Shares in Saudi Basic Industries Corp (SABIC), the Middle East’s biggest petrochemicals company, jumped 4.3 per cent to SAR102.50 in opening minutes as the company announced its second quarter results.
The second-quarter net income saw a 4.5 per cent drop as product prices fell, a much smaller decline than analysts had forecast.
SABIC made a net profit of SAR6.17 billion in the three months ending June 30, down from SAR6.46bn in the same period a year ago, the company said in a bourse statement.
However, earnings still beat analysts’ estimates compiled by Reuters and Bloomberg.
Seven analysts polled by Reuters had predicted that the petroleum major would make a quarterly profit of SAR4.96bn, while Bloomberg’s survey of nine analysts had forecast SAR4.95bn.
SABIC, which is 70 per cent state-owned, said in the statement that the decline in profit was due to “lower average sales prices despite the reduction in cost of sales. However, sales costs also declined during the period.
Operating profit declined 7.3 per cent to SAR9.33bn.
The company’s results are closely tied to oil prices and global economic growth because its products – plastics, fertilisers and metals – are used extensively in construction, agriculture, industry and the manufacture of consumer goods.
Lower oil prices adversely affected SABIC’s earnings in the final quarter of 2014 and the company warned in January that 2015 earnings would be unpredictable, with challenges especially prominent in the early part of the year.
In April, the company said its first quarter net profit dropped 39 per cent, attributing the slide to oil and petrochemical product prices.
The company will pay a dividend of SAR2.5 a share for the first half.
(SAR1 = AED0.98, at the time of publishing)