Petron Corporation (PCOR) Earnings Call Transcript & Summary

Ladies and gentlemen, meeting will come to order. Were notices to the stockholders duly sent?

Yes, Mr. Chairman.

Do we have a quorum?

Mr. Chairman, we have a quorum. They are present at this meeting in person, by attendance advice e-mailed to the company and by proxy, 73.20% of the total outstanding capital stock of the company. For the record, the Chairman of this meeting, Mr. Ramon S. Ang, holds proxies for 73.30% of the outstanding common shares of the company, and he is voting in favor of all corporate actions in the agenda or in accordance with the validated proxies. Mr. Chairman, we acknowledge our directors whose photos are now shown on the screen. We likewise acknowledge the attendance of the company's executive officers and R.G. Manabat & Co., KPMG, the external auditor for year 2021. We advise the stockholders that after the management report, questions and comments e-mailed our dedicated e-mail address flashed on the screen will be read and addressed. Please identify yourself in your e-mail with your name and address. Priority will be given to questions e-mailed in advance.

The full agenda of this meeting is presented on the screen.

The rationale and brief explanation of each agenda item can be found in the definitive information statement. Each common share is entitled to 1 vote. Voting shall be made in accordance with the procedures set forth in the information statement available in the Petron website and in PSE Edge and a summary of which is flashed on the screen for reference.

First agenda is the approval of the minutes of the AGM held on May 18, 2021, copies of which is available for viewing in the Petron's website.

Mr. Chairman, I move that the minutes of the Annual Stockholders Meeting held on May 18, 2021 be approved.

I second the motion.

Motion having been duly made and seconded is carried. Next item on the agenda is the presentation of the management's report for 2021. May I request Manny, our CFO.

Ladies and gentlemen, welcome to the 2022 Petron Annual Stockholders' Meeting. Our 2021 journey is a story of recovery. We fueled our positive momentum in 2021 and rebounded with a net income of PHP 6.14 billion, a reversal from our PHP 11.4 billion net loss in 2020 when the pandemic first emerged. Consolidated revenues were up 53% at PHP 438 billion from last year's PHP 286 billion. We sold 82 million barrels during the period, posting a modest 5% growth as economic activities started to resume in the second half of the year. We saw promising improvements in our performance in key trades like the 6.4% growth in retail volumes as mobility restriction eased. In 2021, economy started to gradually reopen following the massive rollout of the vaccination campaign globally, triggering a recovery in demand. In the Philippines and in Malaysia, the number of fully vaccinated individuals significantly increased in July and continued to rise throughout the year. By year-end, 45.6% of the population in the Philippines and 76.2% in Malaysia have been fully vaccinated. During the same period, movement restrictions have relaxed, visits to different establishments, recreational spaces and transit stations have proved nationwide according to Google Mobility Trends data. This gradual improvement in mobility supported increases in oil prices throughout the year, which picked in October. Focused on recovery, we prioritize improvements in our operating facilities and service station network to increase efficiency. We resumed operations of our Bataan refinery in June of 2021. In Malaysia, we began commercial operation of our new diesel hydrotreater plant and a marine import facility in the second semester of the year. We maintained our network expansion programs, opening new retail outlets and service stations. In 2021, we utilized a new service station design and construction system to promote efficiency and sustainability. While maintaining competitiveness in the market, we implemented programs differentiating our products and services from the rest of the industry. We launched our new Petron Gasul Elite composite cylinder. Offering the best and safest Gasul experience to Filipino households. We also reinvented our loyalty program with the launch of the new Petron value card mobile app for a more enriching reward system for our customers. Petron remained the dedicated partner to our fence-line communities, 308 Tulong Aral ng Petron high school scholars received additional assistance in the form of tablets for online classes. We also helped rehabilitate and repair 79 schools through Brigada Eskwela. We extended our assistance to communities affected by the pandemic and natural calamities. In the case of Typhoon Odette, we distributed food packs to 3,700 families in visayas. In Malaysia, we donated food boxes and Petron Gasul cylinders to over 1,600 families and local businesses affected by the pandemic. Relief assistance was also provided to some 750 families who were victims of heavy floods. We maintained our environmental programs nationwide, including tree and mangrove planting and the Petron-sponsored Pawikan Conservation Forum. Under SMC's Ligtas Lahat program, we launched a vaccination site in Bataan in partnership with the local government to help protect employees and local residents in our battle against COVID-19. To date, almost 100% of our employees have been inoculated while we continue to implement strict health and safety protocols in all our facilities. Our recovery was achieved through hard work and cooperation among our dedicated employees, active partners, loyal customers and communities. Our approach to recovery has been holistic, focusing not only on our performance as a business, but also our social responsibilities to our stakeholders. As we persisted through the worst of times, we emerged victorious with a unique experience proving that Petron is built for our people, built for our nation and build for the future. [Foreign Language].

The Chair will now entertain questions.

Mr. Chairman, we will start with questions submitted in advance.

] Good afternoon, Mr. Chairman. Our first question is from [ Ms. Christina Briones of Laguna ]. Since January this year, we have been experiencing huge increases in pump prices. What are the reasons for the high price? And do you offer discounts and incentives to customers to mitigate the impact of high prices?

The reason for higher prices of fuel is because of the international market force bring about by the Ukraine war and shortage of crude oil. With regards to subsidy, I think government have given out a few billions pesos of subsidy to the public transport. So I guess government at this point, cannot wait its excise tax being requested by the public transport. Thank you, [Foreign Language].

