Welcome to SABIC Q 2 2024 earnings call. This is Alanoud Al-Modaifer, acting as a moderator. Please note that this call is being recorded, and a transcript will be published on SABIC Investor Relations webpage, together with the supplementary materials. The earnings call will feature a commentary from SABIC CEO, Engineer Abdulrahman Al-Fageeh, together with the CFO, Mr. Salah Al-Hareky, and IRO, Mr. Naif Al-Ayed. Naif Al-Ayed will now guide us through an outline of today's event. Thank you, Alanoud. Good day, and thank you for joining the SABIC Q2 2024 earnings call. Please note that any forward-looking statements are subject to certain assumptions, risk, and uncertainty. These statements are not a guarantee of future performance. Actual outcome may differ materially. Please refer to the disclaimer in the presentation and in our financial reports, which are available at sabic.com. Our CEO will start by going over the high-level market context that influence our industry performance in the second quarter of 2024. This will be followed by SABIC 2024 key priorities progress. The CFO will walk you through SABIC aggregate financial performance with additional background and quarter performance. Our CEO will then provide a brief outlook for the remainder of 2024 and open the line for a live Q&A session. We ask that participants keep questions limited to SABIC corporate and avoid addressing listed affiliate companies. Now, please join me in welcoming SABIC CEO, Engineer Abdulrahman Al-Fageeh. Thank you very much, Naif. Good day, everyone, and thank you for being here, joining us today's earnings call. Let me first describe the macroeconomic context for the second quarter. The global economy, the GDP, was 2.6%. A few major nations had some slowness surprises in their recent economic activities. On the other hand, the PMI data, that is the Purchasing Managers' Index, showed some improvement in the global economic conditions. For instance, global output for both manufacturing and services has increased. Additionally, higher exports, restocking of inventories, and other increased financial activities signaled a recovery in global trade. With the inflationary pressure easing, some central banks have begun lowering interest rates. Moreover, this, which could further stimulate the global economy. Overall, the latest economic indicators points to increased confidence but modest growth momentum. Now, I would like to highlight the five significant achievements that focus on SABIC's commitment on safety and performance. First of all, I'm proud to highlight a total recordable incident rate of 0.07 during the second quarter of 2024, and this reflects our unwavering commitment to top-tier environmental, health, safety, and security practices. Furthermore, we successfully completed the transfer of our legacy steel business, Hadeed, after obtaining all necessary regulatory approvals. This marks a major milestone in our portfolio optimization strategy. SABIC's board has approved a dividend distribution of $1.36 billion for the first half of 2024, demonstrating our robust financial position in a still challenging market conditions and our commitment for stable to grow dividends. In addition, SABIC was awarded a gold medal by EcoVadis, a leading provider of business sustainability rating. The award means that SABIC is placed among the top 5% of companies that EcoVadis rated during the past years in terms of environment, labor and human rights, ethics, and sustainable procurement. The SABIC Fujian Petrochemical Complex project, the largest foreign investment in Fujian, China, was recognized as one of the top 10 Invest in China Outstanding cases, which was nominated and selected by the Chinese government ministries. Speaking of this project, we are delighted to share that it is progressing very well. The slide lists another Q2 highlights related to our product innovation, but I will discuss it in the next slide, which shows SABIC's 2024 priorities. The 2024 priorities encompass sustainable, profitable growth, customer intimacy, value creation, and ESG and innovation. Let me now give you some example of how we are progressing those priorities. An example of our sustainable, profitable growth was illustrated by SABIC Agrinutrients, securing the gas allocation from the Ministry of Energy to build a sixth plant with the capacity to produce 1.2 million metric tons per year of low-carbon ammonia, and in addition to 1.1 million tons of urea and other specialized agri-nutrients products. Engineering studies will identify the most efficient technologies to use for energy and feedstock utilization. We signed an investment agreement with the provincial governments in Fujian, China, to build an engineering thermoplastic compounding plant in the southeastern region of the People's Republic of China. The new investment further underscores SABIC's commitment to meeting its local customers' unique requirements for differentiated innovative solutions while strengthening its roots in the China market. Turning now to another priority, customer intimacy. Several new polymer products and applications have been commercialized during the first year of 2024, adding up to 16 new products introductions into different industries that we serve. Additionally, we now have fully deployed our customer relationship management systems, integrating it with our website so that customers experience a