SABIC subsidiaries outperform on reliability; recession pressured margins: Acting CEO

Acting CEO Abdulrahman Al-Fageeh 

The performance of Saudi Basic Industries Corp.’s (SABIC) unlisted subsidiaries was close to the average of most companies, Acting CEO Abdulrahman bin Saleh Al-Fageeh told Argaam.

The performance was distinguished in terms of reliability of plants, along with quality and safety of products, he added.

The glycol markets are under pressure, Al-Fageeh said during a press conference to discuss 2022 financial results. The company succeeded in the commercial operation of the third plant for the production of ethylene glycol in Jubail United Petrochemical Co., which is the largest project for glycol production in terms of sustainability.

He indicated that the second half of 2022 witnessed economic contraction and recession, amid a rise in prices of energy, feedstock and raw materials that the company uses, which led to pressure on profit margins from July 2022 until the end of the year, and such pressure increased during the fourth quarter.

Despite the decline in average prices of petrochemical products, especially in Q4 2022, SABIC’s sales rose by 9% year-on-year in 2022 as new plants started operations and other plants improved performance, according to the top official.

He added that the increase in sales also came thanks to inventory optimization and reducing the final stock of its products. The added quantities from Saudi Aramco amounted to 55% of sales, while 6% came from plants at the global level. New plants contributed 37%, and the optimal management of inventory contributed about 2% of total sales.

The Acting CEO also revealed that cooperation with Saudi Aramco achieved a return of $735 million in 2022, while the amounts of cumulative activities between Aramco and SABIC reached $1.1 billion by the end of 2022.

Furthermore, the fourth quarter witnessed stability at the minimum consumption in most of the final industries and a great pressure on industrial products, cars, construction and operation due to the recession that led to a contraction in demand, Al-Fageeh said.

He expects that there will be stability at the minimum limits during Q1 2023 for most industries, coupled with a significant improvement in demand for consumer goods, electronics and electrical appliances, but not at the levels of demand as in 2019.

Al-Fageeh also pointed out that the cost of sales increased by 23% in 2022 compared to 2021, noting the growth in prices of products was not equal to changing costs, which led to pressure on profit margins. He further added that 2022 witnessed a rise in shipping and distribution costs, but there is currently a slight improvement.

SABIC's profit dropped to SAR 16.5 billion in 2022, compared to SAR 23.1 billion recorded a year earlier. Q4 2022 profit amounted to SAR 293 million, Argaam reported.