Kayan Saudi Petrochemical Company, listed on the TASI index, recorded a net loss of 673 million riyals in the second quarter of this year, an increase of 36% from the same period, amid a 10% decline in revenues to 2 billion riyals.

Sales came in about 29% higher than the Bloomberg consensus estimate, but the loss exceeded expectations by about 16%, indicating that price improvements did not translate into profits, as the company continued to record losses for the 16th consecutive quarter.

Sun, 19 2026

Price surge does not offset volume decline

Kayan's average selling price rose 51% year-on-year, but sales volumes fell 40%, explaining most of the revenue decline.

The deeper problem emerged in cost of sales, which did not decline at the same pace as sales volumes, due to the weight of fixed costs related to operations, maintenance, and depreciation at petrochemical plants.

When operating rates decline, these costs are spread over a smaller production volume, raising unit costs and pressuring gross margins, even as some variable costs decline.

Furthermore, the 40% drop in sales volumes does not necessarily mean a proportional decline in production, as part of it may be linked to shipping disruptions or inventory buildup due to supply chain disruptions.

Operating loss reached 522 million riyals, up 70.8% year-on-year, with its margin widening to 26%. In contrast, other operating expenses declined by about 5%, indicating a limited impact from cost control initiatives, but it was not enough to offset higher input costs and weak capacity utilization during the second quarter.

Kayan continues losses -02

Impact of Hormuz and supply chains

The company said supply chain challenges reduced sales volumes, while higher costs for some production inputs increased pressure on results.

This gains greater importance given Kayan's reliance on foreign markets, as exports accounted for about 89% of its revenues in 2025, with Asia alone comprising 46% of sales.

The location of the company's complex in Jubail makes its shipments to Asian markets more sensitive to disruptions in the Strait of Hormuz. Although some polymers and chemicals can be redirected to Red Sea ports, the western alternative does not cover Kayan's entire portfolio.

Shipping disruptions work in two opposite directions: they supported product prices amid lower supply, but on the other hand, they limited the company's ability to deliver volumes and raised transportation, insurance, and handling costs, which partly explains the 51% rise in average selling prices alongside the 40% drop in sales volumes.

Accumulated losses approach 50%

Accumulated losses rose to 7.19 billion riyals, equivalent to 47.92% of capital, leaving the company only 312 million riyals away from the 50% level. Shareholders' equity also declined 22.8% year-on-year to 7.9 billion riyals.

At a price of 4.93 riyals, the stock trades at about 0.94 times its book value, but the discount does not necessarily reflect a low valuation, as book value is eroded by continued losses.

The challenge facing Kayan is not just sales, but the ability of price increases to turn the gross profit margin positive.

Without that, any revenue increase will have a limited impact, while the company's accumulated losses approach stricter regulatory measures if they exceed half of capital.

Financial Analysis Unit