Moody's rates Sabic A1

Moody's Investors Service said it assigned A1 long-term foreign- and local-currency ratings to Saudi Basic Industries Corp. (Sabic) and a Baa1 senior unsecured issuer rating to indirectly wholly owned subsidiary Sabic Europe.

The outlook is stable.

The agency said Sabic's rating reflects the strong global positions it has built over the past three decades in petrochemicals and fertilizer markets, initially by establishing key strategic partnerships with leading global industry participants; the company's highly competitive cost position, reflecting the significant economies of scale afforded by its world-scale, vertically integrated facilities; its access to gas and liquid feedstock under long-term contracts with Saudi Aramco at highly competitive prices; and its 70% ownership by the Kingdom of Saudi Arabia.

Sabic's profit and cash flow generation is inevitably affected by the volatility inherent in its predominantly commodity-like petrochemicals, fertilizers and steel activities and the significant fluctuations in supply/demand balance affecting its markets, but Moody's believes this has to be considered in the context of the group's above-industry-average profit margins underpinned by its feedstock cost advantage, world-scale integrated plants and strategic locations close to end markets.

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