Sabic, the region’s biggest petrochemicals firm, reported its third consecutive quarterly loss on the back of lower selling prices for its products and impairment provisions on certain assets.
The company registered a net loss of 2.22 billion Saudi riyals (Dh2.17bn) for the second quarter of 2020, compared with a profit of 2bn riyals for the same period last year, Sabic said in a filing to the Tadawul exchange, where its shares trade.
The company declared impairment provisions of 1.18bn riyals related to certain capital assets, including a polymers plant in Spain, which it said had an impact on its profits.
The company took a significant hit in the second quarter, with the business picking up in July and August, said chief executive Yousef Al Benyan. Average petrochemical prices had fell 27 per cent year-on-year in the second quarter and 18 per cent from first-quarter levels.
"The future of demand is driven by uncertainties in the energy market. Market conditions are going to put pressure on the chemical industry for the remainder of this year," he told an earnings briefing.
Saudi Aramco, which produces and sells oil on behalf of the kingdom completed acquisition of a 70 per cent interest in Sabic in June. The state-backed company acquired the stake worth $69.1bn from the sovereign Public Investment Fund.
Following Aramco’s acquisition of the shares, Sabic was “retrospectively” reassigning its control over investments related to its affilates, Saudi Petrochemical Company (Sadaf) and Arrrazi methanol plant.
In May, Sabic merged Sadaf and Petrokemya to drive "efficiency and competitiveness” of its operations.
"Sabic has performed retrospective control reassessment over Sadaf and Arrazi prior to the acquisitions of additional shares and classified them as joint arrangements,” it said in a note to the Tadawul exchange.
The company’s sales revenue declined 29.46 per cent to 24.62bn riyals for the second quarter on a year-on-year basis.
Aramco acquired Sabic as part of its larger plans to increase global refining capacity from 4.9 million to 8 million-to-10 million barrels per day by 2030. Around 2m bpd to 3m bpd of the output will be converted into petrochemical products. This downstream portfolio will consume significant quantities of Saudi Arabia's crude oil.