SABIC eyes recovery as pandemic hits earnings

The headquarters of Saudi Basic Industries Corp. (SABIC) in Riyadh, Saudi Arabia. (Reuters)
Updated 07 August 2020

SABIC eyes recovery as pandemic hits earnings

  • CEO Yousef Al-Benyan said that the company had taken the maximum hit from COVID-19 in the second quarter, but that it had started to see slight improvement in July and August
  • Saudi Aramco completed its acquisition of a 70 percent stake in SABIC from the Public Investment Fund (PIF) in June at a cost of $69.1 billion

LONDON: Saudi Basic Industries Corp. (SABIC), the Middle East’s biggest petrochemicals firm, said market conditions had started to improve after reporting a net loss of SR2.2 billion ($586.6 million) in the second quarter.

Despite the downturn in the global plastics market from a slowing global economy and a decline in consumption linked to the coronavirus pandemic, CEO Yousef Al-Benyan said that the company had taken the maximum hit from the coronavirus pandemic in the second quarter, and that it had started to see slight improvement in July and August. 

“Our view is that the second half is going to be more or less an average of the first half or a little bit better,” Benyan said during a press conference. “There is improvement on prices but current indications of a second or third wave of COVID-19 has put more pressure on demand. There is a potential implication on future demand driven by uncertainty we are seeing in the energy market.”

Revenue for the second quarter reached SR24.62 billion, down 29 percent from the year-earlier period.

“The second quarter saw strong headwinds as global growth declined significantly. This was due to COVID-19 impacting the supply and demand balance for our critical products and the resultant effect on prices and margins,” said Al-Benyan.

“In the current tough macro environment, maintaining a strong balance sheet and a strong credit rating on a standalone basis, and delivering competitive dividends to our shareholders are high priorities.”

The pandemic has seen more demand for the company’s polycarbonate film used in safety facemasks, while it also manufactures the plastic used in screens for pharmacies, grocery stores and other public spaces. 

Abdullah Al-Barrak, a financial adviser, said that sales would likely pick up as demand increased in key export markets. “SABIC relies on global markets, which are semi-closed,” he said. “Demand in many of the industrial countries, especially China, has gone down.”

Thamer Al-Saeed, chief investment officer at Mad’a Investment Co., said that losses should be viewed in the context of the slowdown in the broader petrochemical sector. 

“Right before the emergence of COVID-19, the petrochemical industry had seen a slowdown in demand due to the tangible economic decline,” he said. 

Saudi Aramco completed its acquisition of a 70 percent stake in SABIC from the Public Investment Fund (PIF) in June at a cost of $69.1 billion.

The coronavirus pandemic has sen increased demand for the company’s polycarbonate film that is used in the production of safety facemasks, while it also manufactures the plastic used in screens for pharmacies, grocery stores and other public spaces.


HSBC, StanChart shares fall to 22-year lows

Updated 22 September 2020

HSBC, StanChart shares fall to 22-year lows

  • Falls follow reports on movements of allegedly illicit funds; shares fall amid wider selloff in stocks

LONDON: HSBC’s shares in Hong Kong and Standard Chartered’s in London fell on Monday to their lowest since at least 1998 after media reports that they and other banks, including Barclays and Deutsche Bank, moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

BuzzFeed and other media articles were based on leaked suspicious activity reports (SARs) filed by banks and other financial firms with the US Department of Treasury’s Financial Crimes Enforcement Network (FinCen).

HSBC shares in London fell as much as 5 percent to 288 pence, their lowest intraday level since 2009, after the lender’s Hong Kong shares earlier touched a 25-year low. The stock has now nearly halved since the start of the year.

StanChart dropped as much as 4.6 percent in London to its lowest since 1998, against the backdrop of a broader sell-off in the market with the STOXX European banks index down 4.8 percent.

More than 2,100 SARs, which are in themselves not necessarily proof of wrongdoing, were obtained by BuzzFeed News and shared with the International Consortium of Investigative Journalists (ICIJ) and other media organizations.

In a statement to Reuters on Sunday, HSBC said “all of the information provided by the ICIJ is historical.” The bank said that as of 2012 it had embarked on a “multi-year journey to overhaul its ability to combat financial crime.”

StanChart said in a statement it took its “responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programs.”

Barclays said it believes it has complied with “all its legal and regulatory obligations, including in relation to US sanctions.”

The most number of SARs in the cache related to Deutsche Bank, whose shares fell 5.2 percent on Monday. In a statement on Sunday, Deutsche Bank said the ICIJ had “reported on a number of historic issues.”

“We have devoted significant resources to strengthening our controls and we are very focused on meeting our responsibilities and obligations,” a spokesperson for the bank said.

London-headquartered HSBC and StanChart, among other global banks, have paid billions of dollars in fines in recent years for violating US sanctions on Iran and anti-money laundering rules.

The files contained information about more than $2 trillion worth of transactions between 1999 and 2017, which were flagged by internal compliance departments of financial institutions as suspicious. 

The ICIJ reported the leaked documents were a tiny fraction of the reports filed with FinCEN. HSBC and StanChart were among the five banks that appeared most often in the documents, the ICIJ reported.

“It confirms what we already knew — that there are huge numbers of SARs being filed with relatively low numbers of cases brought through to prosecution,” said Etelka Bogardi, a Hong Kong-based financial services regulatory partner at law firm Norton Rose Fulbright.