Leadership Statements - Chief Executive Officer

Although our safety never wavered in 2022, our financial performance was a bit of a roller-coaster. Midway through the year, both revenue and net income were up on the previous year, by 36% and 15%, respectively. In fact, net income for the second quarter was the highest in more than a decade: SAR 7.93 billion. Average sales prices increased by 26% and sales volumes increased by 10%. But in the third quarter of 2022, the bottomline results dropped. Relative to the second quarter, revenue decreased 16%, EBITDA decreased by 49%, and net income decreased by 77%.

Even so, our full-year results remain strong. Although our net income, at SAR 16.53 billion, was 28% less than the 2021 net income of SAR 23.07, our revenue of SAR 198.47 billion was 13% higher than that of 2021. And our 2022 sales volumes exceeded those of 2021 by 9%, driven by growth projects, improved reliability, inventory optimization, and synergies with Saudi Aramco.

Our performance according to various environmental, health, safety, and security (EHSS) indicators was likewise encouraging in 2022. We equaled last year's best-ever overall EHSS score, and we remain ahead of the pace needed to reach our 2025 maturity target for our EHSS performance-monitoring system. I know we can count on SABIC's employees to continue following all rules and procedures, in keeping with our verified status as an Ethisphere Compliance Leader.

I am also encouraged by the way we handled our cybersecurity in 2022. SABIC had no major incidents in 2022, even when the cybersecurity threat temporarily reached the Critical level in March. There is another bit of tangential news that deserves special mention: SABIC’s cybersecurity team now consists of nearly as many women as men.

A NEW PHASE OF EVOLUTION

At SABIC, we have a long history of looking ahead with realism and adapting in advance to what the future is likely to bring. And to prepare us for what might transpire between now and 2030, it is crucial for SABIC to enter a new phase of evolution from which the company can grow sales volumes and profit margins in a world where there are zero net carbon emissions and where new chemical products are made either from bio-based feed-stock or from chemical products that have reached the end of their useful life. In my opinion, six requirements will have to be fulfilled for us to make this new phase of growth a success.

First, the relationship with our main shareholder, Saudi Aramco, must be further strengthened. That relationship has so many potential synergies on so many levels - far beyond the US$1.5 to US$1.8 billion per year we are on track to realize by 2025. Three examples from 2022 already give a sense of what is possible:

– the production of 25,000 tons of “blue” ammonia (i.e., without a net atmospheric release of CO₂) that was successfully shipped to a customer in South Korea for possible combustion in power plants;

– the potential development of a mixed-feed steam cracker and downstream processing units in a Polish refinery;

– the announcement of the construction of a processing complex at Ras Al-Khair to convert 400,000 barrels of crude oil directly into chemical products every day - the first such project in Saudi Arabia.

The second requirement is mostly for our shareholders. They expect a healthy return on their investment over the long term. And we need to make sure that we can deliver that return in a way that no other investment can. To that end, we must take greater advantage of our “competitiveness enablers” related to: feedstock; capital discipline; borrowing cost; and market access.

Third, we need to tighten our embrace of carbon neutrality, circularity and all the other sustainability-related factors that determine our environmental, social and governance (ESG) performance. By being fully conversant in the ESG aspects of our performance, we can create a portfolio of growth options that mix and match different aspects of sustainability.

Our efforts in advancing sustainability through ESG performance have already drawn praise. We recently received, for the second time in a row, the “Best ESG Award” at the Saudi Capital Market Forum. But let me mention a few more examples:

– We began construction, with BASF and Linde, of the world’s first large-scale electrically heated steam cracker. If such crackers use renewable electricity, then carbon dioxide emissions from one of the petrochemical industry’s most energy-intensive production processes could be reduced by at least 90%.

– We launched a pilot project to investigate the possibilities of blockchain technology in supporting end-to-end tracking of circular feed-stock in customer products.

– And we kicked off the year 2023 with a public commitment to process at least one million metric tons of our TRUCIRCLE^TM products from bio-based or recycled feed-stock annually by 2030.

The fourth requirement for our new phase of growth is collaboration. The virtues of collaboration are rightfully extolled, and our collaborations must now focus more sharply on strategic partnerships that enable us to better manage the risks involved in securing capital, technology, know-how or market access.

The fifth requirement is near and dear to my heart: our employees. The fulfillment of our ambition crucially depends on their acquiring the right capability and capacity. Essentially, our sweeping program of cultural change has to be redoubled so that employees can respond as quickly to today’s challenges as they can to tomorrow’s. That will require refocusing and re-energizing our current performance-improvement initiatives. At the same time, we aim to establish a workplace culture that rewards good performance, invests in training, and instills strong values around inclusiveness, diversity, and integrity.

The sixth and last requirement arises from the enormity of what I am proposing. With so much potential change in assets and infrastructure in so many areas, we have to foster a healthy entrepreneurial ecosystem that facilitates the orchestration of all relevant actors in the energy and chemical industries. In this day and age of rapid technological, geopolitical and societal change, even large established companies like SABIC in large established economies like Saudi Arabia’s could use some more of the constructive networking that entrepreneurship stimulates.

ALIGNED WITH THE KINGDOM

Indeed, our leading role in the Saudi Arabian energy/chemicals ecosystem entitles us to champion the basic chemicals industry in the context of Vision 2030. We therefore have been contributing to the Saudi Green Initiative, as was recently made clear on the sidelines of the COP27 climate-change negotiations. With the collaboration of government and industry partners, SABIC’s carbon-neutrality roadmap will help to remove, by 2035, the equivalent of more than 17 million tons of CO₂ from annual atmospheric emissions.

SABIC is also taking steps in Saudi Arabia to “circularize” its value chains, making new products either directly from used plastic or from chemically decomposed plastic waste. For example, it is working with partners to make the Middle East’s first certifiably circular polymer products from mixed plastic waste.

Promoting sustainable development more broadly within Saudi Arabia, our NUSANED™ program continues to boost economic diversification by localizing the manufacture of goods and creating in-country employment. In 2022, it created more than 7,000 job opportunities and contributed some SAR 3 billion to Saudi Arabia's gross domestic product (GDP). Those figures raise NUSANED™'s cumulative totals since its 2018 inception to 19,416 job opportunities and a GDP contribution of SAR 12 billion.

And through its customer-support program, NUSANED™ has been persuading domestic manufacturers in SABIC’s supply chain to produce goods that SABIC is currently sourcing in high volumes from abroad.

SABIC’s responsibility to the communities in which it operates goes beyond Saudi Arabia, of course. Our global corporate social responsibility (CSR) program includes charitable donations, sponsorships, partnerships, and volunteer service around the world. These are focused on four priorities:

– water and sustainable agriculture

– environmental protection

– science and technology in education

– health and wellness

All in all, US$ 28.9 million was invested in 20 countries for SABIC’s CSR activities in 2022.

GROWING TO WIN

The more things change around the world, the more important it is for SABIC to have deep and solid foundations set in core values, which inspire, engage, create and ultimately deliver to our customers' satisfaction. This is particularly so if those foundations will be expected to sustain further business growth.

SABIC has been turning challenges into sustainable growth since its establishment in 1976. So we have a lot of successful experience to build on. In fact, we have some notable achievements even in our 46th year of doing business. But looking forward, we must be prepared to cope with the twists and turns of the global economy. And we must reshape our products’ value chains into environment-friendly circular loops.

So we are reinforcing the foundation of our business in order to upgrade our products and processes and develop our leaders in expectation of what the future may bring. We will be growing to win. And when we succeed, then there will be no question: SABIC will be the preferred world leader in chemicals.