SABIC sees turnaround as it reports $266.2bn Q3 profit
Updated 3 min 43 sec ago
Nadin Hassan
RIYADH: Petrochemical firm Saudi Basic Industries Corp. reported a net profit of SR1 billion ($266.27 million) for the third quarter of 2024, a marked improvement from a loss of SR2.87 billion in the same period last year.
SABIC attributed its positive results to various factors, including higher income from operations by SR797 million, bolstered by a heightened gross profit margin offset by raised operating costs.
The company’s revenue rose 3 percent year on year to SR36.88 billion, primarily driven by increased average selling prices despite a slight decrease in sales volume.
The firm also benefited from gains related to divesting its Functional Forms business and favorable currency exchange fluctuations.
According to the London Stock Exchange Group, the third quarter profit missed analyst forecasts of SR1.6 billion, as reported by Reuters.
A notable factor was SABIC’s reduced losses from discontinued operations, amounting to SR3.3 billion, mainly stemming from a fair value reassessment of the Saudi Iron and Steel Co., known as Hadeed.
The reclassification of Hadeed as a discontinued operation will continue until the completion of its sale, which was previously announced by the company.
When compared with the second quarter of 2024, however, net profit fell from SR2.18 billion due to a lower gross profit of SR194 million, attributed to softer selling prices and higher feedstock costs.
The quarter also saw a rise in operating expenses by SR223 million and a decline in profits from associates and joint ventures by SR313 million, following a fair value assessment related to the firm’s agreement to sell its shares in Alba, announced in September.
Despite these challenges, SABIC’s total revenue for the first nine months of 2024 reached SR105.28 billion, with a net profit of SR3.43 billion, a sharp turnaround from the SR1.04 billion loss in the same period last year.
This was aided by reduced discontinued operation losses and lower Zakat expenses by SR1.05 billion, stemming from regulatory-driven provision adjustments in June.
In September, Saudi Arabia’s Mining Co. completed the acquisition of SABIC’s 20.62 percent shareholding in Aluminium Bahrain, also known as Alba, marking a significant milestone in its strategy for regional growth.
According to a press statement, the transaction valued between SR3.62 billion ($960 million) and SR3.97 billion.
Saudi Vision 2030 to catalyze banking sector growth: Moody’s
Rating agency said development of planned mega projects in Saudi Arabia will play important role in generating huge business and lending opportunities for banks
Kingdom’s housing program has been a driver of credit growth for the banks over the last five years
Updated 04 November 2024
Nirmal Narayanan
RIYADH: Saudi Arabia’s Vision 2030 program to diversify the economy could accelerate the country’s banking sector development in the coming years, according to an analysis by Moody’s.
In its latest report, the US-based credit rating agency said the development of planned mega projects in Saudi Arabia will play an important role in generating huge business and lending opportunities for banks. The infrastructure required to host major events like the Asia Cup in 2027, the Asian Winter Games in 2029, Expo 2030, and the FIFA World Cup in 2034 is expected to support this growth further.
Vision 2030 aims to reduce the Kingdom’s decades-long dependence on crude revenues and steadily bolster its presence in other sectors like tourism, technology, and real estate.
“Planned mega projects to diversify the economy include the tourism, real estate, and infrastructure sectors, and the government provides the country’s banks the opportunity to help fund them,” said Abdulla Al-Hammadi, assistant vice president and analyst at Moody’s Ratings. “One part of Saudi Vision 2030 is a plan to raise home ownership to 70 percent by 2030 from 47 percent in 2016.”
The report said the Kingdom’s housing program has been a driver of credit growth for the banks over the last five years, with household mortgages reaching SR607 billion ($161.67 billion) at the end of 2023, up from SR110 billion in 2016. They now comprise around 24 percent of total banking sector loans.
“Given these mortgages were secured at a fixed rate during a time of low interest rates and that tenures are often for 25 to 30 years, this could place some pressure on margins in the sector. We believe that larger banks will be hit hardest due to their dominant position in the Saudi mortgage market,” said Al-Hammadi.
