Tasnee cuts titanium dioxide production to balance prices: CEO

Saudi Arabia’s National Industrialization Company (Tasnee) has reduced production of titanium dioxide (TiO2) by 4-5 percent in order to balance supply and demand and maintain the global price, Mutlaq Al-Morished, the company’s CEO told Argaam in an exclusive interview.

“The production cut was deliberate to prevent a decline in the prices of TiO2. The decrease isn’t significant and will not affect the firm’s financial results for the coming period,” Al-Morished said. 

“The five producers did the same,” he further added, while talking to the press discussing the firm’s results.

“It is not in the producers’ best interest to increase output in a small market that is witnessing a drop in prices,” Al-Morished continued, adding that the $4 trillion petrochemicals market is different as it has thousands of producers.

The global market share of Tasnee’s TiO2 reached 14 percent, ranking second or third, depending on market variables among the world’s five producers.

As for the planned merger between Tronox and Saudi Cristal’s titanium dioxide (TiO2) business, which is 79 percent owned by Tasnee, Al-Morished pointed out to the US government shutdown for the delay in the regulatory approvals.

“US investors are observing the settlement updates between Tronox, Cristal and the US Federal Trade Commission (FTC) on the planned merger, and expect it to be approved soon, as they realize the deal’s positive impact on reduced costs and higher profit margins. This is why Tronox share value rose from $9 to over $12 per share. We expect – if we’re lucky – to finalize the merger by the first half of this year,” he said.

“I realize negotiations have taken a long time, but we finalized the work we had to do perfectly, and remains the US regulatory approvals,” Al-Morished added.

In February 2017, US-based chemical maker Tronox unveiled plans to buy the TiO2 business of Cristal for $1.67 billion cash and 37,58 million of newly issued Class A shares in Tronox (which represents approximately 24 percent of the ownership in Tronox at closing), Argaam previously reported.

Meanwhile, Fawaz Al-Fawaz, Tasnee’s executive vice president for financial affairs, said that the firm’s 2018 earnings is attributed to higher average selling prices of TiO2, improved average prices of most petrochemical products, expense rationalization and higher cost control.

Regarding Q4 2018 financials, Al-Fawaz said that prices had begun to decline.

“We hope results improve in the coming months,” he said, adding that “the challenges will be bigger this year but the company will continuously work on improving results.”

The acrylic complex, although operating efficiently, is having difficult times in terms of product prices as the local and GCC markets are witnessing dumping from external companies, Al-Fawaz mentioned.

“We are working with our partners to find markets that offer profitable sales. We also cooperate with the commerce ministry to fight the dumping practices in the Saudi market, and impose tariffs on imports - as some GCC states did – which would help rebalance the market,” he added.

According to data compiled by Argaam, Tasnee net profit after zakat and tax climbed 67.8 percent year-on-year (YoY) to SAR 1.20 billion for fiscal year 2018.