Sabic posts loss due to lower product prices and provisions on capital assets

Sabic, the region’s biggest petrochemicals company, reported its third consecutive quarterly loss on the back of lower product prices and impairment provisions on certain assets.

The company registered a net loss of 2.22 billion Saudi riyals (Dh2.17bn) for the second quarter of this year, compared with a profit of 2bn riyals during the same period last year, Sabic said in a filing to the Tadawul exchange, where its shares trade.

It declared impairment provisions of 1.18bn riyals on certain capital assets such as a polymers plant in Spain, which it said affected profits.

Chief executive Yousef Al Benyan said the company took a significant hit in the second quarter, with business picking up in July and August.

Average petrochemical prices fell by 27 per cent year on year during the second quarter and 18 per cent from the first quarter.

“The future of demand is driven by uncertainties in the energy market. Market conditions are going to put pressure on the chemicals industry for the remainder of this year,” he said.

Saudi Aramco, which produces and sells oil on behalf of the kingdom, completed the acquisition of a 70 per cent stake worth $69.1bn in Sabic in June. The state-backed company bought the stake from the sovereign Public Investment Fund.

After Aramco’s acquisition of the shares, Sabic was “retrospectively” reassigning its control over projects related to its affiliates, Saudi Petrochemical Company (Sadaf) and the Arrazi methanol plant.

Sabic merged Sadaf and Petrokemya in May to boost the “efficiency and competitiveness” of its operations.

“Sabic has performed retrospective control reassessment over Sadaf and Arrazi, prior to the acquisitions of additional shares, and classified them as joint arrangements,” it said in the bourse filing.

The company’s second-quarter sales fell by 29.46 per cent to 24.62bn riyals on a year on year basis.

Aramco acquired Sabic as part of plans to increase its refining capacity from 4.9 million barrels per day to between 8 million bpd and 10 million bpd by 2030. About 2 million bpd to 3 million bpd of the output will be converted into petrochemical products.

Sabic chief executive Yousef Al Benyan said the company took a significant hit in the second quarter