Tasnee swings to SR103.9m profit

Mutlaq Al-Morished
Updated 26 July 2016
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Tasnee swings to SR103.9m profit

RIYADH: Saudi Arabia's National Industrialization Co. (Tasnee) expects further job cuts to come but is seeing the benefits of a restructuring effort which has already resulted in the firm shedding more than 25 percent of its global work force.
The remarks by Chief Executive Mutlaq Al-Morished came after the maker of plastics, chemicals and titanium dioxide halted a run of five straight quarterly losses to return to profit in the second quarter of 2016.
Tasnee's earnings have been hit hard by falling product prices, like many petrochemical firms in the Kingdom, as they are closely tied to slumping oil prices. In response, the company launched in April 2015 a restructuring effort aimed at significant cost cuts and efficiency savings.
Al-Morished had said in January that the firm was not expecting to see the benefits of its cost-cutting program until the end of 2016, although he told a press conference on Tuesday that most of the work had now been completed. "We have now achieved most of it, if not all, and the cost of (the restructuring) we have paid in the previous year and last quarter. Now we're coming slowly to the end of it," Al-Morished said.
When asked about any further job cuts, Al-Morished said: "I expect some, but it's not going to be in the tens (of percent). It's going to be single digits." This would be based on workforce levels after existing staff reductions, he added.
The firm was also improving the efficiency of its plants, which were producing almost 10 percent more products than they were in the second quarter of 2015, with production costs per tonne falling 20 percent over the same time period.
These factors helped Tasnee report a net profit of SR103.9 million ($27.7 million) in the three months to June 30, compared with a loss of SR107.7 million in the prior-year period and well ahead of analysts' expectations. Tasnee's shares were down 1.5 percent by midday, having risen in earlier trade, as the broader stock market slipped.
Al-Morished also said Tasnee was in talks with local banks to refinance around SR6 billion of mostly short-term bilateral facilities into one longer-term instrument.


Oil slips to around $63 as Iran concerns fade for now

Updated 27 min 56 sec ago
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Oil slips to around $63 as Iran concerns fade for now

  • US crude inventories expected to fall for 6th week
  • Goldman cuts 2019 oil demand forecast

LONDON: Oil slipped to around $63 a barrel on Tuesday as concerns faded for now that rising tensions in the Middle East would escalate and hit oil supplies, compounding the impact of a weaker demand outlook.
Iran’s capture of a British oil tanker last week sparked worries about supply disruptions in the Strait of Hormuz, through which about a fifth of the world’s oil flows, prompting crude to rally on Monday.
But oil prices have since pared some gains. Brent crude fell 31 cents to $62.95 a barrel by 1227 GMT on Tuesday. US West Texas Intermediate crude slipped 23 cents to $55.99.
“The response of oil prices to the seizure of a British oil tanker by armed Iranian forces near the Strait of Hormuz has been amazingly muted so far,” said Carsten Fritsch, analyst at Commerzbank.
“It appears that the majority of market participants are convinced that there will be no open conflict between the West and Iran,” he said.
The tensions come as the United States aims to cut off Iran’s oil exports and against the backdrop of supply cuts led by the Organization of the Petroleum Exporting Countries since the start of the year to prop up prices.
As part of US efforts, Washington has imposed sanctions on Chinese state-run energy company Zhuhai Zhenrong Co. Ltd. for allegedly violating restrictions imposed on Iran’s oil sector.
Despite lower Iranian exports and OPEC’s voluntary supply curbs, oil supply is exceeding demand due to strong growth in output from the United States and other non-OPEC producers, according to the International Energy Agency.
A weaker outlook for oil demand because of slowing economic growth has weighed on prices, which are still up by 18% in 2019 helped by the OPEC-led supply pact.
“Although prices had been driven by supply developments in the first half of the year economic considerations are making oil bulls careful this month,” said Tamas Varga of oil broker PVM.
Goldman Sachs lowered its 2019 oil demand projection on Sunday, joining other forecasters such as the IEA and OPEC in trimming its outlook for fuel use.
Oil may gain further support from expectations of another drop in US crude inventories in weekly reports due later on Tuesday and on Wednesday. Analysts expect a 3.4 million-barrel drop in crude stocks.
The American Petroleum Institute, an industry group, releases its inventory report at 2030 GMT.