RIYADH: Saudi Arabian Basic Industries Corp. (SABIC), the world’s top chemical company by market value, said its net profit soared in the fourth quarter, thanks to higher prices and sales volumes for most its products.
SABIC made SR4.58 billion ($1.22 billion) in the three months to the end of December up from SR311 million a year earlier, the firm said in a statement.
The figure beat the highest forecast in a Reuters poll of analysts, which ranged from SR3.21 billion to SR4.42 billion.
“The increase in fourth-quarter net profit ... stemmed from an increase in prices and sales volumes of most petrochemical products, plastics and metals,” SABIC said.
It did not give details on the performance of these products and a cheerful Chief Executive Mohamed Al-Mady declined to comment, saying only that he would meet the media on Wednesday.
Operating income surged 359 percent to SR7.8 billion in the fourth quarter, the company said. It was SABIC’s highest quarterly net profit in five quarters, since before the global crisis seriously hit its margins, forcing it to shut some plants and cut costs.
Earnings per share for all of 2009, however, reached SR3.03, below half their SR7.33 level in 2008. “SABIC succeeded ... to withstand the repercussions of the global economic crisis and preserve its strong credit rating,” Chairman Prince Saud bin Thunayan said.
Laurent-Patrick Gally of Dubai-based Shuaa Capital said SABIC seemed to have gained market share from petrochemical rivals after it announced a 5 percent rise in sales volumes for a difficult 2009.
“SABIC has benefited throughout 2009 from a recovery in petrochemical, fertilizers and to a certain degree steel pricing and demand, with positive implications for both top-line and bottom-line sequential developments,” he said. “With this set of results (SABIC is) ... setting the stage for a rather promising 2010 ... The sky for the petrochemical industry seems to get progressively brighter,” Gally added.
Petrochemical products account for about two-thirds of SABIC’s output, and the rest includes rebar steel and specialist plastics for the automotive and aircraft industries.
The global slowdown could not have come at a tougher time for the state-controlled firm, which had been struggling to digest the $11.6 billion purchase of the plastics unit of General Electric.
SABIC saw its net profit plummet by 95 percent in the last quarter of 2008 after it booked 10.1 billion riyals in depreciation costs linked mainly to the GE unit.
Hesham Abu Jamea, whose Bakheet Investment Group’s net profit forecast came closest, said the main driver was the 200 percent annual rise in the prices of petrochemical products.
“A 1 percent rise in petrochemical prices means a 2 percent rise in SABIC’s bottom line, since costs remain mostly flat. The impact on SABIC’s profit in the fourth quarter was amplified by cost cuts,” he said. He estimated that SABIC’s fourth-quarter turnover rose by at least 22 percent to 30 billion riyals.
“I think SABIC has put the worst of the crisis’ impact behind it. These earnings put it on a good course to make between SR20 billion and SR24 billion in net profit for 2010 if nothing goes wrong with the global recovery,” he added.
SABIC’s figures serve as a yardstick for other petrochemical majors such as Germany’s BASF and Dow Chemical.
But unlike many of these firms, SABIC’s margins tend to be a lot wider since it has access to cheaper feedstock in the world’s largest holder of crude reserves.
