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Saudi Petrochemical Producers Boost 2Q Profits On High Prices

Sunday, Jul 24, 2011

By Angus McDowall

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--High prices and increased output set most Saudi Arabian petrochemical producers on a path of increased profits in the second quarter, although maintenance shutdowns and weak fertilizer demand hit earnings at some big companies.

"For a general basket of petrochemical products, the prices were up about 5% to 10%," said Tariq Al Alaiwat of NCB Capital in Riyadh. "The question is whether this can be sustained. I expect product prices to be a bit lower in the second half of the year as Western debt issues subdue demand for end products."

Saudi Basic Industries Corp . (2010.SA), or Sabic , the majority-state-owned market leader, surpassed its first-quarter record profit of 7.7 billion Saudi riyals ($2.05 billion) with net earnings of SAR8.1 billion, beating most analyst expectations.

The conglomerate, which manufactures basic chemicals such as polyethylenes and polypropylenes, as well as fertilizers, downstream chemicals and steel, was best placed to take advantage of rising prices across the range of petrochemical products.

Sabic 's listed subsidiary Yanbu National Petrochemical Co. (2290.SA), or Yansab, also benefited from market conditions, beating most analyst expectations with net earnings of SAR964 million, nearly double its performance in the same period of 2010.

Among the private companies, Saudi International Petrochemical Co. (2310.SA), or Sipchem , also enjoyed better-than-expected profits of SAR165 million, while Advanced Petrochemical Co. (2330.SA) and Sahara Petrochemicals Co. (2260.SA) surpassed forecasts with earnings of SAR156 million and SAR209 million respectively.

National Industrialization Co. (2060.SA), or Tasnee , said its year-on-year 54% jump in profit to SAR594 million was due to higher sales volumes and prices.

However, the high-price environment appeared to have hit fertilizer sales, said analysts, causing lower-than-expected profits for Saudi Arabian Fertilizer Co. (2020.SA), or Safco, of SAR907 million.

Although some companies, including Sipchem and Sahara, had profits boosted by the commissioning of new units, outages elsewhere caused earnings to dip.

At Rabigh Refining and Petrochemical Co. (2380.SA), Petro Rabigh, maintenance work lasting from April to June led the company to swing to a SAR402 million loss that followed a SAR122 million profit for the same period last year and a SAR699 million profit during the first quarter.

Alujain Corp. (2170.SA), a smaller private company, said a shutdown of its propylene unit had contributed to a net loss in the quarter of SAR19.3 million, compared to a loss of only SAR7.3 million in the same quarter of 2010.

-By Angus McDowall of Dow Jones; +971-4-446-1685, angus.mcdowall@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

24-07-11 1018GMT