Petron Corporation (PCOR) Earnings Call Transcript & Summary

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

Yes, Mr. Chairman.

Do we have a quorum?

Yes, Mr. Chairman, we have a quorum. They are present at this meeting in person, by attendance advice e-mail to us and by proxy about 73.46% of the total outstanding capital stock of the company comprised of common and preferred shares. And for the record, the Chairman of this meeting, Mr. Ramon S. Ang, holds proxies for 73.46% of the outstanding common and preferred shares of the company. He is voting in favor of all corporate actions in the agenda or in accordance with validated proxies. Mr. Chairman, we acknowledge the attendance of all our directors whose photos are now shown on the screen, and a number of whom are also joining us here on site. We likewise acknowledge the attendance of the company's executive officers; and R.G. Manabat & Co. KPMG, the external auditor of the company for 2023. We advise the stockholders that after the management report, questions and comments e-mailed to our dedicated e-mail address 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. Voting shall be in accordance with the procedures set forth in that report that has been made available in our website, and the summary of which is presented on the screen for reference.

Next agenda. Next item on the agenda is the approval of the minutes of the Annual Stockholders' Meeting held on May 16, 2023. A copy of which is available for viewing in the Petron website.

Mr. Chairman, I move that the minutes of the Annual Stockholders Meeting held on May 16, 2023, be approved.

Motions have been duly made and seconded is carried. Next item on the agenda is the presentation of the management's report for 2023. The report will be delivered by our CFO, Manny Eraña. After which, we will entertain questions.

Thank you, Mr. Chairman. Good afternoon, ladies and gentlemen. Welcome to the 2024 Petron Annual Stockholders' Meeting. In 2023, Petron went through a challenging business landscape. Geopolitical tensions threatening the stability of supply, put pressure on prices and contributed to increased volatility. The full year average of Dubai crude price settled at $82 per barrel, 15% lower than 2022's $96, as prices corrected from the record high levels of the previous year. Prices of finished products also declined during the year. Higher inflation and interest rates worldwide further contributed to these global uncertainties. Despite this scenario, we are pleased to report that the 2023 marks Petron's third consecutive year of growth. Our consolidated volumes were up 13% at 127 million barrels, propelled by the substantial growth in our jet fuel and LPG sales. Locally, we increased our overall market share to 24.5% by the first half of the year. However, given price volatility, Petron's revenues decreased by 7% to PHP 801 billion from the 2022's PHP 858 billion. We ended the year with a consolidated net income of a little over PHP 10 billion, a 51% increase from 2022's PHP 6.7 billion on the strength of our volume growth, prudent risk management and more optimized operations. We expect to continue growing this 2024. This is shaping up to be another strong year with our consolidated sales volumes as of March 31, reaching 35 million barrels, 23% higher than last year's 29 million barrels. Petron's consolidated revenues reached PHP 228 billion, up 21% from last year's PHP 189 billion. The resulting net income for the first quarter of 2024 was up 16% at PHP 3.9 billion. While we work double time to meet higher demand and we strengthened our volume growth, coming out on top in terms of the overall market share, we enhanced the competitiveness of our service station network. We expanded our presence in commercial and industrial markets, contributing greatly to our improved sales performance for 2023. We focused on providing the best customer experience, upgrading our stations with improved restroom facilities, enhanced aesthetics and a brand new look for our treat stores, making our service stations a comfortable stopover in their journeys. To round out these efforts, we implemented new and exciting promos to boost the Petron brand and allow our customers to benefit from our loyalty programs. We also further strengthened the Petron brand in Malaysia with effective retail executions, marketing programs and customer service excellence. As the nation's only remaining refinery, Petron has always been the Philippines' partner in progress, ensuring fuel security and delivering quality products. Through carefully planned process enhancement, we scaled up our production at our refineries both in Bataan and Port Dixon, raising our combined crude run by 11% to maximize the company's refining assets. We are consistently maximizing supply chain integrations. And in 2023, improvements were focused on integrating basic hauling services and into-plane operations. A report of our milestones would not be complete without mentioning our environmental, social and governance efforts, which are the guiding principles for our vision and purpose. We have been cutting back on energy consumption as we shift to LED lighting and solar panel systems in our facilities. We are committed to water conservation. As of 2023, we have already reduced our water consumption by 29% compared to our 2016 baseline. We further minimized our environmental footprint through our Puno ng Buhay reforestation program across the Philippines. Petron is also committed to abiding by new regulations, such as the Extended Producer Responsibility Law, with new initiatives to reduce our plastic footprint. Petron continues to be an industry leader, not just in market share and product quality, but also in nation building. We are consistent in implementing our corporate social responsibility programs. Petron stands over 9 decades strong. Shaped by history, hardened through experience, we have been through countless challenges. But to be at another peak in our 90th year is a milestone that not many companies get to enjoy. Thanks to you, our partners and stockholders, that we can continue to fuel the hope in the lives of millions of Filipinos. Thank you for your continued trust and support. Thank you.

