Aug 9, 2022
Sabic Says Profit Rose 3.8% But Margins Remain Under Pressure
Bloomberg News
,(Bloomberg) --
Chemicals behemoth Saudi Basic Industries Corp. reported a 3.8% increase in quarterly earnings, but warned profit margins will remain “under pressure” as costs climb.
Prices of products such as polyethylene and polyvinyl chloride -- used to make everything from plastics to building materials -- have jumped as economies recover from the pandemic, boosting demand. Yet a supply-chain squeeze has pushed up expenses for producers.
Sabic, as the Saudi Arabian company is known, said net income rose to 7.93 billion riyals ($2.1 billion) in the second quarter from 7.64 billion riyals a year earlier. Revenue climbed 32% to 56 billion riyals, beating analysts’ estimates.
The Riyadh-based company, controlled by oil giant Saudi Aramco, said the results reflect higher selling prices and sales volumes, despite rising costs for feedstock and distribution. It gave a cautious outlook for the rest of the year amid fears of a flagging global economy.
“Due to slowdown in global GDP growth, lockdowns in China, conflict in Europe and continued supply-chain challenges, we expect margins to be under pressure in the second half of 2022,” Sabic said in a statement.
Competitors such as BASF SE have faced similar logistical constraints, while also warning of a slowing economy.
Saudi Arabia wants firms like Sabic -- the world’s largest chemicals maker by market value -- to form the basis of new manufacturing and consumer-goods industries as the kingdom seeks to diversify away from oil.
The company’s shares gained as much as 3% at the open on Tuesday. The stock has dropped 11% this year, underperforming rivals such as Dow Inc. and the wider Saudi equity market.
Click here for more details from the results.
(Updates with company comment in fifth paragraph.)
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