Saudi Aramco Base Oil Company – Luberef (2223) Q2 2024 earnings summary

Executive summary

• Operational excellence maintained with nearly 37 million man-hours without a lost-time incident and mechanical availability up to 99.8%.

• Recognized for best safety and maintenance by Saudi Aramco's President's Affiliate Award.

• HVGO line pre-commissioning underway, expected online mid-August 2024 to enhance profitability.

• Strategic partnerships expanded, including Valvoline blending plant MoU and research on uODS technology.

• Sales volumes rebounded after hydrocracker catalyst replacement, returning to normal levels.

Financial highlights

• H1 2024 net income declined 40% year-over-year to SAR 538 million, mainly due to lower crack margins.

• H1 2024 revenue increased to SAR 4,914 million from SAR 4,410 million in H1 2023, reflecting higher sales volume.

• H1 2024 EBITDA was SAR 707 million, down 37% year-over-year.

• H1 2024 free cash flow reached SAR 879 million, up 20% from H1 2023, aided by working capital changes.

• Operating cash flow at SAR 959 million, supported by working capital changes.

Outlook and guidance

• Focus on cost control, maximizing asset utilization, and growth projects for the remainder of 2024.

• 2024 base oil volumes expected to grow mid-single digits year-over-year, with domestic market at about 30%.

• Maintenance capex projected at SAR 80–100 million; Yanbu Growth II project capex estimated at SAR 150–200 million.

• Dividend policy remains at 60%-80% of free cash flow, with interim dividend for H1 2024.

• No material impact from Red Sea situation; mitigation plans in place.