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Saudi Basic Industries’ Q2 Profit Plummets on Crisis | ASHARQ AL-AWSAT English Archive 2005 -2017
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RIYADH, (Reuters) – Saudi Basic Industries Corp (SABIC), a yardstick for global petrochemical firms’ performance, posted a 76 percent drop in second-quarter net profit and blamed the drop on lower petrochemicals and metals prices.

SABIC said it made a net profit of 1.81 billion riyals ($482.7 million) in the three months to June 30, 2009 down from 7.55 billion riyals a year earlier when global demand and petrochemical prices were booming.

That was slightly better than analysts’ predictions of an average 78 percent drop in second-quarter profit.

“The decline in second-quarter net profit … is due to a sharp decrease in the prices of petrochemicals, plastics and minerals because of the global financial and economic crisis,” it said.

SABIC did not give details on the price decrease. Hesham Abu-Jamee, head of asset management at Bakheet Investment Group, said the price of a basket of SABIC’s petrochemical products was in the second-quarter at half its level a year earlier.

In addition to petrochemicals, SABIC owns Hadeed, Saudi Arabia’s largest steel maker.

The firm shocked investors when it reported a net loss of 974 million riyals in the first quarter of 2009 after booking a 1.18 billion riyals goodwill depreciation on its 2007 purchase of the plastic unit of General Electric for $11.6 billion.

But unlike the first quarter, SABIC did not mention any financial costs in its second-quarter earnings disclosure.

Sales volume figures however indicated that lower demand was also a factor: SABIC said sales volume in the six months to June 30 stood at 22.9 million tonnes, which is 2 percent above the same period in 2008. It did not give figures for the second quarter.

Based on the firm’s first-quarter earnings announcement, the volume of sales in the second quarter stood at 11.37 million tonnes down from 11.47 million tonnes a year earlier.


SABIC’s second-quarter earnings were boosted by 536.3 million riyals in dividends from its 42.9 percent stake in Saudi Fertilizers Co (Safco).

Based on previous audited reports, earnings per share stood at 0.61 riyals in the second quarter versus 2.51 riyals a year earlier.

Operating profit in the second quarter stood at 4.08 billion riyals down from 12.14 billion riyals a year earlier.

SABIC had announced in January that it would halt output at some plants and cut 1,600 jobs to weather the downturn.

SABIC usually does better in terms of profitability than rivals like Dow Chemical and Germany’s BASF because it purchases at feedstock at lower prices, analysts say.

Higher oil prices are seen as positive for petrochemical firms because they increase petrochemical product prices and make them more competitive against rival manufacturers from countries with higher tax rates for oil.

Petrochemicals and plastics produced by firms such as SABIC and Sipchem account for around 54 percent of the overall value of the kingdom’s non-oil exports. Sipchem posted a 99.6 percent fall in second-quarter profits.