Dubai — SABIC, the petrochemical producer that is being acquired by Saudi Aramco, posted a 68.4% year-on-year plunge in second quarter net profit to Riyals 2.12 billion ($565 million) as petrochemical prices fell and new supply was added.
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"The slowdown in global GDP growth coincides with a decline in petrochemical prices due to a significant increase in new supply capacity resulting in lower product prices and margins in key product lines," Yousef al-Benyan, vice chairman and CEO of SABIC, said Sunday in a statement to the Saudi stock exchange where its shares are traded.
"The new capacities in key products lines that pressured SABIC's product prices and margins in the first half of 2019 are expected to continue to impact the company's earnings in the second half of 2019."
Second quarter revenue fell 17% year-on-year to Riyal 35.87 billion. Some of the products that suffered from weak prices include mono ethyl glycol, whose prices in the second quarter were the lowest since 2009, SABIC said.
SABIC, the Middle East's biggest petrochemical producer, said last week it had called off talks to form a joint venture with European specialty chemicals producer Clariant due to current "unfavorable" market conditions. SABIC, the top shareholder in Clariant with a 24.99% stake, signed a memorandum of understanding in September 2018 to combine SABIC's specialties business with the Swiss company's additives and high value masterbatch offerings.
State-owned Saudi Aramco agreed earlier in 2019 to acquire 70% of SABIC from the country's sovereign wealth fund for $69 billion as part of plans to expand its petrochemicals portfolio. Both Saudi Aramco and SABIC are boosting their petrochemical footprint and inking agreements within and outside the Gulf state to gain access to feedstock and get closer to their customers.
ExxonMobil and SABIC had announced in June that they are going ahead with a newbuild petrochemical complex in Texas, after having received all necessary permits and approvals.
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