Argaam Tools-Full Package: How ‘Petrochemical Profit Margins – Products’ are calculated?

Many analysts watch the prices of petrochemical products to foresee the results of Tadawul-listed companies. When the product prices of a specific company rise, upbeat forecasts are given for its results, and vice versa, though this is not accurate at all times.

The margins realized by petrochemical producers rely on three key factors, namely product prices, feedstock costs and operating ratio.

If the price of a company’s product goes up and feedstock costs rises much higher, margins will decrease. Contrarily, if the price of a product goes down and feedstock costs see a bigger drop, profit margins will rise. For the operating ratio, breakdowns and scheduled shutdowns weight on profitability, based on the period of those shutdowns in a specific fiscal period.

For these reasons, realizing profit margins of any product is the most important factor to estimate corporate profits, which depend on product prices, feedstock costs and other fixed operational costs.

Tool (23): Petrochemical Profit Margins – Products

This tool helps investors and analysts estimate the margins of basic petrochemical products, manufactured by Tadawul-listed petrochemical producers, including all types of polyethylene; polypropylene; glycol, as well as fertilizers, such as urea, ammonia, and phosphate; aromatics (benzene and styrene); polycarbonate; methanol and its derivatives; and other materials.

Margin estimates for each product are displayed on a weekly basis (blue bars) and in a quarterly average (orange lines) over different periods of more than seven years. The companies that manufacture any product are clearly monitored above the graph of this product. 

With regards to the products that use mixed feedstock, two graphs of the same product are shown, one for the margins related to the use of a higher percentage of cheap ethane and another one for the margins related to the use of a lower percentage of ethane. 

The profit margin estimates were calculated based on a detailed analysis of the financial statements of listed and unlisted companies over 15 years, while taking into account the prices of products, as well as feedstock and fixed production costs. 

 
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Argaam Tools-Full Package: Petrochemical Profit Margins – Products