Sector News

Sabic net loss widens on lower prices, demand amid COVID-19

May 5, 2020
Chemical Value Chain

Sabic (Riyadh, Saudi Arabia) has announced its financial results for the first quarter, reporting a net loss of 950 million Saudi riyals ($250 million). This compares with a net profit of SR3.41 billion in the year-earlier quarter and a net loss of SR790 million in the fourth quarter of 2019.

The net loss is mainly attributed to lower average selling prices and to impairment provisions in certain capital and financial assets amounting to SR1.1 billion, including the suspension of production of Ultem polyetherimide polymers at Sabic’s Cartagena, Spain, site.

EBITDA was down 44% to SR5.7 billion, and income from operations was 92% lower at SR480 million. Revenue contracted 18% to SR30.83 billion. Some nonrecurring charges, a challenging product-pricing environment, and lower demand underpinned by the coronavirus disease 2019 (COVID-19) hurt first-quarter results, the company says.

Announcing the results in Riyadh today, CEO Yousef al-Benyan says the situation is difficult. “Product prices remain challenged with no improvement in the supply/demand balance for key products in the first quarter of 2020 compared to the previous quarter. This was further aggravated by COVID-19 becoming a global pandemic and the significant decline in Brent price towards the end of the quarter.”

Sabic has decided to cut its capital expenditure (capex), Benyan says. “Sabic is committed to capital discipline and maintaining a strong balance sheet and has suspended all capex, except nondiscretionary capex for safe and reliable operations and late-stage projects. We are confident in the resilience and strength of our operations and supply chain, and opportunities [that] exist for long-term growth.”

Benyan says in the earnings briefing that Saudi Aramco has committed to complete the acquisition of a controlling stake in Sabic by the second quarter and he does not see anything that changes this timeline. Separately, Sabic purchased additional shares in Clariant, increasing its stake to 31.5% from 24.9%. The transaction is pending regulatory approvals. Sabic says the investment is part of the company’s growth strategy in specialties and is designed to support its aim of achieving a leadership position among global specialty players.

In its outlook for 2020, Sabic says the global GDP growth rate is expected to be negative, primarily due to the impact of COVID-19. “While we have seen some improvement in business activity in China, a deterioration in other parts of the world, influenced by lockdowns, will impact demand and market sentiment in the second quarter of 2020 and potentially later in the year. This, along with an oversupply in our key products, will put further pressure on product prices and margins,” Sabic says.

Sabic has also provided details of performance by reporting segments. Petrochemicals and specialties, the company’s largest segment, reported a 94% drop in income from operations to SR330 million compared with the first quarter of 2019. EBITDA was down 44% to SR5.07 billion and revenue 18% lower at SR26.59 billion. The agri-nutrients segment reported a 38% drop in income from operations to SR360 million, with EBITDA down 28% to SR560 million and revenue 19% lower at SR1.47 billion.

By: Natasha Alperowicz

Source: Chemical Week

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