Kayan posts record Q3 profit on improved efficiency, says NCB Cap

Saudi Kayan Petrochemical Co.’s Q3 2017 net income of SAR 381 million--the highest quarterly net income on record--came 132 percent above NCB Capital’s estimate of SAR 164 million and the consensus forecasts of SAR 143 million.

The unexpected results were mainly attributed to higher operating rates and margins.

Revenue which stood at SAR 2.7 billion also topped the brokerage firm's expectations by 9.7 percent, NCB Capital said in an earnings review.

Gross margins also beat the brokerage firm's estimate of 25.1 percent, coming in at 30.1 percent in the third quarter of the year.

"We believe the improvement in operating efficiency is the main factor behind the margin expansion, offsetting the negative impact of higher feedstock prices after the end of the grace period in Q2 2017," NCB Capital added.

Operating income was well above forecasts, reaching SAR 624 million.

The petrochemical producer is planning a major maintenance shutdown of 31-56 days at its facilities in Q4 2017, to carry out the debottlenecking project.

"The impact of the shutdown is expected to put pressure on the results in 2017E, although the strong results of 3Q17 is expected to offset that impact," the brokerage firm added.

NCB Capital recommended a "neutral" rating on the stock with a price target of SAR 8.3.