Saudi International Petrochemical Company, or Sipchem, reported a 48 per cent year-on-year rise in the third-quarter net income, beating analysts' forecasts as revenues rose due to production efficiencies.
Net profit attributable to shareholders of the company for the three months ending September 30, climbed to 180.3 million Saudi riyals (Dh176.5m), the company said in a statement to Saudi Stock Exchange, where its shares are listed. Sipchem beat the mean estimate of 156.3m riyals of analysts polled by Bloomberg.
Revenues for the period rose 26 per cent to 1.34 billion riyals from the same period a year earlier.
The rise in the revenue is a “result of the company’s ongoing efforts to improve the plants operating efficiency and an increase in average selling prices of company’s products”, Sipchem said in the Tadawul bourse filing.
The National Commercial Bank, which expected Sipchem's net income to reach 122m riyals, said the 25.8 per cent rise in the company's revenues is primarily due to higher production rates.
"We believe higher than expected operating rates is the key reason for the variance [in revenue]," NCB said in an equities research note on Sunday. "Based on our calculations, the facilities operated at 110 per cent in Q3 201818, versus our estimates of 99.5 per cent and compared to 105 per cent in Q2 18. Higher rates were reported despite the shutdown at [the company's] IMC facility which started on September 16.
The company’s net income for the first nine months of the year almost doubled to 543m riyals from the same period in 2017. This month, Sipchem, signed a non-binding agreement to buy Sahara Petrochemicals Company in a deal valued at 8.25bn riyals, four years after the merger talks between Riyadh-listed rivals stalled.
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[ Saudi Arabia's Sipchem and Sahara plan 8.25bn riyal petchem merger ]
Aramco-Sabic deal to spur consolidation in regional petchems
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Sipchem plans to buy 100 per cent of Sahara's share capital, offering the company's shareholders 0.8356 new Sipchem shares in exchange, it said at the time.
The merger would help in "increasing scale and resilience in the evolving petrochemicals sector, both in the kingdom and internationally", the companies said.
The proposed merger comes as consolidation gains momentum in Saudi Arabia's corporate sector, most recently with Saudi Aramco’s plans to buy a stake in the region's biggest petrochemical maker, Sabic. The deal is expected to trigger more M&A in the Petchems sector, which contributed about $43.8bn (Dh161bn) to GCC economies in 2016 alone, according to the Gulf Petrochemicals and Chemicals Association, the sector's regional representative body.
The sector is consistently expanding with new projects coming up across the GCC as national oil companies target more value from their crude grades.