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Decreased Demand, Global Market Conditions Affect Saudi SABIC Financial Results

SABIC CEO speaking to journalists during Thursday’s press conference (Asharq Al-Awsat)
SABIC CEO speaking to journalists during Thursday’s press conference (Asharq Al-Awsat)
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Decreased Demand, Global Market Conditions Affect Saudi SABIC Financial Results

SABIC CEO speaking to journalists during Thursday’s press conference (Asharq Al-Awsat)
SABIC CEO speaking to journalists during Thursday’s press conference (Asharq Al-Awsat)

The financial results of the Saudi Basic Industries Corporation (Sabic) - the largest producer of petrochemicals, fertilizers and steel in the Middle East - revealed that the company’s performance was affected during the second quarter of 2023 by the conditions of the global chemical markets and the decline in demand.

The company recorded an 85 percent decline in profits on an annual basis in the second quarter of this year, registering SAR 1.18 billion ($314.5 million), compared to SAR 7.93 billion ($2.1 billion) in the same quarter of 2022.

“The global economy is continuously slowing down as a result of tightening monetary policies to confront inflation, leading to weaker demand,” said Abdulrahman Al Fageeh, chief executive of SABIC.

He added: “In the second quarter, we maintained our sales volume despite the challenging economic environment with increased supply of our main products. We achieved the minimum target of our synergies with Saudi Aramco two years ahead of time by reaching $1.51 billion on a cumulative basis.”

According to the CEO, “the company is committed to innovation and sustainability as two main pillars of our growth.”

Al-Fageeh noted that in the second quarter, Sabic completed a project to convert oil from plastic waste into certified circular polymers, becoming the first company in the Middle East and North Africa region to adopt this method.

He added that the company has completed sending the first approved commercial shipments of low-carbon ammonia to India and Taiwan, which confirms its keenness to provide value solutions to customers and markets to achieve net zero emissions.

Over the course of the second quarter of 2023, Sabic announced many agreements and strategic developments that support the company’s goal of achieving carbon neutrality, and its vision of becoming the preferred global leader in chemicals.

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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)

Saudi Arabia’s digital advertising sector is experiencing rapid growth, but a significant portion of its revenues is leaking to foreign platforms. To maximize the impact on the national economy, experts are calling for strategies to curb this outflow and redirect it to local channels.

The importance of retaining digital ad revenues lies in the substantial size of this market. It is estimated that approximately $1 billion in ad spent is lost annually to foreign platforms, representing a considerable loss to Saudi Arabia’s economy.

Dr. Ebada Al-Abbad, CEO of Marketing and Communications at Tadafuq, a Saudi digital advertising network, told Asharq Al-Awsat that the problem stems from the fact that although advertisers, products, and audiences are often local, the largest share of financial gains goes to foreign platforms. He estimated that 70-80% of the $1.5 billion spent on digital advertising in Saudi Arabia in 2022 went to global platforms such as Google and Facebook. This results in the national economy losing nearly $1 billion annually from this sector alone.

Al-Abbad noted that government agencies in Saudi Arabia also contribute to the outflow. He explained that public sector spending on digital advertising, intended to raise awareness among citizens and residents, frequently ends up on foreign platforms. Government spending makes up about 20-25% of the total digital ad market in the Kingdom, meaning hundreds of millions of riyals leave the country annually, weakening the local digital economy.

Al-Abbad argues that Saudi Arabia needs strong local digital ad networks to keep this revenue within the national economy. These networks would help create jobs, drive innovation, and promote cultural diversity in digital content. Developing local platforms would also enhance Saudi Arabia’s digital sovereignty by ensuring that data remains within the country and is not controlled by foreign entities.

Moreover, local networks would reduce dependence on international platforms, ensuring that the economic benefits of digital advertising remain in the Kingdom, he said, stressing that this would align with Saudi Arabia’s broader Vision 2030 goals, which emphasize building a robust, diversified economy driven by local industries and digital transformation.

Globally, the digital advertising sector is growing rapidly. In 2022, worldwide spending on digital ads reached $602 billion, and it is projected to hit $876 billion by 2026. In the Middle East and North Africa (MENA) region, the digital ad market grew to $5.9 billion in 2022, with Saudi Arabia’s market accounting for over $1.5 billion.

In other countries, the digital ad sector plays a crucial role in boosting national economies. For example, in the United States, the digital advertising industry contributed $460 billion to the GDP in 2021, about 2.1% of the total. In the UK, the sector accounted for 1.8% of GDP in 2022. This shows how important digital advertising can be in driving economic growth.

One of the key challenges facing Saudi Arabia’s digital ad sector is the dominance of global platforms like Google and Facebook, which control 60% of the global digital ad market, Al-Abbad told Asharq Al-Awsat. This dominance results in a significant outflow of revenue and allows these platforms to control digital data and content. He warned that this could undermine Saudi Arabia’s national sovereignty over its digital economy.

To counter this, he emphasized that Saudi Arabia needs to build competitive local networks that can retain a larger share of the market. This will not only keep more revenue in the country but also strengthen the Kingdom’s control over its digital data and content.