Saudi’s Sipchem Q1 net profit up 6.5% though shutdowns bite gains

DUBAI (ICIS)–Saudi International Petrochemical Company’s (Sipchem) net profit rose by 6.5 % year on year to Saudi riyals (SR) 68.7m ($18.3m) in the first-quarter of 2014 but unplanned shutdowns limited its profit increase, the company said on Thursday.

Sipchem made a profit of SR64.5m in the prior-year period, the company said in a bourse filing.

The producer’s gross profit rose by 23.32% year on year to SR222.6m in the first quarter of 2014, while its operational profit was up by 12.2% at SR167.7m.

The net profit increase was driven by higher product prices, but largely offset by reduced sales due to unplanned shutdowns of methanol and carbon monoxide plants, which also forced shutdowns of some other plants.

“The improvement in product pricing is, however, largely offset by reduced sales quantities during the current quarter due to unplanned shutdowns of methanol and carbon monoxide plants, which also forced shutdowns of the acetic acid and butanediol plants for lack of downstream feedstocks,” Sipchem said.

The unplanned shut down totalled 30 days in the three months to March 31, the company said.

“The causes of the shutdowns have been fully resolved and the downtime incurred was also utilized to undertake a number of efficiency improvements which will mitigate future closure risk, enhance productivity and support lower operating costs,” it added.

Sipchem said the company also incurred non-recurring costs of economic and technical feasibility studies related to the proposed merger with Sahara Petrochemicals Company, which further reduced company profits levels by approximately SR20m.

In July last, Sipchem and Sahara entered into a non-binding agreement to conduct a feasibility study on the proposed merger. Later in December the two companies have signed a memorandum of understanding to consider the feasibility of the deal.

Established in 1999, Sipchem manufactures and markets methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride, vinyl acetate monomer, as well as carbon monoxide through its various affiliates.