Sipchem says economic recovery pushes petrochemical prices 36% higher, demand likely to sustain in Q2

Abdullah Al-Saadoon, CEO of Sahara International Petrochemical Co. (Sipchem)

Abdullah Al-Saadoon, CEO of Sahara International Petrochemical Co. (Sipchem), said strong economic recovery and a rise in energy prices pushed petrochemical prices higher in the first quarter of 2022. 

The average petrochemical prices rose by 36% year-on-year (YoY) in Q1 2022, which contributed to profit growth during the three-month period, Al-Saadoon told Argaam in a phone call. 

He added that the acquisition of minority interest in some subsidiaries, such as International Vinyl Acetate Co., International Diol Co. and International Acetyl Co., as well as the suspension of production at some unfeasible plants, such as Gulf Advanced Cable Insulation Co. contributed to improving Q1 2022 profit.   

The profit growth was also driven by cost reduction initiatives, Al-Saadoon noted. 

However, the 18% profit drop quarter-on-quarter (QoQ) was due to the periodic maintenance of Al Waha and SAMAPCO factories, along with the expected decline in demand during the first quarter of each year due to weather conditions, especially winter in the northern hemisphere. This is in addition to the holiday season in most Asian countries. 

The weak sales came though demand for petrochemicals has remained strong, Al-Saadoon said. 

He added that the average product prices increased by 39% YoY in Q1 2022, but declined by 3.6% QoQ.  

Meanwhile, the average polymer prices grew by 18% YoY during the three-month period, but dropped by 6.5% compared to Q4 2021.  

Demand for ethylene vinyl acetate, polypropylene, monovinyl acetate and butanediol products increased by 5% YoY and 3% QoQ in Europe. Meanwhile, demand for polyethylene, polypropylene and methanol, butanediol, ethylene vinyl acetate and acetic acid products increased in Q1 2022.  

Regarding the impact of supply chain crisis on Sipchem, Al-Saadoon said that it affected the company’s customers abroad, but the firm managed to overcome this challenge through adopting successful strategies such as exporting polymers via King Abdullah Port. 

This led to saving the time of exporting products to Africa, Latin America and Turkey, as well as improving customer service, the CEO said. “The average time of exporting the company’s products to Africa reached 18 days.” 

The presence of Sipchem in Europe and Asia helped it avoid exporting to crowded areas. In addition, the petrochemical producer constantly communicates with customers who expect that the supply chain issue would continue in the coming years. It also seeks to avoid such disruptions as much as possible. 

The supply chain issue had a significant impact on the container sector, but the dependence of Sipchem's exports on containers is limited. 

Commenting on the company's repurchase of its shares at nearly SAR 60 each, the CEO said the board of directors considered that the stock price was less than its fair value. “The move mainly aimed to add economic value to shareholders.” 

Al-Saadoon expects that demand will remain strong during the second quarter due to the beginning of the summer season and increased construction activities. 

“Product prices will likely remain close to the first-quarter levels, but the prices of some products would increase slightly,” the top executive said, concluding that global events and variables impact prices. 

Sipchem reported a net profit after Zakat and tax of SAR 1.078 billion in Q1 2022, a sharp rise from SAR 411.5 million in the prior-year period, according to data compiled by Argaam.