Sabic, the world’s biggest chemicals firm by market value, posted a 10 per cent rise in first-quarter profit, its smallest increase in almost two years.
Net income in the three months to March 31 rose to SR6.92 billion, compared with HSBC’s forecast of SR7.4 billion.
“It is probably fair to say that relative to expectations the numbers were disappointing,” HSBC Holdings Plc chemicals analyst Hasan Ahmed was quoted by Reuters.
Sabic chief executive Mohamed Al-Mady said Asian markets, mainly China, helped drive profit in the first quarter, despite a rise in input costs, and economic slowdown in U.S. and European markets.
Sales rose 4 per cent, Sabic said in the earnings statement, without providing comparative figures.
Oil prices have surged above $115 per barrel last week, compared with less than $65 per barrel a year ago, boosting the price of naphtha, used to produce petrochemicals, as well as of other feedstock.
That hurt Sabic’s business in Europe where its plants rely more on naphtha. In Saudi Arabia, Sabic relies more on fixed-price ethane gas supplies from state-owned Saudi Aramco.
Sabic’s profit is “about weakness in US demand, impacting the GE Plastics business, and higher crude prices, which, while helping on the pricing side, does negatively impact Sabic’s facilities in Europe,” Ahmed said. Sabic bought GE Plastics last year for $11.6 billion.
Sabic’s share price almost doubled last year as it reported five consecutive quarters of record profit up to the third quarter on surging global demand for chemicals, steel and fertilisers.
In other Sabic news, a senior official of the company said it was looking to build a petrochemical plant in India.
“We are looking at investing in India’s petchem sector. We are looking for production in India,” Sabic’s business development manager Nasser Al-Torki told reporters at a meeting of Arab and Indian oil and gas officials. He declined to give a timeframe or say whether the project will be done on its own or jointly with an Indian company.
Sabic signed a pact this year to build an ethylene derivatives complex in China.
