Expected decline in earnings of major Middle East petrochemical companies
IPR forecast a major in the Middle East during the 4th quarter of the current year. The recession in the Western world will lower the demand for petrochemical products. Earlier this year, the decrease in demand for oil was one of the major reasons for decline in petroleum prices from $147 pb to $42. Dr. Gil Feiler, CEO of Info Prod Research, noted that during the 3rd quarter of 2008 most of the Arab public companies registered increase of about 18 percent y/y, but he added that it won't be the case during the last quarter of 2008. As a result, Dr. Feiler forecasts that the inventory level of the plants will increase, while new petrochemical plants will postpone production. The main petrochemical companies are Saudi Basic Industries Corp. (SABIC), Industries Qatar (IQ), Yanbu National Petrochemicals Company (YANSAB), Saudi KAYAN Petrochemical Company (KAYAN), National Industrialization Company (TASNEE), SAHARA Petrochemical Company (SAHARA), Rabigh Refining and Petrochemical Company (Petrorabigh).
Dr. Feiler added that the market cap of SABIC, the largest petrochemical company in the Middle East, is $43 billion. The market cap of the largest petrochemical company in Europe (BASF of Germany) is around $27 billion, while the largest American company, DOW, is about $18 billion. The largest Asian company is Formosa Plastic from Taiwan with market cap of $8.5 billion. Dr. Feiler mentioned that the big companies paid high dividends. The largest dividend in 2007 was paid the Formosa (13.7 percent). BASF paid 8.5 percent, Dow 8.6 percent and SABIC 4.7 percent.