Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Saudi Arabia 4 February 2016 January 18, 2010 Monthly update In our monthly note, we update price movements of major petrochemical products, manufacturing activity in key demand markets, recent announcements and valuations of Saudi petrochemical companies and their global peers. Price movement of key petrochemical products Products 1-Month Y-o-Y Ethylene -7.3% +12.2% HDPE +1.4% -7.8% LDPE +3.3% -6.4% Propylene -12.1% -34.9% Polypropylene 0% -14.2% Methanol +2.0% -12.3% Benzene -7.0% -22.6% Ammonia -8.3% -45.0% Urea -12.5% -44.0% YTD Performance (Rebased to 100) 180 140 100 60 20 SABIC Sipchem SAFCO NIC Yansab APC TASI, Al Rajhi Capital Research Department ARC Research Team Tel +966 11 211 9370, devassyp@alrajhi-capital.com Petrochemicals Monthly - Feb 2016 Global growth slows, product prices weak Benchmark crude prices continued their downward movement in January (Brent: -7.1%, WTI: -9.2%) as lifting of sanctions against Iran is expected to add to the oil glut in the market. However, oil prices bounced back sharply in the last week of January after Russia said that it was open to talks with the OPEC for coordinated production cuts to balance the supply-demand mismatch. The weakness in crude prices and the soft demand scenario negatively impacted petrochemical product prices, which continued to head southward in line with the global oil prices. The IMF lowered its global economic growth forecast for the year, indicating the sluggish demand expectation. The Saudi Petrochemical index declined sharply by ~12% led by Petro Rabigh (-21.1%), NIC (-19.5%) m-om, supported by Sipchem (-18.5%), SAFCO (-15.7%), and SABIC (-8%). Meanwhile, the TASI also declined significantly by 13% m-o-m. Crude prices drop: Brent crude prices continued to move downward (~7.1% m- o-m; WTI: ~9.2%) on the back of rising supply, sluggish economic growth and a mild winter. The IMF recently lowered its global economic growth forecast, which suggested that oil demand would remain soft. The fall in the US oil rig count (to 498 as of January 29 vs. 516 at the beginning of 2016; source: Baker Hughes) has been unable to prevent the slide. Crude oil inventories in the United States went up by 7.79mn barrels in the week ended January 29, which was much higher than the market expectations of a 4.76mn increase. The OPEC crude production dipped marginally by 0.21mbpd in December to average 32.18mbpd (source: OPEC), which was well above its self-set limit of 31.5mbpd. Manufacturing still in contraction zone: The US January PMI stood at 48.2, a slight uptick of 0.2 percentage points over December 2015 (48). The strong dollar, along with the collapse in oil prices, has forced manufacturers to cut back heavily on capital expenditures. The Caixin PMI for China was marginally ahead at 48.4 for January (48.2 in December, 2015) but remained in the contraction zone. The manufacturing PMI in the Eurozone declined to 52.3 (53.2 in December 2015) during January due to slowing new orders and output growth. However, the accelerated increase in employment and high backlogs of work suggest that the expansion would be sustained in the coming months. The manufacturing PMI