ii view: Royal Dutch Shell disappoints

Challenging macroeconomic conditions in refining and chemicals cause Shell to slip.

Second-quarter results

• Underlying replacement cost profit down 26% to $3.46 billion
• Gearing rose to 27.6% from 23.6% 
• Dividend payment unchanged at 47 US cents per share

ii round-up:

Energy company Royal Dutch Shell B (LSE:RDSB) operates in over 70 countries and employs around 82,000 staff. 

The business consists of Upstream, exploration & extraction, and Downstream refining divisions. 

It also includes Integrated Gas – largely the former British Gas liquefied natural gas (LNG) business – and a Power electricity focused division. 

For a round-up of these second-quarter results, please click here.

ii view:

In the wake of the group’s positive strategy update back in early June this year, today’s disappointing second-quarter results come as a major blow. 

Looking ahead to 2025, the chief executive back in June set out a robust financial outlook that included the potential to make distributions to shareholders of $125 billion. Second-quarter results now leave investors pondering. 

Taking a step back and outside of management’s control, the oil price remains a key ingredient, with $60 per barrel central in its projections. Within its control, a transition of the business portfolio towards more climate friendly alternatives is being pursued, while shareholder returns remain attractive – a historic dividend yield of over 5.5%. For now, we believe, Shell’s position as a core portfolio constituent remains justified.  

Positives: 

• Shareholder returns a core focus
• Cash flow performance remains positive
• Acquisition of BG Group improved both its product diversity and climate change credentials

Negatives:

• Profits have fallen below analyst forecasts. 
• Gearing has risen to 27.6% from 23.6%
• Subject to factors outside of its control such as geopolitical tensions

The average rating of stock market analysts:

Buy