Sabic fourth-quarter net profit more than doubles on higher selling prices

Saudi Basic Industries Corporation (Sabic), the Middle East's biggest petrochemicals firm, said its fourth-quarter net profit more than doubled due to higher average selling prices and an increase in sales volume.

Net profit after zakat and tax for the three months to the end of December rose to 4.93 billion Saudi riyals ($1.31bn), compared to 2.25bn riyals in the same period a year ago, Sabic said in a statement on Thursday to the Tadawul stock exchange. Revenue increased 56 per cent year-on-year to 51.3bn riyals.

"Sabic's fourth-quarter results saw us end the year on a strong note. Those results were driven by our operational performance and higher prices for most of our key products," Yousef Abdullah Al-Benyan, Sabic's vice chairman and chief executive, said.

Manufacturers of chemicals like Sabic have benefitted from an overall rise in demand for chemicals and feedstocks as economic activity ramps up amid a relaxation of movement curbs and a fall in infections globally.

The company's annual net income jumped to 23bn riyals in 2021, a massive surge from 70 million riyals in the prior year, due to higher average selling prices and an increase in the share of results of its joint ventures and associates, it said.

"Looking back on 2021, our financial performance was strong throughout the year, supported by favourable market conditions, and our focus on capital discipline," Mr Al-Benyan said.

For the full year 2021, Sabic declared dividends of 4 riyals per share, 33 per cent higher than the 3 riyals per share declared in 2020.

The increase in net income came despite the company recording an impairment of 760m riyals, restructuring provisions in certain capital assets and "non-cash" charges of 590m riyals. This was driven by the re-measurement of derivatives equity instruments for forward contracts related to certain joint venture agreements.

Sabic, which is majority owned by the world’s largest oil exporting company Saudi Aramco, said it continues to focus on value creation from the partnership. The state-owned oil company acquired a 70 per cent stake in Sabic in 2020 for $69bn.

"Between the completion of Saudi Aramco’s share acquisition of a 70 per cent stake in Sabic, and the end of 2021, Sabic realised $468m in value," it said in the statement. "This reflects the company’s commitment towards achieving between $1.5bn [and] $1.8bn in value creation by 2025."

Looking ahead, the company is bullish in its outlook for this year.

Sabic expects higher incremental sales volumes in 2022 due to transfer of the sales and marketing rights of chemicals and polymers products from Saudi Aramco to Sabic, starting up new assets and continuous improvement in reliability of its assets, it said.

"We expect earnings in 2022 to be healthy, albeit lower than the exceptionally strong earnings in 2021 due to the impact of new capacity coming on stream, higher feedstock cost and continued supply chain constraints during 2022," Sabic said.

The company also expects capital expenditure in 2022 to be higher than the levels in 2021 and 2020 so it can fund its non-discretionary investment "in safe and reliable operations" as well as its sustainability and growth projects, it said.

In 2022, there will likely be pressure on revenue from rising oil prices and supply chain constraints, Mr Al-Benyan told reporters on an earnings call on Thursday.

Oil prices, which are at seven-year highs currently due to tight supply and robust demand, have added to the costs for the petrochemicals sector that uses crude oil and its derivatives as feedstock.

However, Sabic's sales are expected to rise this year due to new production facilities in Jubail, US and China, the chief executive added.

"We hope this will have a positive impact on financial performance in 2022," he said.