Q1 earnings buoy Saudi petrochemical shares; index edges up

Higher petrochemical share prices helped lift the Tadawul All Share Index (TASI) on Sunday after strong first-quarter (Q1) earnings in the sector.
The index rose 1 percent as Saudi Kayan Petrochemical hit its 10 percent daily price limit after the company reported a net profit of SR265.5 million ($70.8 million), having made a loss of SR195 million in the same period last year.
Analysts at NCB Capital had forecast a profit of SR121 million, while Aljazira Capital had expected SR69.5 million.
“This is the highest net income since inception. We believe the variance is due to higher than expected operating rates and gross margin,” NCB Capital said.
Aljazira said its outlook for Kayan would remain optimistic for the rest of the year, but gross margins would decline slightly because of new feedstock prices that would be implemented gradually from the second quarter.
Meanwhile, Saudi Arabia Fertilizers (SAFCO) rose 0.7 percent after it reported net income of SR423 million, at the high end of forecasts; the consensus estimate was SR406 million.
Most of the 14 listed Saudi petrochemical producers have not yet reported quarterly earnings.
“We expect the petrochemical sector’s net income to grow between 60-70 percent from the previous year with the mixed feedstock producers ... being the best performers as they benefit from higher end-product prices,” said Jassim Al-Jubran, an analyst at Aljazira Capital.
“Later this year, many producers are planning temporary facility shutdowns for maintenance works, which may weigh on their performance in the quarters to come, but we believe the worst is behind for the sector.”
Elsewhere, in Dubai the index was almost flat, closing near a 4-1/2 month low, as 16 shares rose and 14 declined. Second- and third-tier shares, which are often traded by local day-traders, were the top movers, with GFH Financial Group jumping 5.6 percent but builder Arabtec dropping 4.6 percent.
In Abu Dhabi, the index edged up 0.2 percent with support from blue chips; real estate developer Aldar Properties rose 0.9 percent.
Qatar’s largest petrochemical maker, Industries Qatar, rose 0.8 percent after news that one of its units, QAPCO, had signed an agreement with state-owned Qatar Petroleum to supply the low-density polyethylene producer with additional ethane gas.
Other Qatari shares sagged, however, dragging the index 0.3 percent lower. Vodafone Qatar, which has not yet reported earnings, fell 0.9 percent.
Egypt’s index fell 0.7 percent to a two-month low, extending the previous session’s 1.2 percent loss, as local retail traders exited positions, bourse data showed.
Tobacco maker Eastern Co. fell 1.4 percent despite saying it had signed an agreement with Al-Mansour International Distribution, the distributor of Philip Morris tobacco products in Egypt, to manufacture cigarettes with the brand name “Target” for two years.

Source: Arab News