JOURNEY 2016 Annual Report & Accounts Petron Malaysia Refining & Marketing Bhd (3927-V) Cover Rationale at Petron, It’S All About the Work of Passionate Experts
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A MORE REWARDING JOURNEY 2016 Annual Report & Accounts Petron Malaysia Refining & Marketing Bhd (3927-V) Cover Rationale At Petron, it’s all about the work of passionate experts. Our unique understanding of the local market drives us to formulate and innovate on products that meet your needs and fit your lifestyle. Simply, we are developing more efficient fuels that can help us get the most from our energy resources so that you can get a more rewarding journey. A MORE REWARDING JOURNEY 2016 Annual Report & Accounts Petron Malaysia Refining & Marketing Bhd (3927-V) THE PETRON MALAYSIA GROUP is part of Petron Corporation in the Philippines, an service stations nationwide, including stations that are of emerging and rapidly evolving Asian oil company. our sister companies. We embody what our brand stands for – innovative products, excellent service, successful Petron Corporation joined Malaysia’s dynamic and partnerships built on trust, and caring for our customers. progressive market with the acquisition of ExxonMobil’s downstream businesses in March 2012. Petron We are proud to be part of your lives as we fuel safe subsidiaries in Malaysia comprise of Petron Malaysia journeys with our top-of-the line fuels, Blaze 100RON Refining & Marketing Bhd (“PMRMB”), a public company Euro 4M, Blaze 97RON Euro 4M, Blaze 95RON, Turbo listed on the Main Board of Bursa Malaysia Securities Diesel Euro 5 and Diesel Max. Beyond just being a Berhad, Petron Fuel International Sdn. Bhd., and Petron petrol station, Petron service stations also provide a Oil (M) Sdn. Bhd. one-stop service experience to travellers on the road. Our convenience store, Treats, offers amenities such as Petron Malaysia Refining & Marketing Bhd operates shopping marts and fast food restaurants. Petron Port Dickson Refinery (PDR), which has a rated capacity of 88,000 barrels per day, producing a wide range Petron’s premier LPG brand, Petron Gasul, provides of petroleum products which include gasoline, diesel, efficient energy for the Malaysian households. liquefied petroleum gas (LPG) and aviation fuel. Our world-class fuels are distributed from eleven strategically- We help power the Malaysian economy by providing located depots and terminals of Petron subsidiaries in commercial fuels to key industries. Beyond our business Malaysia. agenda, we take our corporate and social citizenship to heart by supporting safety, environment, and education Through this robust distribution network, we are able to programmes to ensure sustainability and contribute to ensure a continuous and reliable supply of quality fuels to social development. Through the combined experience our various customers. and expertise of our highly-skilled and motivated management and personnel, and our strong foundations As an Asian company with a global mindset, we look in the oil & gas industry, we are dedicated and forward to becoming an integral part of your lives as we passionate about our vision to be the leading provider fuel journeys through our network of more than 580 of total customer solutions in the oil sector and its allied businesses. 2016 ANNUAL REPORT & ACCOUNTS 1 OUR VISION To be the leading provider of total customer solutions in the oil sector and its allied businesses. OUR MISSION We will achieve this by: Being an integral part of our customers’ lives, exceeding expectations and meeting changing needs, delivering a consistent customer experience through quality products and innovative services; Developing strategic partnerships in pursuit of growth opportunities; Fostering an entrepreneurial culture that encourages teamwork, innovation, and excellence; Acting with professionalism, integrity, and fairness at all times; Adhering to the strictest safety and environmental standards; and Promoting the best interests of all our stakeholders, and caring for our community. CONTENTS YOUR JOURNEY STARTS HERE 8 - 58 59 - 127 8 Chairman’s Statement 59 Board Audit & Risk 1 - 7 Management Committee 12 Management Discussion Report 1 Our Story and Analysis 65 Financial Statements 2 Our Vision / Our Mission 28 Sustainability Report 117 Independent Auditors’ Report 4 How Petron Reaches You 33 Corporate Information 121 Information on Shareholdings 4 Our Facilities in Malaysia 34 Profile of Board of Directors 124 Top 10 Properties 5 Highlights in 2016 38 Profile of Management Committee 125 Notice of Annual General 6 Five-year Summary Charts Meeting 40 Corporate Governance 7 Financial Highlights 126 Statement Accompanying Notice of Annual General 57 Statement of Risk Meeting Management & Internal Controls • Proxy Form HOW PETRON REACHES YOU CRUDE OIL REFINERY TRANSPORTATION, STORAGE, AND LOGISTICS RETAIL Petron service stations provide a delightful and rewarding one-stop service experience for