Saudi Basic Industries Corp, Sabic, one of the world’s biggest petrochemical producers, said yesterday its fourth-quarter net profit rose by nearly 48 per cent as its average cost of sales and expenses fell.
Net profit for the three months to the end of December increased to 4.55 billion Saudi riyals (Dh4.45bn) from 3.08bn riyals in the year-earlier period, the company said in a statement to the Saudi stock exchange. Sales fell by 0.4 per cent to 34.03bn riyals.
Reuters had forecast on average that Sabic would make a quarterly net profit of 4.94bn riyals, based on analyst projections.
For the whole of 2016, profit fell 4.5 per cent to 17.91bn riyals on lower average sales prices, an increase in Zakat provisions and an impairment related to its Ibn Rushd plastics affiliate.
“We expect cost cuts to help boost profits in the coming years but this is something that will likely take time to fully implement given the massive size of Sabic’s operations and is difficult to quantify,” said Yousef Husseini, a Dubai-based petrochemicals analyst at Egyptian investment bank EFG Hermes.
EFG had forecast a fourth quarter net profit of 4.8bn riyals.
The company has merged its chemicals and polymers businesses and plans to make its steel unit an affiliate company.
Sabic, which is 70 per cent owned by the Saudi government, is lowering costs as it has been grappling with dwindling income because of lower oil prices that influence petrochemicals.
“Our view is earnings are likely to be higher this year on the back of the higher oil prices, which have driven petrochemical prices upwards, as well as higher fertiliser prices,” said Mr Husseini. “Any cost cuts that take place would be further upside.”
Sabic’s revenue has come further under pressure after the kingdom slashed subsidies on gas in 2015 to shore up government income. The government plans to phase out subsidies on gas over the coming years, a move that will further dent earnings. But Sabic is forging ahead with projects within and outside the kingdom.
Saudi Aramco and Sabic agreed last year to conduct a feasibility study to develop an oil-to-chemicals complex in the kingdom, the first joint venture between the state-owned energy firm and the petrochemical producer.
Sabic has been unable to expand in the kingdom because of limited feedstock of gas, which is in demand for power generation and industrial use.
Sabic is also looking to increase its overseas investments this year with a joint venture in the US, said Yousef Al Benyan, the chief executive, in November.
dalsaadi@thenational.ae
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