(Bloomberg) -- Saudi Basic Industries Corp., the world’s biggest chemicals maker by market value, saw profit fall as rising feedstock prices lowered its margins.

The company, controlled by Saudi Aramco, made net income of 5.6 billion riyals ($1.5 billion) between July and September, less than analysts had expected. That was up more than five-fold from a year earlier, but down 27% on a quarterly basis.

Chemical prices have soared this year as major economies recover from the coronavirus pandemic, and Sabic made its highest earnings in almost a decade in the second quarter. But delays and disruptions across supply chains have pushed up the cost of commodities, including some of Sabic’s key inputs.

“The third quarter marked a continuation of our recovery from the impact of Covid-19, albeit at a lower level than our exceptionally strong performance during the second quarter,” Chief Executive Officer Yousef Al-Benyan said in a statement.

Rivals such as BASF SE have faced similar supply strains.

Sabic said demand will be “healthy” in the last quarter of 2021, but it expects feedstock prices “to remain elevated with higher oil prices.”

Margins will probably fall further, it said.

Revenue reached $11.7 billion in the third quarter, up 3% from the previous three-month period. Free cash flow rose 57% to $2.2 billion.

Saudi Arabia wants chemical makers like Sabic, valued at $106 billion, to form the basis of new manufacturing and consumer-goods industries as the kingdom seeks to diversify from oil.

 

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