Saudi Basic Industries Corp (SABIC) must keep costs at a minimum given the current global turmoil, its top executive said on Saturday after it posted its first decline in quarterly net profit in more than two years.
The world’s largest chemicals company by market value, which competes with Dow Chemicals and BASF , made 7.24 billion riyals ($1.93 billion) in the three months to September down from 7.4 billion riyals a year earlier.
Mohammed Al-Mady told newswire Reuters the firm posted a slight decline in sales volume in the third quarter but he declined to say from which part of the world this decline originated.
“This decline is normal under the current global economic conditions,” Al-Mady said in a telephone interview.
“China and India continue to be strong drivers of growth… But I don’t think a country will be safe from a potential decline in the United States or Europe.”
Annual sales volume growth was 3 percent for the nine months to Sept. 30, half its level for the six months to June 30.
SABIC said the expected global recession might lead to a decline in demand for products in most of the international markets, in an apparent reference to its own products.
Asked how the firm planned to deal with a potential slowdown, Al-Mady said: “The most important thing for us is to safeguard the operations process and to maintain costs at a strict minimum… The company is strong”. He declined to elaborate.
The firm’s operating profit in the nine months to Sept. 30 rose 20 percent while its net profit rose only 8 percent during the same period.
Mady said the gap was a result of extra financial costs from the decline in the euro’s exchange rate against the US dollar after the firm changed some unspecified US dollar-denominated assets for euro-denominated ones.
“When you have assets that were valued in a specific currency and then you change from the US dollar to the euro, there is an impact,” Al-Mady said.
He declined to say what sort of steps the company had taken or planned to take to readjust to this situation.
SABIC is also bearing the financing cost of its $11.6 billion acquisition of GE Plastics. SABIC included a full quarter of GE Plastics earnings in its financials for first time in the three months to Dec. 31.
The global financial crisis did not have an impact on the firm’s financial operations, SABIC said, noting that loans necessary to finance projects and expansions had been completed before the current crisis started.
Al-Mady said the firm’s decisions to cut the prices of domestic steel by an accumulated 43 percent since September was motivated by a global trend affecting the price of the commodity.
“The Saudi economy is an open market and we had to cut prices to match the global price trends so we can stay competitive… It was not because the Saudi economy is entering a recession phase,” he said. (Reuters)
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