Not every business sector has been affected by the global credit crisis that has swept up a number of the world's biggest corporate icons. While a number of the globe's oldest and most established banks, airlines and even countries have gone bankrupt in the past month, Saudi Arabian Fertilisers Co (Safco) yesterday posted a 197 per cent rise in third quarter profit, in line with analysts' forecasts, due mainly to higher prices of products.
Safco said it made 1.83 billion Saudi riyals (Dh1.79bn) in the three months to Sept 30, up from 616.20 million riyals a year earlier. The firm is controlled by the world's largest chemical firm by market value, Saudi Basic Industries Corp (Sabic). Safco contributes about eight to 10 per cent to Sabic's profit. "The third quarter witnessed the highest profits the company made in a single quarter since its inception," it said in a statement posted on the Saudi bourse website. "The increase was mainly due to improvement in the sale price of the company's products."
Analysts' forecasts for Safco's third quarter profit ranged from 1.04bn riyals to 1.94bn riyals, according to a Reuters survey last month. Global demand for fertilisers has surged as the world contends with a food crisis. Safco launched a fourth production line last year that raised output by 50 per cent. "The reason [for the increase in sales] comes from an increase in the use of fertilisers in the production of food and the manufacture of alternative fuel," the Sabic chief executive, Mohamed al Mady, said on Al Arabiya TV.
Mr Mady said that China's restriction on its urea exports to the rest of the world had increased demand on the material, helping the company's global sales. The prices of urea, which generates the bulk of Safco's revenues, rose 30 per cent in the third quarter compared to the second quarter of this year, said Hisham Tuffaha, whose Bakheet Investment Group forecast the firm would make 1.48bn riyals.
"Compared to a year ago, urea prices rose 150 per cent," Mr Tuffaha said. "Safco has benefited from a rising global demand on fertilisers and the imposition by China of restrictions on the export of fertilisers." Earnings per share were 14.98 riyals as of Sept 30 against an adjusted 5.87 riyals a year ago. Safco said in July that fertiliser prices rose 20 to 25 per cent in the second quarter as oil prices - which have more than doubled in the past year - surged to levels above $140 a barrel by the end of June.
The company's shares, however, have suffered alongside the large majority of stocks in the kingdom and the Gulf. Safco's stock price closed down 6.01 per cent and has lost almost 17 per cent this year. * with Reuters