21 July 2013 13:14 [Source: ICIS news]
DUBAI (ICIS)--Saudi Basic Industries Corp (Sabic), the world's biggest petrochemicals group, on Sunday posted a 13.96% year-on-year increase in its second-quarter net profit as cost cuts propped up margins even though sales revenue declined.
The Gulf's largest chemical producer by market value said in a statement that its net income for the three months to June 30 was Saudi riyals (SR) 6.04bn ($1.61bn) compared to SR5.3bn in the same period last year.
“The increase in net income is attributable to decrease in cost of sales and financial charges, despite reduced revenues due to lower sales prices for certain products,” Sabic said in a bourse filing.
However, the earnings were below analysts' forecasts.
Ten analysts had forecast Sabic, which is 70% state owned, would earn, on average, SR6.39bn in the second quarter.
The performance of Sabic is closely tied to the world economy because its products are used extensively in construction, car manufacturing and other major consumer goods.
Analysts said lower petrochemicals prices linked to sluggish demand in a struggling global economy affected profit at Sabic affiliates.
Sirharsha Puppu a Dubai-based analyst at HSBC Holdings said numbers were weaker than estimates.
“Sabic affiliates also failed to meet estimates in the second quarter and this miss is expected,” Puppu told ICIS by telephone.
Puppu said analysts estimated Sabic’s earnings before the company’s units reported results.
“This (second) quarter is mostly marked by low pricing and margin but we are definitely looking for better third-quarter results,” he added.
"We are expecting better pricing of Sabic products in the third quarter," he further said.
Net profit for the first six months of 2013 was SR12.61bn, a marginal 0.32% up on the SR12.57bn made last year.
Sabic, which in 2007 bought General Electric Co.’s plastics unit for $11.6bn, plans to cut about 1,050 positions and close some assets in Europe in response to lower demands.
As the global economy struggles to recover, lower demand for petrochemicals products has affected earnings at Sabic affiliates. Yanbu Petrochemical Co, Saudi Kayan Petrochemicals Co and Saudi Arabian Fertilizer Co also missed analysts’ estimates.
($1 = SR3.75)
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