MOSCOW (MRC) -- Saudi International Petrochemical Co (Sipchem) reported a 76.4 per cent slump in second-quarter 2016 net profit, as lower sales prices for its products weighed on its earnings for a fifth straight quarter, said TradeArabia.
Sipchem made a profit of SR26 million (USD6.9 million) in the three months to June 30, down from SR110.1 million (USD29.36 million) in the prior-year period, according to a bourse filing.
The average estimate of four analysts polled by Reuters had been for a quarterly profit of SR50.2 million (USD13.38 million).
The company said its profit margins fell as sales prices for all its products dropped, while production costs increased because of higher feedstock and energy prices. This offset the benefits of higher production and sales.
Petrochemical product prices are closely linked to oil, so lower crude prices have reduced margins and the competitive advantage over rival manufacturers from non-oil producing regions which Saudi firms used to enjoy because of subsidised energy and feedstock.
Saudi Arabia is reforming its energy subsidies to help bring down a huge budget deficit. Sipchem had previously announced it expected SR120 million (USD32 million) of extra costs due to the reforms, without specifying the time period.
Sipchem said in May that a 15-day maintenance period for three plants at subsidiaries in which it holds majority control would cost the company around SR22.5 million (USD6 million).
As MRC wrote before, on July 26, 2014 Sipchem commenced trial runs at a new ethylene vinyl acetate (EVA)/low density polyethylene (LDPE) swing plant. Located in Jubail Saudi Arabia, the plant has a production capacity of 200,000 mt/year.
Established in 1999, Saudi International Petrochemical Company (Sipchem) manufactures and markets methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride, vinyl acetate monomer. Besides, it has launched several down-stream projects to manufacture ethylene vinyl acetate, low density polyethylene, ethyl acetate, butyl acetate, cross linkable polyethylene, and semi conductive compound.
MRC