Saudi Aramco’s decision to buy chemicals maker Sabic, which led its debt levels to burst through a self-imposed borrowing target, is now showing signs of paying off as prices for plastics, paint and packaging soar.
Last year’s $69 billion acquisition of a stake in Saudi Basic Industries Corp., as the chemicals maker is formally known, has helped drive a turnaround in Aramco’s business of converting oil into plastics and other products. The downstream unit reported earnings before interest and taxes of $4.6 billion in the second quarter, up from a $344 million loss in the same period of 2020. Aramco also benefited from having Sabic fully incorporated into its own results, whereas a year earlier it only included 15 days of Sabic’s performance.
Sabic, the world’s biggest chemicals maker by market value, last week reported its highest quarterly net income in almost a decade as the economic recovery from the coronavirus pandemic boosted demand for its products. Aramco is currently ahead of schedule in its plans to get $3 billion to $4 billion in cost synergies from integrating Sabic by 2025, Chief Executive Officer Amin Nasser said Sunday in a call with reporters.
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