better digital experience. The transfer of Hadeed ownership was concluded in the second quarter as planned, enabling SABIC to focus on our core business to optimize returns of capital invested and shareholder value. Let me now highlight the efforts to drive value creation with Saudi Aramco, where we continue to work closely to implement potential opportunities of, for synergies across a broad set of areas. To date, we achieved a cumulative synergy value of approximately $2 billion. Our fourth priority for the 2024 innovation, together with industry, has long been a cornerstone of our business. New products and processes link our growth agenda with SABIC support of end product industries. Thus, I'm pleased that SABIC announced its first certified low carbon product, methanol, produced using byproduct CO₂ captured from the upstream processes. This new product has a lower carbon content than traditional methanol, yet maintains a high quality specification. This circular approach to manufacturing reduce the use of traditional feedstock and enables product carbon footprint savings. There are two additional examples of sustainability-focused innovations that I would like to mention. One of that, the new 2.4 MW solar installation at our Genk site in Belgium. It features 100% recyclable solar panels made of our own SABIC polypropylene compounds. The second initiatives worthwhile to highlight is the newly commissioned hydrotreatment plant in Geleen site in the Netherlands. This plant is integral to our advanced recycling process, converting the pyrolysis oil from post-consumer mixed plastic waste into alternative feedstock for the certified circular polymer of our TRUCIRCLE products portfolio. Now, let us take a look at the demand and sales of individual and market we serve through the quarter. As you can see in the slide, market conditions varied across end product industries. Demand was stable in the majority of the sectors, grew in automotive and hygiene and healthcare, but took a downtrend in agriculture due to seasonality. We expect to see market trends in Q3 2024 to remain unchanged in most of end sectors, except for for consumer goods, where we anticipate an improvement over the prior quarter. I will now hand the call over to the SABIC CFO, Mr. Salah Al-Hareky, for a review of SABIC's financial results and additional commentary on individual market. Salah, please. Thank you, Abdulrahman, and thank you to everyone joining the call. Let me start by saying, despite market challenges, we are pleased to report enhanced profitability, driven by a strategic focus on increasing sales and higher contribution margins. This quarter, we achieved a revenue of $9.5 billion, making a 9% increase over the prior quarter, driven by 11% rise in sales volume, partially offset by a 2% decrease in average selling price on SABIC overall. Our EBITDA reached $1.52 billion, reflecting a 26% quarter-over-quarter improvement and surpassing consensus estimate. Consequently, our EBITDA margin improved to 16% from 14% in the previous compared to the previous quarter, supported by marketing activity, focusing on higher margin product in our portfolio. SABIC second quarter net income was $582 million, an improvement of $516 million compared to the last quarter, and 84% increase compared with the last year result of the same quarter. Overall, our results have exceeded consensus expectation, underscoring SABIC commitment to delivering higher value to our shareholders. Year-to-year, SABIC cash flow from operation came to around $760 million, which was mainly a result of Hadeed deconsolidation and phasing out from our books as of June 2024. Excluding Hadeed effect, our cash from operation would be $1.4 billion. Finally, our net debt over EBITDA ratio underscores our financial resilience and robust standing. Let me now proceed further to our profitability analysis. Despite market challenges and fluctuation in petrochemical demand, we leveraged our global market presence to achieve 11% quarter-over-quarter increase in sales volume. At SABIC, our diversified product portfolio enables us to capture the value of higher margin product, significantly enhancing our bottom line. As shown in the graph, our EBITDA has improved, not only comparing it to previous quarter, but also with all 2023 quarters result, which was mainly driven by higher margins and volumes, and underscores a positive profitability trajectory in the first half of 2024. Now, let me take you through the segment performance. Despite flat petrochemical demand in China, recent PMI measures indicate improving market sentiment, as our CEO indicated. While petrochemical product demand was remained stable overall, SABIC has successfully increased sales volume by 8% over the previous quarter, alongside an average price increase of 2% in the petrochemical segment. Both our polymer and chemical segment have increased their sales, with methanol being the primary driver of higher sales. The agri-nutrient sector, during this part of the year, has a typical seasonal effect, driving prices generally lower for the overall industry. Volume, however, remained steady due to the rescheduling of shipment from Q1 to Q2 2024. This has reflected in the 6% increase in our top line. Urea prices were lower in Q2, under pressure from ample supply and lower demand due to South Africa off-season and flooding in Brazil, as well as high stock level