travellers on the road. COMMERCIAL Petron markets a wide range of LPG industrial fuel products including Petron Gasul LPG in 12kg, Automotive Diesel Oil (ADO), 14kg and 50kg provides Mogas, Kerosene and Jet A1 to efficient, clean-burning liquefied industries that power the Malaysian petroleum gas. economy. OUR FACILITIES IN MALAYSIA 1. Port Dickson Refinery, Negeri Sembilan 2. Port Dickson Terminal, Negeri Sembilan 3. Bagan Luar Terminal, Penang MORE THAN 4. Kuantan Terminal, Pahang* 3 580 PETRON 9 5. Westport Terminal (JV-BHP), Selangor* SERVICE STATIONS NATIONWIDE 10 6. KLIA Aviation Facility 4 (JV-Petronas/Shell), Kuala Lumpur 7. Klang Valley Distribution Terminal 11 5 6 (JV-Petronas/Shell) 7 2 1 8. Pasir Gudang Terminal (JV-Chevron), Johor* 8 9. Sepanggar Bay Terminal, Sabah* 10. Sandakan Terminal, Sabah* 11. Tawau Terminal, Sabah* * PMRMB affiliate terminals 4 PETRON MALAYSIA REFINING & MARKETING BHD HIGHLIGHTS IN 2016 PETRON LPG BLAZE100 50kg launched in January launched in June PETRON TURBO DIESEL launched in September YEAR 2016 NET PROFIT RM237.6 MILLION SERVICE STATIONS VOLUME COMPLETED* 580 SOLD TOTAL 32.1 STATIONS* MILLION BARRELS 18 WINS ISO9001: AWARDED PREPAID SILVER 2015 MSOSH in PUTRA BRAND AWARDS* FLEET AWARDS CERTIFIED CARD* launched in October * PMRMB and sister companies, Petron Fuel International Sdn. Bhd. and Petron Oil (M) Sdn. Bhd. 2016 ANNUAL REPORT & ACCOUNTS 5 FIVE-YEAR SUMMARY CHARTS REVENUES PROFIT/(LOSS) AFTER TAX (Net of government duties) RM MILLION RM MILLION 12,000 300 10,000 200 8,000 6,000 100 (64) (64) 4,000 98 221 238 0 2,000 11,476 11,128 10,902 8,150 7,602 -100 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 SALES VOLUME TOTAL THROUGHPUT Thousands of barrels Thousands of barrels per calendar day per calendar day 100 60 80 50 40 60 30 40 20 20 10 80 79 80 83 88 48 51 46 47 47 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 CAPITAL EXPENDITURE TOTAL ASSETS EMPLOYED RM MILLION RM MILLION Financed by 180 3,000 150 2,500 120 2,000 90 1,500 60 1,000 30 500 39 152 102 68 48 2,775 2,792 2,443 2,271 2,646 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Shareholders’ funds Trade payables Notes payable and Taxes payable, bank borrowing provisions & others 6 PETRON MALAYSIA REFINING & MARKETING BHD FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 2016 2015 % RM Million RM Million Change Revenues 7,602 8,150 (7) Profit after tax 238 221 8 Earnings per ordinary share unit (sen) 88.0 81.7 8 Dividend per ordinary share unit (sen) 22 20 10 Total assets employed 2,646 2,271 17 Total shareholders’ funds 1,164 982 19 Sales volume (thousand barrels per calendar day) 88 83 6 SHAREHOLDERS’ INFORMATION 2016 2015 2014 2013 2012 Earnings/(Loss) per ordinary share unit (sen) 88.0 81.7 (23.9) (23.8) 36.4 Gross dividend per ordinary share unit (sen) 22 20 - 14 14 Dividend yield (%) 4.6 6.6 N/A 4.5 4.3 Share price (RM) - Highest 7.31 5.10 3.21 3.60 3.94 - Lowest 3.51 2.51 2.30 2.76 2.71 - Average 4.80 3.02 2.90 3.11 3.26 Number of employees at year-end 315 303 292 293 283 2016 ANNUAL REPORT & ACCOUNTS 7 CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, THE YEAR 2016 WAS TOUGH FOR THE OIL AND GAS INDUSTRY AS WE CONTINUED TO FEEL THE IMPACT OF VOLATILE OIL PRICES. FOR THE YEAR IN REVIEW, THE MALAYSIAN ECONOMY CONTINUED ITS MODEST GROWTH AMID A CHALLENGING ENVIRONMENT THAT SAW A PROLONGED SLUMP IN OIL PRICES, A SLOWDOWN IN THE GLOBAL ECONOMY, AND SIGNIFICANT EVENTS SUCH AS BREXIT AND TIGHTER US MONETARY POLICY. REVENUES RM7.6 billion PETRONM 2016 SHARE PRICE AVERAGE RM4.80 per share DESPITE THESE HEADWINDS IN OUR JOURNEY TO BE AN INNOVATIVE LEADER IN THE MARKET, WE BUCKLED DOWN TO WORK, FOCUSING ON EXPANDING OUR PRESENCE FURTHER, INTRODUCING INNOVATIVE PRODUCTS AND SERVICES FOR OUR CUSTOMERS, AND STRENGTHENING OUR LOGISTICS CAPABILITIES. 8 PETRON MALAYSIA REFINING & MARKETING BHD CHAIRMAN’S STATEMENT The price of benchmark crude Dated Brent averaged US$44 per barrel in 2016, 15% lower than the previous year as supply continued to outstrip demand. Product cracks – the price differential between crude oil and finished products – continued to narrow, a marked trend over last year. These have had an impact on our business. Despite these headwinds in our journey to be an innovative leader in the market, we buckled down to work, focusing on expanding our presence further, introducing innovative products and services for our customers, and strengthening our logistics capabilities. More importantly, we deployed a wide range The increase in our sales volumes helped offset the prolonged climate of programmes to respond to external risks. of softer oil prices, which affected our revenues to drop by 7% to The success of our programmes speaks for RM7.6 billion from RM8.2 billion in 2015. themselves as we thrived despite the challenges and enjoyed another banner year. Leading the Way Through Innovation Another Banner Year Delivering excellent customer service has always been synonymous with the Petron brand.