Saudi Basic Industries Corp. is suspending new capital expenditure after an oil-price slump and coronavirus-related lockdowns hammered demand for chemicals and pushed the company into a 950 million riyals loss ($253 million) in the first quarter.
Sabic, as the Middle East’s biggest chemicals producer is known, warned that the pandemic’s impact on chemical sales would stretch into the second quarter and potentially the rest of the year. First-quarter sales dropped 18% to 30.83 billion riyals.
“Sabic is committed to capital discipline and maintaining a strong balance sheet and has suspended all capex, but non-discretionary capex for safe and reliable operations and late stage projects,” Chief Executive Officer Yousef Al Benyan said in a statement.
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Sabic had already warned in January that weak demand would weigh on its earnings throughout 2020. That was before governments shut down much of the global economy in response to the coronavirus, further weakening the market for chemicals. The Riyadh-based company reported a profit of 3.41 billion riyals in the same quarter of 2019.
Saudi Aramco is set to complete the purchase of a 70% stake in Sabic from the kingdom’s sovereign wealth fund as the oil producer seeks to expand in chemicals. The deal is expected to close before the end of June, Aramco has previously said.
Sabic increased its stake in Clariant AG in March to 31.5% as part of its plan to expand in specialty chemicals. Shares in the Saudi company are down almost 27% this year.
Published on rigzone.com