Oil price slump slashes Sabic Q4 profit by 29 per cent



Saudi Basic Industries Corp (Sabic), one of the world’s biggest petrochemical companies, posted a 29 per cent drop in fourth quarter net profit owing to the oil price rout.

Net profit in the fourth quarter dropped to 4.36 billion Saudi riyals (Dh4.26bn) from 6.16bn riyals in the year-earlier period, the firm said in a statement to the Saudi stock exchange.

“The decrease in net income is mainly attributable to lower average sales prices partially offset by lower costs of certain feedstocks,” the firm said in the statement.

Brent oil prices fell 48 per cent last year from a peak of around US$115 a barrel reached in June because of an oil glut sparked by the US shale boom, weaker demand in Europe and Asia and a strong dollar. The price of Brent dropped around 40 per cent in the fourth quarter last year, pulling down petrochemical prices.

As a result Sabic’s profit margins on products made with natural gas which it buys at a fixed price are squeezed. However, costs for chemicals made from petroleum products decline along with oil, which helps the company.

Full-year net profit fell 7.3 per cent to 23.43bn riyals.

Sabic expects this year to remain unpredictable, with its profit outlook hinged on the oil price, the chief executive Mohamed Al Mady said in a press conference, Reuters reported.

Sabic will probably outperform other Saudi chemical companies this year, Iyad Ghulam, an analyst at NCB Capital in Riyadh, told Bloomberg News.

“The advantage of Sabic is the diversity of its product portfolio,” he said.

The firm will continue to focus on investments in China, North America and Saudi Arabia and is eyeing acquisition opportunities in the United States, including investments in the US shale gas industry, the chief executive said, according to Reuters. Falling steel prices may push Sabic to shelve plans for two new steel plants that are being studied at a projected cost of US$4.26bn, the chief executive, said according to Reuters.

Sabic and Royal Dutch Shell cancelled in October the expansion of Saudi Arabia Petrochemical Co (Sadaf), a 50-50 joint venture in Saudi Arabia, saying the result of studies was “not encouraging”.

The oil price slump has also led to the scrapping in Qatar of the $6.4bn Al Karaana petrochemicals project, a joint venture between state-run energy firm Qatar Petroleum (QP) and Shell.

Gulf countries have invested billions of dollars in petrochemical projects and related sectors in a bid to create downstream industries that will lead to job creation and diversify oil income away from pure energy products.

“The petchem sector in the Gulf has been under pressure from North American shale and now lower oil prices, and the outlook remains difficult,” said Farouk Soussa, chief economist for the Middle East at Citigroup.

“The expansion of the petrochemicals sectors helps governments capture more of the value added in the energy sector, but does little to diversify the economy away from oil. Gulf efforts to diversify going forward have to focus on non-energy sectors, but more importantly on empowering the private sector to lead economic growth and employment.”

Sabic, the biggest listed Arabian Gulf firm, is ploughing ahead with several projects, Mr Al Mady said this month.

The firm plans to launch this year the $3.4bn Al Jubail Petrochemical Company (Kemya), a joint venture between Sabic and the US energy company ExxonMobil. Also in the works is Saudi Arabian Fertilizer Company's (Safco) $533 million expansion, known as Safco V.

Kemya will produce 400,000 tonnes of synthetic rubber products a year, which are mainly used for automotive products, and Safco V will produce 1.1 million tonnes a year of urea.

It is also in the final stages of preliminary studies for the development of the world’s first oil-to-chemicals complex in Saudi Arabia, which is envisaged to be operational by the end of the decade. Sabic expects to use about 10 million tonnes of crude at the complex per year.

Sabic shares were up 1.45 per cent at 79.5 riyals at the close in Riyadh.

dalsaadi@thenational.ae

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What is the FNC?

The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning. 
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval. 
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
 

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Sector: FinTech / PropTech
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Google wasn't new to busting out April Fool's jokes: before the Gmail "prank", it tricked users with mind-reading MentalPlex responses and said well-fed pigeons were running its search engine operations .

In subsequent years, they announced home internet services through your toilet with its "patented GFlush system", made us believe the Moon's surface was made of cheese and unveiled a dating service in which they called founders Sergey Brin and Larry Page "Stanford PhD wannabes ".

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