Advanced Chairman says products sold at $1,300 average in H1 2022, global outlook foggy

Khalifa Al Mulhem Chairman of Advanced Petrochemical Co.

Khalifa Al Mulhem, Chairman of Advanced Petrochemical Co., said average product selling prices stood at $1,300 during the first half of 2022.

The profit decline is attributed to an up to 50% increase in feedstock costs and a surge of 165% in shipping rates, Al Mulhem told Argaam in a phone interview.

Advanced buys 80,000 tons annually of propylene from Saudi Aramco Total Refining and Petrochemical Co. (SATORP). Propylene prices jumped nearly 15% in the second quarter of the year. The company’s production volume of polypropylene reached 161,000 tons in the three-month period, Al Mulhem added, expecting production to rise to 170,000 tons in the third quarter.

On the other hand, SK Advanced incurred SAR 4 million losses in the second quarter, due to higher feedstock costs and lower selling prices. This, in turn, led to a significant decline in profit margins, he explained, predicting better results if oil. And feedstock prices go lower.

Shipping rates rose by 10-15% in the second quarter of 2022, compared to the previous quarter.

The petrochemical producer adopts a variable equation for feedstock pricing based on global prices, Al Mulhem said, indicating that reliance on global prices in local feedstock pricing is important for the company.

Commenting on the rise in the company’s loans and high interest rates, the Chairman said Advanced has strong financial solvency and good reputation with banks. Nearly SAR 4 billion of its SAR 6.1 billion credit facilities will be directed to finance the establishment of plants, while the remainder will be used for hedging.

The loan will be utilized upon starting construction in the second quarter of 2023, Al Mulhem noted.

Touching on APCs’ sales and product prices in Q3 2022, he said there is a slight improvement despite the foggy outlook in global markets due to the economic recession and oil prices.

The petrochemical producer reported a net profit after Zakat and tax of SAR 274 million for the first half of 2022, a 37% decline from SAR 436 million in the year-earlier period, according to data available with Argaam.