Two of Saudi Arabia's major petrochemical producers yesterday posted impressive profits that could be a promising omen for the industry as earnings season gets under way.
Saudi Basic Industries Corporation (SABIC), the world's biggest petrochemicals maker, reported a 46 per cent increase in third-quarter profit compared with the same period last year, on higher prices. Saudi International Petrochemical, or Sipchem, reported a 54 per cent rise in third-quarter net profit, partly on higher sales volumes and prices.
The results, which came mainly on the back of higher butanediol petrochemical product, will be good news for investors after a week that saw bank earnings in the kingdom disappoint. Sipchem said third-quarter operating profit stood at 175.8 million riyals, a 456 per cent rise from the same period last year. It did not explain the gap between net profit and operating profit.
"The company continues to execute its plans aimed to improve operational processes and rationalising costs," it said.
On Saturday, SABIC shares fell 3.1 per cent and closed at their lowest level since September 1, also dragging the Saudi Tadawul All-Share index to its lowest level since then.
Sipchem shares ended 5.8 per cent down. SABIC stock is up 5.5 per cent since the start of the year, outperforming the index by three times and the petrochemical stocks index by 80 per cent.
SABIC has expanded production at home to meet demand as the government invests to diversify its economy away from oil. Saudi Arabia spurred economic growth with a US$400 billion, five-year investment package announced in late 2008.
The third-quarter earnings season is not off to an encouraging start in Saudi Arabia. Three of the country's top five banks by market capitalisation reported results that fell short of analyst expectations.
* The National staff with Reuters
