Saudi Basic Industries Corporation
2010 · Saudi Exchange (Tadawul) · Materials, commodity chemicals · Reporting currency SAR
A logistics blockade, not a broken business, explains SABIC's trough. The petrochemical cycle explains why that is not enough.
The price already pays for a blockaded volume line, but 12.7% to the midpoint is thin compensation for the operating leverage underneath it. The probability-weighted value is SAR 53.9, roughly 6% above the price before a 4.3% forward yield.
Mid-cycle EBITDA of SAR 22bn capitalised at 8.25x to 9.75x EV/EBITDA. Close of SAR 51.00, 5 August 2026.
| Measure | Value | Measure | Value |
|---|---|---|---|
| Market capitalisation | SAR 153.0bn | Enterprise value | SAR 180.9bn |
| Market cap, US dollars | US$40.8bn | EV/EBITDA, trailing | 11.2x |
| Shares outstanding | 3,000m | Price to book | 1.23x |
| Free float | 30% (Aramco 70%) | Book value per share | SAR 41.32 |
| 52-week range | SAR 48.20 – 64.00 | Net debt, 30 Jun 2026 | SAR 2.73bn |
| Average daily turnover, 3M | SAR 96.8m | Net debt / adj. EBITDA | 0.2x |
| Beta | 1.01 | Dividend yield, trailing | 5.1% |
| Share price, 12 months | -9.7% | Credit rating | Aa3 / A+ / A+ |
Sources: SABIC Q2 2026 results (29 and 30 July 2026); Saudi Exchange market data via Argaam at the close of 5 August 2026.
Why this matters now
- Second-quarter sales volumes fell 33% quarter on quarter as the Strait of Hormuz closure cut export access, even as realised prices rose 41%. The shares sit within 6% of their 52-week low.
- On 3 August SABIC completed the sale of its Engineering Thermoplastics business in the Americas and Europe to Mutares for an enterprise value of US$450m, removing an operation that lost SAR 648m in the first half alone.
- Washington, Tehran and Muscat are reported to be close to a 60-day interim agreement to reopen the strait without tolls, which would restore the volume line without SABIC changing anything about its business.
Business and competitive position
SABIC turns natural gas and refinery liquids into the bulk chemicals that other manufacturers convert into packaging, pipe, fertiliser, car parts and electronics. It buys ethane, propane, butane and naphtha, largely under long-term agreements with Saudi Aramco affiliates, cracks them into ethylene, propylene, methanol, MTBE and glycols, and either sells those intermediates or polymerises them into polyethylene, polypropylene and engineering plastics. A fertiliser arm converts gas into ammonia and granular urea.
Almost nothing SABIC sells is differentiated, so revenue is tonnes multiplied by a spread the company does not set. What it controls is feedstock cost, plant reliability and the cost of reaching the customer. Nearly half of group revenue goes to Asia, so the economics run through a shipping route, and in 2026 that route has been the binding constraint.
| Segment, FY2025 continuing operations | Revenue, SAR bn | Share of revenue | EBITDA, SAR bn | EBIT, SAR bn |
|---|---|---|---|---|
| Petrochemicals (chemicals and polymers) | 103.94 | 89.2% | 11.54 | 0.33 |
| Agri-Nutrients | 12.59 | 10.8% | 4.89 | 4.04 |
| Group | 116.53 | 100% | 16.43 | 4.37 |
Source: SABIC Integrated Annual Report 2025, segment disclosure on continuing operations.
Agri-Nutrients produced 10.8% of revenue and 92% of segment operating profit.
Agri-Nutrients produced 10.8% of 2025 revenue and 92% of segment operating profit. The petrochemical business, which is what almost everyone owns SABIC for, earned SAR 0.33bn of EBIT on SAR 103.94bn of sales: three tenths of one percent, before the war.
| Region | Share of revenue |
|---|---|
| Rest of Asia | 28% |
| China | 20% |
| Saudi Arabia | 16% |
| Americas | 10% |
| Europe | 9% |
| Others | 9% |
| Africa | 8% |
Unit economics: three drivers
- Tonnes. 23.2Mt of chemicals, 13.0Mt of polymers and 7.2Mt of agri-nutrients sold in 2025. In Q2 2026 group volumes fell 33% quarter on quarter.
