Petkim announced that the company
has signed an agreement with Socar Gas (a subsidiary of State Oil Company of
Azerbaijan Republic - SOCAR) to purchase up to 455mn Sm³ in natural gas
annually. Reportedly, natural gas price were set at USD380/Sm³ and the
USD/TRY parity was fixed at 1.90 in case the FX rate goes beyond the 1.90
levels.
Comment: Petkim consumes natural gas to meet its
energy needs and looking at the company’s COGS break down (raw materials: 85%,
energy: 7%, labor: 5%, others:3%) Energy comprises 7% of total
COGS. It seems the company secures natural gas at a price that is lower than
Turkey’s average price of approx. USD415/Sm³, which provides an 8% cost
advantage to the company for natural gas. However, we think the overall impact
of this on margins will be negligible. Therefore, we deem the news as neutral
for the company.
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