>>> Europe : Brokers Upgrades & Downgrades - 17th of April 2023

>>> Up
* HP Inc Raised to Overweight at JPMorgan; PT $35
* Lumentum Raised to Overweight at JPMorgan; PT $60
* Murphy Oil Raised to Buy at Jefferies; PT $41
* National Grid PT Raised to 1,275 pence at JPMorgan
* RS Group Raised to Outperform at RBC; PT 1,000 pence
* Shop Apotheke PT Raised to 150 euros from 140 euros at Jefferies
* SLM Raised to Overweight at JPMorgan; PT $17
* TeamViewer SE Raised to Buy at Berenberg; PT 21 euros
* Tryg Raised to Buy at ABG; PT 169 kroner

>>> Down
* Dell Technologies Cut to Neutral at JPMorgan; PT $47
* EssilorLuxottica Cut to Market Perform at Bernstein
* Fortum cut to Neutral from Buy at Citi
* Givaudan Cut to Hold at Berenberg; PT 3,300 Swiss francs
* Prometheus Cut to Neutral at BTIG
* Prometheus Cut to Hold at Stifel; PT $200
* Sampo Cut to Hold at ABG; PT 46.50 euros
* Tele2 Cut to Hold at DNB Markets; PT 110 kronor
* Teradyne Cut to Underweight at JPMorgan; PT $81

>>> Initiation
* Coca-Cola HBC Rated New Buy at Goodbody; PT 2,950 pence
* Diageo Rated New Hold at Goodbody; PT 3,700 pence
* Fluence Energy Rated New Market Perform at BMO; PT $24
* ISS Rated New Buy at DNB Markets; PT 171 kroner

>>> Call
* Bossard Sees Solid Start to the Year as Sales Beat, Baader Says
* Givaudan Cut to Hold at Berenberg on Lack of Upcoming Catalysts
* Power Generator Earnings Nearing Peak, Fortum Downgraded at Citi
* RS Group Raised at RBC With Risk-Reward Now More Attractive
* TeamViewer Upgraded at Berenberg, Turnaround Being Ignored

>>> What to look at today - 17th of April 2023

Asian equities were mixed while US and European share futures rose slightly as investors weighed the prospect of more rate hikes and an economic slowdown. The dollar made small gains versus its major peers. Stocks pared gains in Japan and Australia amid cautious sentiment after equities on Wall Street ended lower on Friday. Shares fluctuated in Hong Kong and climbed in Shanghai after the People’s Bank of China kept a key lending rate unchanged and made the smallest net injection of liquidity since November. 
Meanwhile in India, information technology stocks plunged as much as 6.5% after software firm Infosys Ltd. slumped the most in three years on weak growth guidance. That weighed on the benchmark Nifty 50, which slid about 1%. S&P 500 futures rose around 0.2%, as did those for the Euro Stoxx 50, while contracts for the Nasdaq 100 were little changed. The S&P 500 climbed 0.8% last week and Nasdaq 100 squeezed out a 0.1% gain as policy-sensitive technology names like Microsoft Inc. and Apple Inc. dragged on the tech gauge. Swaps traders upped bets for a rate increase by June and pricing suggests a quarter point hike has better than three-in-four odds for May. The dollar posted modest gains against its Group-of-10 counterparts. Treasury yields were little changed, with the rate-sensitive two-year hovering at around 4.1%. It was driven higher last week by a measure of March retail sales showing core readings declined less than estimated and comments from Fed officials. Yields on government bonds in Australia and New Zealand climbed. Looking further ahead this week, investors are awaiting the release of the Fed’s Beige Book and commentary from officials including John Williams, Raphael Bostic, Loretta Mester and Lisa Cook. Markets were rattled last week after Fed Governor Christopher Waller said he favored more policy tightening in the central bank’s battle with inflation. Traders have upped wagers for at least one more interest rate increase from the Federal Reserve this year as inflation pressure persists in the US.
Meanwhile, a gauge of market risk dropped to the lowest in more than two months as volatility subsided across assets on easing concern eased over troubles in the banking sector. Much of the focus in Asia will be on China and the strength of its economic recovery. Figures on Tuesday are projected to show gross domestic product expanded 3.9% in the first quarter from a year earlier, well below the government’s target for full-year growth of around 5%. March data may show increases in industrial output, investment and retail sales.  In Japan, shares of security companies rose after Prime Minister Fumio Kishida was targeted by an explosive device at an event he attended in central Japan, weeks before he hosts the world leaders for a G-7 summit. There was little discernible impact on wider Japanese markets. 