in India rose to 51.1 in January of 2016 (49.1 in December 2015) on the back of production and new orders recovering from December s flood-related contractions. Product prices muted: Ethylene (-7.3%), Propylene (-12.1%), Toluene (-11.3%), were biggest losers over the month. Ammonia (-8.3%m-o-m),Urea (-12.5%), MTBE (-2.3%), Polystyrene (-1.9%), EDC (-4.2%), and VCM (-4.1%) were down as well. Only Methanol (+2.0%), along with HDPE (+1.4%) and LDPE (+3.3%) witnessed an uptick. Saudi Petrochemical Index declines: The sharp fall in crude prices as well as weak Q4 2015 earnings resulted in the Saudi Petrochemical Index declining sharply by ~12% led by Petro Rabigh (-21.1%), NIC -19.5% m-o-m, Sipchem (- 18.5%), and SAFCO (-15.7%). SABIC (-8%) and Yansab (-5.1%) remained a drag. Meanwhile, the TASI also dipped by 13% m-o-m in January. Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
Key news & announcements Sipchem to complete purchase of Ikarus stakes in affiliates by Q1 2016: Saudi International Petrochemical Co. (Sipchem) is planning to complete the purchase of the stake (11%) owned by Kuwait s Ikarus Petroleum Industries Co. in two of the petrochemical producer s affiliates - International Vinyl Acetate Co. and International Acetyl Co. by Q1 2016. (Source: Argaam) Global petchem demand may grow at 6.5% by 2020: Global demand for petrochemical products is expected to reach US$890 billion by 2020, increasing at an annual compound growth rate of 6.5% between 2015 and 2020. Methanol is projected to be the fastest growing segment from 2014 to 2020. (Source: Argaam) Russia, OPEC may discuss cutting oil output: Russia is considering talking to members of the OPEC about reducing production to rein in falling oil prices, the chief of pipeline company Transneft said on Wednesday in a statement carried by a Russian news agency. The CEO, attending a meeting of oil executives and government officials in Moscow on Tuesday, said the meeting concluded that a discussion with the OPEC was required to stabilize oil prices. (Source: Argaam) Saudi Aramco buys US$1 billion oil products from South Korea s S-Oil: South Korea-based S-Oil Corp said on Wednesday that it would sell oil products worth 1.34 trillion Korean won (US$1.12 billion) to Saudi Aramco s trading arm. Under the deal, S-Oil would deliver 12 million-24 million barrels of low-sulphur diesel and 12 million-20 million barrels of light naphtha to Saudi Aramco Products Trading Co. (Source: Argaam) Saudi Kayan: Plant maintenance to begin March 1, 2016: Saudi Kayan has outlined plans for a maintenance shutdown, which was postponed last year to 2016. The company plans to take the ethylene oxide and ethylene glycol units offline for 48 days beginning March 1, 2016. It will also perform maintenance at the polycarbonate, ethoxylates, and amines plants for 53 days each, starting March 1. Saudi Kayan estimates the impact of the shutdown to be SAR96mn, based on the current petrochemical prices, which will be reflected in the company s Q1 and Q2 of the current financial year. (Source: Argaam) Saudi Sadara set to start up butyl glycol plant in H2: Saudi Arabia s Sadara Chemical Co. (Sadara) is on schedule to start up the new butyl glycol (BG) plant in the second half of 2016, according to ICIS. The Jubail-based plant will have a combined BG and butyl di-glycol (BdG) capacity of,000 tons per year. The US$20 billion Sadara is 65% -owned by Saudi Arabian Oil Co. and 35%-owned by US-based Dow Chemical. (Source: Argaam) Saudi Arabia wants to cooperate to support oil prices: Saudi Arabia wants to cooperate with other oil producers to help stabilize crude prices, the Saudi-owned Al- Arabiya TV announced, citing an unnamed Saudi source. The Kingdom was not the source of the output reduction proposal that Russia was studying, the source added. On Thursday, Russia said that the OPEC had proposed production cuts of up to five percent in an effort to reduce oversupply in the market. (Source: Argaam) SABIC: Restructuring plan will not include layoffs: Saudi Basic Industries Corp. (SABIC) will not cut jobs as part of a recently announced restructuring plan, Prince Saud bin Abdullah, board chairman, told CNBC Arabia. Speaking on the sidelines of the World Economic Forum in Davos, the chairman said the firm s new strategy would include spending cuts and other measures to boost efficiency. (Source: Argaam) Saudi Aramco chairman: IPO could be open to international markets: An IPO of Saudi Aramco, the world s biggest oil company, could be on the local or international markets but would not include Saudi energy reserves, the company s chairman told Saudiowned al-arabiya television. (Source: Argaam) Disclosures Please refer to the important disclosures at the back of this report. 2
Kuwait to buy 25% stake in South Korea-Saudi venture: Kuwait s Petrochemicals Industries Co (PIC) has agreed to buy a 25% equity stake in a venture owned by South Korea s SK Gas Co Ltd and Saudi Advanced Petrochemical Co. PIC, a subsidiary of state oil giant Kuwait Petroleum Corp, will invest in SK Advanced, which is building a,000 tons-per year PDH project in South Korea. (Source: Argaam) Yansab plans 10% cash dividend for H2-2015: Yansab s board of directors recommended the distribution of SAR1 per share of dividend for the second half of 2015, amounting to a total payout of SAR562.5mn. Shareholders of record on the general meeting date will be entitled to receive the dividend. This takes the total dividend for 2015 to SAR2 per share. (Source: Argaam) SABIC lowers MEG Asian CP for February by US$20 to US$710/ton: SABIC has nominated a low price for its February Asian Contract Price for MEG to US$710 per ton, a m-o-m reduction of US$20. MEG spot market price declined to US$580 per ton last week. (Source: Argaam) LLDPE demand growth rate likely to average 3.5% through 2020: Growth for global demand of LLDPE is expected to reach 3.5% through 2020 on the back of demand from the packaging industry. China is projected to continue to be the world s largest producer of LLDPE in 2019, but would remain a net importer of the product. Gulf producers market share was about 17%, or 5.9mn metric tons, of the total global LLDPE production of 34.4mn tons last year. China s output of 7.2mn tons represented 21% of the global market share. (Source: Argaam) Kayan cuts financial impact estimates to 1% after clarification from Saudi Aramco: Saudi Kayan Petrochemical