Yansab Q4 2021 profit below estimates, say analysts

Logo of Yanbu National Petrochemical Co. (Yansab)

Yanbu National Petrochemical Co.’s (Yansab) results for the fourth quarter of 2021 came below estimates, analysts told Argaam, expecting the company’s stock to react negatively to the announced results.

Based on the prices of feedstock and finished products, the results were expected to be better than announced, particularly since the maintenance work occurred at the beginning of Q3 2021. The Q4 period should not be affected by maintenance work with better operational efficiency, Abd-Rabbo Zeidan, Head of Research at Arqaam Capital, told Argaam.

Unless the company charged exceptional maintenance costs or other provisions in Q4, as it used to make exceptional provisions during this period of the year, but detailed financial statements should be considered to find out why the company did not explain this in its announcement, Zeidan added.

Compared to Q3 2021 results, he explained that the company has four final products, all of which achieved quarter-on-quarter (QoQ) increases by nearly 5%, in addition to the increase of polyethylene product by 10%. The company relies mainly on two input materials, namely, ethane, which did not see a change in price, and propane which saw a QoQ rise of 26%, so the expectations were higher than the current results.

Economic analyst Abdulilah Al-Qasem said the company's results fell short of expectations, adding that according to announced revenue figures, operating rates continue to decline.

He added that the impact of feedstock prices was negative on Yansab’s results during Q4 2021, expecting the stock to react negatively to the announced results.

Within the same context, Abdul Aziz Khurais, an economic analyst, said that although Yansab’s results are below analysts' average forecast of SAR 428 million, they are fairly stable as global product prices fell during the fourth quarter.

He noted that revenues grew by 39% and 8% YoY and QoQ, respectively, giving a good impression of the company's strength among its competitors.

The increase of feedstock prices at a rate higher than finished product prices compared to the previous quarter pressured profit margins, he said.

Khurais anticipated a limited negative impact of the results on the stock, as it pre-empted the results announcement and fell by over 4% during the past three sessions contrary to the general index and companies from the same sector.

According to given data, the levels of SAR 70 to SAR 70.40 represent the closest support for the stock, while the levels of SAR 74.50 to SAR 74.90 are considered an important resistance area for the stock which are not expected to be crossed during the upcoming sessions due to financial results.

Zeidan agreed that there will be a relative decline in the stock, followed by re-valuation period for prices according to the expected results of the company in Q1 2022, or until the issuance of financial statements for Q4 2021.

The stock in general is on an upward path since the beginning of the year, and the level of SAR 71 represents a support point.