Revenue – SAR34bn, -0.4% Y-o-Y, +2% Q-o-Q, -4% vs. EFGe Gross profit – SAR10.6bn, +17% Y-o-Y, -3% Q-o-Q, -2% vs. EFGe Operating income – SAR7.29bn, +67% Y-o-Y, -5% Q-o-Q, +5% vs. EFGe Net income – SAR4.55bn, +48% Y-o-Y, -13% Q-o-Q, -5% vs. EFGe Recurring net income (excludes SAR339mn Ibn Rushd impairment) – SAR4.89bn, +42% Y-o-Y, -6% Q-o-Q, +2% vs. EFGe   SABIC reported its 4Q16 results, with headline earnings coming in at SAR4.55bn (-13% Q-o-Q), 5% below our SAR4.8bn forecast. We note, however, that earnings included a one-off SAR339mn (SABIC’s share) impairment at Ibn Rushd, the second time this year and third time since 2H15 that the company has written down the asset as it continues to accumulate losses. Adjusting for this, recurring earnings would have been SAR4.9bn, down 6% Q-o-Q and only 2% ahead of EFG forecasts. The company noted that the lower bottom-line Q-o-Q was a consequence of lower share in income from associates and other income.   On the operational level, the main disappointment was revenues, which missed our forecasts by 4%, likely due to lower-than-expected volumes. Despite this, gross profit was only 2% below our expectation, as margins were slightly higher than our forecast (31.1% vs. 32.9% in 3Q16 and EFGe of 30.7%). The company did not comment on the weaker gross profit Q-o-Q, but we believe a poor performance at the steel division could have been the main drag during the quarter, as steel prices in Saudi Arabia fell substantially in November and December due to lack of demand stemming from the slowdown in construction activities. Fertiliser operations should have improved substantially on the hike in urea prices (+16% Q-o-Q), while we were only expecting marginal gains for petchems, mainly stemming from higher methanol (+28%) and MEG (+16%) prices, of which SABIC is a major producer. EBIT fell 5% Q-o-Q, but beat our expectations by 5%. Note that SABIC typically includes the impairment of Ibn Rushd above the EBIT line, so adjusting for this, EBIT would have been cSAR8bn (the impairment had an impact of SAR706mn at the consolidated level), up 5% Q-o-Q and 15% ahead of our forecast. The beat and better recurring EBIT Q-o-Q were mainly a function of what appears to be much lower S,G&A (full financials not yet available), surprisingly to us, especially as SABIC’s S,G&A has tended to escalate in the fourth quarter of previous years.   Overall, not a very exciting set of numbers, but we see no major surprises beyond the impairment at Ibn Rushd and the decline in S,G&A, with recurring earnings largely in line with our expectations. (Company disclosure, Yousef Husseini)   SABIC: SAR93.59 as of 18 January 2017, Rating: Neutral, TP: SAR90.00 per share, MCap: USD74,872mn, SABIC AB / 2010.SE