Saudi Basic Industries Corp's results suggest that the worst might be over for Saudi petrochemical sector
Saudi Basic Industries Corp (SABIC), one of the world's largest petrochemicals groups, reported on Thursday that its quarterly profit rose from a year earlier for the first time in ten quarters.
The earnings suggested that the worst might be over for Saudi Arabia's petrochemical sector, which has been squeezed by the plunge of oil prices since 2014 and also by government austerity measures, which raised the cost of gas feedstock.
SABIC's fourth-quarter net profit jumped 47.7 percent from a year earlier to 4.55 billion riyals ($1.21 billion) in the three months to Dec. 31.
The company attributed the leap to a lower average cost of sales and lower selling, general and administrative expenses - the result of aggressive cost-cutting that the kingdom's biggest petrochemical producer conducted in response to low oil prices.
Its fourth-quarter earnings were at the low end of analysts' expectations, however; five analysts polled by Reuters had forecast on average that SABIC would make 4.94 billion riyals.
SABIC's operating profit surged 67.2 percent to 7.29 billion riyals in the fourth quarter while gross profit gained 16.9 percent to 10.6 billion riyals.
Meanwhile, sales at SABIC dropped to 34.03 billion riyals ($9.07 billion) in the fourth quarter of last year from 34.16 billion riyals a year earlier, according to CEO Yousef Al Benyan.
Benyan, speaking at a news conference on the petrochemical giant's earnings, added that he expected business in 2017 to be positive compared to last year.
The US and China look positive and while there is uncertainty in Europe because of Britain's decision to leave the European Union, conditions on that continent should be similar to 2016, he said.
The company's results are closely tied to oil prices and global economic growth because its products - such as plastics, fertilisers and metals - are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.
SABIC said in October it had combined its chemicals and polymers businesses and would spin off its steel unit as part of restructuring efforts.
Among several other Saudi petrochemical companies to report fourth-quarter earnings this month, most have posted higher earnings. On Wednesday PetroRabigh, a joint venture between Saudi Aramco and Japan's Sumitomo Chemical , said it had swung to a net profit of 183 million riyals from a loss of 1.01 billion riyals a year ago.