Petron puts Philippine expansion plans on hold

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PETRON Corp. is putting its expansion plans in the Philippines on the back burner, as it waits for global crude oil prices to stabilize.

The listed oil refiner earlier said it is spending $1 billion to upgrade its refinery and expand its retail network over the next three years. About $600 million of this spending was allotted for its refinery expansion in Limay, Bataan.

Ang negosyo ng Petron sumasama dahil ang world prices ng crude oil, fluctuation, ang laki (Petron’s business is getting worse because the fluctuation in crude oil prices is getting bigger),” Petron President and Chief Executive Officer Ramon S. Ang told reporters after the stockholders’ meeting of another company he leads in Mandaluyong on Tuesday.

Mr. Ang cited the large fluctuations in world prices in crude oil currently affecting the industry, as well as lower prices among independent players. He said that smaller players, or what he called white stations, now account for 37% of total industry volume.

The top official answered in the affirmative when asked whether smuggling has become rampant in the country, noting that this was caused by the implementation of excise taxes on fuel products.

Mr. Ang said excise taxes have doubled to P12 since the implementation of the Tax Reform for Acceleration and Inclusion law in 2018, prompting the proliferation of oil smugglers in the country.

“The game plan is to concentrate more on other businesses,” Mr. Ang said.

With this, Petron expects minimal growth in earnings for the year at about P8-9 billion, compared to its P7.1-billion net income in 2018 — which was already 50% lower than the P14 billion it generated in 2017.

“With this fluctuation (in oil prices), maswerte na (we will be lucky) to get P8-9 billion. Karamihan magdadala nun Malaysia pa (Mostly because of Malaysia),” Mr. Ang said, adding that Malaysia accounts for 40% of the business.

Petron’s net income dropped 78% to P1.3 billion in the first quarter of 2019, following a four percent decline in consolidated revenues to P124.6 billion. This came after a five percent drop in sales volume due to the implementation of TRAIN.

The company tallied an increase of around P8 billion in excise taxes and P1 billion in value-added taxes on a quarterly basis for the January to March period.

Petron currently has more than 3,000 stations, more than 650 of which are in Malaysia. It looks to have 6,000 stations under its portfolio by 2022.

It recently raised P20 billion from the issuance of preferred shares.

Shares in Petron were unchanged at P5.90 each at the stock exchange on Tuesday. — Arra B. Francia