IDEAS IN INVESTMENT. SIPCHEM- On Major Growth path SNAPSHOT FINANCIAL SNAPSHOT. Saudi International Petrochemical Company (SIPCHEM)

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1 IN SIPCHEM- On Major Growth path SNAPSHOT Date 21-Nov-07 Industry Petrochemicals Current Market Price SR Sector Industrial 52 week High/ Low SR 56.75/ Listing Tadawul, KSA No. of Issued Shares ( 000) 200,000 Stock Code 2310 Price - Earnings (TTM) Price Book value 3.77 Market Capitalization (SR '000) 10,350,000 % to Total Market 0.6% FINANCIAL SNAPSHOT M '06 9M '07 EPS (Annualized) SR BV (SR) Number of Shares ( 000) 150, , , ,000 HISTORY is a Saudi Company listed in Saudi Stock market. The company was established on 22/12/1999, with a current paid in capital of SR 2.0 billion (US$ 533 million). SIPCHEM actively invests in petrochemical and chemical industries, both basic and intermediate to produce chemicals used to manufacture a multitude of products. 1

2 IN Through its affiliates, International Methanol Company (IMC) and Gulf Advanced Chemical Industries Company (GACIC), SIPCHEM currently produces over one million mtpa of methanol and 75 thousand mtpa of butanediol. SIPCHEM allocated 30% of the company s shareholding or 45 million shares to the general public through initial public offering worth approximately SR 2.5 billion in September Close to 6.7 million Saudi nationals responded to the offer. GROWTH IN THREE PHASES SIPCHEM has chalked out a continuous growth path divided in three phases. Phase one of its development witnessed the successful completion and operation of a world scale Methanol plant and a Butanediol plant, the first of its kind to be built in the Middle East. In the second half of 2006, SIPCHEM started construction of a major Acetyls Complex which consists of Acetic Acid plant (460 thousand mtpa), Vinyl Acetate Monomer plant (330 thousand mtpa) and Carbon Monoxide plant (345 thousand mtpa). Commercial operation of these plants is scheduled to start in the first quarter of This is the phase 2 program under which combined capacity will cross 1.15 million metric tons per annum. In November 2006, SIPCHEM announced its massive, fully integrated olefins and derivatives complex as part of its phase-iii development. The complex will consist of an olefins cracker for producing ethylene and propylene and 16 integrated plants producing various value-added performance products scheduled to start in The launch of these additional facilities demonstrates the company's aggressive expansion program, which aims to make it one of the largest, fully-integrated, petrochemical complexes in the Middle East, owned and operated by the private sector. Production facilities of the company are located in Jubail for the obvious advantages of availability of raw material, proximity to ARAMCO and good infrastructure for exports. 2

3 IN PRODUCT PROFILE PRODUCT AFFILIATE TECHNOLOGY USE The third phase of growth will allow SIPCHEM to meet its objective of producing and selling more than 5.0 million tons per year of petrochemicals and chemical products globally. Methanol with capacity to produce 1 million MTPA International Methanol Company (IMC) Jacobs, (UK) Natural Gas is the raw material and the production capacity is 1,000,000 MT per annum. It is used to manufacture Formaldehyde, Acetic Acid etc. A brief product profile of the company in production and under planning is as follows. The capacities mentioned herein exclude the third phase of Polyolefins that will produce 3 millions tonnes of various products. Specialty Chemicals such as Butanediol (BDO), Tetrahydrofuran (THF) etc. to produce 75,000 MTPA Gulf Advanced Chemical Industries Company (GACIC) Davy Process Technologies (UK) These are used in Pharmaceuticals, adhesives, vinyl films etc. Acetic Acid (AA) and Acetic Unhidride (AAnh) to produce 500,000 MTPA International Acetyl Company (AAC) Eastman Chemicals Company (USA) Used in the production of vinyl acetate, pure terephthalic acid etc. Production expected in early Vinyl Acetate Monomer (VAM) to produce 330,000 MTPA International Vinyl Acetate Company (IVAC) DuPont (USA) Used in adhesives, making of emulsion products etc. Carbon Monoxide (CO) to produce 345,000 MTPA United Industrial Gases Company (UIGC) Lurgi AG (Germany) Widely used as fuel and as reducing agent in the chemical industry. 3

