Saudi chemical giant SABIC sees vaccinations boosting income

Chemicals maker Saudi Basic Industries Corp. (SABIC) expects sales and earnings to increase this year after it beat analysts’ estimates by making a profit in 2020.

The Riyadh-based firm, controlled by Saudi Aramco, said it sees the global rollout of coronavirus vaccines leading to a 2 per cent to 5 per cent gain in revenue this year. Pretax income will be “moderately higher” than in 2020, while capital expenditure will be similar, SABIC said in a results statement on Sunday.

SABIC earned net income of SAR40m ($10.7m) in 2020, down sharply from SAR5.2bn in 2019. Still, analysts expected a loss of almost SAR300m, according to the median estimate in a Bloomberg survey, after the pandemic caused demand for chemicals products to sink.

SABIC’s net income between October and December was SAR2.2bn riyals, more than double the figure for the third quarter.

“The fourth quarter benefited from sustained economic recovery,” said chief executive officer Yousef Al-Benyan. “Distributing competitive dividends to our shareholders continues to be paramount and this is supported by our firm commitment to maintaining capital discipline, as well as our ability to uphold a strong balance sheet and credit rating.”

In December, the company’s board announced a dividend of SAR1.5 per share for the second half of 2020, unchanged from the first half.

SABIC’s stock fell 1.8 per cent to SAR100.80 riyals on Sunday, reversing its gains this year. It’s still up 63 per cent since its trough in March of SAR62.

The company is seeking to list its specialty unit through an initial public offering and has shortlisted banks including Citigroup and Morgan Stanley for roles on the deal, Bloomberg reported this month.

The unit generates about $2bn of revenue annually. Its establishment as a standalone entity last year was a “major milestone that should support the company’s ambitions to be a leader in the specialty chemicals industry,” SABIC said.

Aramco bought 70 per cent of SABIC last year from the Saudi sovereign wealth fund for $69bn. The takeover should create total synergies of about $3 to $4bn, with SABIC’s portion being $1.5 to 1.8bn of that, Al-Benyan said in a press conference.

“At this point, we don’t have any plans to issue any bonds or tap the debt market,” he said, adding that SABIC will continue trying to grow in Asia and the US.

Al-Benyan also said:

• The outlook for the first quarter of 2021 is “more or less” the same as in the fourth quarter
• SABIC has no plans to create more standalone units
• Blue ammonia is “a very good business” to grow in
• NOTE: the company is involved in Aramco’s efforts to produce blue hydrogen, which is often transported as ammonia. Blue hydrogen is made from natural gas in a process that captures the carbon emissions
• SABIC aims to run more plants fully on renewable energy