Shell suffers 71% drop in 2020 earnings but raises dividend

Royal Dutch Shell posted a sharp drop in year-on-year earnings for 2020 as the coronavirus pandemic wrought havoc on the industry through low demand, reduced production and weaker margins.

Yearly sales for 2020 dropped 71% from 2019 numbers, with adjusted earnings of $4.85 billion  (€4.04 billion) compared with the $16.5 billion (€13.7 billion) for the full-year of 2019. Their fourth-quarter sales came to $393 million (€327 million), compared with $2.9 billion (€2.41 billion) for Q4 the year prior, representing a drop of 87%.

Read more: Pandemic energy slump sees BP profits plummet by 96%

Despite these losses, the company chose to raise its dividend for the second quarter in a row as a sign of confidence, increasing it by 4%.

This could possibly be due to a significant expected bounceback in the second half of the year due to the vaccine relief many developed nations are beginning to see.

This move could also be enticing to any potential new investors.

The coronavirus pandemic has seen sweeping changes for the energy industry, including traditional fossil fuel giants such as Shell.

An energy transition has been marked with many companies shifting towards less carbon-heavy forms of energy in the face of renewable energy companies performing significantly better during the pandemic and many players seeing a crisis such as this to make sweeping changes to their businesses.

The report signals Shell's lowest earnings since 2000.

Like many of its rivals, Shell responded to the pandemic by significantly cutting costs.

Reducing costs may be necessary as the company moves towards renewables, which generally have a lower margin than fossil fuels.

Shell's report also noted a 14% drop in production owing to OPEC+ curtailments. The company's net debt also increased by $1.9 billion (€1.58 billion) to $75.4 billion (€69.2 billion) in Q4.

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The company, however, is incredibly positive about the future with an end to the pandemic almost in sight.

Shell's CEO Ben van Beurden, said: “2020 was an extraordinary year. We have taken tough but decisive actions and demonstrated highly resilient operational delivery while caring for our people, customers and communities.

"We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy. We are committed to our progressive dividend policy and expect to grow our US dollar dividend per share by around 4% as of the first quarter 2021.”

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