|25 April, 2019

Sahara Petrochemical Company reports rise in first quarter earnings

The company's shares have added close to 13 percent since the start of 2019

Sahara Petrochemical Company reports rise in first quarter earnings

Saudi Arabia’s Sahara Petrochemical Company reported late on Wednesday a rise in first quarter (Q1) earnings for 2019.

The company’s Q1 2019 net profit amounted to 142.7 million Saudi riyals ($38.05 million) compared to 140.2 million riyals in Q1 2018, a 1.78 percent increase.

The earnings were below an analysts' estimate from EFG Hermes.


Sahara has stakes in a number of related ventures. According to its website, it owns an indirect equity stake of 24.41 percent in SEPC (Saudi Ethylene & Polyethylene Company). it also has a joint venture with Basell Arabie Investissements in Al Waha Petrochemicals Company, in which Sahara owns a 75 percent stake.

“Overall, while the numbers disappointed our expectations we are encouraged to see a beat at the Al Waha level and that SEPC was able to deliver higher earnings year-on-year despite lower prices and spreads,” Yousef Husseini, head of the chemicals team of equity analysts at EFG Hermes told Zawya by email.

However, he highlighted that he had concerns over ongoing losses at an acrylates project, which racked up losses of 312 million riyals in 2018. "There does not appear to be any relief in sight,” Husseini added.

The company’s shares were trading 0.47 percent higher on Thursday at 17.08 riyals by 11:55 GST and have added so far this year 12.96 percent.

“We maintain our Buy rating on Sahara as we think the company offers value," Husseini said, pointing out that its price/earnings ratio of 12-13x is higher than the average 14x for many of its Saudi peers.

Husseini also said he sees “some short term catalysts, including the closing of the Sipchem merger which could drive some substantial passive flows to the stock as well as the potential for a pickup in prices from the weak levels witnessed in 1Q19.”

Add the end of 2018, Sahara and Saudi International Petrochemical Company (SIPCHEM) announced that they entered into a legally binding agreement to implement a proposed business merger of equals. (Read more here)

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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© ZAWYA 2019

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