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Q2 styrene, polystyrene sales fall 21% year on year for Argentina's Pampa Energia

Houston — Independent Argentinian energy company Pampa Energia sold a combined 27,000 mt of styrene, polystyrene, ethylene and bi-orientated polystyrene in the second quarter, the company said in its latest earnings report Tuesday.

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This amount was down 7,000 mt, or 21%, compared with same period last year, company data showed.

The company's styrene-butadiene rubber, or SBR, sales comprised 7,000 mt, or 7,4%, of total petrochemical sales, and were down from 8,000 mt, or 11%, from the same period last year. Other petrochemical products comprised 62,000 mt, or 65%, of total petrochemical sales, up 9,000 mt, or 15%, from Q2 2018.

Total combined sales volume of all petrochemical products in Q2 2019 remained unchanged at 95,000 mt compared with the same period last year, mainly driven by lower domestic and international sales of styrene products and synthetic rubber. In addition, lower sales of ethylene, propylene and bi-oriented polyethylenes, or BOPs, were partially offset by higher domestic sales of octane bases.

The gross margin in the petrochemical segment during Q2 19 was US$4 million, decreasing 72% compared with the same period last year, because of lower domestic demand for styrene products, together with lower international styrene spread, export duties and higher imported virgin naphtha costs. Argentina's implementation of temporary export taxes has hurt the company's ability to place volumes overseas. These effects combined were partially offset by lower labor costs related to the restructuring driven by the closing of the ethylene plant in San Lorenzo and the shutting of the BOPs plant in Zarate, in addition to the devaluation effect on not only labor costs but also on peso expenses. Moreover, during Q2 2019, lower costs of feedstock natural gas purchases were recorded, company data showed.

Consolidated adjusted EBITDA for continuing operations in 2Q 2019 was US$266 million, 21% higher compared with US$219 million for Q2 2018, mainly because of increases of 56% in power generation, 27% in electricity distribution and US$9 million in petrochemicals, partially offset by decreases of 15% in oil and gas and 10% in holding and others.

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The adjusted EBITDA for the petrochemical segment saw a US$3 million increase in Q2 2019, whereas Q2 2018 in nominal terms had an increase of US$2 million, company data showed.

The petrochemicals segment takes part in Pampa's vertical integration with gas operations. The company's goal is to maintain its position in the styrene's market by capitalizing on current conditions and maximizing the use of its own petrochemical raw materials. The company assets' production covers a wide range of products, such as octane bases for gasoline, benzene, aromatic solvents, hexane and other hydrogenated paraffinic solvents, propellants for the cosmetics industry, monomer styrene, rubber, and polystyrene for the domestic and foreign markets.

The petrochemicals market in which Pampa competes is influenced by petrochemical product supply and demand in the global market, which has a strong effect on its results. Pampa is the only producer of monomer styrene, polystyrene and elastomers in Argentina, as well as the only integrated producer of goods ranging from oil and natural gas to plastics. As part of its efforts to integrate operations, it uses a significant volume of its own benzene production to obtain styrene and, in turn, a substantial volume of styrene to manufacture polystyrene and SBR.

Argentina is weathering a financial crisis highlighted by high inflation and a sharp devaluation of its currency, which in previous months prompted the government to turn to the International Monetary Fund for a $57.4 billion bailout.

-- Charlie Uribe, Charlie.Uribe@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com