Petro Rabigh’s Q1 loss a surprise, says Riyad Cap

Rabigh Refining and Petrochemical Co. (Petro Rabigh) has turned to a surprise net loss of SAR 240 million in Q1 2017, versus an estimate of SAR 84 million net profit, continuing its track record of volatile financial statements, Riyad Capital said in an earnings review.

Losses were attributed by the company’s management to narrowing margins on refined products along with a downtrend in crude prices impacting inventory valuations.

“We believe Petro Rabigh’s operating level was constrained and lower Q/Q although pricing at the petrochemicals segment has improved and likely resulted in better margins in that segment,” the brokerage firm added.

Revenue missed forecast of SAR 7.3 billion, despite jumping 35 percent year-on-year (YoY) to SAR 6.7 billion.

Gross margins dropped to 1 percent, compared to estimate of 5 percent and also to actual 4.5 percent and 6 percent in the first and fourth quarters of 2016, respectively.

“Revenues did not rise as much as expected while margins plunged resulting in a net loss of SAR (240) million for the quarter, the highest since Q4 2015,” the report added.

Riyad Capital cut the stock to “neutral”, keeping its target price unchanged at SAR 16.