Saudi Aramco sets share sale stage with $47 billion profit

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Shaybah, the base for Saudi Aramco's Natural Gas Liquids plant and oil production in the surrounding Shaybah field in Saudi Arabia's remote Empty Quarter. (AFP file photo)
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In this file photo taken on January 16, 2018, the Saudi Aramco exhibit is shown at the 2018 North American International Auto Show in Detroit, Michigan. (AFP / GETTY IMAGES NORTH AMERICA)
Updated 13 August 2019

Saudi Aramco sets share sale stage with $47 billion profit

  • Saudi oil giant holds first-ever earnings call with investment analysts

DUBAI: Saudi Aramco proved itself the most profitable company in history on Monday with financial figures that beat all its competitors by a long way.

The Kingdom’s oil giant reported net income of $46.9 billion for the first half of 2019, way ahead of the $31.5 billion reported by the next biggest earner, Apple. Aramco’s profits are nearly 50 percent higher than those of the five largest Western oil companies combined.

It was the first time Aramco — a private company owned by the Kingdom — had disclosed its financial strength in a formal results announcement, and followed the unprecedented level of financial information disclosed in April, when it broke world records in the bond markets with a much-in-demand $12 billion issue.

The company also underlined that it was ready to go to international stock markets in an initial public offering (IPO) of shares whenever the Kingdom thought conditions were right. Some experts think the IPO could happen next year — earlier than many analysts had predicted.




Saudi Aramco's president and CEO, Amin al-Nasser. (AFP file photo)

Amin Nasser, the president and chief executive of Aramco, said the company’s profits — lower than in the same period last year — were earned against a background of tough conditions in the global energy market.

“Despite lower oil prices during the first half of 2019, we continued to deliver solid earnings and strong free cash flow underpinned by our consistent operational performance, cost management and fiscal discipline,” he said in a formal statement to the London Stock Exchange, where Aramco’s bonds are listed.“Our financials are strong and we continue to invest for future growth.”

 

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The profit announcement came at the start of a busy day for Aramco. It also announced a planned investment in the petrochemicals and refining business of the Indian comglomerate Reliance Industries. There was speculation about Aramco buying a 20 per cent stake in the business for about $15 billion, but Khalid Al-Dabbagh, Aramco’s chief financial officer, declined to confirm those figures and said the talks with Reliance were at “an early stage.”

Al-Dabbagh was speaking on a conference call with investment analysts — another first for Aramco — in which he also revealed that the upgrade to the Kingdom’s east-west pipeline, aiming to increase capacity on the route from 5 million to 7 million barrels per day amid security concerns in the Arabian Gulf, would be finished next month.

Dividend payments to the Kingdom amounted to $46.4 billion in the first half of 2019, including a “special dividend” of $20 billion “refecting the exceptionally strong financial performance the company delivered in 2018.”


ALSO READ:  Saudi Aramco ‘ready’ for IPO, says oil giant’s finance boss


 


Economists fear a US recession in 2021

Updated 19 August 2019

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.