Saudi’s SABIC Q3 net profit up 10.7 pct on higher prices, sales

29/10/2017 19:56 AST

Saudi Basic Industries Corp (SABIC), the world’s fourth-biggest petrochemicals company, reported a 10.7 percent rise in third-quarter net profit on Sunday, beating analysts’ estimates.

Majority state-owned SABIC made a net profit of 5.79 billion riyals ($1.54 billion) in the three months to Sept. 30, up from 5.23 billion riyals in the year-earlier period, the company said in a bourse statement.

The net profit was better than the average net profit of 4.27 billion riyals forecast by four analysts.

It was the company’s biggest profit since the second quarter of 2015, as a recovery in crude prices buoyed earnings.

SABIC, the biggest company on Saudi Arabia’s Tadawul stock exchange with a market capitalisation of nearly $79 billion, is 70 percent owned by the kingdom’s Public Investment Fund and 5.7 percent owned directly by the government.

Its results are closely tied to oil prices and global economic growth because its products -- plastics, fertilisers and metals -- are used extensively in construction, agriculture, industry and the manufacture of consumer goods. ($1 = 3.7501 riyals)

SABIC, which aims to be the world’s third-biggest petrochemicals producer, attributed the profit rise to higher average selling prices and higher sales quantities.

The company had expected this year to be positive in terms of economic growth in key markets. However, its steel unit Hadeed weighed on its results in the second quarter, when net profit fell 25 percent from the prior year.

Chief Executive Yousef al-Benyan told Reuters in May the firm is evaluating acquisition opportunities in the range of $3 billion to $6 billion in petrochemicals, speciality chemicals and fertilisers and aims to do the first such deal in the fourth quarter of this year.

SABIC’s expansion is driven by the need to be closer to key markets and feedstock. Constraints in new gas supplies in Saudi Arabia are forcing petrochemical producers to look abroad for expansion.

The company is making progress towards major investment in the United States with an affiliate of U.S. Exxon Mobil. It completed its acquisition of SADAF, which had been a Saudi-based joint venture with Shell Arabia, in August.

It is also pursuing its first project with oil giant Saudi Aramco - development of an oil-to-chemicals project in Saudi Arabia which analysts see as a breakthrough in the industry.

Benyan told Reuters on the sidelines of an investment conference in Riyadh on Thursday that he hoped to complete the joint venture agreement by the end of the year.

Reuters