This article first appeared in The Edge Financial Daily on February 27, 2020

KUALA LUMPUR: Petroliam Nasional Bhd’s (Petronas) quarterly net profit slumped to a near four-year low of RM4.11 billion for the fourth quarter ended Dec 31, 2019 (4QFY19), down 71.3% from RM14.32 billion a year ago.

The national oil company has proposed a dividend of RM24 billion for the financial year ending Dec 31, 2019 (FY19) to the federal government.

The poor quarterly earnings were dragged down by net impairment on its assets due to lower commodity and product prices, and lower revenue. The downward impact was offset by lower tax expenses, the company said.

The quarterly profit was Petronas’ lowest since 2QFY16, when Petronas posted a net profit of RM1.62 billion and the average Brent price was at US$47.03.

The group’s pre-tax profit plunged 55.8% to RM9.02 billion compared with RM20.43 billion for 4QFY18.

Quarterly revenue fell 8.39% to RM64.04 billion from RM69.9 billion for 4QFY18. The drop in revenue was due to lower average realised prices of major products, offset by higher sales volume for petroleum products and crude oil and condensates.

Operating profit for 4QFY19 shrank 52.9% to RM10.48 billion, from RM22.26 billion a year ago.

The dividend for FY19 is lower than RM54 billion for FY18. The bumpy dividend for FY18 included a special dividend of RM30 billion to fund the government’s outstanding goods and services tax refund.

When asked during the results briefing, Petronas president and group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin said there is no plan for any special dividends to the government for FY20.

For FY19, Petronas’ annual net profit fell 26.8% to RM40.47 billion from RM55.13 billion. The lower earnings were attributed to net impairment on assets and lower revenue.

Of the total, the upstream segment contributed to 55% of its net profit or RM22.26 billion, while gas and new energy contributed 24% or RM9.7 billion. The downstream segment contributed 13% or RM5.26 billion.

Annual revenue fell 4.3% to RM240.26 billion, from RM250.98 billion for FY18, arising from lower average realised prices recorded for major products. Its annual operating profit fell 26% to RM59.69 billion, from RM80.75 billion for FY18.

In FY19, brent crude oil price averaged at US$64/barrel (bbl) from US$71/bbl in the preceding year, while liquefied natural gas benchmark prices averaged at US$3.50/mmbtu — its lowest in a decade.

In terms of margin and operating cash flow, Petronas beats its global peers. Petronas’ profit-after-tax margin stood at 17% in 2019 against under 10% for international oil majors, while cash flow from operations expanded to 38% of total revenue — far ahead of industry peers.

Petronas’ operating cash flow increased to RM90.8 billion, from RM86.3 billion, while free cash flow rose 9% to RM43 billion from RM39.4 billion.