Saudi petchem giant SABIC's profit jumps as industry recovers
RIYADH (Reuters) -- Saudi Basic Industries Corp (SABIC), one of the world's largest petrochemicals groups, gave further evidence of a recovery in the sector on Thursday with its first profit rise in ten quarters.
Among nearly a dozen Saudi petrochemical companies that have reported fourth-quarter results, most have posted higher earnings. The industry has been squeezed by the plunge of oil prices since 2014 and also by Saudi government austerity measures, which raised the cost of gas feedstock.
SABIC's net profit jumped 47.7% from a year earlier to $1.21 billion in the three months to Dec. 31.
On Wednesday PetroRabigh, a joint venture between Saudi Aramco and Japan's Sumitomo Chemical, said it had swung to a net profit of 183 million riyals from a loss of 1.01 billion riyals a year ago.
SABIC said its performance was the result of aggressive cost-cutting in response to low oil prices.
Fourth-quarter sales edged down to 34.03 billion riyals from 34.16 billion riyals a year ago, but chief executive Yousef al-Benyan told a news conference that he thought business would improve.
"We think 2017 will be positive compared to 2016 because of growth in major economies, the United States, China. There are sort of challenges in the European market on the back of Brexit, but generally we expect the performance of the European market to be similar to 2016."
Benyan added that he was optimistic oil prices would meet international analysts' expectations of around $45 to $55 a barrel this year, which would be positive for SABIC's business. Last year, Brent crude averaged about $45.
Asked about SABIC's outlook in the United States, where president-elect Donald Trump has pledged to promote local companies, Benyan said he was confident of expanding business there, noting that SABIC was considering a proposal for a joint venture with Exxon Mobil.
He also said his company, which is majority-owned by the Saudi government, had no plans to suspend domestic projects despite financial pressures on Riyadh due to low oil prices.
A feasibility study for a multi-billion dollar oil-to-chemicals project with national oil giant Saudi Aramco is progressing well, he added. A pre-front end engineering and design contract, marking the start of the preliminary engineering phase of the project, is expected to be awarded this year.
Benyan said SABIC had no plan for any new borrowing. In fact, the company is deleveraging, said chief financial officer Mosaed al-Ohali; Benyan said it would pay down 13 billion riyals of debt maturing this year.
The company's results are closely tied to oil prices and global economic growth because its products -- such as plastics, fertilizers and metals -- are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.
SABIC said in October it had combined its chemicals and polymers businesses and would spin off its steel unit as part of restructuring efforts.
Reporting by Marwa Rashad and Reem Shamseddine; Writing by Andrew Torchia; Editing by Elaine Hardcastle
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