Saudi Aramco’s profit dropped a massive 73 per cent in Q2 this year as a slump in energy demand and prices due to the coronavirus crisis hit sales at the world’s biggest oil exporter.
But the company stuck with plans to pay $75 billion in dividends this year and CEO Amin Nasser said global oil demand was recovering. Aramco, which listed in Riyadh last year in a record USD29.4 billion flotation, said the rapid spread of COVID-19 globally had significantly reduced demand for crude oil, natural gas and petroleum products.
Nasser told reporters he had seen a partial recovery in the energy market and a pickup in demand as economies gradually open after the easing of coronavirus lockdowns.
“Look at China, their gasoline and diesel demand is almost at pre-COVID 19 levels. We are seeing that Asia is picking up and other markets (too),” he told reporters after announcing the company’s quarterly results.
Nasser said Aramco was committed to its 2020 dividend. “We intend to pay the $75 billion, subject to board approval and market conditions,” he said. The group’s dividends play a critical role in helping the Saudi government to manage its fiscal deficit.
Aramco reported a 73.4 per cent fall in second-quarter net profit, a steeper drop than analysts had forecast, and said it expected capital expenditure for 2020 to be at the lower end of a USD25 billion to USD30 billion range. Net profit fell to SAR24.6 billion (USD6.57 billion) for the quarter to June 30 from SAR92.6 billion a year earlier. Analysts had expected net profit of SAR1.3 billion.
Aramco said it will pay a dividend of USD18.75 billion for the second quarter of this year, in line with plans for a USD75 billion dividend for 2020. Aramco’s free cash flow stood at USD6.1 billion in the second quarter and USD21.1 billion for the first half of 2020, respectively, compared with USD20.6 billion and USD38 billion for the same periods in 2019.
Aramco’s gearing ratio was 20.1 per cent at the end of June, mainly reflecting the deferred consideration for the acquisition of Saudi Basic Industries Corp. (SABIC) and the consolidation of SABIC’s net debt on to Aramco’s balance sheet.