Saudi Arabia’s SABIC sees industry margins staying tight

The world’s biggest chemicals maker said profit margins would remain tight after its earnings slumped due to the global economic downturn and weakening demand for plastics and building materials.

Saudi Basic Industries Corporation (SABIC) said net income dropped to $78mn (SAR290mn) in the fourth quarter, down 94 per cent year-on-year and the worst result since the height of the coronavirus pandemic in mid-2020.

Today we announced our results for 2022. #ChemistryThatMatters #SABIC pic.twitter.com/xOD13G0U12

— SABIC I سابك (@SABIC) February 28, 2023

The Saudi Arabian company’s results were similar to those of rivals such as BASF, which last week said it would cut 2,600 jobs and Dow. The firms have been hit by lower sales for key products like naphtha as central banks raise interest rates. Their margins were also squeezed when the crisis in Ukraine triggered a surge in prices for natural gas, a crucial feedstock.

“Margins will continue being under pressure in the first half of 2023,” SABIC said.

SABIC, based in Riyadh and majority owned by state oil company Saudi Aramco, said average sale prices dropped 9 per cent from the previous quarter.

Its full-year net profit was $4.4bn, down 28 per cent from 2021. The company announced a $3.4bn annual dividend, up 6.25 per cent.

SABIC has a market valuation of $73bn, more than that of any other listed chemicals firm. Its shares have climbed 2.8 per cent in 2023 to SAR 91.90 though they’re still down from around SAR 135 since April last year.

The company said it will continue with its “relentless growth amibitions” both in the kingdom and abroad. Last year, it signed a deal with Aramco and China’s Sinopec to build an oil-to-petrochemicals plant in western Saudi Arabia. It’s also looking at projects in Poland and elsewhere in eastern Europe.

Read: Saudi Aramco makes second highest profit on surging oil prices