Sabic, the world’s largest chemical company by market value, posted a record quarterly profit, up 50 per cent on last year and beating analyst forecasts on higher prices and output.

Saudi Basic Industries Corp’s net income in the three months to March 31 rose to 6.3 billion riyals ($1.7 billion), or 2.51 riyals per share, compared with 4.18 billion or 1.67 riyals per share a year earlier, the state-controlled company said in a statement.
“The most significant improvement affected prices of polymers, steel and fertilisers,” Vice Chairman and CEO Mohamed Al-Mady said. “Prices of other products, such as plastics, rose as well.”
The price of Sabic’s main products climbed 14 per cent compared with the first quarter of 2006 and production and sales rose 11 per cent, the company said, without being more specific.
Analysts polled in a Reuters survey forecast an average 34.2 per cent increase in first-quarter profit. The highest forecast was for profit of 6.18 billion riyals.
Sabic, which the Saudi government started in 1976 to reduce the country’s reliance on crude oil sales, made 7.15 million tonnes of ethylene last year, its main product by volume.
Prices of the gas rose because of outages in plants in China, Taiwan and Thailand, in contrast to a decline in oil prices with which chemical prices are generally linked, said Patrick Rooney, managing director of CMAI in Dubai.
“Their cost base is so great,” Rooney said of Sabic. “The market has been very kind to them.”
It costs Sabic between $250 and $300 to produce a tonne of ethylene. Sales prices reached a record $1,320 per tonne in the third quarter, Rooney said.
Sabic buys ethane gas from state-owned Saudi Aramco at a fixed price, while many other chemical producers, such as Japan’s Mitsubishi Chemical Holdings Corp, rely for feedstock on naphtha which has risen with oil prices.
“Sabic will post record profit in 2007 if prices remain at their current levels,” said Ibrahim Al-Alwan, deputy chief executive of KSB Capital Group, whose profit forecast of 6.18 billion was the closest.
Prices of methanol, of which Sabic produced 4.09 million tonnes in 2006, rose 43 per cent in the first quarter to $400 per tonne, compared with $280 per tonne in the year-earlier period, Rooney said.
Base chemicals account for about 40 per cent of Sabic’s output, according to its website.
Last year, the company made 49.1 million tonnes of products, including plastics, fertiliser and steel. It plans to increase capacity to 60 million tonnes by the end of this year.
“Barring disturbances in the current capacities ... conditions in the market should remain in their current positive status in 2007 and early 2008,” Al-Mady said.
World steel prices increased 13 per cent to 540 euros ($731.3) per tonne in the first quarter compared with the first three months of 2006, according to London-based Metal Bulletin.
At 3.77 million tonnes of output, Sabic is the largest Gulf Arab steel producer.