Tasnee in talks to sell Ashtabula complex, says CFO

National Industrialization Co. (Tasnee) is in talks with a strategic investor to sell Cristal’s Ashtabula complex, chief financial officer Fawaz Al-Fawaz told Argaam in an exclusive on Sunday.

The deal shows positive signals and will help complete the Tronox-Cristal acquisition deal in the near term.

The US Federal Trade Commission (FTC) had objected to Venator Materials’ request to buy Ashtabula’s complex, citing that the transaction will lessen competition or create a monopoly in the American market.

Al-Fawaz added Tasnee’s Q3 2018 financial results were strong, lauding the efforts of the company’s employees and executive management.

Here is the full interview:

Q: What are the latest updates about Cristal's Ashtabula complex in the United States and the planned merger of Tronox and Cristal?

A: The acquisition procedures have taken longer than expected. However, the company has received a regulatory nod from most countries, where Tronox and Cristal’s plants operate. Both firms have recently obtained a regulatory approval from the EU and had only to obtain the approval of the US Federal Trade Commission (FTC).

FTC has rejected the deal in the first round. Therefore, Tasnee reached an agreement to sell Ashtabula plants to a strategic investor.

Q: Why did FTC reject the acquisition despite setting the sale of Ashtabula complex as a condition for closing the deal? Will the value change, if the deal is closed with the strategic investor?

A: FTC objected to the deal, citing that it would reduce competition and create a monopoly in the American market.

Tronox and Cristal are seeking to sell Ashtabula complex to a strategic investor at a competitive price, which could differ from the value mentioned previously. The deal will be concluded under the same terms.

Talks are ongoing with a strategic investor, and we expect the deal to be finalized in the near term.

Q: What is your comment on Tasnee performance in Q3 2018?

A: Tasnee posted strong consolidated results for Q3 2018, backed by the solid operating and financial performance of its affiliates, recording net profit of over SAR 1 billion.

The third-quarter net profit of SAR 259 million was higher when compared to Q3 2017, but lower than that of the previous quarter, as the company allocated provisions for impairment in non-current assets of some affiliates in the acrylic complex.

Q: Do you expect Tasnee to allocate provisions for the projects of its affiliates going forward?

A: We hope to allocate zero provisions for similar projects going forward. Tasnee operates in line with certain technical standards to ensure smooth work progress.

Q: When will the company begin trial operations at its titanium dioxide complex in Yanbu, Jazan's slagger and the other manufacturing projects in Hail? What is the expected financial impact from these projects on the company's financial statements by year-end and during2019?

A: We are still finalizing preparations for the commencement of trial operations at Yanbu-based complex. We expect the trial run to begin in Q4 2018 and to last for nearly six months.

The titanium slag smelter facility is still facing great challenges. Tasnee is cooperating with Tronox and the project designer to handle the current technical issues.

As for Hail projects, Tasnee has begun pilot operations at some facilities, while commercial production is likely to start by year-end or during H1 2019. We hope these manufacturing industries will benefit from improved market conditions in the neighboring countries, such as Iraq and Yemen.

Q: What are your expectations for the prices of titanium, polypropylene and polyethylene in Q4 2018 and H1 2019?

A: Overall, I expect the average prices of polyethylene and polypropylene to be similar to those of Q3 2018. Other products might see slight variations. If economic and political conditions are stable, and oil prices remain unchanged, we will see a marginal rise in average prices going forward.

However, titanium dioxide products are likely to see drops until year-end and over 2019, amid oversupply and weak demand. Prices are forecast to improve by the end of 2019.

Q: Tasnee’s CEO has recently unveiled talks with investors about new petrochemical projects outside the Kingdom. Can you give more details about these investments?

A: Tasnee is eying investments in the Middle East, the US or other countries, amid shortage of the feedstock required for building new plants.

The company will use the proceeds of Cristal sale and other credit facilities to expand in the petrochemical industry. Tasnee is studying the available opportunities and will announce more details, if new agreements are reached.

Tasnee aims mainly to expand in the production of polypropylene, polyethylene and ethylene. New investments should deliver strong yields and boost the value-added to enhance profitability.

Q: What about the company’s plan for dividends this year?

A: Cash dividends are decided by the board of directors and shareholders. The company will announce relevant updates later on.