Petchems’ combined H1-15 profit falls 31% on price declines, shutdowns

Tadawul-listed petrochemical firms’ H1-2015 net profit dropped 31 percent year-on-year (y-o-y) to SAR 12.8 billion on price declines and plant shutdowns, analysis conducted by Argaam Research revealed.

Combined sales reached SAR 123 billion during the period, marking a 24 percent drop when compared to H1-2014.

Most listed-companies operating in the sector witnessed declines above 20 percent y-o-y.  Meanwhile, petrochemical product prices fell in line with lower oil prices in the first six months of the year.

National Industrialization Co.’s (Tasnee) results weighed on sector performance. The company reported a net loss of SAR 440 million, marking a sharp decline from its H1-2014 net profit of SAR 729 million. Tasnee also incurred expenses associated with terminating and settling futures and derivatives of SAR 386 million and also allocated SAR 81.6 million in provisions for impairment in non-current assets.

In addition, Rabigh Refining and Petrochemical Co. (Petro Rabigh), Saudi Kayan Petrochemical Co., Yanbu National Petrochemical Co. (Yansab), Advanced Petrochemical Co., Alujain Corporation, Nama Chemicals and Methanol Chemicals Co. (Chemanol) saw temporary shutdowns due to scheduled plant maintenance and technical problems.

Chemanol reported a SAR 6.3 million loss for the period after it wrote off expenses related to some shelved projects.

Saudi Industrial Investment Group (SIIG)’s joint-venture Petrochemical Conversion Company Ltd. (PCC) led it to widen its losses in H1-2015 to SAR 41 million due to operational issues.

Sector performance was much stronger in Q2-2015, with combined net profit soaring 92 percent year-on-year to SAR 8.42 billion.

The sector trades at an average price/earnings ratio (P/E) of 15.5x, according to the last 12 months; a figure which falls below the market’s average of 17.7x. It also trades at a combined price/book ratio (P/B) of 1.8x compared to the market’s multiple of 2.1x.