The world’s most valuable chemicals maker reported worse-than-expected earnings and said the market remained fragile, with demand in China yet to recover strongly and inflation hurting consumers.
(Bloomberg) — The world’s most valuable chemicals maker reported worse-than-expected earnings and said the market remained fragile, with demand in China yet to recover strongly and inflation hurting consumers.
Saudi Basic Industries Corp. made net income of 660 million riyals ($176 million) in the first quarter, down 90% from the same period a year earlier and 16% below the average estimate among analysts surveyed by Bloomberg.
“High inflation and interest rates continue to add to the uncertainty of global demand growth,” Sabic said in a statement. “We expect margins to remain under pressure” in the second quarter.
Sabic is majority owned by Saudi Aramco and has a market valuation of $71 billion, more than that of any other listed chemicals firm.
Its shares fell 0.9% by 11:20 a.m. in Riyadh.
“The whole world expected a recovery in Chinese demand, but there are still issues related to the Asian markets in general,” Chief Executive Officer Abdulrahman Al-Fageeh said to reporters. “We were hopeful about China but the demand is still below expectations. It was said that there would be growth of 5% by the end of the year, but so far there are no indications of that.”
The Riyadh-based company is investing heavily in China. In March, it started operations at a $1.7 billion plastics plant. The joint venture with Sinopec is designed to make 260,000 tons a year of polycarbonates.
Sabic saw profit surge in 2021 and the early part of last year as countries rebounded from the coronavirus pandemic. But the trend’s reversed since the middle of 2022 with central banks tightening monetary policy to combat inflation.
The firm’s income more that doubled from the final three months of 2022, but was still the second-lowest figure since the third quarter of 2020.
The company said average sale prices dipped at the start of this year due to falling demand for fertilizers, which came as food commodities from wheat to corn slumped.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.