Saudi Kayan 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% over the same period, amid a 10% decline in revenues to 2 billion riyals.

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

Sun, 19 2026

Price jump does not compensate for lower volumes

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

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

When operating rates decline, these costs are spread over a smaller volume of production, raising unit costs and compressing the gross margin, even with a decline in some variable costs.

Moreover, the 40% decline in sales volumes does not necessarily mean a corresponding decline in production, as part of it may be related to shipment 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 of cost control initiatives, but it was not enough to offset the rise in input costs and weak utilization of production capacity during the second quarter.

Kayan continues losses -02

Impact of Hormuz and supply chains

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

This becomes more important given Kayan's reliance on foreign markets, as exports accounted for about 89% of its revenues during 2025, while Asia alone accounted for 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 as supply fell, but on the other hand limited the company's ability to deliver volumes and increased transport, 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 just 312 million riyals away from the 50% threshold, while shareholders' equity fell 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, because book value is eroding as losses continue.

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

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

Financial Analysis Unit