Sabic’s second quarter net profit declines 25 per cent

Saudi Basic Industries Corp (Sabic), the world’s fourth-biggest petrochemicals company reported a 25 per cent decline in second-quarter net profit on Sunday, amid higher selling costs and lower sales.

Sabic made a net profit of 3.71 billion riyals in the three months to June 30, down from a revised 4.96 billion riyals in the year-earlier period, the company said in a bourse statement.

Sabic said prior period figures have been restated.

Sabic, like most Saudi publicly listed firms adopted IFRS accounting standards in January this year.

Aiming to be Number 3 petrochemicals producer globally, Sabic attributed the profit fall to higher cost of sales and lower sales quantities.

The company’s results are closely tied to oil prices and global economic growth because its products — plastics, fertilisers and metals — are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.

Sabic had expected this year to be positive in terms of economic growth in key markets.

CEO, Yousef Al-Benyan told Reuters in May the firm is evaluating acquisition opportunities in the range of $3 billion to $6 billion in petrochemicals, speciality chemicals and fertilisers and aims to do the first such deal in the fourth quarter of this year.

Sabic’s expansion is driven by the need to be closer to key markets and feedstock.

Constraints in new gas supplies in Saudi Arabia is forcing petrochemical producers to look abroad for expansion.

The company is making progress towards major investment in the United States with an affiliate of US Exxon Mobil, and its first project with oil giant Saudi Aramco for the development of oil-to-chemicals project in Saudi Arabia, which analysts see as a breakthrough in the industry.

Sabic said the company will make announcement by end of third quarter on Aramco project. Chief executive Al-Benyan said Sabic will try to reduce expenses and increase production.