Saudi Aramco's Falling Profit

Saudi Aramco's Falling Profit

over 3 years ago2 mins

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Saudi Aramco reported a 73% second-quarter drop in profit over the weekend, but the oil’s giant’s not listening: it’s pressing ahead with its plan to pay billions in dividends anyway 🙉

What does this mean?

Just like its international competitors, Aramco – the second-biggest company in the world – has been having a horrible time since coronavirus-induced lockdowns sent the demand for and the price of oil into freefall. And while Saudi Arabia has managed to prop up the slippery elixir’s price by convincing the group of oil-producing countries known as OPEC+ to curb production, that price is still down by a third this year.

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But never one to let a little thing like collapsing prices get in the way, Aramco’s still planning to pay $75 billion in dividends this year. That’ll come as a relief for Saudi Arabia, which owns around 98% of Aramco and relies heavily on those payouts to cover its spending 🇸🇦 But Aramco’s stress is far from over: it might have to sell more bonds if it wants to stump up dividends while profits keep falling.

Why should I care?

Unlike Aramco, oil giants BP, Shell, and Eni have all slashed their dividends. That could help explain why Aramco’s share price has been flat this year compared to most of its rivals, whose share prices have fallen by 30-40% 🛢 Still, at least they got some good news to kick off the week: positive Chinese factory data suggested oil demand is recovering, and oil’s price climbed higher on Monday.

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Aramco has outperformed other energy companies this year, sure, but it hasn’t managed to hold on to its title as the world’s biggest company by market capitalization: that title was pinched last month by tech behemoth Apple. After rising almost 50% this year as part of a wider rally in tech stocks, Apple’s total market value is now almost $2 trillion...

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