Saudi Basic Industries Corp. (SABIC), the world’s biggest petrochemical maker by sales, reported a 29% drop in fourth-quarter profit as lower oil prices reduced returns from its own products.

Net income dropped to 4.36 billion riyals ($1.16 billion) from 6.16 billion riyals a year earlier, the Riyadh-based company known as Sabic said in a statement today. The mean estimate of seven analysts was 5.39 billion riyals, according to data compiled by Bloomberg. Sales slipped 10% to 43.4 billion riyals.

“Fourth-quarter results are not a surprise for us, we have foreseen the effects of the drop in oil prices on our business,” Chief Executive Officer Mohammed Al Mady said at a press conference in Riyadh.

Brent crude dropped 48% last year as rising production from North America and the Organization of Petroleum Exporting Countries swelled supply. Saudi Arabia, which depends on crude sales for most of its government income, is seeking to expand output of petrochemicals and refined fuels to diversify its economy.

Low oil prices are not good for Sabic since falling revenue squeezes the company’s profit margin, Al Mady said at a conference in Dubai on Nov. 24. Sabic uses natural gas, which it buys at a fixed price, as its main feedstock, he said.

The company’s operating profit fell 26% to 7.56 billion, it said. Sabic appointed Yousef Al-Benyan as Chief Financial Officer last month after Mutlaq Al-Morished left to head National Industrialization Co.

Source: Bloomberg