Malaysia’s PETRONAS Dagangan lowers capex spending this year, despite 63% rise in 2017 profits

PETRONAS Dagangan Berhad (PDB), the marketing arm of Petroliam Nasional Bhd, will spend RM300 million (USD 76.63 million) on capital expenditures (capex) this year, primarily on upgrading and refurbishing its existing petrol stations and Mesra convenience stores.

PETRONAS Dagangan Berhad concluded 2017 with a 63% increase in profit after tax, from RM 946.5 million (USD 241.7 million) in FY2016 to RM1,545.0 million (USD 394.6 million), which include gains from divestment of its subsidiary. However, the capex announced this year is 25% less than last year’s RM400 million (USD 102.1 million).

The rise in profit is attributed to the company’s successful efforts in implementing effective sales strategies, elevating customer experience, managing its inventory and continued cost-optimization initiatives, amidst the challenging market and intense competition, which saw the company’s overall sales volume decrease marginally by 1%, in line with the industry.

PDB Managing Director and Chief Executive Officer Dato’ Mohd Ibrahimnuddin Mohd Yunus said, “Against the volatility in global crude oil price and challenging business landscape, we continued to outperform and demonstrate our resilience to translate our sound strategies in achieving a strong set of operational and financial result.”

“We have the largest (petroleum retail) network in Malaysia today. We have about 1,045 stations across the country. So, the key focus for us this year will not be growing the network very much. But even then, we are still looking at adding 10 to 15 more stations,” he said.

Under its retail business fuel segment, PDB launched the new PETRONAS Dynamic Diesel Euro 5 with Pro-Drive, which is now available at 60 stations across the country, and expanded the availability of PETRONAS PRIMAX 97 with Advanced Energy Formula to more than 700 stations. For its non-fuel segment, the introduction of Mornings@Mesra breakfast combo yielded a 20% increase in food sales. PDB also revamped its Mesra card loyalty point structure to 3 points per litre to be the highest in the industry, which contributed to approximately 200,000 increase in the number of active members.

In elevating customer experience and creating winning solutions, PDB forged several strategic alliances including Samsung for cashless payment, Grab for its exclusive drivers programme, as well as food solution providers, A’rooma Café, Pie Face and The Morning After. It also expanded the availability of EV charging facility (ChargEV) to 55 stations under a partnership with Malaysian Green Technology Corporation. The retail business also diversified its point-of-sales to e-commerce platforms, Lazada, Shopee and 11Street.

PDB’s commercial business remained the market leader, achieving a 2% increase in sales volume against a competitive and mature market. The gain was mainly contributed by the aviation industry through contract renewals with key customers, gaining of new customers and increased flight frequencies, which saw higher jet fuel usage.

Meanwhile, its lubricant business has implemented strategic growth initiatives to strengthen its foothold in the ever-competitive Malaysian market. Apart from its long-standing partners PROTON and PERODUA, it renewed contracts with IOI Plantation and Honda, as well as newly signed contracts with Keretapi Tanah Melayu Berhad and Sunway Group. It also relaunched its PETRONAS Sprinta with UltraFlex™.

Supporting all these efforts are its operational and cost-efficiency measures to ensure the sustainable growth of the company. This includes digitalization of processes, enhancements of customer service delivery, integration of inventory management, renegotiation of contracts for competitive product cost and collaboration with other industry players to enhance asset utilization and efficiency.

“Going forward, we will continue to focus and grow volume across all business segments by defending our current leadership position. We are committed to push boundaries to continue to achieve operational and commercial excellence and steer the business towards sustainable growth,” he said.