- Sipchem Company
- SABIC Company
Sipchem Company trades in the Saudi stock market and it directs its investments in chemical as well as in petrochemical industries. Some of these are basic while others are intermediate. The materials are used in the production of various products. The company has been in operation for twenty years and its current paid in capital is about $900 million. The company had a beta value reaching 1.17. The price for its shares was 15.35 and the volume of sales was more than 1 million, an average volume of 1.2 million over 50 days. The company’s exceptional shares were more than 300 million.
This company has assets of about 150 million shares and it has formed a coalition with two other companies; International Methanol Company, IMC and with International Diol Company, IDC as its affiliates and through combined efforts of the three, more than one million methanol mtpa and more than 75000 mtpa of butanediol are produced. The company is in the process of considering other more expansion-potentials.
The company is also in the process of further expansion and currently it is constructing other acetic plants. For example, the company is in the process of constructing Acetic Acid Plant and Vinyl Acetate Monomer plant and this is expected to increase its operation by at least 1000 mtpa by mid 2009. The company is also coming up with more integrated olefins complex that will have nine plants. These will aid in improving both quality and quantity (by 800,000 metric tonnes in a year) of chemicals produced. This is to begin in 2013.
It is the company’s objective to be among the largest and most effective petrochemical complexes within the Middle East. The company is very committed to preserving the environment and also ensures that the employees and the whole neighborhood are safe.
It represents Saudi Basic Industries Company, the leading non-oil company in the entire Middle East. The company has six business units that are strategically located in the Middle East. It ranks top among the top 10 petrochemical manufacturers. It deals with manufacturing chemicals, plastics, metals and fertilizers. The company supplies other companies with these products which use these as raw materials in manufacturing other products. The government of Saudi Arabia owns 70% of total shares in the company while the rest of the shares are under private investors. It is noted as being among the top five companies that manufacture petrochemicals.
The price for SABIC shares was 40.70 as at the close of 2008 and the volume of sales was slightly over 28,000,000 with an average 13 million within 50 days. The market cap was more than 122 billion, outstanding shares were 3 billion. The company’s Beta value was standing at 1.25, the price/revenues ratio was 0.73. Its paid-up capital was 30 billion while the par value per share was SR 10.
As at early 2009, the net profit for Sipchem Company was announced as being SR537 million in 2008 and it had decreased by about 9%. However, the net profit for the year 2008 according to the same source was SR 502 Million. By the end of the first half of 2008, the company made a net profit of SR365 million. The approved dividend in cash for 2007 was SR 1 for each share.
Below is a graph showing the trend for the company’s activities between November 2008 and January 2009.
Systematic risks are those risks that affect only all companies in an industry, not just one particular one.
Non-systematic kind of risk is just particular to one company; other companies are not affected by this risk. Investors avoid this by spreading their investments.
The company’s beta can be calculated by using the pricing model for capital assets. Y= a + bX where b is the beta value. Beta coefficient gives the relationship between expected return on the stock and return on financial markets. If a company has a positive beta, it means asset owned by the company tend to follow the prevailing market. In case the beta is zero, then there is no relation between the price and the prevailing market status. A negative beta for a company means that the asset’s value decreases as the market goes high. In this case, if a portfolio received double investment, the beta would be almost double given that the present beta is positive. It can be noted that foreign stocks in an economy will bring about diversification and this has to do with low beta. Also, it is thought that staples stocks are not affected much by cycles hence they tend to have low beta.
There is a high potential for SABIC Company to continue doing well as it continues to expand its operations throughout the world. The petrochemical industry has high prospect for expansion. It is also notable that the gulf region has a lot of oil reserves hence the petrochemical industry will continue receiving oil supply which forms the raw materials for the industry. The industries will hence have more reinforcement and strength to compete globally.
Also, the Gulf region in which Saudi Arabia is located, is centrally located hence its strategic position gives it a competitive advantage over its rivals, even as the global demand for petrochemical products increases.
The greatest challenge facing the expansion of the industry in the region is there is a poor Arab trade level and in the entire Gulf region. A common Arab market has not been created hence there is lack of proper coordination in the regional trade.