Saudi Market Falls After Earnings Announcements

Reason for the Market Fall

Mazen Al Sudairi, head of research at Al-Rajhi Capital, explained that the recent fall in the Saudi market is due to the evaluation process following earnings announcements made by banks and large companies. According to Al Sudairi, the market has overvalued shares after discussions about profits and expected growth rates.

SABIC’s Performance and Expectations

Al Sudairi expressed his conservative view on the petrochemical sector, but stated that Saudi Basic Industrial Corporation (SABIC) is expected to exceed expectations if a certain item is excluded. He noted that SABIC’s improvement in the second quarter was due to cost management efficiency and its diverse product portfolio.

Challenges for the Petrochemical Sector

Al Sudairi highlighted the close link between the petrochemical sector and industrial activity in China. He mentioned that China’s production index has not yet reached pre-pandemic levels, and the market is facing oversupply and low demand. He also predicted that the pressure on the petrochemical sector will continue for at least the next three months.

Expectations for Petrochemical Prices

Al Sudairi anticipated that petrochemical end prices will not improve, while petrochemical feedstock prices will continue to rise. He attributed this to the rise in oil prices, voluntary production cuts by OPEC Plus, and declining inventories. He also mentioned that Al-Rajhi Capital values SABIC shares in the range of 85-90 rials per share.

SABIC’s Financial Performance

In the second quarter of 2023, SABIC’s quarterly profit fell by 85.12% to 1.18 billion rials compared to the same quarter last year. Revenue for the same period fell by 33.6% year-on-year to 37.17 billion rials. The company’s profit for the first half of this year decreased by 87.22% to 1.84 billion rials.

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