in India. Allow me now to summarize. Positive momentum with EBITDA improvement by 26% quarter-over-quarter. Our robust financial standing empowers us to navigate industry downturn and drive our business growth. Our top priority is portfolio optimization to enhance return and strategically relocate capital towards higher margin opportunity. This conclude the financial highlight. I will hand back to Abdulrahman for year ahead guidance. Thank you, Salah. At SABIC, still our long-term focus remains on a strategic portfolio optimization, restructuring of underperformed assets, prioritizing sustainability and innovation, and capital discipline. Our guidance for the year ahead includes stable economic growth, as reflected in a global GDP growth rate of 2.7% for 2024. We maintain a disciplined approach to managing our CapEx, projecting spending to be at a lower range of the $4 billion-$5 billion for the year 2024. This concludes the presentation portion of today's call. Back to Alanoud to kick off the Q&A session. Thank you, Abdulrahman. Audience, please use the Raise Hand feature on your screen to ask questions, and please limit your questions to two. Wait for your line to be opened before you speak. Make sure to click the Lower Hand button once the question is asked. You can also share your question in writing. We receive the questions from Alex from JP Morgan. Please come forward to your mic, please. Me? Yes, Alex. Okay, so you talked about optimization and restructuring performing assets. You've closed a couple of plants in Europe. I'm just wondering what else is to come, and also when will you restart with them? So that's my first question. Second question- Alex, your voice is cutting off. Alex, your voice is cutting off. Sorry, Alex, can you make sure your connection- can you check your connection, please? I can't do anything on the connection. I'm just- Okay. I was just asking about restructuring and plant closures. Continue with your question, and we try to, yeah- I'll put it in the- Go ahead. Thank you, Alex. We cannot hear you correctly. We'll go to the other question. We receive the questions from Shashank, Bank of America. Alex, I think, you know, when the voice was not really very clear, but I guess we've heard a couple of words. I think you were referring to the portfolio optimization. In Europe, something. And specifically in Europe, and I'll try to answer the question, and I'm sure our CEO will add to this. We've actually had started this portfolio optimization sometime. One of our, the result of this portfolio optimization is the divestment of Hadeed. We've done also some work, but the work will still continue, specifically in Europe. We have, we've actually closed one of our plants, Olefin 3. And the work continue to look into the portfolio optimization from a strategic review. And the intention is not actually to make a decision on exit or partial exit, but also, which is very important, to recycle our capital, whether in Europe or different regions. I hope I answered the question, depending on hearing the first maybe couple of words from your question, Alex. Next. Thank you, Alex. Now we have a question from Shashank, from Bank of America. Please come closer to your mic. Two questions. The first one is, if I look at your pet chem pricing, it increased about 2% quarter-on-quarter. This was probably lower than some of the increase we have seen in some of the Saudi peers like Yansab and. So just wondering, if this ties into some potential weakness in your international business in Europe. Any comments around that? That's the first question. And the second question is, just looking at your agri- nutrients business. You did mention EBITDA fell 14% Q-on-Q, despite higher revenues. So what really led to this? I mean, were you experiencing some issues with netbacks, given a seasonally weak demand period? Thank you. Okay, let me take the first one, and I think the second one is about agri- nutrients. So we don't normally, you know, talk about another stakeholder company like, you know, the agri- nutrients, and you could direct the question to them. I'm sure that they will give you the answer. If you are talking about the average pricing and the differences that you have seen, looking in the average prices or portfolio of some companies like Yanbu, is completely different from what we have in SABIC. Let me tell you, I mean, the market price of the petrochemical differs, as you may know, from region to region, from different to different. You take the average, of course. You have to count the volume that, I mean, you sell, the size of the sales that you have to sell, the- y ou know, so many other factors that you need to add in order to get the average sales price. But I think it is very clear, I mean, that the, the majority of the SABIC portfolio have some stability in the price from the Q1 to the Q2. Yeah, if I may add, on this, this is very important. So while we've managed to increase our volume to around 11%, focusing on market and region that had actually maximized our margin. On the 2%, I don't think that it's actually, as our CEO mentioned, it's a one-to-one comparison because of the footprint of SABIC compared to the local company in the region. Thank you, Shashank. Now we have a question from Pratik, from HSBC. Please come forward to your mic and ask your question. First one is on the volume of the petrochemical segment. So your