If deposit development continues to lag loan growth, banks could also face growing funding shortages. Given the nature of mortgage fixed-rate loans, it may be challenging for financial institutions to offload them in the still-developing secondary markets.
The agency said Saudi banks could also face challenges in this run, which include insufficient deposit growth to meet the growing credit demand associated with Vision 2030 infrastructure and development projects.
“A challenge is that availability of deposit growth is lagging behind accelerated credit growth at Saudi banks, while the home-ownership push has packed the banks with long-term, fixed-rate mortgages that tie up funds.
“The banks will need to tap more confidence-sensitive market funding. This could entail foreign deposits, interbank syndications, and debt issuance, particularly Islamic bonds or sukuk,” said Al-Hammadi.
According to the report, reliance on short-term foreign funding will be riskier than long-term, such as senior unsecured debt and additional tier one, since long-term allocations will better match these banks’ long-term loans.
Oil Updates – crude gains more than $1 after OPEC+ delays output hike
Brent up 1.9 percent, WTI up 2 percent
OPEC+ delays December output hike by one month
Updated 04 November 2024
Reuters
BEIJING/SINGAPORE: Oil prices extended gains on Monday, rising more than $1 on a decision by OPEC+ to delay by a month plans to increase output, while the market braced for a week that spans a US presidential election and a key meeting in China.
Brent futures rose by $1.39 per barrel, or 1.9 percent, to stand at $74.49 a barrel by 10:22 a.m. Saudi time. US West Texas Intermediate crude rose by $1.41 a barrel, or 2.0 percent, to stand at $70.90.
On Sunday, OPEC+, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, said it would extend its output cut of 2.2 million barrels per day for another month in December, with an increase already delayed from October because of falling prices and weak demand.
The grouping had been due to increase output by 180,000 bpd from December.
“While the delay until January does not change fundamentals significantly, it does potentially leave the market having to rethink the strategy of OPEC+,” ING analysts said in a note.
The delay bucked the expectations of some in the market for OPEC+ to deliver the planned hike in output, they added.
“This delayed supply increase means that maybe the group are more willing to support prices than many believe,” they said.
The group is set to gradually unwind the 2.2-million-bpd cut over the coming months, while another 3.66 million bpd of production cuts will stay until the end of 2025.
Brent and WTI posted weekly declines last week of about 4 percent and 3 percent, respectively, as record US output weighed on prices. But both contracts edged up on Friday on reports that Iran could launch a retaliatory strike on Israel within days.
On Thursday, US news website Axios said Israeli intelligence suggested that Iran was preparing to attack Israel from Iraq within days, citing two unidentified Israeli sources.
It is questionable whether the price uptrend will be sustained as previous initial positive reaction to the delayed output hike and geopolitical tension have eventually fizzled off, said Yeap Jun Rong, a market strategist at IG.
For now, oil prices may stay in a broad consolidation range, with any upside likely to find some resistance at the level of $78.50, he added.
Markets await Tuesday’s US presidential election, with polls showing Democratic Vice President Kamala Harris and Republican former President Donald Trump neck-and-neck.
And on Thursday, economists expect the US Federal Reserve to cut interest rates by 25 basis points.
In China, the Standing Committee of the National People’s Congress meets from Monday to Friday and is expected to approve additional stimulus to boost the slowing economy, though analysts say the bulk may go to help cut local government debt.
Pakistan set to deliver fourth consecutive rate cut today to revive economy
All 15 investors and analysts surveyed by Reuters expect the central bank to cut rates next week
Policymakers continue efforts to revive a fragile economy as inflation eases off recent record highs
Updated 04 November 2024
Reuters
KARACHI: Pakistan’s central bank is expected to cut its key interest rate further at its policy meeting today, Monday, with policymakers continuing their efforts to revive a fragile economy as inflation eases off recent record highs.
