Shares in Royal Dutch Shell (LON:RDSA) have posted more than a one-percent drop in London this morning, even as the blue-chip company unveiled a jump in fourth-quarter annual profits. Investors, however, have instead focused on a drop in the oil major’s cash flow.
As of 08:30 GMT, Shell’s share price had given up 1.40 percent to 2,428.00p. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.20 percent higher at 7,548.31 points.
Shell posts rise in profits
Shell announced in a statement this morning that its income attributable to shareholders had soared 147 percent to $3.8 billion in the first quarter. For the full year, the oil major’s income came in 184 percent higher at $12.9 billion. The group has benefitted from a recovery in oil prices, along with improved refining performance and higher production from new fields, which helped offset the impact of field declines and divestments.
“2017 was a year of strong financial performance for Shell,” the group’s chief executive Ben van Beurden commented in the statement. “We enter 2018 with continued discipline and confidence, committed to the delivery of strong returns and cash.”
Cash flow concerns
Shell, however, also revealed that its cash flow from operating activities for the fourth quarter had come in at $7.3 billion, marking a 21-percent drop year-on-year, which van Beurden attributed to higher tax payments and increased cash requirements related to the group’s trading business.
“Unfortunately, resilient earnings do not appear to have translated into cash generation,” Bloomberg quoted RBC Capital Markets analyst Biraj Borkhataria as saying in a note. “This result leaves gearing falling by less than we expected” and could temper hopes of a share buyback program in the very near term.