Philippine Rating Services Corporation (PhilRatings) maintained its existing PRS Aaa rating for Petron’s outstanding P6.3 billion in fixed rate corporate notes which will mature in August 2011. PhilRatings likewise kept its rating of PRS Aaa (corp.) for Petron’s overall capacity to service its maturing debts. “Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong,” said PhilRatings adding that a company given a rating of PRS Aaa (corp.) has a very strong capacity to meet its financial commitments relative to that of other Philippine corporates. A PRS Aaa is the highest possible credit rating on PhilRatings’ issue and issuer credit rating scales.
The ratings assigned reflect the company’s strong future earnings and cash flow generation; its ample liquidity; its more than adequate financial flexibility; its solid market leadership and synergies given its present and prospective shareholders. PhilRatings also took into consideration external factors which have affected and which may continue to affect Petron’s overall performance.
Despite the weak performance in 2008, Petron continues to face good business prospects and improving margins, backed by solid company fundamentals. Initial figures for the first quarter of 2009, as provided by Petron to PhilRatings for credit-rating purposes, show that the company is gradually reversing its loss and has started to generate a positive bottomline. Cash flows from operations, expected to be stronger in line with growing revenues and healthy earnings, will be more than enough to cover maturing debt. Forecasted improvements in margins will come from Petron’s diversification into premium-priced petrochemicals; investments in conversion facilities which will increase the production of higher-priced white products; and its flexibility in its feedstock selection which is expected to improve yields per barrel of crude.
Petron incurred a net loss of P3.9 billion in 2008, a reversal from the P6.39 billion net income realized in 2007. The net loss was mainly attributed to margin contraction given the unexpected, unprecedented, and fast rate of decline in crude costs during the second half of 2008. Financing charges were also high last year as Petron increased its borrowings to finance more expensive crude in the first half of the year. Petron’s revenues amounted to P267.7 billion in 2008, much higher than its 2007 revenues of P210.5 billion. This was due to the oil price hikes during the first half of the year. The loss incurred in 2008 is seen by PhilRatings as a short-term aberration which is not likely to recur in the near future. San Miguel Corporation’s (SMC) entry into Petron also allows the latter to serve the substantial fuel requirements of SMC as an institutional client. Synergies can likewise be created given the wide retail network and distribution reach of both companies.
The ratings assigned to Petron and its existing issue can be changed at any time should circumstances warrant such a change. While PhilRatings takes into account a company’s historical performance in arriving at its credit ratings, a credit rating is always more “forwardlooking” than anything else.
For credit & collection questions and inquiries, call or text 0917-7220521 or email at elimtingco@cibi.net.ph