SABIC H1 2025 results reflect exceptional strains on restructuring, external provisions: Analysts

Argaam

2 days ago

Saudi Basic Industries Corp. (SABIC) reported a net loss of SAR 5.28 billion in H1 2025, compared to a SAR 2.43 billion profit a year earlier. The decline was driven by SAR 3.78 billion in impairments and provisions tied to the closure of its Olefins 6 cracker in Teesside, UK.
The shutdown is part of SABIC's portfolio optimization plan, aimed at improving operational efficiency and cutting costs amid ongoing challenges in the petrochemical sector.
In Q2 alone, SABIC posted a net loss of SAR 4.1 billion. Analysts told Argaam that the results were shaped by non-recurring, non-operational factors, particularly asset impairments and restructuring in Europe, while core performance remained resilient.
European Impairments Drive Record Losses
Jassim AlJubran, Director - Head of Sell-Side Research at AlJazira Capital, said Q2 losses stemmed mainly from SAR 3.78 billion in asset impairments at SABIC's UK complex, amid continued pressure from high feedstock costs and negative margins in Europe.
He noted that affiliate and JV contributions fell by SAR 838 million, mainly due to asset devaluations, including SABIC's stake in Clariant, while restructuring charges added SAR 1.1 billion in Q1 and are expected to persist through Q3.
Gross profit margin dropped to 12.43%, its lowest since 2020, indicating ongoing operational pressure. AlJubran warned that these one-off items make quarterly or annual comparisons less meaningful.
Core Operations Hold Amid Market Pressures
Financial advisor Hussein Al-Attas estimated over 90% of Q2 losses were due to non-operational provisions linked to European asset impairments. He said these reflect a broader capital efficiency strategy and efforts to offload non-viable assets.
Despite headwinds, SABIC held revenues steady at SAR 35.7 billion, showing sales resilience. However, weak product prices and high feedstock costs continued to erode profitability.
Al-Attas said the downturn is part of a global petrochemicals cycle, pressured by slowing demand in China and Europe, market saturation, and growing competition from low-cost producers.
He praised SABIC's decisive restructuring and asset optimization strategy, describing it as a positive move for long-term sustainability.
H2 Recovery Anticipated
AlJubran expects a gradual recovery in H2 2025 as one-off charges ease and restructuring wraps up by Q3. A seasonal drop in feedstock costs may also support margin recovery.
He believes SABIC is well-positioned to benefit from a better operating landscape, supported by its solid balance sheet and strategic focus on cost control and efficiency.