Another production delay for Saudi Kayan
Commercial production at Saudi Kayan Petrochemical has been delayed to the second half of the fiscal year after being originally slated for the first half.
Analysts remain sceptical as the company has suffered multiple delays in starting up the project in the past few years.
Saudi Kayan is still in its developmental stages. The petrochemical company started trial operations at its polycarbonate plant in mid-March.
The plant has the capacity to produce 26,000 tonnes a year of polycarbonate resin plastics.
Saudi Kayan is a venture of Saudi Basic Industries Corporation (Sabic) and Al Kayan Petrochemical. Sabic holds 35 per cent of the stock, Al Kayan 20 per cent and the rest is publicly owned.
Sabic holds complete management control over Saudi Kayan, which was listed on the Saudi stock market in June 2007.
Al Rajhi Capital, a research company based in Riyadh, said while the announcement of the production delay had provided investors with more clarity, it was watching "news flow on the actual production date commencement, considering it was marred by delays in the past".
Al Rajhi has an "underweight" rating on the stock and a price target of 15.7 riyals a share owing to the delays in production.
Meanwhile, Saudi Kayan Petrochemical reported a net loss of 16 million riyals in the second quarter as net debt in the first half mounted to 27.5 billion riyals, compared with 25.1bn riyals last year.
"The huge debt on its balance sheet and resultant higher interest payout is likely to impact profitability," Al Rajhi said.
"However, we do not expect any funding or debt repayment constraints for Saudi Kayan in the near future, as it has the backing of its parent company Sabic," it added.
The average prices for ethylene, propylene and monoethylene glycol, Kayan's major products, rose 37.8 per cent, 19.1 per cent and 32.1 per cent year-on-year, respectively, in the second quarter.
Published: August 5, 2011 04:00 AM