Sipchem's Q4 misses estimates, says Aljazira Cap

Saudi International Petrochemical Co. (Sipchem) reported a net profit of SAR 151.4 million in Q4 2018, missing both Aljazira Capital and market consensus of SAR 100.7 million and SAR 86.5 million, respectively, the investment bank said in a note on Thursday.

The weak results is attributed to decline in volumetric sales after the Methanol Plant Energy Efficiency and Performance Enhancement Project and decline in selling prices of all the company’s main products.

“The deviation of Q4 2018 earnings from our estimates is mainly ascribed to higher than expected COGS due to plant shutdown,” it noted.

Sales stood at SAR 1.05 billion, missing the brokerage’s estimates of SAR 1.13 billion, impacted by lower average product prices and scheduled IMC plant maintenance for 55 days during the last quarter.

Gross profit reached SAR 204.7 million, significantly below the brokerage’s estimates of SAR 356 million due to higher than expected cost associated with IMC plant shutdown and high depreciation level.

“We expect operating rate to stabilize above 95 percent during FY 2019 due to efficiency improvement after shutdown. However, PBT and IDC plants are expected to witness a shutdown in Q1-19 for 3 weeks and 41 days respectively, which could weigh on top line,” the report said.

Aljazira Capital remained “overweight” on the stock, revising the target price to SAR 23.50 a share.