April 2020: How is Saudi Arabia enduring plunging oil prices, pandemic?

Despite the continuous economic and social fallouts emerging from the COVID-19 outbreak worldwide, one of the major events that marked the global oil markets in April is the signing of a landmark agreement between OPEC and its allies.

Oil producing countries agreed to reduce oil output by 9.7 million barrels per day (bpd) during May and June 2020, in order to urgently curb crude oversupply and rein in on declining oil prices.

Moreover, the coronavirus pandemic brought about lockdown measures by the Saudi government where businesses have been closed and people confined to their homes for over a month now. These precautionary measures were eased with the beginning of the Holy month of Ramadan, except for Makkah region, the most affected Saudi area.

Argaam compiles a list of key events that took place in April 2020.

Energy

1) Saudi Aramco will supply its customers with 8.5 million barrels per day (bpd) of crude oil starting May 1 following the OPEC deal.

2) OPEC, Russia and other oil producing nations agreed to reduce output by 9.7 million barrels per day (bpd) during May and June.

3) The International Energy Agency (IEA) expected global oil demand to fall by a record 9.3 million barrel per day (mbpd) YoY in 2020, as mobility came to a halt due to the impact of COVID-19 containment measures in 187 countries and territories.

Ramadan measures

4) King Salman ordered to ease the nationwide 24-hour coronavirus-related curfew during Ramadan, except for Makkah.

5) The Saudi Arabian Monetary Authority (SAMA) directed all banks and remittance centers to reopen in compliance with Ramadan and Eid Al Fitr’s working hours, while stressing the importance of social distancing in the workplace.

6) Saudi Arabia revised its curfew hours for Ramadan and allowed residents to go out between 9am and 5pm to shop for essential needs.

Economic Initiatives

7) King Salman approved a new package of economic initiatives to support the private sector, mainly companies operating in the commercial, industrial, agricultural and healthcare fields.

8) The Saudi King also ordered payment of SAR 9 billion in financial support to over 1.2 million citizens working in the private sector facilities.

9) SAMA directed banks to postpone repayment of loan installment for 3 months for Saudi workers supported by the unemployment insurance program (SANED).

10) Moreover, the central bank and the SMEs Loan Guarantee Program (Kafalah) launched a new program that guarantees 95% of total finance granted to SMEs.

11) Several companies donated money to the Health Endowment Fund to support the authorities in combating the virus outbreak, including Saudi Aramco, Southern Cement Co., Najran Cement Co., Yanbu Cement Co., Saudi Research and Marketing Group (SRMG), and ACWA Power.

12) Telecom operators in turn, including Saudi Telecom Co. (STC), Etihad Etisalat Co. (Mobily), and Mobile Telecommunication Company Saudi Arabia (Zain Saudi), exempted quarantined customers from paying their bills for April 2020.

13) Saudi Arabia also signed an agreement worth SAR 995 million with China to conduct 9 million COVID-19 tests in the Kingdom and set up 6 mega labs.

Impact of COVID-19

14) A number of Saudi-listed companies witnessed a significant impact on their operations and financial statements due to the precautionary measures taken to contain the virus.

15) Additionally, 11 listed banks said it is currently difficult to assess the financial impact of the measures, given the inability to determine how long they will be in place.

16) Several fund managers received rent revision requests from the tenants of their respective fund’s commercial and retail properties.

Finance and Markets

17) Financials’ deadline

The Capital Market Authority (CMA) extended deadline for Tadawul-listed companies to disclose their interim financial statements for Q1 2020 to June 22.

18) Q1 2020 positive earnings

A number of listed companies continued to announce their financial results for Q1 2020.

The companies that posted higher profits include Almarai Co., Etihad Etisalat Co., STC, Saudi Ceramic Co., Al Moammar Information Systems Co. (MIS), Yamama Cement Co., Umm Al-Qura Cement Co., Najran Cement Co., Savola Group, National Shipping Co. (Bahri), Zahrat Al Waha For Trading Co., Thob Al Aseel Co., Baazeem Trading Co., Eastern Province Cement Co., Saudi Printing and Packaging Co., Dr. Sulaiman Al Habib Medical Group (HMG), Filling & Packing Materials Mfg. Co. (FIPCO), and Hail Cement Co.

19) Lower profits

On the other hand, the companies that recorded lower profits include Saudi Arabian Fertilizers Co. (SAFCO), Rabigh Refining and Petrochemical Co. (Petro Rabigh), National Petrochemical, Co. (Petrochem), Saudi Industrial Investment Group (SIIG), Saudi Steel Pipe Co., Halwani Bros.,  National Building and Marketing Co., Advanced Petrochemical Co., Arriyadh Development Co., Yanbu National Petrochemical Co., Raydan Cuisines and Restaurants Co., Saudi Automotive Services Co., Saudi Kayan Petrochemical Co., Filling & Packing Materials MFG. Co. (FIPCO) and Herfy Food Services Co.

