Sipchem Losses Jump 250% as Supply Chain Woes and Impairment Hit Q2 2026

Sipchem’s Q2 Loss Balloons to SAR 592 Million

Sahara International Petrochemical Company (Sipchem) widened its losses dramatically in the second quarter of 2026, posting a net loss of SAR 591.9 million – a 249.82% jump from the SAR 169.2 million loss in the same quarter a year ago. Revenue collapsed by 54.84% to SAR 860.9 million, reflecting a steep drop in sales volumes despite slightly higher average selling prices.

The company attributed the deterioration to ongoing supply-chain disruptions that caused unsold inventory to pile up, making it impossible to move product. At the same time, prices of key feedstocks – butane, ethylene and propane – rose, squeezing already thin margins. The results were also bruised by higher losses from joint ventures and associates, partly due to scheduled maintenance at a plant owned by one investee.

A single, non-cash item made the bottom line look far worse: Sipchem recorded a SAR 328 million impairment provision on the value of an investment in an associate company. This charge alone accounted for more than half of the quarterly loss. On a half-year basis, the company flipped from a small profit of SAR 26.1 million in H1 2025 to a net loss of SAR 807.2 million, with per-share losses reaching SAR 1.11 and shareholders' equity contracting by 13.89%.

Behind the Numbers: Operational Pressures and One-Off Charges

Supply Chain Disruptions and Inventory Pile-Up

The revenue plunge was driven by sharply lower sales volumes, even as average selling prices crept up. Sipchem explicitly blamed "continuing challenges related to supply chains," which prevented goods from reaching customers and caused a buildup of unsold inventory. This mismatch suggests that logistical bottlenecks – not a collapse in end-market demand – are the primary sales headwind, though the company offered no timeline for resolution.

Feedstock Cost Surge Squeezes Margins

At a time when sales were already falling, the cost of key raw materials rose. Butane, ethylene and propane prices increased, compressing profitability margins. Petrochemical producers are price-takers on many feedstocks, so Sipchem had limited ability to offset these higher input costs with selling prices. The combination of volume decline and input-cost inflation delivered a double hit to operating income.

The SAR 328 Million Impairment and Associate Losses

The largest single item dragging on Q2 results was a SAR 328 million provision for decline in the value of an investment in an associate. While it is a non-cash charge, it signals that the investee’s outlook has deteriorated materially enough to require a write-down. Additionally, Sipchem’s share of losses from joint ventures and associates widened due to scheduled periodic maintenance at a plant owned by one of those entities, further depressing the bottom line.

Equity Erosion and Earnings Trajectory

The half-year loss of SAR 807.2 million, after excluding non-controlling interests, reduced total equity to SAR 12.82 billion. A loss per share of SAR 1.11 versus a meager profit of SAR 0.04 a year earlier has reset the earnings baseline. Unless the supply-chain situation normalizes and feedstock costs retreat, the company may face continued pressure on cash flow and covenant ratios, even if the impairment is not repeated.

What Investors Should Watch Going Forward

• Monitor shipment data and inventory levels. Resumption of normal logistics is the single most important catalyst for revenue recovery; watch for any quarterly disclosure on sales volumes.
• Track feedstock price trends. Movements in butane, ethylene and propane prices will continue to dictate margin recovery, and any moderation would ease the cost pressure.
• Assess the impairment follow-through. The SAR 328 million write-down is a one-off, but the underlying health of the associate may still be a concern; note whether further provisions arise in subsequent quarters.
• Watch covenant and dividend implications. With equity down 13.89% and a loss per share, Sipchem’s balance-sheet strength is under scrutiny; any change in dividend policy or covenant thresholds needs close attention.