Diversity helps make Tasnee attractive

A healthy mix of revenue streams is keeping analysts tuned to the investment opportunities at Saudi Arabia's Tasnee.

The kingdom's second-largest industrial company has five business units - petrochemicals, chemicals, metals and metallurgical, diversified, and services.

Analysts at Aljazira believe Tasnee's diversified business mix will be the key to its success this year, enabling it to offset an expected weakness in petrochemical prices through rising titanium dioxide (TiO2) prices. Tasnee is the world's second-biggest producer of TiO2, a white pigment used in the production of paints, paper, plastics and pharmaceuticals. Prices have been rising due to higher costs for feedstock, the bulk raw material used in industrial processes, and tight supply conditions.

While Aljazira expects sluggish economic activity and slowing industrial activity to dent demand - and therefore prices - for Tasnee's petrochemicals, the analysts have maintained their "overweight" position on Tasnee on its good business mix.

The company has shown robust year on year profitability growth, up 65 per cent to 2.4 billion Saudi riyals last year compared to 2010.

Tasnee is further diversifying its product portfolio by undertaking new projects for acrylic acid, super-absorbent polymers and butanol. In line with this, Tasnee has entered into joint ventures with America's Dow Chemical and Germany's Evonik Industries.

The company, through its subsidiaries, has already signed a financing agreement with Saudi Industrial Development Fund for 600 million riyals and a 5.25bn riyal financing deal with nine Saudi Arabian banks to support its three joint ventures.

Tasnee had a strong fourth quarter last year. Profitability stood at 544m riyals, giving earnings per share of 0.98 fils, a rise of 74.9 per cent year on year.

lmiller@thenational.ae