A major financial loss is announced by a Saudi company every day. While international investors are hesitant to make investments in Saudi Arabia, Saudi production and service companies reported significant losses.
Saudi Arabia’s top chemicals maker reported a loss after selling its steel unit and as weaker demand hit the industry.
Saudi Basic Industries Corp., or Sabic, said the loss for the third quarter was 2.88 billion riyals ($768 million), compared with a 1.84 billion-riyal profit a year earlier. It said there was a one-time loss after a revaluation following the sale of Saudi Iron and Steel.
Saudi Basic Industries Corp (SABIC) (2010.SE), one of the world’s biggest petrochemical companies, on Thursday posted an almost 17% fall in third-quarter revenue and a net loss.
In a filing, SABIC reported a net loss of 2.88 billion riyals ($768 million) for the three months to Sept. 30, compared with a profit of 1.84 billion riyals a year earlier.
The loss was mainly driven by an impairment charge of 2.93 billion riyals on the fair value of Saudi Iron and Steel Company (Hadeed) after Saudi Arabia’s sovereign wealth fund acquired SABIC’s entire stake in the company.
SABIC’s divestment in Hadeed was agreed to in September, allowing the Saudi petrochemicals giant to “optimise its strategic portfolio and focus on its core business,” it said.
Revenues fell to 35.98 billion riyals from 43.32 billion a year earlier, but was up almost 6% quarter-on-quarter.
The global petrochemical market continues to witness weak global demand and an increase in supply for most products, SABIC said. Its average selling price fell 5% quarter-on-quarter while prices for agri-nutrient products increased by 11%.
The company said it remains disciplined in managing its capital expenditure which for 2023 it estimates at $3.5 billion to $3.8 billion.
Chemical makers had flagged a potential blow in the second half of the year from a slower-than-expected recovery in China following its post-pandemic reopening and lower demand in Europe.
Shares of SABIC have declined almost 15% this year.
Earlier this year, the Electricity and Water Utilities Company in Jubail and Yanbu “Marafiq” revealed a decline in net profit after zakat and tax in the second quarter to 159.4 million riyals, compared to 261.8 million riyals in the same quarter of last year, a decrease of 39.1%. This came after an announcement of the preliminary financial results for the period ending on June 30, 2023.
Operational profit amounted to 285 million riyals in the second quarter, compared to 341.6 million riyals in the same quarter of the previous year, a decrease of 16.6%.
The net profit after zakat and tax during the 6-month period amounted to 266.1 million riyals, compared to 404.7 million riyals in the same period last year, a decrease of 34.2%.
The total shareholders’ equity “without minority rights” amounted to 8.2 billion riyals in the current period, compared to 7.9 billion riyals in the same period last year, an increase of 3.53%.
Earnings per share in the current period reached 1.16 riyals, compared to 1.62 riyals in the same period last year.
The reason for the decrease in net profit is due to an increase in financing costs and a decrease in the company’s operating revenues, despite a decrease in the provision for zakat and tax.
The reason for the increase in net profit is due to an increase in the company’s operating revenues and a decrease in the provision for zakat and tax, despite the increase in financing costs.
Economic sources earlier reported that foreign direct investment (FDI) in Saudi Arabia dropped almost 60% this year. The sources added that some businessmen and companies are afraid to invest in Saudi Arabia due to MBS’s failed policies.
It is not possible to assess whether FDI will be increased adequately to finance Vision 2030, the sources added.
Experts have warned that the sharp decline in foreign investments by 85% in just one year is a real disaster that proves that foreign investors do not trust the projects launched by the Saudi crown prince Mohammed bin Salman.
