Petron suffers P1.1-B net loss

Petron Corp. reported a net loss of P1.1 billion for 2000, a record loss for the company, marking only the second time in its history that it saw negative earnings.

The first was in 1997 when the company incurred substantial foreign exchange losses following the Asian financial crisis.

Petron’s performance started to deteriorate in 1999 when its net income dropped by 35 percent compared to the previous year, as domestic prices of refined products failed to catch up with higher crude oil prices.

The company continued to sustain significant cost under recoveries through most of 2000. Ironically, this happened under a domestic oil pricing regime that was fully deregulated under Republic Act No. 8479, "The New Oil Deregulation Act."

Petron’s losses last year were slightly mitigated by income from its subsidiaries, bringing its consolidated net loss to P1 billion. The company was also able to collect some outstanding claims from government agencies towards the end of the year. Cost optimization measures further helped to minimize losses.

The company said it sees a healthier outlook for 2001 as the peso exchange rate – a key factor in domestic oil prices – promises to be more stable. Petron also expressed hopes to see deregulation work as a sound public policy, enabling the local market to reflect global trends in oil prices and establishing a consistent framework for future investments in the industry.

The improved economic climate under the new administration should also bring about stronger product demand. Last year, Petron’s domestic sales volume declined by more than 10 percent due to reduced demand, particularly from the industrial sector. Total sales, however, declined by only about one percent — to 51.8 million barrels from 52.5 million barrels in 1999 — as a result of higher exports.

"We have always perceived that our financial difficulties were temporary," said Petron chairman Jose A. Syjuco Jr., "We trust that the economic situation will allow us to turn in a more favorable performance for 2001."

Nevertheless, the company still expects crude oil to remain relatively high, given that OPEC has manifested its intention of keeping the price of crude within its desired band of $22 to $28 per barrel by cutting production back by 1.5 million barrels per day starting Feb. 1.