Saudi Kayan swings to profit

24 July 2016

Lower feedstock costs and improved volume of sales helped the company earnings

Saudi Kayan Petrochemical Company (Kayan) has swung to profitability in the second-quarter of this year helped by the low cost of feedstock and improved quantities of sale.

The company reported SR91.02m ($24.27m) of net income for the quarter ending 30 June. This compares with a net loss of SR13.42 reported for the corresponding period of 2015, the company said in a statement to Saudi Stock Exchange, where its shares are traded. Gross profit for the period also climbed to SR397.65m, a 54 per cent increase on SR257.85m reported for the quarter ending June 2015.

Kayan also narrowed its first-half 2016 loss to SR125m, down from SR605.06m it reported for the first six months of 2015.

Improve operational performance and reduce marketing fees by Saudi Basic Industries Corporation (Sabic) also helped company profits in spite of lower average sales prices of most products, the company said in the statement.

Petrochemical companies have struggled in recent years with a decline in oil prices and falling demand for petrochemical products, especially, in the emerging markets including China and Brazil. However, cheaper feedstock has helped some of them to reverse losses after the oil fell from the mid-2014 peak of more than $110 per barrel to current levels of around $45 per barrel.

Saudi Kayan is an affiliate of the kingdom’s largest petrochemicals producer, Sabic, with 70 per cent of the company’s shares owned by the Saudi government and 30 per cent held by private investors.

The company had awarded Taiwan’s CTCI has a $94.5m contract to build a new cracking furnace for its plant in Jubail. Kayan had announced plans in February 2015 to increase ethylene production capacity by 93,000 tonnes a year (t/y) and ethylene oxide by 61,000 t/y by the second quarter of 2017 by expanding its petrochemical plant in Jubail.

France’s Technip has now been awarded the contract to provide basic engineering and equipment for the furnace by CTCI.

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