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UPDATE: Sabic 4th-qtr Profit Down 10% On Lower Global Product Prices

Tuesday, Jan 17, 2012

-- Sabic 4Q net profit disappoints on lower prices, EU debt crisis

-- Sabic CEO doesn't see need to tap debt market

   By Summer Said and Ellen Knickmeyer 
   Of Zawya Dow Jones 
 

RIYADH (Zawya Dow Jones)-- Saudi Basic Industries Corp . (2010.SA), or Sabic , the Middle East's largest listed company, said Tuesday its fourth-quarter net profit fell 10% to 5.24 billion Saudi riyals ($1.43 billion), well short of some analyst expectations, due to a lower global pricing environment.

The result well missed analyst forecasts at Cairo-based EFG-Hermes, which had expected Sabic to post a fourth-quarter net profit of SAR7.44 billion and Riyadh-based NCB Capital's which had predicted SAR7.72 billion.

"The decrease in net income for the quarter ended Dec. 31, 2011...is mainly driven by lower pricing environment in global markets for most of the products, despite an increase in sales volumes," Sabic said in a statement posted on the Saudi bourse.

Net profit for the full-year 2011, however, increased 36% to SAR29.21 billion, from SAR21.53 billion a year earlier, while earnings per share for the period came in at SAR9.74, compared with SAR7.18 in 2010, the plastics, chemicals and metals company said on its website.

"2011 started good and slowed down a little bit towards the end of the year--my prediction is that hopefully 2012 will be maybe a mirror image of 2011. We are going to start slow and then maybe pick up towards the end of the year and maybe 2013 is going to be even better," Sabic Chief Executive Mohammed Al Mady told a press conference.

Sabic 's profits were particularly affected by the slower growth in China and the debt crisis in Europe, which "is impacting our business already...it is not a good situation and everybody is in the same boat," he said.

The CEO had previously told Zawya Dow Jones in an interview in October that improved prices in the fourth quarter will likely result in profit higher than the SAR8.2 billion posted in the third quarter of last year.

Sabic 's fourth-quarter revenue rose to SAR47 billion from SAR40.85 billion in the corresponding period a year ago, while full year-revenue stood at SAR190 billion versus SAR151.97 billion.

"Overall, these are disappointing results as it fell short of the market expectations by 30%," said Tariq Al Alaiwat of NCB Capital in Riyadh. "The company cited lower selling prices as the key reason to the decline in earnings quarter on quarter, which mitigated the higher sales volumes. I think the stock will see selling pressure tomorrow (Wednesday)."

Persian Gulf-based petrochemical manufacturers, including Sabic , have previously benefited from improved global economic conditions that have boosted demand for petrochemical products and plastics, used in consumer goods and such industries as automobiles.

Sabic is also benefiting at home from the low cost of such feedstock as natural gas. That is giving the company a competitive edge over many producers elsewhere that use naphtha, a crude derivative whose price has risen in line with oil prices.

"If there is any more gas in the country, we are ready to invest, build new plants and utilize it," said the CEO.

Sabic , which doesn't see the need to borrow or tap the debt market this year, will also continue to look at acquisitions globally despite the current global economic downturn. The firm still sees growth in the petrochemicals sector in Asia, the Middle East and South America.

The Riyadh bourse-listed company's shares closed down 2.1% at SAR92.

-By Summer Said and Ellen Knickmeyer, Dow Jones Newswires; +966-546-842373; summer.said@dowjones.com

(END) Dow Jones Newswires

17-01-12 1743GMT