Saudi Basic Industries Corporation (Sabic) saw its stock decline sharply following the announcement of a major asset reduction strategy, including the sale of key production facilities in Europe and the United States. The move underscores a broader shift toward refining its global footprint and improving capital efficiency.
- Sabic shares declined 7.3% after announcing the sale of six plants in Germany, the Netherlands, and Texas.
- The divested assets generated $2.1 billion in annual revenue and account for 12% of Sabic’s global output.
- Expected proceeds from sales range between $1.8 billion and $2.2 billion.
- Proceeds will be used for debt reduction and investment in circular plastics and advanced materials.
- The restructuring aims to cut fixed costs by 15% and improve return on invested capital to over 10% by 2027.
- Credit rating agencies are monitoring leverage and execution risk related to the asset sales.
Sabic’s share price fell 7.3% in early trading after the company disclosed a plan to divest a portfolio of manufacturing assets across Western Europe and North America. The initiative, part of a larger restructuring effort, targets the sale of six operational plants—three in Germany, two in the Netherlands, and one in Texas—representing approximately $2.1 billion in combined annual revenue. These facilities currently contribute roughly 12% of Sabic’s global petrochemical output, with a focus on specialty polymers and olefins. The company cited the need to optimize capital allocation and strengthen financial resilience amid volatile feedstock pricing and slowing demand in mature markets. Sabic expects to generate between $1.8 billion and $2.2 billion from the asset sales, with proceeds earmarked for debt reduction and reinvestment in high-growth segments such as circular plastics and advanced materials. The divestiture aligns with a wider strategy to reduce fixed costs by 15% over the next two years and improve return on invested capital to above 10% by 2027. Market reaction reflected investor concerns about potential near-term earnings pressure and execution risks associated with the timeline. Analysts noted that while the restructuring could enhance long-term competitiveness, the loss of scale in key export markets may affect regional supply chain dynamics. The announcement also prompted reassessments by credit rating agencies, with one major firm flagging a potential negative outlook on Sabic’s leverage metrics if the sales do not proceed as scheduled. The move comes as Saudi Aramco, Sabic’s parent entity, continues to prioritize financial discipline across its industrial portfolio. The company’s recent performance has been challenged by elevated energy costs and overcapacity in global chemical markets, particularly in Europe, where production margins have compressed by nearly 30% since 2023.