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SABIC
December 4, 2012
FOOTNOTES
INITIATION OF COVERAGE EQUITY RESEARCH
Sabic’s exposure to so many industries, with different fundamentals, should largely reduce the
company’s market risk.
A BROAD AND DIVERSIFIED MARKET PRESENCE
Given its global reach of more than 100 countries, Sabic faces limited country risk. In terms of
regions, Asia represents the largest market for Sabic, generating 35% of sales, with the Middle
East making up for the next largest market. Sabic has been continuously seeking new markets and
strengthening its presence in existing home markets, especially in key market China. Its JV in China
with Sinopec, along with its 41 offices, 10 production sites and 5 T&I centers in Asia, has solidified
the company’s foothold in one of the world’s highest growth markets. The geographical proximity
of Asia to Saudi Arabia has given domestic producers a material advantage over European and US
counterparts.
Attractive growth dynamics are also present in the MENA region, as the per capita consumption of
various polymers is significantly below that of North America and Europe 31 . Hence, with ambitious
global growth initiatives set, robust emerging market demand and growth potential in the MENA
region, Sabic’s market share is expected to grow.
Chart 20: Geographical Market Segmentation of Sales Revenues
Source: Company Reports 2011
A STATE-OWNED ASSET CONTRIBUTING TO THE KINGDOM’S WELL-BEING
A stake of 30% was floated to the public in 1984. Since then the Saudi government has retained its
70% of Sabic, through the Public Investment Fund, thus granting Sabic the backing of the world’s
largest holder of oil reserves (KSA’s S&P Credit Rating: AA- for Local and Foreign Currency LT Debt ).
Government support for Sabic has been evident in “feedstock supply, funding and infrastructure”
(Sabic). About 11% of Sabic’s loan book is through funding from government-related agencies.
Moreover, as a state-owned asset, Sabic is leading the country’s industrial diversification program
and developing its downstream industries.
By investing increasingly in the specialty chemicals sector, Sabic is establishing the groundworks
for the government’s drive to add more value to its crude oil. This vision will be realized by taking
the petrochemical industry downstream (key examples are Sabic, Saudi Kayan and Tasnee) and
developing industrial parks at proximity to petrochemical complexes. Such integrated sites should
in turn attract multinational names in prime manufacturing industries such as the automotive and
electronics industries. With these industries developed, and additional jobs created for the young
and unemployed, a large part of the government’s economic program would be implemented.
31 Source: MEED, May 2011
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