Petronas 3Q net profit halves amid lower product prices, sales volume

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KUALA LUMPUR (Nov 26): Petroliam Nasional Bhd (Petronas) reported a 48% drop in its net profit to RM7.42 billion for the third financial quarter ended Sept 30, 2019 (3QFY19), from RM14.34 billion in the previous year's corresponding quarter, due to lower revenue and a net impairment on assets.

The impact of these were partly offset by lower net product and production costs, as well as lower tax expenses, the group said in a statement today.

Quarterly revenue fell 14% to RM55.11 billion from RM63.91 billion a year ago, attributed to lower average realised prices recorded for its major products, coupled with the impact of lower sales volume for crude oil and condensates, although these were partially offset by the weaker ringgit against the US dollar.

Its earnings before interest, tax, depreciation and amortisation (Ebitda) for 3QFY19 fell 30% to RM18.79 billion from RM26.91 billion.

The national oil major's capital investments for the third quarter amounted to RM12.02 billion, mainly attributable to upstream projects, bringing its total nine months ended Sept 30 (9MFY19) spending to RM28.89 billion. In contrast, it spent RM6.68 billion on capital investments in 3QFY18, and RM26.5 billion in 9MFY18.

Following the weaker 3QFY19, its net profit for 9MFY19 fell 11% year-on-year to RM36.36 billion from RM40.99 billion, while revenue slipped 3% to RM176.23 billion from RM181.07 billion. Ebitda for the cumulative period retreated 7% to RM73.53 billion from RM79.15 billion.

The decline in revenue for the period was attributed to lower average realised prices for major products, but was partly offset by higher sales volume, particularly for LNG and petroleum products, as well as the effect of the weakening ringgit against the US dollar, Petronas said.

Petronas saw a 15% year-on-year improvement in cash flows from operating activities during the cumulative period to RM64.56 billion from RM56.23 billion, mainly due to positive working capital changes, partially offset by lower cash operating profit.

Meanwhile, its gearing ratio improved to 18.9% from 19.7% as at end-December, amid lower borrowings following the repayment of loan, while its return on average capital employed (ROACE) dropped to 10.7% from 12% as at Dec 31, 2018.

Petronas president and group CEO Tan Sri Wan Zulkiflee Wan Ariffin said the group has demonstrated its resilience and ability as an integrated energy player in sustaining strong and reliable operations throughout the period, despite persistent market volatility.

Outlook for the industry remains challenging, the group noted, driven by slowing global economy, geopolitical tensions and ongoing global trade issues, which has resulted in demand disruptions.

"We will remain focused on driving operational efficiency and commercial excellence across the group in resolute execution of our three-pronged strategy. While our performance will continue to be impacted by the challenging environment, Petronas' financial position is expected to remain robust," Wan Zulkiflee added.