Saudi Basic Industries Corporation (Sabic) on 20 April announced a net profit of SR 4,200 million ($1,120 million) for the first quarter of 2006, 17 per cent lower than the same period in 2005 and 7 per cent less than during the previous quarter. The disappointing result caused an immediate slump in Sabic's share price and brought the already volatile Tadawul All-Share Index (TASI) further downwards towards 12,000 points.
Sabic chairman and chief executive officer Mohamed al-Mady blamed the fall in profits on a 10 per cent decrease in global product prices and rising sales and feedstock costs, particularly of liquid gas and iron ore. 'I expect that the prices of some products will see a relative improvement which will positively impact our corporate performance during the remaining period of this year,' he said. Sales volumes climbed by 14 per cent year on year to 9.4 million metric tonnes.It is the second quarter running that Sabic has reported declining profits. 'Naturally, the second successive set of disappointing results had an effect on the share price and since Sabic's stock accounts for some 30 per cent of market capitalisation brought the market down,' says Eric Louis, equities analyst at Banque Saudi Fransi. 'Part of the problem is that companies don't explain their results very well it's always a very brief announcement, without much clarification.' Sabic shares were trading at SR 160 ($42.70) on 24 April, down by more than 30 per cent since the results were announced.In a separate development, a general assembly of Sabic's shareholders on 22 April approved a 25 per cent increase in capital to SR 25,000 million ($6,667 million) through the issue of one new share for every four held. A full-year 2005 dividend of SR 23 ($6.10) a share was also agreed.www.meed.com/companiesmarkets