May 2020: Saudi Arabia highly positioned globally for oil output cut, economic stimuli

 

While the world is still fiercely fighting the COVID-19 pandemic and its repercussions, economic challenges prevail across the board.

 

Saudi Arabia has shown once again its willingness to position itself as a key player in balancing global oil markets through committing to additional output reduction, and further advance on the international level through inducing economic stimulus packages for local and foreign investors.

 

Locally, the Kingdom also rolled out numerous measures to mitigate the impact of the coronavirus on the economy including easing the curfew, allowing certain economic and commercial activities to restart operations, as well as resuming domestic flights and intercity services.

 

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

 

Energy

 

1) Ministry of Energy directed Saudi Aramco to reduce its crude production for June by extra voluntary amount of 1 million barrels per day (mbpd), in addition to the reduction committed by the Kingdom under the latest OPEC+ deal on April 12.

 

2) Saudi Arabia’s deeper oil output cuts in June are sketched to expedite draining a global supply glut and rebalancing the oil market, according to Energy Minister Prince Abdulaziz Bin Salman.

 

3) Saudi Arabia and Russia reaffirmed their commitment to achieving market stability and expediting rebalancing the oil market.

 

4) The Fadhili gas plant increased its processing capacity to 2 billion cubic feet a day (cf/d) in Q1 2020 from 1.5 billion cf/d by the end of 2019.

 

COVID-19 measures

 

5) Saudi Arabia announced that curfew will end starting June 21, except for Makkah. Movement restrictions will be lifted in three phases.

 

6) The General Authority of Civil Aviation (GACA) will resume domestic flights starting May 31 through national airlines.

 

7) Al-Jouf Airport and Arar Airport will resume domestic flights as of June 1.

 

8) Saudi Arabian Airlines (Saudia) will resume domestic flights on May 31.

 

9) Flynas will also resume limited domestic flights as of May 31.

 

10) Saudi Public Transport Co. (SAPTCO) will resume intercity services on May 31.

 

11) Public sector employees will gradually return to workplaces in all government agencies and offices as of May 31.

 

COVID-19 initiatives

 

12) Saudi Arabian Monetary Authority (SAMA) extended the support program for point-of-sales (POS) and e-commerce fees across all private sector establishments for additional 3 months ending on Sept. 14, 2020.

 

13) The General Directorate of Passports extended the validity of all tourist visas for 3 months, free of charge.

 

14) The cost-of-living allowance will be discontinued as of June 2020 and value-added tax (VAT) will be increased from 5% to 15% as of July 2020, in line with the government’s initiative to support the economy.

 

15) Saudi Arabia will reallocate total spending for 2020 to other areas of development including the private sector and healthcare-related projects.

 

COVID-19 impact

 

16) According to Minister of Industry and Mineral Resources Bandar Alkhorayef, the crisis led to gains that will serve the sector in the long term, as it revitalized the healthcare and medical supplies industries in the Kingdom, and government initiatives helped address cash flow challenges.

 

17) Insurance policies sales declined considerably.

 

Royal Initiative

 

18) King Salman directed the disbursement of SAR 1.85 billion as Ramadan aid for social security beneficiaries.

 

Finance and Markets

 

19) 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 Maharah Human Resources Co. (Maharah), Saudia Dairy & Foodstuff Company (SADAFCO), Astra Industrial Group, Dur Hospitality Co. (Dur), Aldrees Petroleum & Transport Services Co. (Aldrees), Abdullah Al Othaim Markets Co.,  National Medical Care Co. (Care), Saudi Industrial Services Co. (SISCO), Saudi Company for Hardware (SACO), The National Agricultural Development Company (NADEC), Arabian Cement Co., Middle East Specialized Cables Co. (MESC), Saudi Advanced Industries Co. , United Wire Factories Co. (Aslak), National Commercial Bank (NCB), Saudi Cement Co., Southern Province Cement Co., Samba Financial Group (Samba), Al Rajhi Company for Cooperative Insurance (Al Rajhi Takaful),  Al-Jouf Agricultural Development Co. (Al Jouf), Electrical Industries Co. (EIC), Jazan Energy and Development Co. (JAZADCO), Al Yamamah Steel Industries Co., The Company Cooperative Insurance (Tawuniya) and Al Jouf Cement Co.

