Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Saudi Basic Industries Corp (SAU:2010, Financial) reported a 9% increase in revenue over the prior quarter, reaching $9.5 billion, driven by an 11% rise in sales volume.
- The company achieved a 26% quarter-over-quarter improvement in EBITDA, surpassing consensus estimates, with an EBITDA margin improvement from 14% to 16%.
- SABIC's Board approved a dividend distribution for the first half of 2024, reflecting a robust financial position despite challenging market conditions.
- The company was awarded a gold medal by EcoVadis, placing it among the top 5% of companies rated for sustainability, labor and human rights, ethics, and sustainable procurement.
- SABIC's Fujian petrochemical complex project in China is progressing well and was recognized as one of the top 10 outstanding cases by the Chinese government.
Negative Points
- Despite the overall revenue increase, the average selling price decreased by 2%, indicating pricing pressures in the market.
- The agri-nutrient sector experienced a typical seasonal effect, leading to lower prices and a 14% decline in EBITDA despite higher revenues.
- There were challenges in the European market, including the closure of the Olefins 3 plant as part of portfolio optimization efforts.
- Logistics costs are rising, which could potentially compress margins in the upcoming quarters.
- The company faces ongoing challenges in the supply chain, although it is working to minimize impacts and ensure timely delivery to customers.
Q & A Highlights
Q: Can you provide details on the restructuring and plant closures in Europe?
A: We have been working on portfolio optimization, which included the divestment of Hadeed and closing the Olefins 3 plant in Europe. The focus is on recycling capital across regions, not just exiting or partially exiting markets. (Salah Al-Hareky, Executive Vice President, Corporate Finance)
Q: Why did petrochemical pricing increase only 2% quarter-on-quarter, compared to higher increases seen by peers?
A: The average pricing differences are due to the varied portfolio of SABIC compared to peers like Yansab. Market prices differ by region and product, and our focus is on maintaining stability in pricing across our diverse portfolio. (Abdul Rahman Al Fageeh, CEO)
Q: What contributed to the 8% increase in petrochemical volumes, and are there any pending shutdowns?
A: The increase was due to operational excellence and efficiency, with no major shutdowns affecting availability. We focus on reducing inventory while maintaining supply commitments. (Abdul Rahman Al Fageeh, CEO)
Q: Can you elaborate on the synergy benefits with Aramco and expectations for the rest of the year?
A: The synergy with Aramco yielded SAR600 million in Q2. We continue to work closely with Aramco to realize further synergies, with a structured governance in place to ensure execution. (Salah Al-Hareky, Executive Vice President, Corporate Finance)
Q: How do you plan to maintain margins in the next quarter given rising logistics costs?
A: We focus on maximizing margins by targeting higher-margin regions and products, maintaining cost discipline, and leveraging lower feedstock prices. Our global asset distribution helps mitigate logistics challenges. (Abdul Rahman Al Fageeh, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
