Saudi chemicals producers see profits rise

19 January 2017

Drop in cost of sales, improved sales volumes and higher valuation of inventories helped profitability

Petrochemicals producers in Saudi Arabia have reported a quarterly net profit surge, led by Saudi Basic Industries Corporation (Sabic) as a drop in the cost of sales, improved efficiencies and higher valuation of inventories boots income.

Sabic said its fourth quarter 2016 net profit surged more than 47 per cent to SR4.55bn ($1.21bn), up from SR3.08bn recorded for the same period of 2015.

“The increase in net income is attributable to lower average cost of sales,” Sabic said in a statement to Saudi Stock Exchange (Tadawul), where its shares are traded.

The profit for the last three months was 12.84 per cent lower than SR5.22bn reported for the third quarter of last year. The full-year 2016 net income also slid 4.58 per cent to SR17.91 from SR18.77bn at the end of December 2015.

The company said its yearly profit was affected due to an impairment against the assets of Ibn Rushd, which amounted to SR706m and Sabic’s share of that was SR339m.

Sabic, the largest listed firm in the Middle East and fourth-largest petrochemicals company in the world, is likely to spin off its steel business unit Hadeed in July or August 2017, Abdulaziz Sulaiman al-Humaid, executive vice president, metals, Sabic, and former chairman, Hadeed said at a conference in December. His comments followed Sabic’s October announcement of restructuring its business.

Sabic, like many other petrochemicals producers in the region has struggled to maintain profit growth in the past year as demand for its products fell globally. Despite tougher economic conditions, the company is going ahead with expansion plans.

The company expects to conclude the feasibility study of its estimated $30bn joint venture oil-to-chemicals project with Saudi Aramco in the second half of next year, its vice chairman and chief executive, Yousef Abdullah Al-Benyan said in November.

Sabic also has aspiration to expand its global footprint and it is studying a joint venture development of a petrochemicals complex on the Gulf Coast of the US with an affiliate of ExxonMobil. The potential petrochemical complex would also include an ethylene production unit, which will supply ethylene to other units to produce ethylene derivatives. The company, in May, also signed an agreement with China’s Shenhua Ningxia Coal Industry Group, which could lead to a complex being built in China.


Rabigh Refining and Petrochemical Company (PetroRabigh), another Riyadh-listed producer swung to a fourth-quarter net profit as improved operations and higher inventory valuations boosted profitability.

The firm reported net income of SR183m ($48.8m) in the three months ended 31 December 2016, which compares with a loss of SR1.01bn for the same period in 2015.

The fourth quarter profit rose due to “relatively stable operations,” the company said in a bourse filing, adding that the “feedstock price increase also positively impacted inventory valuations.”

PetroRabigh also reported a full-year 2016 net profit to SR37m for the 12-month period, a turnaround from SR759m loss recorded at the end of 2015.

The company, a joint venture between the world’s biggest oil exporter, Saudi Aramco and Japan’s Sumitomo Chemical, in September appointed Nasser al-Mahasher as president and chief executive. In June, it awarded a construction contract to Italy’s Saipem for the second-phase expansion of its petrochemicals facilities. The 30-month deal to expand PetroRabigh’s chemicals complex is worth $208.5m and includes a plant to process and recover vanadium and a unit to dispose of caustic soda.

The total project cost is estimated at about $8.1bn and PetroRabigh has already raised $5.2bn to support the second-phase expansion, on which Japan’s Sumitomo Mitsui Banking Corporation and the local Sabb were the financial advisers. The company in December said it has appointed HSBC Saudi Arabia as financial adviser for a SR9.26bn rights issue to fund its expansion.


Saudi International Petrochemical Company (Sipchem) also announced doubling of its net profit for the last three months of 2016.

Sipchem said its net incom rose to SR52.3m for three-month period ended on 31 December 2016, from SR26m reported for same period a year earlier. An increase in overall production, a 27 per cent jump in sales volumes and price increase of some of its products including methanol boosted profits.

“Investment income increased 134.3 per cent due to increases in deposit rates offered by banks on short term deposits and due to improved treasury management initiatives,” the company said in a statement to Tadawul.

Sipchem’s full-year net income, however fell from SR288.2m at the end of 2015 to SR70m last year.

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