Saudi oil giant Aramco’s profits plunge nearly 45% amid pandemic | Business and Economy News

COVID-19 took a heavy toll on Aramco but the company still made a profit of $49bn and will pay shareholders dividends worth $75bn. Sau...


COVID-19 took a heavy toll on Aramco but the company still made a profit of $49bn and will pay shareholders dividends worth $75bn.

Saudi Arabian state oil giant Aramco has reported a 44.4 percent plunge in last year’s net profit, as the coronavirus pandemic curbed global demand.

The effect of COVID-19 took a heavy toll on the company and its peers in 2020, but oil prices have rallied this year as economies recover from the downturn and after oil producers extended output cuts.

“Aramco achieved a net income of $49bn in 2020,” the company said in a statement on Sunday, down from $88.2bn in 2019.

It said “revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins”.

Aramco CEO Amin Nasser described 2020 as “one of the most challenging years in recent history”.

But compared with many of its loss-generating international peers, the company, which made its stock market debut in 2019, played up its “strong financial resilience” despite the challenges and said shareholders would still receive dividends totalling $75bn.

“We are pleased that there are signs of a recovery,” Nasser told an earnings call. “China is also very close to pre-pandemic levels. So in Asia, East Asia in particular, there is strong pick-up in demand.”

He said demand in Europe and the United States would improve with more deployment of vaccines against COVID-19. Global oil demand is expected to reach 99 million barrels per day by the end of this year, he added.

Crude prices have risen in recent weeks to more than $60 per barrel.

‘Enormous impact’ of COVID

Analysts say the company’s debt levels surged last year as it offered shareholders a bumper dividend even as its earnings plunged.

Aramco lowered its guidance for capital expenditure in 2021 to around $35bn from a range of $40bn to $45bn previously, according to a disclosure to the kingdom’s Tadawul bourse. Capital spending in 2020 was $27bn.

Referring to the dividend, Nasser said there was no intention to increase it this year from what has been pledged.

“The dividend is in line with expectations, which is what holders of Aramco will care about most, but lower capex implies the company does not expect high oil prices to last for the long-term,” said Hasnain Malik, head of equity research at Tellimer.

Aramco’s shares were marginally down 0.6 percent after its results.

Through most of last year, Aramco’s shares held up well against global oil companies in emerging and developed markets, but underperformed against its peers when oil prices recovered.

Without addressing the company’s debt, Aramco’s Nasser said belt-tightening had kept the firm’s financial position “robust”, enabling it to pay out the dividends.

“As the enormous impact of COVID-19 was felt throughout the global economy, we intensified our strong emphasis on capital and operational efficiencies,” Nasser said.

Aramco has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported last June.

But there are also concerns over an uptick in drone and missile attacks on Aramco’s facilities in the kingdom, claimed by Yemen’s Houthi rebels.

A drone strike sparked a fire at a Riyadh oil refinery on Friday, in the second major assault this month on Saudi energy installations claimed by the Iranian-aligned group.



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Newsrust - US Top News: Saudi oil giant Aramco’s profits plunge nearly 45% amid pandemic | Business and Economy News
Saudi oil giant Aramco’s profits plunge nearly 45% amid pandemic | Business and Economy News
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