Sipchem Q1 net profit meets estimates: Aljazira Capital

Saudi International Petrochemical Co.’s (Sipchem) Q1 2019 net profit of SAR 114.7 million has met Aljazira Capital's and market consensus estimates of SAR 113.1 million and SAR 117.4 million, respectively, the brokerage said in an earnings review.

The firm’s Q1 earnings jumped from SAR 40 million in the previous quarter, mainly attributed to an increase in volumetric sales and gross margin after the Methanol plant energy efficiency and performance enhancement, the report said.

Sipchem’s sales in Q1 stood at around SAR 1.122 billion, in-line with the estimates, supported by improved operational efficiency and capacity of IMC plant after a 55-day maintenance in Q4 2018.

Gross profit reached SAR 405.1 million, beating the estimates of SAR 358.4mn due to lower than expected production cost associated with improved IMC plant efficiency after shutdown.

Gross margins expanded to 36.12 percent in Q1, compared to the projections of 32.1 percent, and 35.4 percent a year earlier.

“We believe that the improved efficiency partially offset the impact of weak selling prices, becoming key support for gross margin going forward,” the firm said.

Operating profit stood at SAR 267.4 million, as the company recorded higher OPEX at SAR 137.7 million due to higher selling and distribution expenses, as compared to SAR 130.5 million in the previous quarter and the expectations of SAR 131.8 million for the quarter.

“The company’s top line in Q1-19 was impacted by PBT and IDC plants shutdown for 3 weeks and 41 days respectively, however; the company is expected to witness improved future performance, given high production efficiency and new methanol capacities after the IMC Plant Enhancement Project,” Aljazira Capital said.

The research firm maintained an “Overweight” rating on the stock with a target price of SAR 23.5 per share.