] Thank you, Mr. Chairman. Our next question is from [ Mr. Matt Pineda of Bataan ]. Can you say that Petron has already fully recovered from the impact of the pandemic?

I would like to believe that we have done much, much better now. And -- but of course, we are still recovering to reach the pre-pandemic level. But we are very confident that we will soon have a better outcome than pre-pandemic. Thank you, [Foreign Language].

] Thank you, Mr. Chairman. For our next question, [ Ms. Donna Santos of Pampanga ] asks, [Foreign Language].

[Foreign Language].

] That would be all, Mr. Chairman. Thank you.

Mr. Chairman, I move to close the open forum and to approve and ratify the management report as presented.

I second the motion.

I second the motion.

Move is seconded. Next item on the agenda is the ratification of all asked and proceeding of the Board of Directors and corporate officers since the last AGM held on May 18, 2021, until today. Our Corporate Secretary, Attorney Elacio will guide us on this item.

Mr. Chairman, the material items approved by the Board of Directors or the Executive Committee since the 2020 Annual Stockholders' Meeting include those in the list attached as Annex B to the definitive information statement distributed for the meeting.

Lubin?

Mr. Chairman, I move that the following resolution be approved. Resolved that all asked resolutions and proceedings of the Board of Directors and corporate officers of the company since the Annual Meeting of the stockholders on May 18, 2021, as set forth in the minutes of the meetings of the Board of Directors and the Executive Committee be approved, confirmed and ratified.

I second the motion.

I second the motion.

Move is seconded. Motion is carried. Next item on the agenda is the nomination for the position of external auditor of the company and ratification of its fee.

Mr. Chairman, the Audit Committee after its evaluation is recommending the appointment of the accounting firm of R.G. Manabat & Co., KPMG, as external auditors for 2022 and the ratification of its fees for the preparation of the 2020 audited FS of the company and its subsidiaries.

May I request our Independent Director, Teves to confirm.

Mr. Chairman, I confirm. Thank you.

Moved?

Mr. Chairman, I move that the accounting firm of R.G. Manabat & Co., KPMG, be designated as external auditors for year 2022.

I second the motion.

Move is seconded.

Mr. Chairman, I further move that KPMG's fees as presented be ratified and confirmed.

I second the motion.

Move is seconded. We shall now proceed to the election of the directors. The Corporate Secretary will read the nominees for the election to the Board.

Thank you, Mr. Chairman. The nominees for election to the Board of Directors are Ramon S. Ang, Lubin B. Nepomuceno, Estelito P. Mendoza, Jose P. De Jesus, Ron W. Haddock, Mirzan Mahathir, Aurora T. Calderon, Francis H. Jardeleza, Virgilio S. Jacinto, Nelly Favis-Villafuerte, Horacio C. Ramos, John Paul L. Ang and our independent directors, Artemio V. Panganiban, Margarito B. Teves and Ricardo C. Marquez.

In the information statement circulated for this meeting, the 3 nominees for the election as independent directors are mentioned. They are director, Artemio V. Panganiban, Margarito Teves and Ricardo Marquez. This is in accordance with the mandatory requirement of the SEC for electing independent directors. May I call on our Corporate Secretary.

Yes. Thank you, Mr. Chairman. As discussed in the information statement distributed for the meeting, our Independent Director, retired Chief Justice Artemio V. Panganiban has been serving the company as an independent director for more than 9 years beyond the term limits of the independent directors. In accordance with the manual on corporate governance of the company and upon endorsement of the Corporate Governance Committee of the company. The Board has found that the independence of Director Panganiban has not been diminished or impaired by his long service as an independent director, and it has full confidence that he will continue acting as an independent director with the same zeal, diligence and vigor as when he was first elected. For these reasons, the Board of Directors has approved an endorsed for the vote of the stockholders, the election of the 15 nominees, including Director Panganiban as an independent director pursuant to the corporate governance manual of the company.

May I request Director Teves, to confirm.

Mr. Chairman, I confirm. Thank you.

Mr. Chairman, I move that balloting be dispensed with and that all nominees be considered unanimously elected as directors of the company for the ensuing year, including Independent Director, Panganiban; and the other successors are elected and qualified and that the votes of the stockholders present and represented by proxies be distributed and recorded accordingly.

I second the motion.

I second the motion.

Motion having been duly made and seconded is carried. The 15 nominees are declared duly elected members of the Board of Directors of the company. On behalf of your Board of Directors, I thank all of you for your vote of confidence. Next item on the agenda is the ratification of director's fee for 2022. May I call on our Corporate Secretary.

Mr. Chairman, after evaluation and based on the recommendation of management and in accordance with the corporate governance manner of the company, the Corporate Governance Committee has recommended the payment of directors' fees for 2022 in the amount of PHP 16.4 million, and the Board of Directors has approved the same.

Director Teves, please confirm.

Mr. Chairman, I confirm. Thank you.

The chair will now entertain the motion.

Mr. Chairman...

Mr. Chairman I move that the director's fees for 2022 be ratified and confirmed.

I second the motion.

Move is seconded. Does anyone have any matters or business to present to this assembly. If none, the chair will entertain a motion to adjourn.

Mr. Chairman, I move that the meeting be joined.

I second the motion, Mr. Chairman.

Thank you. Thank you.