Earnings Report /
Saudi Arabia

Sipchem: Earnings Call Summary

  • In Q2 22, revenues came in at SAR3.19bn, up 35.1% yoy (+32.5% qoq)

  • In Q2 22, EBITDA reached SAR1.59bn (+16% yoy, +16% qoq)

  • Sipchem achieved higher than expected synergies on the Sipchem-Sahara merger

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

SNB Capital
31 July 2022
Published bySNB Capital

Overview of Q2 22 results

·      In Q2 22, revenues came in at SAR3.19bn, up 35.1% yoy (+32.5% qoq).

·         Sales volume stood at 1,025,000, up 5.5% yoy (+16.2% qoq) vs 972,000 in Q2 21 and 882,000 in Q1 22, driven by strong demand and reliability of Sipchem’s products.

·         In Q2 22, sales volumes were impacted by the 3-week maintenance turnaround of IAC.

·         Average selling price increased 13% qoq.

·         Geographically in H1 22, the Indian Subcontinent contributed 26% of Sipchem’s sales, followed by Asia (25%), Europe (22%) and Saudi (20%). MEA and America contributed 7%, and < 1% respectively.

·         In Q2 22, Sipchem increased its sales in Europe to capitalize on production issues and to realize better netbacks.


EBITDA and net income

·         In Q2 22, EBITDA reached SAR1.59bn (+16% yoy, +16% qoq). EBITDA margin stood at 49.7% vs 56.5% in Q1 22 and 58.1% in Q2 21.

·         EBIT came in at SAR1.37bn, up 20.1% yoy (+19.3% qoq).

·         Share of profit from JV’s and associates came in at SAR148.7mn up 81% yoy (+29% qoq)  vs SAR82.0mn in Q2 21and SAR115.7mn in Q1 22.

·         Net income came in at SAR1.26bn, 52.2% yoy (+17.1% qoq).


Debt and liquidity

·         Debt to equity declined to 0.26x as of June 2022 from 0.34x in December 2021.

·         Sipchem has a strong cash balance of SAR2.8bn, with a current ratio of 1.9x.

·         Cash flow from operations stood at SAR2.5bn in H1 22, up 22% yoy.

·         Free cash flow decreased 37% yoy (-53% qoq) to SAR713mn in Q2 22. The decrease in attributable to 1)zakat and tax payment of SAR260mn, 2) additional investment in working capital and 3) increase feedstock prices.

·         Annualized ROCE stood at 25.5% at the end of Q2 22.


Additional comments

·         Sipchem achieved higher than expected synergies on the Sipchem-Sahara merger.

·         In Q2 22, Sipchem plants exceeded production targets by 4%.

·         Sipchem management continues to focus on marketing agility to maximize netbacks.

·         The management affirmed the methanol plant capacity is at 1.3mn tonnes and 0.2mn tonnes is used internally.

·         Tasnee is following up on the anti-dumping duty case related to SAPCO. Sipchem management is optimistic that the case outcome will be positive.



·         Higher feedstock and energy costs to continue in H2 22 driven by high oil prices.

·         The management expects product prices in H2 22 to be similar to Q1 22 levels.

·         Due to shortage of natural gas, the management expects c20% of European producers to curtail production in H2 22.

·         The management expects stimulus packages in China to increase demand activity as lockdowns ease.

·         The outlook in H2 is cautious due to market uncertainty.

·         The management has not received any information on increasing feedstock prices. Sipchem said that it will continue to be competitive even if there is increase in feedstock costs.

·         VAM weak prices is due to summer seasonality. VAM demand outlook remains good.

·         BDO oversupply came mainly from China and led to a decline in prices. However, a rebound is expected soon.

·         The Inochem plant is expected to start up in Q2 23, the management believe that the plant has a bright future driven by strong demand in the local market.

·         MTO operations: if oil prices are high, MTO plants will run at good rate, thereby benefitting demand of methanol.

·         The capex plans will be balanced between capex, dividend distribution and sustainability of operations.

·         Debottleneck program:

o    Construction to start at the end of Q1 23 for a period of 2 years without impacting the current operations.

o    The project is expected to increase VAM, EVA, and PP capacity.

o    The management expects margins to improve.

o    More details will be provided later.

o    In the past, Sipchem has undertaken major bottlenecking in its Methanol and BDO plants. The maintenance turnaround time was c1 month for these projects


  • Sipchem is in the process of finalizing its sustainability targets which will be announced in Q4 22.

  • The company is currently at an advanced stage of its greenfield initiatives in coordination with Shareek program. Details will be announced once finalized.