SABIC warns that price slide could hit Q4 earnings, demand declines mainly in Europe, USA

11-Nov-08
Saudi Basic Industries Corp (SABIC) expects its Q4 earnings to be hit by a rapid slide in prices and a slowdown in demand due to the global financial crisis. The world's largest chemicals company by market value posted its first quarterly decline in profits in more than two years in the third quarter. "The prices' curve nosedived from September 1 to today. Prices of polypropylene and polyethylene for instance were above $2,000, now they are below $1,000," Chief Executive Mohamed Al-Mady told Reuters in a telephone interview. "Demand is receding. No one saw this coming. The largest markets in Europe and the United States were affected the most. China and India was also affected but to a lesser extent. The firm, which produces liquid petrochemicals, plastic, steel and fertilisers, was expecting a global slowdown in both demand and prices to start affecting the market in 2009. The financial crisis has brought this forward. It turned out to be more serious than initially thought. The decline in demand will bring costs down, but the decline in costs will not be enough to compensate for the drop in revenues resulting from lower prices". The US GE Plastic unit, which it bought last year and later renamed SABIC Innovative Plastics, to improve profitability, due to the decline in fuel prices in the United States. The company has brought back to "normal" the level of inventories for almost all products, he said.
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