Saudi Arabia’s National Industrialization Co (Tasnee) on Tuesday said it swung to a net profit in the second quarter, beating analysts’ forecasts and ending a run of five straight losses.
Tasnee made a net profit of SR103.9 million ($27.7 million) in the three months to June 30, compared to a loss of SR107.7 million ($28.7 million) in the prior-year period, according to a bourse filing.
Three analysts polled by Reuters had forecast on average a net loss in the second quarter of SR1.20 million ($319,978.6).
Tasnee cited operational improvements, a decrease in certain feedstock costs and a rise in other income as factors for the better performance. Those gains helped offset lower average sales prices for certain products and higher financial charges.
It noted that the company’s results in the same quarter of last year were also hurt by an impairment charge related to non-current assets.
Tasnee reported sales in the second quarter of SR3.8 billion ($1.01 billion) versus SR4.2 billion ($1.11 billion) in the same period a year earlier.
Tasnee’s earnings have been hit hard by falling product prices, like many petrochemical firms in the kingdom, as they are closely tied to slumping oil prices. Saudi producers have also benefited in the past from subsidised energy and feedstock costs, so lower crude prices compress their margins.
The latter is changing though, as energy subsidies are reformed by the Saudi government to help it close a substantial budget deficit.
To help counter market conditions, Tasnee is undergoing a restructuring which aims to cut costs — including job losses — and improve efficiencies.
In April, chief executive Mutlaq al-Morished said he expected to see the benefits of its restructuring soon and had a more positive outlook for the chemicals market.
Source: Reuters / www.tradearabia.com