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Sabic profits rise on higher prices, volumes, reversal of Clariant impairment charges

October 28/2020

MOSCOW (MRC) -- Sabic reports a net profit of 1.09 billion Saudi riyals (USD290 million) for the third quarter, a 47% rise year on year (YOY), due to higher product prices, increased sales volumes, and improved margins, according to Chemweek.

Sales declined 11% to SR29.30 billion compared with the prior-year period, with EBITDA down 26% YOY to SR5.67 billion.

Improved economic activity in the third quarter and an average Brent crude oil price up 50% compared with the second quarter were reflected in the improved product prices, volumes, and margins, says Sabic CEO Yousef al-Benyan. Sales volumes were 8% higher compared with the second quarter and average selling prices rose 11% quarter on quarter, although feedstock costs also increased with the average price of naphtha increasing 45%. Sales and EBITDA rose 19% and 62%, respectively, compared with the second quarter, when Sabic reported a net loss of SR2.22 billion. Sabic says its firm commitment to cost control resulted in EBITDA margins of 19% for the third quarter, up from 14% in the second quarter.

The company has also reversed write-downs related to Clariant, which offset some impairments in other assets. This resulted in non-recurring gains in the quarter of SR690 million “primarily due to the reversal of impairment provisions associated with Clariant,” compared with non-recurring charges of SR1.18 billion recorded in the second quarter, it says. Sabic holds a 31.5% stake in Clariant.

Sabic is maintaining its 2020 outlook, with global GDP expected to contract this year before an improvement is seen in 2021, says Benyan. “However, even without the COVID-19 impact, supply still exceeds demand for our key products, which will continue to pressure product prices and margins for the foreseeable future,” he says.

The implementation phase of Sabic’s alignment as the chemical arm of Saudi Aramco also got under way in the third quarter, “positioning it well to achieve long-term growth and to create and deliver value for its stakeholders,” according to the company. The portfolios of the two companies “complement one another, and we are both global organizations with a deep understanding of the worldwide marketplace,” Benyan says.

Sabic marketed a USD1.0-billion dual-tranche bond offering in September on the Taiwan stock exchange, demonstrating the company’s “agility and robustness to market conditions and its attractiveness for a diverse investor base looking for different tenors, which stimulated demand and drove favorable prices,” he says. The company also remains “committed” to driving sustainability forward in the chemicals industry, he adds.

In its petrochemicals business unit, Sabic’s largest, the company reports third-quarter sales of SR25.55 billion, up 20% on the second quarter. Average selling prices rose 13% and sales volumes were up 7% compared with the previous quarter, it says. EBITDA was up 63% compared with the second quarter at SR5.31 billion. Ethylene glycol (EG) prices improved in the third quarter due to a reduction in supply coupled with an improvement in demand, especially in polyester and polyethylene terephthalate (PET) bottle resin across regions, it says. Methanol demand also began recovering in the third quarter. In its polyethylene (PE) unit, prices rose in the third quarter, supported by steady demand and better macroeconomics conditions, according to Sabic. Polypropylene (PP) prices also improved compared with the previous quarter, supported by healthier demand from automotive and steady demand for applications such as personal hygiene, it says. Polycarbonate prices also rose in Asia following an increase in feedstock prices, it adds. “Demand for automotive, construction, and electrical appliances improved from the low levels observed in the second quarter of 2020. However, an increase in demand may be offset by increased supply from announced capacity additions,” Sabic says.

The company’s agri-nutrients business saw sales slip 1% to SR1.57 billion compared with the previous quarter, driven by a 5% fall in sales volumes that offset a 4% increase in average selling prices. Urea prices increased in the quarter due to tighter supply-and-demand balances, with favorable farming conditions across multiple regions, it says. Demand improved in India, Southeast Asia, and South America, and outages in the Middle East, Southeast Asia, and the Black Sea/Baltic region tightened supply, Sabic says.

Earlier this month Sabic and Aramco announced plans to expand the scope of their proposed joint crude-oil-to-chemicals project in Saudi Arabia, with the project now to include the integration of the existing Yanbu complex. Sabic earlier this year suspended all capital expenditure (capex) except nondiscretionary capex for safe and reliable operations and late-stage projects.

As MRC reported earlier, Saudi Aramco and Saudi Basic Industries Corporation (SABIC) have decided to reevaluate their crude-oil-to-chemicals project in Yanbu on the kingdom's west coast, according to an Oct. 18 statement on the Tadawul stock exchange, as they slash spending due to low prices. The USD20 billion project may be downsized to use Aramco's existing facilities in the port city, instead of building a new plant, the statement posted by SABIC said. "Both parties intend to re-evaluate the scope of the crude-oil-to-chemicals (COTC) complex project and study the integration of Saudi Aramco's existing refineries in Yanbu with a world-scale mixed feed steam cracker and downstream olefin derivative units," the statement said.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the world's market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.


mrcplast.com
Author:Margaret Volkova
Tags:Europe, PP, PE, LLDPE, crude and gaz condensate, PP random copolymer, propylene, PET-granulate, ethylene, petrochemistry, PET bottles, Clariant International, Sabic, Saudi Aramco, Russia, Saudi Arabia.
Category:General News
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