4 IN COMPETITIVE ADVANTAGES (SR '000) 2003 * M 2007 The company as ambitious as SIPCHEM cannot move forward without sizeable advantages over competitors. We believe it has following advantages. Strong record of performance Integrated petrochemical production units (Petrochemical Value Chain) Good prices for raw materials (Agreement with Saudi Aramco) Integrity of logistic & supporting services Geographic location: near to sources of raw materials as well as to targeted markets Ability of best financing (with governmental or private financial institutions). Sales 0 7, ,087 1,333,990 1,026,000 Gross Profit 0 5, , ,720 Operating Profit 3,512 4, , , ,000 Net Profit 1,310 6, , , ,000 EPS (SR) # $ 2.3 Capital 650, ,000 1,500,000 1,500,000 2,000,000 No. of Issued Shares 65,000 65, , , ,000 # SR 10 par value of shares assumed. * Investment Income in 2003 amounted to SR 7.7 million. $ Annualized. This helps the company to complete projects in time with less financial cost in financing. Good business reputation. Investors of the company have good business reputation in the whole region. Good relations with pioneer companies in the field of technology Internationally recognized partners that are keen in joint venture equity shareholding and willing to off-take and globally market a significant portion of production volumes 4

5 IN AFFILIATES SIPCHEM invests in companies that operate in the Petrochemicals sector. A brief pattern of shareholding in subsidiaries of the company is as follows International Methanol Company (IMC) 65% 65% Gulf Advanced Chemical Industries Company (GACIC) 53.91% 53.91% International Vinyl Acetate Company (IVAC) 75% International Acetyl Company (IAC) 75% United Industrial Gases Company (UIGC) 75% The central location of Jubail enables IMC product to be shipped economically to Europe, the Middle East, Africa and the Far East. 2. Gulf Advanced Chemical Industries Company Limited GACIC is a limited liability company established in 2002 in Saudi Arabia. GACIC is majority owned by SIPCHEM in joint venture with the Public Pension Agency GOSI, Huntsman Corp., Davy Process Technology, Sabih Tahir Darwish Al Masri, and A.S. Albabtain & Company. GACIC had successfully started initial production in October 2005 and is now going on stream with a total capacity of 75,000 mtpa to meet the growing demand for Butanediol (BDO) and derivatives in the world and domestic markets. 3. International Acetyl Company (IAC) 1. International Methanol Company IMC is a limited liability company established in 2003 in Saudi Arabia, owned 65% by Saudi International Petrochemical Company (SIPCHEM) and 35% by Japan-Arabia Methanol Company Limited (JAMC) a special purpose subsidiary owned by a consortium of Japanese companies including Mitsui & Co. Limited (Mitsui) (55%), Mitsubishi Corporation (Mitsubishi)(15%), Daicel Chemical Industries Limited (Daicel) (15%) and Iino Kaiun Kaisha Limited (Iino) (15%). IMC owns and operates a Methanol Plant in Jubail, Saudi Arabia. Production of the first drop of Methanol was celebrated in November 2004 and commercial operation was accomplished in early December SIPCHEM signed a supply Agreement for natural gas with Saudi Arabian Oil Company (ARAMCO). JAMC, which is a shareholder of IMC, markets about 80% of the company s Methanol output outside the Middle East, whereas the Company is marketing the remaining balance in the Middle East. IAC is a limited liability company registered in January 2006, to be ultimately owned 85% by SIPCHEM and 15% by Helm Arabia. IAC is intended to build, own and operate the Acetic Acid (AA) plant. Helm Arabia is a special purpose company established in Hamburg, Germany between Helm AG of Germany, a leading multinational producer and distributor of petrochemical products and 5

