S&P upgrades outlook of Saudi firms SEC, Sabic and STC to positive on state support

The rating agency had revised Saudi Arabia’s outlook to positive from stable in March

S&P Global reviewed the ratings on Saudi Arabia’s three corporates in the utility, telecommunications and chemical sectors. EPA

S&P Global Ratings revised the outlooks of Saudi Electric Company, Saudi Basic Industries and Saudi Telecom Company to positive from stable, citing the state support they receive.

The rating agency revised Saudi Arabia’s outlook to positive from stable last month, citing improving gross domestic product growth and fiscal dynamics over the medium term as the kingdom’s economy continues to recover from the effects of the pandemic.

It revised SEC’s outlook to positive from stable and affirmed its “A-” long-term corporate credit rating. The utility company, which serves 10.5 million subscribers, recently posted a 220 per cent rise in net profit for 2021 to 6.729 billion Saudi riyals ($1.79bn).

“The positive outlook on SEC mirrors that on Saudi Arabia. We equalise our long-term issuer credit rating on SEC with the sovereign rating on Saudi Arabia because we consider that the government is almost certain to support SEC if needed,” S&P said.

The outlook for Saudi Basic Industries, known as Sabic, was revised to positive from stable. Its “A-/A-2” long- and short-term corporate credit rating and related debt rating were affirmed.

Sabic, the Middle East’s biggest petrochemicals company, reported a surge in annual net income to 23 billion riyals in 2021 from 70 million riyals in the previous year, due to higher average selling prices and an increase in the share of results of its joint ventures and associates.

“The positive outlook … reflects our expectation that Sabic will maintain industry-leading profitability and modest leverage,” S&P said.

The agency also revised STC’s outlook to positive from stable and affirmed its “A-/A-2” long-and short-term corporate credit rating and related debt rating.

STC, the country’s largest mobile operator, is majority owned by the Saudi sovereign wealth fund Public Investment Fund.

“We view STC as a government-related entity with a high likelihood of extraordinary support. The very strong link with the Saudi government caps the rating on STC at the level of the A- sovereign rating on Saudi Arabia.”

Saudi Arabia, the Arab world’s largest economy, continues to recover from the impact of the pandemic on the back of higher oil prices, an accelerated vaccination programme and government policies to attract more investment.

The kingdom’s economy is estimated to have expanded by 3.3 per cent last year. S&P expects it to grow by 5.8 per cent in 2022 and by an average of 2.7 per cent from 2023 to 2025.