Shrinking refining margins pull down Petron’s income

PETRON CORP. posted a 70% fall in its net income as of September to P3.6 billion largely because of its shrinking refining margins, the company told the stock exchange on Tuesday.

The company said it managed to book a “modest” profit during the period “with Petron Malaysia’s contributions and its parent company’s extensive efforts to manage costs and keep the business viable under the current volatile market condition.”

It said the profit slide was “owing to prolonged depressed refining margins in the region and its refinery shutdown.” The company did not release profit and revenue figures for the third quarter alone.

Consolidated revenues in the three quarters dropped by 9% to P381.7 billion, with a decline in sales volume after a 7% decrease in Philippine sales as a result of the emergency shutdown in April of its Limay, Bataan refinery.

The refinery, which has a capacity of 180,000 barrels per day, was forced to close after the April 22 earthquake. It resumed normal operations in early August.

Malaysia’s sales volume increase of 2% partially softening the impact of Philippine operations. Petron said global oil prices remained volatile and lower compared with the past year because of ongoing trade wars.

In the Philippines, the company noted that despite the decrease in volumes, Petron stations within freeport zones performed better than last year. It said under the current regime, enterprises such as service stations within freeport zones in Clark and Subic do not pay local and national taxes, including excise taxes.

Petron retail volume inside the Clark freeport recorded a 54% rise over the same period a year ago. It did not disclose comparative numbers.

The company quoted Ramon S. Ang, its president and chief executive officer, as saying: “This level playing field is what we hope will prevail in the entire country once the fuel marking program is in place. We fully support and look forward to its implementation but at the same time, we reiterate that this mechanism will only work if all players go by the same rules.”

Petron Freeport Corp., the listed company’s wholly owned subsidiary, earlier reported a 14% increase in consolidated volume and a 20% improvement in net income for the first semester.

The unit, whose performance is in contrast to that of its parent firm, manages Petron stations inside the Subic freeport zone.

“Oil smuggling has worsened in recent years and it’s not only us in the industry but also the government and the entire nation that suffer because of it,” Mr. Ang said.

As of September, Petron opened at least 100 new stations in the Philippines, and 38 new stations in Malaysia. It has more than 2,400 stations in the Philippines alone, remaining the local oil company with the largest network of service stations in the country.

“Petron remained the country’s leading oil company cornering about a third of domestic demand,” it said.

On Tuesday, shares in the company slipped by 0.59% to close at P5.03 each. — Victor V. Saulon