SABIC’s Q4 Profit Plummets on Global Woes

RIYADH - Saudi Basic Industries Corp (SABIC), one of the world’s largest chemical firms, saw profits nearly erased in the fourth quarter due to the global slowdown, saying it would shut plants and cut jobs.

By (Reuters)

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Thu 22 Jan 2009, 1:16 AM

Last updated: Thu 2 Apr 2015, 4:30 AM

SABIC made 311 million riyals ($82.9 million) in the three months to December 31, down over 95 per cent from 6.87 billion riyals a year earlier, it said in a statement, worse than analysts’ expectations. SABIC shares fell nearly 10 per cent on the news, the maximum intraday drop allowed on the Saudi bourse. “These numbers will come as a shock to many investors, especially the retail ones,” said analyst Laurent-Patrick Gally at investment bank Shuaa Capital in Dubai.

“Until further clarity on the level of ongoing earnings is provided, and until there are some signs of stability in demand levels, it will be difficult for many people to find SABIC shares attractive,” Gally said.The decline is the latest example of how the global crisis has pounded Arab Gulf firms, once thought protected from any downturn due to energy-export revenues and sovereign savings.

SABIC produces liquid petrochemicals, plastics and is the Gulf Arab region’s largest steel producer. The company said it had suspended steel operations in Saudi Arabia and at a plastics plant in Spain.

Chief Executive Mohamed al-Mady told a news conference cost cuts would involve layoffs, but he did not specify how many. SABIC results are a yardstick for other petrochemical majors such as Dow Chemical and Germany’s BASF. BASFwarned on Monday that a sharp slowdown in business in December and January would force it to step up cost cutting moves.

SABIC shares fell 13 per cent in January after a 69 per cent slide in 2008.”The sharp decrease in fourth-quarter earnings is generally due to a decline in demand on petrochemical products and metals because of the economic recession ... as well as the credit crisis,” the firm said.

SABIC was mostly affected in specialty plastics which cater to the needs of the car, building and construction sectors outside of Saudi Arabia. State-controlled SABIC bought General Electric’s plastics unit in 2007 for $11.5 billion and later renamed it SABIC Innovative Plastics.

“Affiliates are restructuring their businesses to improve performance through a reduction in costs, but in such a manner that does not affect their major activities,” the company said. Analysts had cautioned last week that SABIC could post a big decline in quarterly profit if it included a plastics writedown.

Innovative, with operations in North America, Europe and Asia, booked a $650 million impairment charge in third-quarter results but SABIC has yet to recognise the charge, analysts at Shuaa said in a research note.

Analyst forecasts of SABIC’s fourth-quarter net profit had ranged from 3.6 billion riyals to 6.36 billion riyals, according to a Reuters survey last month. SABIC warned in November that a slowdown in demand for chemicals and a rapid decline in prices would weigh on its fourth-quarter profit. It posted its first decline in profit in more than two years in the third quarter.

SABIC unit Saudi Fertilizers Co, posted a 28 per cent drop in quarterly profit this week, missing analysts’ forecasts. Its profit almost tripled in the third quarter.

The Saudi company’s operating profit in the fourth quarter was 1.61 billion riyals, down 86 per cent from a year earlier.

More news from