Leading Saudi petrochemical firms reported weaker financial results for the fourth quarter 2008, ending on December 31. Sliding profits reflect the sharp decline of the petrochemical prices during the fourth quarter of 2008, as shown in the Argaam Petrochemical Index, which covers a bulk of petrochemical products produced in the region.
Saudi Basic Industries Corporation (SABIC), the largest petrochemical and fertilizers producer in the Middle East and the Largest producer of steel in the region, has posted 95% decline of the fourth quarter results to US$82.9 million, the lowest profits since the fourth quarter 2001 – which is the period in which Sabic posted losses for the first time in its history.
During the second quarter 2008 SABIC posted $2.01 billion, the highest since its establishment and as it says, what goes up must come down, but the downturn this time came sharp and rapid.
The company attributed the sharp decline in the results of the fourth quarter of 2008 to the fall in demand for petrochemical products and metals, due to the economic recession that has hit the world’s major economies, as well as the credit crunch that led to difficulties for consumers in obtaining the necessary financial facilities from banks and financial institutions.
Saudi Arabia Fertilizers Co., the largest fertilizer producer in the world, had posted a 94% increase in 2008 compared to 2007, due to the high urea and ammonia prices. Fourth quarter results have declined 71% compared to the third quarter, due to the decline of the ammonia and urea prices.
Saudi Industrial Investment Group (SIIG), which has three joint venture projects with Chevron Phillips, has posted a 87% decline in its annual profits to $15.2 million, despite a sales increase of 47% to $ 181.35m, but the increase of the sales cost have led to decline of profit margins from 32% to 7% in 2008.
The National Industrialisation Company (Tasnee), recorded 9% decrease in net profits, to $161.4 million on sales up 40% to $2.66 billion, due to the decline of petrochemical prices and the profit margin; the company has started commissioning of its HDPE plant in 2008, but the operational results weren’t included with the published results; the company is expected to launch its LLDPE plant this month.
Saudi International Petrochemical Company (Sipchem), the methanol and butanediol producer, have posted 10% fall in net profits to $143.64m, and 13% increase in sales. The decline of the net profits is due to the SR77.6 million the company allocated as cost to develop projects, the company said.
Alujain Corporation increased it losses by 60% to $16.87 million, the company has announced the start up of its 400,000 tonnes per year of polypropylene, after a series of delays.
Non operational losses for companies such as Petro Rabigh, Yansab and Sahara petrochemical have also increased as these companies are still under construction.
Meanwhile, Saudi Kayan, still under construction, has posted non operational profits of $131.93 million, resulting from Islamic company bank investment.
In a time when petrochemical companies around the world are posting losses resulting from the current downturn of the industry, for example the US Dow Chemical posted $1.55 billion losses for the fourth quarter of 2009, Saudi operating companies are still enjoying profits as they receive ethane feedstock with a very competitive price of 75 cents per BTU comparing to around $8 per BTU in the USA.
As a result of the recent downturn in profits, Saudi Basic Industries Corporation (SABIC) has sent a general memo to its staff informing them that it will freeze promotions and bonuses in 2009, due to the recent drops in the world economy as revealed by the Saudi website argaam business information.
In the Saudi Kingdom, petrochemical companies are urged to go on initial public offering (IPO), to allow Saudi citizens to become stakeholders in the operations. In order to achieve this, feedstock allocations are used as the incentive, with only those companies which comply receiving their much-needed gas.
