Saudi Aramco was the world's most profitable company in 2018 with net income of $111.1 billion, easily outstripping U.S. behemoths including Apple Inc. and Exxon Mobil Corp, Bloomberg reported with reference to Moody's Investors Service.
Saudi Aramco has been rated A+ by Fitch in its first-ever credit rating. Fitch said its A+ rating reflects the "strong links" between the company and the kingdom, and the influence the state has on Aramco through regulating the level of production, taxation and dividends.
Aramco generated earnings before interest, tax and depreciation (EBITDA) of $224 billion in 2018, Fitch said, surpassing ExxonMobil, the world’s largest listed oil firm.
The kingdom’s dependence on the company to finance social and military spending, as well as the lavish lifestyles of hundreds of princes, places a heavy burden on Aramco’s cash flow. Aramco pays 50% of its profit on income tax, plus a sliding royalty scale that starts at 20% of the company’s revenue, according to Bloomberg.
Aramco reported cash flow from operations of $121 billion and $35.1 billion in capital spending, and paid $58.2 billion in dividends to the Saudi government in 2018, according to Moody’s.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that "there is no reason for IT companies and manufacturers of modern technologies to earn more than commodity giants. Oil is a sought-after and expensive product, and Saudi Arabia also has low oil production cost, which allows Saudi Aramco to regularly become one of the most profitable companies. In addition, it hasn’t started huge projects recently, that is, it had no significant capital costs last year," he explained.
"Saudi Aramco’s advantage is that it shouldn't go to the Arctic shelf or to Eastern Siberia in order to increase oil production, as Russian companies do, and spend money on development. First, the company is the sponsor of the entire state, its budget is practically the budget of Saudi Arabia, and the country's expenses are its expenses. Second, the Saudi authorities need high ratings of the company. It's possible that Riyadh stimulated Saudi Aramco's high profits in one way or another," Igor Yushkov concluded.
