Sabic’s Q3 earnings surprise analysts as earnings miss estimates
Results attributed to a decline in selling prices, sales volume and lower results from joint ventures and associates
Saudi chemical giant SABIC saw its profits fall to SR1.84 billion ($490 million) in the third quarter of 2022, surprising analysts as they didn’t expect earnings to decline at that level.
In response to the results, SABIC’s shares fell over 2 percent to reach SR87.9, as of 10:16 a.m. Saudi time.
The company’s profits declined over 67 percent from SR5.6 billion in the same quarter a year earlier, recording a bigger fall than analysts had earlier estimated, despite a revenue jump of 7 percent to SR47 billion.
“Today, SABIC shocked us with its third quarter of 2022 result. Even the most pessimistic did not expect these results” Saudi economist Ali Alhazmi told Arab News following the announcement.
He added: “I believe, there are many reasons for this kind of result, such as an increase in raw materials (cost), which played a major role in those results, due to the rise in oil, relative contraction in the Chinese economy due to Zero COVID policy, and also a decline in demand in the European zone, due to war between Russia and Ukraine, and increase in the shipping cost.”
SABIC also underperformed in its nine-months performance, reporting a 10 percent profit decline to SR16 billion.
The Riyadh-based company attributed the results to a decline in selling prices and sales volume, as well as lower results from joint ventures and associates.
Average sales prices increased by 15 percent and sales volumes rose by 11 percent for the first nine months of 2022, compared with the corresponding period of 2021.
The leading petrochemical producer also expects margins to be under pressure in the fourth quarter of 2022 after forecasting 2.5 percent to 2.8 percent growth in the Kingdom’s gross domestic product for 2022.
“With current global conditions, we continue to keep our operating costs under control and maintain our strong balance sheet,” said acting CEO Abdulrahman Al-Fageeh.
SABIC’s capital expenditure will fall by 20 percent by the end of this year due to a continued focus on capital discipline, according to Al-Fageeh.
He added: “We have announced the start of the construction of the world’s first demonstration plant for large-scale electrically heated steam cracker furnaces — a new technology with the potential to reduce the CO2 emissions of one of the most energyintensive production processes in the chemical industry by as much as 90 percent. This shows our ongoing commitment to sustainability and innovation in everything that we do.”
Speaking to Arab News ahead of the result announcement, analysts expected SABIC to record weak performance due to lower product prices and higher raw material costs but they didn’t estimate profit to fall as low as SR5.6 billion.
“I think SABIC will achieve almost SR6 billion in the third quarter of 2022, which is more than the third quarter of 2021 by 7.3 percent, due to a decrease in the selling prices of its products and an increase in the cost of raw material,” Alhazmi told Arab News prior to the results.
He added: “The company has been in continuous growth, whether in distributions, grants or profitability, and now in investments, and I believe the quality of management plays a great role.”
Hesham AbouJamee, founder and CEO of Mekyal Financial Technologies, said the results were expected as the company’s peers in the same industry also recorded a decline.
“Due to Saudi Kayan Petrochemical Co. and Yanbu National Petrochemical Co. results, it seems that SABIC will have very bad results this quarter,” he predicted.