August 16, 2015

Petron Corp (PCOR) posts 2Q15 net earnings of P3.2b

Petron Corp (PCOR), in a statement, said it posted a consolidated net income (before minority interest) of P3.2bm in 2Q15. The quarterly results represent a substantial improvement over the previous quarter when the company reported a net profit of P257m in 1Q15. Year-to-date, earnings reached P3.4b in 1H15, a 13% increase from the same period last year. However, excluding dividends for preferred shares and unsubordinated capital securities of P2.1b, we estimate PCOR’s 1H15 adjusted earnings to be lower at P1.3b, a 55% increase over the previous year’s P838m.

By our estimate, operating income reached P5.9b in 2Q15, almost double the previous quarter’s P2.97b, given higher gross margins. Note that PCOR’s 1Q15 earnings performance were weighed down by huge inventory losses of P3b. Year-on-year, earnings grew a hefty 300% over prior year’s net income of P789m while operating profit increased by 140% from 2Q14’s P2.5b.

Consolidated sales volumes continue to increase, up 9% to 47.4m barrels in 1H15. Domestic sales surged 17% to 29.7m barrels, which more than made up for the 2% decline in sales (17.7m barrels) from Petron Malaysia. Domestic retail sales volume saw a 10% growth while LPG sales grew by 25%. On a quarterly basis, we estimate domestic sales rose by 15% to 15.4m barrels in 2Q15 while sales from Petron Malaysia stayed relatively flat at 9.1m barrels.

Our take: On paper, PCOR’s 2Q15 quarterly performance is the strongest in the last seven quarters when the company posted a consolidated net profit of P3.22b in 3Q13. However, with crude oil prices remaining volatile, dropping by as much as 28% in 3Q15 (from a high of US$67/barrel in May to US$48 presently) the risk of margin erosion remains high. – WealthSec