Saudi SABIC swings to net loss in 2023 on Hadeed sale, challenging market

Nurluqman Suratman

28-Feb-2024

SINGAPORE (ICIS)–Saudi Arabia’s chemicals major SABIC swung to a net loss of Saudi riyal (SR) 2.77bn ($739m) in 2023, largely due to one-off losses related to a divestment, while earnings from continued operations shrank amid challenging global market conditions.

in Saudi Riyal (SR) bn 2023 2022 % Change
Revenue 141.5 183.1 -22.7
EBITDA 19.0 36.4 -47.7
Net income from continuing operations 1.3 15.8 -91.8
Net income attributable to equity holders of the parent -2.8 16.5

The company’s net loss for 2023 was “driven mainly from the fair valuation of the Saudi Iron and Steel Co (Hadeed) business”, SABIC in a filing to the Saudi bourse Tadawul on 27 February.

In early September 2023, SABIC announced it had agreed to sell its entire stake in the Saudi Iron and Steel Co (Hadeed) to Saudi Arabia’s sovereign wealth fund for SR12.5bn.

The sale resulted in non-cash losses worth SR2.93bn.

From continuing operation, full-year net income declined by 91.8% on reduced profit margins for major products, as well as lower earnings of joint ventures and associated firms.

SABIC also incurred charges from non-recurring items amounting to SR3.47bn in 2023,“as a result of impairment charges and write-offs of certain capital and financial assets as well as provisions for the restructuring program in Europe and constructive obligations”.

Meanwhile, SABIC’s average product sales price in 2023 fell by 21%, reflecting the global downturn in petrochemical markets, it said.

Overall sales volumes fell by 2% year on year in 2023 amid sluggish end-user demand, the company said.

“Year 2023 presented numerous challenges for the petrochemical industry – the market environment was shaped by lackluster macroeconomic sentiment, weak end-user demand, and a wave of incremental supply for a large suite of products,” it said.

The company’s petrochemicals business posted a 20% year-on-year decline in sales to SR131.3bn in 2023, with EBITDA down by 42% at SR14.6bn.

“The petrochemical industry navigates a challenging operating environment – underwhelming demand within our target markets led to lower year end product prices and there remains considerable uncertainty heading into the first quarter of 2024,” SABIC CEO Abdulrahman Al-Fageeh said.

“The announced divestment of Hadeed is proceeding as planned – this optimization of internal resources will enhance our core focus on petrochemicals,” he said.

SABIC is also pursuing a number of initiatives to address the “competiveness of our European assets” aimed at a “maintainable and modernized footprint in the region”, Al-Fageeh added.

The company plans a higher capital expenditure of between $4bn and 5bn in 2024, compared with $3.5bn-3.8bn last year.

SABIC has started construction of its $6.4bn manufacturing complex in China’s southern Fujian province.

The project will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products.

SABIC is 70%-owned by energy giant Saudi Aramco.

($1 = SR3.75)

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