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pg 121 PETRONAS DAGANGAN BERHAD BUSINESS REVIEW RETAIL COMMERCIAL LPG LUBRICANT SUPPLY & DISTRIBUTION Page 122 Page 134 Page 140 Page 146 Page 152 AT A GLANCE WHO WE ARE AND WHAT WE DO LEADERSHIP MANAGEMENT DISCUSSION AND ANALYSIS RETAIL ACHIEVEMENTS SUSTAINABILITY JOURNEY CORPORATE GOVERNANCE WHO WE ARE FINANCIAL STATEMENTS We are the fuel that powers your everyday journey. We STAKEHOLDER INFORMATION represent the thousands of smiling faces of our Krew PETRONAS that greet customers visiting our PETRONAS stations. Together with our Rakan Niaga, we run and manage the vast network of PETRONAS stations across Malaysia. Strategic Review and Outlook Performance Review Business Review PDB Manpower Age Group Gender Permanent: 277 51 and above: 35 Male: 96 Contract: 16 40-50: 91 Female: 197 20-39: 167 Total: 293 Total: 293 Total: 293 PETRONAS DAGANGAN BERHAD ANNUAL REPORT 2016 pg 122 pg 123 AT A GLANCE MARKET AND INDUSTRY OVERVIEW IN 2016 WHO WE ARE AND WHAT WE DO 2016 has been a tough year for the retail fuel industry at large. The Retail business of PDB LEADERSHIP was no different, as the business saw intense pressure from competitors to remain MANAGEMENT DISCUSSION above board. AND ANALYSIS Overall market volatility was a major contender that severely impacted our business. ACHIEVEMENTS According to the Department of Statistics Malaysia, the Consumer Price Index for the SUSTAINABILITY JOURNEY country, rose by 2.1% to 116.9 from 114.8 during preceding year under review. This is CORPORATE GOVERNANCE further compounded by the Consumer Sentiment Index which has also improved from 69.6% in 2015 to 75.0% at the end of 2016. FINANCIAL STATEMENTS STAKEHOLDER INFORMATION BUSINESS MODEL The primary fundamentals of our retail segment are rooted in providing superior Customer Experience at our PETRONAS stations. This begins with the appointment of our Rakan Niaga who serves as our brand ambassador. Our Rakan Niaga, work effortlessly to serve our customers by providing the best in convenience and service that we have to offer at PETRONAS stations. Both the Rakan Niaga and Krew PETRONAS are provided with adequate training to ensure that customers will be attended to and that the best service and customer experience is provided. At PDB, our Retail business model can be divided into two categories: COMPANY OWNED, DEALER DEALER OWNED, DEALER OPERATED (CODO) STATIONS OPERATED (DODO) STATIONS Strategic Review and Outlook ∞ Under the CODO model, the PETRONAS ∞ Under the DODO model, the PETRONAS station is owned and managed by the station is owned, managed and operated by a Performance Review Company but is operated by an appointed Dealer. Business Review Dealer. ∞ The Dealer is also appointed by PDB through a ∞ The Dealer, also known as an Operator is series of screening processes. The Dealer appointed by PDB through a series of sources the fuel products from the Company. screening processes. For the year under review, most of our PETRONAS stations operate under the CODO RETAIL business model. The DODO business model is implemented on selective basis. Both business models source their non-fuel items for the Kedai Mesra from a list of vendors and suppliers provided by PDB. PETRONAS DAGANGAN BERHAD ANNUAL REPORT 2016 pg 124 pg 125 BUSINESS STRATEGY A major hallmark of our Company is the PETRONAS network of stations. During the year under review, our network of PETRONAS stations continues to be the largest throughout the nation, with more than 1,000 stations in operation across Malaysia. As we weather these challenging times, the Company has rationalised its network expansion plan to look into maximising the output of our current stations, strengthening their capabilities and enhancing their profitability to become leaner and more resilient to overcome the limitations and obstacles that lay ahead. Moving forward, PDB will focus towards developing entrepreneurs whom are about delivering results and becoming true brand ambassadors. Aside from developing a strong and efficient network, 2016 has also seen the Company focused more towards engaging customers, fine tuning our message on educating the customers about our superior fuel products that have led our Mercedes AMG PETRONAS Formula One™ Team to 3 consecutive World Constructors’ Championships and 3 consecutive World Drivers Championships in a row. It cannot be denied that the introduction of PETRONAS Primax 95 with Advanced Energy Formula and PETRONAS Primax 97 with Advanced Energy Formula has revolutionised the fuel market in Malaysia, bringing more value in fuel economy and also power. Elevating the customer experience delivered at our PETRONAS stations is a one of our primary objectives. However, this is only possible by taking account customer feedback of their