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|08 April, 2019

Saudi's Advanced Petrochemical reports higher first quarter earnings, shares rise

Increase in sales volume and lower propane prices boost Advanced's earnings

Gas flares at a Refinery and Petrochemical Integrated Development (RAPID) oil refinery at Pengerang Integrated Petroleum Complex in Pengerang, Malaysia February 26, 2019. Image for illustrative purposes.

Gas flares at a Refinery and Petrochemical Integrated Development (RAPID) oil refinery at Pengerang Integrated Petroleum Complex in Pengerang, Malaysia February 26, 2019. Image for illustrative purposes.

REUTERS/Edgar Su

Saudi Arabia’s Advanced Petrochemical Company has reported a rise in first quarter (Q1) earnings for 2019, triggering a rise in the company’s shares on Monday.

Advanced’s Q1 2019  estimated net profit after zakat and tax amounted to 162 million Saudi riyals ($43.19 million) compared to 97.6 million riyals in Q1 2018, translating into a 65.98 percent rise but a 13 percent miss on investment bank SICO’s estimate.

Nitin Garg, a senior analyst at Bahrain-based SICO Bank, told Zawya by email that the year-on-year (YoY) improvement in earnings is “mainly due to the increase in sales volume by 39 percent” and the second reason according to Garg was the “reduction in propane and outsourced propylene prices (20.7% and 13.3% respectively) despite (a) reduction in Polypropylene prices by 7.4%.”

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He said that the “13 percent miss on net income is led by higher than expected feedstock cost as we penciled in 27 percent lower YoY propane prices into our estimates compared to 20.7 percent announced by the company,” Garg said.

Q1 2019 estimated revenue amounted to 648 million riyals, up 28.62 percent on the 503.8 million riyals made in Q1 2018.

Yousef Husseini, head of the chemicals team at EFG Hermes, told Zawya by email that over a quarter-on-quarter basis, the company’s earnings were “flattish”. In Q4 2018, Advanced recorded a 163.87 million riyals net profit.

Husseini said this represented “a very resilient performance despite the fact that the company had a shutdown during the quarter which negatively impacted volumes (-7% Q-o-Q) and of course the lower PP (polypropylene) prices (-7%),” Husseini said.

“We are expecting a strong performance in 2019 on a healthy margin environment and strong production and we have a 'buy' rating on the name,” he ended.

The company’s shares were trading 0.91 percent higher at 55.6 riyals by 11:40 GST on Monday and have gained 10.1 percent since the start of the year 2019.

SICO’s Garg said the company’s Q1 earnings were overall neutral despite the 13 percent earnings miss.

“We continue to like APC’s operational excellence and supportive current dividend yield of 5.1%. However the stock is trading close to our target price of SAR 60/sh,” Garg ended.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(Gerard.aoun@refinitiv.com)

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© ZAWYA 2019

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