Saudi Basic Industries Corporation (SABIC), one of the world’s largest petrochemical companies, on Thursday reported a 90 percent drop in its net profit in the first quarter and expects margins to remain under pressure in the second quarter.

The company earned 660 million riyals ($175.98 million) in the three months ended March 31, compared with 6.47 billion riyals in the same quarter a year earlier.

Despite the decline, SABIC’s profits exceeded average analysts’ expectations to reach net income of 540 million riyals in the first quarter, according to Refinitiv data.

Abdul Rahman Al-Faqih, the company’s CEO, said in a statement: “We are closely monitoring the current changes in the global market and the process of demand recovery, and new production capacities are high in the first quarter of 2023. Pressure on global prices in light of limited reduction in variable costs.”

He added, “We continue to keep operating costs under control and maintain a strong balance sheet, and despite uncertainty in the markets, our commitment to innovation and sustainability remains strong.”

The Schreck plan, announced in 2021, aims to lead SABIC and oil giant Saudi Aramco, which owns 70 percent of SABIC, to invest $1.3 billion in the private sector by 2030 as part of broader plans to reduce oil dependence.

The company said: “High inflation and interest rates continue to add to the uncertainty surrounding global demand growth, and we expect product margins to remain under pressure in the second quarter of 2023.”

In March, SABIC announced the start of commercial operations at a polycarbonate plant in China, a joint venture with Sinopec, with a capacity of 260,000 tons per year.

Aramco is listening to proposals from Sinopec and Total Energy to invest in developing the Zafura field in Saudi Arabia, sources told Reuters on Tuesday.

The Chinese state-owned gas giant said in March it was exploring the possibility of taking a stake in an existing refinery in Saudi Arabia.

(Reuters)