experiences at PETRONAS stations. From the feedbacks, Retail business embarked on transforming the customer experience at PETRONAS stations to ensure that we provide a retail environment for our customers that is ‘Clean, Bright, Safe and Works All The Time’. The Winning Formula behind Commercial Excellence is the Key Retail Ambition Redefined Commercial Excellence Transformation Strategy To achieve the aspiration of becoming the Commercial Excellence will drive PDB The key aspects of our Commercial nation’s ‘Most Favoured Retailer’ by 2018, the Retail business strategy moving forward, Excellence is focused towards delivering Retail business embarked on a Commercial and has clearly paved the way for Retail to consistently superior customer experience Excellence Transformation Strategy which realise its full potential and in achieving its at all our PETRONAS stations nationwide. redefines the way we do business. ultimate goal: Most Favoured Retailer. Delivering superior customer experience Through this strategy, Retail business would It is all about delivering results that matter means providing PETRONAS customers be able to identify clearly their target as we bring the vision of tomorrow to with a selection of products that meet consumers allowing them to better you today through improvement of the their needs for every buying occasion, understand the needs of their customers. facilities, services and the entire look of superior fuel products that are engineered PETRONAS stations. for the race track but delivers the best in This entire initiative would focus on fuel economy and power. delivering results that matter and that would be winning over customers by consistently Retail business is developing an delivering superior customer experience at organisational culture that is more our stations. customer-centric and responsive to the customers’ needs. These e orts will allow The final key element which is the us to further grow into an organisation foundation of this transformation is to that is focused on marketing and branding ensure that all our stakeholders including that continues to deliver products and PDB employees, Rakan Niaga and our services with customers’ interests at heart. vendors work continuously and seamlessly towards enhancing their speed of execution and e ectiveness by making sure that we are brilliant at basics. AT A GLANCE FINANCIAL PERFORMANCE WHO WE ARE AND WHAT WE DO Following the global fall in crude oil prices, most oil companies were forced to realign LEADERSHIP their businesses to meet the escalating costs against price volatility. During the year under MANAGEMENT DISCUSSION review, Retail business contributed 45% towards the Group’s Gross Margin. AND ANALYSIS Through focused execution and towards a common goal of shared success, Retail ACHIEVEMENTS business recorded close to 4% increase in overall MOGAS volume. The significant growth SUSTAINABILITY JOURNEY is due largely to the aggressive marketing and promotional activities for PETRONAS Primax CORPORATE GOVERNANCE 95 with Advanced Energy Formula and the growing number of stations offering PETRONAS Primax 97 with Advanced Energy Formula nationwide. FINANCIAL STATEMENTS STAKEHOLDER INFORMATION In the non-fuel segment, Retail business recorded an increase of 5% on gross income as compared to preceding year under review. KEY PRODUCTS AND SERVICES PETRONAS Stations Pushing the boundaries and reinventing the way we approach the retail fuel industry, Retail business continues to shape and develop the future of new Malaysian entrepreneurs to produce better results and deliver superior customer experience to our valued customers. Dedicated to ensuring that customers have a profound experience at our stations, Retail business is all about delivering a healthy environment where all our stations are ‘Clean, Bright, Safe and Works All The Time’. Strategic Review A major milestone for 2016 saw the introduction of new Multi-Product Dispensers that can and Outlook accommodate up to six products. This ensures that every customers’ needs and fuel preference are immediately addressed at the pump. With the new Multi-Product Dispensers Performance Review we are able to provide convenience that is both seamless and fast. During the year under Business Review review, Retail business operationalised six new stations to further strengthen our retail network. Kedai Mesra The name ‘Mesra’ itself reflects the care our Krew PETRONAS take in providing all our customers with the best level of service either at the pump or in the Kedai Mesra itself. Taking customer convenience to a whole new level, Retail business Convenience Retail segment continues to push the envelope and redefine Convenience Retailing in Malaysia. Moving forward, our Kedai Mesra will be tailored to the customers’ wants