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