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SABIC
December 4, 2012
FOOTNOTES
INITIATION OF COVERAGE EQUITY RESEARCH
FINANCIAL FLEXIBILITY PAVES WAY FOR 2020 TARGET
Sabic’s balance sheet is fairly robust with cash exceeding $14 billion and a net debt-to-equity of
just 0.23x vis-à-vis a peer average of 0.58x. The company’s Debt-to-Ebitda of 1.7x is also below
the industry average of 2.2x, while enjoying double-digit interest coverage for over ten quarters.
Moreover, Sabic’s interest coverage of 18.1x well exceeds its peer average of 8.8x. In parallel, Sabic
enjoys A+ long-term credit ratings by both S&P and Fitch rating agencies. Given its strong financial
position and favorable credit ratings, Sabic holds the financial flexibility to: 1/participate in organic
growth 2/acquire growth companies 3/ invest in its innovation capability and 4/retain adequate
funds for the distribution of dividends. It is noteworthy highlighting that Sabic has announced
previously this year that it intends to repay $7 billion of debt in 2012. In turn, the significant
deleveraging in 2012 and the years to come should increase notably its cash dividend pay-outs.
Chart 9: Projected Gearing Level Chart 10: Projected Dividend Stream
Source: ASIB Estimates Source: ASIB Estimates
Sabic has invested in many green-field projects across the years, among which the latest were
Yansab and Saudi Kayan, and in turn has the expertise of developing world-scale assets. Moreover,
with its robust balance sheet, Sabic can continue its acquisition trail, in aim of its 2020 target of
130 million tons of output (versus today’s 69 million tons) and accordingly realizing its vision of
becoming the leading chemical producer by 2020. It is noteworthy to mention that Sabic is aiming
to launch over 30 new performance chemicals and polymers in the coming several years, part of
its 2020 vision where this new product line will represent 10% of the company’s revenues by that
year 16 . Thus, the Performance Chemicals SBU will be one of the core drivers of growth.
AN INDUSTRY LEADER WITH CONTINUOUS ACQUISITION APPETITE
Sabic is one of the world’s largest and fastest-growing petrochemical producers, with its 2011
production volume exceeding 69 million tons. With a global growth strategy intact, the company
has been on an acquisition mode for years, making investments around the world. Through these
acquisitions, Sabic has expanded its product portfolio, acquired world-class technology and
boosted its market presence.
16 Saudi Kayan was one of Sabic’s first projects in the performance chemicals arena. It represented the first company
within the Middle East to produce and sell these specialty chemicals. The first shipment of ethanolamines
and ethoxylates was made in June 2012.
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