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Shifting sands: Saudi Aramco reports

Saudi Aramco, the Saudi Arabian state-owned oil giant that listed with a record breaking $29.4bn initial public offering (IPO) in December, reported a 25% fall in first-quarter net profit to $16.6bn on Tuesday (12 May). However, it maintained its quarterly dividend, keeping it on track to deliver its promised $75bn payout for the year.

Aramco said that its first-quarter payout would be worth $18.75bn but surprised analysts by maintaining the dividend it pays to the Saudi government, whose finances look to be in disarray following the fall in oil prices this year. However, analysts still expect to see the government’s cut being reduced this year.

Over a barrel
It’s been a tempestuous year for oil prices. Brent crude prices fell 66% in the first quarter due to ailing demand and a bitter price war that broke out between Saudi Arabia and Russia in March. Oil traders then witnessed a collapse in oil prices late last month when the May futures contract for US West Texas Intermediate (WTI) crude fell to minus $37 – literally paying buyers to take delivery as global storage capacity dried up.

Since then oil prices have made strong gains thanks to the promise from the Organisation of Petroleum Exporting Countries (OPEC) and other oil-producing nations including Russia (known collectively as OPEC+) to cut oil supply by a record 9.7m barrels a day from May to help shore up prices and curb oversupply.

On Monday (11 May), Saudi Arabia announced it would increase production cuts in June beyond its quota under this deal, prompting a further rise in crude prices. They surged again on Tuesday (12 May) after the US Energy Information Administration lowered its production forecasts for 2020 and 2021, with a barrel of WTI crude gaining more than 8%.

Power to you: Vodafone maintains dividend

Shares in Vodafone the multi-national mobile and broadband provider jumped more than 5% on Tuesday morning (12 May) after the company reported a notable return to profit and promised to maintain its annual dividend of 8p per share at a time when most of its FTSE 100 peers are freezing theirs.

During the first quarter, the company’s revenue rose 3% to €44.97bn (from €43.7bn a year ago) and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 2.6% to €14.9bn. This means that for the financial year to the end of March 2020, the telecom giant delivered a pre-tax profit of €795m following a €2.6bn loss in the previous year.

The results reflect a big improvement in net losses, which fell to €455m in the year to the end of March after they topped €7.6bn the year before due to losses on its discontinued Indian operations.

Even so, the company warned of a weaker performance this year due to the coronavirus crisis.

Quilter Market Explainer

In response to the severe market volatility that has accompanied the outbreak of the global coronavirus pandemic, Quilter has launched the Quilter Market Explainer, a special weekly webcast for advisers and clients.

All our previous broadcasts in this series are available on demand, please click on the play button.

Today’s Explainer aired at midday and featured Stuart Clark from Quilter Investors alongside David Miller and Carly Moorhouse from Quilter Cheviot, discussing how the coronavirus pandemic is affecting emerging markets from an investment perspective and whether opportunities remain in some of the potentially faster-growing economies of the world.

Click here to listen to the recording.

These webcasts now run at midday every Friday throughout the virus lockdown period.