Chairman's Message

It is my pleasure to present to you SABIC’s first integrated annual report. This report weaves together a single narrative about the company’s strategy, governance, performance, and outlook from the various financial, operational, and sustainability perspectives of our business. We attempt to show how the various elements of our business collectively contribute to value creation and impact over time. We view our first step into integrated reporting as a significant milestone not only because it improves the quality of our disclosures to our stakeholders, but also because of its capacity to provoke integrated thinking across our organization and help us deliver Chemistry that Matters^TM — chemistry that society values, chemistry that shapes the future.

While SABIC shows tremendous potential for future growth, a challenging macro-economic environment marked by sluggish global growth, higher inflation, and reduced margins has resulted in an overall financial performance that was lower than expected. Despite these difficult market conditions, SABIC’s resilient free cash flow of SAR 14.0 Bn. (US$ 3.7 Bn.) allowed us to distribute SAR 11.4 Bn. (US$ 3.04 Bn.) in dividends to our shareholders for 2023, maintaining a stable dividend yield. In addition, I would like to highlight that for the second half of 2023, the board approved dividends of SAR 4.8 Bn. (US$ 1.28 Bn.), which were paid in early March of 2024. The optimization of our company portfolio with a focus on core assets allows us to maintain this long-term commitment to shareholder distributions.

Global trends are creating structural changes in the petrochemical industry, bringing risks, but also opportunities and impetus for transformation and growth. These trends include:

• evolving patterns of globalization that are transforming trade flows, and market scales and scopes;
• a heightened focus on climate change that is profoundly impacting industries around the world as pressure mounts for the implementation of low-emission processes and products;
• new technologies for automation, data analysis, and the nano-engineering of materials that are disrupting traditional business models and circularizing value chains.

This is where SABIC now finds itself: we are at a critical juncture of our evolution. Our inherent strengths and competitive advantages mean that we have tremendous potential for growth—but we need to position ourselves to be able to unlock and capitalize on that potential. We must prepare now for the new directions of our business, along with delivering on our carbon neutrality, energy efficiency, and circularity commitments, by becoming more agile, resourceful, and competitive in how we create value in the present.

In 2023, several major achievements helped sharpen SABIC’s focus on such long-term growth:

• As part of our focus on strategic assets and portfolio optimization, we reached an agreement to sell Hadeed, SABIC’s iron and steelmaking unit, to Saudi Arabia’s Public Investment Fund (PIF). The strategic clarity created by Hadeed’s separation from SABIC will set both companies on separate courses for new phases of growth. For Hadeed in particular, it will unlock possibilities in alignment with broader national initiatives to accelerate industrial development and economic diversification. Hadeed has been a key contributor to SABIC’s success and value creation for 44 years, and we will follow their new journey with enthusiasm and encouragement.
• Commercial operations began at the new polycarbonate plant of our Tianjin-based joint venture with SINOPEC—the first plant of its kind for SABIC in Asia. This opens up possibilities for expanded collaborations with customers in China, delivering the benefits of economic growth while sustainably developing natural resources and human capital.
• More recently - in January of 2024 - the final investment decision was taken on the SABIC Fujian petrochemical complex in partnership with Fujian Petrochemical Industrial Group Co., Ltd. (FJPEC). The US$ 6.4 Bn. project provides yet another clear signal of SABIC’s focus on growth in China. The world-class facilities will leverage leading technologies, producing a wide range of high-performance polymers and industrial chemicals to supply our vast customer base in China.

These initiatives will also help us build the capacity and position to serve another one of our fundamental aims: playing a vital role in Saudi Arabia as the national chemicals champion and an enabler for Saudi Vision 2030. We are focused on building a profitable downstream localization of the industry and maximizing value for our shareholders.

In 2023, we announced our first major project under the Shareek program, an initiative that partners with the public and private sectors to diversify the national economy. This project will build a catalyst-manufacturing plant with the aim of turning Saudi Arabia into a production center for these specialized materials that lie at the heart of almost all industrial chemical processes.

To enable our growth, we also need to make sure that our enterprise operations and people meet the required objectives. Therefore, we are launching the SABIC Transformation and Renovation (STAR) program. STAR will be our new global advanced enterprise resource planning (ERP) system, connecting all of SABIC, fostering an intelligent enterprise, generating new employee capabilities, and ultimately bringing value.

SABIC also creates value for society through its corporate social responsibility (CSR) initiatives. These initiatives, which promote science and technology education, environmental protection, health and wellness, and water and sustainable agriculture, foster a culture of volunteerism in the local communities from which we hire the majority of our employees. This sense of belonging in Saudi communities was fostered in 2023, for example, by our partnership with INJAZ Saudia, our sponsorship of the Riyadh Marathon (in which more than 200 SABIC employees participated), blood-donation drives across the Kingdom, and investments in the Shama’a Autism Center in Saudi Arabia. In short, our CSR program is a vital element of our corporate identity.

Our activities in the social realm do not go unnoticed - neither do our activities in innovation, ethics, integrity and other aspects of sustainability. In fact, the breadth of awards received by our company shows that we are making a positive impact in multiple areas.

While awards are always appreciated, one of the most important recognitions that we seek comes from our customers. And in a year of challenges, we have remained committed to them. Our approach is based on the fundamental understanding that our materials enable our customers’ success: when they grow, we grow. That is why for us, our customers’ success comes first. Our customers are facing shifting regulatory frameworks and socio-political considerations along with constantly evolving consumer demands. We collaborate with our customers to solve problems and meet the needs of their target markets and end-users. Ultimately, we are seeking to play our part in laying the foundations for a more sustainable planet where societies can thrive.

Heading into 2024 and beyond, SABIC will focus on raising its performance level, especially against the backdrop of muted global economic recovery, as it was in 2023. A high level of performance will enable SABIC to cope with unexpected hindrances—or seize business opportunities—that come its way in the short term. It will also lay the foundation for long-term sustainable growth in accordance with the awe-inspiring Saudi Vision 2030 that is being realized under the leadership of King Salman bin Abdulaziz Al-Saud, the Custodian of the Two Holy Mosques, and HRH Prince Mohammed bin Salman bin Abdulaziz Al-Saud, the Crown Prince and Prime Minister.

I extend my appreciation to SABIC’s employees for their hard work and dedication and to my fellow board members for their guidance during 2023. I also thank HRH Prince Abdulaziz bin Salman bin Abdulaziz Al-Saud, Minister of Energy, and his ministry for their ongoing support.

Let me end with a note of gratitude to our customers, suppliers, strategic partners, and shareholders. We look forward to continued collaboration and trust, ready to seize the opportunities ahead and prosper together with chemistry that shapes a better tomorrow.

_{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.}