Advanced expects stable margins, production in Q4: CEO

Mamdouh AlAmri, CEO of Advanced Petrochemical Co.

Mamdouh AlAmri, CEO of Advanced Petrochemical Co., said third-quarter net profit fell year on year as sales volumes declined 20% due to geopolitical disruptions to logistics, despite a 12% increase in production.

In an interview with Argaam, AlAmri said results were also affected by an 8% rise in propane prices, while depreciation, fixed costs, and financing expenses were recognized for a full three months, compared with two and a half months in the year-earlier quarter.

The company expects fourth-quarter 2026 production to remain close to third-quarter levels, while sales are expected to increase as carried-over inventory becomes available, provided the improvements in logistics and profit margins seen in September continue.

Third-quarter sales volumes represented about 70% of production, AlAmri said, while inventory carried over from the previous quarter equaled 10% of targeted production, bringing inventory at the quarter-end to about 40% of average production volumes.

Advanced had sold about 50% of its inventory by the end of September, but the volumes were classified as goods in transit for accounting purposes and will be recognized as revenue at the end of the fourth quarter once the revenue recognition criteria are met.

To address logistics challenges, the company adopted multiple shipping routes, including land transport to neighboring markets such as Turkey and Jordan, domestic sales, and shipments through Dammam Port and Red Sea ports.

Demand remained strong in the third quarter, particularly in India and Pakistan, AlAmri said, while selling prices fell 16% quarter on quarter, but profit margins held steady as propane prices declined 31% over the same period.

AlAmri noted that fourth-quarter price trends remained difficult to predict amid geopolitical uncertainty, adding that the company recorded an increase of about $100 per ton in net selling prices in October, accompanied by a broadly similar rise in propane prices.

These developments suggest fourth-quarter profit margins will remain close to levels recorded in the second and third quarters of 2026, he predicted.

He added that the company has returned to normal operating rates following the stabilization of propane supply flows during the third quarter, and current production levels should support net profit despite continued pressure from financing and depreciation costs, provided profit margins stabilize and logistics conditions improve.

AlAmri said financing and depreciation costs are normal burdens for large industrial projects such as Advanced’s, adding that reducing their impact on financial results depends on maintaining targeted production levels, which the company achieved in the third quarter, while preserving healthy profit margins.

If September’s improvements in logistics and profit margins continue, fourth-quarter production is expected to remain close to third-quarter levels, while sales should increase as carried-over inventory becomes available, potentially improving the company’s financial results, AlAmri added.