London, Asharq Al-Awsat- Standard & Poor”s and Fitch Ratings have assigned their corporate credit ratings to Saudi Basic Industries Corporation (SABIC) highlighting SABIC”s worldwide leading market positions in base and commodity petrochemicals, fertilizers and steel products. The outlook of these two rating services companies reflect on SABIC”s leading global position, increasing profitability during the past five years, and its sound financial position in honoring its long and short-term financial obligations.
According to Standard & Poor”s rating, SABIC is the world”s third-largest producer of ethylene, the world”s largest producer of polymers, a leading producer of fertilizer and as the Gulf region”s largest steel producer. SABIC”s rating reflects its leading market position based on its competitive advantage, deriving mainly from its access to natural gas, as well as its favorable geographical location serving the fast-growing Asian markets alongside the established European and North American markets.
SABIC”s profitability is supported by its large, integrated production plants in Saudi Arabia, which allow significant economies of scale. The adjusted EBITDA margin was 38% in 2004, which is several times higher than major competitors in the US and Europe . Free cash flow generation is even stronger, a privilege that presents a key advantage over international competitors.
Fitch Ratings reflected on SABIC”s strong profitability (median 5 year EBITDA margin of 34%). Margins are affected by significant cyclicality but are consistently much higher through the cycle than for other international petrochemical groups. SABIC”s credit metrics are very robust on the FY04 figures, which benefited from strong chemical markets and oil prices alongside SABIC”s ability to pay finance and interest costs.
The outlook reflected Standard & Poor”s and Fitch Ratings” expectation that SABIC will remain committed to its conservative financial policy and the strong cash flow of its operations, taking into account SABIC”s plans to increase its current production capacity from 43 million MT to 60 million MT by 2008.
These ratings confirm SABIC”s leading position amongst the world”s top petrochemical companies.