Pricey feedstock impacted our income in Q4: Advanced chairman
Advanced Petrochemical Co. has attributed a sharp decline in net income for Q4 2017 to unforeseeable higher feedstock cost, due to improved crude oil prices, Chairman Khalifa Al Mulhem told Argaam.
"An unanticipated rise in feedstock prices had an impact on operating costs, and in turn on margins. It was prompted by the rise of crude oil prices, partly due to higher demand from Europe and USA in the fourth quarter," he added.
The Saudi-based polypropylene producer saw feedstock prices rise by a whopping 36 percent in 2017. The company produces 455,000 tons of propylene and 450,000 tons of polypropylene per year, relying on locally produced crude oil.
Its net income for Q4 2017 declined by 50 percent to SAR 103.8 million.
"Prices of end products will eventually rise to offset increased costs, but that takes time," he said.
The company boasts a strong footprint worldwide, according to Al Mulhem, who added "We are always on the lookout for new markets, where we can achieve reasonable sales and acceptable margins."
"Our project in South Korea is outperforming plans and expectations, but inflated feedstock prices weighed also on the profitability of our affiliate there, SK Advanced Limited", he added.