(Reuters) – Saudi Basic Industries Corp. (SABIC) reported an 86% drop in third-quarter net profit on Sunday after taking an impairment charge of 1.5 billion riyals ($400 million) on its investment in Swiss chemicals firm Clariant.
A man walks past the headquarters of Saudi Basic Industries Corp (SABIC) in Riyadh, Saudi Arabia October 27, 2013. REUTERS/Faisal Al Nasser/File Phot
SABIC also warned that the new capacity in key products lines that have pressured its product prices and margins this year would persist into 2020.
The world’s fourth-biggest petrochemicals company posted a net profit of 830 million riyals for the quarter ending September 30, down from 6.1 billion a year earlier.
“The decrease in net income is attributable to lower average selling prices in addition to recording the 1.5 billion (Saudi riyal) impairment provision,” it said.
SABIC, which has a 25% stake in Clariant, has said in the past it has no interest in taking it over after the Swiss company shelved a joint venture plan with SABIC in July.
SABIC bought its stake in Clariant in January. It did not disclose the value of the deal then, but based on market value the stock was worth $2.4 billion.
The current market value of the stake is less than $1.8 billion.
SABIC said it reassessed the carrying value of the stake based on a number of factors such as publicly available information and analysts’ 12-month consensus forecasts for the stock.
SABIC’s revenue fell 23% from a year earlier to 33.69 billion riyals, it said.
“A challenging environment due to slower global growth coupled with additional new capacities in key product lines… coming on-stream together with a decline in oil prices exerted a downward pressure on petrochemical prices in the third quarter of 2019,” the CEO said.
($1 = 3.7504 riyals)
Reporting by Saeed Azhar and Marwa Rashad; editing by Jason Neely