Yanbu National Petrochemical Company (Yansab) released some more earnings details after Thursday’s session, and at first look it appears that costs were significantly lower than our expectation. Revenues came in at SAR1.5 billion, 7% lower than our expectation, as volumes appear to have declined even more than we expected. The main highlight, however, lied in margins, with EBITDA margin coming in at 52%, the highest margin level since 1Q2011, on the back of a significant reduction in costs (COGS/Sales were also the lowest since 1Q2011). While naphtha prices dropped strongly Q-o-Q (-21%), this alone would not account for the large improvement in costs. Instead, we speculate that two things could have driven such a large cost reduction: i) a significant improvement in ethane supply, which we think is the most likely reason, as ethylene produced from ethane is c60% lower cost than propane based ethylene, we estimate; and ii) improved cost efficiency and cost controls. While we had already expected improved ethane supply - in line with guidance from Sipchem’s management, which mentioned on their 4Q2015 results conference call that ethane supply in Saudi Arabia started to improve in December - we did not expect the supply to improve so significantly. Kayan also reported results after Thursday’s session, with earnings also coming in better than consensus forecasts, and while full numbers are not yet out, it is possible that the improvement was also driven by lower costs from better ethane supply.   What does this mean for SABIC’s results and other ethylene crackers? According to Argaam, SABIC will announce its 1Q2016 results this morning, and we see the potential for earnings to exceed our expectation (our forecast is for net income of SAR2.9 billion). Essentially, if the reason for the improved cost at Yansab was mainly due to better ethane supply, this could also mean that SABIC’s ethane supply improved substantially during the quarter and thus costs could be well below what we and the market are currently expecting, even with the feedstock price increases. Of course, the impact on SABIC would not be as large as is the case for Yansab, given that SABIC has exposure to areas outside Saudi Arabia and produces several products outside the ethylene value chain, but hypothetically speaking, a significant improvement in ethane supply could push earnings closer to the SAR3.5 billion range, ahead of consensus (Bloomberg consensus is for SAR3 billion). We also wonder whether other ethylene crackers (Petrochem, SEPC [Sahara and Tasnee JV] and Petro Rabigh) could have also seen a big improvement in ethane supply, in which case they are also likely to beat market expectations. (Earnings release, Yousef Husseini)   YANSAB: SAR41.58 as of 14 April 2016, Rating: Buy, FV: SAR40.00 per share, MCap: USD6,237 million, YANSAB AB / 2290.SE SABIC: SAR76.55 as of 14 April 2016, Rating: Buy, FV: SAR85.00 per share, MCap: USD61,240 million, SABIC AB / 2010.SE