Petron profits up 70% to P2.31B in first semester

Escalating oil prices and higher export volumes boosted Petron Corp.’s net income in the first six months by a hefty 70 percent to P2.31 billion, compared with the P1.36 billion earnings during the same period in 2004.

With the strong performance in the first semester, company officials expressed confidence the country’s biggest oil company will meet its full-year income target of P3.6 billion and surpass its 2004 net income of P3.4 billion.

"I am optimistic that we could achieve our net income target, especially if the same conditions prevail," said Petron president Khalid D. Al-Faddagh in a press briefing yesterday following its stockholders meeting at the Manila Hotel.

Al-Faddagh attributed the huge leap in the company’s bottomline to higher export revenues, which at P808.5 million accounted for 35 percent to the P2.31 billion income during the period. Export volumes also increased by 18 percent to 2.26 million barrels from 1.92 million barrels in 2004.

During the first semester period, the company’s net sales reached P85.619 billion, up 29 percent from P66.142 billion in 2004.

The robust export volumes and sales, along with favorable oil prices, compensated for the weak domestic demand that saw sales volumes dropping nine percent to 22.88 million barrels. Total volume sales was two percent lower than in 2004.

Petron also maintained its leadership in the domestic market with a commanding 38.1 percent share, compared to the 32.2 percent share of Pilipinas Shell Petroleum Corp.; 16 percent share of Caltex Philippines Inc. and the remaining 13.7 percent share split among the new players in the industry.

"We were able to take advantage of high prices of exports which contributed significantly to our bottomline. At the same time, we are reaping the benefits from investments that improved the cost-efficiencies at our Bataan refinery," said Petron chairman Nicasio Alcantara.

These new investments include a $100-million clean air facilities opened last May that enabled the company to produce more environment-friendly fuels as mandated by law. The facilities include an isomerization unit and a gasoil hydroeater.

In the medium term, Petron will also be increasing its investments in its petrochemical business and has allotted an initial spending of $250 million until 2010.

"There is a huge potential in the petrochemical business, we have tested the market and we are seeing favorable prices for petrochemical products. We are in a very good position to further develop our refinery assets and expand our petrochemical operations. We are also diversifying our operations because as you can see, a two percent growth in sales volume is not encouraging," said Al-Faddagh.

He noted that among petrochemical products, there is a stronger demand for mixed xylene compared to naphtha and reformate.

Under the company’s refinery master plan, it would be expanding its double mixed xylene production capacity and would be putting up a benzene/toluene extraction facility and a propylene from a fluid catalytic cracker and feedstock recovery unit.

"We would be constantly reviewing our investments and these would depend on prevailing economic conditions and the demand of the market," said Al-Faddagh.

For 2005, Petron’s proposed capital expenditures program amounts to P6 billion. Major capital projects involve upgrading of refinery facilities such as its thermofor catalytic cracking unit which will improve the conversion rate of fuel oil into LPG, gasoline and diesel. Another project is the upgrading of its turbo generators which includes retrofitting of generators to ensure reliable power system at its Bataan refinery.

Al-Faddagh added that Petron will also be more aggressive in its efforts to increase its volume sales in the Asian region.

The company is selling various petroleum products such as LPG, gasoline, naphtha, reformate, mixed xylene and reformate to other Asian countries such as Korea, Singapore, Australia and China.