Shell hikes dividend despite falling profits and mass job cuts

Tom Belger
·Finance and policy reporter
·3-min read
File photo dated 3/2/2011 of the logo for Shell, which has said it plans to cut between 7,000 and 9,000 jobs worldwide following a collapse in demand for oil amid the coronavirus pandemic.
Shell said both lower demand and lower oil and gas prices were to blame for lower earnings. Photo: PA

The energy giant Royal Dutch Shell (RDSB.L) has announced plans to hike payouts to shareholders, despite profits nosediving and mass job cuts as the coronavirus crisis hammers the industry.

Shares in the company leapt more than 4% as it made the announcement on Thursday in its third-quarter results. It follows the company’s first dividend cut since the Second World War in April, when it also announced a cost-cutting drive.

Shell posted adjusted earnings of $955m (£735.4m), an 80% decline on its third quarter a year earlier but still better than expected by analysts.

“Quarterly profits were better than some feared, but when the overall result is an 80% drop in earnings, that’s a funny sort of win,” said Steven Clayton, an HL Select fund manager at Hargreaves Lansdown.

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READ MORE: Shell plans to cut up to 9,000 jobs

“After a dramatic cut to the dividend a couple of quarters ago, the Q3 payout inches up by 4% to 16.65p per share and the group plans to grow it at this pace.”

The company announced plans to drastically curb its net debt from $73.5bn to $65bn, and then distribute up to 30% of cashflow from operations to shareholders through dividends and buybacks.

Shell also emphasised plans to become a net-zero energy firm by 2050 “or sooner,” including commercialising hydrogen and biofuels.

It said both lower demand and lower oil and gas prices were to blame for lower earnings. Upstream production was down 14% year-on-year, “due to OPEC+ curtailments, lower gas demand and hurricanes in US Gulf of Mexico.”

Last month the company announced up to 9,000 job cuts, with the majority expected by the end of the year.

READ MORE: BP stocks up as it beats expectations and swings back into profit

But its marketing division, which includes its service stations, enjoyed record performance, with higher sales and margins in retail, lubricant sales and business-to-business operations.

“Our sector-leading cash flows will enable us to grow our businesses of the future while increasing shareholder distributions, making us a compelling investment case,” said CEO, Ben van Beurden.

It comes a day after rival BP stocks also surged as it swung back into profit and cut debt levels, beating expectations for its own third-quarter results.

The energy giant (BP.L) reported earnings of $100m (£76.5m), when it had suffered a record $6.7bn (£5.1bn) loss in the second quarter and analysts expected further losses. Its shares were trading 1.6% higher in early trading on Tuesday morning in the UK.

It still came significantly short of the $2.3bn profit it made in its third quarter of 2019, however, and the earnings were reported on BP’s preferred measure of underlying replacement cost profit. On a reported basis, it lost $500m.

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