 

20) Lower profits

 

The companies that recorded lower profits or losses include Saudi Basic Industries Corp. (SABIC), Saudi Electricity Co. (SEC), Middle East Paper Co. (MEPCO), Saudi Research and Marketing Group (SRMG), Aseer Trading, Tourism and Manufacturing Co. (Aseer), Arab Sea Information Systems Co. (Arab Sea), Takween Advanced Industries Co., The Saudi Arabian Oil Co. (Saudi Aramco), Sadara Chemical Co., Al Rajhi Bank, Banque Saudi Fransi (BSF), Alandalus Property Co., Bank Albilad, Alinma Bank, Riyad Bank, Saudi British Bank (SABB), Sahara International Petrochemical Co. (Sipchem), Dallah Healthcare Co., Saudi Investment Bank (SAIB), Al Abdullatif Industrial Investment Co. (AlAbdullatif), Saudi Airlines Catering Co., Buruj Cooperative Insurance Co., Al Khaleej Training & Education Co., Bank AlJazira, Zamil Industrial Investment Co., Fitaihi Holding Group, Nama Chemicals Co., Arab National Bank (ANB) and Sadara Chemical Co.

 

21) Cash dividends

 

A number of companies and REITs recommended or distributed dividend for H1 and H2 2019, FY 2019, Q1 2020 and FY 2020 which include Zahrat Al Waha For Trading Co., Jadwa REIT Saudi Fund, Qassim Cement Co., Bank Aljazira, Albilad Saudi Sovereign Sukuk ETF, Saudi Arabia Refineries Co. (SARCO), Saudia Dairy and Foodstuff Co. (SADAFCO), Al-Jouf Agricultural Development Co, Abdullah Al Othaim Markets Co., Yanbu National Petrochemical Co. (Yansab), Dr Sulaiman Al Habib Medical Group, Makkah Construction and Development Co., Saudi Aramco, Banque Saudi Fransi, Saudi Automotive Services Co. (SASCO), Bawan Co., Saudi Arabia Fertilizers Co. (SAFCO), Saudi Pharmaceutical Industries and Medical Appliances Corp's (SPIMACO), Alandalus Property Co., Halwani Bros, Bonyan REIT Fund and Leejam Sports Co. (Fitness Time).

 

22) Dividend freeze

 

On the other hand, Saudi Company for Hardware (SACO), Fitaihi Holding Group, Saudi Chemical Holding Co., Astra Industrial Group, Chubb Arabia Cooperative Insurance Co., and Saudi Marketing Co. (Farm Superstores) recommended withholding dividend distribution for H2 2019 and FY 2019.

 

23) Appointments & resignations

 

Some companies elected new boards and announced appointments and resignations to their boards and executive management teams, including  Al Alamiya for Cooperative Insurance Co. (Al Alamiya), Abdullah A. M. Al-Khodari Sons Co. (Al-Khodari), Saudi Re for Cooperative Reinsurance Co. (Saudi Re), Fitaihi Holding Group, Salama Cooperative Insurance Co. (Salama), Al Gassim Investment Holding Co. (GACO), Arabian Centres Co., National Agricultural Marketing Co. (Thimar), SACO, and AXA Cooperative Insurance Co.

 

Credit facilities

 

24) Saudi Aramco closed a $10 billion one-year loan provided by a group of 10 banks.

 

25) Al Moammar Information Systems Co. (MIS) signed a SAR 290 million Shariah compliant financing agreement with Riyad Bank.

 

26) National Industrialization Co.’s (Tasnee) shareholders approved the business transactions and contracts concluded with BSF in the fiscal year 2019.

 

27) Makkah Construction and Development Co. received the second tranche of the Shariah compliant credit facility provided by Bank Albilad, valued at SAR 50 million.

 

28) Takween Advanced Industries Co. signed an agreement to reschedule the remaining part of SAR 429.4 million Murabaha facilities from a total of SAR 1.3 billion with ANB, Samba and Bank Albilad.

