JEDDAH: Earnings of GCC (Gulf Cooperation Council) petrochemical companies increased 62.4 percent YoY to $3.57 billion in the third quarter of 2011 as compared to $2.19 billion in the same period last year, the Kuwait-based Global Investment House (Global) said in its GCC Petrochemical Sector quarterly report released recently.
Overall, performance of regional petrochemical companies was mixed with SABIC (Saudi Basic Industries Corp.), IQ (Industries Qatar), SAFCO (Saudi Arabia Fertilizers Co.), YANSAB (Yanbu National Petrochemical Company), TASNEE (National Industrialization Co.), Sipchem (Saudi International Petrochemical Co.) and Dana Gas reporting better than expected earnings while other stocks such as Saudi Kayan Petrochemical Co., Rabigh Refining and Petrochemical Co., Saudi Petrochem and Nama Chemicals Co. continued to extend their losses as they are yet to start full throttle commercial production.
Within the GCC petrochemical companies, Global Research Petrochemical Universe witnessed a sizable growth of 61.5 percent during Q3 in the profitability.
Prices of petrochemical products up on an average by 31.5 percent during Q3. Producers passed on the impact of sharp rise in the prices of naphtha and other raw materials used in petrochemical products to the consumers as the prices of various petrochemical products rose in the range of 15-55 percent. In addition, strong increase in demand from Asia, particularly China, has resulted in upward pressure on end-products prices, the Global report said.
During the quarter, Industries Qatar said it had put on hold two planned steel plants worth QAR8.1 billion in the industrial city of Mesaieed due to problems securing natural gas for the projects. While, Saudi Chemanol and Alujain faced technical problems during the quarter. Saudi Chemanol halted production in its methanol and dimethylformamide plants for about 12 days in order to implement some technical improvements in the two plants. Alujain Corporation announced that a sudden technical problem occurred in September in the dehydrogenation unit of its subsidiary NATPETs Propylene and Polypropylene Complex in Yanbu Industrial City caused stoppage of the production activity for two weeks.
Outlook for Q4
According to the Global report, the petrochemical sector's sales and net profitability to show limited QoQ growth as the oil prices are expected to stay in the range of $90-$100 a barrel in Q4.
Financial performance
In the first nine months of 2011, the petrochemical sector's profitability went up by 54.9 percent to $9.7 billion. SABIC continued to remain the lead contributor to the sector profitability at 65.5 percent followed by Industries Qatar and SAFCO at 17.6 percent and 7.7 percent respectively.
The sector top-line witnessed an increase of 31.9 percent and 32.7 percent in Q3 and nine months respectively, which was due to the combined effect of increase in price of oil and petrochemical products along with commencement of commercial production from the new expansions.
Cost of sales dropped during Q3, which gave boost to the margins and they rose to 37.4 percent in as compared to 33.2 percent in Q3, 2010. The trend was roughly similar in the nine months of this year where the margins rose to 37.1 percent, the global report added.
During Q3, the companies were able to reduce the cost of funding which dropped the interest expense by 13.7 percent. Overall interest expense during the first nine months dropped by 4.8 percent to $802 million as compared to $843 million in Q3, 2010, the Global report said.
SABIC
SABIC reported after tax profit of SR8.2 billion ($2.2 billion) up by 53.7 percent. Sales revenue went up by 29.2 percent to SR48.9 billion ($13.0 billion). The growth was mainly associated with the appreciation in the prices of related products along with rolling out of better than expected volumes. The impact of mentioned factors reflected positively on the company's gross, operating and net profitability margins, which were recorded at 34.4 percent, 27.6 percent and 16.7 percent respectively during the Q3. The company has continued to step up its production capacities in its different businesses. The Saudi Kayan petrochemical complex in Jubail Industrial City has started its commercial operations in early October and its results will be consolidated with the company's full year.
Dana Gas
Dana Gas net profit surged to AED143 million in Q3 from AED33 million in Q3, 2010. The four-fold increase in profitability can be attributed to both increase in production and increase in prices. Sales revenue increased by 58.5 percent to AED645 million. According to the company, as reported in the media, production in Kurdistan region of Iraq increased in Q3 compared to Q3, 2010 as a result of both trains of the gas plant at the Khor Mor Field being in operation to cater for increased demand for gas from the power stations at Erbil and Suleymania.
Industries Qatar
Industries Qatar reported after tax profit of QAR2.1 billion up by 45.2 percent. Sales revenue went up by 35.6 percent to QAR4.3 billion ($1.2 billion). The growth was mainly associated with the increase in the prices of petrochemical and fertilizer products on an average by 31.5 percent and 46.7 percent respectively. With the increase in sales and drop in cost the company's gross, operating and net profitability margins, rose to 52.5 percent, 47.6 percent and 47.4 percent respectively during the Q3.
Sipchem
Sipchem's Q3 net profit increased by 148 percent to SR208 million. The increase in profitability was driven by increase in volumes and prices of company products. Sales revenue for the company increased by 70.1 percent to SR865 million. The net profit has increased by 26.0 percent while sales have increased by 4.0 percent.
YANSAB
YANSAB's Q3 net profit jumped by 132 percent to SR828 million. The increase in profitability was driven by increase in sales revenue by 55.8 percent to SR2.50 billion. In turn the increase in sales revenue was driven by increase in both production and product prices. YANSAB started its commercial operations in March 2010.
SAFCO
SAFCO reported after tax profit of SR1.2 billion ($323 million) up by 100 percent. Sales revenue went up by 54.8 percent YoY to SR1.37 billion ($368 million). The growth was mainly associated with the increase in the prices of urea and ammonia by 73.1 percent and 31.7 percent respectively. With the increase in sales and drop in cost the company's gross, operating and net profitability margins, rose to 78.6 percent, 77.0 percent and 87.8 percent respectively during the Q3.
© Arab News 2011
