Saudi Aramco’s nine-month profit falls 18% as IPO starts

Muscat Daily - - BUSINESS -

Dubai, UAE – Saudi Aramco’s nine-month profit fell 18 per cent as lower oil prices eroded sales ahead of a share sale that could be the world’s largest.

The oil gi­ant earned net in­come of US$68.2bn com­pared with US$83.1bn for the same pe­riod a year ago, it said in a state­ment posted on its web­site. The state com­pany’s rev­enue slipped to US$217bn from US$233bn last year.

Aramco gave no ex­pla­na­tion for the de­cline in its re­sults, though its nine-month in­come alone ex­ceeded the 2018 net posted by Ap­ple Inc, the most prof­itable pub­licly traded com­pany. Av­er­age Brent crude dropped about 11 per cent over the nine-month pe­riod com­pared with the pre­vi­ous year. Saudi Ara­bia has been cut­ting oil out­put along with other global pro­duc­ers to shore up prices amid a sur­plus and signs of weaker de­mand.

Aramco kicked off an oft-de­layed ini­tial public of­fer­ing on Sun­day, re­veal­ing po­ten­tial tax cuts and div­i­dends to lure in­vestors. The Saudi gov­ern­ment has con­ceded the com­pany prob­a­bly isn’t worth the US$2tn val­u­a­tion Crown Prince Mo­hammed bin Sal­man has long tar­geted.

Saudi Aramco’s US$111bn an­nual net in­come for 2018 made it the world’s most prof­itable firm. The Prince is count­ing on those earn­ings and Saudi Ara­bia’s vast oil re­serves - the world’s big­gest de­posits of con­ven­tional crude - to at­tract in­vestors. The king­dom is seek­ing funds to build job-gen­er­at­ing in­dus­tries that it hopes will help wean the econ­omy off of its over­whelm­ing re­liance on crude sales.

Saudi Aramco will de­lay fully pay­ing for the ac­qui­si­tion of a 70 per cent stake in petro­chem­i­cals com­pany Saudi Ba­sic In­dus­tries Corp (Sabic) by four years un­til Septem­ber 2025 un­der terms of a new deal agreed on last month.

Aramco will also only pay the king­dom’s sovereign wealth fund about a third of the US$69.1bn price tag in cash, down from half pre­vi­ously, the oil firm said in its in­ten­tion-to-float an­nounce­ment on Sun­day. The pur­chase of the Public In­vest­ment Fund’s (PIF) stake in Sabic, is set to close in the first half of 2020, the doc­u­ment shows.

Un­der the fresh pact, Aramco will also pay a to­tal of US$3bn in ad­di­tional costs to PIF in the form of loan charges and prom­is­sory notes. When the deal was first agreed on in March, Aramco was set to foot US$1bn in loan charges and prom­is­sory notes, ac­cord­ing to its bond prospec­tus from April.

The ac­qui­si­tion of Sabic is a key part of Aramco’s strat­egy of mov­ing down­stream from oil pro­duc­tion into chem­i­cals, and also served as a way to help PIF raise cash to fund its in­vest­ment plans.

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