Earnings of GCC (Gulf Cooperation Council) petrochemical companies increased 62.4% yoy to US$3.57 bln in Q3-2011, vs US$2.19 bln in Q3-2012, the Kuwait-based Global Investment House (Global) said in its GCC Petrochemical Sector quarterly report. Overall, performance of regional petrochemical companies was mixed with SABIC (Saudi Basic Industries Corp.), IQ (Industries Qatar), SAFCO (Saudi Arabia Fertilizers Co.), YANSAB (Yanbu National Petrochemical Company), TASNEE (National Industrialization Co.), Sipchem (Saudi International Petrochemical Co.) and Dana Gas reporting better than expected earnings while other stocks such as Saudi Kayan Petrochemical Co., Rabigh Refining and Petrochemical Co., Saudi Petrochem and Nama Chemicals Co. continued to extend their losses as they are yet to start full throttle commercial production.
Within the GCC petrochemical companies, Global Research Petrochemical Universe witnessed a sizable growth of 61.5% during Q3 in the profitability. Prices of petrochemical products increased by an average by 31.5% during Q3. Producers passed on the impact of sharp rise in the prices of naphtha and other raw materials used in petrochemical products to the consumers as the prices of various petrochemical products rose in the range of 15-55%. In addition, strong increase in demand from Asia, particularly China, has resulted in upward pressure on end-products prices.
According to the Global report, the petrochemical sector's sales and net profitability to show limited QoQ growth as the oil prices are expected to stay in the range of US$90-$100 a barrel in Q4. In the first nine months of 2011, the petrochemical sector's profitability went up by 54.9% to US$9.7 bln. SABIC continued to remain the lead contributor to the sector profitability at 65.5% followed by Industries Qatar and SAFCO at 17.6% and 7.7% respectively. The sector top-line witnessed an increase of 31.9% and 32.7% in Q3 and nine months respectively, which was due to the combined effect of increase in price of oil and petrochemical products along with commencement of commercial production from the new expansions. Cost of sales dropped during Q3, which gave boost to the margins and they rose to 37.4% in as compared to 33.2% in Q3-2010. The trend was roughly similar in the nine months of this year where the margins rose to 37.1%. During Q3, the companies were able to reduce the cost of funding which dropped the interest expense by 13.7%. Overall interest expense during the first nine months dropped by 4.8% to US$802 mln as compared to US$843 mln in Q3-2010.