Sahara Petrochemicals net income came in at US$26.6mn above its estimate of US$14.6mn.
While Q1 2011 net income fell 14 per cent YoY, Sahara recorded strong earnings growth of 129 per cent QoQ due to higher income from its SEPC plant, according to the latest report by the Saudi bank, NCB Capital (NCBC).
Q1 2011 net income beats estimate:
Sahara's Q1 2011 net income came in at US$26.6mn, higher than our expectation of US$14.6mn. Strong earnings from its SEPC plant was the key reason behind the net income deviation. SEPC, Sahara's 24 per cent owned subsidiary, was the only income generator in Q1 2011. On a YoY basis, net income fell by 14 per cent due to higher zakat expenses and increased feedstock cost which impacted SEPC's earnings. However, Sahara's net income was up 129 per cent QoQ benefiting from higher revenues from the SEPC plant, and this is due to increased production and petrochemical prices.
Operating loss in line with expectation:
Sahara was in a pre-operational stage during Q1 2011 and reported an operating loss of US$1.1mn in line with our estimate of US$0.4mn. Sahara's Q1 2011 operating loss was worse than the operating loss of US$14.2mn in Q4 2010 and US$0.9mn in Q1 2010. Additional expenses related to the capitalization of the headquarter building located in Jubail Industrial City was the key reason which led to the weaker operating loss performance during Q1 2011.
Al Waha commenced commercial operations in April 2011:
After the successful completion of trial runs during Q1 2011, Al Waha commenced commercial operations on 01 April 2011. This announcement came in earlier than Sahara's expectation. The company expected this start-up to take place in May 2011.
Sahara remains overweight on the stock with price target of US$6.3 The commercial start up of Al Waha in April 2011 and strong Q1 2011 results indicate a possible upside to its 2011 assumptions. However, Sahara awaits the detailed results before updating its numbers.
