Tasnee Q1 net loss narrows ahead of forecasts

JEDDAH — Saudi Arabia’s National Industrialization Co. (Tasnee) posted a narrower first-quarter net loss, beating analysts’ forecasts due to higher sales volumes and not suffering the same negative impact from financial contracts at a subsidiary. Tasnee made a loss of SR94.8 million ($25.3m) in the three months to March 31, compared to a loss of SR332.5m in the prior-year period, according to a bourse filing. It attributed the slimmer loss to an increase in quantities of products sold during the quarter, despite lower average sales prices and higher financial charges. Tasnee’s earnings have been hit hard by falling product prices, like many petrochemical firms in the kingdom, as they are closely tied to slumping oil prices. Saudi producers have also benefited from subsidized energy and feedstock costs, so lower crude prices compress their margins. The latter is changing though, as energy subsidies are reformed by the Saudi government to help it close a substantial budget deficit. Tasnee Chief Executive Mutlaq Al-Morished told Reuters in January the timing of energy price reforms was “not the best” for the petrochemicals industry. The company had already disclosed that higher gas feedstock prices would hurt its 2016 results by around SR190m. To help counter market conditions, Tasnee is undergoing a restructuring which aims to cut costs — including job losses — and improve efficiencies, although the benefits of this are unlikely to be reflected in profitability until at least the end of 2016. Tasnee’s first-quarter earnings in 2015 had also been dragged by higher expenses from foreign exchange hedging and derivatives contracts transacted by a subsidiary: Morished said at the time the firm would revise those contracts. — Reuters