Saudi Kayan’s Q4 profit misses estimates: Aljazira Cap

Saudi Kayan Petrochemical Co.’s net profit of SAR 103.6 million for the fourth quarter 2016 came 12 percent below Aljazira Capital’s estimate of SAR 118 million on higher feedstock cost and operational expenditure, the brokerage firm said in an earnings review on Tuesday.

A rise in financial charges also negatively impacted Saudi Kayan due to its highly leveraged balance sheet with long-term obligation of SAR 24.8 billion. The company is expected to report a finance charge of SAR 245 million, higher than estimated at SAR 202 million.

However, Kayan’s sales in 4Q-2016 reached SAR 2.45 billion, beating Aljazira Capital’s estimate of SAR 2.32 billion due to the higher-than-expected operating rate.

“We believe that the maintenance on March/April-2016 had positively impacted the overall performance, and we expect a more improved performance in FY2017,” the firm said.

Gross margin is expected to slightly increase to an average of 18.4 percent in FY17 compared to an average of 16.2 percent in FY16 due to the impact of that maintenance.

In Q4, Asian average prices of Kayan key products such as, HDPE, PP and MEG products average prices increased by 1 percent QoQ, 3.3 percent QoQ and 16.8 percent QoQ, respectively.

Aljazira Capital has a ‘neutral’ rating on Saudi Kayan with a target price of SAR 8.80 per share.