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Sun 27 Oct 2019 11:40 AM

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Saudi chemical giant Sabic slumps to lowest quarterly net in a decade

State oil giant Saudi Aramco is buying Sabic to become one of the world's biggest refiners and chemical producers

Saudi chemical giant Sabic slumps to lowest quarterly net in a decade

Sabic shares declined as much as 2.3% within the first two minutes of trading in Riyadh.


Saudi Basic Industries Corp posted its lowest quarterly profit in at least a decade as the chemical maker took an impairment charge and cheaper oil put pressure on its product prices.

Net income slumped 86% from the previous year to 830 million riyals ($221 million), while sales fell 23% for the same period to 33.7 billion riyals, the company known as Sabic said.

Sabic took a 1.5 billion riyal impairment charge on its 25% holding in Swiss chemical manufacturer Clariant AG, it said in a statement.

Saudi Arabia expects chemical makers like Sabic to form the basis for new industries in manufacturing and consumer goods and hopes they will provide jobs and reduce the economy’s reliance on oil exports.

State oil giant Saudi Aramco is buying Sabic to become one of the world’s biggest refiners and chemical producers. Oil prices, which dropped about 9% in the quarter, are hindering Saudi growth and the government’s ability to meet spending demands.

“A challenging environment due to slower global growth coupled with additional new capacities together with a decline in oil prices exerted a downward pressure on petrochemical prices in the third quarter of 2019,” Yousef Al-Benyan, the company’s chief executive officer, said in the statement. “We are confident about the long-term prospects of the industry and remain focused” on new projects.

Sabic shares declined as much as 2.3% within the first two minutes of trading in Riyadh.

With economic growth projected to be lower this year than last, Sabic expects that the challenges to earnings in the third quarter will persist for the rest of the year. The company continued to review the value of all its assets as part of its annual planning.

“We think the next quarter could be worse,” Pritish Devassy, head of equity research at Al Rajhi Capital, said in an email. “Next quarter could be the bottom for earnings for the petrochemicals sector.”

Sabic’s profit in the second quarter was also at a 10-year low, when the company results missed analysts estimates that net would be at least 1.77 billion riyals.

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