The Clap
The net profits of the oil giant, Saudi Aramco (2222), declined by about 14% on an annual basis in the first quarter of the current year, reaching 102.3 billion riyals (27.3 billion dollars).
Details
The decline in profits of “the largest crude oil company in the world” during the first three months was attributed to the following:
– Decrease in the quantities of crude oil sold, partially offset by an increase in crude oil prices
– Weak profit margins from refining and chemicals operations
– Decline in finance income
So what
Aramco will maintain its huge dividend distributions despite the continuing decline in its profits. It has decided to distribute 116.5 billion riyals (31 billion dollars) for the first quarter. This is in favor of the Saudi government (which directly owns about 82.2% of the company) and other investors.
The distributions include core profit distributions of about 76 billion riyals. In addition to performance-related profit distributions, totaling 40.4 billion riyals (the fourth distribution of performance-related profits).
The company continues its dividend distribution policy, aiming to distribute sustainable and increasing profits. It expects the total dividends to be announced this year to reach 466.1 billion riyals (124.3 billion dollars), an increase of 3% from the previous year.
Some Context
These dividend distributions to investors and the government come amid the budget deficit challenges facing the Saudi economy. These distributions are expected to exceed their equivalent in 2023, which will help finance some of the kingdom’s massive spending plans aimed at diversifying its economy away from oil.
Now What
The importance of the “generous dividend distributions” is increasing, as oil prices continue to remain below the levels needed by Saudi Arabia to balance its budget. This is part of Crown Prince Mohammed bin Salman’s efforts to implement high-cost projects, such as the future NEOM project. He is heavily betting on tourism and entertainment to accelerate the country’s economic transformation.
