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Mon 11 Jan 2010 10:34 PM

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Plant shutdown hits Saudi Fertilizer's Q4 profits

The 30% drop in profits from 2008 is Safco's fifth straight decline in quarterly profit.

Plant shutdown hits Saudi Fertilizer's Q4 profits
PROFIT FALL: Safcos Q4 profits fell to its lowest level in three years after a maintenance shutdown. (Getty Images)

Saudi Arabian Fertilizers Co's (Safco) fourth quarter net profit fell to its lowest level in almost three years after a maintenance shutdown cut output.

The near 30 percent fall in fourth quarter profit to $100 million from a year earlier was below average analyst forecasts of $111.46 million.

The drop was also Safco's fifth straight decline in quarterly profit.

Operating profit was down 55 percent at $81.5 million in the fourth quarter, while gross profit fell 54 percent to $83.72 million, Safco said.

Shares in Safco, 42.9 percent owned by petrochemical giant Saudi Arabian Basic Industries Corp, closed 1 percent lower, underperforming the all share index, still better than intraday losses which culminated at 3.1 percent after the earnings announcement.

In a statement posted on the bourse website, Safco said: "The main reason for the decline (of net profit) in the fourth quarter is because of lower production due to maintenance at the firm's plants."

Its chairman Mohamed al Mady told Dubai based Al Arabiya television that four plants had to shut down for one month, which hit both output and sales.

Safco' net profit for 2009 was $493.30 million - the lowest since 2006 - or $1.96 per share, down from $4.5 per share in 2008. Safco said global prices of urea and ammonia were weaker in 2009 compared to 2008.

Mady said prices are expected to improve in 2010, but he declined to say during which quarter this improvement would start. He dismissed the likelihood of new output interruptions this year.

Safco sells the bulk of its output to India, the Far East, the United States, Australia and Saudi Arabia, Mady said.

Laurent Patrick Gally of Dubai based Shuaa Capital said Safco's plant maintenance has led it to miss out on a relative improvement in prices during the fourth quarter compared to previous periods.

Gally said: "We note the absence of public communication on the matter from Safco on the Tadaul (Saudi stock exchange)."

A dividend distribution by Safco for the second half of 2009 "would be slightly surprising" after the 5 riyals per share the company gave shareholders for the first half, Gally said. (Reuters)

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