Saudi International Petrochemical Company (Sipchem) reported a 37.1 per cent drop in first-quarter net profit on Tuesday, hurt by a fall in sales prices of all its products and an increase in production costs.

Sipchem made a profit of SR50.7 million ($13.5 million) in the three months to March 31, down from SR80.6 million in the prior-year period, according to a bourse filing.

The average estimate of analysts polled by Reuters was for a quarterly profit of SR37.42 million.

The mid-sized petrochemical company was, once more, hit by lower product sales prices: it had reported a halving of profits in the previous three quarters for this reason.

Product prices are closely linked to oil, so the lower crude price has reduced the margins and competitive advantage over rival manufacturers from non-oil producing regions which Saudi firms used to accrue due to their subsidised energy and feedstock.

Saudi Arabia is reforming its energy subsidies to help bring down a substantial budget deficit: Sipchem has previously announced it expects SR120 million of extra costs due to the move, and said on Tuesday it had negatively impacted its first-quarter earnings without quantifying it.

The firm also took a provision due to disposals and write-offs of equipment at its International Methanol Company affiliate, following a shutdown of the plant during the previous quarter to conduct planned maintenance. - Reuters