The new chief executive of Saudi Arabia’s National Industrialisation Co (Tasnee) said on Tuesday that slumping oil and petrochemical prices were creating a difficult near-term outlook for the industry.
Mutlaq al-Morished spoke after the firm reported a 46.5 per cent tumble in fourth-quarter net profit because of lower prices for its petrochemical products, as well as for titanium dioxide and acrylic acid.
The result was the latest disappointing earnings update from the Saudi petrochemical sector, led by a 29 per cent slump in the net profit of Saudi Basic Industries Corp (SABIC), one of the world’s largest petrochemical firms. Weak oil prices tend to push down profit margins at petrochemical producers.
“It’s hard to predict the outlook for 2015. Tell me a price for oil and I’ll give you a forecast,” Morished told reporters at a media event, his first public appearance since becoming chief executive on Jan. 12.
Morished, previously finance head of SABIC, said that while he believed the petrochemical industry would benefit in the long term from cheaper oil, as it would help to stimulate economic growth around the world and therefore demand for petrochemical products, the industry would suffer in the short term.
This was seen in his company’s latest earnings, with Tasnee making a net profit of SAR160.7 million ($42.8 million) in the three months to Dec. 31, down from SAR300.1 million in the same period a year ago and well below the SAR266.6 million average forecast of analysts polled by Reuters.
This came despite fourth-quarter sales worth SAR4 billion, about the same as in the same period of 2013, chief financial officer Fayez al-Asmari told the press conference.
Tasnee, one of the world’s largest producers of titanium dioxide through its subsidiary Cristal, will continue to invest in its current projects and there will be no delays despite the oil price decline, Morished told Reuters on the sidelines of the event.
Qatar Petroleum scrapped a $6.4 billion joint venture agreement with Shell last week, the second major petrochemical scheme halted in Qatar in four months because of concern about its economic feasibility.
Tasnee, through its Saudi Acrylic Acid Co affiliate jointly owned with Sahara Petrochemicals, and in combination with Saudi Kayan and Sadara Chemical Co, is developing the Middle East’s first butanol plant in Jubail, in the east of the Kingdom.