Embracing the “New normal”
Yousef Al-Benyan, Vice Chairman and CEO, SABIC, and Chairman, GPCA, discusses the company’s strategy for growth in a post COVID era, his plans for the Asian market, and what Saudi Aramco’s acquisition will mean for SABIC
How has the COVID-19 pandemic impacted SABIC and the chemical industry as a whole? How did you address the challenges, and what new challenges do you expect to see in 2021?
2020 saw unprecedented levels of challenge and transformation opportunities for SABIC and the industry. Times of disruption accelerate evolution throughout value chains and hasten the failure of outdated operating methods. The pandemic triggered major shifts in how we must think, act and build for future success. The resulting global disorder exposed complacency in some industries and inadequate contingency plans that struggled to keep up with shifting lockdowns and new supply and demand dynamics. Our industry pivoted to tackle these obstacles and adapt to the workforce, supply chain and economic disruptions.
For more than five years, we have encouraged global players to rethink their operations amid increasing competition and the advance of digitalization. The advent of the ‘new normal’ expedited the business and workplace trends we identified several years ago – and our actions in response have kept us ahead of the industry curve. We have further embraced innovation and the new future of work, while remaining focused on our long-term growth ambitions and leveraging the strength of our global supply chain, operational efficiencies and capital discipline. The outcome is that, despite economic uncertainty, we are optimally placed to counteract short-term challenges and to thrive in the long-term.
Industry prospects for 2021 must be set in the context of a projected annual global rise in GDP of between 4.5 and 5.0 per cent. The development and rollout of vaccines give cause for optimism but collectively we must remain vigilant and operate as an essential industry, maintaining our output levels while helping to secure supplies of essential goods.
The outlook for 2021 also varies between market segments. The agricultural sector, for example, has withstood the crisis well, with demand sustained and production largely unhampered by lockdowns and social distancing measures. Those industries heavily impacted by lockdowns, such as automotive and transportation, may take longer to recover.
The key to success for us all in the Gulf region is ultimately to remain agile – and continue to mobilize our production and supply chains to meet market needs as they evolve, while also offering our humanitarian support to protect the most vulnerable groups in the communities where we operate.
We’ve seen the Circular Economy trend accelerate in the last few years. How do you anticipate it will impact the plastics industry and its products, and what is SABIC doing to address circularity?
During 2020, I was privileged to chair the Business Twenty (B20) – official voice of the global business community to the G20 – presided over by Saudi Arabia. Sustainability was central to this group’s priorities and it reinforced why we are right to place this issue at the heart of SABIC’s responsible business strategy.
The circular economy needs to be set in the broader context of both sustainability and Environmental, Social and Governance (ESG). At SABIC, our approach to sustainability aligns with the United Nations Sustainable Development Goals and our strategy is aligned to the goals where we can have the greatest impact. We continue to drive for excellence in ESG performance and the application of science based targets as measures of our success.
SABIC’s vision for the future is that plastic should never end up in the environment, landfill or in our oceans and instead be reused and remade into new products. This vision requires a total transformation of the value chain. We have been working with our downstream and upstream partners to reinvent and pioneer our way towards a circular economy for the good of people and the planet.
Our TRUCIRCLE™ portfolio and services play a significant role in helping us achieve our vision and close the loop on used plastic. This portfolio enables us to showcase circular innovations while helping manufacturers to produce more sustainable products. SABIC will also soon commence construction of the first commercial unit to produce our flagship certified circular polymers in The Netherlands.
SABIC recently announced plans to become the largest petrochemical company by the year 2030. What will be the key focus areas and priorities for SABIC in the near future?
Our immediate priority is laser focused on delivering our 2021 business plan. The operating environment is defined by volatility and uncertainty. We must embrace this reality and be disciplined in our stewardship of the business by taking whatever actions required to remain competitive and resilient. We will continue to exhibit discipline in our capital expenditure while investing for growth and capability development.
The new relationship with Saudi Aramco opens new doors to help us achieve our long-term aims. This is a naturally complementary relationship combining the strength, expertise and global reach of both companies and we are excited by the opportunities to create value through harnessing synergies.
Our transformation journey enabled us to mitigate many challenges during 2020 and will unlock the opportunities presented by a global economic recovery. Digitalization is a core part of this effort and is a game changer for SABIC. We will continue our drive to become a more data driven, intelligent and agile company. The differentiating power of sustainability and innovation will continue to command our focus too.
We have identified various performance levers we can pull over the next five years to drive us forward. These include making improvements in areas such as the pricing of key products, raising yield and reliability in our manufacturing, managing our costs and working capital.
Throughout SABIC we are focused on improving our organizational effectiveness – seeking simplification to raise efficiency and building a mindset which is strategic instead of operational. We have already taken action to optimize our operating model by reorganizing our agri-nutrients, specialties and metals operations into standalone businesses. This gives those businesses the opportunity to better hone their focus and agility, unlock their value creation potential and bring them even closer to their customers.
