Welcome to SABIC's Q1 2025 Earnings Call. This is Sarah Alzamami acting as a moderator. Please note that the call is being recorded. A transcript of the recording, together with supplementary materials, will be published on the Investor Relations webpage on SABIC's website. Today's earnings call will feature SABIC CEO Engr. Abdulrahman Al-Fageeh and its CFO Mr. Salah Al-Hareky, and IRO Mr. Naif AlAyed. Naif will now take us through an outline of today's event.
Thank you, Sarah, and thanks to those of you who are joining the SABIC Q1 2025 Earnings Call. Please note that forward-looking statements will be made in this call are based on certain assumptions filled with risk and uncertainty. These statements are not a guarantee of SABIC future performance. Actual outcomes may differ materially from what the statements imply. For the details, please refer to the disclaimer in the presentation and in our financial report, both of which are available at SABIC.com. Our CEO will start his presentations by going over the market context that influenced our industry performance in the first quarter of 2025. This will be followed by a rundown of some key points with respect to SABIC Q1 2025 performance. Subsequently, he will outline SABIC key priorities for 2025 and the expected end-industry market movements.
The CFO will then walk you through SABIC aggregate financial performance, focusing on the first quarter of 2025. Afterward, our CEO will come back to provide a brief outlook for the year. At the end, we will open the line for Q&A sessions. I ask that participants limit the topic of their questions to SABIC corporate performance and avoid referring to listed affiliate companies. Now, please join me in welcoming SABIC CEO Engr. Abdulrahman Al-Fageeh to the call.
Thank you, Naif, and thank you to those who have dialed in to join today's earnings call. Let us begin with a brief overview of the macroeconomics and industry landscapes. The first quarter of this year shows signs of a deceleration toward the economy. The global GDP growth rate was only 2.97%, and growth rates forecast for the year have been downgraded to 2.2%. Lower inflation due to falling energy prices has eased some monetary policies, but tariffs might reverse this progress. Hovering at 50 for the quarter, the Manufacturing Purchasing Managers' Index remains weak. Overall, macroeconomics indicators point to increasing uncertainty about the global economy, largely a result of the U.S. trade policies. In the petrochemical industry, overcapacity remains a challenge, and demand was under pressure from oversupply and increasing uncertainty. Chemicals' capacity utilization remains below the historical global average.
Now, I would like to highlight six points that demonstrate SABIC's commitment to improving its overall performance. Our total recordable incident rate for the first quarter of this year is 0.08, a 27% improvement in comparison to the first quarter of last year. This is a testament to SABIC's dedication and commitment to health and safety. Moving to commercial innovation, I'm happy to say that we have won the six Edison Awards: one gold, two silver, and three bronze. They were given to SABIC in the categories of Material Science, Green Energy Transition, and Clean Water, Food, and Agriculture. This is a strong reflection of our commitment to continue investing in innovation and develop groundbreaking market-focused solutions. Innovation remains an important growth engine for us and a contributor to our long-term business success.
I'm also pleased to announce that SABIC's general assembly approved the new composition of the new board of directors. The formation of our new board will bring greater diversity, deep industry expertise, and strategic insights. We would like to extend our appreciation and gratitude to our ongoing board members for their service to the company and its shareholders. They have enriched the company and the board with their invaluable expertise and contributions. As part of enhancing our operating model and advancing SABIC's long-term competitiveness, we constantly evaluate the transformations needed to effectively align our workforce and third-party service with evolving business priorities and future demands. In the first quarter of this year, we embarked on strategic workforce optimization initiatives. This restructuring is expected to pay back in three years through structural cost savings and long-term efficiency, which we will be continuing.
