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Mon 19 Jul 2010 01:21 PM

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SABIC sees H2 better for stocks

At a news conference after Q2 results, firm says it has no plans for bond issue in medium term.

SABIC sees H2 better for stocks
(Getty Images)

Saudi chemicals company SABIC said excess stocks should be less of a problem in the second half as its shares fell 2 percent on quarterly results that missed expectations and showed weak prices hurting profits.

At a news conference after Sunday's results, Saudi Basic Industries Corp said it had no plans for a bond issue in the medium term.

SABIC delayed a planned dollar bond in May and instead raised 4.5 billion Saudi riyals ($1.20 billion) through a loan last month.

Shares in the world's biggest chemicals group by market value fell 1.4 percent to 86.50 riyals as they opened for trading on Monday for the first time since the results were released.

"A recovery in Asian demand had supported petrochemical producers' margins, but inventories are now well stocked and with global sentiment weakening and product prices expected to fall, demand should also drop," said a petrochemicals analyst who asked not to be identified.

However, SABIC Chief Financial Officer Mutlaq al-Morished told reporters that inventory levels in the second half should pose less of a problem in the second half.

In Sunday's results, SABIC said that net profit rose 177 percent from a year ago to 5.02 billion riyals ($1.34 billion) as new output came on stream.

But it missed analysts' forecasts of 5.62 billion riyals and undershot first quarter earnings of 5.43 billion as selling prices ate into margins.

Without giving figures, SABIC said sales rose in both volume and value during the second quarter compared to a year ago after the addition of new capacities under its Saudi-based affiliates Yansab, and Sharq and under its Tianjin joint-venture with Sinopec.

"The (profit) decline compared to the first quarter is due to a decline in the prices of the majority of products, an increase in feedstock prices and also an increase in iron ore prices," it said in Sunday's statement. (Reuters)

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