Saudi petchem sector revenue exceeds SR 310 bn

1 / 2
2 / 2
Updated 03 February 2013
0

Saudi petchem sector revenue exceeds SR 310 bn

Saudi Arabia is the most prominent producer in the global petrochemical industry.
The Kingdom holds approximately one-fifth of the world’s proven oil reserves, which is considered to be the world’s largest reserve base.
Saudi Arabia is producing more than two-third of the total GCC petrochemical capacity, the Gulf Petrochemicals and Chemicals Association (GPCA) reported recently.
Strong infrastructure, substantial reserves of cheaply extractable feedstock and supportive government policies help domestic producers to enjoy competitive advantage globally.
Despite challenging market conditions, the Saudi petrochemicals sector is continuing to show strong growth.
At the end of 2012, the sector accounted for more than 31.4 percent of the total market capitalization on the Saudi Stock Exchange, reaching at the level of SR 440 billion roughly.
SABIC (Saudi Basic Industries Corp.) is the flagship company among 14 listed companies, representing 61.2 of the total value of petrochemical sector.
SABIC is also the biggest petrochemicals company in the GCC region, reflecting 19.2 percent of the total market capitalization on the Saudi stock exchange.
The total market capitalization of Tadawul (market) stands at SR 1.4 trillion at end of December 2012.
The Kingdom’s 14 petrochemical companies all generated around SR 310.5 billion as revenue during 2012, reflects an increase of 5.19 percent compared with revenue of FY2011. Out of which, SR189 billion was earned by SABIC, which equates nearly 61 percent of the aggregate value.
During 2012, Saudi Kayan commenced and expanded operational capacity of many commercial operations including olefins, ethylene glycol, polypropylene, high density polyethylene and Amines etc.
The company remained at top in terms of percentage growth. It’s revenue increased by 295 percent to record SR9.5 billion.
Alujain Corporation and Saudi Industrial Investment Group are other significant advancers, growing 43 percent and 27 percent respectively.
Core operating profitability of petrochemical sector declined significantly, mainly due to decrease in overall product prices.
Total operating income for FY 2012 reported SR 53 billion compared with SR 64.25 billion for FY 2011, a decrease of 17.52 percent.
Three out of 14 companies including , National Petrochemical (Petrochem), Sahara Petrochemical Company and Saudi Kayan showed operating losses during 2012.
On the positive side, Petrorabigh operating income increased exceptionally by 536 percent, it achieved SR 654 million during FY2012 compared with SR103 million of FY2011.
Alujain Corporation’s operating income also increased by 127 percent during 2012.
The petrochemical sector managed to earn an adequate margin of 10.9 percent, generating SR 33.85 billion as net Income during fiscal year 2012. SABIC dominated the profitability, contributing SR24.7 or 73 percent of the consolidated value.
Unfortunately, its bottom line decreased by 15.47 percent, which is attributed to the decrease in sales prices for certain products, despite higher sales and production volumes.
Furthermore, the heavyweight Saudi Arabian Fertilizers Co. (SAFCO) showed a maximum net profit margin of 77.6 percent.
Saudi-listed petrochemical companies’ total assets grew to SR 596 billion, recording a yearly growth of over two percent.
SABIC’s assets are amounting to SR 338 billion, a relative sector share of 57 percent.
National Industrialization Co. and Saudi Industrial Investment Group topped on percentage basis, both achieved nearly 14 percent higher value of total assets in 2012.
At Saudi Stock Market, the petrochemical sector has been showing a positive drive since the start of 2012.
The sector’s index added a healthy return nearly 16.5 percent at the end of the first quarter of 2012, crossing the 7,000 points mark.
Subsequently, it could not sustain upward momentum due to wide fluctuation in oil prices. The index finally closed lower by 6.04 percent, trimming back 6,000 points-mark to end at 5,856.41 point on December 31, 2012.
Saudi Arabia’s benchmark stock index (TASI) achieved a return of 5.98 percent during 2012, closing at 6,801.22 points.
Nama Chemicals Co. outdid the rest of the petrochemical issues, marching higher roughly 29 percent to SR 12.85 at the end of 2012.
Saudi Industrial Investment Group and heavyweight Saudi Arabian Fertilizers Co. (SAFCO) followed it, advancing 19 percent and 15 percent respectively.

— Mushtaq Ahmed is senior financial analyst at Zughaibi & Kabbani Financial Consultants.


Gulf companies challenged by debt and rising interest rates

Updated 22 April 2018
0

Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.

 

Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”

FACTOID

Four

The number of interest rate rises in the UAE since March 2017.