Yousef bin Abdullah Al-Benyan, CEO of SABIC, delivers the company’s earnings report on January 31, 2021. Saudi Arabia.

Photo courtesy of SABIC

A spike in fourth-quarter revenue helped Saudi Basic Industries Corp (SABIC) generate profits in 2020, beating analysts’ worst-case estimates of full-year losses.

SABIC, the petrochemicals division of oil giant Saudi Aramco, posted net profits of 40 million riyals ($ 10.7 million) last year, up from 5.2 billion riyals in 2019. Analysts had losses of more than 300 million, according to some estimates Riyal expected.

SABIC posted net income of 2.22 billion riyals ($ 592 million) for the fourth quarter, offsetting a loss of 890 million riyals in the year-ago quarter. Full year sales decreased 14% to 116.96 million riyals, but rose 12% to 32.85 million riyals in the fourth quarter.

“The fourth quarter benefited from an ongoing economic recovery that resulted in healthier demand for our products,” said Yousef Abdullah Al-Benyan, vice chairman and chief executive officer of SABIC.

“Product prices rose in the fourth quarter of 2020 due to strong demand and the tight supply and demand balance for some of our key products due to outages and rising oil prices,” the company said.

“These factors resulted in higher margins for SABIC in the fourth quarter of 2020.”

Optimistic outlook

SABIC said it was “cautiously optimistic” for a gradual rebound in the coming year and expects earnings to be “moderately higher” in 2021 as the world slowly emerges from the coronavirus crisis.

“In most parts of the world, we expect economic activity to continue to improve in the second half of 2020 and estimate that global GDP growth rate will increase between 4.5% and 5% in 2021,” it said a statement from SABIC.

“This requires the effective and widespread use of the COVID vaccine around the world,” he added. World Health Organization data shows that as of January 31, 2021, there were 101,561,219 confirmed cases of COVID-19 worldwide, including 2,196,944 deaths.

SABIC was forced to suspend investments after the oil price drop and the coronavirus lockdown in 2020, but returned to profit in the third quarter. It is now expected that the sales volume will be 2 to 5% higher compared to last year and the investments will be similar to 2020.

SABIC stocks are up as much as 65% from the coronavirus low in March.

New IPO talks

SABIC announced that its specialty chemicals unit is now operating as a “separate company” in the fourth quarter earnings release. It is speculated that SABIC is considering an IPO for the entity that makes engineering thermoplastic resins and compounds, among other things.

“This is an important milestone that should support the company’s ambitions to be a leader in specialty chemicals,” SABIC said of the separation. “The move creates value for SABIC by making specialties more agile, more focused, and better understanding the value associated with unique business and customer needs.”

A potential IPO would be in line with the UK’s efforts to deepen its capital markets and focus on new industries to reduce its reliance on oil. SABIC did not comment on the rumored listing.

Reuters reports that SABIC has screened overseas banks for advisory roles, and HSBC and JPMorgan are in the final stages of pitching the deal, which could start later this year or early 2022.