Saudi Basic Industries Corp (SABIC), the world’s biggest petrochemicals group, posted a 10 per cent year-on-year fall in its first quarter net profit on Saturday and warned that growth would likely not improve until next year.
The dip in profits, in line with analyst expectations, was mostly due to lower production and sales volumes because of planned maintenance at factories of some affiliates, it said in a statement.
“I am hopeful about the future but you need the time for shake out (of global economic difficulties), which is this year. Once we shake out these things, we will come back to good recovery in the next couple of years,” said SABIC chief executive Mohamed al-Mady at a press conference.
Net income for the three months to March 31 was 6.56 billion riyals ($1.75 billion) compared to 7.27 billion riyals in the same period last year. SABIC’s sales were 46.74 billion riyals, a 3.3 per cent dip from the 48.34 billion riyals sales in the first quarter of 2012.
However, SABIC also said first-quarter profit had risen from 5.83 billion riyals in the fourth quarter of 2012. It cited higher sales prices of some products, which it did not name.
Eleven analysts surveyed by Reuters had forecast SABIC would earn, on average, 6.59 billion riyals in the first quarter.
Mady said he could not predict global petrochemical prices for this year but thought 2013 would be similar to 2012, with improvement in prices occurring after 2013.
The company is reviewing its global growth outlook, especially in light of the weak economic situation in Europe, he added.
The performance of SABIC is closely tied to the world economy because its products are used extensively in construction, car manufacturing and other major consumer goods.
Last Thursday, the company said it planned to cut 1,050 jobs in Europe and close some operations there because lower consumer spending had hit demand.
Mady described Europe as a “special case” and said the continent would remain a very important market for the company, even in bad times.
Earlier this month he said European operations faced increased competition from the United States, where development of shale gas has cut natural gas prices, and Asia, where production and consumption have been rising.
Mady said SABIC is looking at opportunities in the United States to build a plant using shale gas feedstock, but had not yet decided how to do so.
Chief Financial Officer Mutlaq al-Morished said at the news conference that SABIC was not looking for additional financing at the present, but might consider taking more debt to fund projects late this year or early in 2014.
SABIC affiliates in Saudi Arabia reported mixed earnings last week. Saudi Arabian Fertilizers Co (SAFCO) posted an 18 per cent jump in first-quarter net profit to 932 million riyals, but missed analysts’ forecasts.
Yanbu National Petrochemical Co (Yansab), a large olefins producer, said its net profit fell 7.4 per cent. Saudi Kayan, where full-scale production is expected to start this year, said its net loss for the quarter more than doubled to 155 million riyals.
SABIC shares were down 0.82 per cent after the profit announcement.