(Bloomberg) -- Saudi Arabia’s biggest chemical company beat analysts’ profit estimates in the second-quarter, an early sign the industry may be recovering after a challenging downturn.
Saudi Basic Industries Corp., also known as Sabic, posted 2.18 billion riyals ($581 million) in profit. That’s an 85% increase as the company said margins for some products improved.
The results will provide some relief for an industry that’s struggled with demand concerns in recent quarters. Global behemoth BASF SE reported lower second-quarter earnings while specialty-chemicals maker Lanxess AG flagged improvements but cautioned that it doesn’t see a broader market recovery yet. Sabic had itself earlier this year warned about “considerable uncertainty.”
Sabic’s shares have dropped about 6% this year. Still, they trade at a premium to global peer such as BASF and Dow Inc. because of access to cheaper feedstock, according to Bloomberg Intelligence analyst Salih Yilmaz. Saudi Aramco, the world’s biggest oil exporter that’s scheduled to announce its own second-quarter earnings on Aug. 6, owns a majority of Sabic.
The market is likely under-appreciating the scope for a recovery in petrochemicals pricing and spreads this year, Yilmaz said. He expects Sabic’s revenues to surpass $40 billion in 2024, with supply-demand fundamentals strengthening in the second half and further in 2025.
Other analysts have a weaker outlook. Citigroup Inc. said it remains more cautious than the market, warning some investors are too optimistic on near-term earnings for chemicals. Hopes of a return to normal conditions over the next 12 months are “unrealistic,” Citi analysts led by Oliver Connor said in a note on July 9.
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