The earnings call will start with a presentation by our CEO. He will provide an overview of the market context for the quarter, outline SABIC positioning for long-term value, review our business units, and highlight key operational and performance developments. The CFO will then take over the call to walk you through SABIC aggregate financial performance of the first quarter of 2026, show SABIC financial framework, and share recent update on SABIC portfolio optimization journey. Please join me in welcoming SABIC CEO, Dr. Faisal Alfaqeer to the call.
Thank you, Naif, and thank you to everyone for joining SABIC's earnings call. Let me begin with an overview of the macroeconomics and industry environment. While the market environment is gradually improving, our focus has been firm, prioritizing shareholder value, preserving strong cost position, maintaining capital discipline, and positioning SABIC to capture upside as conditions continue to normalize. Global GDP growth in the first quarter of 2026 was 2.8%, reflecting a moderation versus historical level amid geopolitical uncertainty. China and Asia GDPs remain robust near 5% for the quarter. At the same time, the manufacturing PMI remained above 50, indicating stable and gradually improving global manufacturing activities. Within the petrochemical industry, growth remains broadly in line with GDP. We are seeing an increasing regional divergence. Some regions are gradually decoupling from the broader global economy, particularly in the served-led markets.
Oil volatility continues to elevate uncertainty, reinforcing the importance of resilience. Against this backdrop, SABIC continues to adopt its strategic approach, shifting from scale-driven growth to value-driven profitability. Turning to global chemical trade flows, the Middle East continues to strengthen its role as a key export hub for petrochemicals. The region represents a crucial link for both C1 and C2+ value chains. Approximately half of the global imports of key products such as MEG and methanol originate from the Middle East. Asia remains the primary demand center, reinforcing long-term trade linkages between the regions. This position the Middle East will to sustain export scale supported by feedstock advantage, infrastructure, and proximity to key markets. However, overcapacity continue to weigh on margins. In this environment, our focus is clear: leveraging SABIC's structural advantage while building adaptability across supply chain and trade flows.
In SABIC, we are doubling down on our core strategic business units, enabling higher returns on our investments. In Petrochemicals, our focus is on resilience, leveraging our global commercial presence, cost advantage production base, and disciplined capital allocation. In Agri-Nutrients, we continue to strengthen our leadership in core fertilizers markets, supported by a competitive cost position and improving demand fundamentals. In Specialties, we are accelerating growth by building a diversified platform, expanding through potential partnership, and advancing innovation-led solutions. Let me now turn to the focused action we are taking to strengthen performance and create sustainable value. First, reinforcing our leadership position across our core businesses: Petrochemicals, Agri-Nutrients, and Specialties with a clear focus in areas where we hold structural competitive advantage. Second, enhancing our cost competitiveness through structural efficiencies, accelerated transformation initiatives, and a strong focus on operational excellence.
Third, continue to deepen our integration with Saudi Aramco, capturing additional synergies across feedstock optimization, operations, and commercial platforms. Finally, firmly committed to maximizing long-term shareholder returns through disciplined capital allocation, competitive dividends, and selective high-return growth opportunities. In a few moments, SABIC CFO will provide further detail on how our financial framework continues to support value creation and enhance shareholder returns. Let me now highlight the key milestones achieved during the first quarter. Starting with operations, we maintained best-in-class safety performance, delivering a Total Recordable Incident Rate of 0.08. From a financial perspective, SABIC delivered a 36% uplift in EBITDA versus the fourth quarter of 2025.
On innovation, multiple Edison Awards were secured for the sixth consecutive years, underscoring the strength and consistency of SABIC innovation platform. These solutions are translating into high-value applications across lightweight aerospace materials, electrical vehicle components, and more efficient agricultural inputs, reinforcing our focus on commercially relevant innovation and differentiated growth. Turning to our corporate transformation program, which is designed to unlock greater shareholder value, we delivered approximately $220 million of recurring earnings impact during the quarter. This strong moment keeps us on track toward our 2030 annual targets of $3 billion, comprising $1.4 billion from cost excellence and $1.6 billion from value creation initiatives. In parallel, advance our portfolio optimization agenda is ongoing. As announced earlier this year, we signed two agreements to divest our European Petrochemicals business and our Engineering Thermoplastics business across the Americas and Europe.
