According to the Kuwait-based Global Investment House, profits of petrochemical companies in the Gulf Cooperation Council declined by 25.8% YoY basis in Q2 2012 to USD 2.54 billion as compared to USD 3.42 billion in the same period last year.
On QoQ basis, the earnings declined by 19.3% majorly because of lower income reported by Saudi Basic Industries Corporation. SABIC's profit declined by 27.1% QoQ. Q2 performances of various petrochemical companies witnessed decline as prices of various petrochemical products witnessed a fall in the range of 5% to 10%.
Overall, the performance of regional petrochemical companies was mixed on a QoQ basis with SABIC, YANSAB, Sipchem, Nama Chemicals Company, Petro Rabigh, Saudi Kayan Petrochemical Company and Dana Gas missing consensus estimates by a larger margin while other stocks such as, IQ, Sahara Petrochemical, Shell Oman, SAFCO and TASNEE reporting relatively better than expected earnings.
On a country basis, Qatar and Oman reported higher earnings on a QoQ basis while Saudi Arabia and the UAE witnessed a sizable fall in earnings. Overall net income registered by the companies under our coverage was USD 2.46 billion in Q2 2012 compared to USD 2.96 billion in the previous quarter. SABIC continued to remain the lead contributor to the sector profitability at 57.3% followed by Industries Qatar and SAFCO at 23.7% and 8.5% respectively.
According to the Gulf Petrochemical & Chemicals Association, Meanwhile, GCC petrochemical capacity is estimated to increase from 77.3 million tonne per annum to 113 million tonne per annum at the end of 2015, a 46% rise. The GCC petrochemicals production capacity grew 13.5% last year to nearly 116 billion tonnes where Saudi Arabia alone was responsible for more than half of the USD 100 billion in sales generated by the GCC petrochemical sector.
Following is a quick look at the financial performance of the GCC major petrochemical companies in 2Q12:
1. SABIC - SABIC reported Q2 2012 net income of SAR 5.3 billion compared to SAR 8.2 billion for the same quarter last year representing a decrease of 34.6% and compared to the net income for the Q1 of 2012 of SAR 7.3 billion representing a decline of 27.1%. The decrease in net income of the quarter compared to the previous quarter was driven by lower product pricing because of continuous slowdown in global economic growth, especially in Europe and North America. The drop in production further aggravated the fall and sales volume due to scheduled maintenance activities at its fertilizers, metals and some petrochemical plants. The results came lower also because of low income reported by SAFCO and widening of losses by Saudi Kayan.
2. Industries Qatar - IQ announced its Q2 2012 results, which were slightly ahead of our estimates by 3.8 percent. Q2 2012 net income was higher by 11.6% QoQ at QAR 2.12 billion. Gross and operating margins improved to 51.6% and 45.8% in Q2 2012 compared to 49.6% and 44% in Q1 2012 respectively. Associates reported better than expected results as they managed to end in the green in Q2 2012 with income of QAR 12.8 million compared to loss of QAR 31 million in Q1 2012. The company has benefited significantly from the QAFCO-V commercial launch in Q1 2012 and LDPE-3 launch during Q2 2012.
3. SAFCO - SAFCO recorded a profit of SAR 784 million, 0.76% less YoY and 0.38% less on QoQ basis. Maintenance shutdowns and turnaround at some of the lines and plants reduced the production and sales volume, however, prices rose which were able to compensate for the volumes. Revenue during the period rose by 5.1% QoQ while cost rose substantially by 21% which reduced the gross margins to 66.6% in Q2 2012 compared to 71% in Q1 2012. The company reported a net income SAR 1,571 million during 1h 2012 against SAR 1,632 million for the same period of previous year, 3.2% lesser.
4. SIPCHEM - SIPCHEM reported a net income of SAR 136.1 million which declined by 17.7% YoY and 10.3% QoQ. Decrease in production and sales quantities as a result of planned turnaround of acetic acid plant and carbon monoxide plant during the Q2 in addition to a decrease in prices of most of products were the main reason for the fall in profits. Revenue during the period dropped by 14.5% QoQ while it was higher on a YoY basis by 8.8%. Gross margins recovered strongly during the quarter to 37.0% compared to 31.6% in Q1 2012 and slightly lower than Q2 2011 margins of 38.1%. Net profit during H1 2012 amounted to SAR 287.7 million compared to SAR 286.3 million for the same period last year, higher by 0.5%.
5. YANSAB - YANSAB reported a net income of SAR 649.6 million for the Q2 2012 compared to SAR 963.7 million for the same quarter last year with a decrease of 32.6% and compared to SAR 720.3 million for the previous quarter with a decrease of 9.8%. The decrease in profits for Q2 2012 on both YoY and QoQ basis was due to lower product sales price despite increase in production and sales volumes, which resulted from continuous operational improvement.
Dana Gas - Dana Gas Q2 net profit rose 46% on year as tax expenses fell. The company made a net profit of AED 181 million in the last quarter up from AED 124 million a year earlier. The company's income tax expenses amounted to AED 51 million in the 3 month period down from AED 99 million a year earlier. Its Q2 revenues fell 12% on year to AED 554 million due to a decline in Egypt's production and lower hydrocarbon prices during the period. The company's net profit in the first 6 months of the year surged to AED 387 million up from AED 216 million in the year before period.
Source - Arab News
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