Petrochemical giant Sabic sank almost SR 974 million ($260 million) into the red in the first quarter of 2009 as slumped markets caused prices to plunge The quarterly loss announced Tuesday was the company's first since 2001. Saudi Basic Industries Corp blamed the loss on plunging demand for plastics in the car and electronics industries as well as tighter bank credit for its customers. In the same period of 2008, Sabic made a SR 6.92 billion ($1.85 billion) net profit. It had made a profit of SR311 million ($82.9 million) in the fourth quarter. Chief executive Mohammed Al-Mady said in a statement to the Saudi bourse that the global crisis resulted in tighter credit from banks for Sabic's customers, “accelerating the pace of decline in the price of petrochemical products.” Al-Mady pointed to the decline in petrochemical, metals and plastics prices as major contributing factors that were further compounded by the downturn in the construction and auto industries. Some of SABIC's products are used in vehicles, and the struggles confronting US carmakers weighed heavily on the Saudi company's operations. Plastics used in the recession-hit auto industry were especially hard hit, he said. Sabic, the Saudi stock exchange Tadawul's largest listed company, said operating profit for the first quarter fell 97 percent to SR379 million ($101 million) from SR10.9 billion (2.9 billion) in the same period of last year. Gross profits for the first quarter slipped to SR3.62 billion ($960 million) from SR13.79 billion ($3.67 billion) in the corresponding quarter of 2008, reflecting a 74 percent drop. The corporation said it took a goodwill impairment of SR1.2 billion ($320 million) in the quarter, which contributed to the loss. “This is the first time that a goodwill impairment affected Sabic's income,” Mady said at a press conference. The writedown came from the company's US subsidiary Saudi Innovative Plastics, known as GE Plastics before Sabic bought the unit for SR43.5 billion ($11.6 billion) in 2007. “US operations are likely to be still loss-making,” Shuaa Capital analyst Laurent-Patrick Gally said. He said that the size of the impairment “gives room for a further write-down in the upcoming quarters” if Sabic's US operations do not turn around quickly. “The fact that gross profit did not develop sequentially is disappointing,” said Gally. SABIC's shares were down almost 9.9 percent in morning trading on the Tadawul exchange.
