Saudi Aramco eclipses Apple as world’s top-earning company

Agencies
April 2, 2019

Dubai, Apr 2: Saudi Aramco, the world’s biggest oil producer, made core earnings of $224 billion last year, almost three times as much as Apple, figures from the state-owned company showed on Monday ahead of its debut international bond issue.

Aramco revealed its financials in order to obtain a public rating and start issuing public international bonds.

Despite the huge profit, the state-owned oil giant was rated by credit agencies at par with Saudi Arabia, meaning the Kingdom’s economy will weigh on Aramco’s cost of borrowing as it prepares its bond market debut.

Saudi energy minister Khalid Al-Falih said earlier this year the planned bond sale would raise around $10 billion, but banking sources said the transaction could be larger.

Rating agencies Fitch and Moody’s rated Aramco A+ and A1 respectively, but both said that without sovereign rating constraints Aramco would be in the same league as better-rated international oil companies like Exxon Mobil, Chevron and Shell.

Fitch put Aramco’s standalone credit profile at “AA+.”

Credit ratings allow investors to compare and assess the credit quality of bond issuers and their debt securities, and are important in determining how much borrowers have to pay.

The planned bond deal is Aramco’s inaugural transaction in international markets. It still plans to launch an initial public stock offering or IPO in 2021, expected to generate $100 billion, having postponed its flotation from 2018.

“Saudi Aramco has many characteristics of a Aaa-rated corporate, 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, senior credit officer at Moody’s.

The group has 257 billion barrels of oil equivalent, representing over 50 years of reserves based on current production levels, according to a company presentation given to investors and seen by Reuters.

Aramco will start meeting international bond investors this week for the much anticipated debt transaction, expected to attract hefty demand from global investors.

The planned bond sale follows the announced acquisition of a 70 percent stake in Saudi Basic Industries Corp. (SABIC), the world’s fourth-largest petrochemicals maker, from Saudi Arabia’s Public Investment Fund (PIF), in a deal worth $69.1 billion.

The bond sale, which may be split into tranches with maturities ranging from three to 30 years, is not linked to the SABIC acquisition, Aramco said.

Aramco intends to pay for the acquisition in tranches, with 50 percent at the closing of the transaction and the remainder over a two-year period, from internal cash generation and, potentially, other resources, the company said in its presentation.

Aramco had earnings before interest, tax and depreciation (EBITDA) of $224 billion in 2018. By contrast Apple, which according to Forbes was the world’s top company in terms of profits last year, had normalized core earnings, or EBITDA, of $81.8 billion.

Moody's Investors Service said Aramco posted a net profit of $111.1 billion in 2018 — far higher than the combined net earnings of the five international oil majors — and generated $359.9 billion in revenues. Last year, Apple posted nearly $50 billion in net profits.

“Saudi Aramco has an extremely strong liquidity position,” Moody’s said, with $48.8 billion in cash against $27 billion in reported debt.

“The company’s balance sheet leverage has been conservatively managed,” said the agency, adding it has $46.8 billion of bank facilities, of which about $25.5 billion was still available.

Aramco representatives will meet with investors in Asia, Europe and the US through Friday, April 5, according to a document issued by one of the banks leading the deal.

The roadshow has no planned stop in the Middle East, showing the transaction is mostly aimed at international buyers.

“The blue-chip company is extremely profitable, free cash flow positive, has low leverage and strong reserves for the future, making it a compelling investment case for global investors,” said Parth Kikani, fixed income director at Emirates NBD Asset Management.

Aramco is presenting itself to global investors as an “anchor of global energy” and a global energy provider of systemic importance, producing one of every eight barrels of global crude, according to the investor presentation.

It had $86 billion in free cash flow at the end of 2018.

The SABIC acquisition, at the heart of Aramco’s push to expand in the downstream business, will not impact Aramco’s rating, the company said in the presentation.

Aramco has hired Lazard as financial adviser for the planned bond deal, and JP Morgan and Morgan Stanley as global coordinators. They are joined by Citigroup, Goldman Sachs, HSBC and NCB Capital as bookrunners.

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Agencies
July 13,2020

Jaipur, July 13: Amid a deepening political crisis in Rajasthan where the number 2 leader of the Congress party Sachin Pilot has revolted, over 200 Income Tax (I-T) sleuths raided the residences and properties of two of Chief Minister Ashok Gehlot’s close confidants.

The Income Tax department has carried out searches at over a dozen locations linked to Congress leader Dharamender Rathore as well as jewellery firm owner Rajiv Arora, both of whom are considered close to Gehlot.

Officials said that the raids that are underway in Jaipur, Kota, Delhi, and Mumbai were done after a complaint of tax evasion was made. Under the scanner, they said, are transactions that were made outside the country.

The curious timing of the Income Tax department’s action against Gehlot’s aides has made the Congress accuse the sleuths of acting on the behest of the BJP.

Congress spokesperson Randeep Singh Surjewala tweeted: “After all, BJP's lawyers came on the field. The Income Tax Department started raids in Jaipur. When will ED arrive?”

The Congress is facing a cliffhanger in Rajasthan after the open rebellion by deputy chief minister Sachin Pilot, who on Sunday night claimed that he had the support of 30 MLAs and that Gehlot was leading a minority government in the state.

However, Congress leader Avinash Pande on Monday said 109 MLAs have signed a letter of support to the chief minister, well above the majority mark of 100. The party has issued a whip to all the MLAs, asking them to attend the Congress Legislature Party meeting at 10.30 am. 

