Petron Corporation (PCOR) Earnings Call Transcript & Summary

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

Yes, Mr. Chairman.

Do we have a quorum?

Yes, Mr. Chairman, we have a quorum. There are present at this meeting in person, by attendance advice e-mailed to our company and by proxy about 73.67% of the total outstanding capital stock of the company. For the record. The Chairman of this meeting, Mr. Lubin B. Nepomuceno, holds proxies for 73.83% of the outstanding common shares of the company. And he is voting in favor of all corporate actions in the agenda or in accordance with validated proxies. Mr. Chairman, we also acknowledge the attendance of all our directors whose photos are now shown on the screen. We likewise acknowledge the attendance of the company's executive officers; and R.G. Manabat & Co., KPMG, the external auditor of the company for 2022. We advise the stockholders that, after the management's reports, comments and questions e-mailed to our dedicated e-mail address for this meeting will be read and addressed. Please identify yourself in your e-mail with your name and address. Priority will be given to questions sent 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 information statement for the meeting. Each common share is entitled to 1 vote. Voting shall be made in accordance with the procedures set forth in the information statement that has been made available in our website and in the EDGE of the Philippines Stock Exchange, a summary of which is flashed on the screen.

The next item on the agenda is the approval of the minutes of the Annual Stockholders' Meeting held on May 17, 2022, 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 17, 2022, be approved.

Second...

I second the motion.

The motion, having been made and seconded, is carried. The next item on the agenda is the presentation of the management report for 2022. The report will be delivered by Mr. Emmanuel Erana, our Chief Finance Officer, after which we will entertain questions.

Ladies and gentlemen, welcome to the 2023 Petron Annual Stockholders' Meeting. Petron's 2022 is a story of stability marking 2 straight years of growth. Our volume increased by 37%, with 112.81 million barrels sold compared to the previous year's 82.24 million barrels due to improving demand. Petron's operating income closed at PHP 19.21 billion, 12% more than 2021's PHP 17.21 billion. This was in part due to more favorable refining cracks and optimized refinery operation. Despite global economic challenges in the second half of 2022, we maintained our recovery with a consolidated net income of PHP 6.7 billion, a 9% increase from 2021's PHP 6.1 billion. This 2023, Petron shows continuous improvement. We are expecting a more vibrant industry as we emerge from the pandemic, and thus full recovery in terms of volume and revenue is projected. Our consolidated net income reached PHP 3.4 billion for the first 3 months of 2023, slightly lower than last year's PHP 3.6 billion due to external pressures such as lower crude prices, inflation and recession concerns. Our focus remained on stabilizing the business, strengthening our volume recovery and meeting the requirements of our customers and the country. We showed remarkable growth in our LPG, industrial and retail segments; as well as our nonfuel business. 2022 was a breakthrough year for our LPG business in the Philippines, as we regained our #1 position in the market. Given the overall rise in demand and more favorable refining margins in the region, we optimized operations at the Bataan refinery and increased our average crude run by nearly 50%. We started operations at our polypropylene plant in Mariveles, Bataan to capture the requirement for polypropylene products here and abroad. Despite the overall volume increase, our storage and distribution network proved reliable and efficient as we delivered a 98% nationwide delivery fulfillment performance for our accounts. In our bid to maintain our market leadership, we continued to invest in the growth and enhancement of our retail network. We built more service stations, appointed and activated new dealers, entered into new supply agreements and firmed up our presence in both traditional and nontraditional outlets. We launched new products and ensured the superior quality of our services. We also rolled out targeted and value-adding marketing initiatives that resonate with both new and core followers. As we make our mark locally, we are simultaneously carving out a stronger position in Malaysia as one of its leading oil companies. In 2022, Petron Malaysia celebrated its 10th anniversary. In its first decade, it was able to establish itself as a reliable brand with a 600-strong workforce and 750 service stations throughout the country. Major investments at the Port Dickson refinery, retail network expansion, customer service programs and sustainability initiatives ensure that we are ahead of the competition in the years to come. After 9 decades in the industry, Petron remains to be the country's dedicated partner for sustainability and progress. Petron has invested heavily on environment, social and governance programs across our operations to reduce our environmental impact while increasing operational efficiency. These include solar panels at our service stations, ramping up our plastic waste reduction and water conservation programs, building a more efficient source of steam and power for our refinery and soon building our own coco methyl ester as -- or CME plant to provide better margins for diesel products. In 2022, we sustained our support for our CSR programs such as Tulong Aral ng Petron and the Puno ng Buhay initiative. We also formed new partnerships with national agencies and local governments to provide more livelihood opportunities and promote biodiversity conservation in our communities. Our strategic focus on the optimization of our facilities, continuous expansion and renewed sustainability goals propels us forward on a road to full recovery. On our 90th year of service, we are confident that our foundation as a homegrown company and our unique understanding of the Filipino path to progress allows us to build the stronger today while we sow the seeds for a better tomorrow. To our partners and stockholders, [Foreign Language].

The Chair will now entertain questions.

Mr. Chairman, we will start with questions submitted in advance.

Our first question is from [ K. Domingo ] from Cavite. "We are pleased to hear that Petron registered higher sales and net income in 2022. Can you already say that, at this point, Petron has fully recovered from the effects of the pandemic?"

Let me answer the question. In the past 2 years, we've seen at least the worst effect, and probably this may be over already, as far as the pandemic is concerned. We've seen increases in sales, as far as our retail business is concerned. And as well, we have seen a significant improvement in the aviation sector. We're also enjoying refining margins because of improved product cracks. We're hoping that these will continue and it will normalize our performance. Thank you.

Our second question is from [ A. Martinez ] from Quezon City. Does Petron have programs on clean energy?

Yes, we do. As far as the service stations are concerned, we have been installing solar panels. We have also included some water catchment in many of our major retail stations. We've also included some electric vehicle charging facilities. We have a new steam and power facility in Bataan which is helping us reduce our power and steam consumption. We also are planning to put up our CME plant. This is the material that will be blended with our diesel. This is the biodiesel component of our diesel. Thank you.

We have another question, from [ H.C. ] from Parañaque City. [Foreign Language]?

[Foreign Language] the price will continue to be stable, but prices, as you know, as far as its stability is concerned, is controlled by many factors. And there are external factors as well to be considered. These are geopolitical events, concerns; the international market. And these are factors that we may not be able to control. [Foreign Language]

Our next question is from [ L. Balcarce ] from Bataan. [Foreign Language]?

Well, in the meantime, I think our management or your management has looked at the safety of each stockholder and its members so that we do not infect anybody during these COVID times. Maybe perhaps, in the coming year, we will have one that is face to face. Thank you.

We also received a query from stockholder [ E.C. Gomez ] from Makati City. We will refer your query to our sales division. That would be all, Mr. Chairman.

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

I second the motion.

The motion, having been duly made and seconded, is carried. The next item on the agenda is the ratification of all acts and proceedings of the Board of the Directors and the corporate officers since the annual meeting held on May 17, 2022, until today. Our Corporate Secretary, Attorney [ Wanie ] Elacio, will guide us on this item.

Thank you, Mr. Chairman. The material items approved by the Board of Directors or the Board Executive Committee since the meeting in 2022 include those in the list attached as annex B in the information statement distributed to the stockholders.

Mr. Chairman, I move that the following resolution be approved: resolved, 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 17, 2022, as set forth in the minutes of the meetings of the Board of Directors and the Executive Committee be approved, confirmed and ratified.