volume increased 8%. How much of that volume was because of better demand, and how much was it because of your better plant availability? No shutdowns, for example. And also, could you tell us about any pending shutdowns you have scheduled in second half of this year? So this is the first question on volumes. The second question is the synergy you were talking about with Aramco position. You said that in quarter two, the benefits were around SAR 600 million. How, what's your expectation for the rest of the year? Till when can we expect this sort of benefit to continue for SABIC? Thanks. Thank you, Pratik. Let me take the first one about the sales, and then Salah will take the second one related to Aramco. As you may know, the level of the sales is consistent with our average. We work, you know, with a lot of focus on the operational excellence, efficiency, utilizing the assets, maximizing our shareholder value, and this is what's important. And sometimes, like what we have done in the second quarter, we also try to reduce our inventory to the level that we should not impact the reliability of our supply to our customers. Salah? Okay, so in the synergies on Aramco, b oth team from Saudi Aramco and SABIC working very hard to actually cultivate synergy between the two company. We've actually had established, you know, great momentum. And the second quarter, the value creation that actually been cultivated is around SAR 600 million. The efforts continue to take place with a very close governance structure to ensure the execution and the realization of the targets. Thank you, Pratik. We have questions from Yousef. Please come closer to the mic while asking your question. Thank you so much for the presentation and taking our questions. I just had one question related to the margins this quarter. We noted it was mainly the higher margin was driven by the, you know, the different products you were targeting, or I guess, contribution margin, margin. Just wondering if you could provide any guidance on that, and if there was anything else boosting margins this quarter as well, whether improved cost efficiencies or maybe some of the portfolio optimization? And then just a follow-up to that, sort of looking into the next quarter, do you guys think you can maintain margins moving into 3Q? Prices don't seem to have moved too much, but I know that logistics have been rising. Just wondering if you expect, you know, some compression margins due to the higher logistics in the third quarter? Thank you. Thank you, Yousef. You know, we always in SABIC continue to work to maximize, of course, our margin, our contribution margin, by allocating, of course, the sales as explained rightly by Salah, into the higher margins, regions, and also increasing the, what you call it, the differentiated and higher added value, which is the high end of our portfolio, to maximize the revenue out of this. Also, in the production and the side, also try to maximize the production for those portfolios that give the maximum, of course, margins. In addition, I think it's very obvious in SABIC that we have a good discipline in our spending, try to have the optimum cost of production. And in the second quarter, we have leveraged some of the feedstock that have, you know, a lower price and better margins. And definitely all of this above, this is what, you know, has contributed in a better margin for this quarter. For the second half of your question, which is the addition, additional I mean, for the continuation of such, you know, contribution margin, hopefully, we will work in our side in terms of continuing the discipline in our cost and cost optimization, continue also the maximizing the areas that give a better revenue and better netback. And definitely, I think you mentioned, I think, the supply chain challenges, right? Yes. The logistics cost. You know, the good thing about SABIC is our distribution of our assets footprints around the globe. This has really helped us a lot in maneuvering, you know, the challenges that we have in the supply chain. And no doubt that we still have some challenges around this, but our people in the company, they are trying their best to minimize this impact. And the most important thing in this time of challenging this logistics, to make sure that our products, our innovative solutions, is reaching to our customers on the right time that we committed to deliver. Thank you, Yousef. Thank you. Now we have a question from Faisal from Goldman Sachs. Please come closer to the mic while you're asking your question. Hi, and thank you for the opportunity to ask questions. I have a few, if you don't mind. So maybe just a question on the Zakat reversal. Is this- s o how much of that is recurring, and how much of it effectively should we expect as a one-off? So because you mentioned there are a few for prior years, but should we expect Zakat to be lower going forward, given the changes? That's my first question. My second question relates to the volumes that you've achieved this quarter. I guess the question I have is, should we assume that volumes can be sustained at these levels? I'm sure you'd have certain turnarounds every now and then, but the current level of production, is this sustainable? And then my final question relates to, M&A. In this global margin and oversupply situation, doesn't that prompt you to look at some of the international companies, maybe