Saudi Basic Industries Corporation (Sabic) increased net profits in the second quarter, but failed to meet analyst forecasts as the world's largest producer of petrochemicals was exposed to a subdued market, with economic woes in Europe and slower growth in China dampening demand.
Sabic's profits rose by 14 per cent to 6.04 billion Saudi riyals (Dh5.91bn). Revenues declined by 3.2 per cent compared with a year earlier.
"The increase in net income is attributable to a decrease in cost of sales and financial charges, despite reduced revenues due to lower sales prices for certain products," the company said in a statement on the Tadawul, the Saudi stock exchange.
Sales dropped on lower demand in China and Europe, Sabic's chief executive, Mohamed Al Mady, said yesterday.
"Growth in China decreased... and this is affecting our profits," he said, adding that he expected a "positive" second half of the year and overall "profits of this year similar to last year's".
Sabic missed the average earnings estimates of analysts sampled by Bloomberg and Reuters. Some analysts ascribe this to the predictions being made in advance of earnings statements of Sabic's subsidiaries, which were below expectations.
With prices lower than foreseen, the company could not expand its profit margin further.
Results in the third quarter should surpass the latest results, said Sriharsha Pappu, an analyst at HSBC.
"Prices have started to pick up. The current quarter is at the bottom of the pricing cycle," he said.
Sabic shares closed at 93.5 Saudi riyals yesterday, up 1.36 per cent.
The company's share's have advanced by 5 per cent this year, compared with a Tadawul average of 13 per cent.
Sluggish demand in Europe led Sabic to announce in April it would slash more than 1,000 jobs and close some of its assets on the continent.
The same month, Mr Al Mady reiterated that the company was interested in expanding its business in the US.
Sabic bought General Electric's plastics unit in 2007 for US$11.6 billion.
A market leader in basic petrochemicals, the company, which is majority state-owned, is seeking to broaden its footprint further downstream with the production of more complex products.
It is also keen to increase its market share in the US, where production costs have been slashed by the shale gas revolution, which has brought feedstock prices crashing down.
After new extraction techniques vastly increased the amount of natural gas produced in the US, the domestic petrochemical industry is predicted to threaten Sabic's market position, which is built on cheap feedstock allocations by the Saudi government.
By becoming part of the US petrochemical revival, Sabic can head off this threat.
With company debts low and a slew of new cracker projects under way in the US, Sabic's growth in North America will likely be through the purchase of existing assets, said Mr Pappu. "They have the financial firepower for an acquisition."
Sabic is also under pressure to grow the downstream industry in its native Saudi Arabia, where the government regards industrial expansion as key to its efforts to tackle high rates of unemployment.
Companies such as Tasnee are already active in plastics production in the kingdom. A focus on production in Saudi Arabia could come into conflict with maximising shareholder value, analysts say.
fneuhof@thenational.ae
* with agencies
EXPATS
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Brighton 1
Gross (50' pen)
Tottenham 1
Kane (48)
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
The five pillars of Islam
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More from Rashmee Roshan Lall
AL%20BOOM
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The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Company%20Profile
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EDirect%20Debit%20System%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%20Sept%202017%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20with%20a%20subsidiary%20in%20the%20UK%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20FinTech%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20Undisclosed%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Elaine%20Jones%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%208%3Cbr%3E%3C%2Fp%3E%0A
Race card
6.30pm: Al Maktoum Challenge Round-3 Group 1 (PA) US$100,000 (Dirt) 2,000m
7.05pm: Meydan Classic Listed (TB) $175,000 (Turf) 1,600m
7.40pm: Handicap (TB) $135,000 (T) 2,000m
8.15pm: Handicap (TB) $135,000 (D) 1,600m
8.50pm: Nad Al Sheba Trophy Group 2 (TB) $300,000 (T) 2,810m
9.25pm: Curlin Stakes Listed (TB) $175,000 (D) 2,000m
10pm: Handicap (TB) $135,000 (T) 2,000m
10.35pm: Handicap (TB) $175,000 (T) 1,400m
The National selections
6.30pm: Shahm, 7.05pm: Well Of Wisdom, 7.40pm: Lucius Tiberius, 8.15pm: Captain Von Trapp, 8.50pm: Secret Advisor, 9.25pm: George Villiers, 10pm: American Graffiti, 10.35pm: On The Warpath
SPEC%20SHEET%3A%20NOTHING%20PHONE%20(2)
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Soldier F
“I was in complete disgust at the fact that only one person was to be charged for Bloody Sunday.
“Somebody later said to me, 'you just watch - they'll drop the charge against him'. And sure enough, the charges against Soldier F would go on to be dropped.
“It's pretty hard to think that 50 years on, the State is still covering up for what happened on Bloody Sunday.”
Jimmy Duddy, nephew of John Johnson
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
The%20specs%20
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Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
Company%20Profile
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Scoreline
Abu Dhabi Harlequins 17
Jebel Ali Dragons 20
Harlequins Tries: Kinivilliame, Stevenson; Cons: Stevenson 2; Pen: Stevenson
Dragons Tries: Naisau, Fourie; Cons: Love 2; Pens: Love 2
Ticket prices
- Golden circle - Dh995
- Floor Standing - Dh495
- Lower Bowl Platinum - Dh95
- Lower Bowl premium - Dh795
- Lower Bowl Plus - Dh695
- Lower Bowl Standard- Dh595
- Upper Bowl Premium - Dh395
- Upper Bowl standard - Dh295
OIL PLEDGE
At the start of Russia's invasion, IEA member countries held 1.5 billion barrels in public reserves and about 575 million barrels under obligations with industry, according to the agency's website. The two collective actions of the IEA this year of 62.7 million barrels, which was agreed on March 1, and this week's 120 million barrels amount to 9 per cent of total emergency reserves, it added.
The biog
Favourite film: Motorcycle Dairies, Monsieur Hulot’s Holiday, Kagemusha
Favourite book: One Hundred Years of Solitude
Holiday destination: Sri Lanka
First car: VW Golf
Proudest achievement: Building Robotics Labs at Khalifa University and King’s College London, Daughters
Driverless cars or drones: Driverless Cars
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
The specs
A4 35 TFSI
Engine: 2.0-litre, four-cylinder
Transmission: seven-speed S-tronic automatic
Power: 150bhp
Torque: 270Nm
Price: Dh150,000 (estimate)
On sale: First Q 2020
A4 S4 TDI
Engine: 3.0-litre V6 turbo diesel
Transmission: eight-speed PDK automatic
Power: 350bhp
Torque: 700Nm
Price: Dh165,000 (estimate)
On sale: First Q 2020
Profile of MoneyFellows
Founder: Ahmed Wadi
Launched: 2016
Employees: 76
Financing stage: Series A ($4 million)
Investors: Partech, Sawari Ventures, 500 Startups, Dubai Angel Investors, Phoenician Fund
Match info:
Wolves 1
Boly (57')
Manchester City 1
Laporte (69')
