Advanced Q1 misses estimates, says NCB Cap

Advanced Petrochemical Co.’s first quarter net profit (SAR 124 million) came below NCB Capital and the consensus estimates of SAR 149 million and SAR 156 million, respectively.

“We believe higher than expected operating expenses and lower income from associate SK Advanced led to the variance in earnings,” NCB Capital said in an earnings review on Wednesday.

Revenue stood at SAR 526 million, matching forecast of SAR 522 million.

Gross margins contracted to 27.2 percent in Q1, coming slightly above the brokerage firm’s estimate of 26.6 percent, due to higher operational efficiency.

Operating expenses (Opex) declined to SAR 26.3 million in the first quarter from SAR 31.1 million in Q1-2016, but were higher than the brokerage firm’s estimate of SAR 11.7 million.

Key strengths are the company’s higher operating rates and efficiency, strong balance sheet and an attractive dividend yield of 5.6 percent. “However, normalizing PP-propane spread remains a key risk.”

The brokerage maintained an “overweight” rating on the stock with its target price unchanged at SAR 45.1.

Advanced posted a drop of 12.9 percent YoY and 40.2 percent QoQ in Q1-2017 net profit to SAR 124 million.