Petron income up 77% to P6.04B

Petron Corp. posted a 77- percent increase in its net income to P6.04 billion in 2005 from P3.42 billion in 2004, its best performance in 10 years.

Petron is 40 percent owned by the government through Philippine National Oil Co. (PNOC). Another 40 percent is held by oil giant Saudi Aramco while the remaining 20 percent is listed in the country’s stock market.

In a statement, Petron said 2005 marks the fifth straight year of robust income growth despite a challenging business environment, reflecting improved operating efficiencies, benefits derived from refinery investments, and other growth initiatives.

Based on its unaudited financial statement, operating expenses only increased by three percent from P5.16 billion in 2004 to P5.34 billion last year as Petron continued to improve its operations through various initiatives such as the deployment of modern IT software in its supply chain and the rationalization of depots across the country.

"Our success as a company has been supported by several initiatives that we started a few years ago. We continue to apply the latest technologies throughout our supply chain. Additionally, strategic investments to improve product yields and operating efficiencies in the past few years have given Petron a unique advantage over its competitors," Petron president and CEO Khalid D. Al-Faddagh said.

Al-Faddagh cited the commissioning of the isomerization unit and a gas oil hydrotreater in early 2005 that allowed Petron to produce Clean Air Act-compliant gasoline and diesel to meet its domestic requirements without resorting to product importations.

He also said the decision to invest in the mixed xylene unit a few years back proved beneficial to the company.

The Petron executive also attributed the improvement in the company’s net earnings in 2005 to favorable export margins last year for the petrochemical mixed xylene which contributed significantly to the bottomline.

Due to the success of its initial entry into petrochemicals, Petron has allocated $300 million to invest in new refinery units. These units will allow the company to double its production of mixed xylene as well as extract higher value petrochemical streams such as benzene, toluene, and propylene.

Export volumes grew 45.3 percent to 7.96 million barrels last year compared to 5.48 million barrels in 2004. Overall, sales volumes fell by about two percent to 51.67 million barrels from 52.76 million barrels due to sluggish domestic demand.

"We will continue to leverage our refinery assets since we see these as the main driver for sustained growth over the long term. Given the relatively mature fuels market, petrochemical feedstock production will be a significant revenue stream for Petron over the next few years," Petron chairman Nicasio I. Alcantara said.

Alcantara said parallel to these initiatives, the company is aggressively pursuing the expansion of its non-fuel business which includes the construction of additional Treats convenience stores and locators at its service stations.

Despite an industry demand contraction of 10 percent, Petron continued to dominate the local oil industry as it increased its overall market share to 38.3 percent in 2005 from 37.8 percent in 2004.

In the hotly-contested retail market, the company enjoyed a 34-percent share, more than one percent over its closest rival.

The company continues to strengthen its service station network adding another 64 for 2005 alone. As of end-2005, Petron has nearly 1,270 stations nationwide – the largest network in the country.

Total sales revenues increased by 29.8 percent to P191.49 billion from P147.42 billion in 2004.