given where valuations are, and that could encourage you to buy some of these names at these levels only to capitalize on the next upcycle? Thank you. So I will take the M&A, then you can take the other thing related to Zakat and volume. First, thank you, Faisal, I mean, for, I mean, addressing to us the question related to the opportunities in the M&A. Look, in SABIC, since day one, we have a dedicated team that looking always for the opportunities that company can leverage or capitalize on its existence. It is ongoing process. I don't think that this is a focus for the company during the downturns or the upturns. This is a continuous process in the company. The moment that we see any opportunity for the company, definitely we are going to announce such kind of such kind of an events. Salah? Okay, thank you. Thank you, Abdulrahman. So let me take first the Zakat aspect. Kind of this is non-recurring event. This is related to employee home ownership, specifically the receivable of the home ownership from our people. There was actually a new regulation that was introduced by the tax regulator in Saudi Arabia to promote, you know, home ownership and the housing sector in Saudi Arabia, and now become this receivable become a deductible from our Zakat base. So we've been taking a provision on the home ownership, on the receivable aspect for our Zakat, and then now we have that regulation introduced, we've reversed that provision. And M&A, and I, this is something as our CEO mentioned, that M&A opportunity has always been in our radar screen, but it's also very much integrated into portfolio optimization. I have already alluded to the point that looking to our portfolio strategically and making decisions on growth. This growth may potentially yield, and as our CEO mentioned, you know, yield to reviewing and assessing some opportunity going forward in order to recycle our capital. Thank you. There is, yeah, I think there is a volume question. What's the question? Yeah, the question was, Salah is- Yeah, the question is sustain the volume for this. Okay. So I think it is, you know, we're- as I said, our volume has actually increased 11%, and we were able to take advantage of expanding our sales in different region to maximize our profit margin or EBITDA margin. And the average of our volumes are actually on an average, there's something that is within the range of, you know, achieving, and not only that we have achieved maybe on the higher level of our average of volume, but the commitment from, you know, cost management is also to increase the volume going forward, building into increasing our reliability of our assets. Thank you. Now we have a question from Oliver, from Citibank. Please come closer to the microphone asking your question. Oliver? Industries as broadly stable. Just wondering if you have a sense of, you know, between products, whether there's any, you know, positive movements, you know, perhaps where, where we were versus 1Q and into the second half, as you look forward. And then the second question is really just related to, you know, the broader industry, supply dynamics. So obviously, you're pursuing your large-scale project, and I know a number of your peers are also looking to invest, in projects in China. I'm just curious to, to how you see those capacities fit within a global context and whether, you know, you expect capacity to, to come out in other regions to, to make way for that. Thank you. Thank you. Okay, let me try to understand your first part of the question related to the positive movement. If you're talking about, I mean, the sales movement in the second half of the year, I think Salah has, I mean, answered, you know, mostly that question. But we are anticipating that our production level is continue with the same levels, same thing as the sales. Hopefully, that There is, you know, stability in the global economy and in the demand. So I don't see that there is any major, you know, reasons that our sales can go below what we have done in the first, first half. Talking about the Fujian and our expansion of our capital in China, let me just give you good news about this. I mean, the project is moving very well. The project actually is in schedule and, moving very well towards the completion in 2026. We have a lot of support from, you know, our, business partners there and our contractors that we are doing and our suppliers, and the things is moving very well. We didn't see any, hiccups in this project, and I'm sure SABIC, with its partner over there, FPIC, is going to start that plant safely, and this is what most important. I think the, demand in China is, quite enough to accommodate our, Fujian project output, and that was our main business case when we developed for this project. We don't see that there is something that it has to be rationalized from our side for that project in order to make any space for it. We think that the demand growth in that area, in Fujian, as well as in the overall Greater China, is going to accommodate definitely the output of that plan. Thank you, Oliver. Thank you all for your thoughtful questions. The investor relation team is available for pending inquiries and any follow-up from today's call. Contact information is displayed on the screen. The call has now concluded. Thank you again for attending SABIC's earnings call for the second quarter of 2024. You may now disconnect.