Sabic's q2 net loss expands over twofold, lowers full-year capital spending guidance, cost cutting urgent

On August 4, Zhuansu Shijie learned that Sabic, the petrochemical subsidiary of Saudi Aramco, recently reported that the closure of the Wilton steam cracker in Teesside, UK, announced in June, resulted in an impairment cost exceeding 3.78 billion Saudi riyals (approximately 1.08 billion US dollars). The company stated that amid the current challenges in the petrochemical market, there is a need for "urgent cost reductions."

"Obviously, amid the numerous challenges in the petrochemical market, reducing operating costs is an urgent priority," said Salah al-Hareky, Executive Vice President of Corporate Finance at Sabic, during the Q2 earnings call on August 3rd, where the company reported an expanded net loss for the quarter.

Sabic stated that the impairment cost of 3.78 billion riyals related to the permanent closure of the Wilton cracker includes various expenses and provisions. Its financial statement mentioned: "This move is in line with the company's asset portfolio review objectives, aimed at reducing costs and improving profitability."

Sabic confirmed in June that it has decided to permanently shut down its No. 6 olefins cracker with an annual capacity of 865,000 tons. The unit was shut down for maintenance and upgrades in October 2020 but has not been restarted since. The company stated at the time that this was its second cracker closure in Europe; previously, in April 2024, Sabic had closed its naphtha cracker in Geleen, the Netherlands, due to lack of competitiveness and structural oversupply.

In the earnings briefing on August 3rd, when asked about Sabic's ongoing review of its European asset portfolio, CEO Abdulrahman al-Fageeh made it clear that there would be no further closure plans in the near future. However, in the earnings statement, Fageeh stated that the company will "continue to regularly review and optimize the asset portfolio as part of the transformation plan."

Q2 sales increased quarter-on-quarter.

In the second quarter, Sabic's revenue was 35.56 billion riyals, representing a slight decrease of 1% compared to the same period last year, but a 3% increase compared to the first quarter's 34.6 billion riyals. The company stated that the quarter-on-quarter improvement was primarily due to a 3% increase in total sales volume, reaching 11.78 million tons, which largely offset a 3% decline in average prices.

The company stated that the sales growth of oxygenates and ethylene glycol was particularly significant. The total sales volume of petrochemical products increased by 3% to 9.9 million tons this quarter.

Additionally, the month-on-month sales growth also benefited from the license income of 863 million riyals brought by its Fujian United Petrochemical joint venture.

The company stated that the prices of products, including ethylene glycol (EG), methanol, methyl tert-butyl ether (MTBE), polyethylene, polypropylene, and polycarbonate, fell this quarter, mainly due to weak demand and oversupply.

SABIC reported a net loss of SAR 4.07 billion in the second quarter, more than doubling from the net loss of SAR 1.21 billion in the previous quarter. In the fourth quarter of 2024, the company posted a net loss of SAR 1.89 billion. However, benefiting from improved product margins, overall sales growth, and increased licensing income, EBITDA nearly doubled quarter-on-quarter to SAR 4.91 billion. Adjusted EBITDA was SAR 5.22 billion, a 40% increase quarter-on-quarter but a 9% decrease year-on-year.

The company stated that the widening net loss mainly reflected a $1.08 billion impact from the shutdown of its UK cracking unit, as well as a $193 million impairment loss on its stake in Clariant AG due to a decline in stock price.

In this quarter, Sabic's EBITDA margin rose to 14%, and the adjusted EBITDA margin reached 15%, compared to 7% and 11%, respectively, in the first quarter.

In the second quarter of 2025, market sentiment remained unstable, affected by ongoing global economic uncertainties and geopolitical tensions,” the company said. Global GDP grew by 2.5%, and the manufacturing Purchasing Managers' Index (PMI) averaged slightly below 50, indicating “continued weak demand.”

“Due to overcapacity, the operating rate remains below the historical global average level, and the oversupply has put pressure on profit margins,” Fageeh stated.

Capital expenditure guidance downward adjustment

Sabic has lowered its full-year capital expenditure guidance announced in May from the previously estimated $3.5 billion to $4 billion, adjusting it to $3 billion to $3.5 billion. The company stated that this year's capital expenditure is mainly allocated to the ongoing construction of the China Fujian Petrochemical Complex. This flagship project costs $6.4 billion, with the latest phase scheduled to start production in the second quarter of 2026, and both its progress and budget are on track as expected.

The company stated that this year's capital expenditure also includes the ongoing development of its subsidiary Petrokemya's MTBE plant in Jubail, which has an annual capacity of 1 million tons. Fageeh mentioned that the engineering, procurement, and construction (EPC) phase of the MTBE project has been more than 95% completed, and pilot commissioning will take place in the third quarter of 2025.

In the outlook section of the financial report, Sabic stated that it will continue to "focus on long-term value creation through operational excellence, transformation, and selective growth." The company will maintain a prudent approach to capital investment, including the planned capital expenditure for the year.

The terminal market is stable.

For the second quarter, Sabic stated that except for improvements in the industrial, electronics and electrical, and healthcare sectors compared to the previous quarter, the end uses of petrochemical products remained stable and similar to previous quarters.

In the chemicals sector, Sabic stated that methanol prices have fallen due to high inventory and oversupply, while MTBE prices have also dropped due to sluggish demand and ample supply.

The company stated that prices of polymer products such as polypropylene, polyethylene, and polycarbonate have declined due to “global uncertainty leading to weak demand and ample supply.” Its financial report mentioned: “Overcapacity persists, especially in the polymer sector, with low operating rates for ethylene.” However, the company also noted that the profit margin for the overall product portfolio improved quarter-on-quarter, particularly in the polymer sector.

In the agricultural business, Sabic's sales in the second quarter increased by 2% quarter-on-quarter to 3.16 billion riyals, with average prices rising by 1% and production also increasing. The company stated that urea prices usually seasonally decline in the second quarter, but "the decline was limited due to regional political tensions and strong demand."

Sabic stated that its broader transformation plan, including cost optimization measures launched in the first quarter of this year, aims to achieve a recurring EBITDA impact of $3 billion annually by 2030. According to its presentation, the plan will include "focusing on improving underperforming businesses and enhancing capital efficiency."

In May this year, Sabic lowered its 2025 GDP growth forecast and stated that the restructuring work would be completed this year. The company had confirmed in November 2024 that it was studying further optimization measures.