Saudi Basic Industries Corp (Sabic) has said it is cutting spending to counter rising costs and a possible slowdown in US and European demand in 2008.

It says it expects “more challenges in light of an increase in the prices of raw materials and chances of declining demand as a result of a slowdown in the economies of the US and Western Europe to some extent.”     
The state-owned company has taken steps to cut costs to overcome these constraints, it added without elaborating.
Sabic also sought to calm investors after losing almost 30 per cent of its value since it ended a run of record profits in the fourth quarter as US chemicals demand faltered.
The company’s fourth-quarter costs soared 115.7 per cent against a 77 per cent rise in sales. This surge slashed the firm’s net margin by more than a third according to a Reuters calculation.
Sabic chief executive Mohamed al-Mady told Reuters that higher input costs from a surge in oil prices also weighed in on fourth-quarter profit which rose 12.3 per cent to SR6.87 billion ($1.83 billion), missing analysts’ forecasts which ranged from SR8.38 billion to SR9.1 billion.
The company also defended its $11.6 billion purchase of GE’s plastics unit last year, saying the acquisition would add value and boost its competitiveness in growth markets in the US, Europe and Asia and aid long-term growth.
“Sabic confirms its confidence in the quality of its investments in Sabic Innovative Plastics, according to its long-term strategic plan in which its future growth depends on expansion in specialised products,” it said.
Sabic has renamed the GE unit Sabic Innovative Plastics.
In other Sabic news, Sabic affiliate Saudi Kayan Petrochemical Company awarded Shell Global Solutions a contract to prepare its industrial complex for a smooth start-up.
The three-year contract at the Saudi Kayan industrial complex calls for Shell Global Solutions to utilise its ‘Flawless-Start-up’ programme to help identify the potential risks to a smooth production launch or to interruptions after start-up.
The Saudi Kayan industrial complex, located at Jubail Industrial City, will be one of the latest greenfield petrochemical projects to be started in the Middle East.  It will consist of nine plants linked together and will have an annual production capacity exceeding 4 million tonnes of petrochemical and chemical products.  Construction is underway and start-up of most units is expected towards the end of the decade.
For the first time, the Sabic family of plastics businesses, including Sabic Innovative Plastics and Sabic Europe, showcased its diverse plastics portfolios for key Russian industries at Interplastica 2008.
Its presence at the event underscored the importance of the Russian market to its expanding global business strategy. Major Russian markets into which Sabic materials are sold include automotive, building and construction, electrical and lighting, pipe and infrastructure. Sabic offers Russian customers a strong local team, local supply of materials, and the extensive resources of its Global Application Technology (GApT) centres to support in-country application development.
“Russia is a top priority for Sabic Innovative Plastics’ global expansion plans. We believe we have exciting solutions for this major emerging market, particularly in the automotive sector,” said Juri Bercovitz, area sales manager for Russia, CIS and Baltic states, Sabic Innovative Plastics. 
“Sabic has a long-term growth strategy for Central and Eastern Europe, where growth in polyolefins in the coming years is predicted to be more than 15 per cent,” said Hubert Guth, director of sales offices, Sabic Europe. 
In 2007, Sabic Innovative Plastics launched its new Russian automotive division as part of a global network dedicated to accelerating market and application development activities for the rapidly expanding automotive industry in Russia and the CIS.