Petrolimex reports 50 per cent growth in net profit ahead of listing
Petrolimex reports 50 per cent growth in net profit ahead of listing
Vietnam National Petroleum Group (Petrolimex), the biggest fuel distributor in Vietnam and where JX Nippon Oil and Energy Corporation is the sole foreign investor besides the Vietnamese government, reported a net profit of VND5.16 trillion ($226 million), up 50 per cent on-year, before its planned listing by the end of March.
According to the company’s recently released consolidated financial statement, in 2016, Petrolimex earned a total consolidated revenue of VND123.1 trillion ($5.4 billion), down 16.2 per cent on-year. The company attributed this to the decreasing price of WTI crude oil, from $48.8 a barrel on average in 2015 to $43.32 in 2016.
The company also announced completing all the procedures to be listed and is only awaiting the approval of the State Securities Commission.
Petrolimex is one of the companies in which the government is going to hold a controlling stake. Additionally, the company is tasked with stabilising the market through the supply of gasoline, oil, and other petrochemical products.
After the restructuring, the company intends to position oil and gasoline production and sales as its main activity. Next in line will be fuel transportation, refinery and construction in oil and gas. In the past few years profit from fuel have accounted for between 50 and 60 per cent of the company’s total profit.
According to Nguyen Quang Dung, head of investment strategy at Petrolimex, the company aims to expand its market inside and outside of Vietnam, by developing its fuel retail network with a focus on providing added value at Petrolimex gas stations.
In May 2016, JX Nippon Oil and Energy Corporation officially acquired 8 per cent of Petrolimex. According to JX Nippon’s press release on the share subscription agreement, JX Nippon will enhance the corporate value of Petrolimex through “[exploring] various business opportunities in the petroleum products supply chain, from refining to marketing, using its long business experience in Japan.”
At the moment, Petrolimex has 2,400 gas stations all over Vietnam, holding a 55 per cent market share in fuel distribution. Foreign companies, such as JX Nippon, cannot join the field of fuel distribution. Exceptions are made only to companies that also invest in fuel production.
Most recently, Idemitsu Q8 Petroleum Limited Liability Company, a joint venture between Idemitsu Kosan Co., Ltd. and Kuwait Petroleum International Ltd., was allowed to set up to sell the products of Nghi Son refinery, where both companies are investors.
JX Nippon and Petrolimex have also signed a memorandum of understanding to start a joint study for the construction of South Van Phong Refinery in Khanh Hoa province. Licensed in 2008 with a planned capacity of five million tonnes of crude input per year, the refinery has been at a standstill because the government has not agreed to the incentives requested by Petrolimex.
Following an inspection of the group’s operations between December 26, 2013 and June 17, 2014, the Government Inspectorate of Vietnam found that Petrolimex incurred significant losses through its financial investments into businesses far removed from its core operations.
For example, the VND76.5 billion ($3.4 million) investment into Petrolimex Aviation resulted in a dividend of VND6.4 billion ($287,000), a 2.8 per cent gain, while the VND102 billion ($4.6 million) investment into PetrolimexLand yielded a thin VND6.12 billion ($274,000), equal to 2 per cent.
