SABIC Q1 net income falls 62%, warns of industry overcapacity
Nurluqman Suratman
02-May-2024
SINGAPORE (ICIS)–SABIC’s net income fell by 62% year on year to Saudi Riyal (SR) 250 million in the first quarter amid a drop in prices and sales volumes, the chemicals major said late on Wednesday.
- Losses from discontinued operations continue to weigh on results
- Overcapacity persists, pressuring the industry as market growth lags – CEO
- Spending range of $4 billion to $5 billion expected for 2024
in Saudi riyal (SR) billions | Q1 2024 | Q1 2023 | % Change |
Sales | 32.69 | 36.43 | -10 |
Operational profit | 1.21 | 1.76 | -31 |
Net income | 0.25 | 0.66 | -62 |
“The decrease in net profit is attributed to lower revenues, lower results from associates and joint ventures in addition to losses from discontinued operations,” SABIC said in a filing on the Saudi bourse, Tadawul.
SABIC swung to a net loss of Saudi riyal (SR) 2.77bn ($739m) in 2023, largely due to one-off losses related to a divestment.
Q1 revenue fell following a 3% decline in average selling prices and a 7% reduction in sales quantities.
“Global economic uncertainty remained high during the first quarter of 2024, caused by geopolitical and logistical issues. Adding to these challenges were high global inflation levels and strict lending policies,” SABIC CEO Abdulrahman Al-Fageeh said in a separate statement.
Al-Fageeh in an investor call cautioned that overcapacity remains a challenge for the industry, creating a gap between supply and demand that is likely to persist throughout 2024.
While positive demand signals emerged in Q1 2024, “the year outlook remains uncertain as the world still navigates through geopolitical situations with high inflation”, he said.
SABIC plans to adopt a disciplined approach to capital expenditure, projecting a spending range of $4 billion to $5 billion for the year, compared with $3.5 billion to 3.8 billion last year.
NEW PROJECTS
SABIC has started construction of its $6.4bn
manufacturing complex in China’s southern
Fujian province.
The project “would add a qualitative range of products to SABIC’s portfolio of chemicals and polymers and enhance the company’s presence in the Chinese market”, the company said.
The project will include a mixed-feed steam cracker with up to 1.8m tonne/year ethylene (C2) capacity and various downstream units producing ethylene glycols (EG), polyethylene (PE), polypropylene (PP) and polycarbonate (PC), among other products.
SABIC also inaugurated the world’s first large-scale electrically heated steam olefins cracking furnace in Netherlands, which will pave the way for the company to fulfill its commitment to reach carbon neutrality by 2050.
SABIC is 70%-owned by energy giant Saudi Aramco.
($1 = SR3.75)
Thumbnail photo by SABIC
Focus article by Nurluqman Suratman
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