Sahara Petrochemical Company was yesterday downgraded to "neutral" from "overweight" by NCB Capital after technical problems forced it to delay the start-up of its Al Waha plant at Al Jubail.
The Saudi plant was initially expected to begin operations in August last year. Al Waha is a joint venture between Sahara Petrochemical, which controls 75 per cent of the company, and LyondellBasell, which owns the rest. NCB Capital revised the company's price target to 24.9 riyals from 25.7 riyals, but expects a higher net income of 364 million riyals for this year, compared with 76m riyals last year. Al Waha said it was still working on performance tests, which were estimated to be completed by the end of the year. The plant has produced 213,000 tonnes of propylene until last week, plus 204,000 tonnes of polypropylene. The company generated US$242m from polypropylene.
"We are still working to performance-test the propylene plant, which will be completed by year end. Once we complete it, we will start commercial production," Sahara said in a statement to the Saudi Tadawul last week.
Tariq al Alaiwat, an analyst with NCB, expects 52 per cent net income growth to 554m riyals next year driven by the contribution from Al Waha, and growth in demand and prices. Sahara said it expected to start operations by the end of this year, a quarter later than previously expected. Despite the news, the Saudi Arabia company share's rose 0.4 per cent to 23.35 riyals.
"Given the consistent delays in the project's start up, we have revised our expectations for the start of commercial operations to the second quarter of 2011," said Mr al Alaiwat. It also attributed its downgrade to Sahara's strong performance since it upgraded the company in August. The stock has risen 27 per cent since.
On the upside, Mr al Alaiwat forecast improved petrochemical prices and higher demand in Asia, mainly China and India, to help push the stock higher.