The central bank, the State Bank of Pakistan, has slashed the benchmark policy rate to 17.5 percent from an all time-high of 22 percent in three consecutive policy meetings since June, having last reduced it by 200 basis points in September.
All 15 investors and analysts surveyed by Reuters expect the central bank to cut rates. Two expect a 150 bps cut, twelve predict a 200 bps reduction, and one forecasts a 250 bps cut.
Economic activity has stabilized since last summer when the country came close to a default before an eleventh hour bailout by the International Monetary Fund (IMF).
The IMF, which in September gave a boost to Pakistan’s struggling economy by approving a long-awaited $7 billion facility, said that the South Asian nation had taken key steps to restore economic stability with consistent policy implementation under the 2023-24 standby arrangement.
While the economy has started to gradually recover, and inflation has moved sharply down from a multi-decade high of nearly 40 percent in May 2023, analysts say further rate cuts are needed to bolster growth.
Mustafa Pasha, Chief Investment Officer at Lakson Investments, said rates must drop under 15 percent and hold below that for six months to have a material impact.
The IMF in its latest October report forecast Pakistan’s gross domestic product growth at 3.2 percent for the fiscal year ending June 2025, up from 2.4 percent in fiscal 2024.
The government expects annual inflation to have come in at 6-7 percent last month and slow further to 5.5-6.5 percent in November.
However, inflation could pick up again in 2025, driven by electricity and gas tariff hikes under the new $7 billion IMF bailout, and the potential impact of taxes on the retail and wholesale sector proposed in the June budget.
Ahmad Mobeen, senior economist at S&P Global Market Intelligence, said that while lower rates will offer some relief to the manufacturing sector, the benefits may be limited due to “elevated input costs, driven by high electricity and gas tariffs, combined with global supply and shipping constraints.”
Sindalah showcases Saudi Arabia’s investment potential, says commentator Ali Shihabi
Likens Kingdom’s approach to giga-projects to that of venture capitalist following launch of NEOM’s new tourism destination
Updated 04 November 2024
Arab News
DUBAI: Sindalah Island, NEOM’s new luxury tourism destination under construction on Saudi Arabia’s Red Sea coast, represents a critical milestone in the Kingdom’s economic transformation and proves many of its early doubters wrong, Saudi commentator Ali Shihabi has said.
Appearing on Arab News’ current affairs program “Frankly Speaking,” Shihabi highlighted the significance of Sindalah, saying its launch marked an important shift in global perceptions of the Kingdom as a holiday destination and as an investment opportunity.
“The launch of Sindalah was very, very important because you needed proof of a concept on the ground to show what can be done,” he said.
“For people to come and see it and feel it and enjoy it and experience it” validates the vision that Saudi Arabia has for NEOM and similar projects.
Sindalah Island, which will feature world-class yachting, luxury hotels and a golf club, could soon rival the likes of Monaco or Greece as a global destination. It is the latest in a bevy of megaprojects under construction across the Kingdom as part of the Vision 2030 transformation.
Sindalah Island is the latest in a bevy of megaprojects under construction across the Kingdom as part of the Vision 2030 transformation. (NEOM photo)
This transformation is already drawing the interest of major investors. Shihabi mentioned a recent conversation with an Indian investor planning to establish a $15 billion steel plant in the Kingdom, describing it as an “exciting opportunity” that showcases the nation’s appeal to foreign investors.
“His group will be investing a billion dollars in equity,” Shihabi told “Frankly Speaking” host Katie Jensen. “And he was very excited about the potential, the structure of incentives that are given to foreign investors, whether industrial investors, whether it’s the SIDF (Saudi Industrial Development Fund), or other facilities that the Saudi government makes available for foreign investors, and the good size domestic market also for different products.”
In Shihabi’s view, the Saudi government’s approach to giga-projects like NEOM is akin to that of a venture capitalist. The government has taken on the financial risk of building and launching these projects to attract global investors.
