RIYADH, 20 January 2008 — Saudi Basic Industries Corp. (SABIC) made a net profit of SR27 billion in 2007, an increase of 33 percent from 2006. Full-year earnings per share were SR10.81 versus SR8.12 by the end of 2006, it said in a statement yesterday.
SABIC’s board said it would propose giving investors one free share for every five they hold and a cash dividend of SR2 a share.
Higher input costs from a surge in oil prices to record highs also weighed on earnings at the world’s largest chemical-maker by market value, SABIC Chief Executive Officer Mohamed Al-Mady told Reuters. The company may have also taken a hit from the cost of financing its $11.6 billion acquisition of GE Plastics, analysts said. SABIC included a full quarter of GE Plastics earnings in its financials for first time in the three months to Dec. 31.
SABIC, also the Gulf’s largest steel maker, said fourth-quarter profit rose 12.3 percent to S6.87 billion ($1.83 billion). SABIC has reported record profit in each of the five preceding quarters on surging global demand for its chemicals, steel and fertilizer. “Right now there is a correction in demand,” Chief Executive Officer Mohamed Al-Mady told Reuters.
“We noticed a drop in demand from the US market mainly from the automotive and the construction sectors, which has weakened prices.
The problem in the US also affected consumer goods,” Mady said in a telephone interview. Demand also faltered in Europe, though the downturn was not as sharp as in the United States, Mady said, declining to give details. SABIC did not published detail financial statements.
SABIC has been bracing for slowing growth in United States, but Mady said in December he expected India, China and the Middle East to offset the decline in the US demand.
Expectations for SABIC’s fourth quarter earnings received a boost when affiliate Saudi Arabian Fertilizers Co (SAFCO) more than doubled fourth-quarter profit on higher output and prices. SABIC owns 42 percent of SAFCO. “We were expecting strong growth because of the SAFCO results,” said Talal Al-Tawari, head of the GCC equities division at Gulf Investment Corp.
“SABIC is the indicator for the whole Saudi market and if its results are disappointing to investors it will definitely have a negative impact,” he said. Shares of SABIC rose 1.76 percent ahead of the results release after trading hours. The stock had surged more than 58 percent in the fourth-quarter, outperforming the index, whose 42.7 percent gain in the three-month period was the biggest in the Arab world.
SABIC’s earnings may have been affected by financing costs of its $11.6 billion acquisition of GE Plastics in August from General Electric Co, said Abdullah Al-Rashoud, chief executive officer of KSB Capital Group in Riyadh. SABIC came to market to fund the GE transaction as the global credit crisis triggered by defaults on US subprime mortgages.
