Saudi Basic Industries reports 3.8% jump in quarterly earnings

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Saudi Basic Industries reports 3.8% jump in quarterly earnings

Saudi Basic Industries Corp., a chemicals giant, reported a 3.8% increase in quarterly earnings, but warned profit margins will be under pressure as costs go up.

As economies recover from the Pandemic, prices of products such as polyethylene and polyvinyl chloride used to make everything from plastics to building materials have gone up, boosting demand. A supply-chain squeeze has pushed up costs for producers.

Net income increased to 7.93 billion riyals $2.1 billion in the second quarter from 7.64 billion riyals a year ago, according to Sabic. Revenue climbed 32% to 56 billion riyals, beating analysts estimates.

The company, controlled by Saudi Aramco, said the results reflect higher selling prices and sales volumes, despite rising costs for feedstock and distribution. It gave a cautious outlook for the rest of the year, despite fears of a flagging global economy.

Sabic said that the margins will be under pressure in the second half of 2022 due to the slowdown in global GDP growth, lockdowns in China, conflict in Europe and continued supply-chain challenges.

Competitors such as BASF SE have had similar logistical constraints, while also warning of a slowing economy.

Saudi Arabia wants firms like Sabic, the world's largest chemicals maker by market value to form the basis of new manufacturing and consumer-goods industries as the kingdom seeks to diversify away from oil.

The company's shares gained as much as 3% at the open on Tuesday. The stock has dropped 11% this year, underperforming rivals such as Dow Inc. and the wider Saudi equity market.

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