The ratings reflect Sabic's strong profitability, robust financial profile and solid competitive position as a petrochemicals and fertiliser producer, according to the agencies. 'Sabic's overall profitability is exceptionally high, with an EBITDA [earnings before interest, tax, depreciation and amortisation] of SR 29,200 million [$7,780 million] and a margin reaching more than 42 per cent in the 2004 financial year,' Fitch said. 'Sabic's margins are affected by significant cyclicality, but are consistently much higher through the cycle than those of other international chemical groups.'

The short-term rating is supported by high cash balances and Fitch also factored in Sabic's ambitious expansion plans, which will see it increasing its petrochemicals output capacity to 60 million tonnes a year (t/y) from 40 million t/y by 2008. However, Fitch warns that the company's credit metrics 'could deteriorate' if market conditions weaken as it invests up to $13,500 million in its expansion goals, while S&P said the ratings were 'constrained by the high capital intensity of the company's petrochemicals and steel business units, lower diversification in terms of sales and regional operation compared with its large international competitors, and the risk posed by its significant investment programme'.

Sabic asked both agencies to give it a corporate rating earlier in the year. The company is preparing for its forthcoming SR 1,000 million ($267 million) sukuk bond issue, which will be launched in the autumn. HSBCis advising the company on the paper (MEED 8:7:05).