RIYADH: Global economic pressures have eaten into the profits of Saudi Arabia’s National Industrialization Co., also known as Tasnee, despite a sales increase, according to its Finance Manager.

The petrochemical maker saw a rise in sales in the second quarter by 38 percent year-on-year, Fawaz bin Mohamed Al-Fawaz told Argaam.

However, cost of sales increased due to higher average prices of feedstock and production inputs, as well as an increase in freight and distribution prices, which affected the contribution of increased sales to the net profit, he said.

Tasnee reported a decline in first-half profits of 11 percent to SR606 million ($162 million), down from SR684.3 million in the prior-year period, according to a bourse filing.

The increase in the cost of financing and Zakat provision affected net profit as well, he added.

Tasnee is expected to see lower demand in the third quarter and may be further into the fourth quarter of this year, due to the current global recession, Al-Fawaz said.

Demand levels traditionally fall during the summer period by rates ranging between 15 and 20 percent, due to products required by customers as per their needs, he explained.

He added that global events are not allowing much stock to be formed, leading to pressure on demand and consequently selling prices.

Tasnee has not received any official decision to increase feedstock prices in the Kingdom so far, Al-Fawaz confirmed.

Feedstock prices were already noticeably increased, leading to a direct increase in production costs and inputs, thus reducing profit margins, he said. 

Shipping and distribution costs are still high compared to previous years, but are starting to ease noticeably for the first time since the beginning of the pandemic, he added.