SAUDI Basic Industries Corp, the world's biggest chemicals maker by market value, declined in Riyadh yesterday after quarterly profit grew at the slowest pace since the third-quarter of 2006.
Sabic, as the company is known, fell as much as 8.4 percent in early trading. The shares traded dropped 7.7 percent at 200 riyals (US$53) as of 1:28pm local time, heading for its biggest one-day drop since April.
It reported on Saturday that fourth-quarter net income rose 12 percent to 6.87 billion Saudi riyals, according to Bloomberg News. Profit jumped 37 percent in the same period of 2006.
"The optimism over Sabic's earnings was exaggerated," Waleed Madani, vice president of research at investment bank Financial Transaction House, said in a telephone interview from Jeddah, Saudi Arabia. "The high expectations helped double the blow in the absence of profit warnings or company forecasts."
The company makes ethylene and other petrochemicals from ethane which it buys at fixed prices from state-owned oil company Saudi Aramco. Most of its rivals outside the Middle East use naphtha, a more expensive feedstock that is linked to the price of oil. Crude traded in New York averaged US$72.36 per barrel in 2007, a 20-percent rise from the previous year.
KSB Capital Group of Saudi Arabia had estimated a fourth-quarter net income of 8.8 billion riyals, while HSBC Holdings Plc had forecast profit of 6.3 billion riyals for the period. Quarterly profit growth had averaged 43 percent in 2007 before the latest results, according to Bloomberg calculations.
Chief Financial Officer Mutlaq al-Morished didn't answer his mobile phone yesterday.
"I would expect a freefall in the market today," Abdullah al-Rashoud, chief executive officer of Riyadh-based KSB Capital Group, said before the market opened yesterday. "It was disappointing."
Full-year net income rose 33 percent to 27 billion riyals, or 10.81 riyals a share.
The Saudi chemical maker, which is 70 percent government-owned, bought General Electric Co's plastics division for US$11.6 billion in August in the largest-ever purchase by a Gulf company.