19/07/2010
STOCKS NEWS MIDEAST-SABIC under pressure as Q2 disappoints
Saudi Basic Industries Corp (SABIC) is seen facing selling pressure on Monday after the petrochemicals producer reported below-forecast second-quarter profit.
"The market will not like these earnings," says Ibrahim al-Alwan, deputy chief executive at Saudi investment bank KSB Capital.
SABIC's quarterly profit rose 177 percent to 5.02 billion Saudi riyals ($1.34 billion), but missed a consensus analyst forecast and also declined quarter-on-quarter.
"Product prices have declined, some by nearly 20 percent quarter-on-quarter, but SABIC was able to report flattish numbers (quarter-on-quarter) because of increased revenue contribution from (Saudi subsidiary) Yansab and its Chinese joint venture," says a petrochemicals analyst who asked not to be identified.
"The wider expectation is for petrochemicals earnings to have peaked for this year in the first quarter and for margins and profitability to decline.".
The UAE's Emirates Telecommunications Corp (Etisalat) also posted downbeat numbers, with second-quarter profit falling 21 percent as rival du eats into the former monopoly's market share.
Last week, HSBC downgraded Etisalat to neutral from overweight, saying the operator's domestic business is under pressure as price-based competition intensifies in the region.
This could be prompting Etisalat to look to expand in other markets and the firm is close to buying a 26 percent stake in India's Reliance Communications, the Financial Times reported on Monday.
Saudi Arabia's Savola Group was another regional heavyweight to post mediocre earnings, with quarterly profit falling 2.3 percent as capital gains declined.
Abu Dhabi Islamic Bank may lift the gloom slightly, saying it will post double-digit profit growth for the remainder of the year after second-quarter profit came in above analysts' forecasts.
"Islamic banking in the UAE and the GCC continues to enjoy better growth than conventional banks and this is demand-related," CEO Tirad Mahmoud told Reuters. (Reuters).
