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Fri 1 Jul 2011 12:49 PM

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SABIC revenues to see double digit growth in 2011 - Fitch

Ratings agency says new capacity, sustained demand to boost Saudi Basic Industries Corp

SABIC revenues to see double digit growth in 2011 - Fitch
SABIC headquarters

Saudi Basic Industries Corporation's (SABIC) revenues are likely to see low double digit growth in 2011, Fitch Ratings has forecast.

The ratings agency said the petrochemicals giant's growth would be driven by sustained demand conditions and the ramping up of new capacity at Sharq, Yansab, SSTPC and Saudi Kayan.

In affirming SABIC's long-term issuer default rating (IDR) at 'A+' with a stable outlook, Fitch also projected a 2011 EBITDA margin roughly in line with Q1 levels (34 percent).

In line with the trends observed across the chemicals sector, SABIC posted strong results in Q1 2011.

"The group also benefited from a strong post restructuring recovery in the performance of Sabic Innovative Plastics (SIP)," Fitch added.

Although free cash flow (FCF) was negative Q1, Fitch said it was expected to turn positive in 2011, reflecting higher absolute levels of operating cash flows and lower investment requirements.

"The ratings continue to reflect SABIC's strong business profile and moderate leverage, as well as a one-notch uplift for assumed support from its controlling shareholder, the Kingdom of Saudi Arabia," the Fitch report added.

SABIC has announced new projects in the coming years, including a elastomer production site in Saudi Arabia and a polycarbonate plant in China, with both projects slated to start commercial operations in 2015.

Fitch said a key risk to its forecasts was a return to recessionary market conditions, with slower growth in Asia, lower demand for petrochemical products against the backdrop of large capacity additions in the GCC region and China, and resulting pricing pressure and margin erosion.

SABIC is the largest non-oil company in the Middle East and one of the world’s five largest petrochemicals manufacturers.

It is a public company based in Riyadh and the Saudi Arabian government owns 70 percent of its shares, with the remaining 30 percent held by private investors in Saudi Arabia and other countries of the Gulf Cooperation Council.

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