Co. cut the expected financial impact due to energy price hikes to 1% from 8.5% announced earlier after Saudi Aramco said that it would maintain the prices of some feedstock contracts until 2017. Kayan clarified that it was granted a grace period of seven years and three months for some feedstock, namely ethane, butane and methane, which were being supplied from 2010. Accordingly, new feedstock prices will be gradually applied by the second quarter of 2017. Related impact will be announced beforehand, Kayan added. (Source: Argaam) Tasnee s manufacturing investments hit SAR5bn: Tasnee s investments into its manufacturing segment have reached SAR5bn, accounting for 10-15% of the company s total revenue, the company CEO told CNBC Arabia. (Source: Argaam) SABIC s polyacetal plant will start production in 2017: SABIC 50,000 ton-per-year polyacetal plant is set to start production in early 2017, according to a senior manager of the company s polyacetal business. SABIC sees 5% rise in costs after subsidy cuts: SABIC expects a 5% increase in annual production costs, due to energy price hikes, the company said in a statement to the Saudi bourse. (Source: Argaam) Saudi Aramco starts 17-day maintenance at Riyadh refinery: Saudi Aramco started a 17-day scheduled maintenance at a benzene unit at its Riyadh refinery to improve efficiency and production capacity, and to increase the octane rating. The maintenance, which will be completed on February 4, will not affect production of petroleum products or its ongoing supply to the market, the state-owned company said. (Source: Argaam) SABIC cuts January urea price to SAR 874/ton: SABIC has slashed local urea prices to SAR874 per ton for January, marking a month-on-month cut of SAR75 per ton. The company has kept the price of January DAP unchanged at SAR2,130 per ton for the 27th consecutive month. (Source: Argaam) Methanex cuts methanol prices to Asia by US$30/ton for Jan: Methanex Corp., the world s largest producer and supplier of methanol, has cut its Asian contract price by $30 to $275 per ton for January, as compared to the previous month. The company slashed Disclosures Please refer to the important disclosures at the back of this report. 3
the price of its contracts in the North American market by US$50 to US$299/ton. (Source: Argaam) Advanced to maintain annual dividend of SAR 3/share: Advanced Petrochemical Co. (APC) will maintain its annual dividend payout of SAR 3 per share, the company s CEO told CNBC Arabia TV. (Source: Argaam) SAFCO: High feedstock, energy prices would increase production costs by 8%: SAFCO has said that its production costs are expected to rise by 8% due to upward revision in feedstock and electricity pricing. The financial impact will be reflected from Q1 2016 results. (Source: Argaam) Yansab expects 6.5% rise in production costs after energy price hikes: Yansab expects a 6.5% increase in production costs following the Kingdom s decision to raise energy and electricity tariffs. The financial impact is expected to begin in the first quarter of 2016. (Source: Argaam) Petro Rabigh expects SAR300mn financial impact due to energy price hikes: Petro Rabigh expects an annual financial impact of