SABIC misses Q4 estimates on lower sales prices: Aljazira Cap

Saudi Basic Industries Corp. (SABIC) fourth-quarter 2018 net profit of SAR 3.24 billion missed Aljazira Capital's and consensus estimates of SAR 5.09 billion and SAR 5.25 billion, the research firm said in an earnings review on Monday.

The year-on-year weak performance is attributed to lower average sales prices and products spreads, decrease in share of results of associates and joint ventures (Yansab’s shutdown and weak contribution from Kayan).

The company's revenue stood at SAR 40.13 billion, slightly above Aljazira's estimates of SAR 39.1 billion.

"We believe higher than expected revenues was a result of continued improvement in operating rates and efficiency after multiple plant maintenance during FY17,” it added.

Gross profit stood at SAR 12.24 billion, below the brokerage's estimate of SAR 13.25 billion due to higher than expected production cost.  Gross margin stood at 30.50 percent in Q4 2018, lower than the estimates of 33.87 percent.

Aljazira Capital maintained its “neutral” rating on the stock, setting the target price at SAR 126 a share.

"The expected rebound in petrochemical prices, improved oil fundamentals, and improved production efficiency are the key factors for SABIC. We believe the company’s strategic restructuring initiative with total cost of SAR 1.1 billion during FY18 would increase productivity while lowering the cost structure going forward," the report noted.