Sabic expects petrochemical markets to again be “challenging” in 2024 amid slow demand and a lack of significant economic recovery in China, with the company also looking to address the competitiveness of its European assets, according to CEO Abdulrahman al-Fageeh.
“There remains considerable uncertainty heading into the first quarter of 2024,” he said in a presentation on Feb. 27. “Sabic has undertaken a comprehensive portfolio review and identified the pathway to sustained value creation,” he said.
Al-Fageeh said the review would optimize its internal resources to “enhance its core focus on petrochemicals. Additionally, we are pursuing a number of initiatives to address the competitiveness of our European assets.” The company is “ultimately striving for a maintainable and modernized footprint in the region,” he said. No further details were given regarding which assets in Europe are being reviewed.
In January, Sabic implemented the permanent closure of one of its two polycarbonate (PC) production lines at Cartagena, Spain. The LX2 PC production line was shut down on Dec. 31 after the closure was first announced in October. The resins line had been idle since October 2022 due to difficult market conditions and was “no longer sustainable,” it said at the time. In November, Sabic recorded an impairment charge of 255 million Saudi riyals ($68 million) in its fiscal accounts for the third quarter of 2023 as part of the restructuring program in Europe.
The portfolio review also includes its previously announced divestment of subsidiary Saudi Iron & Steel Co. (Hadeed), which is proceeding as planned, he said.
Sabic said in an outlook that it anticipates capital expenditure in the range of $4 billion-$5 billion in 2024. In the first nine months of 2023, capex was about $2.8 billion. It did not provide a figure for 2023 capex.
In January, the company announced the final investment decision to go ahead with its $6.4 billion petrochemical complex at Gulei, Fujian Province, China, with partner Fujian Energy and Petrochemical Group. The project will have a mixed-feed steam cracker with a production capacity of up to 1.8 million metric tons per year of ethylene, along with ethylene glycol, polyethylene, polypropylene and PC.
Sabic posted a fourth-quarter net loss from continuing operations, excluding Hadeed, of 1.48 billion riyals, swinging from a profit of 540 million riyals in the third quarter and 350 million riyals in the prior-year period. EBITDA of 3.33 billion riyals fell 41% sequentially on 3% lower sales volumes, with its EBITDA margin of 10% down from 16%. The average sales price rose by 1% sequentially. Sales of 35.03 billion riyals declined 3% sequentially and 11% year over year.
For the full year 2023, Sabic’s sales declined 23% year over year to 141.54 billion riyals, and net earnings from continuing operations plunged to 1.3 billion riyals from 15.8 billion riyals in 2022. Including Hadeed, Sabic swung to a net loss of 2.77 billion riyals from a profit of 16.53 billion riyals. The company’s average selling prices and volumes on a year-on-year basis in 2023 dropped by 21% and 2%, respectively. The EBITDA margin fell to 13% from 20% a year earlier. Nonrecurring items of 3.47 billion riyals were the “result of impairment charges and write-offs of certain capital and financial assets, as well as provisions for the restructuring program in Europe and constructive obligations,” it said.
While petrochemical makers are expanding their production capacities, including Sabic, demand for most petrochemicals is “still low,” al-Fageeh said. “The petrochemical industry navigates a challenging operating environment — underwhelming demand within our target markets led to lower year end product prices and there remains considerable uncertainty heading into the first quarter of 2024,” he said.
Sabic’s fourth-quarter petrochemical sales fell 4% sequentially to 32.14 billion riyals, driven primarily by lower sales volumes, it said. EBITDA of 2.12 billion riyals declined 52%. Global methyl tert-butyl ether prices decreased by 18%, burdened by lower gasoline prices and weak seasonality, it said. Ethylene glycol prices, however, rose 3% sequentially due to extended and unplanned shutdowns. Global polyethylene and polypropylene prices increased slightly, by 1%, with support from higher resin and gas pricing, it said. Average PC prices declined by 4% sequentially due to lower global demand.
We remind, Saudi Basic Industries Corp. (SABIC), a prominent entity listed on the Saudi stock exchange, is gearing up to make a bid to acquire a stake in Braskem, a leading petrochemical company headquartered in Brazil. It is worth noting that SABIC is predominantly owned by Saudi Aramco, holding a significant 70% stake in its ownership. Contrary to previous speculations, SABIC plans to pursue an independent bid for the stake in Braskem and will not engage in a partnership with the Abu Dhabi National Oil Co. (ADNOC) from the United Arab Emirates (UAE) for this endeavor. Reports indicate that ADNOC has already initiated the due diligence process in connection with this potential transaction.
mrchub.com