SABIC Q2 net profit surges 85% on higher margins amid improved prices

SINGAPORE (ICIS)–SABIC’s net profit surged by 84.7% year on year to Saudi riyal (SR) 2.18 billion in the second quarter, supported by higher margins amid improved average selling prices, the chemicals giant said on Thursday.

in Saudi riyal (SR) billions	Q2 2024	Q2 2023	% Change	H1 2024	H1 2023	% Change
Sales	35.72	34.1	4.8	68.4	70.53	-3.0
Operational profit	2.1	1.64	28.0	3.31	3.4	-2.6
Net profit	2.18	1.18	84.7	2.43	1.84	32.1

“The global economy experienced a slight decline in the second quarter of 2024, primarily due to unexpected downturns in the recent economic indicators of major countries,” said Abdulrahman Al-Fageeh, SABIC’s CEO and executive board member.

However, PMI data continued to indicate improvement in global economic conditions, while global trade showed signs of recovery, driven by higher exports, inventory restocking and increased financial activities, Al-Fageeh noted.

“As inflationary pressures ease, some central banks have begun reducing interest rates, potentially providing additional stimulus to the global economy.”

Q2 KEY POINTS
 – Q2 sales growth primarily attributed to the improvements of the average selling prices and a slight increase in sales volume.
– Gross profit rose by SR1.76 billion due to improved profit margins for key products, partially offset by increased operating expenses from non-recurring charges.
– A reversal of zakat provision, which is a mandatory Islamic tax on wealth, resulted in a non-cash benefit of SR545 million in Q2 2024, compared to a zakat expense of SR440 million in Q2 2023, due to updated regulations.
– The petrochemicals segment’s revenue increased by 10% quarter-over-quarter to SR 33.33 billion in Q2, driven by higher methanol sales volume.
– EBITDA rose 37% to SR 4.88 billion in Q2, compared to SR 3.56 billion in Q1, due to higher sales volume and average selling prices.

Market trends on quarter-on-quarter basis:
– Methyl tertiary butyl ether (MTBE) prices remained stable, supported by summer demand.
– Methanol prices held steady, driven by tight supply and low inventories in China, as well as strong demand from Asia.
– Monoethylene glycol (MEG) prices were flat, due to higher supply and stable demand.
– Polyethylene (PE) prices increased slightly, due to delayed Middle East deliveries and tightened Southeast Asian supplies.
– Polypropylene (PP) prices rose, supported by tight container and vessel supply.
– Polycarbonate (PC) prices slightly increased, despite global oversupply, with high freight rates adding pressure to subdued demand in automotive and construction sectors.

Separately, SABIC has successfully commissioned its new hydrotreater plant in Geleen, the Netherlands. 

This facility plays a crucial role in SABIC’s advanced recycling process, transforming pyrolysis oil derived from post-consumer mixed plastic waste into high-quality alternative feedstock.

This feedstock is then used to produce the SABIC’s TRUCIRCLE circular polymers.

H1 KEY POINTS
– The company’s revenue decreased by 3% year on year primarily due to a decline in sales volume.
– Net profit rose on the back of an 18% increase in gross profit (SR1.96 billion) due to improved margins, partially offset by increased operating expenses from non-recurring charges.
– Earnings were also supported by a SR245 million increase in the share of results from associates and non-integral joint ventures.

OUTLOOK
“Looking ahead, a global GDP growth of 2.7% is expected in 2024. At SABIC, our long-term focus remains on strategic portfolio optimization, restructuring of underperforming assets, and prioritizing sustainability and innovation,” the company said.

“We maintain a disciplined approach in managing our CAPEX, projecting a spending at the lower range of $4.0 to 5.0 billion for 2024.”

SABIC is 70%-owned by energy giant Saudi Aramco.

Thumbnail shows a SABIC production facility (Source: SABIC)