Saudi Basic Industries Corp, the world’s fourth-largest petrochemicals company, said third-quarter profit fell by nearly 7 per cent because of weaker markets for its products and rising costs.
The company said net income was 5.2 billion Saudi riyals (Dh5.1bn) for the three months to the end of last month, compared with 5.6bn riyals a year earlier. Third-quarter sales were down by nearly 11 per cent to 33bn riyals. It is the ninth quarter in a row that profit has declined, as its oil-price-linked products have been hit by weaker end markets and lower oil prices.
Sabic, which is 70 per cent owned by the Saudi government, said a higher Zakat (religious tax) provision and an impairment charge against its Arabian Industrial Fibers Company (Ibn Rushd) subsidiary of 366 million riyals also cut into income.
Yousef Al Benyan, Sabic’s chief executive, said he expected next year also to be tough but stable while the company continues to cut costs and look for growth opportunities.
“We predict that 2017 is going to be a quite challenging year for us,” Mr Al Benyan said at a press conference in Riyadh after the results on Wednesday. “We need to focus internally on how we can improve our efficiency.”
Profit has been falling but Sabic’s shares have been among the best performers on the Tadawul so far this year, rising by 7.6 per cent against an index fall of 21 per cent. Its shares closed 2 per cent higher at 84 riyals on Wednesday in Riyadh.
“At first glance, the numbers look quite good, with a gross margin of 32.9 per cent, the highest since 2011,” said Aditya Pugalia, an analyst at Emirates NBD in Dubai, adding that the company’s cost control and restructuring efforts have helped even as it has had to deal with the government cutting subsidies on utilities this year.
Key markets are still pressured – especially China – with weaker economic growth, reflected in an average decline of 11 per cent in prices for Sabic’s products, which range from plastics to fertilisers to metals.
“We need to focus internally on how we can improve our efficiency,” said Mr Al Benyan, who said earlier this month that Sabic will combine its polymers and chemicals divisions and bring its wholly owned subsidiary, Saudi Iron & Steel Company (Hadeed), together with other metals business to rationalise and cut costs.
While earnings are still under pressure, Mr Pugalia said there are signs that Sabic is poised for turnaround, “especially if Opec does go ahead and clinches a deal [limiting crude output at its November 30th meeting] and oil finds a price floor around US$50-55 a barrel, then it should be quite positive heading into 2017 in terms of the commodities cycle.”
amcauley@thenational.ae
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
COMPANY%20PROFILE%20
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UAE currency: the story behind the money in your pockets
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The specs
Price: From Dh180,000 (estimate)
Engine: 2.0-litre turbocharged and supercharged in-line four-cylinder
Transmission: Eight-speed automatic
Power: 320hp @ 5,700rpm
Torque: 400Nm @ 2,200rpm
Fuel economy, combined: 9.7L / 100km
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
'Avengers: Infinity War'
Dir: The Russo Brothers
Starring: Chris Evans, Chris Pratt, Tom Holland, Robert Downey Junior, Scarlett Johansson, Elizabeth Olsen
Four stars
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Day 2, Dubai Test: At a glance
Moment of the day Pakistan’s effort in the field had hints of shambles about it. The wheels were officially off when Wahab Riaz lost his run up and aborted the delivery four times in a row. He re-measured his run, jogged in for two practice goes. Then, when he was finally ready to go, he bailed out again. It was a total cringefest.
Stat of the day – 139.5 Yasir Shah has bowled 139.5 overs in three innings so far in this Test series. Judged by his returns, the workload has not withered him. He has 14 wickets so far, and became history’s first spinner to take five-wickets in an innings in five consecutive Tests. Not bad for someone whose fitness was in question before the series.
The verdict Stranger things have happened, but it is going to take something extraordinary for Pakistan to keep their undefeated record in Test series in the UAE in tact from this position. At least Shan Masood and Sami Aslam have made a positive start to the salvage effort.
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The specs
Engine: 2.0-litre four-cylinder turbo
Power: 268hp at 5,600rpm
Torque: 380Nm at 4,800rpm
Transmission: CVT auto
Fuel consumption: 9.5L/100km
On sale: now
Price: from Dh195,000
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
Company%20Profile
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LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
Four reasons global stock markets are falling right now
There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:
1. Rising US interest rates
The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.
Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”
At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.
2. Stronger dollar
High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.”
3. Global trade war
Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”
4. Eurozone uncertainty
Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.
Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”
The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”
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Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
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