By Souhail Karam
RIYADH, Oct 10 (Reuters) - Saudi Arabian Fertilisers Co (Safco) said on Saturday that lower global prices were behind an almost 75 percent drop in its net profit during the third quarter, sending its shares down by as much as 4 percent.
Safco said it made 464 million riyals ($123.7 million) in the three months to September 30, compared with a 1.83 billion riyal record net profit it made a year earlier.
'The decline during the third quarter compared to both the same period of 2008 and the second quarter of 2009 is due to a decrease in global prices,' Safco said in a statement posted on the bourse website.
Saudi Basic Industries Corp (SABIC) holds a 42.9 percent stake in Safco.
'For four quarters now Safco's net income has been down sequentially,' Laurent-Patrick Gally of Dubai-based Shuaa Capital said, adding that the stock was losing its appeal because of earnings decline. 'These are not good numbers for investors'.
Shuaa's third-quarter earnings forecast were in line with Safco's earnings.
'Our forecasts assumed a 3 percent decline in fertiliser sales volume, a 64 percent in urea prices and 70 percent for ammonia,' Gally said.
Safco said operating profit fell 77 percent during the third quarter to 432 million riyals.
The annual decline in Safco's net profit stood at 60 percent in the second quarter and 27.4 percent in the first quarter.
'We need to see next year prices of urea above $300 per tonne and ammonia above $250 per tonne to give a 10 to 15 percent rise in Safco's top line. Every dollar in Safco's topline goes almost fully to its bottom line,' Gally said.
Safco's earnings were close to the average forecast of analysts polled by Reuters in a survey this month, who predicted an average net profit of 467.8 million riyals in the third quarter.
'Ammonia and urea prices during the third quarter were relatively flat compared to the second quarter, but the Indian monsoon season was not as rainy as usual which lessened demand,' Gally added.
After it announced its earnings, Safco's stock fell to as low as 120.25 riyals from a previous close of 125.25 riyals. Before Saturday's session, Safco shares gained 39.6 percent since the start of 2009, which is above the year-to-date performane of the all share index, but below the 63.2 percent rise in the petrochemical industry's index.
'Valuation appears to us quite full ... We advise investors holding Safco shares to take some money out of the table at this stage. For those who don't already own the name, we recommend to wait for better entry points,' Gally said.
(Editing by Andy Bruce) ($1=3.75 riyals) Keywords: SAFCO EARNINGS (souhail.karam@thomsonreuters.com, +966 1 463 2603; Reuters Messaging: souhail.karam.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
RIYADH, Oct 10 (Reuters) - Saudi Arabian Fertilisers Co (Safco) said on Saturday that lower global prices were behind an almost 75 percent drop in its net profit during the third quarter, sending its shares down by as much as 4 percent.
Safco said it made 464 million riyals ($123.7 million) in the three months to September 30, compared with a 1.83 billion riyal record net profit it made a year earlier.
'The decline during the third quarter compared to both the same period of 2008 and the second quarter of 2009 is due to a decrease in global prices,' Safco said in a statement posted on the bourse website.
Saudi Basic Industries Corp (SABIC) holds a 42.9 percent stake in Safco.
'For four quarters now Safco's net income has been down sequentially,' Laurent-Patrick Gally of Dubai-based Shuaa Capital said, adding that the stock was losing its appeal because of earnings decline. 'These are not good numbers for investors'.
Shuaa's third-quarter earnings forecast were in line with Safco's earnings.
'Our forecasts assumed a 3 percent decline in fertiliser sales volume, a 64 percent in urea prices and 70 percent for ammonia,' Gally said.
Safco said operating profit fell 77 percent during the third quarter to 432 million riyals.
The annual decline in Safco's net profit stood at 60 percent in the second quarter and 27.4 percent in the first quarter.
'We need to see next year prices of urea above $300 per tonne and ammonia above $250 per tonne to give a 10 to 15 percent rise in Safco's top line. Every dollar in Safco's topline goes almost fully to its bottom line,' Gally said.
Safco's earnings were close to the average forecast of analysts polled by Reuters in a survey this month, who predicted an average net profit of 467.8 million riyals in the third quarter.
'Ammonia and urea prices during the third quarter were relatively flat compared to the second quarter, but the Indian monsoon season was not as rainy as usual which lessened demand,' Gally added.
After it announced its earnings, Safco's stock fell to as low as 120.25 riyals from a previous close of 125.25 riyals. Before Saturday's session, Safco shares gained 39.6 percent since the start of 2009, which is above the year-to-date performane of the all share index, but below the 63.2 percent rise in the petrochemical industry's index.
'Valuation appears to us quite full ... We advise investors holding Safco shares to take some money out of the table at this stage. For those who don't already own the name, we recommend to wait for better entry points,' Gally said.
(Editing by Andy Bruce) ($1=3.75 riyals) Keywords: SAFCO EARNINGS (souhail.karam@thomsonreuters.com, +966 1 463 2603; Reuters Messaging: souhail.karam.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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