GCC petchem sector profits down 25% at $ 2.54 bn in H1

Profits of petrochemical companies in the Gulf Cooperation Council (GCC) declined by 25.8 percent year-on-year basis in Q2 2012 to $ 2.54 billion as compared to $ 3.42 billion in the same period last year, a report from the Kuwait-based Global Investment House (Global) said.
On QoQ basis, the earnings declined by 19.3 percent majorly because of lower income reported by Saudi Basic Industries Corp. (SABIC). SABIC’s profit declined by 27.1 percent QoQ (contributing 55.6 percent in Q2 2012 compared to 61.5 percent in Q1 2012 and 63 percent in Q2 2011), the report said.
Second quarter performances of various petrochemical companies witnessed decline as prices of various petrochemical products witnessed a fall in the range of 5-10 percent.
Overall, the performance of regional petrochemical companies was mixed on a QoQ basis with SABIC, YANSAB (Yanbu National Petrochemical Company), Sipchem (Saudi International Petrochemical Co.), Nama Chemicals Company, Petro Rabigh, Saudi Kayan Petrochemical Company and Dana Gas missing consensus estimates by a larger margin while other stocks such as, IQ (Industries Qatar), Sahara Petrochemical, Shell Oman, SAFCO (Saudi Arabia Fertilizers Co.) and TASNEE (National Industrialization Co.) reporting relatively better than expected earnings, the report said.
On a country basis, Qatar and Oman reported higher earnings on a QoQ basis while Saudi Arabia and the UAE witnessed a sizable fall in earnings.
Overall net income registered by the companies under our coverage was $ 2.46 billion in Q2 2012 compared to $ 2.96 billion in the previous quarter. SABIC continued to remain the lead contributor to the sector profitability at 57.3 percent followed by Industries Qatar and SAFCO at 23.7 percent and 8.5 percent respectively, the GLOBAL report said.
Meanwhile, GCC petrochemical capacity is estimated to increase from 77.3 mtpa to 113 mtpa at the end of 2015, a 46 percent rise, according to the Gulf Petrochemical & Chemicals Association (GPCA).
The GCC petrochemicals production capacity grew 13.5 percent last year to nearly 116 billion tons, where Saudi Arabia alone was responsible for more than half of the $100 billion in sales generated by the GCC petrochemical sector, according to GPCA report.
Following is a quick look at the financial performance of the GCC major petrochemical companies in 2Q12:
SABIC: SABIC reported Q2 2012 net income of SR 5.3 billion compared to SR 8.2 billion for the same quarter last year, representing a decrease of 34.6 percent and compared to the net income for the first quarter of 2012 of SR 7.3 billion, representing a decline of 27.1 percent. The decrease in net income of the quarter compared to the previous quarter was driven by lower product pricing because of continuous slowdown in global economic growth, especially in Europe and North America. The drop in production further aggravated the fall and sales volume due to scheduled maintenance activities at its fertilizers, metals and some petrochemical plants. The results came lower also because of low income reported by SAFCO and widening of losses by Saudi Kayan.
Industries Qatar (IQ): IQ announced its Q2 2012 results, which were slightly ahead of our estimates by 3.8 percent. Q2 2012 net income was higher by 11.6 percent QoQ at QR 2.12 billion. Gross and operating margins improved to 51.6 percent and 45.8 percent in Q2 2012 compared to 49.6 percent and 44 percent in Q1 2012 respectively. Associates reported better than expected results as they managed to end in the green in Q2 2012 with income of QR 12.8 million compared to loss of QR 31 million in Q1 2012. The company has benefited significantly from the QAFCO-V commercial launch in Q1 2012 and LDPE-3 launch during Q2 2012.
SAFCO: SAFCO recorded a profit of SR 784 million, 0.76 percent less YoY and 0.38 percent less on QoQ basis. Maintenance shutdowns/turnaround at some of the lines/plants reduced the production and sales volume, however, prices rose, which were able to compensate for the volumes. Revenue during the period rose by 5.1 percent QoQ while cost rose substantially by 21 percent, which reduced the gross margins to 66.6 percent in Q2 2012 compared to 71 percent in Q1 2012. The company reported a net income SR 1,571 million during 1h 2012 against SR 1,632 million for the same period of previous year, 3.2 percent lesser.
SIPCHEM: SIPCHEM reported a net income of SR 136.1 million which declined by 17.7 percent YoY and 10.3 percent QoQ. Decrease in production and sales quantities as a result of planned turnaround of acetic acid plant and carbon monoxide plant during the second quarter in addition to a decrease in prices of most of products were the main reason for the fall in profits. Revenue during the period dropped by 14.5 percent QoQ while it was higher on a YoY basis by 8.8 percent. Gross margins recovered strongly during the quarter to 37.0 percent compared to 31.6 percent in Q1 2012 and slightly lower than Q2 2011 margins of 38.1 percent. Net profit during 1H 2012 amounted to SR 287.7 million compared to SR 286.3 million for the same period last year, higher by 0.5 percent.
YANSAB: YANSAB reported a net income of SR 649.6 million for the Q2 2012 compared to SR 963.7 million for the same quarter last year with a decrease of 32.6 percent and compared to SR 720.3 million for the previous quarter with a decrease of 9.8 percent. The decrease in profits for Q2 2012 on both YoY and QoQ basis was due to lower product sales price despite increase in production and sales volumes, which resulted from continuous operational improvement.
Dana Gas (DANA): Dana Gas second-quarter net profit rose 46 percent on year as tax expenses fell. The company made a net profit of AED 181 million ($ 49.3 million) in the last quarter, up from AED 124 million a year earlier. The company’s income tax expenses amounted to AED 51 million in the three-month period, down from AED 99 million a year earlier. Its second-quarter revenues fell 12 percent on year to AED 554 million due to a decline in Egypt’s production and lower hydrocarbon prices during the period. The company’s net profit in the first six months of the year surged to AED 387 million, up from AED 216 million in the year before period.