Nikkei +0,12% Hang Seng +0,75% CSI +0,94% Shanghai +1,03% Shenzen -0,10%

Eur$ 1,0987 CNH 6,8789 CNY 6,8765 JPY 134,15 GBP 1,2412 CHF 0,8940 RUB 82,2751 TRY 19,3795 WTI$ 82,45 Gold 2,004,60 BTC 29,981 -1,25% ETH 2,07 0,85%

S&P +0,20% Nasdaq +0,08% EuroStoxx +0,21% Dax +0,17% SMI +0,09%

Macro :
- G7 Leaders Agree to Accelerate Fossil Fuel Phase-Out: Nikkei
- EU Aims to Strengthen Tools to Manage Banking Crisis: El País
- Hedge Funds Go All In on Dollar for First Time in Over a Year
- ECB’s Nagel Expects Core Inflation to Slow Before Summer Break

Keep an eye on :
- ABI BB : Molson Coors Brands in Place to Tap AB InBev Bud Light Brouhaha
- ALIVP BB : Aliaxis Offers to Buy Uponor for EU25 Per Share in Cash
- AZN LN : AstraZeneca: Phase 3 Trial for Imfinzi Met Primary Endpoints
- AZN LN : AstraZeneca: Imfinzi-Based Treatment Cut Risk of Disease Return
- BSGR NA : B&S FY Revenue Meets Estimates; Names Peter van Mierlo CEO
- BARC LN : Barclays to Cut More Than 100 Investment Banking Roles, Sky Says
- BOSN SW : Bossard 1Q Sales CHF304.5M Vs. CHF291.6M Y/y
- BT/A LN : BT Stress-Tested Supply Chain in 2022 on China-Taiwan Unease: FT
- BMAX SS : Byggmax Group Names Karl Sandlund as New President, CEO
- DLAR LN : De La Rue Chairman Resigns Amid Acitivist’s Call to Step Down
- EDPR PL : EDPR Gets Agreement to Sell Energy From Wind Project in Indiana
- EO FP : Faurecia 1Q Revenue Beats Estimates
- FRA GY : Fraport March Frankfurt Airport Passengers 4.30M
- GLEN LN : Einhorn’s Greenlight Supports Teck Plan Over Glencore Takeover
- GLEN LN : Freeport, Vale, Anglo Are Said to Eye Teck Metals Operations
- MC FP : LVMH Set to Tap Former LV Chief as Fashion Group CEO: Miss Tweed
- MRK US : Merck-Moderna Vaccine Helps Keep Patients Free From Skin Cancer
- MANU US : Carlyle in Talks to Buy Stake in Manchester United, Sky Says
- MOR GY : MorphoSys, Incyte Say 5-Yr Monjuvi Data Show Curative Potential
- NETW LN : CVC Is Said in Advanced Talks to Buy Network for £2 Billion
- NCOD NO : Norcod Offering of 6.35m Shares Prices at NOK30/Share
- NHY NO : Hydro Says Strike to Gradually Affect Ops at Karmoy and Ardal
- ORA FP : Ripplewood Said to Consider Bid for Orange’s Banking Arm
- RXDX US : Merck Will Buy Prometheus Biosciences for $200 Per Share
- ROG SW : Roche: Tecentriq Plus Avastin Cut Risk of Cancer Returning
- ROVIO FH : Rovio Says It’s in Talks With Sega After Strategic Review
- ROVIO FH : Sega Sammy Board to Make Decision on Rovio Takeover Mon.
- RYA ID : Ryanair Assessing With Boeing on Impact to 737 Aircraft Delivery
- SPM IM : Saipem Says It Got Full Acquittal by Algiers Court on 2008 Bid
- GLE FP : SocGen’s Pool of €1 Million-Plus Earners Rises 30% on Volatility
- STAN LN : Danamon to Buy SCBI’s Retail Loans Portfolio; No Price Disclosed
- SUN SW : Sulzer 1Q Orders CHF1.07B Vs. CHF858.5M Y/y
- 8TRA GY : Traton Prelim 1Q Sales About EU11.2B, Est. EU10.46B
- UPONOR FH : Aliaxis Offers to Buy Uponor for EU25 Per Share in Cash
- VOW GY : VW to Invest in Indonesia Car Battery Industry:Minister

FT : Enel investor challenges Italian government over board shake-up

Enel investor challenges Italian government over board shake-up
Row brewing over plan to replace upper echelons of state-controlled utility

A London-based hedge fund has directly challenged Italy’s government over who will lead state-controlled utility Enel, presenting its own alternative list of board candidates.

