Aramco: the most profitable company in the world

Listen this article

The revealed net income of the Saudi state oil company surpassed those of Apple, Facebook, and Microsoft together

A few days ago the data of Aramco, the Saudi state oil company that had been kept secret since its nationalization in the 1970s, was released. With this information revealed, it was confirmed that this company is the most profitable in the world, surpassing the net result of Facebook, Apple, and Microsoft.

Leer en español: Aramco: la empresa más rentable del mundo

Moody's and Fitch showed that Aramco is positioned as the first in the world with a profit of $111,100 million in 2018. This is an impressive result considering that they also paid $ 102 billion in taxes to the state last year, according to Bloomberg.

To have a reference, Apple had net income of $ 59.5 million, and Samsung of $ 35.1 million.

This oil company produced around 10% of the oil worldwide last year. Also, Bloomberg also claims that it spends less than $ 4 to produce a barrel, although they do not generate as much cash for each unit as other large oil companies because of the high taxes they must pay.

The high taxes that are charged to him are due to the kingdom's high dependence on the company to finance its social and military programs, as well as the luxurious lives of hundreds of royalty.

Who is behind the oil giant?

Aramco has been from the Saudi State since the end of the 70s. On the official website of the oil company, there are also the names of those who belong to the board of directors. Here are people like Khalid Al-Falih, chairman of the board since 2015 and Minister of Energy of Saudi Arabia. The Minister of Foreign Affairs, Ibrahim Al-Assaf, is also on the list. Also, there are the finance ministers, Mohammed Al-Jadaan and Mohammad Al-Tuwaijri.

On the other hand, there are advisors within this board such as Mark Moody Stuart, president of other oil companies such as Shell and Andrew Liveris, who is also a member of the board of directors of IBM.

What information was revealed and why?

The information that had been confidential for decades was revealed by Moody's to court investors for its first share issue, which will be one of the largest in the world. It is the first time that Aramco will seek financing in international markets.

The privatization of 5% of the company was announced in 2017 by the Saudi Government, although last year it was delayed and, now, it is planned to be done in 2021.

Moody's and Fitch, after obtaining the information, assigned the oil company the fifth-highest investment grade, A +, considered low risk. According to the country, this was granted to Saudi sovereign debt, although it is lower than oil companies such as Exxon, Shell and Chevron.

This exit to the stock exchange aims to obtain funds to finance the plans of Mohamed bin Salman, the crown prince, which is based on diversifying the country's energy sources and reducing its dependence on oil.

Read also: Ecopetrol will advance with fracking despite not convincing Wall Street

Also, according to Gulf News, the company is also preparing to pay a majority acquisition in the Saudi Basic Industries Corp. (SABIC) national petrochemical group worth around $ 69 billion. This is a Plan B to generate money for the country's agenda after having postponed the IPO (initial public offering).

The newspaper El Espectador clarified that the figures shown give investors the data set necessary to evaluate the possible value of this agreement. They also claim that, given that the accounts also offer investors in sovereign bonds a view of the real financial health of the realm.

According to Richard Segal, a senior emerging-market analyst at Manulife Asset Management, told Bloomberg, "this presentation has been eagerly awaited for some time, and high demand has already preceded it."

However, among all these figures revealed, Bloomberg also published other information regarding health to the company, which should also be taken into account. Among these is, for example, the risks that Aramco faces as a target of missiles and hackers. Of this second they have been victims of successful cyber attacks.
There is also a risk in the face of climate change and the impact of US antitrust laws. UU proposals in OPEC.

LatinAmerican Post | Valentina Moya

Translated from "¿Cuál es la empresa más rentable del mundo? Conozca a Aramco"