Riyadh: Saudi Basic Industries Inc. expects earnings to come under further pressure this year from sluggish economic growth and an oversupply of petrochemicals. The shares fell.
The Middle East’s biggest chemicals maker reported its first quarterly loss in a decade last quarter due to lower sales prices and writedowns at a joint venture. The same factors that squeezed prices and profit margins last year are likely to persist in 2020, the state-run company said Wednesday in a stock exchange statement.
Sabic is central to Crown Prince Mohammad Bin Salman’s ambition to overhaul the kingdom’s economy by developing new industries and manufacturing. Saudi Aramco is preparing to buy the sovereign wealth fund’s majority stake in Sabic as the oil producer seeks to become a global chemicals powerhouse.
The company posted a loss of 720 million riyals ($192 million) in the last three months of 2019 compared with a profit of 3.22 billion riyals in the year-earlier period. A 1.3 billion-riyal impairment provision at the Ibn Rushd petroleum products joint venture also cut into earnings.
Sabic shares declined 2.4%, the most in more than a month.
Sabic last posted a quarterly loss in the first three months of 2009, when it was struggling to integrate the plastics unit it purchased from General Electric Co.
Saudi Aramco plans to complete its takeover of Sabic this year, in a push to diversify away from sales of crude oil. The two companies haven’t specified any potential cost savings from the deal. Aramco has said that the Sabic shares it won’t own will continue to trade on the Riyadh exchange.