Saudi "SABIC" Turns Profitable but Below Market Expectations

SadaNews - The "Saudi Basic Industries Corporation" (SABIC), the largest petrochemical company in Saudi Arabia, returned to profitability in the third quarter of 2025, indicating an improvement in the operating environment, ending a series of losses that lasted for three consecutive quarters. However, the net profit of 440 million riyals fell short of market expectations, which estimated it at 729.3 million riyals, according to Bloomberg data, amidst ongoing challenges linked to shrinking profit margins and weak global prices.

On a year-over-year basis, the company’s profits declined by 56% during the three months ending in September due to tightening profit margins, a decrease in other operational revenues, and an increase in zakat and tax expenses. Meanwhile, revenues fell by a much smaller rate of 7% year-on-year to 34.33 billion riyals, primarily affected by lower selling prices and quantities sold.

SABIC incurred losses for three consecutive quarters until the second quarter of this year, amidst a broader downturn in the sector, with its share price dropping by nearly 9% since the beginning of the year. The company, which is predominantly owned by the oil giant "Saudi Aramco", is restructuring its business portfolio and reviewing non-core assets.

Pressure in the Petrochemical Sector

SABIC's performance comes amidst wider pressures facing the petrochemical sector as a whole, with analysts predicting a 29% decline in profits for petrochemical companies in the third quarter due to lowered global demand, particularly from China, alongside increased supply and feedstock price pressures, according to Abed Rabah Zidan, head of research and studies at Al Arqam Financial Portal. He clarified in a previous interview with "Asharq" last October that expectations align with market realities, as weak prices negatively impact profit margins.

The drop in demand has affected the profits of major chemical companies globally and compressed their profit margins over the past few quarters, forcing some of them to sell assets and close projects.

On Friday, "LyondellBasell Industries NV" announced that it would halt production at sites in Germany and the U.S. starting in November for reasons including cost reduction. Similarly, "Shell Plc" stated last week that there is no immediate end in sight to the chemical sector's downturn.

The German industry giant "BASF SE" provided some positive signals, stating that demand growth in China helps offset weaknesses in other regions. The company reported a 4.8% decline in profits before interest, taxes, depreciation, and unusual items, while "Dow Inc" reduced its losses in the third quarter.

Al-Fuqaih: Excess Production Capacity Continues to Pressure Profit

Commenting on the results, Abdulrahman Al-Fuqaih, CEO of SABIC, stated: "The third quarter of 2025 witnessed moderate improvement in the global economic landscape; however, the excess production capacity in the petrochemical industry continued to pressure profit margins and reduce operating rates. This quarter also saw the introduction of 91 new products to meet customer needs across various global markets."

He added that the company continues to make progress in implementing its key strategic growth projects, with mechanical works for the "Methyl Tertiary Butyl Ether" project at "Petrochem" in Saudi Arabia having been completed ahead of schedule. In China, the "SABIC Fujian Complex" has reached 87% completion in engineering, construction, and procurement work.

Al-Fuqaih noted, "SABIC's transformative journey made additional progress during the third quarter, as transformation efforts yielded tangible value of 300 million dollars, bringing us closer to our target of achieving 3 billion dollars in recurring profits before interest, taxes, depreciation, and amortization by 2030."

SABIC..Optimistic Outlook for the Future

In the long term, Al-Fuqaih expressed confidence in SABIC's ability to navigate market fluctuations and enhance the value provided to its shareholders over the long term.

Regarding future performance, SABIC expressed an optimistic outlook, anticipating "stable demand during the fourth quarter of 2025 compared to the previous quarter across all end-use industries, including packaging, construction, agriculture, consumer goods, transportation, industrial solutions, automobiles, electronics, electrical appliances, personal care, and healthcare."

Regarding capital investments, SABIC stated that it continues to manage them with discipline and currently expects spending in the range of 3 billion to 3.5 billion dollars for the year 2025.