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Sabic swings to profit, forecasts rise in 2021 volumes on improving outlook

February 02/2021

MOSCOW (MRC) -- Sabic has reported net profit of 2.22 billion Saudi riyals (USD592 million) for the fourth quarter, swinging from a loss of SR890 million in the prior-year period, on sales that rose 4% year on year (YOY) to SR32.85 billion, reported Chemweek.

The fourth-quarter net profit and revenue figures are also up sequentially 104% and 12%, respectively, on the companys third-quarter figures, due mainly to higher average selling prices, rising demand, and improved margins amid the wider economic recovery, says Sabic CEO Yousef al-Benyan.

The fourth quarter benefited from sustained economic recovery, which translated into higher demand for our products, according to Benyan. Product prices rose driven by healthy demand and a tightness in the supply/demand balance for some of our key products, which resulted from outages and rising oil prices, leading to higher margins, he says. The YOY swing to profit is mainly attributable to the higher sales volumes and lower average cost of sales, as well as the reversal of impairment provisions in certain capital assets, net of SR300 million, the company states. Impairment provisions of SR1.3 billion were recorded in the prior-year quarter, it notes.

In terms of feedstocks, Brent crude prices rose 3% sequentially in the fourth quarter, Japanese and European naphtha prices increased by about 2%, and Japanese propane and butane prices rose by more than 30%, Sabic says. Cost of sales in the quarter rose 9% sequentially to SR24.73 billion, due mainly to the increase in feedstock prices, it says.

Sabics petrochemicals business unit achieved fourth-quarter sales of SR28.99 billion, a quarter-on-quarter (QOQ) rise of 13%, driven by higher average selling prices and volumes. EBITDA of SR6.27 billion were up 18% QOQ, and operational income rose 74% to SR3.64 billion, it says. Ethylene glycol prices increased in the fourth quarter, led by healthy demand coupled with tight supply resulting from outages and a decrease in inventories, particularly in China. For methanol, unplanned outages in the quarter supported prices considerably, with healthy demand and reduced inventories, Sabic says. Polyethylene (PE) and polypropylene (PP) prices rose in the quarter, driven by improved demand and an increase in feedstock costs, it says. Polycarbonate (PC) prices also saw a significant increase, especially in Asia, supported by stable demand from key end industries and tighter supply resulting from outages in Asia and the US, it adds.

In its agri-nutrients business, Sabic says lower sales volumes caused a 4% fall in revenue QOQ to SR1.50 billion despite average selling prices rising 6%, with EBITDA declining 14% compared with the third quarter to SR510 million. Operational income declined 18% to SR370 million. Urea prices improved QOQ, supported by tighter supply and improved demand, especially from the middle of the fourth quarter, the company says. Urea demand was supported by two Indian tenders of more than 3 million metric tons, as well as healthy demand from Europe, the US, and Brazil later in the fourth quarter, it notes. Supply remains tight due to outages at certain production units, mainly in Southeast Asia and the Middle East, it adds.

Sabic reports net profit of SR40 million for full-year 2020, plunging from SR5.2 billion in the prior year, on sales that fell 14% to SR116.96 billion. The decrease in net income is due primarily to lower average selling prices for most products, in addition to the recording of impairment provisions of SR1.3 billion, it says. Impairment provisions of SR2.8 billion were recorded in 2019, it notes.

The company says it expects economic activity to continue improving and is estimating a global GDP growth rate of 4.55.0% in 2021, assuming the effective and widespread use of COVID-19 vaccines worldwide. Sabic estimates its full-year 2021 sales volumes will be 2.05.0% higher than in 2020, with capital expenditure at a similar level.

Sabic also expects its share of annualized value creation from synergies and collaboration following its acquisition by Saudi Aramco will amount to USD1.5-1.8 billion by 2025, according to Benyan. Both companies are focused on strategically transforming their growth optimization, joint-venture management, and service delivery model, he says. Aramco acquired a 70% stake in Sabic in June 2020. Sabic's global business model and the strength of its supply chain continue to demonstrate their resilience and flexibility, positioning us well for long-term growth, he says. Despite challenges posed by COVID-19 last year, the company has demonstrated its ability to enhance our resilience, boost our operational excellence, and strengthen our global supply chain and presence, he adds.

As MRC informed earlier, in November 2020, SABIC announced the successful commercialization of LEXAN HP92AF Anti-Fog film, targeted especially at demanding COVID-19 protection equipment such as safety face shields and goggles in front-line work environments.

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

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.
Author:Margaret Volkova
Tags:Asia, Europe, PC, PP, PE, crude and gaz condensate, homopolymer PP, HDPE, sheet extrusion, film extrusion, petrochemistry, film, Sabic, China, Russia, Saudi Arabia, USA, Japan.
Category:General News
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