Petrolimex loses coin-toss on excess stock

Large amounts of excess stock and low oil prices caused Vietnam National Petroleum Group (Petrolimex, HOSE: PLX), the number one petroleum distributor in Vietnam, to see lower profit in the second quarter of 2017 compared to the same period last year.

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Taking chances with excess stock

In the first quarter of the year, Petrolimex saw impressive growth with a net revenue of VND35.8 trillion ($1.57 billion), 30 per cent higher than the same period last year. However, by the end of the quarter, the petroleum giant’s sizable excess stock was valued at VND11.6 trillion ($510.3 million), VND3 trillion ($131.97 million) higher in value than at the end of 2016.

With a large amount of excess stock, Petrolimex had the opportunity to see increased profit if global oil price rose, but there was also considerable risk in the event oil prices took a downturn.

Market developments and financial data from the second quarter show that Petrolimex has not been lucky. In the last quarter, the corportation’s revenue reached VND38.5 trillion ($1.69 billion), an increase compared to the VND31.2 trillion ($1.37 billion) in the second quarter of 2016. However, Petrolimex’s profit after tax in this quarter was VND909 billion ($39.99 million), a considerable drop compared to the VND1.14 trillion ($50.15 million) in the same period last year.

Notably, Petrolimex earned VND178 billion ($7.83 million) from foreign investors through PLX shares in May 2017. Without this, Petrolimex’s profit would have dropped even more, as its operating profit in the second quarter only reached VND952 billion ($41.88 million), much lower than the VND1.59 trillion ($69.94) in the same period last year.

One of the reasons behind Petrolimex’s falling profit is the constant drop of WTI crude oil prices in the global market. The average crude oil price in the first quarter was $51.78 per barrel, which dropped 12.7 per cent to $45.2 per barrel by June 2017. This went completely against the first six months of 2016, when the price of crude oil increased from $33.63 in the first quarter to $48.85 per barrel in the second quarter, a growth of 45.3 per cent.

Solutions for the second half of 2017

Clearly, Petrolimex did not have much luck with balancing excess stock in the first half of 2017. However, after the drop in the first six months, the risk of oil prices continuing to slip is no longer significant. The price of WTI crude oil dropped quite low by the end of June and is unlikely to drop any further. By August, the WTI price of crude oil has reached $49 per barrel, about $4 higher than in June.

Meanwhile, Petrolimex has also embarked to increase sales and develop support services with the hope of improving the company’s business in the future.

Tran Van Thinh, director general of Petrolimex, shared that the company will strengthen retail by investing in facilities at locations that offer long-term advantages and promoting brand identity.

Additionally, Petrolimex is implementing a number of projects, including the plan to accept card payments from partner banks. At the end of July, Petrolimex signed an agreement with the National Payment Corporation of Vietnam (Napas) and Petrolimex Group Commercial Joint Stock Bank (PG Bank) to integrate ATM card payment through PG Bank’s POS machines at Petrolimex gas stations nationwide.

Following this, from August 2017, credit card holders of 41 banks associated with Napas will be able to purchase gasoline and other goods or services at Petrolimex gas stations.

Card payment service at Petrolimex gas stations is expected to improve the company's retail business

The PLX stock has grown steadily since it was listed in April 2017, peaking at VND64,460 ($2.84) per share on June 26, and gradually decreasing since then. In the trading session on August 4, PLX’s price slightly increased by VND600 ($0.03), reaching VND63.600 ($2.8) per share.

Petrolimex profit in the first six months of 2017

Net pre-tax profit reached VND2.44 trillion ($107.47), of which:

  • Profit from the petroleum business reached VND1.18 trillion ($51.91 million), accounting for 48.3 per cent;
  • Profit from non-petroleum business was VND1.263 trillion ($55.56 million), accounting for 51.7 per cent.

 

By Chi Tin