Last week prime minister Giorgia Meloni’s rightwing coalition made a series of proposals to change the make-up of the boards of state-controlled companies, including energy groups Enel and Eni and defence group Leonardo. Shareholders will have to approve these appointments at the companies’ upcoming annual meetings.

The government owns a 23 per cent stake in Enel through the finance ministry. Minority shareholders do not usually challenge the government’s proposals and get three out of nine board seats, with directors usually chosen from a list proposed by a group of domestic investors. Enel shareholders will meet on May 10.

Zach Mecelis, the chief of Covalis Capital, a Mayfair-based firm that specialises in energy investments, told the Financial Times that the proposals were the result of a political compromise.

“Shareholders should get to choose. It’s a matter of governance and transparency,” said Mecelis, who has been an investor in Enel since 2004. Covalis Capital currently owns less than 3 per cent of the €58bn utility.

“I want this toxic [management appointment] process to end.”

Flavio Cattaneo, currently a board member at insurer Generali and the former chief of state-controlled electricity infrastructure group Terna is the government’s preference for chief executive. Paolo Scaroni, chair of football club AC Milan and a former chief executive of Eni, was proposed as Enel chair.

Meloni said last week that the government’s proposals were based on “competence not political affiliation”.

The appointments process for state companies, which take place every three years, is a key moment in Italy’s political and business life. Parties in government coalitions traditionally negotiate to appoint political affiliates to top jobs in order to exercise influence over the companies during the government’s tenure.

The proposals were the result of days of fierce negotiation within the government, according to multiple people briefed on the talks. The prime minister ditched her preferred candidate to lead Enel to avoid clashing with her coalition partners, including Matteo Salvini and Silvio Berlusconi, a longtime ally of Scaroni, according to the people and multiple media reports.

Enel shares were down 4 per cent on Thursday after the proposed appointments were announced over fears of a U-turn on the current energy transition strategy, according to analysts.

“Enel’s stock will go up 30 to 40 per cent if this process is run differently,” Mecelis said.

According to Mecelis, Enel trades at a discount compared to Spain’s Iberdrola and France’s EDF mainly because political demands outweigh shareholders’ interests and company strategy.

Outgoing Enel chief Francesco Starace said last year that the company would sell €21bn in assets, getting out of countries such as Argentina, Peru and Romania to cut the company’s €96bn debt pile.

Starace clashed with Italy’s new government, which has been in power since October, over the company’s strategy. According to Mecelis, however, the new proposed management has no alternative plan to present to shareholders.

“I’m standing up for everyone else who can’t speak for themselves and like me rejects this process,” Mecelis said. “I’m not an activist, I just have no choice.”

The Italian government was not immediately available for comment. Enel will publish the list of board candidates received from shareholders on Tuesday.

FT : Margins will fall, but to where?


Margins revisited
Before our spring break, we observed that corporate margins, as measured in the US national accounts, remain extraordinarily high. Higher, even, than the numbers followed most closely by Wall Street — S&P 500 operating margins — would suggest. This is important to any assessment of the economy because margins are a leading economic indicator. Companies fire people when margins tighten, contributing to recessions. Still-high margins suggest that recession may not be imminent.

It is possible to regard today’s persistently high margins as a pandemic effect; Albert Edwards of Société Générale takes this view. Certainly, margins have not been as high as they were in 2021 and early 2022 in a long time. But in the case of US public companies, at least, it looks like the pandemic profit boom might be the culmination of a longer-term trend, rather than a distinct event.

We reach this (very tentative!) conclusion on the basis of a data set sent to us by Chris Mowbray and his team at S&P Capital IQ. It aggregates the profit margins of all public US companies since 1990 (excluding public companies that have no revenue, which can’t be said to have margins; and banks and other financials, for which revenue margins are a bad way to measure profitability). The data set is good because of its breadth and because it avoids survivorship bias: it looks at every US company that existed in each historical quarter, not just the historical margins of companies that still exist.

Here is what margins look like over the last three decades:


One interesting thing here is that in the case of both gross and operating margins, there was a 2021 peak, but it was not very much higher than the highs reached in the preceding 10 years (this is not as true when you look at the S&P 500; very big companies had a sharper spike in margins than all companies in aggregate).