“It was a theoretical opportunity and you needed the Kingdom to be the venture capitalist really: to build the first models, even if those are loss leaders, because you needed a proof of concept on the ground,” he said.
Ali Shihabi, an author and commentator on the politics and economics of Saudi Arabia, speaks with Frankly Speaking host Katie Jensen. (AN photo by Abdulrahman bin Shalhoub)
Shihabi said Saudi Arabia’s Red Sea coastline, largely untouched by mass tourism, is “one of the last, if not the last, unspoiled virgin territory of exquisite seafront.”
By acting as an initial investor, the government aims to establish Saudi Arabia as a legitimate luxury destination and to cultivate demand among global tourists.
While Shihabi acknowledged that it will take time for Saudi Arabia to fully emerge as a tourism hub, he is confident that the foundation stones are in place. “Putting Saudi Arabia on the tourist mindset and map is going to take a number of years,” he said.
However, the momentum of these projects and Saudi Arabia’s investments in infrastructure, marketing, and partnerships are advancing the Kingdom’s vision to create an attractive and competitive tourism sector in the region.
“It will take time for tourists to get used to the concept of coming to the Kingdom as a tourist destination,” said Shihabi. “But I think that the foundation stones are being put in place successfully.”
The recent annual conference of the Future Investment Initiative in Riyadh, commonly referred to as “Davos in the desert,” showcased the Kingdom’s commitment to becoming a significant player on the global stage.
Shihabi, who is both an author and commentator on the politics and economics of Saudi Arabia, acknowledged that FII plays a valuable role in promoting the Kingdom’s image and helping international investors understand the scale and seriousness of Vision 2030.
Ali Shihabi is an author and commentator on the politics and economics of Saudi Arabia. (AN photo by Abdulrahman bin Shalhoub)
With the launch of projects like Sindalah and explosion of opportunities in NEOM, Saudi Arabia is gradually redefining its reputation on the world stage. However, Shihabi said changing global perceptions will require time and continued openness.
“The Kingdom has never been good at communication,” he said. “One of the deep structural problems the Kingdom had was it was closed off to the world. And the big change has been the opening up of the Kingdom to the world now.
“I encourage Western journalists, always, just to take a tourist visa, get on the plane and go and see things the way they are and the way they are developing and changing. And I can hardly think of a journalist who, having made the effort, has not changed his opinion of the Kingdom from what he had before he came to the Kingdom.
“The story really is a good one to be told on the ground and much easier to be told on the ground than to be explained in theory abroad. And there are a lot of skeptics; there are a lot of cynics.
“There’s a certain amount, I guess you can say, in the world of … I don’t want to exaggerate and use the word racism, but sort of prejudice toward Arabs and Muslims, which carries over to the Kingdom, prejudice against oil wealth. And a lot of historical baggage that the Kingdom has carried, which continues to affect its image.
“But I think that the more we open up the country and the more we allow people to come in and the more we allow people to see the changes on the ground, the better the image becomes.”
OPEC countries extend 2.2m bpd voluntary production cut until end of December
Originally implemented in April and November 2023, these additional reductions aim to stabilize the global oil market
Updated 04 November 2024
Arab News
LONDON: OPEC announced on Sunday that eight key OPEC+ member nations have agreed to extend their voluntary production cuts of 2.2 million barrels per day through December.
The countries are Saudi Arabia, Russia, and Iraq, as well as the UAE, Kuwait, Kazakhstan, Algeria, and Oman.
Originally implemented in April and November 2023, these additional reductions aim to stabilize the global oil market, according to a statement from the OPEC Secretariat.
The countries emphasized their commitment to full adherence to the Declaration of Cooperation, which includes monitoring the production adjustments to ensure compliance.
The 53rd meeting of the Joint Ministerial Monitoring Committee, held on April 3, underscored this dedication, establishing a timeline for the eight nations to fully offset any overproduction by September 2025.
Both Iraq and the Russia-Kazakhstan alliance recently reiterated their strong support for the agreement, pledging to uphold their compensation schedules.
