Saudi Aramco's profit plunges 73.4%

Daniel Fowler
August 10, 2020

Saudi Aramco reported a 73.4 per cent fall in second quarter net profit due to the impact of lower oil prices and declining refining and chemicals margins, amid the Covid-19 pandemic, which tipped the global economy into its deepest recession since the Great Depression, the company said.

Most energy companies have taken a painful blow from the coronavirus pandemic as lockdowns to contain the spread of the deadly virus limited travel and halted production, crushing demand for crude and sending oil prices into a tailspin.

Aramco said the crisis had significantly reduced demand for crude oil, natural gas and petroleum products.

"We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies", he said.

"This demonstrates Aramco's agility, strength and resilience across market cycles", Nasser added, who made the payment despite calls for it to be scaled back.

Net profit for the second half dropped to 24.62 billion Saudi riyals from the year-earlier period, Aramco said in a regulatory filing on Sunday to the Tadawul exchange where its shares trade.

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The group's dividends play a critical role in helping the Saudi government to manage its fiscal deficit.

Aramco's CEO, Amin Nasser, told reporters that profits were affected by the "current unfavourable conditions resulting from the decline in crude demand and prices".

Analysts had expected a net profit of 31.3 billion riyals in the second quarter, the mean estimate from three analysts provided by Refinitiv showed.

Saudi Aramco was listed on the Saudi bourse in December following the world's biggest initial public offering, generating $29.4 billion in the sale of 1.7% of its shares.

Nasser said Aramco would distribute $18.75 billion in dividends for the second quarter to keep its listing promise of distributing at least $75 billion in annual dividends for five years. The oil giant has long held the position of world's most valuable company - until last week, when it was dethroned by USA tech giant Apple. In April, US crude futures entered into negative territory for the first time in history.

Aramco's free cash flow stood at US$6.1 billion in the second quarter and US$21.1 billion for the first half of 2020 respectively, compared to US$20.6 billion and US$38.0 billion for the same periods in 2019.

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