JEDDAH - Saudi Basic Industries Corp (SABIC) missed estimates with a 25 percent fall in second-quarter net profit on Sunday as the world's fourth-largest petrochemicals maker reported higher selling costs and lower sales.

Net profit fell to 3.71 billion riyals ($989.3 million) in the three months to June 30 from a revised 4.96 billion a year earlier, the company said in a bourse statement. That fell well short of the 4.6 billion riyals expected by analysts.

SABIC shares fell 1.2 percent in opening trade on the kingdom's stock exchange. Chief Executive Yousef al-Benyan said profit fall stemmed from weaker performance at its Hadeed iron and steel unit.

"The impact of our Q2 comes from Hadeed, related to inventory and slow sales," Benyan told a news conference in Riyadh.

The drop in demand for steel was seasonal, driven by the Muslim holidays of Ramadan and Eid, he said, adding the company would try to reduce expenses and increase production.

"Hopefully in the third and fourth quarters the demand will pick up, because normally these (expenses and production) are impacted by these important occasions in the second quarter," Benyan said. SABIC, which aims to be the world's third-biggest petrochemicals producer, said prior period figures had been restated.

Like most Saudi publicly listed firms, SABIC adopted IFRS accounting standards in January. Its plastics, fertilisers and metals are used in construction, agriculture and manufacturing. SABIC had expected this year to be positive in terms of economic growth in key markets. The firm's earnings shot up 80 percent in the first quarter buoyed by higher prices.

Benyan told Reuters in May the firm was evaluating acquisition opportunities in the range of $3 billion to $6 billion in petrochemicals, speciality chemicals and fertilisers and aims to do the first such deal in the fourth quarter of this year.

SABIC's expansion is driven by the need to be closer to key markets and feedstock. Constraints in new gas supplies in Saudi Arabia are forcing petrochemical producers to look abroad for expansion.

The company is making progress towards a major investment in the United States with an affiliate of Exxon Mobil.

It is also pursuing its first project with oil giant Saudi Aramco, development of an oil-to-chemicals project in Saudi Arabia which analysts see as a breakthrough in the industry.

Benyan said he expected to announce more detail on the project by the end of the third quarter. ($1 = 3.7501 riyals)