Dubai/Riyadh: Saudi Basic Industries Corp (Sabic), one of the world’s largest petrochemicals groups and the Gulf’s largest listed company, reported a 7 per cent increase in second-quarter net income on Sunday, matching analysts’ forecasts.

It earned 6.46 billion riyals (Dh6.3 billion, $1.72 billion) in the quarter, compared to 6.04 billion riyals in the year-earlier period, Sabic said in a bourse statement.

This was in line with the average forecast of analysts polled by Reuters, who had predicted a quarterly profit of 6.42 billion riyals.

Sabic, which is 70 per cent state-owned, attributed the rise in profits to higher production and sales volumes as well as higher prices for products. However, this was partly offset by a dip in sales volumes and an increase in feedstock costs for some products, the company said in a bourse filing.

The company’s results are closely tied to global economic growth because its products — plastics, fertilisers and metals — are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.

There had been some concern in the stock market about Sabic’s earnings after two of its subsidiaries, Yanbu National Petrochemical Co and Saudi Arabian Fertiliser Co, missed analysts’ second-quarter earnings forecasts earlier this month.

Sabic’s first-quarter earnings dipped 1.8 per cent year-on-year, as chief executive Mohammad Al Mady complained that a lack of ample natural gas supplies within Saudi Arabia had emerged as a key constraint on growth there. Natural gas is used as a feedstock for petrochemical production.

Last year, Mady said Sabic planned to build a shale gas cracker in the United States, but he added that any investment would not be heavy in the initial stages and the company had no urgent funding needs. “Most of the shale investment will come in 2017.”

Petchem prices may rise

The global outlook for petrochemical demand over the next three years is positive and there is room for prices to rise, Sabic chief executive Al Mady said on Sunday, while addressing a news conference after Sabic declared results.

Forecasts suggest shale gas, a potential feedstock for petrochemicals, will only be produced in large quantities from the United States in 2018, leaving room for improvement in petrochemical prices before then, he said.

For this year, Mady predicted the business outlook would remain similar to 2013, with petchrochemical product prices probably staying stable.

He added that Africa was a very promising market for Sabic and the company was focusing on opening distribution centres in a number of African countries, especially for fertilisers and plastics.

Chief financial officer Mutlaq Morished told the news conference that Sabic’s sales in the second quarter climbed to 48.15 billion riyals ($12.84 billion) from 44.99 billion riyals a year earlier.