Riyadh: Saudi Basic Industries Corp (Sabic) beat forecasts with a 46 per cent rise in third-quarter profit on higher plastic and petrochemical sales, and looked set for at least the same profit level in the fourth quarter.
The world's largest chemical firm by market value made a net profit of 5.33 billion riyals (Dh5.21 billion) in the three months to September 30, up from 3.65 billion riyals a year earlier, and 5.02 billion riyals in the second quarter.
Sabic's earnings are a yardstick for rivals such as Dow Chemical and Germany's BASF.
The earnings exceeded by close to five per cent the 5.09 billion riyals average forecast from six analysts surveyed by Reuters earlier this month.
"We benefited from a rise in prices in the second quarter and the first month of the third quarter ... Prices rose in the last two months of the third quarter as oil prices rose ... Demand was stable on a global level," Chief Executive Mohammad Al Mady told reporters in the company's headquarters in Riyadh.
High oil prices are positive for petrochemical firms because they increase petrochemical product prices, and Sabic usually does better in terms of profitability than rivals because it purchases feedstock at lower prices.
A drop in the dollar against the euro helped profitability, Sabic executives said at the press conference. The Saudi riyal is pegged to the greenback.
In a separate statement, Sabic said "an increase in production and sales as well as an improvement in prices of most petrochemical and plastic products" fuelled the profit rise.
New capacity
Ebrahim Al Alwan, deputy chief executive at private investment bank KSB Capital, said the earnings would please investors as they give the stock a PE ratio slightly below 13 times 2010 earnings.
"A good set of results that should nudge the stock a bit higher tomorrow. The price right now is reasonable. What"s even more important is that Sabic seems to be on course to at least match in the fourth quarter the net profit of third quarter," Al Alwan said.
The company's third-quarter sales were up 5 per cent from 38.86 billion riyals in the second quarter.
This year, Sabic benefited from higher production after the addition of new capacity under its Saudi-based affiliates Yansab and Sharq and under its Tianjin joint-venture with Sinopec.
- 5.33b profit in riyals made in third quarter of 2010
- 3.65b profit in riyals made in third quarter of 2009
- 38.86b sales in third quarterin riyals
- 5.33b profit in riyals made in third quarter of 2010
- 3.65b profit in riyals made in third quarter of 2009
