UPDATE 2-SABIC optimistic on Q2 after strong first quarter

Tue Apr 19, 2011 8:04am EDT

Related Topics

* CEO says "hopeful" Q2 results will be better than Q1

* Sees Q2 demand to be similar to that of Q1

* SABIC Q1 sales 45 bln riyals - CEO

* SABIC shares gain 2.2 percent on Saudi bourse

(Adds details, stock price)

By Asma Alsharif

RIYADH, April 19 (Reuters) - Saudi Basic Industries Corp (SABIC) 2010.SE, the world's biggest petrochemical firm by market value, expects its second-quarter results to be better than the previous as demand for its products remains strong.

Mohamed al-Mady, Chief Executive of the Gulf's most valuable firm, said on Tuesday sales in the first quarter reached 45 billion riyals ($12 billion), down 6 percent on the first quarter.

Al-Madi said there was a 2 percent decline in production for the first quarter from the previous quarter due to halting of some operations, but was optimistic about future results as demand remained high.

"We are very optimistic that we will continue on the same demand for the rest of the year," Mady told Reuters a day after the group posted a forecast-beating 42 percent jump in first-quarter profit. [ID:nLDE73H1FJ]

Asked if second-quarter results would be better than the previous quarter, al-Mady said: "Yes, it is possible if things continue the same way." Earlier this year, SABIC said it expects higher sales and profitability through 2011 and 2012 as petrochemical prices return to pre-crisis levels and further capacity is added. [ID:nLDE70H1W4]

"Prices (of petrochemical products) are stable, especially with the rise in energy prices and the shortage in products," al-Mady said.

SABIC has an advantage over rivals in terms of profitability because it pays a government-subsidised 75 cents per million BTU (British Thermal Unit) for gas feedstock, a fraction of the cost on international markets.

The firm reiterated on Tuesday that operations at its affiliate Saudi Kayan Petrochemicals 2350.SE will start commercial production in the second half.

"All plants will be finished sometime in 2012 but the majority of the plants will be commercially operational in (the second) half of this year," al-Mady said.

Al-Mady also said SABIC is looking to expand into the performance chemicals segment in 2011. He said some plants would be built in Saudi Arabia and others outside.

SABIC shares were up 2 percent at 1030 GMT on the Saudi Arabia bourse. The broader index .TASI was down 0.6 percent. (Writing by Dinesh Nair; Editing by Amran Abocar and David Holmes) ($1=3.750 Saudi Arabian Riyal)

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