Saudi Arabia’s 10 listed petrochemical companies are likely to report lacklustre earnings for the fourth quarter of 2024 because of an ongoing downturn in the global chemicals industry, analysts predict.
The sector’s prolonged malaise means they are likely to be of little interest to international institutional investors – although all enjoy significant cost advantages over competitors in Europe and Asia, excluding China, through access to cheap feedstock.
Trading in the likes of Saudi Basic Industries Corp (Sabic), the world’s sixth-largest petrochemical operation by market cap according to companiesmarketcap.com, is now largely the preserve of retail investors seeking to make a quick profit as stock prices fluctuate.
Sabic was the standout performer in the kingdom last year, posting a 42 percent rise in nine-month net profit to $1.1 billion, while Yanbu National Petrochemical Co – a Sabic subsidiary – and Basic Chemical Industries Co both posted a net profit from a net loss in the year-earlier period.
Sabic’s petrochemical EBITDA margin, a measure of core profitability, was 13.6 percent in the third quarter. This will probably fall to 13.3 percent in the fourth quarter, says Oliver Connor, director of Mena energy research at Citigroup in London.
“If pricing and costs remain flat, margins will flatline also,” he says. “There is a risk that margins could decline further if economic growth weakens, there’s a collapse in oil prices or greater-than-expected capacity is added.”
Sabic will hold a fourth-quarter earnings call on February 26.
Most Saudi Arabian petrochemical producers are likely to report a decline in profit compared with the third quarter because of rising feedstock prices and lower product sales prices, says Yousef Husseini, director of chemical equity research at EFG Hermes in Cairo.
Only three of Saudi Arabia’s 10 listed petrochemical companies – Sabic among them – reported improved earnings in the first nine months of 2024 versus the same period of 2023, AGBI research shows.
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