Collectively these developments represent significant change, but the priority of protecting and supporting our employees remains constant. Alongside resolute EHSS commitments, our long-term success will depend on providing best in class programs which enhance the physical wellbeing and mental health of our people while helping them to adapt to the future of work. This is why we are committed to developing the key skills and knowledge of our people to better prepare them for the jobs of the future in an increasingly digitalized business.
Across the petrochemicals industry, collaboration holds the key to success – something which extends right across the spectrum of the public, private and government sectors internationally as the world strives for recovery. The new normal is here to stay – the way we do business has changed and now is the time to adjust and underline the petrochemical industry’s value as an essential industry.
What are your plans for value creation and collaboration with Saudi Aramco? What will the recent move mean for SABIC?
Since Saudi Aramco’s acquisition of a 70% majority stake in SABIC in June 2020, we have been working together to explore areas of synergy and collaboration that will maximize value for both parties. SABIC is now the chemicals arm of Aramco. During 2021 and beyond, alignment will bring benefits in terms of creating additional scale, technology, investment potential and growth opportunities for SABIC.
At the transaction close we identified six top business focus areas – including procurement, sales and marketing, supply chain, stream integration, feedstock optimization and maintenance – which taken together represent around 80% of the total value and synergy capture. SABIC’s share of the expected annual value creation with Saudi Aramco, is predicted to amount to between USD1.5 billion to USD1.8 billion by 2025.
We are focused also on strategically transforming our approach to growth optimization, joint ventures and the service delivery model across SABIC and Aramco – while across our corporate functions we are exploring where quick wins can be achieved to drive further value.
The pace of our progress is encouraging and as we move through 2021 you will hear more about the synergies and collaboration which will create additional value for all of our stakeholders.
How do you expect China’s growing self-sufficiency in chemicals to impact your business? And what are your plans for the Asian market in general?
China is central to our growth strategy. We have been present there for 30 years and are established as a leading petrochemical and engineering plastics products supplier, investor and employer. Economic activity dropped significantly in China during early 2020 amid moves to control the pandemic but we expect a recovery in 2021 with vaccines and government policies spurring consumer and investor sentiment. As the Chinese economy stabilizes, the country will re-embark on its transformation from an export and investment-led model to a private consumption-led model. We are optimistic about the direction China is taking. We recognize the opportunity to support synergies between Saudi Arabia’s Vision 2030 and China’s Belt and Road Initiative.
As a trusted partner for sustainable and inclusive development, SABIC can help strengthen relationships and drive mutually beneficial strategic engagement in China, the Middle East and the rest of Asia. While China alone represents more than 40% of the world’s chemical sales, the Asia region as a whole is an important demand driver for our industry. Winning here is a goal for almost any global company. Chemical companies eyeing growth here need to have a robust and value-driven strategy which is bespoke to the region.
Before the pandemic, the region was witnessing structural changes including increasing environmental regulations, industrial slowdown, and changes in government policies. As a result, global players have needed to make material changes in their strategies to tap the growth in the market. We have worked hard to carefully recalibrate our Asia operations in order to better meet customers’ current and future needs and we are well-placed for growth throughout the region.
Ultimately, our success in China and throughout Asia depends upon our ability to leverage our fully-integrated global footprint, supply chain excellence and commitments to sustainability and innovation. These elements strengthen customers’ confidence in our offer and enable us to grow commercial relationships founded upon mutual trust.
“The new normal is here to stay – the way we do business has changed and now is the time to adjust and underline the petrochemical industry’s value as an essential industry.”
Vice Chairman and CEO, SABIC
As the Chairman of GPCA, what is your vision for the association and how do you plan to maintain its role in catalyzing growth for the regional industry?
In the 15 years since it was launched, GPCA has successfully steered the regional petrochemical and chemical industries towards a new era of co-ordination and co-operation for the collective good of the region.
The importance of GPCA for leaders in the global chemical and related industries has become more acute in the last year. The impact of the COVID-19 pandemic has exacerbated headwinds that the chemical industry was already facing and accelerated disruptors that global business had only started to grasp.
A return to sustained growth will require bold decisions that fully recognize the dynamics of a changed world. When we come together with common purpose, we see the ingenuity of the chemical industry to not only overcome challenges, but to always evolve and come out stronger.
In recent years, GCC players have embraced bold integration, consolidation and partnership strategies. The fruits of this approach have served early adopters well and revealed the limitations of those who hesitated or delayed.
GPCA will continue to collaborate closely with our members to encourage transformation and recovery strategies that are informed by data-driven insights, trends and analysis. We will also use our voice to ensure policymakers can support the needs of the industry and ensure the potential of its future economic contribution can be realized.