around SAR300mn from the revision in energy prices. (Source: Argaam) Saudi Aramco to prioritize some projects, keeps focus on costs: Saudi Aramco will keep its focus on cost controls in the short-term, with some projects delayed at the expense of high-priority initiatives. The focus on costs comes as Saudi Arabia has been tightening its budget to cope with an expected lengthy period of low oil prices and its 2016 plans, including spending cuts, and reforming energy and utility subsidies. (Source: Argaam) Summary of Q4 2015 Results Figure 1 Quarterly results of listed Saudi petrochemical companies Companies (SAR mn) Revenues Net Income Q4 2014 Q3 2015 Q4 2015 % change y-o-y Q4 2014 Q3 2015 Q4 2015 % change y-o-y Advanced Petrochemicals Co 740 632 542-26.8% 234 146-27.0% Alujain Corp 573 413 401-30.1% 65 46 27-57.9% Methanol Chemicals Co 210 174 166-20.9% (18) (43) (60) NM Nama Chemicals Co 179 110 108-39.9% (46) (24) (25) NM National Industrialization Co 3,676 3,614 3,377-8.1% 161 (296) (690) NM National Petrochemical Co 2,230 1,912 1,655-25.8% 193 321 178-7.4% Rabigh Refining & Petrochemicals Co 11,146 6,675 2,696-75.8% (198) (460) (1,009) NM Sahara Petrochemical Co 504 503 433-14.1% 83 121 (48) NM Saudi Arabian Fertilizer Co 1,093 887 814-25.6% 779 566 379-51.4% Saudi Basic Industries Corp 43,435 37,352 34,157-21.4% 4,356 5,604 3,075-29.4% Saudi Industrial Investment Group 2,230 1,912 1,655-25.8% 85 207 55-35.2% Saudi International Petrochemical Co 987 810 872-11.6% 132 72 26-80.4% Saudi Kayan Petrochemical Co 2,526 2,195 1,879-25.6% 12 (14) (624) NM Yanbu National Petrochemicals Co 2,290 1, 1,831-20.0% 618 302 393-36.4% 71,821 58,989 50,584-29.6% 6,422 6,635 1,823-71.6% Source: Company data, Al Rajhi Capital Disclosures Please refer to the important disclosures at the back of this report. 4
Saudi Petrochemical Index vs. Major Indices Figure 2 Saudi Petrochemical Index vs. TASI and Industry Indices (Petrochemical Index -12% and TASI -13% m-o-m) 175 150 125 100 75 50 25 0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Saudi Petrochemical Index S&P500 Chemical Index MSCI World Chemical Index TASI Note: Rebased to 100 on January 1, 2013 Crude, Gas and Naphtha Spot Prices Figure 3 European Brent Crude (-7.1% m-o-m) US$/barrel 140 120 100 80 60 40 20 0 Figure 4 WTI Crude (-9.2% m-o-m) US$/barrel 120 100 80 60 40 20 0 Figure 5 Natural gas (Henry Hub) (-2.6% m-o-m) US$/mmbtu 10 Figure 6 Naphtha (-15.3% m-o-m) 8 6 4 2 0 0 Disclosures Please refer to the important disclosures at the back of this report. 5
Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Manufacturing activity and economic growth trend in key markets Figure 7 United States Manufacturing PMI (48.2 vs. 48.0) Figure 8 Euro zone Manufacturing PMI (52.3 vs 53.2) 60 56 58 56 54 54 52 52 50 48 46 50 48 46 Source: US ISM Source: Markit Figure 9 China Manufacturing PMI (48.4 vs 48.2) Figure 10 India Manufacturing PMI (51.1 vs 49.1) 54 58 52 56 54 50 52 48 50 48 46 46 Source: Caixin-Markit Source: Nikkei-Markit Figure 11 Real GDP growth trend % growth 10.0 8.0 6.0 4.0 2.0 0.0-2.0 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016E Q2 2016E Q3 2016E Q4 2016E Q1 2017E US Euro Area China India Disclosures Please refer to the important disclosures at the back of this report. 6
