CEO's Message

As I look back at not just the year, but SABIC’s more than 47-year-long history, I am reminded that we are a homegrown, Saudi Arabian success story. In less than half a century, we have risen to the top of an industry where many of our leading peers have legacies that date back to the 1800s. We have come so far, so quickly, because of our fundamentals: being a reliable supplier—and solutions provider—to our customers, focused on innovation and new technologies, and committed to sustainability and the health and safety of our people and our stakeholders. In short, I am proud that our company has held fast to its vision and values.

And I believe that fundamentals are essential to weathering the challenges that are a part of our business. As our shareholders and stakeholders are well aware, the economic counter currents of 2023 created a difficult business environment. Global GDP growth was dampened during the year, while both inflation and petrochemicals margins strayed far from their 10-year average values. Every day seemed to bring news that underscored just how unpredictable international relations have become, adding supply-chain disruptions to the increasing cost of debt.

Things are changing in our industry too. And with a growing global population that needs and deserves sustainable solutions, we see it as a calling - our fundamental purpose as a business – to meaningfully contribute to addressing some of the world’s most pressing concerns.

To fulfil these ambitions, SABIC has to adapt to be resilient and agile in the short term, while grasping the opportunities along the way to grow and thrive in the long term. This includes driving our commercial and operational performance, maximizing value creation from our existing business, strengthening our operating model, and gaining greater access to capital and markets in order to pave the way for our next phase of evolution.

During 2023, it was resilience and leadership from every corner of our organization that helped us navigate challenging market conditions through robust capital discipline and focused efforts on managing costs. SABIC turned over SAR 141.5 Bn. (US$ 37.7 Bn.) in revenues, generated an EBITDA of SAR 19.0 Bn. (US$ 5.1 Bn.) with a full-year EBITDA margin of 13%, and recognized SAR 1.3 Bn. (US$ 0.3 Bn.) of net income from continuing operations.

The year-on-year reduction in net income from continuing operations was largely driven by a decline in average selling prices, but was also impacted by special items related to impairments of polymer assets in US and Europe and provisions for restructuring and constructive obligations, which are cash neutral and which were partially offset by fair value gains in embedded derivatives in joint venture agreements and release of uncertain tax provisions. Our overall net income was further impacted by the Hadeed divestment, which led to a fair valuation loss in addition to losses from running operations. Without these one-off items, our net income from continuing operations before special items stands at SAR 2.2 Bn. (US$ 0.6 Bn.).

Beyond the challenges of this year, the cash generation of SABIC business remains strong – as evidenced by our free cash flow of SAR 14.0 Bn. (US$ 3.7 Bn.). We have also maintained a robust net debt position, and released SAR 6 Bn. (US$ 1.6 Bn.) of working capital, driven by collective efforts across the company. In addition, our cumulative Saudi Aramco synergy value realization to date stands at SAR 6.8 Bn. (US$ 1.8 Bn.), a reflection of the potential arising from the combined forces of SABIC and Saudi Aramco.

Overall, we are well positioned to weather tough markets with a negative net gearing and a robust balance sheet. Furthermore, we are ranked as the third strongest chemical company by S&P Global Ratings Research with a rating of A Stable and a standalone company credit rating of A+, which we have maintained consistently since 2007.

I am also pleased to report that SABIC’s brand value rose to US$ 4.9 Bn. in 2023 - a 3.7% year-on-year increase - and we retained our position as the second-most valuable brand in the chemicals industry. This demonstrates the increasingly favorable perception we enjoy among our customers globally, and our strengthening of this perception in a year of challenges indicates that we have remained committed to enabling our customers’ success.

Looking back at the progress and lessons of the year, there are three key areas that I would like to highlight.

First—and above all else—is our commitment to the safety and security of our employees, customers, facilities, environment, and communities. The nature of our industry is inherently hazardous and, therefore, requires constant vigilance, every day. However, in 2023, we had three incidents. At SABIC, a serious work-related injury is never acceptable. In our effort to continuously learn, we conducted detailed reviews of these incidents with clear takeaways that were shared across our sites to prevent recurrences in the future.

In addition to our focus on the health and safety of our workforce, we also work to mitigate the health, safety, and environmental impacts linked to our diverse product portfolio. In 2023, SABIC was ranked first out of 50 global chemical companies in the 2023 ChemScore report, which assesses the efforts of the world’s largest chemical companies to reduce hazardous chemical production. This achievement recognizes the remarkable work of our product stewardship program in establishing SABIC as a leader in this field.

