On January 10, the Financial Association reported (Editor Li Lin / Intern Editor Ma Xinyue) that a recent report released by S&P Global pointed out that major Saudi companies including the chemical giant Saudi Basic Industries Corporation (SABIC), Dairy Product manufacturer Almarai, and Saudi Electric Company (SEC) have adequately prepared to face the impacts of rising diesel prices effective from January 1 this year.

The report provides a detailed analysis of how these major Saudi companies are absorbing the slight increases in production costs through improved Operation efficiency and potential transmission mechanisms. The report notes that despite the pressures from rising prices, these companies, due to their strong market positions and efficient Operation models, have the ability to maintain stable profitability.

It is noteworthy that earlier, Saudi Aramco raised domestic diesel prices to 1.66 riyals per liter (approximately 0.44 USD), an increase of 44.3%, effective from January 1 this year. However, despite the price increase, the diesel prices in Saudi Arabia remain lower than in many neighboring Arab countries, with diesel prices in the UAE and Qatar at 0.73 USD and 0.56 USD per liter respectively. However, in Bahrain and Kuwait, the diesel prices are 0.42 USD and 0.39 USD per liter respectively.

The report specifically mentions that for SABIC and Almarai, the rise in raw material and fuel prices will not significantly impact their profitability. As a leading global chemical company, SABIC's profitability is expected to continue to surpass that of its global peers. S&P Global predicts that despite the rise in raw material and fuel prices, SABIC's sales costs are expected to increase only by 0.2%, thus having a limited impact on its profitability. Additionally, since SABIC is closely related to the government, the possibility of receiving government support when needed is also high.

Almarai also demonstrates a strong ability to cope. Although it is expected that costs will increase by 0.2 billion riyals in 2025 due to the indirect impacts of rising fuel prices and other cost increases in the supply chain, the company has clearly stated its commitment to focusing on Business efficiency, cost optimization, and other innovative initiatives to effectively mitigate these impacts and maintain its market-leading position.

Regarding SEC, S&P Global indicates that an unrestricted and unlimited balance Account provides a support mechanism for the government, including support related to rising fuel costs. This means that any increased fuel costs will be covered by this balance Account, thereby ensuring the financial stability of SEC.

Although these major companies have the capacity to respond to the impact of rising prices, the report also notes that slight increases may still significantly affect the profit margins and competitiveness of a broader range of Saudi companies. Starting from the first quarter of 2025, these additional costs will gradually reflect in the financial statements of many companies, posing certain challenges to the overall operating conditions of Saudi businesses.

In this context, Saudi Arabia is continuing to undergo significant and rapid transformation in accordance with the 'Vision 2030' plan. The report anticipates that Saudi Arabia will accelerate its investment pace, promote economic diversification, and reduce reliance on the upstream hydrocarbons sector. The enormous scale of this transformation plan (estimated to exceed a total of 1 trillion dollars) means that Saudi Arabia requires substantial financial support. The reduction in government subsidy costs due to rising raw material and fuel prices will provide additional funding support for the 'Vision 2030' projects, injecting new vitality into Saudi Arabia's economic development.