Petrochemical product price trends Basic Olefins & Polyolefins Figure 12 Ethylene (-7.3% m-o-m) 1 1 1 Figure 13 Polyethylene (HDPE: +1.4%, LDPE: +3.3% m-o-m) 1 1 1 HDPE LDPE Figure 14 Propylene (-12.1% m-o-m) 0 1 1 1 Figure 15 Polypropylene (0% m-o-m) 1 1 1 Methanol & MTBE Figure 16 Methanol (+2% m-o-m) 500 300 100 0 Figure 17 Methyl Tertiary Butyl Ether (MTBE) (-2.3% m-o-m) 1 1 Disclosures Please refer to the important disclosures at the back of this report. 7
Figure 18 Benzene (-7.0% m-o-m) 1 1 Benzene & its derivatives Figure 19 Toluene (-11.3% m-o-m) 1 1 Figure 20 Styrene (-5.1% m-o-m) 0 1 1 1 Figure 21 Polystyrene (-1.9% m-o-m) 2250 0 1750 1500 1250 750 500 Other key petrochemical products Figure 22 Mono-ethylene glycol (-1.7% m-o-m) 1 1 1 Figure 23 Ethylene di-chloride (-4.2% m-o-m) 500 300 100 Disclosures Please refer to the important disclosures at the back of this report. 8
Figure 24 Vinyl chloride monomer (-4.1% m-o-m) Figure 25 Polyvinyl chloride (+1.4% m-o-m) 1 Figure 26 Purified terephthalic acid (-5.2% m-o-m) 1 Figure 27 Caustic soda (-1.7% m-o-m) 1 700 500 300 Ammonia & Fertilizers Figure 28 Ammonia (-8.3% m-o-m) 700 Figure 29 Urea (-12.5% m-o-m) 700 500 500 300 300 100 Disclosures Please refer to the important disclosures at the back of this report. 9
Metals Figure 30 Gold (+5.4% m-o-m) US$/oz 0 1 1 1 Figure 31 Aluminum (-6.1% m-o-m) 3000 2750 2500 2250 0 1750 1500 1250 Figure 32 Price movement of key petrochemicals, fertilizers and metals Products Recent Price % Change 1-Month QTD YTD 1-Year European Brent (US$/bbl) 33.2 (7.1) (7.1) (7.1) (29.1) WTI (US$/bbl) 33.6 (9.2) (9.2) (9.2) (24.5) Natural Gas (US$/mmbtu) 2.3 (2.6) (2.6) (2.6) (21.8) Naphtha () 347.5 (15.3) (15.3) (15.3) (20.4) Key petrochemicals () Ethylene 825 (7.3) (7.3) (7.3) 12.2 HDPE 1065 1.4 1.4 1.4 (7.8) LDPE 1095 3.3 3.3 3.3 (6.4) Propylene 535 (12.1) (12.1) (12.1) (34.9) Polypropylene 845 0.0 0.0 0.0 (14.2) Methanol 206 2.0 2.0 2.0 (12.3) MTBE 516 (2.0) (2.0) (2.0) (8.6) Benzene 530 (7.0) (7.0) (7.0) (22.6) Toluene 550 (11.3) (11.3) (11.3) (12.7) Styrene 830 (5.1) (5.1) (5.1) (1.8) Polystyrene 1045 (1.9) (1.9) (1.9) (6.3) Other petrochemicals () Mono-ethylene glycol 711 (1.8) (1.8) (1.8) (23.3) Ethylene di-chloride 230 (4.2) (4.2) (4.2) (23.3) Vinyl chloride monomer 590 (4.1) (4.1) (4.1) (18.1) Polyvinyl chloride 730 1.4 1.4 1.4 (10.4) Purified terephthalic acid 550 (5.2) (5.2) (5.2) (9.1) Caustic soda 530 (1.7) (1.7) (1.7) (6.0) Fertilizers () Ammonia 275 (8.3) (8.3) (8.3) (32.9) Urea 210 (12.5) (12.5) (12.5) (44.0) Metals Gold (US$/oz) 1122 5.7 5.7 5.7 (10.8) Aluminum () 1583 (6.1) (6.1) (6.1) (21.6), Al Rajhi Capital Disclosures Please refer to the important disclosures at the back of this report. 10
