KUALA LUMPUR (Aug 23): Petronas Dagangan Bhd reported a 45% drop in its net profit to RM172.75 million for the second quarter ended June 30, 2019, from RM314.42 million in the previous year, amid lower margins for its retail and commercial operations

This was despite higher quarterly revenue of RM7.61 billion, up 4.5% from RM7.28 billion a year earlier, as a result of higher contribution from both its retail and commercial segments.

The increase in revenue for the retail segment was driven by improved station productivity, higher number of stations in operation and the introduction of the new Petronas Primax 95 with Pro-Drive.

Meanwhile, the commercial segment saw an increase in sales volume amid higher Jet A1 sales to existing customers.

However, both segments saw lower profit contribution.

The retail segment saw lower margins for mogas and diesel due to lower MOPS (Mean of Platts Singapore) prices and higher product costs. Liquefied petroleum gas (LPG) margins also fell amid higher material costs.

Besides that, the segment also saw higher advertising and promotion expenses as well as depreciation and amortisation.

The commercial segment was also affected by lower diesel margin amid lower prices, on top of lower fuel oil sales volume.

For the first half of FY19, net profit fell 13% to RM463.95 million from RM532.9 million in the preceding year while cumulative revenue was slightly higher at RM14.69 billion versus RM14.35 billion a year earlier.

Petronas Dagangan expects the retail market to remain challenging in the near term, amid increasing numbers of energy efficient vehicles and the rise in usage of public transportation and e-hailing services.

“The retail segment will continue to leverage on the newly launched superior products, mainly Petronas Primax 95 with Pro-Drive, Petronas Syntium 7000, Petronas Syntium 7000 Hybrid and Petronas Syntium 3000.

“In addition, the retail segment will focus on strengthening dealership and network management as well as enhancing customer experience through digital initiatives such as Setel, an e-payment solution,” said the group.

Meanwhile, it said the continued growth in the manufacturing sector may lead to stronger demand for petroleum products, which provides opportunities for the commercial segment.

“The commercial business and bulk LPG sales will maximise value through effective sales strategies, leveraging on its superior logistics, personalised services and differentiated offerings to sustain existing markets and capture new markets,” said the group.

Petronas Dagangan shares gained 14 sen to RM23.26, giving it a market capitalisation of RM23.11 billion.