Saudi Aramco in talks for stake in world’s no. 4 chemical firm

General view of Aramco tanks and oil pipe at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia. (REUTERS/Ahmed Jadallah/File)
Updated 19 July 2018
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Saudi Aramco in talks for stake in world’s no. 4 chemical firm

  • Aramco made the invitation for the SABIC deal to the banks last month
  • The oil giant is expanding its footprint globally by signing downstream deals and boosting the capacity of its plants

DUBAI: Saudi Aramco said on Thursday it is looking to buy a stake in Saudi petrochemical maker SABIC, a move that could boost the state oil giant’s market valuation ahead of a planned initial public offering.
Aramco said in a statement that it was in “very early-stage discussions” with the Kingdom’s Public Investment Fund to acquire the stake in SABIC via a private transaction. It has no plans to acquire any publicly held shares, it said.
In a separate statement, the PIF also said that talks about a sale were in early stages. “There is a possibility that no agreement will be reached in relation to this potential transaction,” it said.
Reuters reported on Wednesday that Saudi Aramco had invited banks to pitch for an advisory role on the potential acquisition of a strategic stake in Saudi Basic Industries Corp, citing two sources with direct knowledge of the matter.
Aramco wants to develop its downstream business as the government prepares to sell up to 5 percent of the world’s largest oil producer, possibly by next year. Boosting its petrochemicals portfolio further could help attract investors for the IPO.
Riyadh-listed SABIC, the world’s fourth-biggest petrochemicals company, is 70 percent owned by the Public Investment Fund (PIF), Saudi Arabia’s top sovereign wealth fund. It has a market capitalization of 385.2 billion Saudi riyals ($102.7 billion).
The Aramco IPO is the centerpiece of an ambitious plan championed by Crown Prince Mohammed bin Salman to diversify Saudi Arabia’s economy beyond oil.
Aramco made the invitation for the SABIC deal to the banks last month, said the sources, declining to be identified due to commercial sensitivities.
Aramco plans to boost investments in refining and petrochemicals to secure new markets for its crude, and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand.
The oil giant is expanding its footprint globally by signing downstream deals and boosting the capacity of its plants.
Aramco’s push into chemicals also includes a mega project it is building at home with SABIC. The $20 billion project would build a complex that converts crude oil into chemicals directly, bypassing the refining stage.


Profit at world’s biggest miner BHP jump, but warns on costs, savings

Updated 21 August 2018
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Profit at world’s biggest miner BHP jump, but warns on costs, savings

  • The world’s biggest miner said it expected its strong momentum to continue into the medium term
  • BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion
MELBOURNE: Global miner BHP posted a 33 percent jump in annual underlying profit and a record final dividend on Tuesday, but flagged a delay in future savings as well as cost pressures at some of its operations.
The world’s biggest miner, which has been focusing on simplifying its business and driving returns to shareholders, said it expected its strong momentum to continue into the medium term.
However, BHP Chief Executive Andrew Mackenzie said the miner was “a little more apprehensive” on the short-term outlook, given trade ructions between China and the United States, and analysts flagged concerns over rising costs.
For the year ended June 30, underlying profit, which excludes one-time gains and losses, rose to $8.93 billion from $6.73 billion, just below an estimate of $9.27 billion according to 15 analysts polled by Thomson Reuters.
BHP paid out a record final dividend of $0.63 a share, up from $0.43 a year ago, on the back of free cashflow of $12.5 billion from a strong operating performance and higher commodity prices. “A pretty solid result really. I think largely in line with what the market expected,” said portfolio manager Andy Forster of Argo Investments in Melbourne. “Definitely the cash flow was strong, the dividend probably a bit stronger than what we expected.”
However, a cut in productivity gains expected in fiscal 2019 — to $1 billion from a previously promised $2 billion — “slightly took the gloss off the results,” he added, although the miner pledged to make the additional savings in 2020.
BHP also noted some cost creep due to geotechnical issues at its Queensland coal operations, rising fuel costs, and pockets of inflation in labor.
“The dividend was better than expected, but the slight fiscal 2018 (earnings) miss and fiscal 2019 cost guidance is likely to cause us to take down estimates modestly,” broker Clarkson Platou said in a report
Shares in BHP fell 1.8 percent in afternoon trading, compared with a 1 percent fall in the broader Australian market and a 0.8 percent dip in rival Rio Tinto.
Including one-time charges, BHP’s profit fell 37 percent to $3.71 billion.
These included a $2.8 billion post-tax charge from the sale of BHP’s US shale oil and gas assets in July which ended a disastrous seven-year foray into shale.
BHP said that it would not make a decision on how to return profits from the sale to investors until it was finalized.
The company also took a $650 million charge for the 2015 Samarco dam failure in Brazil that killed 19 people.
Total revenue rose 20 percent to $45.81 billion. Revenue from iron ore mining, BHP’s biggest division, edged up 1.3 percent, while copper surged by nearly 60 percent backed by higher production from its Escondida mine in Chile.
Revenue from its petroleum division grew 14.5 percent on surging oil prices.
BHP said it cut net debt to $10.9 billion, at the lower end of its $10-15 billion target.