Yanbu National Petrochemical Company (Yansab) announced a sharp decline in its net profits for 2023 by 81%, reaching SAR 79 million, compared to profits of SAR 420.3 million in 2022. This significant decrease reflects the magnitude of the challenges facing the global petrochemical sector and puts the company's performance under scrutiny amidst market volatility.
Reasons for the decline in financial performance
According to the official statement published by the company on the Saudi Stock Exchange (Tadawul) website, the primary reason for this decline is the “lower average selling prices for all products.” This factor indicates the company's vulnerability to global supply and demand dynamics, as increased supply of some products and slower economic growth in key markets have put downward pressure on prices. Additionally, Yansab cited “higher costs for some production inputs” as another contributing factor, consistent with global inflation and rising energy and raw material prices. Despite these challenges, the company affirmed that it has achieved outstanding levels of plant reliability, which has positively impacted operational efficiency, but this was not enough to offset the negative effects of market conditions.
General context and importance of the petrochemical sector
Yansab, a subsidiary of the industrial giant SABIC, is a major player in the Saudi and global petrochemical sector. Its industrial complex is located in Yanbu Industrial City, a strategic hub on the Red Sea coast. The company's role is centered on converting hydrocarbons into basic petrochemical products such as ethylene, propylene, and polyethylene, which are used in countless industries ranging from packaging and automotive to textiles and construction. The performance of companies like Yansab is a significant indicator of the health of the Saudi economy and its diversification efforts under Vision 2030, which aims to reduce dependence on crude oil and promote value-added downstream industries.
Expected impacts and dividend distribution decision
The decline in profits for a company the size of Yanbu National Petrochemical Company (Yansab) has multiple implications. Locally, it affects investor confidence in the petrochemical sector listed on the Saudi Stock Exchange (Tadawul). Regionally and internationally, this performance underscores the cyclical nature and sensitivity of the petrochemical industry to global economic fluctuations. To address this situation and reassure shareholders, the company's board of directors announced its decision to distribute interim cash dividends for the second half of 2023.
Details of cash dividend distribution
The Board of Directors approved the distribution of cash dividends totaling SAR 562.5 million to shareholders, at a rate of SAR 1 per share, representing 10% of the share's nominal value. The entitlement date for shareholders of record at the close of trading on February 17, 2024, was set, with the distribution date to be March 8, 2024. This decision, despite the decline in profits, reflects the company's policy of maintaining profitable returns for its shareholders and its confidence in its ability to overcome current challenges.