20) REITs earnings

Several REIT funds disclosed their total net assets for the first quarter of 2020, including AlAhli REIT Fund (1), Mulkia Gulf Real Estate REIT Fund, Al Maathar REIT Fund, Musharaka REIT Fund, SEDCO Capital REIT Fund, Jadwa REIT Saudi Fund, Derayah REIT, Jadwa REIT Al Haramain Fund, Al Rajhi REIT Fund, Swicorp Wabel REIT Fund, and Alkhabeer REIT Fund.

21) Cash dividends

A total of 70 out of 182 Tadawul-listed companies, excluding Saudi Aramco, distributed cash dividends of SAR 63.91 billion for the fiscal year 2019, a decline of 5%, compared to SAR 67.19 billion a year earlier.

22) Dividend freeze

On the other hand, Saudi Public Transport Co. (SAPTCO), Arabian Shield Cooperative Insurance Co., Saudi Chemical Holding Co., and Northern Region Cement Co recommended withholding dividend distribution for FY2019.

23) Tadawul-Nomu

Tadawul announced the calculation and publishing of the Parallel Market Index (Nomu) to be suspended by the end of trading on May 14, 2020.

24) Islamic loans

Saudi conventional banks issued SAR 742.8 billion worth of Sharia-compliant loans in 2019, an 8% increase year-on-year (YoY).

25) Global Medium-Term Note Program

The Ministry of Finance announced, through the National Debt Management Center, the receipt of investors’ subscriptions to its 7th international issuance under the Kingdom’s Global Medium-Term Note Program. The issuance was more than 7 times oversubscribed, with total orders amounting to over $54 billion.

26) AlJazira Sukuk Fund’s IPO

CMA approved a request from AlJazira Capital Co. to sell the units of AlJazira Sukuk Fund in an initial public offering (IPO).

27) Arab Sea

Arab Sea Information Systems Co. began trading on April 15 on Tadawul with symbol 7201 under Information Technology sector and a daily fluctuation limit of 10%.

28) Almarai

Almarai Co. fully redeemed its SAR 787 million Sukuk – Series II and the amount was deposited into the holders’ accounts on March 31. The company announced it will also invest SAR 275 million to expand the existing processing facilities in the poultry segment.

29) Al-Babtain

Al-Babtain Power & Telecommunication Co. (Al-Babtain) signed a medium-term Murabaha facility agreement with Samba Financial Group at SAR 150 million to boost liquidity.

30) Appointments & resignations

Some companies elected new boards and announced appointments and resignations to their boards and executive management teams, including Saudi Aramco, Almarai Co., BATIC Investment and Logistics Co., Saudi Enaya Cooperative Insurance Co., Etihad Atheeb Telecommunication Co., Arab National Bank, The National Co. for Glass Industries (Zoujaj), Shams, SABB Takaful Co., Saudi Paper Manufacturing Co., and The Company for Cooperative Insurance (Tawuniya).

Economy & Investment

31) Saudi Arabia Q1 2020 Budget

Saudi Arabia recorded a total revenue of SAR 192 billion, a decline of 22% year-on-year (YoY), and a budget deficit of SAR 34 billion in Q1 2020. Total expenditures rose 4% YoY to SAR 226 billion during the same quarter.

32) SAMA assets

Assets held by the Saudi Arabian Monetary Authority (SAMA) declined by SAR 70.2 billion month-on-month (MoM) to SAR 1.823 trillion in March 2020.

33) Payment orders

Ministry of Finance disbursed nearly 104,000 payment orders in Q1 2020, at a total value of SAR 210 billion.

34) Credit Ratings

Fitch Ratings affirmed Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at “A” with a stable outlook. On the other hand, Moody's Investor Service updated its credit report for the Kingdom at “A1” with a stable outlook as well.

Banking

35) Loan portfolio

Retail loans rose 19% YoY to SAR 545 billion, representing 36%, while corporate loans rose around 9% YoY to SAR 910.7 billion, accounting for 60% of the total loans, in 2019, issued by 11 Saudi Arabian banks.

Merger & Acquisition

36) STC extended the non-binding memorandum of understanding (MoU) to acquire 55% stake in Vodafone Group’s Egyptian business for additional 90 days.

37) The state-owned oil giant Saudi Aramco is currently in talks with banks to borrow about $10 billion to finance its acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC).

New Contracts

38) Renewables

Spanish group Abengoa, in a consortium with engineering firm SEPCOIII, secured a contract to construct a 600,000 cubic meters per day (m3/d) desalination plant for ACWA Power in Saudi Arabia.

39) Gold mine

Global technology group Wärtsilä secured a contract to supply engineering equipment and provide technical advisory for a 44 megawatts (MW) power plant within the Mansourah & Massarah gold project mine in Saudi Arabia.

40) Shipping

Saudi Ports Authority (Mawani) signed a new build, operate and transfer (BOT) agreement worth more than SAR 7 billion with Saudi Global Ports (SGP) for container terminals at King Abdulaziz Port in Dammam.

41) Fuel

SASCO secured a contract worth SAR 209 million, including VAT, to supply fuel and other derivatives to the General Security in Makkah Region.

Write to Paromita Dey at paromita.d@argaam.com and Christine El Cheikh at christine.elcheikh@argaam.com