Zooming in on operating margins, it is pretty clear that something happened after the great financial crisis. Through different stages of the economic cycle, margins are higher since 2010:

The crucial question for public company investors is not whether margins will mean-revert from post-pandemic peaks. They very likely will, though the precise timing can only be guessed at. The big question is whether they will revert to pre- or post-GFC levels.

It is natural to conclude that the post-GFC margin spike is somehow explained by monetary policy, given that after 2010 policy rates were pinned down and the Fed balance sheet growing. It is not clear to me exactly how this would work, however (remember operating margins are calculated before interest expense). Furthermore, there are other explanations available. Are companies underinvesting, boosting profits (and management pay) at the cost of future growth? This is the view of the economist Andrew Smithers. Or perhaps industry has become less competitive, allowing companies to pad margins without giving up market share? Or perhaps companies have had the upper hand against workers in recent years? We are keen to hear readers’ thoughts.

(ZH) California Utilities Propose Charging Customers Based On How Rich They Are

California Utilities Propose Charging Customers Based On How Rich They Are

As if the relatively affluent needed another reason to escape California... If you earn more, you pay more.
That's the bottom-line impact on your electricity bill if a proposal from California’s three largest power companies is passed.

As KTLA5 reports, Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric submitted a joint proposal to the state’s Public Utilities Commission last week that outlines the new rate structure. It follows last year’s passage of Assembly Bill 205 which requires a fixed rate and generally simpler bills.
The plan would break monthly bills in two parts: The fixed-income rate, plus a reduced usage charge based on consumption.
Under the proposal, the fixed charges increase as follows:
  • Households earning less than $28,000 a year would pay a fixed charge of $15 a month on their electric bills in Edison and PG&E territories and $24 a month in SDG&E territory.
  • Households with annual income from $28,000 – $69,000 would pay $20 a month in Edison territory, $34 a month in SDG&E territory and $30 a month in PG&E territory.
  • Households earning from $69,000 – $180,000 would pay $51 a month in Edison and PG&E territories and $73 a month in SDG&E territory.
  • Those with incomes above $180,000 would pay $85 a month in Edison territory, $128 a month in SDG&E territory and $92 a month in PG&E territory.

Southern California Edison says approximately 1.2 million of its lower-income customers will see their bills drop by 16%-21%.
“We have listened to and heard from our customers that fundamental change is needed to provide bill relief,” SDG&E CEO Caroline Winn said in a statement.
So 'some folks' want energy bill relief... so the wealthy will have to pay their 'fair-er share' for the same power consumption.
“When we were putting together the reform proposal, front and center in our mind were customers who live paycheck to paycheck, who struggle to pay for essentials such as energy, housing and food.”
Of course, this is being directed from the top-down...
The income-based bill proposal is part of the companies' compliance with legislation passed by the California state government last year requiring these types of plans for utilities.
Ironically, it is only the relatively affluent (we use that term because what is 'poor' in California is likely a considerably wealthier situation in most other US states) are the only residents of California that can afford an electric vehicle (which the state is demanding everyone transition to within the next few years) and thus ave higher electricity power demands broadly speaking.

Miss Tweed : Former LV boss set to become new CEO of LVMH Fashion Group

Former LV boss set to become new CEO of LVMH Fashion Group

Former Louis Vuitton CEO Michael Burke has emerged as a frontrunner to become CEO and Chairman of the LVMH Fashion Group, several sources close to the French luxury giant said. Fashion Group includes Celine, Kenzo, Loewe and many other brands. Burke would replace Sidney Toledano, 71, who would become an adviser to 74-year-old LVMH CEO and Chairman Bernard Arnault and would continue to manage a few of the group’s brands including Moynat.

Another major development in the works is that Fendi and Loro Piana could join Fashion Group, Miss Tweed was told. The two Italian luxury brands are currently overseen by LVMH Managing Director Antonio Belloni. “It’s a project under study,” a source with first-hand knowledge said. Fendi’s growth has slowed down in recent years and needs fresh momentum, several sources close to the group said on condition of anonymity. LVMH has declined to comment on all these moves under consideration.

At its first-quarter trading update on Wednesday, Arnault did not specifically mention Fendi’s performance. He would only say that it opened a boutique in Seoul and one in Tokyo, two cities enjoying a strong rebound in luxury spending since the pandemic. When Arnault omits to mention the performance of a brand, it usually means it’s not doing too well, industry analysts say. Fendi is run by the affable Serge Brunschwig, who was previously head of Dior Homme and Celine.

