Saudi chemicals maker Tasnee reported a second-quarter net loss of SAR 548 million, a wider shortfall than Riyad Capital had anticipated. The brokerage had forecast a loss of SAR 353 million, but weaker margins and higher costs pushed the actual figure deeper into the red.
Revenue, however, came in ahead of expectations at SAR 380 million versus the broker's SAR 327 million estimate. That mixed result — better top line, worse bottom line — left Riyad Capital holding its Neutral rating and a price target of SAR 9 per share.
What's behind the numbers
Tasnee, formally known as National Industrialization Co., is one of Saudi Arabia's largest industrial players, with operations spanning petrochemicals, metals, and mining. Its earnings are closely tied to global chemical prices and the health of downstream demand, both of which have been under pressure in recent quarters.
The company's second-quarter loss reflects those headwinds. While revenue beat the broker's model, margins were squeezed — a common theme across the sector as feedstock costs and operational expenses eat into profitability.
Riyad Capital also highlighted progress at SEPC, one of Tasnee's key projects. Scheduled maintenance at the site was completed on June 7, and pilot production at the Ethylene Cracker Expansion began on July 1, according to a filing on Tadawul, the Saudi stock exchange. That timeline suggests the project is moving forward, though it has yet to contribute meaningfully to earnings.
The Rowad sale is the key to deleveraging
Beyond operations, the broker's outlook hinges on the planned sale of Rowad, a Tasnee subsidiary. Riyad Capital noted that approval for the sale has been secured, but the deal has not yet closed. Until it does, the company's ability to reduce debt — a central part of its turnaround story — remains uncertain.
Deleveraging is a critical issue for Tasnee, which has carried a heavy debt load in recent years. A successful sale would provide cash to pay down borrowings, lower interest costs, and potentially improve the balance sheet. But with the transaction still pending, Riyad Capital is taking a cautious stance.
The broker's SAR 9 price target implies limited upside from current levels, which is consistent with a Neutral rating. For investors, that signals the stock is fairly valued given the risks and opportunities.
What it means for investors
For everyday investors, the key takeaway is that Tasnee's turnaround is still a work in progress. The company is making operational strides — the SEPC restart and expansion are positive signs — but the financial payoff depends on closing the Rowad sale and seeing those projects translate into profits.
Riyad Capital's decision to hold its rating and target suggests it sees neither a compelling reason to buy nor a strong case to sell. That's typical when a stock's prospects are balanced between recovery potential and ongoing losses.
Investors should also keep an eye on global chemical prices, which remain a major swing factor for Tasnee's earnings. A sustained recovery in demand — or a sharp drop — could move the stock more than any company-specific news.
For context, other regional brokers have recently taken similar cautious stances on companies with turnaround stories. For example, Riyad Capital upgraded Flynas after its loss narrowed, showing the firm does reward improvement when it shows up in the numbers. Tasnee, by contrast, hasn't yet delivered that kind of beat on the bottom line.
Meanwhile, broader market conditions — including oil prices and their effect on global yields — can influence sentiment toward Saudi industrials. And with central banks like the RBA holding rates steady, the global cost of capital remains a factor for highly leveraged companies.
The bottom line
Tasnee's second-quarter results were a mixed bag: revenue beat, but the loss was bigger than expected. Riyad Capital is staying neutral, waiting for the Rowad sale to close and for the SEPC expansion to start generating returns.
For investors, the message is patience. The stock's fate rests on execution — completing the asset sale and turning operational progress into actual profits. Until then, the risk-reward profile looks balanced, which is exactly why the broker is holding its ground.
