(MENAFN- AFP) Saudi petrochemicals giant SABIC on Sunday posted a 39 percent decline in net profits for the first quarter of 2015 compared with a year ago before global oil prices plunged.
Saudi Basic Industries Corp, the largest publicly traded firm in the Gulf, reported net profit of 3.93 billion riyals ($1.05 billion) for the three months ending March 31.
That compared with a net profit of 6.44 billion riyals in the same quarter a year earlier.
The drop in oil prices from above $100 per barrel over the past year to around $56 for US benchmark crude on Friday "has affected greatly the petrochemical price," SABIC's acting vice-chairman and CEO, Yousef al-Benyan, told reporters.
"The petrochemical companies will go through some pressure with regard to profitability. This is because of the drop in oil prices," he said.
"The petrochemical industry is married and linked to oil prices," Benyan said.
In a statement, SABIC said that although costs had fallen, lower average sale prices were also down, with a resultant fall in net income.
Revenue dropped 28 percent in the first quarter compared with the same period a year earlier, from 49.22 billion riyals to 35.51 billion riyals because of the "impact of declining oil prices," Benyan said.
He added that the industry was cyclical and the long-term outlook was good for the company, which has a global presence.
"We are optimistic," Benyan said.
Crude prices have tumbled on worries over oversupply and weak demand growth.
Saudi Arabia is the world's biggest oil exporter and SABIC is one of the world's largest petrochemical manufacturers, producing chemicals, fertilisers, plastics and metals.
The company also operates wholly-owned Saudi Iron and Steel which sells domestically.
Despite falling oil revenues, the kingdom's budget for 2015 projected a slight increase in spending, leaving it with an expected deficit of $39 billion, its first since 2011.
But an analysis by Jadwa Research in early April said the actual deficit will reach $106 billion.
That forecast did not take into account the eventual cost of an air war which a Saudi-led coalition launched on March 26 against rebels in Yemen.
Saudi Arabia has assigned 150,000 troops and 100 warplanes to the Yemen operation, according to a Saudi adviser.
Benyan said he did not see any effect from the war on SABIC's operations or the Saudi economy. "Business as usual," he said.
Company plants are running normally, "our movement of material supply chain has not been impacted, and I don't foresee any impact".
Strong government spending has a positive impact on the firm's operations and the kingdom's growth is projected at four percent, he said.
The International Monetary Fund has forecast three percent real growth this year in Saudi Arabia's Gross Domestic Product.
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