Saudi Basic Industries Corporation (SABIC) is a Saudi Arabian company headquartered in Riyadh. It is one of the largest manufacturers of fertilizers, petrochemicals, metals, and plastics in the world. SABIC focuses on the production of intermediary products, i.e. its products are used by other companies to produce finished products. It is also the biggest non-oil producing company in the Middle East with a stable market capitalization as well as a good relationship with investors. The company was founded 75 years ago and its growth and success have been attributed to the major spotlight on the most excellent research and development on technology projects, partnering with local investors, and a determined grand strategy of global growth (Gulfbase, 2010).
The core values of SABIC are to believe in ethical commitments in making important business decisions as well as vital financial factors. The firm is committed to ensuring best practices all over its operations in Saudi Arabia, the Middle East, Africa, Asia- Pacific, Europe, and America. SABIC launched a new product in the market in 2007 called SABIC Innovative Plastics which is the largest supplier of thermoplastics used in engineering to provide a solution to its customers’ problems. SABIC has grown its brand image over the years to the product of quality to its shareholders and customers (SABIC, 2010b).
Opinions as to whether the stock should be held or sold
In the year 2006, SABIC Europe BV which is 100 percent owned by SLUX issued an unsecured €750 million Euro-bond. The Euro-bond carries a fixed coupon rate of 4.5% upon maturity on 28th November 2013. SABIC Capital I B.V. which is indirectly fully owned by the SLUX replaced SABIC B.V in carrying the Euro-bond with implementing the exchange offer. The exchange offer was implemented by SABIC Capital I B.V. giving security for the obligations to the bond-holders. The application of important terms and conditions remains the same together with the payment of coupons semi-annually in May and November every year (EFG HERMES, 2010).
In recent times, SABIC has put a lot of emphasis on increasing its expansion plans on the fundamental production of petrochemicals. Most of SABIC’s manufactured products are exported to China and India which accounts for a large portion of its markets. SABIC aims at increasing its production capacity by expanding its existing production plants at Yanbu and Jubail. Another important plant is being built in Jubail called Saudi Kayan and will be one of the world’s biggest petrochemical plants. Currently, the company is the second-largest ethylene glycol producer in the world, and with the completion of the new projects; it will be the biggest producer of ethylene glycol in the world. It is also the world’s third-biggest polythene producer as well as the fourth biggest polyolefins producer in the world. Apart from these, it is also the world’s fourth-biggest producer of polypropylene and also the biggest producer of mono-ethylene glycol, granular urea, polyphenylene, and polyetherimide (SABIC, 2010a).
China’s huge demand for petro-chemicals is the main driving force leading the countries with huge demand for petroleum-derived products. While the domestic market keeps growing, analysts predict that the demand for growth could exceed the existing capacity. The world’s attention focuses on Saudi Arabia as most countries like China and Other Asian countries focus on the petrochemical industry. Apart from the BRICK countries i.e. Brazil, Russia, India, and China which have huge growth in demand for petrochemicals in the long run. It is believed that in the short run that the current plants under expansion will cub pressure on the existing demand from three of the four BRICK countries. The economies are India, Brazil, and China (GCC, 2010).
SABIC has a huge opportunity for growth because of the available growth in markets in the future. The rise in market demand, the growth in capacities through building new plants as well as increasing profitability indicate that the value of the firm is increasing. It is recommended that shareholders should hold on to the stock as the company’s shares are likely to have better returns in the future.
References
Gulfbase (2010). “Stock Quote Fundamental Data Research Reports”. Web.
GCC (2010). Saudi Basic Industries Corporation (2010.SE). Web.
SABIC (2010a). Accounts and Reports 2009. Web.
SABIC (2010b). Company Brochure. Web.
EFG HERMES (2010). SAUDI BASIC INDUSTRIES CORPORATION (SABIC). Web.