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SABIC Loses $739 Million over Challenging Operating Environment

SABIC revenues dropped by 22.69% to SAR141.5 billion at the end of 2023. (Photo: SABIC website)
SABIC revenues dropped by 22.69% to SAR141.5 billion at the end of 2023. (Photo: SABIC website)
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SABIC Loses $739 Million over Challenging Operating Environment

SABIC revenues dropped by 22.69% to SAR141.5 billion at the end of 2023. (Photo: SABIC website)
SABIC revenues dropped by 22.69% to SAR141.5 billion at the end of 2023. (Photo: SABIC website)

The Saudi Basic Industries Corporation (SABIC), one of the largest petrochemical companies in the world, recorded a net loss of SAR2.77 billion ($739 million) for the year 2023, at a time when the company faces a challenging operating environment.

“The petrochemical industry navigates a challenging operating environment,” SABIC Chief Executive Officer Abdulrahman Al-Fageeh said on Tuesday.

He added: “Underwhelming demand within our target market led to lower year-end product prices.”

On the other hand, Al-Fageeh noted that SABIC achieved profits from its main ongoing operations, amounting to SAR1.31 billion, compared to SAR15.79 billion during the previous year, which reflects the company’s financial strength in light of the current economic conditions and the impact of the sale of the Hadeed steel company last year.

These numbers highlight the extent of the challenge facing petrochemical companies as they grapple with market weakness, slow economic growth, and falling prices.

SABIC’s financial results coincided with the announcement by Moody’s credit ratings agency that SABIC, stc and SEC were rated at A1 with “positive” outlooks, while Maaden was assigned a Baa1 with a “stable” outlook.

SABIC said in its financial results statement published on the Saudi Stock Exchange (Tadawul) website that the net loss was due to discontinued operations amounting to around SAR4 billion, driven mainly from the fair valuation of its subsidiary Saudi Iron and Steel Company (Hadeed) amounting to SAR2.93 billion, as well as its lower financial performance during the current year.

The company achieved profits from ongoing main operations, amounting to SAR1.3 billion, compared to SAR15.7 billion during 2022, mainly due to several factors, including: the drop in profit margins for most of the main products and the impairment charges and write-offs of certain capital and financial assets, as well as provisions for the restructuring program in Europe and constructive obligations.

Al-Fageeh noted that the petrochemical industry was going through a challenging operating environment, pointing to “considerable uncertainty heading into the first quarter of 2024.”

He said that the company was committed to deploy between $4 and $5 billion in capital expenditure in 2024, adding that SABIC would strive to maintain dividend distributions to shareholders without compromising the robust balance sheet.

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World Breathes Sigh of Relief as Trump Spares Fed, IMF

US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
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World Breathes Sigh of Relief as Trump Spares Fed, IMF

US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)
US President Donald Trump speaks to members of press onboard Air Force One on a flight to Fiumicino Airport near Rome to attend the funeral of Pope Francis, April 25, 2025. (Reuters)

Global policymakers gathering in Washington this week breathed a collective sigh of relief that the US-centric economic order that prevailed for the past 80 years was not collapsing just yet despite Donald Trump's inward-looking approach.

The Spring Meetings of the International Monetary Fund and the World Bank were dominated by trade talks, which also brought some de-escalatory statements from Washington about its relations with China.

But some deeper questions hovered over central bankers and finance ministers after Trump's attacks on international institutions and the Federal Reserve: can we still count on the US dollar as the world's safe haven and on the two lenders that have supported the international economic system since the end of World War Two?

Conversations with dozens of policymakers from all over the world revealed generalized relief at Trump’s scaling back his threats to fire Fed Chair Jerome Powell, the guardian of the dollar’s international status whom he had previously described as a "major loser".

And many also saw a silver lining in US Treasury Secretary Scott Bessent’s call to reshape the IMF and World Bank according to Trump's priorities because it implied that the United States was not about to pull out of the two lenders that it helped create at the Bretton Woods conference of 1944.

"This week was one of cautious relief," Austria's central bank governor Robert Holzmann said. "There was a turn (in the US administration's stance) but I fret this may not be the last. I keep my reservations."

A politicization of the Fed and, to a lesser extent, the hollowing out of the IMF and World Bank are almost too much to fathom for most officials.

Deprived of a lender of last resort, some $25 trillion of bonds and loans issued abroad would be called into question.

NO ALTERNATIVE

At the heart of policymakers' concerns is that there is no ready alternative to the United States as the world's financial hegemon - a situation that economists know as the Kindleberger Trap after renowned historian Charles Kindleberger.

To be sure, the euro, a distant-second reserve currency, is gaining popularity in light of the European Union's newly found status as an island of relative stability.

But policymakers who spoke to Reuters were adamant that the European single currency was not ready yet to dethrone the dollar and could at best hope to add a little to its 20% share of the world's reserves.

Of the 20 countries that share the euro only Germany has the credit rating and the size that investors demand from a safe haven.

Some other members are highly indebted and prone to bouts of political and financial turmoil - most recently in France last year - which raise lingering questions about the bloc's long-term viability.

And the euro zone's geographical proximity to Russia - particularly the three Baltic countries that were once part of the Soviet Union - cast an even more sinister shadow.

With Japan now too small and China's heavily managed currency in an even worse position, this left no alternative to the dollar system underpinned by the Fed and the two Bretton Woods institutions.

In fact, the IMF and the World Bank could scarcely survive if their largest shareholder, the United States, pulled out, officials said.

"The US is absolutely crucial for multilateral institutions," Polish Finance Minister Andrzej Domanski told Reuters. "We're happy they remain."

Still, few expected to go back to the old status quo and thorny issues were likely to await, such as widespread dependence on US firms for a number of key services from credit cards to satellites.

But some observers argued that the market turmoil of the past few weeks, which saw US bonds, shares and the currency sell off sharply, might have been a shot in the arm as it forced a change of tack by the administration.

"When President Trump talked about firing Jay Powell, the fact that markets reacted so vigorously to that ended up being a disciplining reality just reminding the administration that, if you cross that line, it could have some very severe implications," said Nathan Sheets, global chief economist at Citi.