Safco Quarterly Net Income Almost Triples on Prices

By Glen Carey

Oct. 11 (Bloomberg) -- Saudi Arabian Fertilizer Co., a unit of Saudi Basic Industries Corp., said third-quarter profit almost tripled as it raised production to tap fertilizer demand.

Net income rose to 1.83 billion riyals ($488 million) from 616.2 million riyals in the year-earlier period, the Dammam, Saudi Arabia-based company, known as Safco, said today in a statement posted on the Web site of the Saudi bourse. It didn't provide quarterly earnings per share.

Rising demand for food products in China, India and Brazil has driven up global fertilizer prices, according to the Web site of the U.S.-based The Fertilizer Institute. Asian countries will use 59 percent of the fertilizer consumed globally over the next four years, according to a report on the Web site of the United Nation's Food and Agriculture Organization.

``There has been an increase in fertilizer prices and higher global demand,'' Faisal Hasan, head of research at Global Investment House KSCC, said in a telephone interview from Kuwait City today. ``Safco also has raised its production capacity.''


Safco, which is 43 percent owned by Saudi Basic Industries, doubled production capacity to 5 million tons last year after an expansion in April 2007. It produces 66 percent of the kingdom's fertilizers, according to a Global Investment House report on Safco in June. At the end of 2007, Saudi Arabia had fertilizer production capacity of 6.8 million tons, representing 25 percent of total Middle East's capacity, according to Global Investment.

Global Investment, which has a ``hold'' recommendation and a price estimate of 252.5 riyals, had forecast quarterly net income of 1.04 billion riyals for Safco. Credit Suisse Group AG has an ``outperform'' recommendation and a price estimate of 330 riyals for the fertilizer maker.

Safco's earnings may bolster profit at chemicals maker Saudi Basic Industries. Sabic, the largest company in the Middle East by market value, may report its weakest net income growth in nine consecutive quarters as U.S. and European demand declines and petrochemical prices fall.

Like Sabic, Safco benefits from discounted natural gas supplied by the kingdom and government efforts to diversify the economy away from oil. The world's largest oil exporter may grow by 4.9 percent in 2008, according to the median estimate of seven economists surveyed by Bloomberg News.

Safco's nine-month net income increased to 3.74 billion riyals, or 14.98 riyals a share, from 1.47 billion riyals, or 5.87 riyals a share, in the year-earlier period, the company said in the statement.

Safco advanced 1.8 percent to 144 riyals as of 1:03 p.m. local time, giving it a market value of 36 billion riyals.

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net