Saudi Arabian companies warn Aramco fuel price hike may curb earnings
(Reuters) - Scores of Saudi Arabian companies said their earnings could be dampened this year as production costs will increase after state energy group Saudi Aramco notified them it would sharply raise feedstock and fuel prices.
Companies including Nama Chemicals and Saudi Ceramic said in regulatory filings that they were notified by Saudi Aramco on Wednesday that, effective from Jan. 1, the energy giant would increase retail diesel prices for 2024 by 53% to $0.3067 per liter, its third increase since 2016.
Qassim Cement, Saudi Aramco Base Oil Co. and Rabigh Refining and Petrochemical were also among companies that issued regulatory filings late on Wednesday and Thursday saying they would be affected by the price increases.
Natural gas and other fuel prices will also rise but the companies did not give details on how much.
The companies said they could start to feel the impact in the first quarter and were looking for ways to improve efficiencies to offset the rising costs.
Saudi Aramco did not immediately respond to a request for comment when contacted by Reuters on Thursday.
Saudi Arabia's Tadawul stock index fell 1.6% in early trading on Thursday, weighed down by petrochemical and cement stocks.
The price rises are part of domestic fuel price reforms initiated by Saudi Arabia's government. The reforms began in 2016 in response to lower oil prices at the time and saw gasoline, diesel and electricity prices jump by up to 80% as the kingdom sought to gradually eliminate energy subsidies.
"While the market is taking the news negatively, investors were aware of a potential increase given how low prices were," and the government had been talking about further restructuring since 2016, said Yousef Husseini, associate director for equity research at EFG Hermes.
"I think most investors as well as producers viewed it as inevitable but there was no clarity at how large the increases could be nor the timing," Husseini said.
Middle East Company for Manufacturing and Producing Paper on Thursday said it expected its total annual sales costs to rise by about 3% due to the fuel price hike.
Saudi Industrial Investment Group said on Thursday its subsidiaries face higher production costs this year because of the fuel increase.
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