RIYADH: Saudi Basic Industries Corp. (SABIC) is on the hunt for acquisition targets, focusing on firms affected by the market turmoil, its top executive said in remarks aired yesterday.
The Saudi firm had secured financing worth SR50 billion ($13.3 billion) over the past five years up to 2008 for its expansion, Mohamed Al-Mady told Al-Arabiya television.
“(That is) more than 95 percent of the financing we need ... It was (secured) at unimaginable pricing,” he said. “We have very excellent financing rates.”
The earnings of SABIC, the world’s largest chemical firm by market value, were affected by its US GE Plastic unit, which it later renamed SABIC Innovative Plastics, he said.
He expects the US unit’s profitability to improve due to the decline in fuel prices in the United States.
Al-Mady also warned of low earnings in the fourth quarter. He blamed it on a rapid slide in prices and a slowdown in demand due to the global financial crisis.
SABIC posted its first quarterly decline in profits in more than two years in the third quarter. “The prices curve nosedived from Sept. 1 to today ... Prices of polypropylene and polyethylene for instance were above $2,000 now they are below $1,000,” Al-Mady told Reuters in a telephone interview.
Demand is receding, he said. “No one saw this coming.”
The firm was expecting a global slowdown in both demand and prices to start affecting the market in 2009, he said. “The financial crisis has brought this forward ... It turned out to be more serious than initially thought,” Al-Mady said.
The decline in demand will bring costs down, he said, but the decline in costs will not be enough to compensate a drop in revenues resulting from lower prices. “No way, it will not help. But it’s not all doom and gloom,” he said.
