SABIC’s CEO Raises Expectations for Coming Quarters

Saudi Basic Industries Corp. (SABIC) chief executive said on Tuesday that he expected good results in the coming quarters if the economy is stable in Europe.

“Prices are still reasonable within the economic situation…we will make good results in the coming quarters if there are no jitters in Europe,” Mohamed Al-Mady said.

SABIC posted a fall in first quarter earnings, sandwiched by higher input costs and a slowdown in Chinese consumption that crimped demand.

SABIC’s net profit fell 5 percent to SR7.27 billion but this was better than analysts expected and the shares rose 4.34 percent at the close.

Analysts surveyed by Reuters estimating the chemicals, fertilizers, metals and plastics conglomerate would post profit of SR6.74 billion.

“China was growing at a higher rate (before), then there was a slowdown in its economy, also the European slowdown…and high oil prices had an impact on raw materials cost,” Al-Mady said.

He said that product selling prices overall continued to be satisfactory, given the circumstances, and sounded a bullish note on coming quarters.

SABIC’s profits fell sharply in the last quarter of 2011 after two successive quarters of record profits achieved on the back of surging product prices and strong global demand, as Reuters stated.

Since SABIC products are used in a wide variety of industries, from car manufacture to house construction and cheap retail goods it is highly sensitive to movements in the global economy.

SABIC benefits from government subsidized gas feedstock prices, which are a fraction of international prices, but was hit during the quarter by higher liquid fuel costs.

Brent crude < rose 14 percent during the quarter and now hovers around the $120 per barrel mark. On average, crude prices were clearly higher year on year in the first quarter.

By the end of this year SABIC plans to launch an iron plant with the production capacity of 500,000 tons which would help boost the firm’s products volume, Al-Mady said.