Saudi Basic Industries Corporation (Sabic), the Middle East's biggest petrochemicals company, reported an 85 per cent annual slide in second-quarter net profit as demand slumped and prices of its products fell.
Net profit after zakat and tax in the three months to the end of June fell to 1.18 billion Saudi riyals ($314.5 million), Sabic said on Thursday in a statement to the Tadawul stock exchange, where its shares are traded.
Revenue during the period fell nearly 34 per cent to 37.17 billion riyals.
“The global economy is continuously slowing down as a result of tightening monetary policies to confront inflation, leading to weaker demand,” said Abdulrahman Al Fageeh, chief executive of Sabic.
“In the second quarter, we maintained our sales volume despite the challenging economic environment with increased supply of our main products. We achieved the minimum target of our synergies with Saudi Aramco two years ahead of time by reaching $1.51 billion on a cumulative basis.”
In 2020, Saudi Aramco, the world’s largest oil exporting company, completed the acquisition of 70 per cent of shares in Sabic.
Sabic's average sales prices fell by 30 per cent in the second quarter, compared with the same period a year earlier.
Meanwhile, sales volumes dropped by five per cent in the latest reported quarter.
Prices of crude oil, the main component of petrochemical feedstocks, surged to nearly $140 a barrel after Russia's invasion of Ukraine last year. The international benchmark is currently trading at about $82 a barrel.
Sabic, which expects the global economy to grow at 2.4 per cent in 2023, said capital expenditure during the year will be in $3.3 billion to $3.8 billion range.
Last week, the International Monetary Fund marginally raised its forecast for the global economy for this year and next but said it was “not out of the woods” due to headwinds that persist, even though the recovery is on track.
The fund revised its earlier forecast for this year upwards, raising it by 0.2 percentage points to 3 per cent, lower than the 3.5 per cent expansion recorded in 2022. It is projecting a similar pace of growth in 2024.
The global petrochemicals industry is growing and is projected to be worth about $800 billion by 2030, up from about $475 billion in 2020, according to Precedence Research.
Sabic is playing a key role in Saudi Arabia's plan to reduce its reliance on oil exports.
Last year, the company announced plans to set up a plant to convert crude oil into petrochemicals in Ras Al Khair, with a capacity of 400,000 barrels per day.
In December, Sabic signed an agreement with Oman’s state energy company OQ and Kuwait Petroleum International to set up a petrochemical complex in the Sultanate.
The complex will manufacture petrochemical products for markets linked to the energy transition process, clean technology, mobility and construction, among others.
Despite current market challenges, Sabic has approved a cash dividend of 1.80 riyals per share for the first half of this year.