FENDI
Burke knows Fendi well, having run it for nearly a decade from 2003. Sources close to the group said it made little sense for Fendi to remain outside of the Fashion Group since it was estimated to generate close to €2 billion in annual sales, around the same size as Celine which is part of Fashion Group. In January, Arnault said Celine made more than €2 billion in revenue in 2022. Fendi would come under Burke’s supervision and possibly Loro Piana as well, the sources said. “If Fendi joins then it makes sense for Loro Piano to join the Fashion Group as well,” one source close to LVMH said.

Louis Vuitton and Dior, the group’s biggest sources of profit, are run directly by Arnault. They are not part of Fashion Group which includes Marc Jacobs, Pucci, Patou and Givenchy.

Burke, 66, is currently taking time off from LVMH, mourning the recent loss of his wife Brigitte with whom he was very close. Burke left his position as CEO of Louis Vuitton in early January to accompany his wife during her last days. His departure and succession had been planned for a long time but his desire to leave Louis Vuitton accelerated that process. Burke’s arrival at the helm of Fashion Group is not imminent. It could be in a few months, around the summer, the sources said. Burke and Toledano declined to comment.

Burke may not yet be mentally ready but Burke’s office on the eighth floor of LVMH’s headquarters at 22, Avenue Montaigne in Paris, is being renovated ahead of his nomination, several sources said. Arnault and Toledano’s office are on the ninth floor, the highest. “It’s a logical move,” one of the sources said. “Burke is the best-positioned to do that job. He’s a pillar of the LVMH group.”

On LVMH’s website, Burke is described as a strategic adviser to Arnault since February 2023 and a member of the group’s executive committee. Toledano is also a member of LVMH’s executive committee. It remains unclear whether he will remain a member once he resigns from his position as CEO and Chairman of the Fashion Group.

While there may be other candidates queueing up to take Toledano’s job, Burke is by far the best qualified, several sources said. Burke is one of Arnault’s closest lieutenants and a long-time rival of Toledano in terms of proximity and closeness to the luxury king. Burke, known for his pragmatic no-nonsense approach, is originally from the United States but resides in France. His friendship with Arnault goes back to the 1980s, when the two entrepreneurs made ill-fated real estate deals in Florida and Arnault returned to France to buy Dior owner Boussac Saint-Frères. Burke helped Arnault build LVMH and has since held several senior positions within the group.

The American executive was deputy CEO of Christian Dior Couture in the late 1990s and ran Louis Vuitton for more than a decade from 2012. He did an excellent job squeezing profitability out of the megabrand while maintaining growth thanks to strong creative teams. Until January this year, Burke was also Chairman of Tiffany’s board of directors for two years.

After LVMH acquired Bulgari in 2011, Burke was briefly CEO the Roman jeweler. Within a few months, he moved on to an even bigger job: he became CEO of Louis Vuitton. Due to health reasons, Louis Vuitton’s newly appointed CEO Jordi Constans, a Spaniard who headed Danone’s fresh dairy products division, resigned. Constans had been hired to be Arnault’s “yes man.” In 2011, Arnault brutally sacked Yves Carcelle, the charismatic leader who built Louis Vuitton and planted LV flags in many of world’s most promising luxury markets in Asia and elsewhere. Arnault was tired of the fact that Carcelle did not always listen to him. The French entrepreneur wanted his strategy to be implemented without resistance.

PROBLEM CHILDREN
Burke was a safe pair of hands to whom Arnault could entrust Louis Vuitton. A strong operational manager, Burke does not question Arnault’s strategic decisions. Once he arrives at the helm of Fashion Group – if he does as planned - Burke will have several issues to tackle. One of them is Givenchy. The French brand has been struggling under designer Matthew Williams. As his contract ends, he is expected to leave by the summer. Industry sources predict he could be replaced by Paco Rabanne’s Julien Dossena, as Miss Tweed reported in November last year. Another problem child is Kenzo. Under Japanese designer Nigo, the brand’s sales growth has fallen short of expectations, industry sources say.

Burke would also have to supervise the renaissance of Pucci under talented designer Camille Miceli and pump resources into Patou, a promising brand LVMH acquired in 2018 which has yet to fully takes off. Patou is under the creative helm of Guillaume Henry, who resuscitated Carven and bolstered Puig’s Nina Ricci. Henry is regarded as a strong creative director and is frustrated with LVMH’s reluctance to grant him bigger budgets, industry sources say.

