Saudi's Sabic Cuts Costs to Counter Earnings Fall
July 28 2016 - 9:20AM
Dow Jones News
By Ahmed Al Omran
RIYADH--Saudi Basic Industries Corp. (2010.SA), one of the
world's biggest petrochemical companies, on Thursday said it has
cut costs by 18% in the second quarter as it copes with a fall in
earnings due to lower sales prices.
"Global markets are going through difficulties and challenges
when it comes to energy prices and its effect on the petrochemicals
industry and the economies of different countries," Yousef Abdullah
al-Benyan, vice chairman and chief executive, said in a press
conference.
The company, better known as Sabic, on Wednesday reported a 23%
year-over-year fall in second-quarter net profit as lower product
prices continued to weigh on its business.
Sales in the quarter ending June 30 dropped 18% to 34.5 billion
riyals ($9.2 billion) from 42.1 billion riyals for the same period
last year, Sabic said. It cut costs compared with the previous
quarter.
"But in the second quarter, the improvement of oil prices had a
positive impact on petrochemicals prices," he said.
"We have an 11% increase in average sales price in the second
quarter compared with the first quarter," Mr. al-Benyan said. "We
hope oil prices will stabilize in the third quarter as we have seen
in the second quarter, and this will reflect positively in the
petrochemicals industry," he added.
The company said it maintains a positive outlook for Europe,
despite the U.K.'s decision to leave the European Union.
"In Europe, we own our plants 100%. We have no partnerships.
There is no impact on Sabic, our sales or business plan," he
said.
Sabic employs around 6,000 people in Europe and its business
includes a network of sales offices and logistic hubs, as well as
three petrochemical production sites in the Netherlands, Germany
and the U.K.
As for the U.S., Mr. al-Benyan said the company was "very
excited" about a potential project announced Monday for a major new
petrochemical complex on the Gulf Coast that would be developed as
a joint venture with Exxon Mobil Corp.
"This is in a very strategic market: North America. It is going
to be one of the major players in the petrochemicals industry in
the future. It's a huge market and a very important market for us,"
he said.
Mr. al-Benyan said it would be premature to determine the cost
of the project at this stage, but added that the company is
"confident this project is moving in the right direction."
Write to Ahmed Al Omran at ahmed.alomran@wsj.com
(END) Dow Jones Newswires
July 28, 2016 09:05 ET (13:05 GMT)
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