SABIC net profit triples on prices, missing estimates

New production and a global economic recovery helped beat previous year's slump.
SABIC net profit triples on prices, missing estimates
PROFIT JUMP: Saudi Basic Industries Corp said that its Q2 profit almost tripled due to higher prices and demand recovery. (Getty Images)
By Bloomberg
Sun 18 Jul 2010 08:19 PM

Saudi Basic Industries Corp, the world’s biggest petrochemicals maker, said second quarter profit almost tripled on higher prices and as demand for fertilizers and plastics recovered in a strengthening global economy.

Net income surged to $1.34 billion from $482.6 million in the year earlier period, the Riyadh based company said in a statement to the Saudi bourse today. The average estimate of eight analysts was for a profit of $1.51 billion, according to Bloomberg data.

New production and a global economic recovery helped Sabic overcome last year’s slump, when sales of its automotive, construction and consumer products weakened.

Sabic has seen strong demand for its petrochemical products from China and the US, Mohamed al Mady, chief executive officer, said on May 23.

Second quarter profit “is a result of better prices and improvement in demand than seen in the second quarter last year,” said Syed Taimure, a senior analyst at Global Investment House KSCC.

During the same quarter last year, “there was an uncertainty in the market, which had a negative impact on the overall demand for petrochemical products,” he said.

Sabic shares closed unchanged at $23.3 in trading in Riyadh before the results were announced. The stock has gained 6.4 percent this year against a 0.07 percent drop in the benchmark Tadawul All Share Index. BASF SE, Sabic’s main competitor, has gained 3.5 percent this year.

The International Monetary Fund on July 8 raised its forecast for global economic growth this year to 4.6 percent, which would be the fastest rate since 2007, from the 4.2 percent it predicted in April.

Canada and the US are leading advanced economies out of the worst recession since World War II, the Washington based fund said.

Sabic, also a steelmaker, is increasing production to meet rising demand, as the kingdom spends $400 billion over five years to stimulate economic growth and build new infrastructure. The company aims to triple petrochemicals production to 130 million tons by 2020.

Sabic started commercial operations this year at its units Eastern Petrochemical Co, known as Sharq, and Yanbu National Petrochemical Co, known as Yansab. In addition, Sabic and China Petroleum & Chemical Corp, or Sinopec, started producing this year at a joint venture complex in Tianjin, China.

The second quarter profit “is attributable to the increased production and sales volumes with the new capacity coming on stream at Sharq, Yansab and the joint venture with Sinopec,” Sabic said in the statement.

It added: “The improved pricing environment for most of the products had a positive bearing on the consolidated financial performance.”

Earnings gained at its unit Saudi Arabian Fertilizer Co, which posted an 89 percent jump in second quarter profit. Yansab reported a profit of $133.9 million for the three months to June 30 after losing $1.77 million a year ago.

Sabic said it would pay a second half dividend of $0.39 a share, according to another company statement.

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