Advanced's Q2 2019 profit exceeds forecasts, says Falcom

Advanced Petrochemical's (Advanced) net profit fell 24.1 percent year-on-year (YoY), but improved 18.8 percent quarter-on-quarter (QoQ) to SAR 192 million, beating the market expectations, Falcom Financial Services said in a note. 

Decline in net profit on an annual basis may be attributed to a drop in sales volumes by 2.8 percent YoY, lower polypropylene (PP) prices, and higher consumption of outsourced propylene.

Net profit increased on a quarterly basis, aided by a rise in PP prices, lower cost and consumption of propylene, and a fall in fixed production cost.

Since the beginning of 2019, Advanced witnessed improved sales volumes, which helped prop up overall revenue. Moreover, the company recorded profit growth as it benefitted from price decline in propane and outsourced propylene. 

"Going forward, we expect the company to record further improvement in product spreads given the recovery in PP prices and drop in propane prices," Falcom said, maintaining a target price of SAR 57.5 per share, in light of the second quarter results, and reinstating a “Neutral” rating on the stock.