Q4 2011 review of Saudi petrochemical companies

Q4_2011_petrol_companies_1 Sabic, PetroRabigh, Petrochem and Sipchem have announced their Q4 2011 financial reports recently. We have provided a round-up of the results.


Saudi Basic Industries Corp (Sabic) reported a 10 per cent drop in Q4 2011 profits as the petrochemical giant felt the impact of lower prices globally.

The Q4 2011 net income came in at US$1.3 billion below the estimate of US$2.10 billion and consensus estimate of US$1.7 billion. The stock is expected to remain under pressure today, at which point would pose a good entry point considering SABIC's strong long term fundamentals.

It is believed higher volumes sold at lower prices contracted SABIC's margins generating lower earnings in Q4 2011. The company stated that weak product prices hit its Q4 2011 earnings, completely mitigating the impact of higher sales volumes.

"The economic situation in Q4 impacted but we started to see an improvement in prices and we hope it improves further," chief executive Mohamed Al Mady told reporters. "My prediction is that 2012 will be a mirror image of 2011 and that 2013 will be even better."

Al Mady said fourth quarter sales rose to US$12.5 billion, from 10.8 billion in the prior-year quarter. On the year, Sabic had sales of US$50.6 billion, up from US$40.2 billion in 2010.


Saudi Arabia's Refining & Petrochemical Co (PetroRabigh) posted a 4.4 per cent drop in fourth-quarter net profit, citing lower refining margins.

The company made a net profit of US$13.4 million in the three months ending Dec. 31, compared with US$14 million during the same period a year earlier.

"The decrease in net profit during the fourth quarter versus the same period a year earlier is due to a decline in refining margins," the company said in a bourse statement.

PetroRabigh's operating profit for the quarter fell 20 per cent to US$14.3 million.


According to NCB Capital's report, Petrochem's net loss came in at US$7.7 million greater than the expected US$3.4 mn loss.

The company reported net loss of US$7.7mn in Q4 2011 compared to the estimate of SR13.2mn and a Q3 2011 net loss of US$3.3mn, primarily due to higher than expected general and administrative (G&A) expenses of the Saudi Polymers Co (Petrochem's 65 per cent owned subsidiary). On a YoY basis, the Q4 2011 results were weaker as lower Zakat provisions resulted in a net income of US$10.9mn in Q4 2010.

Petrochem reported a Q4 2011 operating loss of US$8.4mn compared to the estimate of US$1.6mn and US$1.4mn in Q3 2011, owing to higher G&A expenses in Q4 2011. The company's Q4 2011 operating loss was higher than the Q4 2010 operating loss of US$1.7mn.

Petrochem reported a 2011 net loss of US$17.2mn lower than the net loss of US$11.3mn in 2010 due to higher G&A expenses incurred during the last quarter of 2011.


NCB Capital's report revealed that Sipchem's Q4 2011 net income came in at US$56.2mn, ahead of the estimated 18 per cent.

The 69 per cent YoY growth was primarily driven by better operational efficiency which led to increased sales volumes along with higher selling prices. The strong set of Q4 2011 earnings further strengthens optimism towards the stock.

Sipchem's Q4 2011 net income came in at US56.2mn, 18 per cent higher than the expectation of US$47.7mn. This can be attributed to higher than expected sales driven by better than expected operational efficiency.

The Q4 2011 sales figures are not released yet. On a YoY basis, net income increased 68.8 per cent benefiting from increased production and sales volumes, higher prices and improved operational performance as stated by the company in its earnings release.

The company reported an operating profit of US$100mn above the estimate of US$91mn. The Q4 2011 operating profit is higher than the Q3 2011 operating profit of US$104.5mn and US$75.2mn in Q4 1010.

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