SABIC eyes overseas expansion as outlook improves

The view from SABIC headquarters in Riyadh is much improved thanks to increased global demand for the petrochemicals it makes. (Courtesy of SABIC)
Updated 29 July 2018
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SABIC eyes overseas expansion as outlook improves

  • First half was "very positive" says CEO
  • Profits surge 81 percent in second quarter

RIYADH: Saudi Basic Industries Corp. (SABIC) said on Sunday it expects positive growth in the second half of this year, backed by an increase in production and enhanced global economic outlook.

The comments came after SABIC reported an 81 percent leap in second-quarter net profit, citing higher selling prices and a jump in sales volumes.

The first half of 2018 was “very positive” and SABIC expects the second half of the year to be “equally positive,” CEO Yousef Al-Benyan told a news conference.

SABIC has been a focus of investor attention after Reuters reported earlier this month that Saudi national oil giant Aramco aimed to buy a stake in SABIC, possibly taking the entire 70 percent holding owned by Saudi Arabia’s sovereign wealth fund, Public Investment Fund (PIF). Aramco subsequently confirmed the report.

Benyan said on Sunday that talks on the potential acquisition of a stake in his company are taking place solely between Aramco and PIF.

“Hard to expect anything in this regard — Aramco-PIF talks are between an owner and a future investor,” Yousef Al-Benyan told a news conference. “I can assure you we have trust in our regulators.”

SABIC posted a net profit of SR6.70 billion ($1.79 billion) in the three months to June 30, up from SR3.71 billion in the year-earlier period, beating average analyst forecasts of a 5.8 billion riyals net profit.

Benyan said the company’s production rose about 1.5 million tons in the first half of the year and is expected to rise to three million tons by year-end.

Quarterly sales climbed 26 percent from a year earlier to SR43.28 billion, and were up three percent from the previous quarter.

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

The petrochemical giant has plans to expand its presence in global markets; specifically in North America, China and North Africa, Benyan said, adding that the company is looking at various options, without giving further details.

In Europe, the company is still committed to its investment in Clariant, and is awaiting antitrust approvals for acquiring a 25 percent stake in the Swiss speciality chemical maker which was announced in January, Benyan said.

Earlier this month, Clariant CEO said his company’s update on its ties with SABIC is likely to be delayed as antitrust approvals take longer than expected.


Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

Updated 21 September 2018
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Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

  • The dollar has been lifted by a stronger-than-expected US economy, the world’s largest
  • A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies

BENGALURU: Goldman Sachs said a stronger dollar is unlikely to derail its bullish view on commodities, which are likely to find support from physical shortages.
The dollar has been lifted by a stronger-than-expected US economy, the world’s largest, and that’s a positive sign for global growth, the US investment bank said.
The US dollar index has lost more than 1 percent this week, but this follows months of strong demand over US-China trade-related tensions, as investors bet the greenback would gain at the expense of riskier currencies.
“The risk aversion this summer created significant emerging market destocking, particularly in China, as consumers attempted to avoid a strong dollar and tariffs by liquidating inventories,” Goldman said in a note dated on Thursday.
A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies, making buyers and users more likely to draw on any stored materials in preference to imports.
“This liquidation, however, has a physical limit with Chinese destocking having already created significant increases in physical (premiums) for oil and metals – a sign of physical shortages.”
Going forward, oil had a strong fundamental outlook helped by US demand growth, supply losses and disruptions, and still constrained US shale output, Goldman said.
The bank said its near-term Brent crude oil price target remained at $80 a barrel.
The bank said it was moderating its bullish view for gold due to a sell-off in emerging markets, and it lowered its 12-month price forecast for the metal to $1,325 per ounce, down from $1,450 an ounce earlier.