RIYADH (Bloomberg) -- Saudi Basic Industries Corp., the world’s largest petrochemicals maker, said third-quarter profit dropped 50 percent as the global recession hurt prices and weakened demand for plastics and fertilizers.

Net income declined to 3.6 billion riyals ($960 million) from 7.24 billion riyals a year earlier, Riyadh-based Sabic said on Sunday in a statement on the Saudi bourse Web site. The average estimate of five analysts surveyed by Bloomberg was for a 2.31 billion-riyal profit.
“The improvement in third-quarter prices wasn’t as strong as it was in the second quarter,” Laurent-Patrick Gally, vice president of research at Shuaa Capital PSC, said in a phone interview from Dubai before the results were released. “Beyond the pricing, any growth in revenue would have had to come from increased volumes.”
Sabic, 70 percent owned by the Saudi government, cut jobs and reduced production as the worst global recession since World War II decreased sales of plastics used for everything from packaging to car bumpers. The company reported a first-quarter loss of 974 million riyals, its first since 2001, after booking 1.18 billion riyals in goodwill writedowns attributed to Sabic Innovative Plastics in the U.S.
Sabic shares fell 0.3 percent to 79 riyals in Riyadh before the earnings were released. The stock has advanced 53 percent this year, giving the company a market value of 237 billion riyals. BASF SE, the world’s largest chemical provider, has gained 43 percent this year.
----------Falling exports
BASF, Dow Chemical Co. and other chemical makers have closed plants and revamped units to cope with falling orders brought on by the global credit crisis. Dow Chemical said on Sept. 10 that it will close styrene monomer and ethylbenzene production units in Freeport, Texas, by the end of the year.
Other Saudi petrochemical companies have reported a drop in quarterly earnings as demand fell for products made by companies in the Arab world’s largest economy. Saudi non-oil exports in the second quarter fell 24 percent from a year earlier to 24.05 billion riyals, the state-run Saudi Press Agency said on its Web site, citing the kingdom’s statistics office.
Saudi Arabian Fertilizer Co., Sabic’s agriculture unit, posted a 75 percent profit decline in the third quarter to 464 million riyals. Urea and ammonia prices plunged as much as 70 percent in the period, Shuaa’s Gally said on Oct. 10. Advanced Polypropylene Co., a Saudi petrochemicals maker, posted a 90 percent decline in profit.
----------New production, demand
Sabic plans to boost petrochemical production by 12 million tons in the next two years by expanding foreign ventures and domestic plants as the global economy improves. Chairman Prince Saud Bin Thunayan Al-Saud said in July that the increase will mainly come from a joint venture with China Petroleum & Chemical Corp., or Sinopec, and from units in Saudi Arabia.
“We expect a strengthening of the global economic recovery to continue in the fourth quarter and in 2010,” Gally said. “This will translate to better a volume environment and sustained pricing. We also expect to see a contribution from new projects.”
Sabic and Mitsubishi Rayon Co. agreed in August to set up a $1 billion joint venture making materials used for cars in a bid to compete with U.S. and European rivals including BASF. The company’s access to discounted feedstock gives it a competitive advantage over rivals that are also suffering from slumps in the automotive, construction and consumer industries.
Eastern Petrochemical Co., the Sabic affiliate known as Sharq, will start an ethylene cracker by the end of the year, Anas Kentab, Sabic’s general manager of operations, said Oct. 7. Sabic’s affiliate Yanbu National Petrochemical Co., or Yansab, announced the first shipment of ethylene glycol from its plant in Yanbu Industrial City in September.