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Sustaining record SABIC profit will be tough – CEO

Says will invest in India if sees something suitable; Q2 net profit 61 pct rise surprises analysts

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July 18, 2011 2:42 by



Saudi Basic Industries Corp (SABIC) , the world’s biggest petrochemical firm by market value, said on Sunday that maintaining profitability would be a tough challenge after posting record profit in the latest quarter.
The bellwether Middle East conglomerate, which supplies chemicals, industrial polymers, fertilisers and metals globally, is in a good position to grow its own business while making acquisitions when necessary, said Chief Executive Mohamed al-Mady.
Net profit rose 61 percent in the second quarter to a record 8.1 billion Saudi riyals ($2.16 billion) from a year earlier, on the back of 49 billion riyals in quarterly revenue.
“What keeps me awake at night is keeping the successes we have,” Mady told Reuters. “This is about the 8.1 billion riyals … How long can we sustain this? It is challenging.”
Asked whether SABIC was interested in any assets being divest as a result of the split-up of ConocoPhillips and the divestment of its refining arm, announced three days ago, Mady declined to say whether it was a possibility.
“We always look at everything, and match it with company strategy,” he said. “We always evaluate these opportunities, we are always on the lookout for very important acquisitions and for organic growth.”
Bolstered by robust growth in China, India and the Middle East, results for the latest quarter came in well above analysts’ forecasts, beating the average for 7.1 billion riyals and the highest estimate of 7.7 billion.
“India is a huge market, the (Indian) government is thinking of attracting new investments and SABIC is looking at investments in India — if there are any good investments in petrochemicals there, products from refineries,” Mady said.
“If there are refineries attached to petrochemical plants we will be looking at that.”
SABIC has an advantage over rivals in terms of profitability because it pays a government-subsidised 75 cents per million BTU (British Thermal Unit) for gas feedstock, a fraction of the cost on international markets.
In terms of projects, Mady said a decision would be made this year on SABIC affiliate Saudi Arabian Fertilizers Co.’s (Safco) proposed 1 million tonne urea factory in Jubail. Production is due to begin in the second half of 2013.
A plan to build a facility with China’s Sinopec, estimated to cost at least $1 billion and to be operating by 2015, is on track, Mady said.
Operations at Saudi Kayan Petrochemicals will start commercial production in the second half of this year, Mady added, having originally been slated for the first half.

By Reed Stevenson and Asma Alsharif
(Editing by David Hulmes)



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