Strong oil prices and an increase in production capacity have buoyed Egypt’s Sidi Kerir Petrochemicals (Sidpec).
Shares of Sidpec gained 29.8 per cent in the past six months, while the price of crude futures for February delivery gained 17.5 per cent in the same period.
Rehan Hamza, an analyst at Okaz Brokerage in Cairo, said: “The stock has a high correlation to oil prices, which have surged in the last few months.”
Sidpec is the sole producer of ethylene and polyethylene in Egypt. The company is planning to raise its production capacity for ethylene to 760,000 tonnes a year by 2013 from 300,000 tonnes last year, and increase its polyethylene output to 425,000 tonnes a year from 225,000 last year.
“We expect that the increase in production capacity should benefit the company’s bottom line,” Ms Hamza said. “Currently, the country relies mostly on the import of the products, with Sidi covering only 20 per cent of local demand.”
Shares of the company closed at 14.60 Egyptian pounds yesterday.
Sidpec’s production process begins with the input of feedstock in the form of ethane-propane mixture bought from Egyptian Natural Gas Company (GASCO) through a favourable arrangement for Sidpec, whose plant then converts the feedstock into ethylene.
The output from the ethylene plant is then processed to make high and low-density polyethelene, naphtha, butane and liquefied natural gas.
The company’s production facility is within easy reach of the Mediterranean ports of Alexandria, Dekhelia and Damietta, giving it access to the European market at competitive transport rates. Sidpec’s close location to GASCO offers cost benefits in terms of utilities and logistics.
The company has also historically rewarded its shareholders with generous dividends, averaging a yield of 12.9 per cent for the past five years. Last March the company’s management recommended a distribution of 1.25 pounds a share for the fiscal year 2009.