Mr. Chairman, may we start with the questions?

The chair will now entertain questions.

Our first question is from [ Mr. Valdez ] of Quezon City. Congratulations [Foreign Language].

[Foreign Language]. We're taking advantage of the ongoing economic recovery. [Foreign Language]. Thank you.

Our next question is from [ Ms. Viray ] of Pasig City. Prices of petroleum products in the Philippines remain high. What could be the reason for this? And how can Petron help soften the impact on motorists?

The increase in prices are due to international geopolitical conflicts in the Middle East and, as you are aware also, the Russia-Ukraine war, and part of what is happening in the whole world. At the same time, when I mentioned what is happening in the whole world is actually an increase in demand because of improving economic progress. [Foreign Language]. This is why we have loyalty programs in place to put customers or to give customers a chance to collect points. [Foreign Language] We are also having our regular promos to create more points [Foreign Language].

Our next question is from [ Mr. Gumapas ]. I would like to ask if there is a release of Petron dividends this month of April.

[Foreign Language]. In Malaysia, it's only PHP 20 per liter. In the Philippines, PHP 60. Because in Malaysia, the government of Malaysia do not impose excise tax and VAT, VAT of 12%. [Foreign Language]. Another PHP 20 is -- Malaysian government or other Asian countries give subsidy, another PHP 20. That's why the prices of gasoline is PHP 60 in the Philippines, because the actual price is only PHP 20, the other PHP 20 is government-imposed excise tax and VAT. [Foreign Language]. The electricity rate in the Philippines is usually 3x compared to our regional countries, because our neighboring countries also put in subsidy 1/3, and 1/3 actual cost and another 1/3 is the imposed taxes. [Foreign Language]. Pilipinas is -- we are market force. Unlike our other neighboring countries, they are heavily subsidized. But I think our neighboring countries will not be able to sustain that in the long term. [Foreign Language]

Thank you, Mr. Chair. Our next question is from [ Mr. Gumapas ]. I would like to ask if there is a release of Petron dividends this month of April. And on a related question from [ Ms. De Leon ] of Las Piñas, [Foreign Language]?

Yes, of course. [Foreign Language]

And our last question, Mr. Chair, from [ Ms. Bacara ] of Rizal. [Foreign Language]

[Foreign Language]

Other questions related to ownership of shares and dividends were forwarded to and will be addressed by our stock transfer agent, SMC Stock Transfer Corporation. Thank you, Mr. Chair. That would be all.

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

I second the motion.

Moved and seconded. Next item on the agenda is the ratification of all acts and proceeding of the Board of Directors and management since the last AGM held on May 16, 2023 until today. Our Corporate Secretary, Attorney Winnie, will guide us on this item.

Thank you, Mr. Chairman. The material items approved by the Board and the Board ExCom since the 2023 ASM include the matters attached as Annex A to the definitive information distributed to the stockholders.

Mr. Chairman, I move that the following resolution be approved. Resolve that all acts, resolutions and proceedings of the Board of Directors and corporate officers of the company since the Annual Meeting of the Stockholders on May 16, 2023, 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.

Moved and seconded. Next item on the agenda is the nomination for the position of external auditor of the company and ratification of its fee. May I call on Attorney Winnie.

Thank you, 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 2024 and the ratification of its fees for the preparation of the 2024 audited financial statements of the company and its subsidiaries.

May I request Independent Director Teves of the Audit Committee to please confirm.

Mr. Chairman, I confirm. Thank you.

The chair will now entertain a motion.

Mr. Chairman, I move the accounting firm, R.G. Manabat & Co. KPMG, be designated as external auditors for the year 2024.

I second the motion.

Moved and seconded.