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

Executive summary

• Achieved nearly 37 million man-hours without a lost-time incident, maintaining industry-leading safety and mechanical availability of up to 99.8%.

• Net income for H1 2024 declined 40% year-over-year to SAR 538 million, mainly due to lower crack margins, despite higher sales volumes and improved operational efficiency.

• Revenue for H1 2024 increased to SAR 4,914 million from SAR 4,410 million in H1 2023, reflecting growth in base oil sales volume.

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

• The company operates as a single business segment focused on base oil and related products, with major operations in Saudi Arabia and the UAE.

Financial highlights

• H1 2024 EBITDA was SAR 707 million, down 37% year-over-year; net income was SAR 538 million, down 40% year-over-year.

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

• Sales volume reached 607,000 metric tons in H1 2024, slightly higher year-over-year.

• Basic and diluted EPS for H1 2024 was SAR 3.20, down from SAR 5.35 in H1 2023.

• Operating cash flow was SAR 959 million, with cash conversion at 224% driven by positive working capital changes.

Outlook and guidance

• Focus remains on meticulous 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 accounting for ~30% of total.

• Consultants forecast base oil prices and margins to remain flat or slightly decline for the rest of the year.

• Dividend policy remains at 60%-80% of free cash flow, with no intention to deviate in the near term.

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