Saudi Basic Industries Corporation (Sabic), the Middle East's biggest petrochemicals company, reported a 3.8 per cent increase in second-quarter profit as revenue rose on higher average selling prices and volumes.
Net profit after zakat and tax for the three months to the end of June increased to 7.93 billion Saudi riyals ($2.1bn), from 7.64bn riyals in the same period last year, Sabic said in a statement to the Tadawul stock exchange, where its shares are traded.
Revenue during the period rose 32 per cent year-on-year to nearly 56bn riyals.
"The second quarter strong financial results demonstrates Sbic’s robust operational performance across the different segments," Yousef Al-Benyan, Sabic's vice chairman and chief executive, said.
Sabic attributed the increase in net income to higher selling prices and sales, despite increases in feedstock costs and higher selling and distribution expenses.
This year’s rise in oil prices has increased the costs of petrochemical feedstocks, which are produced from a derivative of crude.
Brent, the global benchmark for two thirds of the world's oil, is up more than 23 per cent since the start of this year, after falling from a recent peak of $123 per barrel.
Higher income from Sabic's associates and joint ventures also contributed to overall revenue growth.
Riyadh-based Sabic is majority-owned by the world’s largest oil-exporting company, Saudi Aramco, which acquired a 70 per cent stake in the company in June 2020 for $69bn.
Average sales prices in the second quarter of 2022 increased by 3 per cent compared with the first quarter of 2022, Sabic said. Sales volumes also increased by 3 per cent during the quarterly period.
The company's earnings before interest, taxes, depreciation and amortisation (Ebitda) reached 13.28bn riyals, in the second quarter, a 3 per cent annual decrease and a 4 per cent increase quarter-on-quarter.
Sabic's free cash flow during the second quarter rose4 per cent yearly to 6.07bn riyals.
Net profit for the first six months of the year rose 15 per cent year-on-year to 14.4bn riyals, as revenue for the period increased 36 per cent to 108.6bn riyals.
For the January to June period, sales volumes increased by 10 per cent compared with the first six months of 2021.
Looking ahead to the second half of this year, Sabic expects its margins to be under pressure due to a slowdown in global economic growth, lockdowns in China, conflict in Europe and continued supply chain challenges, it said.
The International Monetary Fund in July lowered its growth forecast for the global economy for the second time this year, citing Russia's war in Ukraine that has exacerbated inflationary pressures and derailed the momentum of the recovery from the Covid-19 pandemic, and a slowdown in China.
The IMF now expects global growth of 3.2 per cent in 2022 and 2.9 per cent in 2023, revised down 0.4 and 0.7 percentage points from its April forecasts, respectively. There was 6.1 per cent growth last year.