Sabic UK return to profit following major restructure

More than 100 jobs were lost in Sabic's restructure last year - but upgrade plans announced this year will future-proof the firm

SABIC UK has announced an upgrade of its Cracker plant - safeguarding thousands of jobs on Teesside
SABIC UK on Teesside

Petrochemicals giant Sabic UK is back in the black with profits of £5.7m following an “operationally successful” year which involved a major restructuring plan resulting in 150 jobs losses.

Sabic UK Petrochemicals, which operates sites at North Tees near Seal Sands as well as a plant at Wilton, Redcar, saw revenues rise in 2013 to £330.5m from £317.5m – a lift of 4%.

Meanwhile, net profit for the year after taxation rose to £5.7m, a welcome return to profit from the previous year’s loss of £1.1m.

The company’s base in Wilton operates a world-scale Olefins ‘cracker’, producing ethylene, propylene, butadiene and gasoline products which are used in plastic drinks bottles, CDs, car interiors and tyres.

The production complex features a large-scale aromatics and ethylene liquefaction facility, aromatics being the building blocks for medicines, food packaging, sports equipment and computers. Raw material costs and overproduction has squeezed the company, however.

In a report filed at Companies House the business said: “Operationally, 2013 was a successful year with volumes being produced to meet commercial demand. The products manufactured are traded regionally within Europe and more increasingly globally.

“During 2013 margins in Europe remained under pressure due to continued high raw material costs and excess supply over demand for the products. The market has remained similar to date in 2014.”

As it strove to battle through a significant downturn in the industry, the company announced swathing cuts to its workforce as part of 1,000 being made at its sites across Europe.

The reduction represented a loss of one in seven of the workforce, resulting in average headcount by the year end of 645 compared to 2012’s 739.

Since the year end, the firm has been buoyed by plans to upgrade Wilton’s Cracker, a project which will create many hundreds of construction jobs and safeguard thousands more on Teesside.

The firm announced in August 2014 its intention to convert its Olefins cracker to a gas processing cracker. The 223-acre Cracker – or Olefins 6 – was built in 1979 and makes the essential chemical building blocks for everyday items from toothbrushes to TVs and car parts.

Directors said the work, due to be finished in 2016, will future-proof the plant which is heralded as the ‘cornerstone’ of industry on Teesside.

During 2013 the firm also continued to make capital investments, with expenditure topping £49m.

Improvements to plant saw a £6m spend on an overhaul of its polyethylene plant and £7m “preparatory spend” for the overhaul of the Olefins cracker.

Meanwhile, the firm said it is still involved in legal proceedings with Punj Lloyd Ltd, amid claims of an unfulfilled contract.

In 2006 SABIC had enlisted Simon Carves in a £135m contract to build a process plant.

However, Sabic cancelled the contract claiming Simon Carves was failing to proceed with the works with due diligence, and that the firm’s finances had deteriorated to the point that the project was in jeopardy.

Simon Carves was later acquired by Punj Lloyd Ltd, an Indian engineering and construction firm. Sabic took the case to the High Court in May 2013 and a judgement in favour was handed down in October 2013, with Punj Lloyd ordered to pay £13.06m for the costs of completing a project and £2,25m towards legal costs. Punj Lloyd, however, have struck back.

Sabic UK’s strategic report said: “Punj Lloyd sought leave to appeal and have been granted an appeal hearing which will take place later in 2014.

“The company is now pursuing legal means in India to recover the amounts awarded, including the issuing of a winding-up petition against Punj Lloyd Limited.”

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