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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)
TT
TT

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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China Launches Late Stimulus Push to Meet 2024 Growth Target

FILE PHOTO: A worker works on a building under construction in Beijing's Central Business District (CBD), China July 14, 2024. REUTERS/Tingshu Wang/File Photo
FILE PHOTO: A worker works on a building under construction in Beijing's Central Business District (CBD), China July 14, 2024. REUTERS/Tingshu Wang/File Photo
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China Launches Late Stimulus Push to Meet 2024 Growth Target

FILE PHOTO: A worker works on a building under construction in Beijing's Central Business District (CBD), China July 14, 2024. REUTERS/Tingshu Wang/File Photo
FILE PHOTO: A worker works on a building under construction in Beijing's Central Business District (CBD), China July 14, 2024. REUTERS/Tingshu Wang/File Photo

China's central bank on Friday lowered interest rates and injected liquidity into the banking system as Beijing assembled a last-ditch stimulus assault to pull economic growth back towards this year's roughly 5% target, Reuters reported.
More fiscal measures are expected to be announced before China's week-long holidays starting on Oct. 1, after a meeting of the Communist Party's top leaders showed an increased sense of urgency about mounting economic headwinds.
On the heels of the Politburo huddle, China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of fresh fiscal stimulus, two sources with knowledge of the matter have told Reuters.
Capital Economics chief Asia Economist Mark Williams estimates the package "would lift annual output by 0.4% relative to what it would otherwise have been."
"It's late in the year, but a new package of this size that was implemented soon should be enough to deliver growth in line with the 'around 5%' target," he said.
Chinese stocks are on track for the best week since 2008 on stimulus expectations.
The world's second-largest economy faces strong deflationary pressures due to a sharp property market downturn and frail consumer confidence, which have exposed its over-reliance on exports in an increasingly tense global trade environment.
A wide range of economic data in recent months has missed forecasts, raising concerns among economists that the growth target was at risk and that a longer-term structural slowdown could be in play.
On Friday, data showed industrial profits swinging back to a sharp contraction in August.
"We believe the persistent growth weakness has hit policymakers' pain threshold," Goldman Sachs analysts said in a note.
As flagged on Tuesday by Governor Pan Gongsheng, the People's Bank of China on Friday trimmed the amount of cash that banks must hold as reserves, known as the reserve requirement ratio (RRR), by 50 basis points, the second such reduction this year.
The move is expected to release 1 trillion yuan ($142.5 billion) in liquidity into the banking system and was accompanied by a cut in the benchmark interest rate on seven-day reverse repurchase agreements by 20 bps to 1.50%. The cuts take effect on Friday and Pan, in rare forward-looking remarks, left the door open to another RRR reduction later this year.

Given weak credit demand from households and businesses, investors are more focused on the fiscal measures that are widely expected to be announced in coming days.
Reuters reported on Thursday that 1 trillion yuan due to be raised via special bonds will be used to increase subsidies for a consumer goods replacement program and for the upgrade of large-scale business equipment.
They will also be used to provide a monthly allowance of about 800 yuan, or $114, per child to all households with two or more children, excluding the first child.
China aims to raise another 1 trillion yuan via a separate special sovereign debt issuance to help local governments tackle their debt problems.
Bloomberg News reported on Thursday that China is also considering the injection up to 1 trillion yuan of capital into its biggest state banks.
Most of China's fiscal stimulus still goes into investment, but returns are dwindling and the spending has saddled local governments with $13 trillion in debt.
The looming fiscal measures would mark a slight shift towards stimulating consumption, a direction Beijing has said for more than a decade that it wants to take but has made little progress on.
China's household spending is less than 40% of annual economic output, some 20 percentage points below the global average. Investment, by comparison, is 20 points above but has been fueling much more debt than growth.
The politburo also pledged to stabilize the troubled real estate market, saying the government should expand a white list of housing projects that can receive further financing and revitalize idle land.
The September meeting is not usually a forum for discussing the economy, which suggests growing anxiety among officials.
"The 'shock and awe' strategy could be meant to jumpstart the markets and boost confidence," Nomura analysts said in a note.
"But eventually it is still necessary for Beijing to introduce well thought policies to address many of the deep-rooted problems, particularly regarding how to stabilize the property sector."