Saudi Arabia’s SABIC reports 9.4% drop in Q3 profit

Saudi Arabia’s petrochemicals giant, Saudi Basic Industries Corp. (SABIC), has reported a 9.4-percent profit loss in the third quarter of this year as a result of a decline in the price of its products.

In a statement released on Sunday, SABIC, which is the Middle East’s largest listed company, posted a net profit of 5.6 billion riyals (USD 1.49 billion) in the July to September period this year compared with 6.18 billion riyals in the corresponding period last year.

The company, however, did not provide any explanation for the price drop, AFP reported.

According to the statement, SABIC’s net profit in the first nine months of the year also dropped 17.7 percent.

The company’s net income in the first three quarters of 2015 stood at 15.7 billion riyals compared to 19.1 billion riyals in the same period in 2014.

The company’s acting chief executive, Yousef Abdullah al-Benyan, said SABIC, which is 70-percent state-owned took steps to cut costs by an average of 22 percent during the first three quarters of this year, Reuters reported.

Benyan added that cost reduction helped mitigate the impact of a 22-percent fall in the company’s third-quarter sales to 37.3 billion riyals from 48.7 billion riyals a year earlier, but did not explain on how SABIC reduced costs.

The company mostly produces various kinds of plastics, fertilizers and metals, which are used in construction, agriculture, industry and the manufacturing of consumer goods.

SABIC is mulling petrochemical joint ventures in China and the United States and could make announcements in this regard in the first quarter of 2016, Benyan told Reuters.

“We continuously assess our business and organizational structure,” said Benyan, adding, “Our goal is to really grow while at the same time we want to be efficient. This has led to some restructuring, some realignment of our business units.”

Meanwhile, Saudi petrochemical stocks have fallen in value on fears that the government may reduce gas subsidies to help ease pressures on state finances as the country is facing a record budget deficit following the oil price drop.

At present, Saudi Arabia’s petrochemical companies benefit from subsidized gas feedstock prices, which give them an advantage over rival manufacturers from non-oil producing countries.