BAKU, Azerbaijan, October 6. Fitch expects that Petkim, the petrochemical complex of Azerbaijan’s state oil company SOCAR in Türkiye, will return to mid-cycle EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) levels by 2025, Trend reports.
Petrochemical product pricing in both Türkiye and Europe has faced persistent pressure since the end of Q4 2022, extending into 2023. Despite Petkim's concerted efforts to optimize costs, its EBITDA margins have plummeted below 2 percent in the first half of 2023, down from approximately 9 percent in the full year of 2022.
Fitch Ratings anticipates a gradual but muted recovery in the near term, with EBITDA margins projected to hover around 3 percent for the entirety of 2023. Following this, moderate growth is anticipated, with margins expected to reach approximately 6 percent in 2024. Fitch's assumptions indicate a return to mid-cycle EBITDA levels by 2025.
The credit rating agency also expects negative Free Cash Flow (FCF) to persist throughout 2023 and 2024. This is attributed to significant increases in interest expenses, diminished earnings, and the ongoing capital expenditure requirements. Fitch envisions FCF reaching breakeven levels in the years 2025-2026.
It is worth noting that Fitch assumes Petkim will continue to rely on USD/EUR borrowings, a strategy aimed at mitigating exposure to fluctuations in domestic interest rates.
Petkim is the first and the sole integrated petrochemical facility in Türkiye. It is the largest exporter in the Aegean region. Petkim’s production capacity is 3.6 million tons per year. The petrochemical complex produces around 60 different types of products and exports to 78 countries. The complex meets about 20 percent of Türkiye’s demand for petrochemical products.
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