Our growth projects remain on target: the SABIC Fujian Petrochemical Complex in China, the flagship project of our strategic expansion in Asia, is progressing towards mechanical completion by the second half of 2026. In Saudi Arabia, our MTBE project in Petrokemya, in Jubail, is also advancing well towards mechanical completion later this year. Another project, one of our Saudi affiliates, the LTRS mega project in IBN ZAHR, was also successfully completed. It will enable us to increase our MTBE production while reducing our CO2 footprint. This is a demonstration of our commitment towards improving the profitability and performance of existing assets. Finally, I'm proud to inform you that SABIC recently achieved two milestones in our sustainability journey in China. Our Shanghai plant was officially certified as a Model Green Factory by the Shanghai Economic and Information Commission and the Shanghai Development and Reform Commission.
The other milestone was achieved by our Nansha plant in China, as it makes its second year of using 100% green electricity. Moving now to SABIC's priorities for 2025, I group them under four focus areas: first, operational excellence; second, transformation; third, selective growth; and fourth, the value creation. In the area of operational excellence, we continue to prioritize safety and reliability by fostering a culture of continuous improvement and capitalizing on the digitalization. We are also optimizing our operations to establish cost leadership and increase productivity. As part of our transformation journey, our asset portfolio is also being optimized in line with our core businesses and strategic positioning. This means that we will improve our underperforming assets around the world and equip our global organization with the tools and expertise needed to overcome the challenges of an ever-changing global market.
It is worth mentioning that we have completed the Alba transition as part of our ongoing portfolio optimization during the first quarter of this year, and we received the cash proceeds. Our selective growth projects are being cost-effectively executed so that our business can expand through a strategic partnership and optimize market deployment. This creates value, which brings me to the last focus area. By focusing and delivering value creation, we can constantly deliver stable, true-growing dividends to our shareholders, and we intended to do so by maintaining robust financials through disciplined capital allocation and cost management. It also means innovating to meet our customers' demand and unlocking further synergies from our integration with Saudi Aramco. Let us now talk about quarterly product demand and sales for the end market that SABIC serves.
As you can see in the slides, demand was stable in Q1 for most of our end products sectors, with some growth in industrial, electrical, electronics, hygiene, and healthcare. We expect demand to remain stable across the board next quarter. With that, I will now hand the call over to the SABIC CFO, Mr. Salah Al-Hareky. He will review the company's financial results and provide additional commentary on our business segment's performance. Salah.
Thank you, Abdulrahman, and warm welcome to everyone joining the call today. SABIC continued to leverage its global business footprint in the first quarter of 2025 to generate $9.2 billion in revenue, about the same amount as the previous quarter. Early 2024, the company commenced its transformation and portfolio optimization initiative, focusing on cost structure and strategic positioning. In 2024, we divested Hadeed and our equity in Alba. In Q1 2025, we launched the first phase of global restructuring and manpower optimization. The expected cost reduction of progress so far is more than $90 million annually. Q1 EBITDA is $670 million, mainly impacted by one-time restructuring costs that position us for long-term value creation. These strategic actions will lower costs, sharpen focus, and enhance future returns, with initiatives reflecting SABIC's broader transformation agenda.
EBITDA, excluding the impact of special items, mainly restructuring and manpower optimization, of around $300 million amounted to $1 billion. This represents a 7% increase compared to $930 million in Q4 2024. The EBITDA margin before special items reached 11% in Q1 2025, compared to 10% achieved in Q4 2024. Moreover, an upgraded A-plus long-term credit rating from S&P demonstrates our robust financial standing. It reinforces our confidence in our resilience and long-term stability. Our balance sheet remains strong. Our gearing ratio of 0.48% gives us the flexibility to sustain our dividend commitment and capital investment. Next, I will discuss the quarterly performance of our separate business segment. In petrochemicals, both prices and volumes in Q1 2025 were flat compared to Q4 2024. Within this segment, chemicals experienced slightly higher sales volume, whereas polymers had marginally lower sales volume.
