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Saudi Basic Fourth-Quarter Profit Drops 10% on Pricing, Misses Estimates

Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemicals maker, said fourth-quarter profit dropped 10 percent, missing analysts’ estimates.

Net income fell to 5.24 billion riyals ($1.4 billion) from 5.81 billion riyals a year earlier, the Riyadh-based company known as Sabic said in a statement today. The mean estimate of seven analysts was for a profit of 7.56 billion riyals, according to data compiled by Bloomberg.

The decline was “mainly driven by a lower pricing environment in global markets for most of the products, despite an increase in sales volumes,” the company said in the statement. Kayan Petrochemical Co., a Sabic unit, said its fourth-quarter loss widened, while Yanbu National Petrochemicals Co. (YANSAB), another unit, reported fourth-quarter profit that missed estimates.

“The fundamentals have been strong in 2011, but in the fourth quarter prices and demand started to weaken,” Hans Zayed, head of research at Rasmala Investment Bank, said in response to e-mailed questions before the results were announced.

The shares declined 2.1 percent to close at 92 riyals today before the results were announced. The stock lost 8.1 percent last year compared with a 3.1 percent drop in Saudi’s benchmark Tadawul All Share Index.

‘Mirror Image’

Sabic Chief Executive Officer Mohamed al-Mady said he expects prices and demand for petrochemicals to improve toward the end of 2012. Last year “started good and slowed down a little bit toward the end of the year,” he said in a press conference today. “My prediction, hopefully, is that 2012 may be a mirror image of 2011. We are going to start slow then maybe pick toward the end of the year.”

Sabic’s fourth-quarter sales increased 14.6 percent to 47 billion riyals, Chief Financial Officer Mutlaq al-Morished told reporters in Riyadh today. Full-year sales gained about 25 percent to 190 billion riyals, al-Morished said.

The company’s earnings fell “due to lower chemicals prices across the board, which should more than offset strong fertilizers prices that prevailed during the quarter,” Ahmed Shams El Din, Cairo-based director of equity research at EFG- Hermes Holding SAE, said in an e-mail today.

Saudi Arabian Fertilizer Co. (SAFCO), a unit of Sabic, said fourth- quarter profit rose 25 percent to 1.28 billion riyals from 1.03 billion riyals a year ago, according to a statement from the Jubail-based company on Jan. 11.

Expansion Plans

Sabic, the maker of fertilizers and plastics used for everything from packaging to car bumpers, has added output capacity through units and joint ventures. It seeks to triple production to 130 million tons by 2020.

The company signed a memorandum of understanding with China Petroleum & Chemical Corp. (600028) to build a petrochemical plant in Tianjin, China, the Saudi Press Agency reported on Jan. 15. The companies will have annual polycarbonate capacity of 260 kilo metric tons from the plant when operations start in 2015, Sabic said yesterday in an e-mailed statement.

“In terms of new materials and products, China is the one that is on our radar screen,” al-Mady said.

Sabic has no plans to offer bonds this year, al-Mady said. The European debt crisis had “impacted our business,” al-Mady said. “When you have slow growth, you have low prices,” he said.

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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