Further updates on these transactions will also be provided by SABIC CFO later in this call. On selective growth, I would highlight several well-executed strategic projects. First, the SABIC Fujian project, which strengthens our position for growth in China and broader Asian markets, has now reached approximately 98% completion across engineering, procurement, and construction. Second, feedstock allocation approval was received from the Ministry of Energy to expand urea production capacity by up to 54% from current levels. This further reinforces SABIC Agri-Nutrients position as a national champion and a global leader in nitrogen fertilizers. Finally, SABIC signed a strategic agreement with the Public Investment Fund, Pirelli joint venture, enabling production capacity of 3.5 million tires annually in the Kingdom. This agreement supports our localization agenda under the Nusaned program and contributes to the long-term economic growth and industrial development of Saudi Arabia.
Looking ahead, we remain focused on clear priorities and disciplined execution. Our emphasis is on delivering sustainable earnings growth, strengthening cash generation, and enhancing returns. We continue to advance our transformation and portfolio initiative to deliver meaningful EBITDA uplift. At the same time, we maintain strict capital discipline and a selective approach to growth with a 2026 capital investment guidance of $3.5 billion-$4 billion. Overall, SABIC is well positioned to deliver on its strategic ambitions and create sustainable long-term shareholder value. With that, I will now hand over to our CFO, who will take you through our financial performance in greater detail.
Thank you, Faisal, and warm welcome to everyone joining today's call. Despite the current geopolitical tensions, SABIC continues to demonstrate its resilient, leveraging its strong infrastructure, integrated operating model, and disciplined execution to navigate a dynamic market environment. Let me begin with an overview of our financial performance for the quarter. Revenue stood at $ 7 billion, down 6% compared with the fourth quarter of the last year. The decline was primarily driven by lower sales volume, reflecting geopolitical-related disruption and plant maintenance activities. Despite lower revenue, adjusted EBITDA increased to $ 1 billion, up 25% quarter-on-quarter, supported by improved pricing and disciplined cost management, which I will discuss in this call. Adjusted EBITDA margin was 15.9%, representing an increase of 4% versus the previous quarter.
Adjusted net income reached $218 million, marking a significant improvement from the losses of $373 million reported in the fourth quarter of 2025, reflecting SABIC agility to capture higher prices globally. Cash flow from operation was $232 million, lower than last quarter, primarily due to higher working capital. We closed the quarter with a net debt of around $700 million, reflecting our robust financial position and balance sheet strength. Let me now dig deeper into EBITDA movement quarter-over-quarter. In Q1 2026, margin improved, driven by 7% increase in prices, offset by lower sales volume. As a result, EBITDA benefited from those higher product margin. Our continued focus on strengthening SABIC cost position and operational efficiency is clearly reflected by the 16% year-on-year reduction in general and administrative expenses.
In a challenging market environment, disciplined internal performance improvement remain critical. We are undertaking comprehensive review of all profitability drivers to further enhance efficiency, optimize our cost base, and strengthening overall financial performance. As the CEO mentioned, in the first quarter of this year, our transformation program realized $220 million in recurring earning impact, which is a split approximately 39% value creation and 61% cost excellence, progressing as planned toward our 2030 target. Before turning to segment performance, I would like to highlight an enhancement of our financial reporting. Starting this quarter, we introduced Corporate and Specialties segment. This will further improve transparency and financial performance, enhance accountability, and provides a more decision useful view of segment profitability for both management and investor.
On Petrochemical segment, prices increased by 6%, reflecting supply chain disruption, although this was partially offset by lower sales volume during the quarter. Total sales volume reached 6.2 million metric tons during the quarter. Adjusted EBITDA increased by 28% quarter-on-quarter, supported by margin expansion, disciplined cost control actions, and SABIC advantaged production capability, which enabled us to efficiently capture high pricing in the market. Nevertheless, industry-wide overcapacity continued to weigh on the segments, and SABIC is actively building resilience within its petrochemical portfolio to navigate and overcome this structural challenge. Turning to Agri-Nutrients. We also delivered strong performance with adjusted EBITDA rising to $367 million from $305 million in Q4. urea prices were higher in Q1 as a strong fertilizer application season coincided with export disruption.
Additional price support came from the redirection of natural gas from fertilizer production to the power generation sector. Sales volume reached 1.4 million metric tons, down 17% versus quarter four, mainly due to plant maintenance shutdown. Market fundamentals remain supportive with demand continue to outpace supply across key regions. The Specialty business has recorded positive results with adjusted EBITDA rising to $ 180 million from $86 million in Q4, an increase of 38% quarter-over-quarter. Volume declined by 4% while prices increased by 4%. Demand remains diversified, led by infrastructure and mobility, followed by electronics and other economic sectors. Overall pricing remains resilience, reflecting the strength and value of our Specialties portfolio. Let me share our financial framework of financial resources prioritization and our approach to driving sustainable growth while enhancing shareholder value.
