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Saudi Basic Q1 Profit Drops 5% as Prices Declineqrcode

Apr. 18, 2012

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Apr. 18, 2012

Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker, said first-quarter profit dropped 5 percent on lower prices for its products and higher feedstock costs.

Net income fell to 7.27 billion riyals from 7.69 billion riyals a year earlier, the Riyadh-based company known as Sabic said in a statement. The average estimate of seven analysts was for a profit of 6.64 billion riyals, according to data compiled by Bloomberg.

Chief Executive Officer Mohamed Al-Mady said earlier this month that demand growth from China, one of Sabic’s biggest markets, was moderating as the nation’s economy slows. Saudi Arabian Fertilizer Co. (SAFCO), a unit of Sabic, reported first-quarter profit that missed analysts’ estimates, while Saudi Kayan Petrochemical Co. (KAYAN) said its loss widened.

"There is a lag effect of low prices in the fourth quarter,” Faisal Potrik, an analyst at Riyad Capital, said before the results were announced. “Demand has been good but a slowdown in China is on people’s minds.”

The shares declined 1.3 percent to 98 riyals yesterday. The stock increased 1.8 percent this year compared with a 13 percent gain for the benchmark Tadawul All Share Index.

Sabic, the maker of fertilizers, plastics and steel, has added output capacity through units and joint ventures. The company plans to begin producing urea in the third quarter of 2014 at a 2 billion-riyal plant being built by its fertilizer unit. It forecast steel-production capacity will grow 50 percent this year to 6 million metric tons after completing work at a plant in Jubail.

"Costs increases are far outstripping product prices in the first quarter,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said in response to e-mailed questions. “Product prices have failed to impress since the start of the year.”
Source: Bloomberg

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