Sahara Petrochemical’s Q2 beats estimates: Aljazira Cap

Sahara Petrochemical Co.’s net profit of SAR 221.2 million for Q2 2018 beat Aljazira Capital and consensus estimates of SAR 142.20 million and SAR 147.3 million, respectively, the research firm said in an earnings note.

"We believe that the higher than expected results is mainly due to high operating rate in Al-Waha Plant, higher than expected earnings from Tasnee and Sahara Olefins Company (TSOC), a decline in the losses of the Saudi Acrylic Acid Company (SAAC) and impairment reversal of SAR 23 million," it added.

Income from associates stood at SAR 234 million, higher than the brokerage estimates of SAR 168.5 million, and the previous quarter’s SAR146.1 million. TSOC contributed SAR 91.6 million, beating AlJazira's estimate of SAR 71.5 million.

Sahara subsidiary Al Waha's net profit in Q2 is expected at SAR 99.0 million, higher than Aljazira Capital's estimates of SAR 89 million, the report said. It forecasts the plant running at an operating rate of 135 percent, higher than the brokerage’s estimate of 129 percent. 

"We believe that the plant maintenance in 2017 and lower feedstock cost had a positive impact on Al Waha’s performance, while further improvement was witnessed in other associates, due to improved sales prices. However, we believe that the company’s margin is subject to shrink gradually starting from Q3 2018 due to expected lower spreads in PP-Propane," the report noted.

In addition, the SAAC project is likely to maintain its losses this year with SAR 85 million compared to losses of SAR 103.4 million in 2017.

Aljazira Capital maintained a “Neutral” rating on the stock, setting a target price of SAR 20.40 per share.