Figure 33 Performance of Saudi petrochemical companies vs. global peers Company Currency Last Price % Change 52-Week Dividend 1 Month QTD YTD 1 Year High Low LTM Yield Saudi Arabia SABIC SAR 70.39 (9.9) (12.5) 3.2 (35.2) 110.5 59.5 5.5 7.8% SAFCO SAR 69.26 (12.9) (15.4) (9.6) (23.6) 127.5 62.0 5.4 7.8% Sipchem SAR 11.42 (15.1) (33.9) (19.4) (50.3) 36.1 9.8 1.3 10.9% NIC SAR 8.54 (18.5) (28.6) (44.9) (62.4) 29.2 7.5 1.0 11.7% Yansab SAR 30.77 (5.4) (16.1) 0.6 (38.1) 57.5 23.8 2.5 8.1% APC SAR 37.48 (1.2) (17.4) 19.3 (10.6) 61.0 31.9 3.0 8.0% SPC SAR 8.20 (21.4) (16.4) (17.9) (53.5) 18.3 7.6 0.9 10.4% Saudi Kayan SAR 5.00 (22.9) (20.0) (21.5) (50.3) 14.2 4.4 NA NM PetroRabigh SAR 9.69 (17.7) (17.2) (3.9) (50.0) 26.7 7.0 0.5 5.2% SIIG SAR 11.93 (14.9) (27.2) (19.7) (51.8) 29.9 9.8 1.0 8.4% Chemanol SAR 5.39 (20.6) (28.9) (21.4) (47.8) 15.1 5.0 NA NM Nama SAR 5.55 (20.9) (21.2) (20.4) (51.1) 14.0 5.0 NA NM Alujain SAR 11.35 (16.4) (18.9) 5.5 (35.0) 24.8 9.5 NA NM National Petrochemical SAR 14.31 (11.6) (20.3) (9.1) (43.3) 30.4 12.7 NA NM Middle East & Africa (ex-saudi Arabia) Industries Qatar QAR 104.80 (5.5) (7.6) (17.1) (26.7) 157.0 88.0 7.0 6.7% Mesaieed Petrochem QAR 17.50 (11.4) (10.2) (24.2) (33.2) 30.9 14.0 1.1 6.3% Sidi Kerir EGP 10.47 (8.3) 2.3 (3.8) (26.3) 16.0 10.0 0.4 3.8% Al Qurain KWd 164.00 (11.8) (8.3) (8.3) (25.9) 216.0 140.0 10.0 6.1% Sasol ZAr 41,.00 (3.0) (5.6) 0.3 (28.5) 49,538.0 35,.0 1,850.0 4.6% Europe BASF EUR 61.50 (12.6) (9.6) 5.8 (5.3) 97.2 59.0 2.8 4.6% Solvay EUR 76.09 (25.1) (15.0) (4.0) (9.9) 132.6 73.8 3.3 4.3% Lanxess EUR 37.99 (13.0) (14.8) 18.7 (3.1) 56.5 35.3 0.5 1.3% Arkema EUR 57.56 (15.2) (2.7) 17.4 17.3 75.8 52.9 1.9 3.2% Yara NOK 327.00 (12.9) (9.6) 14.3 22.7 444.6 318.9 13.0 4.0% Akzo Nobel EUR 59.07 (5.8) (7.6) 6.3 14.7 75.5 54.1 1.5 2.5% Clariant CHF 16.65 (11.4) (8.9) 4.4 8.0 21.7 14.5 0.4 2.4% North America Eastman USD 61.21 (8.0) (11.4) (3.4) (10.3) 83.9 56.0 1.7 2.7% Dow USD 42.00 (6.4) (14.5) (2.4) (15.5) 57.1 35.1 1.7 4.1% Westlake USD 45.48 (16.2) (19.5) (9.2) (42.6) 79.3 40.4 0.7 1.5% Celanese Corp USD 63.67 (8.5) (15.2) 2.5 (1.3) 74.2 53.0 1.2 1.8% Methanex USD 26.52 (24.1) (26.8) (10.2) (37.8) 61.4 23.1 1.1 4.1% LyondellBasell Industries USD 77.97 (13.4) (16.7) 10.3 (22.8) 107.3 69.1 3.0 3.9% Axiall Corp USD 17.93 22.4 (29.9) (40.1) (38.3) 51.4 9.0 0.6 3.6% Huntsman Corp USD 8.63 (20.3) (25.1) (26.6) (37.2) 24.6 7.5 0.5 5.8% Asia Indorama Ventures THB 21.00 (2.4) (20.7) 9.8 (17.9) 28.5 19.0 0.4 2.0% Mitsui Chemicals JPY 519.00 (11.8) (9.7) 20.4 35.8 545.0 334.0 7.0 1.3% Sumitomo JPY 603.00 (14.3) (17.9) 26.7 65.2 795.4 485.4 11.0 1.8% Formosa Chemicals & Fibre Corp TWD 71.40 3.4 (4.7) 5.7 (4.9) 80.4 59.0 1.2 1.7% Lotte Chemical Corp KRW 275,000.00 19.2 (14.5) 54.4 52.0 305,000.0 169,500.0 NA NM Formosa Plastics Corp TWD 77.00 4.0 1.2 1.6 (5.2) 81.7 59.5 1.7 2.2% LG Chem KRW 295,500.00 (11.4) (16.0) 29.3 (11.3) 344,500.0 201,500.0 4,500.0 1.5% Indices Saudi Petrochemical Index SAR 3,746.87 (12.0) (19.7) (14.1) (44.2) 7,069.2 3,267.1 283.3 7.6% S&P500 Chemical Index USD 423.73 (5.6) (10.7) (10.2) (11.6) 542.0.4 11.5 2.7% MSCI World Chemical Index USD 234.93 (6.5) (10.1) (6.9) (10.5) 301.2 228.4 6.8 2.9% TASI SAR 5,996.57 (12.7) (17.2) (9.7) (32.3) 9,897.5 5,348.6 254.0 4.2%, Al Rajhi Capital Note: SAFCO dividends/yield adjusted for bonus shares. Prices as of January 31, 2016. Disclosures Please refer to the important disclosures at the back of this report. 11