6 IN Thales International Offsites, a subsidiary of Thales Company of France, a leading international electronics and systems group, serving government and business customers worldwide. The plant is designed to produce up to 460 thousand mtpa of acetic acid and up to 50 thousand mtpa acetic anhydride that will start commercial operation in early The feedstock, namely methanol, carbon monoxide and hydrogen will be provided internally by other SIPCHEM affiliates, viz. International Methanol Company (IMC) and United Industrial Gases Company (UIGC), thus ensuring an uninterrupted supply of feedstock. 4. International Vinyl Acetate Company (IVAC) IVAC is a limited liability company registered in January, 2006, to be ultimately owned 85% by SIPCHEM and 15% by Helm Arabia. IVAC is intended to build, own and operate the Vinyl Acetate Monomer (VAM) plant. Helm Arabia is a special purpose company established in Hamburg, Germany between Helm AG of Germany, a leading multinational producer and distributor of petrochemical products and Thales International Offsites, a subsidiary of Thales Company of France, a leading international electronics and systems group, serving government and business customers worldwide. The plant is designed to produce up to 330 thousand mtpa of VAM, which will start commercial operation in early The feedstock, Acetic Acid, will be provided internally by other SIPCHEM affiliates, viz. International Acetyl Company (IAC) thus ensuring an uninterrupted supply of feedstock. 5.United Industrial Gases Company (UIGC) UIGC is a limited liability company registered in May 2005, owned 75% by SIPCHEM and 25% by National Power Company (NPC), a Saudi joint stock company. The plant is designed to produce up to 345 thousand mtpa of Carbon Monoxide (CO), that will start commercial operation in the 4th quarter of Saudi Aramco has agreed to supply SIPCHEM with natural gas to be used as feedstock for UIGC plant. PERFORMANCE REVIEW Company went into commercial operations in Since then, it has been raising its performance level steadily. From mere SR 1.3 million profits in 2003, it made a profit of SR 318 million for the nine month period ended September Production in 2006 (MT) Achievement Methanol 1,064,000 Fully marketed all production Butanediol, Tetrahydrofuran 46,109 70% capacity utilization The cumulative profit since 2003 reached SR 1,484 million. In 2006, the company achieved highest ever production level. 6

7 IN Income Statement 9M M 2007 % Change Income Statement % Change Sales 853,550 1,025, % Cost of sales -346, , % Gross Profit 507, , % General & Administrative expenses -28,780-37, % Operational Income 478, , % Income from investment 43,546 25, % Financial Charges -59,542-71, % Pre-operational expenses -1, % Other Income / Expenses 1,315 5, % Net Profit Before Zakat & Minority Interests 462, , % Minority interest -137, , % Income before Zakat 325, , % Zakat -7,482-16, % Net Profit 318, , % Sales 726,087 1,333, % Cost of sales -250, , % Gross Profit / Loss 476, , % General & Administrative expenses -25,091-48, % Operational Income 450, , % Income from investment 36,925 54, % Financial Charges -40,484-81, % Pre-operational expenses -2,328-1, % Other Income / Expenses 17,787-4, % Net Profit Before Zakat & Minority Interests 462, , % Minority interest -130, , % Income before Zakat 332, , % Zakat -7,834-25, % Net Profit 324, , % During September, the company closed two plants for scheduled maintenance and it had an impact on the bottom line. A healthy trend is seen in sales and operational income.total assets of the company reached SR 6.3 billion out of which property and equipments were to the tune of SR 4.5 billion. Year 2006 produced remarkable results for the company on the back of higher tonnage sales, improved product prices and continuity in production. Sales rose 84% from the year before. The total production of Methanol and Butanediol reached 1.1 million metric tons. As a result, profits soared to SR 494 million, a jump of 52% year on year. 7

8 IN Nov Nov-06 RECOMMENDATION SIPCHEM Vs TASI SIPCHEM TASI 9-Dec Dec-06 6-Jan Jan-07 3-Feb Feb-07 3-Mar Mar Mar Apr Apr May May-07 9-Jun Jun-07 7-Jul Jul-07 4-Aug Aug-07 1-Sep Sep Sep Oct Oct Nov-07 The stock has been an out-performer since its listing in November Except for a brief volatility post-listing, investors have preferred the stock over the broader market. Since its inception in late 1999, SIPCHEM has witnessed progress and development in all fields. The two affiliates started under the Phase-I development, International Methanol Company (IMC) and Gulf Advanced Chemical Industries Company (GACIC) are successfully producing methanol and Butanediol. Construction of three more projects under Phase-II, International Acetyl Company, International Vinyl Acetate Company, and United Industrial Gases Company has already started and the plants will be commercially operational in early Shareholders of SIPCHEM can look forward to a steady development for at least next 10 years. During this period, we expect new dimensions to emerge in the Global Petrochemical Sector. We expect a total domination by Middle East companies in the Petrochemical sector. Financial Strength, government support, critical locational advantage from logistics point of view as a connecting link between Western countries and the fast growing Asian region would offer the companies in the region a sustainable competitive advantage. SIPCHEM, we believe, would be at the forefront of Petrochemical industry in the Middle East. A rapid growth and visionary founding investors are bound to take SIPCHEM to a destination that every long-term investor would aspire to reach. 8

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