attributed the decline of 2014’s net profit compared to the same period in 2013, to the following:

1-   Decrease of prices of some of Company major products due to unstable economic situations and recession which hit some global markets particularly in Q4.

2-   Appropriation of about SAR 11.9 million as additional provisions to cover the losses resulting from the reassessment of Hedging Agreement which is considered as part of the Restructuring of Murabaha Agreement in 2011. Also the mentioned provisions cover additional amounts of potential price differences of one of the Company suppliers which have not yet been settled.

3-   Shutdown of the Methanol plant for seven days during the year resulting in the shutdown of the Dimethylformamide plant which mainly uses the Carbon Monoxide produced by the Methanol plant.

4-   The limited fire incident at Paraformaldehyde plant in the beginning of Q3 of the current year.

5-   Increase of G&A expenses by SAR 11.8 million compared to the same Quarter of the previous year. Such increase was due to increase in employees salaries and end of service benefits, in addition to charging a portion of the above provision to this item. The increase of financing expenses by SAR 3.9 million is mainly attributed to the Reassessment of Hedging Agreement losses it incurred. Zakat adjustments for the previous years were done in favor of the Company contributing positively to the results of Q4-2014.

Reporting Q4-2014’s net loss compared to a net profit for the same period in 2013 was due to:

1-    Sharp decrease in global prices and the sold quantities of some of Company major products in some global markets due to unstable economic situations which caused a sharp decrease in sales by 19% which is SAR 50 million, compared to the same Quarter of 2013. Such decrease in sales caused decrease in the gross profits by about 65% compared to the same Quarter of the previous year.

2-     Appropriation of about SAR 11.9 million as additional provisions to cover the losses resulting from the reassessment of hedging agreement which is considered as part of the Restructuring of Murabaha Agreement in 2011. The mentioned provisions cover additional amounts of potential price differences of one of the Company suppliers which have not yet been settled.

3-    Increase of G&A expensesby SAR 8.7 million compared to the same Quarter of 2013. Such increase was due to increase in employee salaries and end of service benefits, in addition to charging a portion of the above provisions to this item admin and general expenses. The increase of financing expenses by SAR 3.5 million is mainly attributed to the reassessment of hedging agreement losses incurred. Zakat adjustments for the previous years were done in favor of the Company contributing positively in the results of Q4.

Reporting a net loss for Q4-2014 compared to a net profit for the previous period (Q3-2014) was attributed to:

1-               Decrease of sales by about SAR 10 million due to decrease in prices of some of Company products, and relative increase in prices of some of the raw materials and production input materials. In addition to above mentioned in provision.