2023-08-03 12:07:07
Al-Ahly Capital revealed that the profits amounting to 1.18 billion riyals, which SABIC achieved in the second quarter of this year 2023, were in line with its expectations, which indicated a record of 1.2 billion riyals, while it was less than the average expectations of expert houses, which amounted to 1.3 billion riyals.
On the other hand, “Al-Ahly Capital” recommended increasing the weight of SABIC’s share with a target price of 95.4 riyals per share, adding that the future outlook for the sector is still muted in the short term due to weak demand, delayed recovery in China and high supply, suggesting that the potential recovery may be achieved in the first half of 2024. Indicating that (SABIC) expects that the profits of the third quarter of 2023 will be affected by weak price margins, as raw materials prices may rise, noting that the share is trading at a multiple of 22.5 times, compared to the average of the corresponding companies, which is 27.1 times.
According to “Al-Ahly Capital”, net income decreased by 85.1% on an annual basis (+79.6% on a quarterly basis) to 1.18 billion riyals, and although revenues and net income were in line with estimates, the cost of production was much higher than expected. However, it was offset by lower non-operating costs associated primarily with the remeasurement of the option rights.
Revenues amounted to 37.17 billion riyals, down 33.6% year-on-year (-6.4% on a quarterly basis), and were in line with estimates, as the strong performance of agro-nutrients offset the weakness in petrochemicals. The decline on a quarterly basis was attributed to lower selling prices (-7%) as volumes remained flat. Revenues of the petrochemical sector amounted to 31.6 billion riyals (-7% on a quarterly basis) and were lower than the estimates of 32.5 billion riyals. The decline on a quarterly basis was driven by lower trading volumes (-4%) and prices (-3%), while revenues amounted to Agro-Nutrients 2.49 billion riyals (+3%), which was higher than our estimate of 1.56 billion riyals, the Q-o-Q improvement was driven by higher volumes (+38%) which offset lower prices (-35%).
On the other hand, steel sales decreased by 6% on a quarterly basis to 3.07 billion riyals compared to estimates of 3.26 billion riyals, driven by lower volumes (-6%) as prices remained flat on a quarterly basis.
The total profit amounted to 5.37 billion riyals, down 64.4% year-on-year (-5.5% on a quarterly basis) and less than estimates of 6.35 billion riyals. Gross margin was 14.4%, lower than estimates of 17.0% and in line with 14.3% in Q1 2023. Higher than expected cost of production, despite raw material costs declining by 20% qoq, is exciting to worry.
According to the “Al-Ahly Capital” report, profits before interest and taxes amounted to 1.42 billion riyals, down 86.0% year-on-year (-15.3% on a quarterly basis), less than estimates of 2.42 million riyals. Operating expenses amounted to 3.94 billion riyals, in line with estimates and compared to 3.99 billion riyals in the first quarter of 2023.
Sales operating expenses were 10.6%, in line with estimates, and EBITDA amounted to 5.13 billion riyals (-63% on an annual basis, -2% on a quarterly basis) in the second quarter of 2023.
And SABIC achieved a cumulative synergy of $1.51 billion (5.65 billion riyals) through the second quarter of 2023 since the Aramco deal, and the company said it had achieved its goal two years ahead of the plan.
Net non-operating operations amounted to 250 million riyals, down 89.2% on an annual basis (-75.8% on a quarterly basis) and was lower than the estimates of 1.2 billion riyals., Attributing the decrease to the remeasurement of option rights gains and the decrease in zakat / taxes, although Low profits of non-integrated joint ventures.
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