- Spread. Q2 realised prices rose 41% quarter on quarter and revenue still fell 5%. Price does not substitute for tonnes when fixed costs do not move.
- Utilisation. SABIC said alongside its Q2 results that ethylene operating rates are at their lowest levels. Adjusted EBITDA margin fell from 15.9% in Q1 to 13.6% in Q2.
Competitive position and moat
SABIC ranks in the global top five in ethylene, ethylene glycol, methanol, MTBE, granular urea, polyethylene, polypropylene and polycarbonate, across 60 sites and 140 countries. It competes on delivered cost per tonne against BASF, Dow, LyondellBasell and, increasingly, Chinese producers building for self-sufficiency.
The mechanism is a cost position, not a franchise: privileged access to administered-price Saudi feedstock through Aramco affiliates, plus scale. There is no switching cost and no brand, and the advantage is conditional on logistics, since cheap ethane at Jubail is worth nothing if the tonnes cannot reach Asia. Three straight years of ROIC below the risk-free rate is what that erosion looks like.
Ownership and the capital allocation record
Saudi Aramco holds 70% and the free float is 30%. Dr Faisal Al-Faqeer became chief executive on 1 April 2026, arriving from Aramco where he ran In-Kingdom Liquids-to-Chemicals; Khalid Al-Dabbagh chairs a nine-member board, 33% independent at end-2025. Five years of capital allocation read as a shrinking dividend funded by a shrinking business: SAR 4.00 a share in 2021, then 4.25, 3.40, 3.40, 3.00, and 1.10 for H1 2026, while the portfolio was cut back toward Saudi Arabia through the sales of Functional Forms, Hadeed, Alba and the European and Americas plastics businesses.
Financial analysis
| SAR m unless stated | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | 174,883 | 183,077 | 141,537 | 117,736 | 116,525 |
| EBITDA | 43,203 | 33,532 | 16,503 | 18,989 | 15,594 |
| EBITDA margin | 24.7% | 18.3% | 11.7% | 16.1% | 13.4% |
| EBIT | 30,832 | 20,928 | 4,335 | 8,809 | 5,610 |
| Net income to shareholders | 23,066 | 16,530 | -2,772 | 1,539 | -25,779 |
| Earnings per share, SAR | 7.69 | 5.51 | -0.92 | 0.51 | -8.59 |
| Free cash flow | 28,693 | 25,698 | 13,996 | 6,244 | 7,209 |
| Return on invested capital | 13.7% | 9.3% | 1.8% | 4.3% | -0.9% |
| Net cash | 8,827 | 13,925 | 8,761 | 3,010 | 3,609 |
| Book value per share, SAR | 60.05 | 62.02 | 55.81 | 52.12 | 42.91 |
| Dividend per share, SAR | 4.00 | 4.25 | 3.40 | 3.40 | 3.00 |
Source: SABIC Integrated Annual Report 2025; five-year history from S&P Global Market Intelligence.
EBITDA margin fell from 24.7% in 2021 to 13.4% in 2025 on revenue down a third.
The 2025 loss is almost entirely non-cash and non-continuing: continuing operations lost SAR 1.53bn.
Quality of earnings
The SAR 25.78bn headline loss for 2025 is almost entirely non-cash and non-continuing, and reading it as an operating collapse is the most common error on this name. Continuing operations lost SAR 1.53bn. Discontinued operations lost SAR 24.38bn, of which SAR 15.18bn was a fair-value write-down on the European Petrochemicals (SAR 9.85bn) and Engineering Thermoplastics (SAR 5.33bn) businesses being sold, SAR 3.78bn was the Teesside cracker closure, and SAR 1.73bn deferred tax derecognition. Operating cash flow that year was SAR 15.96bn and free cash flow SAR 7.18bn.
