SABIC reports narrower quarter loss and revenue drops 18% due to disruptions in supply chains caused by the Iran War
Saudi chemicals giant SABIC reported on Wednesday a'sharply smaller second-quarter net loss, due mainly to the 'absence of large one-off expenses from last year. Revenue fell 18% as a result of war-related disruptions in supply chains.
SABIC, which is 70% owned by the state oil giant Aramco posted a loss of 833 millions riyals ($221.91million) attributable to its shareholders, compared with 4.07 billions riyals one year ago.
The main reason for the improvement was a drop of 3.79 billion riyals in the losses from discontinued operations.
The revenue fell from 30,23 billion riyals to 24,81 billion riyals, as the higher average selling price only partially offset lower volume. Sales volumes fell by?41% compared to last year, but prices increased 39%. SABIC cut its dividend for the first half to 3.3 billion riyals, down from 4.5 billion riyals. The company said that this decision would preserve financial flexibility and maintain shareholder distributions.
WAR DISRUPTS SUPPLY CHAINS The result reflected regional conflict, as the U.S. - Iran war disrupted shipping in the Strait of Hormuz. This increased energy and product costs while hampering SABIC production from eastern Saudi Arabia.
SABIC? cited the closing of the strait as well as disruptions at key energy installations and higher global energy costs among the main challenges for the quarter.
The company increased its?polymer shipment from the eastern to the western Saudi Arabia region by 150% and relied on a new container service, Red Sea Express, to maintain delivery.
CEO Faisal Al-Aqeer stated that "despite the challenging market conditions, our disciplined capital allocation approach and strong balance sheet enable us to remain resilient."
Due to higher working capital, free cash flow was a negative 1.4 billion Riyals, compared to a positive 870 millions riyals in the previous year and a negative 270million riyals during the first quarter. The company maintained its full-year capital guidance between $3.5 billion and $4 billion. The joint-venture petrochemical facility in Fujian, China is expected to begin operations in the fourth.
(source: Reuters)
