Business | Oil & Gas
Chemicals rally spurs Sabic profit
Saudi Basic Industries Corp (Sabic), the world's largest petrochemical company by market value, reported a record net profit in the fourth quarter as chemical and fertiliser prices rose and energy costs fell.
- Reuters
- Published: 00:00 January 22, 2007
Riyadh: Saudi Basic Industries Corp (Sabic), the world's largest petrochemical company by market value, reported a record net profit in the fourth quarter as chemical and fertiliser prices rose and energy costs fell.
The company made 6.1 billion Saudi riyals ($1.63 billion) in the three months to December 31, an increase of 36 per cent from the year-earlier period that easily beat analysts' forecasts and the earnings record set in the third quarter.
The range of forecasts from analysts polled in December was for net profit to grow between 15.4 per cent and 16.7 per cent in the fourth quarter.
"The average price for our products is up," Sabic chief executive Mohammad Al Mady said yesterday, adding the biggest increases in the quarter were in fertilisers, glycol and polyethylene.
Sabic is also benefiting from declining energy prices. Oil's slide from a peak of more than $78 a barrel to just over $61 at the end of December weighed on gas prices which make up the bulk of the company's energy costs, Mady said.
Petrochemicals tend to track oil prices but Mady said in December prices of Sabic products would hold steady as a rise in demand in Europe and China offset the decline in crude prices.
Dubai-based Shuaa Capital raised its recommendation on Sabic's stock in December to 'buy' from 'neutral', saying chemical prices would stay higher for longer than expected.
The price of ethylene, which the investment bank used as a benchmark for the industry, would stay above $950 per tonne until the end of 2008, Shuaa said.
Yesterday, Mady sounded a more cautious note, saying slower economic growth in some countries Sabic had targeted for expansion could hurt demand in 2007. "The growth in some countries needs to be looked at very carefully," he said, declining to be more specific.
Net profit in the year to December 31 was 20.3 billion riyals, a six per cent rise from 2005, a statement on the stock exchange's website said.
Annual revenues rose 11 per cent to 86.5 billion riyals, the highest on record, Sabic said. Output rose five per cent from the previous year.
Sabic did not give quarterly sales or production data, but output was likely to have risen in the fourth quarter, Mohammad Al Nabarawy, vice-president of research at Shuaa, said. "It is probably a combination of prices, higher margins, volumes and higher production," he said.
Sabic, expected to produce about 51 million tonnes of chemicals and steel in 2006, plans to boost capacity to 100 million tonnes by 2015, building plants in China, India and Saudi Arabia, and buying US and European firms, Mady said in December. Last year, Sabic agreed to buy the European bulk chemicals unit of US-based Huntsman Corp for $700 million.
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