XOM Exxon Mobil Corp

By Ahmed Al Omran

RIYADH-Saudi Basic Industries Corp. (2010.SA), one of the world's largest petrochemical companies, said Thursday it expects growth in major global economies to support the industry in 2017 after posting its first quarterly rise in profit in over two years.

The company, better known as Sabic, said volatility in the oil market remains a challenge but expects crude prices to average around $55 per barrel this year following the Organization of the Petroleum Exporting Countries' deal late last year to cut production.

Chief Executive Yousef a l-Benyan also dismissed concerns over Sabic's business in the U.S. following the election of Donald Trump, who has threatened to impose heavy import tariffs on foreign companies.

"We are considered local manufacturers in the American market. Additionally, we believe the American market is a promising market for petrochemicals," Mr. Benyan told reporters at the company's headquarters in Riyadh.

The CEO added that Sabic plans to continue to expand in the U.S. following the announcement last year that the company is considering a joint-venture with Exxon Mobil Corp. (XOM) to build a major new petrochemical complex on the U.S. Gulf Coast.

Sabic posted a 48% jump in net profit to 4.55 billion Saudi riyals ($1.21 billion) for the three-month period ending Dec. 31, up from 3.08 billion riyals in the same period last year, on lower selling costs and expenses.

The result, its first three-month rise in profit in the last 10 quarters, still missed most analysts' expectations. Riyadh-based Albilad Capital expected Sabic to post a net profit of 5.37 billion riyals, while analysts at NCB Capital had expected 5.33 billion riyals in earnings.

"We believe lower than expected gross margin and income from associates were the key reasons behind the deviation," an analyst at NCB Capital said.

The Saudi Arabian petrochemical giant, which is 70% government-owned, said it made sales worth 34.03 billion riyals in the fourth quarter, slightly down from 34.16 billion riyals a year earlier.

Its full-year net profit was down 4.6% year-on-year to 17.91 billion riyals due to lower average product sales prices and an additional impairment charge, Sabic said.

Sabic's earnings are linked to prices of commodities and global economic growth, as many of its products like plastics and fertilizers are sold and used across the world. A diversified portfolio and global presence can help buffer the company against the sharp drop in oil prices since the middle of 2014.

Mr. Benyan said Sabic analysed different scenarios for oil prices this year but the company's focus remains on improving reliability in their plants while hoping for stable energy markets.

"If there is stability in prices regardless of the price, though of course it is better if it is higher, then results of the companies can be positive and they can control manufacturing operations and also the impact on products prices," he said.

The company has worked to reduce costs by merging different units and aimed for better use of its feedstock after the Saudi government cut subsidies for utilities such as electricity, water and fuel to cope with the impact of cheap oil.

Sabic is the biggest listed entity in the Middle East. Its performance is closely monitored by investors, especially after the kingdom allowed foreign investors to begin purchasing stocks directly in its market in 2015.

Write to Ahmed Al Omran at ahmed.alomran@wsj.com

(END) Dow Jones Newswires

January 19, 2017 06:56 ET (11:56 GMT)

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