Yahoo Finance Saudi Chemical Giant’s Profit Slumps as Pressures Persist
(Bloomberg) -- Saudi Arabia’s top chemicals company reported a 62% drop in year-on-year profit as weak demand puts the industry under stress.
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Saudi Basic Industries Corp., also known as Sabic, posted 250 million riyals ($67 million) in net income in the first three months of the year, according to a statement on Wednesday. That compares with the average analyst estimate for about 556 million riyals.
While the company has seen some signs of demand improvement in the first quarter, the “gap between excess supply and moderated demand growth is set to remain in place for 2024,” Chief Executive Officer Abdulrahman Al-Fageeh said.
Overcapacity “continues to place significant pressure on our industry,” he added, while persistent inflation and the geopolitical environment also remain concerns.
The earnings further highlight the pressure on petrochemical producers as subdued demand and elevated operating costs dent margins. Sabic said last month it plans to close a unit in the Netherlands after evaluating market conditions, while Exxon Mobil Corp. is shutting some operations in France.
Global behemoth BASF SE recently posted lower earnings while weak chemicals helped drive down Sinopec’s profits. Still, Dow Inc. said it’s optimistic a demand rebound is ahead.
Read More: BASF Says China Is Turning Around But Recovery Still Uncertain
Sabic’s results come after it suffered a surprise net loss in 2023 — partly attributed to discontinued operations after divesting its steel unit — and warned earlier this year about “considerable uncertainty” in the industry.
The company said that revenue from petrochemicals slipped 5% quarter-on-quarter, driven by lower sales volumes. It will maintain a “disciplined approach” to managing capital expenditure, projecting a spending range of $4 billion-$5 billion in 2024.
Shares of Sabic, which is majority owned by Saudi Aramco, are little changed so far this year compared with a gain of about 3% in the Saudi Tadawul index.
Aramco is scheduled to announce its first-quarter earnings May 7.
--With assistance from John Deane and Muneeza Naqvi.
(Updates with CEO’s comments from third paragraph.)
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