In total, our first quarter sales volume reached 9.6 million metric tons. In terms of profitability, we can see that EBITDA was lower quarter over quarter. Yet, the EBITDA excluding special items in petrochemicals is $689 million compared to $629 million in Q4 2024, which represents around 10% improvement quarter over quarter. Next slide, please. In agri-nutrients, we observed higher prices in Q1 2025 as a consequence of tight supply in several regions at the time of healthy global demand. However, lower production resulted in 4% lower sales volume compared to last quarter. The total agri-nutrient sales volume was around 1.8 million metric tons in the first quarter of 2025. The EBITDA excluding special items of agri-nutrients during the first quarter of 2025 is $308 million. Let me now wrap up. Next.
We remain committed to drive greater capital efficiency through disciplined capital allocation, structural cost reduction, and an enhanced focus on return. We're also strategically optimizing our workforce to strengthen our cost structure and position the company for sustainable long-term success. At the same time, we are maintaining a strong balance sheet and disciplined financial framework. That is why we ensure resilience and agility across business cycles. Our portfolio optimization efforts are progressing with a clear intent to exit non-core business and relocate resources towards strategic priorities. This concludes the financial highlight. I will now hand back to our CEO for our year-ahead guidance. Abdulrahman.
Thank you, Salah. Our guidance for the year ahead is based on slow economic growth, as reflected in revised expected global GDP growth rates of 2.2%. In line with our commitment to value creation and selective growth, our 2025 capital investment is expected to be between $3.5 billion and $4 billion. This concludes the presentation portion of today's call. We can now kick off the Q&A session.
Thank you, Engineer Al-Fageeh. Audience, please use the raise hand feature on your screen to ask a question and wait for your line to be opened. Make sure to click the lower hand button once the question has been asked. You can also share your questions in writing. Please limit your questions to two to three per participant to allow for enough time for others. First question is from Ricardo Harten from Morgan Stanley. Ricardo, please come close to the mic and ask your question.
Hello. Good afternoon. Thanks for taking my questions. A couple of questions, if I may. The first one, it's on the expected savings from some of the initiatives implemented in the first quarter. What should be the timing on those numbers that you provided? How much would you expect to capture in 2025 and 2026? Another question on the portfolio optimization. Until now, most of your initiatives have been focused in Europe. When you look forward, should we expect you to continue optimizing some of your footprint in Europe, or are you also looking at some of the other regions where you have plans? Thank you.
Thank you, Ricardo. This is Salah. A very good question. You know, we actually, in 2024, we've actually launched two very important initiatives. One is very strategic, where we actually look into the repositioning of our business, especially in Europe and America. Also, we've launched another initiative, which is transformation, with a focus on cost reduction and value creation. You know, we're very, actually, much progressing very well. I think we will be able to give you more information and detail, especially on the portfolio optimization, hopefully third quarter this year. I will give you more information on what we're doing. However, in the second quarter, we will also provide, hopefully, more information on the progress.
Now, what you have seen here, the $1 billion, is actually more of the restructuring and the focus on Europe and America, and was actually more of a soft, you know, restructuring of organization in order to really understand our cost structure when it comes to manpower and resources allocation. We've done the same thing. We've done it in Europe and America. We've done also the resizing and the optimization of resources in Saudi Arabia. The result of this manpower optimization was a cost one-time hit of around $300 million. The gain or the cost avoidance that we will hopefully enjoy every year, minimum, is $92 million. Going back, I know there is a lot of eagerness to understand more about the portfolio optimization.
We'll be more than happy, and the transformation will be more than happy to provide that information later, hopefully second quarter, detail some progress. In the third quarter, we'll give you the result of our review.
Thank you, Ricardo. Next question is from Shashank Lanka from Bank of America. Shashank, please come close to the mic and ask your question.
I have two questions, if that's fine. The first one is just on the market ever since April 2nd. Just wanted to understand what the trade was. Have you started to see any impact now that it's almost a month in terms of your volumes and just demand? That's the first question. The second question is with regards to your expansion plans. Obviously, you have the Fujian Petroc hemical Complex in China. Just wondering what's the outlook for expansions in Saudi? We have seen a couple of companies in the sector announcing feedstock allocation for mixed feed crackers. Will SABIC as well, at some point, be looking for expansion similarly? Thank you.