Figure 34 Margins and Valuation Metrics - Saudi petrochemical companies vs. global peers Company Market Cap Operating margin Net margin P/E P/B EV/Sales EV/EBITDA ROE Operating_R OE ROA Saudi Arabia SABIC 211,170 19.5 12.6 11.7x 1.5x 1.8x 6.2x 11.6 18.0 5.6 SAFCO 28,858 55.8 60.1 14.1x 5.0x 9.2x 12.7x 27.6 25.6 23.8 Sipchem 4,187 16.8 8.2 15.5x 1.3x 4.1x 10.0x 4.9 10.0 1.7 NIC 5,713 0.2 (9.5) NA 1.0x 2.2x 11.1x (14.5) 0.3 (3.1) Yansab 17,308 22.3 17.5 14.1x 1.7x 3.4x 8.0x 7.8 10.0 5.6 APC 6,147 31.2 30.0 9.8x 3.2x 2.8x 7.9x 29.2 30.4 18.5 SPC 3,598 14.2 2.5 71.1x 1.0x 4.6x 22.4x 0.6 3.6 0.4 Saudi Kayan 7,500 (7.4) (15.6) NA 1.0x 4.1x 15.7x (9.3) (4.4) (2.8) PetroRabigh 8,488 (3.0) (3.0) 18.4x 1.5x 1.0x 14.0x (8.5) (8.5) (1.6) SIIG 5,369 24.0 10.0 9.5x 1.3x 3.1x 10.0x 10.5 25.2 2.7 Chemanol 650 (10.4) (19.0) 34.4x 0.7x 2.3x 8.5x (9.5) (5.2) (5.3) Nama 713 (20.1) (16.1) NA 0.9x 3.3x 119.3x (6.4) (8.0) (3.0) Alujain 785 19.0 7.3 8.9x 1.2x 1.7x 5.8x 10.9 28.5 3.1 National Petrochemical 6,869 24.1 12.4 11.3x 1.8x 2.9x 9.3x 17.0 33.0 4.1 Middle East & Africa (ex-saudi Arabia) Industries Qatar 63,404 17.8 100.9 13.6x 2.5x 13.4x 62.1x 16.7 3.0 15.6 Mesaieed Petrochem 21,986 NA NA 20.9x 2.0x NA NA 8.6 0.0 8.5 Sidi Kerir 5,497 40.0 32.2 7.5x 3.2x 2.0x 4.6x 39.0 48.4 25.2 Al Qurain 180 6.2 14.8 5.3x 0.6x 0.8x 7.6x 7.4 3.1 4.6 Sasol 259,247 26.1 16.0 8.5x 1.4x 1.5x 4.5x 16.4 26.6 9.8 Europe BASF 56,488 9.8 6.7 13.7x 2.2x 1.1x 7.4x 17.7 25.9 7.0 Solvay 8,056 6.8 5.0 28.1x 1.3x 1.0x 6.1x 8.2 11.0 3.2 Lanxess 3,476 3.5 1.0 54.6x 1.8x 0.7x 7.7x 3.6 12.4 1.1 Arkema 4,287 6.6 3.5 20.4x 1.2x 0.9x 8.0x 7.0 13.1 3.3 Yara 89,952 14.8 8.8 14.1x 1.6x 1.1x 6.5x 14.7 25.0 9.0 Akzo Nobel 14,707 8.8 5.3 21.6x 2.6x 1.2x 9.6x 13.6 22.8 5.0 Clariant 5,527 9.5 4.8 20.3x 2.6x 1.2x 8.8x 11.3 22.4 3.6 North America Eastman 9,096 14.3 8.8 10.1x 2.9x 1.8x 10.8x 19.0 31.9 5.3 Dow 48,662 13.8 9.5 13.0x 2.6x 1.3x 7.7x 21.6 34.0 7.0 Westlake 5,942 23.4 15.6 10.5x 2.3x 1.6x 5.4x 23.7 35.7 13.5 Celanese Corp 9,341 5.7 5.4 10.7x 3.0x 1.8x 11.1x 11.7 12.5 3.5 Methanex 2,378 10.7 9.0 18.0x 2.1x 1.9x 8.1x 11.4 13.6 4.3 LyondellBasell Industries 35,043 17.1 12.4 9.2x 5.0x 1.1x 6.2x 52.0 71.6 18.1 Axiall Corp 1,266 (19.0) (19.6) 19.9x 0.7x 0.8x 8.5x (36.1) (35.1) (14.7) Huntsman Corp 2,118 4.2 0.5 7.9x 2.4x 0.8x 9.8x 2.7 23.8 0.5 Asia Indorama Ventures 101,100 3.3 2.2 22.2x 1.3x 0.8x 11.4x 6.2 10.7 2.4 Mitsui Chemicals 530,428 4.6 2.2 13.4x 1.0x 0.6x 9.3x 7.8 16.1 2.3 Sumitomo 998,234 7.1 3.9 13.7x 1.2x 0.9x 8.1x 12.1 22.1 3.2 Formosa Chemicals & Fibre Corp 418,489 3.3 4.6 27.1x 1.5x 1.4x 15.4x 5.7 4.2 2.9 Lotte Chemical Corp 9,425,740 13.8 8.5 13.3x 1.2x 0.7x 5.7x 11.1 19.7 6.9 Formosa Plastics Corp 490,162 5.5 16.1 21.2x 1.6x 2.2x 25.8x 9.0 3.9 5.8 LG Chem 19,583,111 9.0 5.7 17.6x 1.2x 0.8x 6.1x 7.9 13.7 5.7 Indices Saudi Petrochemical Index 307,355 13.5 6.1 15.4x 1.5x 2.4x 9.1x 5.5-2.1 S&P500 Chemical Index 355,383 14.7 10.6 15.9x 4.0x 2.1x 10.6x 24.3-7.7 MSCI World Chemical Index 857,347 11.2 7.7 16.3x 2.6x 1.6x 9.4x 15.5-6.0 TASI 1,370,096 18.5 16.5 15.8x 1.8x 3.8x 11.9x 10.4-2.5, Al Rajhi Capital Notes: 1) Market cap in local currency. 2) Profit margins based on TTM performance. 3) All valuation ratios as on January 31, 2016 prices. Disclosures Please refer to the important disclosures at the back of this report. 12
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