NEVER RETIRE
Toledano, who spearheaded Dior Couture for two decades, has always said that he did not wish to hear the word retirement. He will likely continue to play an active role at LVMH. Among other things, he will continue running Moynat, a leather goods maker aiming to challenge Hermès and Goyard. Moynat is part of LVMH but belongs to Agache, the Arnault family investment company. Toledano is of Moroccan descent and has roots in the Spanish city of Toledo, from where his Jewish ancestors were banished in 1492 by Isabela, the Catholic Queen of Castile.

He will look after industry-wide matters on top of working for LVMH. Last year, he was appointed chairman of the board of the Institut Français de la Mode. Since its 2020 merger with the design school l’École de la Chambre Syndicale de la Couture Parisienne, the fashion school has grown into a federative force for the French fashion industry and is sponsored by several major players including Chanel, Hermès and LVMH.

In this capacity, Toledano will be expected to coordinate various cross-industry initiatives. He is President of the Chambre Syndicale de la Haute Couture, the body that decides which brands can join Paris Couture Week. Toledano is also a member of the executive committee of the Fédération de la Haute Couture et de la Mode and a board member of the Comité Colbert, France’s luxury industry lobby. Once he resigns from the top job at the LVMH Fashion Group, Toledano will likely remain busy.

FT : Saudi Arabia boosts sovereign wealth fund with transfer of $80bn Aramco sta

Saudi Arabia boosts sovereign wealth fund with transfer of $80bn Aramco stake
Kingdom adds firepower to the Public Investment Fund tasked with overhauling economy

Saudi Arabia’s government has transferred a near $80bn stake in national oil group Saudi Aramco to its sovereign wealth fund as the kingdom looks to give more firepower to the vehicle tasked with overhauling its economy.

The transfer of the 4 per cent stake to Sanabil, an investment arm of the sovereign Public Investment Fund, comes more than a year after the state first transferred a similar sized chunk of Aramco to the PIF, which now in effect controls 8 per cent of the world’s largest oil producer.

Crown Prince Mohammed bin Salman, the country’s prime minister, said the transfer would “solidify PIF’s strong financial position and credit rating”.

MBS, as he is widely known, also chairs the PIF and has made it the vehicle for investments under his Vision 2030 strategy, which seeks to modernise the kingdom and diversify its economy to reduce its reliance on oil.

The $600bn PIF has a target of managing $1tn in assets and the larger stake in Aramco will provide it with substantial dividends to fund its expansion.

The PIF has become a key source of investments for financiers looking to raise capital from tech start-ups to football clubs.

Yasir al-Rumayyan, governor of the PIF who has risen to become one of the most powerful non-royals in the kingdom, has been tasked with spearheading its expansion. He is also chair of Saudi Aramco and of Newcastle United football club, one of the PIF’s most high-profile overseas investments.

The state remains Aramco’s largest shareholder with 90.18 per cent of shares, MBS said. The energy giant listed a 1.7 per cent stake on the Saudi stock market in 2019, raising about $29bn in a blockbuster initial public offering to kick-start the kingdom’s diversification drive.

Sanabil Investments, which is wholly owned by the PIF, this month disclosed investments in dozens of private equity and venture capital companies including Blackstone and General Atlantic.

As well as overseas investments, the PIF in November secured a $17bn loan to help finance its push into big development projects, such as the hyper-modern Neom city on the Red Sea. An earlier $11bn loan for five years that was arranged in 2018 would be paid off early, it said at the time.

While Saudi Arabia wants to diversify its economy, it remains committed to developing its energy sector and maintaining its position among the world’s most powerful oil producers.

Oil is by far the largest source of government funds and the kingdom plans to remain among the top producers for decades, even if demand peaks in the coming years.

Global demand has risen to more than 100mn barrels a day with Saudi Arabia producing more than 10 per cent of that. It expects consumption will remain high even if it stops growing.

In recent weeks, Saudi Arabia has led the Opec+ producer group in cutting production to help support prices, which have risen back to above $85 a barrel, well above the long-term average.

Saudi Aramco made record profits of $161bn last year and paid a dividend of $19.5bn in the fourth quarter alone.

Fitch upgraded Saudi Arabia’s sovereign debt to A+ earlier this month, citing its reserves and economic diversification programme.