Sleepless in Riyadh

By Malini Hariharan

CEOs of Asian petrochemical companies worried about rising feedstock costs, a weak economic outlook and profitability should have been reassured to read over the weekend that even Mohammed Al-Mady, vice-chairman and CEO of Sabic is having sleepless nights.

His chief concern is keeping Sabic’s record profits at record levels.

Sabic churned out a net profit Saudi riyal (SR) 8.1bn ($2.16bn) on sales of SR13.2bn in the second quarter of this year beating analyst expectations. Net profit was up 61% while sales rose by 45.3%

“What keeps me awake at night is keeping the successes we have. This is about the 8.1 billion riyals … How long can we sustain this? It is challenging,” Al-Mady said after declaring the bumper results.

Success in the last quarter has mainly been a result of increase in production and sales volume as well higher sales prices for most of its products compared with Q2 2010.

Production volumes are set to grow if Saudi Kayan quickly achieves commercial production. Al-Mady indicated that this was likely to take place only in second half of the year, delayed from the earlier target of H1. But given an uncertain demand outlook, especially in the key China market, placing additional volumes at the best possible price is going to be a challenge.

Al-Mady is of course hoping that crude oil continues to stay firm. In his view today’s price range is “quite good for everybody” although some of his Asian counterparts squeezed by high feedstock costs may not entirlely agree.

But Al-Mady’s challenge extends beyond the short-term as he has to figure a way to keep Sabic on the winning track. New projects will certainly help and Sabic has 14 of them lined up during 2012-15 including a $1bn expansion at its joint venture with Sinopec in China.

India continues to be on the radar.

“India is a huge market, the (Indian) government is thinking of attracting new investments and SABIC is looking at investments in India — if there are any good investments in petrochemicals there, products from refineries,” said Al-Maady.

But as projects take time to materialize a quicker route to growth will be through acquisitions and Al-Mady is, as always, open to the idea. The issue now is finding the right asset at the right price.

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