Aramco's Giant Profit Dwarfs Joint Earnings of 163 Saudi Stocks

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Ol giant Saudi Aramco was today confirmed as the world's biggest profit machine, making as much as Apple, ExxonMobil and Google put together past year.

For context, Apple's earnings shot up to R851 billion past year while Amazon brought in R141 billion in profits making Aramco's figures stratospheric in comparison. By comparison, ExxonMobil, which is the largest listed company in the world, made earnings before interest, tax and other adjustments of $50bn past year.

Moody's, for its part, also says that Aramco's rating would have been even higher were it not for the close link between the company and the government.

The ratings are considered investment-grade level and indicate low credit risk, but the agencies held off on issuing their top grades to Aramco due to strong links between the Saudi state and the company.

Aramco revealed the impressive state of its finances for the first time as the firm prepares to go to the markets to issue its first bonds.

"In addition, the Government is under no obligation to extend financial support to the Company", it said. It had $86 billion in free cash flow at the end of 2018.

Based on its finances, massive hydrocarbon reserves and low production cost, its stand-alone rating would have been a top AA on an equal footing with worldwide oil companies, Fitch said.

"Funds from operations, which is operation cash flows before working capital changes, is the best measure to compare oil companies' profitability, since Ebitda does not take into account taxation", Dmitry Marinchenko, senior director at Fitch in London, said in an interview.

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Aramco's financial details were put together in a prospectus for a proposed bond sale of roughly $10 billion to fund the acquisition of a $69.1 billion stake in Saudi Arabia's national petrochemicals company.

Fitch said its conservative forecasts show Saudi Aramco's net debt rising to around $US35 billion by 2021, after incorporating the SABIC transaction. In effect, Crown Prince Mohammed bin Salman is using the firm's pristine balance sheet to finance his ambitions.

Aramco reported funds flow from operations of $26 per barrel equivalent of oil past year, according to Fitch.

Fitch's A+ rating for Aramco is one level below the AA- for both Shell and Total.

Last week, Aramco said it would buy a 70 percent stake in Saudi Basic Industries Corp.

Global ratings agencies Fitch and Moody's got rare access to Aramco's accounts which show the firm posting billions in profits.

"Saudi Aramco has many characteristics of a Aaa-rated corporate (top rating), with minimal debt relative to cash flows, large scale of production, market leadership and access in Saudi Arabia to one of the world's largest hydrocarbon reserves", said Rehan Akbar, vice president at Moody's. Yet his ambition to secure a $2 trillion valuation has faced pushback from global investors, prompting a delay in the IPO.

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