RIYADH: Chemical producers in Saudi Arabia are capable enough to withstand a potential feedstock price hike which could happen as early as the fourth quarter of 2023, according to S&P Global. In its report, the credit rating agency said that the strong credit metrics of Saudi chemical companies are one of the main reasons that give them a competitive advantage over their global peers to combat this price hike. “S&P Global Ratings believes that publicly listed rated and unrated Saudi chemical producers would be able to withstand a potential price hike, with their reported EBITDA (earnings before interest, taxes, depreciation, and amortization) margins remaining above 17 percent and adjusted debt to EBITDA below 1.5x on average,” said S&P Global in the report. The report added: “All else being equal, we estimate that these companies, including Saudi Basic Industries Corp., could withstand up to a 25 percent decrease in EBITDA due to higher feedstock costs, among other causes, in 2024.” The report further pointed out that Saudi chemical companies are also benefiting from the Kingdom’s domestic feedstock prices, which are significantly lower than global benchmarks. S&P Global added that SABIC would maintain industry-leading profitability and modest leverage, as the company gets most of its feedstock from the Kingdom, giving it a crucial competitive price advantage. According to the credit rating agency, chemical companies in Saudi Arabia are more sensitive to rising interest rates than declining EBITDA margins. “We keep a close eye on their refinancing risk and liquidity, in addition to their financial policy decisions and the actions they take to preserve their liquidity positions. The cash flow visibility that chemical players enjoy is also essential for mitigating price volatility and preserving credit metrics,” added S&P Global. Earlier in May, SABIC reported a 127.59 percent increase in net profit in the first quarter of 2023 compared to the last quarter of 2022. The firm registered SR660 million ($176 million) in net profit in the three months to the end of March 2023 — up from SR290 million in the final quarter of 2022. However, SABIC’s net profit dipped 89.8 percent year on year in the first quarter, as the company had clocked a profit of SR6.47 billion in the same quarter of 2022.