Saudi Chemical Giant SABIC Reports Net Loss for Third Consecutive Quarter

Saudi Arabia's largest chemical company has reported a loss for the third consecutive quarter, missing analysts’ previous profit expectations, due to the closure of some assets amid a prolonged industry downturn.

According to a statement released on Sunday, Saudi Basic Industries Corporation (Sabic) reported a net loss of approximately 4.1 billion riyals (about 1.1 billion US dollars), compared to a loss of 1.2 billion riyals in the previous period. Analysts had generally expected the company to achieve a profit of 1.1 billion riyals for the quarter.

At the opening of the main stock exchange in Saudi Arabia, the company's stock price once fell by 1.9%.

The performance was affected by impairment expenses in two areas: firstly, the closure of a cracker unit at its Teesside plant in the UK; secondly, the investment in Clariant experienced impairment due to the decline in Clariant's share price.

Saudi Basic Industries Corporation stated that market sentiment remains unstable, and the company has found an oversupply and weak demand situation in most of its major chemical product sectors.

CEO Abdulrahman Fagih stated: "Due to excess capacity, the operating rate remains below the historical global average, and oversupply is putting pressure on profit margins."

Earlier this year, Saudi Basic Industries Corporation announced a corporate restructuring plan to cut costs, as weak demand has affected the earnings of major global chemical companies and compressed their profit margins. To address these challenges, companies have been selling assets and shutting down projects.

Dow Inc. reported its first quarterly loss in five years last month and announced the closure of three plants in Europe. LyondellBasell's second-quarter earnings fell short of expectations, and it delayed a project in Texas. However, the company stated that it remains "cautiously optimistic" about addressing the overcapacity issue in Europe and revitalizing the European chemical industry. Following the earnings report, the company's stock fell by 8% on Friday.

BASF SE is also selling one of its divisions to focus on its core business; Shell Plc recently stated that its chemical business has been sluggish for some time.

Shares of global chemical giants fall

Source: Data standardized based on August 6, 2023 (set as 100)

Analysts expect that Saudi Basic Industries Corporation (SABIC) will face continued margin pressure and weak pricing due to the persistent oversupply of major petrochemical products. However, the company's diversified product portfolio and fixed raw material cost structure are considered to help support its margins. As part of a broader operational review, SABIC is considering the public listing of its industrial gases division.

The Saudi company stated that it is still evaluating its strategic business in Europe and has not yet made a final decision regarding the potential initial public offering (IPO) of National Industrial Gases Co.

Saudi Basic Industries Corporation has lowered its capital expenditure guidance for 2025 from a previous maximum of $4 billion to $3 billion to $3.5 billion. The company’s second-quarter revenue exceeded analysts' expectations.

The share price of this chemical giant has fallen by about 20% this year. During the same period, the decline of the Saudi main index was about half of that.

Saudi Aramco, the world's largest oil exporter, holds a majority stake in Saudi Basic Industries Corporation, which is scheduled to announce its earnings on August 5.