NCB Capital forecasts lower Q3 earnings for Saudi petrochemical firms

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NCB Capital has forecast lower third-quarter earnings for Saudi Arabia’s top petrochemicals firms.

NCB estimated a 67 percent drop in the profit of Saudi Basic Industries Corp (SABIC) year-on-year. If true, this would represent the third straight quarter of profit decline for the Middle East’s biggest petrochemicals producer as it copes with lower average selling prices and a reduction in the share of contributions from associates and joint ventures.

SABIC produces plastics and chemicals for industries ranging from agriculture to oil and gas.

Earlier this year, SABIC Chief Executive Officer Yousef al-Benyan told reporters that while the company’s expectations for 2019 were better than “what the market gives … but it will not be as it was in 2018.”

NCB has forecast a Q3 2019 net income of about two billion riyals for the petrochemical giant, down from 6.1 billion riyals, a year earlier.

Other petrochemical firms are also set to record a drop in net profit in Q3 2019 year-on-year. The National Petrochemical Company (Petrochem), the largest independent chemical distributor in the Middle East, is expected to report a 56 percent drop in profit, while the Saudi Industrial Investment Group’s net income will tumble by nearly 47 percent, NCB analysts wrote in a note.

Several major Saudi Arabian petrochemical firms, including SABIC, Tasnee, Yansab and Saudi Kayan, had revealed drastically reduced feedstock supplies in the wake of an attack on the Abqaiq processing plant, which processes crude oil from the Ghawar, Shaybah and Khurais fields. On September 18, some companies reported an improvement in feedstock supplies from Saudi Aramco. Two weeks ago, SABIC said that feedstock supply had reached normal levels and added that there was no financial impact from the shortage.

NCB expects Yanbu National Petrochemical Company’s profit to plunge by over 62 percent to 275 million riyals.

However, Advanced Petrochemical Co reported better-than-expected Q3 results with net income of 213 million riyals, handily beating NCB’s estimates of 172 million riyals.

“We estimate that, Advanced’s operating rates stood at 121 percent vs our estimate of 116 percent which we believe confirmed that feedstock supply disturbance had no impact on Saudi petrochemical companies,” NCB Capital analysts wrote in a separate note.

Supplies had resumed to pre-attack levels 10-14 days after the incident and it seems that Saudi producers had no material financial impact, they added