SABIC swings to loss in third quarter

Saudi Basic Industries Corp (SABIC), one of the world’s biggest petrochemical companies, on Thursday posted an almost 17% dip in third-quarter revenues that swung its earnings into a net loss.

SABIC reported a net loss of 2.88 billion riyals ($767.80 million) in the three months to Sept. 30, compared with a profit of 1.84 billion riyals in the year ago period, it said in a filing.

It is worth noting that there are non-cash losses as a result of the Public Investment Fund’s acquisition of SABIC’s entire stake in the Saudi Iron and Steel Company (Hadeed), which was previously announced, amounting to 2.93 billion Saudi Riyals.

This deal will enable SABIC to focus on its strategic business portfolio, to maintain its leadership competitiveness and prepare the company for a new era of growth in the field of petrochemicals.

With a robust sales volume performance combined with cost containment efforts, the company maintained a positive momentum in its continuing operations leading to a net income of 536 Million Saudi Riyals in the current quarter. In the same quarter of prior year, the company generated a net income from continuing operation of 1.64 Billion Saudi Riyals, a decrease of 67%. This is due to the following reasons:

• The stagnation in global demand for chemicals, which led to a decrease in average selling prices, and thus a decrease in the value of sales by 7.3 Billion Saudi riyals despite the increase in the quantities sold.

• A decrease in SABIC’s share in the results of joint ventures and associated companies, which amounted to 919 Million Saudi Riyals. This mainly attributable to the decrease in their sales quantity and lower selling prices.

• Recording an impairment charge in certain capital assets, which amounted to 255 Million Saudi Riyals as part of the restructuring program in Europe to improve the return on investment.

The company incurred a net loss of 2.88 Billion Saudi Riyals in the current quarter compared to net profit of 1.18 Billion Saudi Riyals in the previous quarter.

It is worth noting that there are non-cash losses as a result of the Public Investment Fund’s acquisition of SABIC’s entire stake in the Saudi Iron and Steel Company (Hadeed), which was previously announced, amounting to 2.93 Billion Saudi Riyals. Note that this deal will enable SABIC to focus on its strategic business portfolio, to maintain its leadership competitiveness and prepare the company for a new era of growth in the field of petrochemicals.

With a robust sales volume performance combined with cost containment efforts, the company maintained a positive momentum in its continuing operations leading to a net income of 536 Million Saudi Riyals in the current quarter. In the prior quarter, the company generated a net income from continuing operation of 1.45 Billion Saudi Riyals, a decrease of 63%. This is due to the following reasons:

• A decrease in SABIC’s share in the results of joint ventures and associated companies, which amounted to 669 Million Saudi Riyals. This was mainly attributable to the decrease in their sales quantity and lower selling prices.

• Recording an impairment charge in certain capital assets, which amounted to 255 Million Saudi Riyals as part of the restructuring program in Europe to improve the return on investment.

The company incurred a net loss of 1.04 Billion Saudi Riyals in the period compared to net profit of 16.24 Billion Saudi Riyals in the same period of last year.

It is worth noting that there are non-cash losses as a result of the Public Investment Fund’s acquisition of SABIC’s entire stake in the Saudi Iron and Steel Company (Hadeed), which was previously announced, amounting to 2.93 Billion Saudi Riyals. Note that this deal will enable SABIC to focus on its strategic business portfolio, to maintain its leadership competitiveness and prepare the company for a new era of growth in the field of petrochemicals.

The company achieved a net income from continuing operations of 2.78 Billion Saudi Riyals in the current period compared to the same period of the previous year of 15.44 Billion Saudi Riyals, a decrease of 82%. This is due to the following reasons:

• The stagnation in global demand for chemicals, which led to a decrease in average selling prices, and thus a decrease in the value of sales by 37 Billion Saudi Riyals.

• A decrease in SABIC’s share in the results of joint ventures and associated companies, which amounted to 3.64 Billion Saudi Riyals. This was mainly attributable to the decrease in their sales quantity and lower selling prices.

The company said that certain prior period figures have been re-classified to conform with the current period presentation. Hadeed’s earnings are being disclosed separately as results from discontinued operations in the interim consolidated financial statements, in compliance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”.