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Saudi Aramco pushes ahead of Apple as the world's most profitable company

Saudi Aramco's net profits reached $111 billion last year, according to a report published Monday by Moody's Investors Services that provides a rare glimpse into the state-owned oil firm's finances before it issues its first bonds in international markets. That places Aramco ahead of some of the world's most profitable firms. 

By contrast, Apple booked a net profit of about $60 billion in its last full year, Royal Dutch Shell had net income of $23 billion and Exxon Mobil $21 billion.

The plan to issue its first bonds to international investors are part of Prince Mohammed's plans, who is also pursuing an IPO for the oil business, according to Bloomberg News. The IPO, which could be the biggest in history, was delayed last year after a rise in crude oil prices lessened the need to take Aramco public. The IPO is part of the country's plan to diversify into businesses other than oil.

In another assessment issued Monday, Fitch Ratings said Aramco posted profits of $224 billion before interest, tax, depreciation and amortization. 

"Saudi Aramco's per-barrel profitability significantly improved in 2017 as the state has reduced the company's tax rate to 50 percent from 85 percent, and started to compensate the company for income forgone as a result of Saudi Aramco's selling some of its products to domestic customers at regulated prices," the Fitch analysts noted.

Revenue: $355.9 billion

Moody's said the oil giant's revenue hit $355.9 billion last year and that it produced 10.3 million barrels per day of crude oil in 2018.

Moody's said Aramco paid $58.2 billion in dividends in 2018 and $50.4 billion in 2017. It remains unclear exactly how these dividends are distributed within the Saudi monarchy and its ruling family.

Fitch said Aramco accounted for around 70 percent of the Saudi government's budget revenue between 2015-2017, but it wasn't immediately clear if that figure included the dividends mentioned by Moody's.

Tax rate

In anticipation of a partial listing of Aramco on an international exchange, the Saudi government in 2017 reduced Aramco's tax rate from 85 percent to 50 percent. Such moves are part of an effort by Saudi Arabia to create new income streams and lessen the government's dependence on oil for revenue.

In their first-ever grade assessment for Aramco, Fitch issued the firm an A+ rating, while Moody's gave it it's A1 rating.

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. Specifically, Fitch noted "the influence the state has on the company through regulating the level of production, taxation and dividends."

Bond sale

The ratings agencies issued their reports on the same day that Aramco said it will start to meet with investors about selling its bonds which, if issued, would be priced in dollars and traded on the London Stock Exchange. The bonds are expected to help pay for Aramco's $69 billion acquisition of majority shares in Saudi petrochemical firm SABIC from the kingdom's sovereign wealth fund.

Fitch said its conservative forecasts show Saudi Aramco's net debt rising to around $35 billion by 2021, after incorporating the SABIC transaction.

The $69 billion deal with SABIC pumps capital into the Public Investment Fund, which is overseen by Crown Prince Mohammed bin Salman.

Prince Mohammed has transformed the fund to back major development projects throughout the kingdom amid delays to an initial public offering of Aramco, which he'd touted as a way to raise capital for the PIF's projects.

The deal was struck after the crown prince's early efforts at attracting Western investors for his social and economic transformation plans suffered a setback following the killing of Washington Post columnist Jamal Khashoggi by Saudi agents inside the country's consulate in Istanbul last year.

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