Polyurethane led BCI's Q2, up 40% QoQ; CEO sees Q3 volumes steady, margins squeezed by input, freight, insurance costs. H2 rebound hinges on supply chains.
Alpha Score of 40 reflects weak overall profile with moderate momentum, poor value, moderate quality, moderate sentiment.
Basic Chemical Industries Co. (BCI) expects third-quarter sales volumes to remain broadly in line with first-half levels. Profit margins will come under pressure because the company is replenishing raw material inventories at higher costs, CEO Alaa Al-Sheikh told Argaam.
Al-Sheikh pointed to the geopolitical situation as the reason raw material costs have climbed.
The impact falls in the third quarter, when replacement inventory purchased at current prices enters the cost base, Al-Sheikh said. Material bought before the surge sits in that base at lower prices, and each replacement batch raises the average cost of inputs. He described the restocking squeeze as the primary challenge for the second half of the year, particularly the fourth quarter, for most industries if current disruptions begin to ease.
How long the squeeze lasts depends on how quickly supply chains return to pre-war levels, Al-Sheikh said.
Producers that sold through inventories built when materials were cheaper now restock at higher prices; freight and insurance increases sit on top of the material cost in every delivered shipment. Selling prices, Al-Sheikh said, should persist at current levels at a minimum; he does not see them rising to offset the higher input costs.
Sales volumes are likely to improve in the second half if most of the company's major customers resume production, he said.
BCI's portfolio spans polyurethane, industrial adhesives, basic chemicals, industrial chemicals, and water treatment chemicals. Al-Sheikh described the chemicals market as governed by supply and demand dynamics and the nature of individual products. Basic chemicals move mainly with product availability and the availability of substitutes. Specialized chemicals such as polyurethane and industrial adhesives are more exposed to supply shortages and the lack of alternative products, he said, in part because of the complexity of their manufacturing processes.
The structure Al-Sheikh described puts specialized lines with few substitutes in a stronger position to hold prices than basic chemicals, where alternatives give buyers options.
On the second quarter, Al-Sheikh said the group's operating profit margin improved despite recording SAR 7 million in non-recurring administrative expenses. The charges comprised impairment on certain assets and additional provisions for employee-related costs. The CEO said BCI has no plans to dispose of additional assets in the near term.
The segment results show a clear split. Polyurethane sales rose 40% quarter on quarter, the strongest performance in the group. Adhesives followed with a 13% gain. Basic chemicals sales fell 4%, the CEO said, because production shutdowns at some customers' manufacturing facilities in Saudi Arabia cut demand.
Industrial chemicals and water treatment chemicals recorded a visible improvement in profit margins in Q2, Al-Sheikh said. Their contribution to overall results stays limited; the two segments together account for about 6% of group sales.
BCI reported net profit of SAR 22.9 million for the first half of 2026, up from SAR 1.1 million in H1 2025, according to Argaam data. The half-year figure came in at roughly twenty times the year-earlier level. Q2 contributed SAR 17.6 million, about three-quarters of the total. The remaining SAR 5.3 million was recorded in the first quarter.
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