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Inventory losses cut Petron’s net income

April 9, 2007

PETRON Corp. said its earnings last year fell slightly due to inventory losses arising from a drop in petroleum prices.

The Philippines’ largest oil refiner said that profits hit P6.02 billion, lower than the P6.05-billion net income registered in 2005.

The lower net income was due to inventory losses of about P1.6 billion from the “sudden and steep” drop in crude and finished product prices in the latter half of last year.

This was, however, offset by foreign-exchange gains with the strengthening of the peso and improvements in operating efficiencies.

Petron’s revenues, however, reached P211.72 billion last year, or a 10.5-percent increase from P191.48 billion in 2005.

While high prices resulted in the contraction in domestic demand by 7.5 percent, Petron’s domestic sales fell 5.8 percent to 41.17 million barrels.

Petron said that an increase in export volumes, however, made up for the domestic contraction, as sales abroad rose 37 percent to 10.91 million barrels. Overall, sales volume was nearly flat, growing 1 percent to 52.08 million barrels.

“In spite of a difficult and highly competitive business environment, we were able to maintain our profitability while retaining our focus to move our major programs forward,” Virginia A. Ruivivar, Petron public affairs manager, said.

Last year the company expanded its revenue base by tapping nontraditional markets including the introduction of Petron-branded lubricants in Cambodia and Indonesia.

Petron also expanded its strategic partnership with Innospec, a global fuel additives supplier, with the construction of a $2.5-million fuel additives blending plant in Subic Bay. The plant will serve as a supply hub for Innospec’s customers in the Asia-Pacific region.

The company also reported that the construction of its PetroFCC project, under its $300-million Refinery Master Plan, is more than 50-percent complete and is expected to be on stream by the first quarter next year.

The PetroFCC will allow the company to produce more high-value white products and make it the only local producer of the petrochemical grade propylene. (Manila Times, April 9, 2007)

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