I can take that. Thank you very much. For the markets and the trade war, I think the beauty of SABIC is that we have the global footprints of our assets and our distribution. I can tell you that so far, we have not seen any major interruptions to our supply chain due to this trade wars. I mean, our supply chain continues to deliver to our customers. As far as the expansions, as I have mentioned, we are progressing very well with our SABIC Fujian project in China. Hopefully, by mid of next year, we are going to complete the construction and start the commissioning and startup in the second half of next year, as well as also our expansions here in Saudi Arabia for them to be that I have also explained.
Any future expansion or growth for the business with any major developments, this will be immediately informed to you, and you'll be notified by the time that we have any development in this area. Yeah. To actually, on the investment side, I think we're very focused into being very disciplined and allocating our capital. But we have a very clear path in doing that. We're doing the transformation, the portfolio optimization in order to unlock our capital and grow. I think we have been growing. We've been growing in different regions. Saudi Arabia is also focused on our growth, especially with our major shareholder. I think that's very important because we have, as the CEO mentioned, there is a synergy on the investment pathway also with the major shareholder.
Thank you, Shashank. The next question is from Jassim AlJubran from AlJazira Capital . Jassim, please come close to the mic and ask your question.
Just one question on the trade war from my side. With the elevated tariffs in place from the U.S. and China, do you see any potential for a shift in Chinese demand from U.S. to KSA? How has the overall impact of trade war been so far this quarter?
Jassim, I can understand that your question related to the trade war, but I could not understand what you mean by moving from China to Saudi Arabia. I can tell you that. Can you specify exactly what you mean by that?
Yeah. I mean, with the implemented tariffs between the U.S. and China, can we see the demand from Chinese demand from the U.S. to shift to Saudi Arabia, to see more demand from Saudi Arabia to avoid tariffs?
Yeah. Look, I mean, at this point of time, actually, there is uncertainty about the supply chain changes globally. I can tell you, and I have explained earlier, that we did not see any interruption to our supply chain. The opportunity for moving these supply chains among our assets globally, I think this opportunity is being assessed at this point of time and analyzed. The most important thing is that we continue to deliver to our customers in a very reliable way and maintaining our, of course, market share. If there's an opportunity out of this dilemma, definitely the company is going to look into this.
Thank you, Jassim. The next question is from Oliver Connor from Citi . Oliver, please come closer to the mic and ask your question.
Hi. Thanks for taking my question. I'm just coming back on the restructuring point. Obviously, you mentioned on people costs. I mean, how are you thinking about the business in terms of the global footprint going forward to legal growth in China? You've got potential for growth in Saudi. I'm just trying to get a sense of where you see the business coming out of this cycle, maybe streamlined or fewer geographies in terms of where your assets are. Thank you.
Thank you very much. I think that's a great question. I mean, no doubt the petrochemical industry is going through a very challenging time. The key success in this time is a focus on cost reduction and improving our margin, reducing our G&A, reducing our fixed cash cost, which is what we're doing right now. There is also the other aspect of it, which is the repositioning of our business and assets within the European market and America. This is where we're doing the work. I mean, we're not ready to share any information. I don't have the detail right now. We will be more than happy to give you a little bit of a detail, hopefully second quarter, and more detail in the third quarter. Of course, anything, any move we do, because there are always low-hanging fruit.
We capture those low-hanging fruit in order to make an impact. We do not want to wait for the program to finish. We want to do that immediately. What you have seen on the restructuring and manpower workforce optimization is one aspect and many to come, hopefully, in the future. This is very critical and very important. We also look into assets that are not within our strategic focus or not our core assets or assets where we do not have the competitive advantage. We are looking into options for these assets in a way that actually yields a better return to our shareholders. Hope I answered your question. Thank you very much.
Thank you, Oliver. Thank you all for the thoughtful questions. The Investor R elations team is available for pending inquiries and any follow-up from today's call. The contact information is displayed on screen. The E arnings Call for the First Quarter of 2025 has now concluded. Thank you again for attending. You may now disconnect.