The company which is looking develop its speciality chemicals business to diversify revenue streams, plans to spend between $3 billion and $10 billion on acquisitions

Saudi Basic Industries Corporation (Sabic), the biggest petrochemicals producer in the Middle East, which recorded a 19 per cent slide in its fourth-quarter net income, has cited 'planned turnarounds at certain plants', which impacted output and lower quantities of products sold, as main reasons for the reduced profitability.

It also recorded impairments against assets of Hadeed, a wholly owned subsidiary, amounting to SR350 million and Ibn Sina amounting to SR274 million.

'The increase in net income is attributable to higher average selling price and lower general and administrative expenses,' it said in the statement.

Sabic, which is 70 per cent owned by the Saudi government, is among the largest listed firms in the Middle East. The company has restructured its business in recent years as it struggled to maintain profitability amid slower global economic conditions and sluggish demand for its products. Sabic manufacturers plastics, fertilisers and metals that are used in construction, agriculture, industry and the manufacturing of consumer goods.

The company which is looking to develop its speciality chemicals business to diversify revenue streams, plans to spend between $3 billion and $10 billion on acquisitions over the next five years in specialties and agri-nutrients businesses.

Sabic agreed to buy a 25 per cent stake in Clariant, becoming the largest shareholder of the Swiss chemicals company. Sabic is acquiring approximately 83 million shares in Clariant from 40 North and Corvex Management. Reuters estimates the transaction value at $2.4 billion based on Clariant’s market capitalisation.

The latest acquisition amount does not exceed 10 per cent of Sabic’s net assets and the deal will be financed through foreign banks, the company said.

The chemicals industry is a key component of regional economies and contributed $43.8 billion to the GCC in 2016 alone, according to a November report from the Gulf Petrochemicals and Chemicals Association. Capacity additions from Saudi Arabia, Opec’s biggest oil producer, have been the main driver for the regional petrochemicals sector.

Sabic, along with Saudi Aramco feature prominently in the kingdom’s economic diversification plans as it seeks greater downstream integration and builds major refining and petrochemicals facilities.

In November Sabic signed an agreement with Aramco to build one of the world’s largest oil-to-chemicals facilities, valued at $20 billion, as Riyadh continues to cut its dependence crude revenues. The integrated complex, to be located on the country’s western Red Sea coast, will process around 400,000 barrels per day of oil that would be turned into around 9 million tonnes of chemicals and base oils annually. The facility is set to begin operations in 2025.

Meanwhile, the Home of Innovation facility signed a Memorandum of Understanding (MoU) with ABB Group to reaffirm a global strategic framework for short- and long-term collaboration, propel their healthy development of high-technology industries, and collaborate on potential technology ventures.

Through technology ventures, the Home of Innovation initiative’s mission is to create a business platform for those committed to innovation and growth, bringing together the best minds and organisations interested in the future of Saudi Arabia and the region, and building productive collaboration. The MoU with ABB Group is an example of this productive collaboration. Uwaidh Al-Harthi, executive vice president, innovation and business development, Sabic, and Peter Terwiesch, president, industrial automation division and member of the group executive committee, ABB, signed the MoU.

Al-Harthi emphasised the importance of utilising this collaboration to augment local content and help achieve Sabic’s passion to support the national transformation programme, Saudi Vision 2030, and contribute to local industries and job creation.

Dr Fahad Al-Sherehy, vice president, technology and innovation, Sabic, highlighted ways to integrate this collaboration effort.