 

Capital hike

 

29) NADEC shareholders approved the capital increase from SAR 847 million to SAR 1.016 billion through issuance of 20% bonus shares.

 

30) United Electronics Co.’s (eXtra) shareholders approved a 20% capital hike to SAR 600 million from SAR 500 million through the issue of bonus shares.

 

31) Saudi Fisheries Co.’s (Alasmak) shareholders approved a capital increase from SAR 101.1 million to SAR 400 million, through a rights issue of 29.8 million shares.

 

32) Allianz Saudi Fransi Cooperative Insurance Co. published its rights issue prospectus for SAR 400 million capital hike.

 

33) Capital Market Authority (CMA) approved Al-Samaani Factory For Metal Industries Co.’s request to increase its capital from SAR 15 million to SAR 25 million through the issue of 1 bonus share for every 1.5 shares held.

 

Share buyback

 

34) Electrical Industries Co.’s (EIC) shareholders approved buying back 350,000 treasury shares under the Employee Long Term Incentive Program (LTIP).

 

35) Zamil Industrial Investment Co.’s shareholders approved buying back 5%, or 3 million treasury shares, worth SAR 50 million.

 

36) Bank Albilad’s shareholders approved buying back 5 million treasury shares, to be allocated within the Employee Stock Incentive Plan.

 

Mergers & Acquisitions

 

37) Public Investment Fund (PIF) acquired stakes in several leading US companies, such as Boeing Co., Citigroup Inc., Facebook Inc., Walt Disney Co. and Bank of America Corp.

 

38) Dallah Healthcare Co. signed two definitive agreements in connection with the sale and purchase of shares equivalent to 58.64% in Care Shield Holding Co.

 

Tadawul

 

39) Saudi Stock Exchange (Tadawul) will resume official trading hours for all listed securities as of May 31.

 

40) The second tranche of the fifth phase of Saudi Arabia's inclusion in FTSE Russell Emerging Market Index will start on June 22, 2020.

 

41) Sumou Real Estate Company commenced trading on Nomu Parallel Market, under the symbol 9511, with a daily fluctuation limit of 20%.

 

Economy & Investment

 

42) Foreign investment in Saudi Arabia increased by 14% year-on-year (YoY) to around SAR 1.78 trillion in 2019, compared to SAR 1.56 trillion a year earlier.

 

43) Ministry of Investment issued 348 foreign investment licenses in Q1 2020, up by 19% year-on-year.

 

44) The National Industrial Development and Logistics Program (NIDLP) contributed in granting SAR 5 billion worth loans to over 40 Saudi exporters, and increased private sector investments to more than SAR 35 billion.

 

45) Saudi Aramco ranked 5th on Forbes 2020 Global 2000 list, which includes the world’s largest public companies based on asset value, market value, net profit and revenues.

 

46) Saudi insurance per capita spending grew 5% year-on-year (YoY) to SAR 1,105 by the end of 2019, data from the SAMA showed.

 

47) CMA issued penalty decisions against 199 violators in 2019.

 

48) Moody’s Investors Service affirmed Saudi Arabia's rating at “A1”, but cut its future outlook from stable to negative.

 

Real Estate

 

49) The value of Saudi Arabia's real estate transactions plunged 72% year-on-year (YoY) to SAR 3.89 billion in March-April 2020, the lowest since 2008.

 

50) The Red Sea Development Company (TRSDC) awarded a solid waste management contract to a joint venture between Averda and the Saudi Naval Support Company.

 

Fuel

 

51) Saudi Automotive Services Company (SASCO) received a notice from Saudi Aramco regarding the retroactive increase of profit margin of fuel stations and service centers amounting to SAR 112 million including VAT.

 

52) Aldrees Petroleum and Transport Services Co. (Aldrees) received a notice from Saudi Aramco regarding the retroactive increase of profit margin of fuel stations and service centers amounting to SAR 287 million.

 

Cement output

 

53) The aggregate sales of 17 Saudi cement producers declined 29% to 2.89 million tons in April 2020, compared to 4.02 million tons in the same month last year.

 

Write to Christine El Cheikh at christine.elcheikh@argaam.com and Parag Deulgaonkar at parag.d@argaam.com