Sipchem posts disappointing Q3, says Aljazira Cap

Sahara International Petrochemical Co. (Sipchem) posted a disappointing set of results for Q3 2019, Aljazira Capital said in a recent earnings note.

Net profit stood at SAR 111.1 million, falling shy of Aljazira Capital’s and analysts’ estimates of SAR 199 million and SAR 190 million, respectively, due to weak product prices, plant shutdown and a significant increase in production cost, the brokerage firm noted.

“We believe that the company’s performance in Q3-19 was partially impacted by IAC, IGC and IVC plants shutdown for 34 days, 22 days and 17 days respectively, significant increase in production cost associated with plant shutdown and feedstock disruption,” the brokerage firm added.

Sipchem is expected to witness improved future performance, given high production efficiency and improved volumetric sales after maintenance.

The methanol to olefins (MTO) operators are still running their plants at profitable levels, with the average operating rate expected to rise after some units will restart soon.

“We expect IMC plant operating rate to stabilize above 95 percent during FY20 due to expected efficiency improvement,” Aljazira Capital noted.

Aljazira Capital maintained its “overweight” recommendation on the stock, but revised its target price to SAR 20.25.