Saudi Aramco Base Oil Company, or Luberef, posted a more than 47 per cent rise in first-quarter net profit, helped by lower feedstock prices that resulted in higher margins.
The company’s net income in the three-month period ending in March rose to 445.6 million Saudi riyals ($118.8 million) from 302.6 million riyals a year earlier, Luberef said on Thursday in a statement to Saudi Arabia's Tadawul stock exchange, where its shares are traded.
The higher profit was mainly driven by a 6 per cent increase in base oil prices and a 46 per cent reduction in feedstock prices from the same period last year, Luberef said.
This helped to offset a 14 per cent fall in sales volumes from the year-ago quarter, the company said.
Net income was also boosted by a decrease in zakat and income tax expenses due to Luberef being subjected to zakat only after its listing, it said.
Luberef's revenue fell more than 34 per cent annually to 1.79 billion riyals in the quarter.
Earnings before interest, taxes, depreciation and amortisation rose 10 per cent to 555 million riyals in the first quarter from 507 million riyals last year.
The company began trading on the Arab world's largest stock market in December after raising $1.32 billion in its initial public offering.
The refining unit of oil major Saudi Aramco sold more than 50 million shares, or about 29.7 per cent of the company's issued share capital, with the IPO drawing strong demand from investors in the kingdom and internationally.
Established in 1976, Luberef operates two production plants on the west coast of the kingdom — in Yanbu and Jeddah — with a combined annual production capacity of 1.3 million tonnes of base oils, according to its website.
The Aramco unit makes base oils used in lubricants for motor vehicles, ships and industrial machinery.
Base oils are used across various sectors where hydraulic, turbine and transmission fluids are required in production and manufacturing machinery, such as in the steel industry, food production, textiles and clothing.
The global base oil market is projected to reach $41.7 billion by 2030 from $34.9 billion in 2020, Allied Market Research said.
Luberef’s products are sold mainly in the company’s key end markets, including Saudi Arabia and other countries in the Mena region, Asia, the Americas and Europe.
The company posted a 32 per cent rise in full-year net profit last year, driven by an increase in sales volumes and improved base oil crack margins.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
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The flights
Fly Etihad or Emirates from the UAE to Moscow from 2,763 return per person return including taxes.
Where to stay
Trips on the Golden Eagle Trans-Siberian cost from US$16,995 (Dh62,414) per person, based on two sharing.
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The specs
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Transmission: eight-speed automatic
Power: 325bhp
Torque: 450Nm
Price: Dh289,000
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What it means to be a conservationist
Who is Enric Sala?
Enric Sala is an expert on marine conservation and is currently the National Geographic Society's Explorer-in-Residence. His love of the sea started with his childhood in Spain, inspired by the example of the legendary diver Jacques Cousteau. He has been a university professor of Oceanography in the US, as well as working at the Spanish National Council for Scientific Research and is a member of the World Economic Forum’s Global Future Council on Biodiversity and the Bio-Economy. He has dedicated his life to protecting life in the oceans. Enric describes himself as a flexitarian who only eats meat occasionally.
What is biodiversity?
According to the United Nations Environment Programme, all life on earth – including in its forests and oceans – forms a “rich tapestry of interconnecting and interdependent forces”. Biodiversity on earth today is the product of four billion years of evolution and consists of many millions of distinct biological species. The term ‘biodiversity’ is relatively new, popularised since the 1980s and coinciding with an understanding of the growing threats to the natural world including habitat loss, pollution and climate change. The loss of biodiversity itself is dangerous because it contributes to clean, consistent water flows, food security, protection from floods and storms and a stable climate. The natural world can be an ally in combating global climate change but to do so it must be protected. Nations are working to achieve this, including setting targets to be reached by 2020 for the protection of the natural state of 17 per cent of the land and 10 per cent of the oceans. However, these are well short of what is needed, according to experts, with half the land needed to be in a natural state to help avert disaster.
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Islamophobia definition
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The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
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