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World’s Most Profitable Company Sees Profits Slump By 73% As Pandemic Chokes Oil Sales

Saudi Arabia’s state-controlled oil giant reported a 73% drop in second-quarter profit and maintained plans to pay $75 billion in annual dividends, a vital source of cash for a government saddled with a swelling deficit.

Saudi Aramco, which Apple Inc. recently dethroned as the world’s most valuable listed company, said profit in the three months ending in June declined to 24.6 billion riyals ($6.6 billion) compared with 92.6 billion a year earlier, according to a statement. Aramco will pay a second-quarter dividend of $18.75 billion, most of it to the government, the company’s main shareholder.

The decrease in profit was due mainly to “the impact of lower crude oil prices and declining refining and chemicals margins,” Aramco said in the statement to the Saudi stock exchange.

The world’s biggest oil exporter has been hit hard by global economic shutdowns aimed at halting the spread of the coronavirus. Saudi Arabia generates most of its revenue from crude, which has slumped 33% this year. The kingdom’s deficit, meanwhile, is set to exceed 12% of annual gross domestic product, according to the International Monetary Fund. That would be the widest since 2016, adding pressure on Aramco to maintain its dividend payments.

Aramco’s shares are down about 7% this year at 32.95 riyals on Thursday, though still higher than the 32-riyal price the government sold them for in an historic initial public offering in December.

In June the company completed a $70 billion acquisition of a stake in Saudi Basic Industries Corp. from the kingdom’s sovereign wealth fund, a deal that transfers cash from one arm of the government to another. The acquisition was funded by a loan from the Public Investment Fund that Aramco plans to finish repaying in 2028.

-Bloomberg

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