Our cash sources are clear. Operating cash flow, transformation, and portfolio optimization are the main levers with a clear focus to further optimize cost in all parts of our business. Our capital priorities are equally formalized. Run and maintain CapEx first, competitive dividend to our shareholder, followed by selective growth, CapEx, and higher return opportunities. The objective is simple: Fund the growth responsibly while maintaining attractive shareholder return. This reflects disciplined approach centered on cash generation, resilience, and long-term value creation. Portfolio optimization remained a key lever to improve return and sharpen strategic focus. The Americas and European ETP transaction is progressing toward closing with the key steps on track, physical separation underway, and closing targeted for early Q3 2026. The Europe Petrochemical transaction is also advancing through a regulatory approval and carve-out with the closing targeted in Q4 2026.
Beyond this transaction, additional portfolio action continue to recycle capital, unlock value, and enhance profitability. As I conclude, I would like to reiterate SABIC clear focus on driving long-term shareholder value. Despite challenging environment, the foundation for long-term success continue to strengthen, unlocking value through disciplined capital recycle, de-risking the portfolio by addressing underperforming assets and leveraging partnership, refocusing the assets base on cost advantage region and value chain, and continuing to build sales through efficient go-to-market channels. This conclude the presentation portion of today's call. We will now be open for Q&A.
Thank you, Mr. Salah. To ask a question, please use the raise hand feature on your screen 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. Let's have no more than two or three questions per person so that we have enough time for everyone. The first question is from Jassim AlJubran from AlJazira Capital. Jassim, please come close to the mic and ask your question.
Am I audible? Sorry.
Yes, we can hear you.
Yeah. Thank you. This is Jassim AlJubran from AlJazira Capital, and congratulation on delivering good result despite the current challenges. Only two questions from my end. The first question on the disruption in the Middle East. Did the 13% QoQ decline in volume mainly come from the disruption in March? To what extent are the increased freight and insurance premium being passed to the customer versus being absorbed by the company's bottom line? This is the first question. Should I continue with the second one?
Yes, please.
Yeah. The second question. Based on the current condition as of April, what's the management outlook for the recovery in the volume? How do you see product prices for the remainder of 2026? Will some premium on the product prices persist for the rest of the year due to the current significant structural shift in the supply, or does the management anticipate a notable downward correction with any settlement in the region? Thank you.
Hello, Jassim AlJubran. I will take the first question and maybe our CFO, Salah, will address the second. Our sales volume in the first quarter was 9.6 million tons, which is 13% less than previous quarter. This is mainly due to seasonality, plant maintenance activity, and the supply chain disruption because of what's happening in the Strait of Hormuz. We have also noticed an increase in the logistics and insurance cost to cover the war risk. That was reflected in our prices. The price appreciations for the end products increased 6%, that compensated for the lower volumes and higher logistics costs, as can be seen in the 25% improvement in our adjusted EBITDA quarter-on-quarter.
Maybe, I'll take the second question. Typically, demand is seasonally strong in Q2 for key petrochemical. Inventory are currently decreasing. As a result, low supply, which is expected on a regular demand, by visits. At a certain moment in time, there may be a competition for available volume. Of course, prices have been increasing as a result of higher upstream prices. We expect that petrochemical prices will continue to increase as supply become more short, especially in Asia, where we have seen separate situation for several petrochemicals compared to the crisis.
Thank you, Jassim. The next question is from Sriharsha Pappu from HSBC. Sriharsha, please come close to the mic and ask your question.
Hello?
Hello. Hi.
Yeah. Hi. Sorry. Thank you for taking my question, and thank you for the call. I just had two questions, if I may please. The first one is on actual production volumes. Can you talk about your production volumes over Q1? What were you running at in March, and what are production volumes currently in April? Have you seen a big drop there, given the destruction in the Straits? Also the second question is on feedstock availability. Have you seen any significant drop-off in feedstock availability from Aramco? The production question's obviously for your Jubail assets, please. Thank you.
