Saudi Arabia’s National Industrialization Co’s chief executive expects to see the benefits of a restructuring soon and has a more positive outlook for the chemicals market.
Like many Saudi petrochemical firms, Tasnee’s earnings have suffered as its product prices are closely tied to oil prices, which have slumped since mid-2014.
To combat poor market conditions, Tasnee said last year that it would undertake a major restructuring to cut costs and revise contracts.
On Sunday, Tasnee posted a narrower first-quarter net loss, beating analysts’ forecasts due to higher sales volumes, and did not suffer the same negative impact from financial contracts at a subsidiary.
Although much depended on the direction of oil prices and the performance of the global economy, Mutlaq al-Morished said he saw potential for an improved outlook for the rest of 2016.
“We think it is positive if the prices continue the way they are, titanium dioxide and chemical prices which have shown movement up in March,” the CEO told Reuters in an interview.
The diversified industrial firm has interests in petrochemicals, metals and chemicals and its Cristal subsidiary is one of the world’s largest producers of titanium dioxide .
Morished said previously the benefits of the restructuring — which includes job cuts — are unlikely to be reflected in profitability until at least the end of 2016.
“The restructuring we have been doing for the last six-to-nine months, the fruit now is coming of that,” he said.
“Of course it cost us a lot of money, which hurt us in the third and fourth quarters of last year. When you let a lot of people go, you have to pay packages, end of year services … that is normal.”
Morished said the majority of the lay-offs have been done.
“We are fine-tuning now, after the big numbers we have done in the second half of last year globally,” he said, noting it had shrunk by around 2,000 to approximately 7,000 employees.
After benefiting for years from cheap energy and feedstock costs, Saudi’s industrial firms are grappling with the kingdom’s decision late last year to reform its subsidies structure.
Tasnee had already disclosed that higher gas feedstock prices would hurt its 2016 results by around 190 million riyals, while Morished has previously expressed that bringing in such changes now was not the best time for the chemicals industry.
The reforms added 47 million riyals to Tasnee’s costs in the first quarter, Morished said.