Saudi Basic Industries Corp , one of the world's largest petrochemicals groups, reported a drop in second-quarter net profit on Sunday but beat analysts' forecasts by a large margin, suggesting it was coping well with low oil prices.
The Gulf's largest listed company made a net profit of 6.17 billion riyals ($1.64 billion) in the three months to June 30, down 4.5 percent from a year earlier.
SABIC has been hit by the plunge in crude oil prices since mid-2014, which has dragged down petrochemical product prices and shrunk its profit margins. But its second-quarter profit was well above the average of 4.96 billion riyals predicted by analysts polled by Reuters.
Second-quarter sales totalled 42.10 billion riyals, down from 48.15 billion riyals a year earlier but up from 35.56 billion riyals in the first quarter. In the first quarter, net profit plunged 39 percent from a year ago.
Acting chief executive Yousef Abdullah al-Benyan told Reuters that product prices in the second quarter were on average 20 percent higher than in the previous quarter.
SABIC was able to boost production 2 percent from the previous quarter by focusing on individual clients' demands, and careful cost management also helped its bottom line, Benyan said by telephone.
"We were able to take advantage of dynamics of market changes in Europe and China" to improve the performance of SABIC's global assets, he added without elaborating.
"We normally can't get into predictions on prices, but what we can see is pressure on prices related to the crude price. However, we will continue to focus on factors that are under our control," Benyan said of the business outlook in coming months.
SABIC shares initially surged 4.5 percent in response to the earnings announcement but later came off their highs. They were up just 0.7 percent at mid-afternoon.
Benyan said SABIC, which is over 70 percent government-owned, was looking at major overseas investments and indicated a decision on them might be made in the next few months.
"We are looking for business opportunities in North America related to shale gas, and also some options in China related to coal-to-chemicals." He added, "Hopefully by the end of the year we will have an announcement."
In May last year, SABIC said it was in the final stages of preliminary studies on a proposed oil-to-chemicals complex in Saudi Arabia that would start operations by the end of 2020, using around 10 million tonnes of crude oil annually as feedstock.
Benyan said on Sunday that the project, which the company has estimated would create around 100,000 jobs for Saudis directly and indirectly, was still under review. "By the end of the year we should have more clarity on it."For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.