Yes, Sriharsha . Thank you for the questions. As I mentioned, our sales in the first quarter was 13% less than the previous quarter, was around 9.6 million tons. In terms of production in March, there was no major impacts in our production for all our facilities. For the second question in the feedstock, we continue to coordinate with Saudi Aramco for the feedstock coming from Ju'aymah and other sources. I can assure you most of our plants is up and running now with a normal operation. We continue to focus on reliability and safety of our employees and our assets and make sure we deliver to our customers as per plan. Thank you.
Thank you, Sriharsha. The next question is from Prateek Bhatnagar from Jefferies. Prateek, please come close to the mic and ask your question.
Yeah. Hi. Thanks for taking my question. I have two. The first one is that there was a news that SABIC has announced force majeure on the delivery of liquid chemicals. In a scenario where Strait of Hormuz stay closed, what are the steps company's taking to continue with the supply of liquid chemicals? That's question number one. In the question number two, if you look at in the Agri segment, the volume drop was 17%, but if you look in SAFCO, the implied volume drop is much more. Can you reconcile the difference, please? Thank you.
Yeah. Thank you. For the force majeure, we continue to work with our customers to satisfy their needs. Of course, the major impacts for the Hormuz Strait was on the chemicals. Please remember we have two affiliates or two plants in Yanbu, Yansab and Yanpet. We can provide our customer with the chemicals from those two through the Red Sea. I'll leave the second question for Salah.
Thank you for your question. Of course you know that SABIC markets some of SABIC Agri-Nutrients product. Their revenue recognition consequently, the volume sales is different between the two entities. Additionally, some of the SABIC Agri-Nutrients products are consolidated as a chemical SABIC solution. That is, for example, the DOP and the 2-EH.
Thank you, Prateek. The next question is from Faisal AlAzmeh from Goldman Sachs. Faisal, please come close to the mic and ask your question.
Relations on the strong set of numbers. I wanted to ask more about the rerouting of volumes in the current environment. If you can talk a bit to, you know, how much are you able to kind of reroute from production from east to west in Saudi today? Has it been improving? Like how are your capabilities picked up versus where we were, for example, in March? Are you looking at more long-term, let's say sustainable options in terms of moving product? Or effectively it's more of let's wait and see for the Strait to reopen? If you can talk a bit more towards that would be helpful. My second question is regarding the CapEx associated with the urea expansion.
I saw that you've mentioned that you've obviously have the approval for feedstock for expanding urea. What kind of CapEx should we expect for this project? Thank you.
Thank you, Faisal. For the first question, yes, we have been utilizing the western region, the Red Sea mainly for our solid product. We have been able to move most of our solid product from Jubail to Yanbu and Jeddah, and export from there. I don't think there is an issue with that. It has been very successful in March and April so far. This is done for, again, solid product. The challenge is in the chemicals because liquids, we have volumes that will not lend itself to like a pipeline, but, and it's very difficult to move with trucking to Yanbu. This is where maybe the previous question about the force majeure came on the chemicals.
On the CapEx, maybe Salah can comment on that.
Faisal AlAzmeh, thank you for the question. Maybe I can answer the question, you know, on a high level and maybe I can, you know, talk about the SABIC Agri-Nutrients and the capital allocation for the year. Although I am very limited on what to disclose, SABIC Agri-Nutrients is a separate public company. As a group, our capital priorities are equal from high. Run and maintain CapEx in taking first priority competitive dividend to our shareholder, followed by the selective growth of CapEx and high return of opportunities. Of course, this opportunity and as CEO had actually highlighted, we're very excited with the regulator on feedstock allocation on the project. The project is early stage on the development.
Hopefully in the future, very near future, through Agri Nutrients, maybe, earning calls, total capital will be communicated.
Thank you, Faisal. The next question is from Sashank Lanka from Bank of America. Sashank, please come close to the mic and ask your question. We cannot hear you. Hello, Sashank? Sashank, we cannot hear you. We'll move to the next question from Alex Comer from JPMorgan. Alex, please come close to the mic and ask your question.
Alex, we cannot hear you.
Can you hear me?
Yes, we can hear you now.
Okay, okay.
Alex, we cannot hear you.
Now we can. Alex, maybe you can send your question to the IR team so we can actually get back to you on your question.
The next question is from Prateek Bhatnagar from Jefferies. Prateek, please come close to the mic and ask your question.
Yeah, my questions are already answered. Thanks a lot.
Okay. If no further questions, we thank you all for the thoughtful questions. The investor relations team is available for pending inquiries and any follow-up from today's call. The contact information is displayed on the screen. The earnings call for the first quarter of 2026 has now concluded. Thank you again for attending. You may now disconnect.