April 28, 2019 / 9:11 AM / 7 months ago

UPDATE 1-SABIC posts 38 pct drop in first quarter profit, expects 2019 not to be as strong as 2018

(Adds quotes, details)

By Stephen Kalin

RIYADH, April 28 (Reuters) - Saudi Basic Industries Corp (SABIC) expects its financial performance in 2019 won’t be as strong as 2018, but will still beat market forecasts, its chief executive said on Sunday.

His comments came after the world’s fourth-biggest petrochemicals giant posted a 38 percent drop in first-quarter earnings, missing analyst expectations.

“Our expectations are that 2019 will be better than what the market gives, but it will not be as it was in 2018,” Yousef al-Benyan told reporters in Riyadh.

He said a rise in global prices of some primary products used in the production of petrochemicals like polycarbonate and methanol had a big impact at the end of 2018 and in the first quarter of 2019.

“SABIC continues to work on internal corporate affairs to reduce external impacts,” Benyan added.

SABIC made a net profit of 3.41 billion Saudi riyal ($909 million) in the three months to March 31, down from 5.51 billion riyals in the year-earlier period, the company said earlier in a bourse statement.

Analysts expected SABIC to make a net profit of 3.98 billion riyals in the first quarter, according to the average of estimates of five analysts polled by Refinitiv.

SABIC is forecast to post a net profit of 21.25 billion riyals in 2019, compared to 21.54 billion riyals in 2018, according to an average forecast by nine analysts polled by Refinitiv.

SABIC said average prices decreased by 8 percent quarter-on-quarter, driven by slowing global demand, a slow start to the year and a relatively high level of inventories.

The company’s results are closely tied to oil prices and global economic growth because its products - plastics, fertilisers and metals - are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.

Benyan said the company would continue its strategy to grow in overseas markets.

“We are focusing on SABIC’s competitive strength and it’s presence in the Chinese market as well as the American and African markets.”

Saudi national oil giant Aramco last month reached an agreement with the Public Investment Fund to buy its controlling stake in SABIC for $69.1 billion. ($1 = 3.7508 riyals)

additional reporting by Saeed Azhar; Editing by Elaine Hardcastle

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