A further SAR 6.15bn of impairments ran through continuing operations, including Teesside and the Clariant stake, so reported EBIT of SAR 4.37bn understates the underlying result against adjusted EBIT of SAR 6.92bn. Tax and zakat of SAR 1.60bn exceeded pre-tax income of SAR 1.26bn, which is what happens when losses arise where they cannot shelter Saudi zakat. Working capital was managed, not merely flattered: receivables fell to SAR 16.68bn from SAR 20.44bn and inventory to SAR 12.85bn from SAR 18.81bn on revenue down 1%.
SAR 25.13bn of book equity and SAR 1.28bn of trailing earnings belong to outside shareholders of consolidated affiliates such as Yansab, Saudi Kayan and SABIC Agri-Nutrients. Group EBITDA is not all SABIC's to keep.
Balance sheet, liquidity and the distribution
Cash and short-term investments stood at SAR 35.92bn against total debt of SAR 38.68bn at end-Q1 2026, and net debt was SAR 2.73bn at 30 June, about 0.2 times adjusted EBITDA. Moody's upgraded SABIC to Aa3 during 2025 following the sovereign upgrade, with S&P and Fitch in the A+ band. The soft spot is tenor, not quantum: current maturities of long-term debt rose to SAR 11.24bn from SAR 2.02bn, with a further SAR 13.38bn of short-term debt, so there is refinancing to execute even though the net position is close to flat.
On distribution, 2025 dividends paid of SAR 9.63bn against free cash flow of SAR 7.18bn including discontinued operations, or SAR 9.21bn on the continuing basis, was at best exactly covered. The board acted rather than defended: SAR 1.10 declared for H1 2026 is 27% below the SAR 1.50 paid for H2 2025. Annualised at SAR 2.20 the payout is SAR 6.60bn, comfortably inside 2025 cash generation. The dividend has been resized to the cycle.
Valuation
Model: mid-cycle EBITDA capitalised at a mid-cycle EV/EBITDA multiple. SABIC is a price-taking commodity producer whose current quarter is distorted by a shipping blockade, so a discounted cash flow off spot spreads and blockaded volumes would be a bet on the Strait of Hormuz dressed as a valuation. Trailing earnings are negative, so no earnings multiple can anchor it.
| Period | EV/EBITDA | Price to book | Dividend yield |
|---|---|---|---|
| FY2021 | 8.7x | 1.93x | 3.4% |
| FY2022 | 8.6x | 1.44x | 4.8% |
| FY2023 | 16.3x | 1.50x | 4.1% |
| FY2024 | 12.1x | 1.29x | 5.1% |
| FY2025 | 11.5x | 1.20x | 5.9% |
| Today | 11.2x | 1.23x | 5.1% |
| Company | What the half showed | 2026 year to date |
|---|---|---|
| SABIC (2010) | Loss SAR 690m, from SAR 5.28bn | -0.6% |
| Yansab (2290) | Net profit up fourfold | +14% |
| Sipchem (2310) | Loss SAR 807m, revenue -46% | -9% |
| Advanced (2330) | Loss SAR 69m on propane cost | -23% |
SABIC has held up better than the independents this year despite the larger absolute loss, because the balance sheet and the fertiliser arm absorb the cycle. BASF traded on 8.8x EV/EBITDA at end-June 2026.
Assumptions, stated in full
- Mid-cycle revenue SAR 118bn at an 18.5% adjusted EBITDA margin, giving EBITDA of SAR 22.0bn. 2025 continuing revenue was SAR 116.53bn on volumes up 5% to 6%. Margins were 17.8% in 2024 and 15.3% in 2025, both inside a downcycle, against a five-year range of 11.7% to 24.7%.
