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New Straits Times
6 days ago
- Business
- New Straits Times
Saudi Aramco profit drops as it flags cost cuts, divestments
DUBAI: Saudi Arabian oil company Aramco reported a 22 per cent drop in second-quarter profit on Tuesday, and the world's top oil exporter said it was cutting costs and looking to divest assets as crude prices drop and its debt mounts. The firm's generous dividends, a key source of funding for ambitious plans to cut the kingdom's reliance on oil, will be about a third lower this year. Aramco reported its 10th decline in quarterly net profit to US$22.7 billion in the quarter through June, from US$29.1 billion a year earlier. Aramco's shares were up 0.3 per cent at 23.98 riyals. They have dropped about 14.5 per cent this year, trailing industry peers. Adjusted net income fell 13.7 per cent to US$24.5 billion, above a company-provided median analyst estimate of US$23.7 billion. "What we're looking at across the portfolio is to unlock capital that is currently locked into low - relatively low-return (assets) ... invest it in our core investment, which are high return," CFO Ziad Al-Murshed told reporters. He declined to name the assets, but said: "it is your typical low-return that is tied in things like infrastructure." Reuters reported last month that Aramco was close to a deal to raise US$10 billion from a group led by BlackRock, and is considering selling up to five gas-powered power plants to raise up to US$4 billion. Total borrowing rose to US$92.9 billion at June 30 from US$74.4 a year prior. Gearing, a measure of indebtedness, rose to 6.5 per cent from minus 0.3 per cent a year earlier and 5.3 per cent the previous quarter. Aramco is looking at different geographies, currencies and instruments for debt issuance, Al-Murshed said. The company, long a reliable source of revenue for the Saudi state, confirmed a previously outlined US$21.3 billion in total dividends for the second quarter, about US$200 million of which is performance-linked dividends. DIVIDENDS SINK Aramco in March outlined total dividends of US$85.4 billion for 2025 - a 31 per cent drop from more than US$124 billion the previous year. The performance-linked component is set to plunge 98 per cent from 2024 to US$900 million as free cash flow dwindles. Free cash flow dropped nearly a fifth year-on-year in the second quarter to US$15.2 billion. For the Saudi government, which owns 81.5 per cent of Aramco shares directly and another 16 per cent through its sovereign wealth fund PIF, dividends are a critical source of income, particularly as it invests to diversify the economy away from oil. Oil generated 62 per cent of the government's revenue last year, and the International Monetary fund estimates the kingdom needs oil prices at more than US$90 a barrel to balance its 2025 budget. Aramco's average realised crude oil price was US$66.7 a barrel in the quarter, down from US$76.3 in the first quarter and US$85.7 in the second quarter of 2024. "We've pencilled in for Saudi Arabia to run a budget deficit of 5.0 per cent of GDP this year," said James Swanston, senior economist at Capital Economics, adding the government would likely overshoot its annual borrowing plan. That would be more than double the 2.3 per cent deficit, or about US$27 billion, the kingdom projected in November for the 2025 budget.
Leaders
03-06-2025
- Business
- Leaders
Saudi Aramco Completes $5 Billion Bond issuance
Saudi oil giant Aramco has completed a $5 billion issuance of bonds across three tranches under its Global Medium Term Note Program, according to the Saudi Press Agency. Saudi Aramco has classified the three tranches as follows: $1.5 billion in senior notes maturing in 2030 with a coupon rate of 4.750% $1.25 billion in senior notes maturing in 2035 with a coupon rate of 5.375% $2.25 billion in senior notes maturing in 2055 with a coupon rate of 6.375% The company also noted that the tranches were priced on May 27, 2025. Meanwhile, the notes were successfully listed on the London Stock Exchange. Aramco's Executive Vice President of Finance and CFO Ziad Al-Murshed stated that the strong demand for the new bond offering stands as a testament to global investors' confidence in Aramco's financial resilience and robust balance sheet. 'Pricing the offering with no new issuance premium across all tranches clearly reflects Aramco's unique long-term credit proposition,' Al-Murshed added. Related Topics: CST, Aramco Digital Launch AI-Powered Crowd Management Trial at Holy Sites China Is Major Market for Saudi Aramco: CEO Saudi Aramco Records $106bn Profits in 2024 Short link : Post Views: 43 Related Stories
