Photo courtesy of SABIC
A boost in fourth quarter sales helped to push Saudi Basic Industries Corp (SABIC) to profit in 2020, beating worst case scenario estimates from analysts who forecast a full year loss.
SABIC, the petrochemicals business arm of oil giant Saudi Aramco, reported net income of 40 million riyals ($10.7m) last year, down from 5.2 billion riyals in 2019. Analysts had expected losses to exceed 300 million riyals by some estimates.
SABIC posted a net profit of 2.22 billion riyals ($592 million) in the fourth quarter, reversing a 890 million riyal loss in the same quarter a year earlier. Full-year revenues fell 14% to 116.96 million riyals, but rose 12 per cent in the fourth quarter to 32.85 million riyals.
“The fourth quarter benefited from sustained economic recovery, which translated into a healthier demand for our products,” said Yousef Abdullah Al-Benyan, Vice Chairman and Chief Executive Officer of SABIC.
“Product prices rose during the fourth quarter of 2020 driven by healthy demand and a tightness in the supply/demand balance for some of our key products, which resulted from outages and rising oil prices,” the company said.
“These factors led to higher margins for SABIC during the fourth quarter of 2020.”
SABIC said it was “cautiously optimistic” for a gradual recovery in the year ahead, and said it expects earnings to be “moderately higher” in 2021, as the world slowly emerges from the coronavirus crisis.
“In most parts of the world, we expect economic activity to continue improving as witnessed during the second half of 2020, and estimate the global GDP growth rate to increase between 4.5% and 5% in 2021,” SABIC said in a statement.
“This assumes the effective and widespread use of the COVID vaccine around the world,” it added. The World Health Organisation data shows there had been 101,561,219 confirmed cases of COVID-19 globally, including 2,196,944 deaths, as of January 31st 2021.
SABIC was forced to suspend capital expenditure after the oil price collapse and coronavirus lockdowns of 2020, but returned to profit in the third quarter. It now expects sales volumes to be 2% to 5% higher compared to the previous year, and capital expenditures to be similar to 2020.
SABIC shares have risen as much as 65% from the coronavirus related trough in March.
New IPO talks
SABIC said its specialty chemicals unit was now operating as a “standalone business” in its fourth quarter results release. It comes amid speculation that SABIC is weighing an IPO of the unit, which produces engineering thermoplastic resins and compounds, among other things.
“This is a major milestone that should support the company’s ambitions to be a leader in the specialty chemicals industry,” SABIC said of the separation. “The move generates value for SABIC by making specialties more agile and focused, better able to capture the value associated with its unique business and customer requirements.”
Any potential IPO would be in line with the Kingdom’s efforts to deepen its capital markets and pivot to new industry in order to reduce its reliance on oil. SABIC didn’t comment further on the rumored listing.
Reuters reports SABIC had been sounding out foreign banks for advisory roles and HSBC and JPMorgan are among those in the final phase of pitching for the deal, which could be launched later this year or early 2022.