Sipchem’s Q3 tops estimates in a positive surprise, says Aljazira Cap

Saudi International Petrochemical Co.’s (Sipchem) net profit for Q3 2017 of SAR 121.6 million came above Aljazira Capital's estimate of SAR 90.5 million and the consensus forecasts of SAR 82.9 million in a positive surprise, Aljazira Capital said in an earnings review.

“We believe that the plants shutdown in Q2 would translate into efficiency improvement in Q4 and onward. We expect that the company will continue to focus on production efficiency and cost optimization to mitigate the impact on performance.”  

The strong YoY performance was primarily attributed to an increase in average selling prices, higher sales volume due to improved operating rate and the impacts of plants shutdown in Q3 2016 and a remarkable improvement in production efficiency after IVC and IGC plants shutdown inQ2 2017.

Sipchem’s Q3 sales stood at SAR 1.06 billion, below Aljazira’s estimates of SAR 1.12 billion but higher than SAR 918.2 million in Q2.

Despite the higher Q-o-Q sales volume and product prices, the company’s operating rate was lower than expected, due to more time required for ramping up production after maintenance, the brokerage firm added.

Sipchem is expected to post a net profit of SAR 395.7 million for the fiscal year 2017, a 465 percent Y-o-Y increase.

Aljazira Capital remained “overweight” on the stock, with a target price of SAR 19.50 per share.