SABIC to continue strategy as it posts SR23.43bn net profit

The Saudi Basic Industries Corporation (SABIC) reported on Sunday net profits of SR23.43 billion for 2014, a decline by seven percent compared to the previous year.
The SABIC is one of the world's largest petrochemical manufacturers, producing chemicals, fertilizers, plastics and metals.
Addressing a press conference at the SABIC headquarters, Mohamed Al-Mady, the company's vice chairman and CEO, said it registered SR4.36 billion net profits in the fourth quarter of the year 2014, compared to SR6.16 billion in the same quarter a year earlier.
"The decrease in the net income is mainly attributable to lower average sales prices, partially offset by lower costs for certain feedstock (raw materials)," he said.
Describing the year-end profit figure as good result for the organization, Al-Mady said the current environment of falling crude prices creates uncertainty for the firm, whose traditional markets are China and Europe as well as local market in Saudi Arabia.
"It's going to be very difficult to judge the 2015 situation, just because of crude oil," Al-Mady told reporters, adding: "We are used to this rotation of petrochemicals."
Al- Mady stressed that his company would continue its long-term strategy of focusing investments in China, North America and Saudi Arabia, to be close to raw materials or SABIC's markets. It would focus on petrochemicals by improving efficiency, planning and resource developments, he added.
He said it would continue to look hard at acquisition opportunities in the United States and at investing in the US shale gas industry.
Although the oil prices are low, he said that there can be good sales due to demand and supply.
He also said Africa is a good market in addition to North America, China, Europe and Saudi Arabia. “We have two marketing centers in Africa,” he noted, focusing on South Africa, Egypt, Tunisia and Mauritania.
Al-Mady told Reuters that SABIC was still studying the idea of building an oil-to-chemicals plant that would allow it to diversify products, though he could not estimate the project's likely cost if it went ahead.
"SABIC's strategy is not to be locked in one feedstock...Shale and syngas (feedstock) can only give you so much. Oil can give you more different chemicals," he said.
However, Al-Mady said falling steel prices meant SABIC would think twice about proposals for two new domestic steel plants in Rabigh and Jubail that are being studied by its affiliate Saudi Iron and Steel Company (Hadeed), and are expected to cost $4.26 billion.
The company has no plans to issue new bonds this year and is considering refinancing two loans which fall due in June and November, another company official told reporters after the results announcement. The loan due in June is worth $1 billion, he said.
SABIC attributed the slide in its profits to lower average prices for the products, which it sold, although this was partly offset by lower feedstock prices. Falling oil prices hit the chemicals segment of SABIC's business most strongly, followed by polymers, Al-Mady said.
In addition to oil, the company's results are closely tied to global economic growth because its products - plastics, fertilizers and metals - are used extensively in construction, agriculture, industry and manufacturing consumer goods.
Al-Mady also announced the launch of an annual innovation award, SABIC Innovation Award, a new initiative specific to Saudi Arabia that will grant cash awards of up to SR10 million, along with the necessary research and commercial support, for innovative ideas in the field of smart plastics.
The award will identify promising future technologies and avenues to support downstream development in Saudi Arabia, address community interests, and meet sustainability needs.
The award program is open to both individuals and businesses in Saudi Arabia who can send in their entries through the SABIC website (sabic.com/innovationaward) till May 31.
Applicants will need to submit their ideas relevant to the field of plastics and participate in either the SABIC Growth Fund or the SABIC Ideas Award.
“SABIC has always played a leading role in supporting the betterment of society and economic development, not only with its strong commitment to corporate social responsibility, but also by encouraging innovation to develop new products to meet present and future societal needs. This new initiative has been created to extend opportunities and drive innovation within Saudi Arabia to encourage the development of specialized and advanced plastics and polymer applications for the national industry.”
The SABIC Ideas Award is a cash prize for those ideas with most potential that are still at an early stage of development.
The SABIC Growth Fund, represents an opportunity for the applying individual or establishment to form a long lasting business collaboration with SABIC.