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News Network
February 9,2020

New Delhi, Feb 9: Calling India a "long-standing friend", Sri Lankan Prime Minister Mahinda Rajapaksa on Saturday thanked Prime Minister Narendra Modi for visiting his country in the aftermath of last year's Easter Sunday terror attacks and outlined that New Delhi has always helped Colombo in its fight against terrorism.

In a joint press briefing with PM Modi, Mahinda Rajapaksa said he hopes that India will continue to help Sri Lanka fight terrorism.

Mahinda Rajapaksa expressed his gratitude to PM Modi for the neighbourhood first policy and the priority India gives to Sri Lanka.

"We had agreed that our cooperation is multifaceted and priority is given to a number of areas including security, economy, culture and social sectors. Part of our discussions centered on cooperation with regard to the security of the two countries. India has always assisted Sri Lanka to enhance our capacity, capabilities in intelligence and counter-terrorism. We look forward to getting continued support in this regard," he said.

"I thank the Prime Minister for visiting Sri Lanka in the aftermath of the Easter Sunday terror attacks that provided us with immense strength to come to terms with the tragedy. We also appreciate Prime Minister Modi's $400 million line of credit to enhance the economy of Sri Lanka and another $50 million line of credit for fighting terrorism," he added.

The Sri Lankan president urged PM Modi to consider further assistance to expand housing projectS all over Sri Lanka to benefit people from rural areas.

"The Prime Minister and I discussed how Sri Lanka and India can work together in the field of economy. India is among the world's fastest growing economies. I discussed with PM Modi how Sri Lanka could benefit from certain economic sectors where India is in a strong position," he said.

Concluding his statement, Mahinda Rajapaksa said, "India is our closest neighbour and a long-standing friend. The close historical links...provided a solid foundation to our ties."

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News Network
February 14,2020

New Delhi/Washington, Feb 14: India has offered to partially open up its poultry and dairy markets in a bid for a limited trade deal during US President Donald Trump's first official visit to the country this month, people familiar with the protracted talks say.

India, the world's largest milk-producing nation, has traditionally restricted dairy imports to protect the livelihoods of 80 million rural households involved in the industry.

But Prime Minister Narendra Modi is trying to pull all the stops for the US President's February 24-25 visit, aimed at rebuilding bonds between the world's largest democracies.

In 2019, President Trump suspended India's special trade designation that dated back to 1970s, after PM Modi put price caps on medical devices, such as cardiac stents and knee implants, and introduced new data localization requirements and e-commerce restrictions.

President Trump's trip to India has raised hopes that he would restore some of the country's US trade preferences, in exchange for tariff reductions and other concessions.

The United States is India's second-largest trade partner after China, and bilateral goods and services trade climbed to a record $142.6 billion in 2018. The United States had a $23.2 billion goods trade deficit in 2019 with India, its 9th largest trading partner in goods.

India has offered to allow imports of US chicken legs, turkey and produce such as blueberries and cherries, government sources said, and has offered to cut tariffs on chicken legs from 100 per cent to 25 per cent. US negotiators want that tariff cut to 10 per cent. The Modi government is also offering to allow some access to India's dairy market, but with a 5 per cent tariff and quotas, the sources said. But dairy imports would need a certificate they are not derived from animals that have consumed feeds that include internal organs, blood meal or tissues of ruminants.

New Delhi has also offered to lower its 50 per cent tariffs on very large motorcycles made by Harley-Davidson, a tax that was a particular irritant for President Trump, who has labelled India the "tariff king." The change would be largely symbolic because few such motorcycles are sold in India.

President Trump will be feted in PM Modi's home state of Gujarat, then hold talks in New Delhi and attend a reception that the hosts have promised will be bigger than the one organised for former president Barack Obama in 2015.

But it is far from clear whether India's offers will be enough to satisfy US Trade Representative Robert Lighthizer, who cancelled plans for a trip to India this week. Instead, he has held telephone talks with Commerce Minister Piyush Goyal.

The US dairy industry remained sceptical on Thursday that a viable deal is at hand.

"We're always looking for market access, but in terms of India, as of today I'm not aware of any real progress going on," said Michael Dykes, president of the International Dairy Foods Association and a member of USTR's agricultural trade policy advisory committee.

Mr Dykes said the US dairy industry was looking for access in viable commercial quantities.

A USTR spokesman and India's trade ministry did not respond to requests for comment.

A parliament panel is reviewing a draft data privacy law that imposes stringent controls over cross-border data flows and gives the government powers to seek user data from companies.

It is not clear whether it will be passed, or in what form, but the possibilities have unnerved US companies and could raise compliance requirements for Google, Amazon.com Inc, and Facebook.

The draft law is not part of the trade discussions, Indian officials say, because the issue is too difficult to resolve at the same time.

"The privacy and localization piece will be raised independently and in concert with the trade discussions," said a Washington-based source with knowledge of the US administration's thinking.

President Trump on Tuesday was non-committal about sealing a trade deal before his visit. "If we can make the right deal, we'll do it," he told reporters.

Two US sources said progress had been made on proposed alterations to the medical device price caps. India's new import tariffs on medical devices, walnuts, toys, electronics and other products on February 1 surprised US negotiators, however.

The new tariffs were aimed at China, which also makes medical devices, according to an Indian government source. "We have to protect our market and our companies," the source said.

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