- Transformation credit of roughly 40% of what remains. The programme targets a US$3.0bn recurring EBITDA uplift by 2030, of which US$623m is banked in the 2025 base and US$547m came in H1 2026. The remainder is assumed to go to customers.
- Multiple 9.0x, sensitised 8.25x to 9.75x, anchored on SABIC's own 8.7x and 8.6x in 2021 and 2022, the last two years of normal margin. A mid-cycle multiple goes with mid-cycle EBITDA.
- Bridge to equity. Less net debt of SAR 2.73bn at 30 June 2026, less minority interest of SAR 25.13bn at book, over 3,000m shares. Marking the listed minorities to market would raise that deduction, so this is not conservative. No credit is taken for Fujian or the new MTBE line.
- Cash-yield cross-check. 2025 free cash flow of SAR 9.21bn on a SAR 153.0bn market capitalisation is a 6.0% yield against a US 10-year Treasury yield of 4.62% on 5 August 2026, the hurdle that matters given the riyal peg. A 140 basis point spread in a trough year is the strongest single argument for the shares, and thin pay for the operating leverage.
| Mid-cycle EBITDA | 7.50x | 8.25x | 9.00x | 9.75x | 10.50x |
|---|---|---|---|---|---|
| SAR 18bn | 35.7 | 40.2 | 44.7 | 49.2 | 53.7 |
| SAR 20bn | 40.7 | 45.7 | 50.7 | 55.7 | 60.7 |
| SAR 22bn | 45.7 | 51.2 | 56.7 | 62.2 | 67.7 |
| SAR 24bn | 50.7 | 56.7 | 62.7 | 68.7 | 74.7 |
| SAR 26bn | 55.7 | 62.2 | 68.7 | 75.2 | 81.7 |
Base case is SAR 22bn at 8.25x to 9.75x. Compare against the 5 August close of SAR 51.00.
| Case | Assumptions | Value | Probability |
|---|---|---|---|
| Bear | SAR 18bn at 7.5x: the strait stays impaired into 2027 and savings are competed away | SAR 36 | 30% |
| Base | SAR 22bn at 9.0x: volumes normalise, 40% of the programme reaches EBITDA | SAR 57 | 50% |
| Bull | SAR 26bn at 9.5x: volume recovery, a spread turn, Fujian ramping | SAR 73 | 20% |
Probability-weighted value SAR 53.9, about 6% above the price before a 4.3% forward yield.
Vertical marker = current price SAR 51
Probability-weighted value SAR 53.9.
The current price needs mid-cycle EBITDA of SAR 22bn at 8.25x, or SAR 20bn at 9.0x, to be justified, and two variables carry that. Whether mid-cycle EBITDA is nearer SAR 18bn or SAR 24bn, a question about global spreads and about how much of the transformation programme SABIC keeps rather than competes away. And whether the multiple is 8x or 10x, which asks whether the market treats SABIC as a cyclical at a trough or as structurally impaired. The strait decides the next two quarters and almost nothing about either.
Risk, thesis tests, and basis
| Risk | Mechanism | Leading indicator | Severity |
|---|---|---|---|
| Hormuz stays shut | Export volumes stay a third below normal while fixed costs do not move, so EBITDA falls faster than revenue | Daily transit counts; quarterly volumes | High |
| Structural overcapacity | Chinese and US additions hold polyolefin and glycol spreads at or below cash cost, and SABIC cannot price around it | Capacity start-ups; operating rates | High |
| Feedstock set by the parent | Aramco prices ethane, propane and butane, so administered-price changes move value to the 70% owner without negotiation | Monthly Aramco propane and butane prices | High |
| Minority treatment | Related-party terms and any restructuring are set by a controlling shareholder whose interests differ from the float | Related-party disclosure; board independence | Medium-High |
| Refinancing | SAR 13.38bn of short-term debt plus SAR 11.24bn of current maturities against a position already in net debt | Maturity disclosure; new issue spreads | Medium |
| Dividend resized again | The half-year payout was already cut 27%, and a further cut removes the main support under the shares | Half-year declarations against free cash flow | Medium |
| Liquidity on exit | A 30% float and SAR 96.8m of daily turnover mean a large position cannot be sold quickly into a stressed market | Daily traded value; foreign ownership | Medium |
| Remaining sale fails | The European Petrochemicals sale to AEQUITA has not closed, and failure leaves an asset written down by SAR 9.85bn | Tadawul filings; works council approvals | Medium |
Bear case
- The blockade is the new normal. Reopenings failed repeatedly in 2026: the strait opened on 21 April and shut within 24 hours, and Iran declared it closed again in June days after a memorandum. Value: SAR 36 or below.
