Sabic: remarkable growth

Sabic: remarkable growth

Sabic maintains its competitive edge

The world’s fourth-biggest petrochemicals company’s market leading operations, along with its strong research and development (R&D) capabilities, provide it a competitive advantage

August 2018

As Saudi Basic Industries Corp (Sabic), the world’s fourth-biggest petrochemicals company, reported a big jump in second-quarter net profit, the company once again established its capabilities in facing different challenges.

The company reported an 81 per cent leap in second-quarter net profit, citing higher selling prices and a jump in sales volumes. Sabic made a net profit of SR6.70 billion ($1.79 billion) in the three months to June 30, up from SR3.71 billion in the year-earlier period, it said in a bourse statement. Analysts had on average expected Sabic to make a net profit of SR5.8 billion. Quarterly sales climbed 26 per cent from a year earlier to SR43.28 billion, and were up 3 per cent from the previous quarter.

Sabic’s results are closely tied to oil prices and global economic growth because its products – plastics, fertilisers and metals – are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.


Sabic Product Application and Development Centre in Riyadh, Saudi Arabia

Sabic Product Application and Development Centre in Riyadh, Saudi Arabia

Leading Operations

Ranked as the third largest global diversified chemical company, it has a wide range of businesses, which helps the company cater to the diverse needs of its consumer base and generate higher revenue.

Headquartered in Riyadh, Saudi Arabia, Sabic manufactures on a global scale in the Americas, Europe, Middle East and Asia Pacific, making distinctly different kinds of products:  chemicals, commodity and high performance plastics, agri-nutrients and metals. Its market leading operations, along with strong research and development (R&D) capabilities provide it a competitive advantage.

The company’s Technology and Innovation (T&I) division works with strategic business units to improve the manufacturing processes and develop new technologies. Its T&I facilities spread across the world focus on the development of new patents and certifications. As of December 2016, the company operated technology centres in China, India, the Netherlands, Saudi Arabia, and the US, according to a report by GlobalData.

Sabic develops new and highly innovative products through advanced application and process development. The company’s R&D facilities develop 150 new products annually. As of December 2016, the company had 12,191 global patents and was working on over 640 research projects, the report said.


Develops New resins

More recently, Sabic, has developed a dedicated, diverse global foam portfolio, applicable in almost all industrial applications - automotive, packaging, consumer and construction.

Sabic is adding to this portfolio with two new dedicated LDPE grades for the cross-linked foaming process – Sabic LDPE HP0722NDF and Sabic LDPE HP2022 NDF, which will be available globally.

“Sabic’s new resins are specifically designed and beneficial for cross-linked foaming processes. Together with our partners we have created innovative recipe designs of our new grades with additional value due to improved foam quality and increased process efficiency,” said Douwe van der Meer, engineer, market development and technical support.

“These new solutions can enable better surface quality and smaller cell-size, with potentially improved mechanical properties due to their improved reactivity; we have conducted several customer trials in Asia which have indeed confirmed this,” added Kai Chek Kuan, engineer, market development and technical support.

The improved reactivity of Sabic LDPE HP0722NDF and Sabic LDPE HP2022NDF to cross-linking can result in more efficient processing, with shorter cycle times or faster line speeds, typically leading to a more competitive product and added value.        

“We all face many global challenges due to an ever-growing population and increasingly limited resources. Foaming is key to help solving these challenges, by pushing industries to invest in solutions that are both sustainable and cost-efficient, with enhanced material properties.” said Frank de Vries, Sabic’s global foam and lightweight leader.

“These two new LDPE grades for the cross-link foaming process are the latest examples from Sabic of such innovative solutions developed together with our customers and value chain partners,” concluded Frank de Vries.

Sabic has a strong base of global supply chain which has enabled it to strengthen its operations. The company operates through a global network of 64 manufacturing plants in Argentina, Austria, Bahrain, Belgium, Brazil, Canada, China, Germany, India, Italy, Japan, Mexico, The Netherlands, Saudi Arabia, Singapore, South Korea, Spain, Thailand, the UK, and the US. It has approximately 20,000 delivery locations spanning 140 countries.

The company has more than 35,000 employees worldwide and operates in more than 50 countries, through a global network of 64 manufacturing plants and 19 technology centres.

Geographically, the company classifies its operations into six segments namely Middle East, Africa, Europe, Asia, America, and Others. In FY2016, the company generated 29 per cent of its total revenue from Asia, 26 per cent from Europe, 24 per cent from the Middle East, 9 per cent from America, 5 per cent from Africa, and 7 per cent from Others, GlobalData reported.


New Opportunities

According to the report, Sabic could benefit from the increasing worldwide demand for fertilisers and capitalise on the opportunity to expand its business and revenue. According to International Fertilizer Industry Association (IFA)’s Fertilizer Outlook report 2016-2020, the global demand for fertilisers is expected to increase by 2.9 per cent per annum, reaching 186 million tonne by 2020. The fertiliser industry will invest close to $130 billion in more than 150 new production units, increasing global capacity by over 150 million tonnes products by 2020.

Further, Sabic is focusing on strengthening its operations through selective investments such as its agreement with ExxonMobil Corporation in the US or its investment in composites specialist Airborne International in The Hague. The two investments could further strengthen its reach and help development of fully automated and digitised composites production processes, the report said.

The company also has various projects including its oil-to-chemicals joint venture with Saudi Aramco; coal-to-chemicals joint venture with Shenhua Ningxia Coal Industry Group Co; and strategic cooperation agreement with Sinopec in China. Such initiatives could further strengthen its operations.

Strong outlook in the petrochemical industry could also help Sabic to expand its geographical operations and explore untapped markets to bolster revenue. The company could benefit from the potential global petrochemicals market.

However, the company is exposed to severe competition in all the product segments from both national and international players.


Firm on localisation

Sabic has partnered with nine more global companies to promote the introduction of industry-leading technologies into Saudi Arabia, create new jobs, and help the ongoing localisation drive.

During the annual meeting of Sabic Home of Innovation at the Riyadh Techno Valley, the participants were updated on the performance and achievements of the Home of Innovation in 2017, and were briefed on its 2018 strategy. They were introduced to Sabic’s Nusaned initiative, which was launched earlier this year to support Saudi Arabia’s local content development plans and contribute to the realisation of Saudi Vision 2030.

Yousef Al Benyan, Sabic vice chairman and CEO, stressed the importance of the Home of Innovation meeting in enhancing its role as a platform to help localize global technologies and strengthen business relationships to attract both local and global investments.

Al Benyan added that the success of the initiative can be clearly gauged from the fact that more participants have joined hands with Sabic to contribute towards Saudi Arabia’s aim of transforming into a knowledge economy. This is in line with Sabic›s 2025 strategy that views innovation as a key element in developing new businesses and help advance Saudi Arabia’s growth plans, he said.

The meeting discussed the opportunities offered by the Home of Innovation to its global participants, as part of a cooperative matrix involving 42 companies from nine countries. The initiative provides them an attractive investment environment and an opportunity to take part in mega projects in various sectors in Saudi Arabia, such as construction, energy, transportation, and consumer goods.

The new participants later visited the Home of Innovation Demonstration House and learned about advanced energy-efficient solutions that help save up to 40 percent of the energy consumed by it.

Since its launch in May 2016, the Home of Innovation has helped in creating more than 20 investment opportunities. It received more than 4,000 visitors and held more than 30 workshops on key subjects ranging from business, innovation, and investment.  

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