Saudi International Petrochemical Co.’s (Sipchem) net profit of SAR 52 million for Q4 2016 exceeded Riyad Capital’s estimates of SAR 28 million, the brokerage said in an earnings report.
Revenue came in at SAR 914 million in Q4, up 5 percent year-on-year (YoY) and 34 percent quarter-on-quarter (QoQ).
This was attributed to an increase in production and sales volumes by 27 percent, in addition to an increase in the prices of methanol and ethylene-vinyl acetate (EVA) by 28 percent and 8 percent, respectively.
Meanwhile, Q4 gross profit more than doubled, jumping 108 percent YoY and 152 percent QoQ to SAR 212 million.
Gross margins rose to 23 percent from 12 percent YoY and from 18 percent in 3Q, due to higher product prices and better efficiency on a 90 percent utilization rate.
“There was a serious initiative of cost savings that included rationalizing employees, managing distribution costs and exploring new markets. We have confidence that management would continue to focus on optimizing costs at a time when higher energy prices are expected going forward,” the report said.
Sipchem’s operating expenses increased by 7 percent YoY but were down 5 percent QoQ – another indicator of better efficiencies in 2016.
Riyad Capital forecasts a net income of about SAR 366 million for the petrochemical firm in 2017.
The brokerage maintained its ”Neutral” rating of the stock but raised the target price to SAR 16 per share from SAR 11.
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