Sabic reported a record third-quarter net profit with surging prices for steel and chemicals powering growth.

Sabic’s quarterly profit of 5.4 billion riyals ($1.44 billion), a rise of 12 per cent from the year-earlier period, topped the forecasts of all four analysts surveyed by Reuters. The average forecast was for an increase of 2.1 per cent.
“We are still in the positive cycle (of growth) in the chemicals sector,” Chief Financial Officer Mutlaq Al Morished said.
Sabic was cutting costs especially for feedstock and was outsourcing services including logistics, he said.
Emaar Financial Services, which had forecast growth of 10.9 per cent, said Sabic’s strategy was working after the Arab world’s largest listed company reported declining profits in the first and second quarters, citing rising raw material prices.
“Sabic has consciously revised its investment strategy, has targeted the lowest prices in raw materials, and very much concentrated on reducing costs,” said Jamil Matar, regional manager for Emaar Financial Services.
Net profit in the nine months to September 30 was 14.2 billion riyals, down 3.5 per cent from a year ago, Sabic said.
Sales volumes in the nine-month period rose eight per cent to 29 million tonnes while revenues jumped 12 per cent to 63.6 billion riyals.
Sabic did not give revenue or sales figures for the three months to September 30, but Reuters data showed revenue for this period rose 19.4 per cent from its level a year earlier.
The company said a new steel plant and a glycol ethylene plant started operations in the third quarter and boosted output.
“We expected results would be driven by higher petrochemical prices, which have reached their highest in the last 10 years,” said Mohamed El Nabarawy, vice-president of research for Dubai-based investment bank Shuaa Capital.
The price of all major chemicals rose seven per cent in the third quarter, with ethylene prices rising by 11 per cent in the three months to September, Shuaa said in the note.
Sabic’s steel business has been riding surging demand from the construction industry in the Gulf Arab region, where governments are pouring windfall oil revenues into real estate projects and infrastructure.
Demand for iron and steel in the Gulf will rise 31 per cent by 2008, industry group Gulf Organisation for Industrial Consulting said earlier.
“It’s not an easy job to continue what has been achieved this quarter. They have to continue their diversification strategy...,” said Wadah Al Taha, head of strategy at Emaar Financial Services.
Sabic agreed to buy the European bulk chemicals unit of US-based Huntsman Corp for $700 million, saying the assets fit well with its other European operations and would allow it to gain scale on the continent.
Sabic is also working on petrochemical projects in China.
The company is looking raise a 1.25 billion euro loan and issue a debut euro-denominated bond of at least 500 million euros to help pay for acquisition.
Investors outside the Gulf Arab region cannot buy Sabic’s shares.