SABIC clarifies impacts of Aramco’s acquisition on consolidated financials
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Saudi Basic Industries Corp (SABIC) clarified the financial impact of Saudi Aramco’s acquisition of a 70% stake in the petrochemical producer’s shares on its consolidated financial statements.
SABIC will ensure alignment of relevant accounting policies, specifically related to the control assessment of SABIC’s investments in certain ventures, where SABIC shareholding is 50%, the petrochemical producer said in a bourse filing.
There are seven ventures located across the industrial cities of the Kingdom.
In line with SABIC accounting policies, the financial statements of these ventures were consolidated within SABIC consolidated financial statements up to the first quarter ended January 31, 2020.
The consolidated financial statements have been reviewed and audited by SABIC external auditors where they issued unqualified conclusion and opinion in their auditors’ reports.
Based on the reassessment of the control over these ventures under Saudi Aramco’s unified accounting policies, the accounting treatment has been changed for the following four Saudi Yanbu Petrochemical Company (YANPET), Al-Jubail Petrochemical Co. (KEMYA), Eastern Petrochemical Co. (SHARQ), and Saudi Methacrylates Co.(SAMAC).
On the effective date of the acquisition during Q2 2020, SABIC will deconsolidate the financial statements of these four ventures, and recognize YANPET, KEMYA and SHARQ as joint ventures under the equity accounting method.
It will recognize SAMAC as a joint operation under the joint operations accounting requirements.
There is no financial impact on the consolidated equity, nor the net income attributable to SABIC shareholders; which were previously reported prior to the acquisition date, SABIC added.
According to the IFRS requirements, the comparative figures for the applicable periods will be restated retrospectively to reflect the deconsolidation of the four ventures on SABIC Group assets, liabilities, and operations and a specific disclosure will be included, where applicable, in the consolidated financial statements for Q2 2020.
SABIC will remain subject to applicable Zakat and tax regulations, and disclosure requirements.
Moreover, the rights and obligations of shareholders shall apply to Saudi Aramco.
Saudi Aramco may not dispose of its shares within six months following the deal completion without prior approval from the Capital Market Authority (CMA).
The acquisition will help realize the Saudi Vision 2030. It will serve as a key pillar for SABIC to continue as a major petrochemical producer in the Kingdom, and reinforce its strategy to become the world’s top chemicals producer.
It will also strengthen Saudi Aramco's position to become one of the world's largest integrated energy and chemical companies. The deal will also support the Public Investment Fund (PIF) to re-invest the significant capital in potential new sectors that will contribute to the long-term diversification of Saudi Arabia's income.
On the other hand, SABIC's board asserted the company will continue its business to achieve the interest of its shareholders, employees and other stakeholders.
Under the deal, SABIC will remain a Tadawul-listed company. It will continue to operate within its legal regulatory framework and exercise its robust governance practices.
The remaining 30% of SABIC’s shares are not part of the transaction.
SABIC’s board will continue to represent all shareholders; perform its duties, undertake all actions in the general interest of the company and maximize its value.
SABIC’s dividend policy will continue to consider the company’s financial position, cash flows and investment plans, which will enable SABIC to continue to provide competitive dividends to shareholders while maintaining a strong financial position.
In addition, SABIC’s strategy will support Saudi Aramco’s strategy and the Saudi Vision 2030. The major petrochemical producer will be the chemicals growth platform of Saudi Aramco, which reinforces SABIC’s strategy to become the world’s leader in chemicals.
Both companies will work to strategically align upstream, downstream and chemicals to maximize value for all shareholders and support growth.
SABIC’s also aims to maintain a strong investment grade credit rating on a stand-alone basis, the statement added.
Meanwhile, the transaction is expected to provide significant growth opportunities, that will enhance career opportunities.