At its own pace: how KOS overcame difficulties in 2020 and reached net profit
The pandemic caused financial and economic tension almost in all sectors of the economy. Despite this, the Russian polymer market already started to recover by late last year. The process goes on in 2021. However, the weakening Russian ruble and a fall in feedstock prices influence it. When some enterprises had to suspend production, one of the Russian largest ethylene polymer and co-polymer manufacturer Kazanorgsintez kept modernising plants and earned 63 billion rubles of revenue. The enterprise summed up the financial performance in 2020 according to the International Financial Reporting Standards.
Market situation
The economy of all countries faced a big crisis in the spring of 2020: the lockdown and quarantine restrictions impacted the amount of supplies and deadlines of projects. But if the situation was critical for most sectors, some polymer producers worked twice hard.
“Most demand for polymers is linked with the production of basic goods, which demonstrate sustainable demand even during economic declines. The stability was partly provided by a rise in demand for polymers from the pharmaceutical industry and the production of medical goods. At the same time, there was a sudden fall in demand for separate types of products such as automotive engineering. However, in the second half of the year, demand from more affected sectors started to recover,” Vasily Tanurkov analyses the situation.
According to FINAM GC’s analyst Alexey Kalachev, gas and petrochemistry now remain one of the most dynamically growing sectors of the global economy whose growth pace outstrips the dynamics of the world’s GDP many times. The expert thinks that the market was significantly backed by demand from China where a deficit of ethylene persisted. Imports covered this deficit.
“Average sales prices, of course, dropped because prices collapsed during the first half of the year. However, the market already began to recover in the third quarter, which notably accelerated in the fourth quarter last year and in the first quarter this year. Prices for standard thermoplastics are now near historic lows. So we can note that this year the gas and petrochemical sector has good prospects,” Alexey Kalachev explains.
Despite the experts’ good outlooks, the fall in feedstock prices is still the reason for a shortage of feedstock for chemistry and petrochemistry.
Results of the year for Kazanorgsintez
The tough year kept the growth pace of one of the largest Russian ethylene polymer and co-polymer manufacturers. Nevertheless, the enterprise, unlike many others, wasn’t in the red but earned 8,6bn rubles of net profit.
Kazanorgsintez’s revenue totalled 63bn rubles. Since prices in the market changed, the number turned out to be 15% below numbers in 2019.
KOS’s gross profit was equal to 12bn rubles, while its business yielded 10 billion. Last year, the non-current assets of Kazanorgsintez PJSC rose to 57,6bn rubles, while in 2019, this sum reached 53,5bn rubles.
The enterprise’s working capital grew too: from 72,7bn rubles in 2019 to 75bn rubles in 2020. Its capital amounted to 65,5bn rubles, which is more than in 2019.