Second, at SABIC, sustainability is a key business driver, underpinned by a strong culture of innovation and excellence and an ethos of pushing the limits of science and technology. Since 2020, we have embraced the methodology developed by the World Business Council for Sustainable Development (WBCSD) to execute portfolio sustainability assessments. These assessments are fundamental to our efforts to steer and constantly improve the sustainability performance of our products for our customers and end-consumers. In 2023, we significantly increased the coverage of the assessment to 63% of total corporate revenue, up from 48% in 2022. And in 2023 alone, we filed 224 patent applications, 40% of which were aimed at enhancing environmental attributes. Several important awards provided useful markers of our progress, including five 2023 Edison Awards for product innovations across our portfolio and a 2023 R&D 100 Award for our LNP™ ELCRES™ CRX copolymer resin, along with a special recognition for Bob Maughon, SABIC Executive Vice President, Technology & Innovation, as ‘R&D Sustainability Innovator of the Year’.

Other key initiatives in 2023 that deserve mention when it comes to carbon neutrality and achieving a greater circularity include:

• In the first quarter of 2023, we announced our objective of processing at least 1 million metric tons of our TRUCIRCLE™ products annually by 2030 from bio-based or recycled feedstock. Our Circular Technology Road Map was issued in October 2023, providing an aligned strategy to achieve this ambitious goal. We are proud of our modest start this year with 18kt, which sets a strong groundwork of key partnerships and collaborations―and this is coupled with the projected opening of a commercial plant for advanced recycling in 2024 in Geleen, the Netherlands, which will further boost our capacity in this area.
• Our partnership with BASF and Linde to build the world’s first large-scale electrically heated steam-cracker furnace reached a crucial milestone as the last transformer was installed at the demonstration plant. A stepwise commissioning phase will begin in the first quarter of 2024.
• SABIC introduced a new offering of bio-based versions of all NORYL™ resin grades, certified under the bioeconomy and circular economy certification scheme, ISCC PLUS. These resin grades will further advance renewable-plastic solutions in a range of industries, from wind power to construction and others.
• As part of our moves into the low-carbon ammonia and urea markets, SABIC Agri-Nutrients became the first company to introduce certified low-carbon ammonia to the Indian fertilizer sector, shipping 5,000t to the Indian Farmers Fertilizer Cooperative Limited; other shipments this year included 5,000t to the Taiwan Fertilizer Co. and 2,700t of low-carbon urea to Ravensdown, a New Zealand-based agricultural co-operative.

Here, I think it is important to put these initiatives into perspective. Many of these innovations, as exciting and promising as they are, are only the first steps into potential market opportunities that are still emerging and defining themselves. But this is what our times call for—a spirit of exploration and experimentation, where we position ourselves as early movers that open commercial routes and create demand. They represent a statement of intent and confidence in our role as an innovator and market leader, a creative partner for our customers, and a catalyst for change.

Third, I want to focus on the importance of our corporate culture. The year 2023 also brought further progress in SABIC’s efforts to nurture a strong culture of ethics and compliance across the organization. The board approved a new SABIC Code of Ethics that will be rolled out throughout the company in the first quarter of 2024. SABIC also earned the Compliance Leader Verification™ for 2024 from the Ethisphere Institute. This marks the third consecutive Compliance Leader Verification^TM for the company. In addition, the General Authority for Competition in Saudi Arabia awarded SABIC with a competition law compliance program certificate for upholding the highest standards of work ethics.

Alongside our focus on ethics, this year, we issued a new diversity statement, ‘Sense of Belonging’. This statement connects deeply with our purpose of Chemistry that Matters™ and serves as a rallying cry to continue building a vibrant and inclusive corporate culture that makes SABIC an employer of choice and enables our collective success. Here, I would like to underscore our efforts at recruiting female employees at SABIC, in line with Saudi Vision 2030 goals of increasing the participation of women in the national workforce: hiring of women at SABIC within Saudi Arabia has increased by about 150% over the last two years. We also celebrated the 10-year anniversary of the first 40 Saudi female direct-hire employees, who have continued to make a positive impact on SABIC’s growth and transformation both in Saudi Arabia and around the world. Additionally, 2023’s batch of 224 students in the SABIC Scholarship Program (SSP) was split evenly between men and women, helping us to create a strong diverse future talent pipeline for the company.

It is fitting to conclude with a focus on our purpose and values. They are the philosophy behind how we work, how we build long-lasting relationships of trust, how we create meaningful impacts for our stakeholders globally, how we live up to our role as Saudi Arabia’s national chemicals champion and an enabler of Saudi Vision 2030, and how we help safeguard our planet for present and future generations. This is the chemistry that truly matters to our company, our customers, and our communities, and the force that animates our vision of becoming the preferred world leader in chemicals.

_{Disclaimer: This abridged interactive version of the SABIC Integrated Annual Report 2023 is based on the original PDF report published on this website. In case of any discrepancy, the original PDF report will prevail.}