- The cycle does not turn. SABIC's own outlook has petrochemical volume growth at 2.9% a year to 2030, roughly global GDP, against capacity still arriving. Value: SAR 40.
- Savings become discounts. Cost cuts delivered by everyone become price cuts for customers. Zero net retention removes SAR 3.5bn of mid-cycle EBITDA. Value: about SAR 10 a share.
Bull case
- Volumes return unaided. Q2 volumes fell 33% while prices rose 41%. Restoring 2025 tonnes at 2025 prices lifts EBITDA toward SAR 18bn at once, and the market is paying for the blockaded number. Value: SAR 50 to 57.
- Aramco integration is real. The new chief executive ran In-Kingdom Liquids-to-Chemicals at Aramco. If that becomes better feedstock economics, the cost position widens. Value: SAR 6 to 10.
- A cleaner portfolio. Engineering Thermoplastics closed on 3 August, removing SAR 648m of half-year losses and 130 to 140 basis points of margin drag. Value: SAR 3 to 5.
What would say a holder is wrong
- A close below the 52-week low of SAR 48.20 on news that the interim Hormuz agreement has failed. That is the blockade being priced as structural, not a buying opportunity.
- Adjusted EBITDA below SAR 15bn annualised in any quarter after export access is restored, showing the weakness is spreads rather than logistics.
- A second consecutive half-year dividend cut below SAR 1.10, or ROIC failing to clear 4.62% in a full year of normal export access.
What desk research cannot answer
- The size of the feedstock advantage. Aramco's administered ethane, propane and butane prices are not disclosed per tonne, and that gap is the entire moat.
- Whether the mid-cycle margin is 17% or 20%. That needs product-level spread forecasts from ICIS or Wood Mackenzie, a data purchase, not a search.
- The market value of the minorities, which needs a sum-of-the-parts on the listed floats of Yansab, Saudi Kayan, SABIC Agri-Nutrients and Petrochem, rather than a book deduction.
Basis of analysis. Built from SABIC's Integrated Annual Report 2025 and Executive Summary, the Q2 2026 results of 29 and 30 July 2026, the Tadawul filing of 4 August 2026 confirming completion of the Engineering Thermoplastics divestment on 3 August, and Saudi Exchange market data via Argaam at the close of 5 August 2026. Five-year history is from S&P Global Market Intelligence; the US 10-year Treasury yield of 4.62% is as of 5 August 2026. Dollar conversions use the riyal peg of SAR 3.75, and year-end share prices in the multiple history come from reported year-end market capitalisation and the constant 3,000 million share count.
This document is independent research prepared for informational purposes. It is not investment advice, not a recommendation to buy or sell any security, and does not constitute an offer or solicitation. It does not take account of any particular person's objectives, financial situation, or needs. Figures are drawn from public sources believed reliable as of the date shown and may change without notice. Anyone acting on this material does so at their own risk and should seek their own professional advice.
This document is independent research prepared for informational purposes. It is not investment advice, not a recommendation to buy or sell any security, and does not constitute an offer or solicitation. Figures are drawn from public sources believed reliable as of the date shown and may change without notice. Anyone acting on this material does so at their own risk and should seek their own professional advice.