Petronas’ earnings down by 68% in Q1

22 May 2020 / 19:00 H.

PETALING JAYA: Petroliam Nasional Bhd’s (Petronas) net profit for the first quarter ended March 31, 2020 fell 68% to RM4.5 billion compared with RM14.2 billion in the corresponding quarter in the previous year, primarily due to net impairment on assets and lower revenue recorded.

Net profit excluding impairment, however, stood at RM9.2 billion, a 35% decrease from RM14.1 billion compared to the first quarter last year.

The group recorded a revenue of RM59.6 billion, a 4.0% decrease from RM62.0 billion in the same period last year, mainly attributable to the impact of lower average realised prices recorded for LNG, petroleum products and crude oil & condensates.

As the industry outlook continues to be marred by prolonged volatility, the group remains focused in strengthening its resilience to weather the downward cycle while not losing sight of its long-term plans to ensure Petronas’ future sustainability.

Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin anticipates a challenging outlook for the rest of 2020, with economic activities expected to only gradually recover in the second half of the year. Industry players, including Petronas, will be adversely impacted if the current market situation persists and oil prices remain low.

“Against this challenging backdrop, our focus is to preserve cash and maintain our liquidity, continue our cost compression efforts and respond to changing market conditions with pace. We will also continue to uphold the health and safety of our people and communities where we operate as well as contribute towards efforts in overcoming the global pandemic.

In the longer term, we remain committed to our three-pronged growth strategy to maximise cash generators, expand core business, and stepping out to future proof the organisation and ensure Petronas’ long-term sustainability,” he said in a statement today.

Cash flows from operating activities for the first quarter of 2020 decreased by 24% as compared to the first quarter of 2019 mainly due to lower cash operating profit and net negative working capital changes partially offset by lower taxation paid.

Total assets increased to RM630.0 billion, compared to RM622.4 billion recorded as at Dec 31, 2019, mainly due to higher capital expenditure and the effect of the weakening ringgit against the US dollar exchange rate.

As at March 31, 2020, shareholders’ equity decreased to RM374.1 billion compared to RM389.1 billion as at Dec 31, 2019, primarily contributed by the final dividend declared for FY19. This was partially offset by profit generated during the period and an increase in foreign currency translation reserve due to the effect of the weakening ringgit against the US dollar exchange rate.

Gearing ratio increased marginally to 19.9% as at March 31, 2020 from 19.4%, as at Dec 31, 2019, mainly due to higher borrowings following the impact of the weakening ringgit against the US dollar exchange rate.

The group’s capital investment during the first quarter of 2020 was RM8.5 billion, mainly attributable to upstream projects.

On the outlook, Petronas noted that it is operating in unprecedented market conditions driven by a combination of severe demand destruction due to the Covid-19 pandemic and global oil market glut, which are testing the resilience of oil and gas players globally. In mitigating the negative impact on its profitability and liquidity, the group is taking steps to optimise its planned international capital investments and operating expenditures.

While the group continues to invest domestically, it anticipates that there will be constraints in the supply chain as a result of the pandemic. The board expects the overall financial year performance will be significantly affected by these factors.

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