Analysing SABIC's Q1 2024 Performance

SABIC, one of the world’s leading chemical industry giants, couldn’t perform well in 2024. As reported by ICIS, their financials took a hit in the initial quarter, witnessing a significant 62% downfall in the net income compared to the corresponding period last year. The reason behind this downturn? A combination of decreasing prices and low sales, according to the company’s statements.

Delving into SABIC’s Q1 2024 Financials

A deeper dive into the figures unveils the challenging state of SABIC as navigated in Q1 2024. Sales witnessed a notable 10% descent, plummeting from SR 36.43 billion to SR 32.69 billion. Operational profit also took a steep 31% fall from SR 1.76 billion to SR 1.21 billion. Likewise, downward momentum persisted with net income, sliding from SR 0.66 billion in Q1 2023 to SR 0.25 billion in Q1 2024.

SABIC clarified in a filing on the Saudi exchange, Tadawul, that the net profit declined due to reduced revenues, diminished returns from associates and joint ventures, and losses from discontinued operations.

Impact of Global Economic Uncertainty on SABIC

Throughout the initial quarter of 2024, SABIC dealt with unavoidable circumstances which affected it severely. Global economic uncertainty, geopolitical tension, logistical disruption, soaring global inflation, and strict lending protocols compounded the company’s challenges, making it tough to navigate the market.

Overcapacity Challenges With SABIC

CEO Abdulrahman Al-Fageeh pointed out the ongoing challenge of overcapacity in the industry during an investor call. This overcapacity creates a significant gap between supply and demand, which is expected to persist throughout 2024. Despite some positive demand signals in the first quarter, the overall outlook for the year remains uncertain.

SABIC New Projects and Expansion Plans

Despite the challenges, SABIC is pushing forward with expansion and innovation. The company kicked off the construction of a $6.4 billion manufacturing complex in China’s Fujian province. This project aims to beef up SABIC’s product portfolio and bolster its presence in the Chinese market. Additionally, SABIC recently unveiled the world’s first large-scale electrically heated steam olefins cracking furnace in the Netherlands. This marks a significant step towards achieving carbon neutrality by 2050.

The project will involve building a facility that processes a mix of materials to produce up to 1.8 million tons of ethylene (a chemical compound abbreviated as C2) per year. This ethylene will be used in different processes to make various products like ethylene glycols (EG), polyethylene (PE), polypropylene (PP), and polycarbonate (PC), along with some other items.

OFB’s Take on SABIC’s Performance & Expansion Endeavours

SABIC’s performance in the first quarter of 2024 shows just how tough the global chemical industry can be. Despite facing obstacles like overcapacity and economic uncertainty, the company is staying focused on careful financial management and strategic expansion plans. Given the uncertain times, SABIC is taking a cautious approach to capital expenditure. They’re planning to spend between $4 billion to $5 billion in 2024, slightly more than last year. This prudent strategy demonstrates SABIC’s commitment to navigating through unpredictable market conditions.

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