Pilipinas Shell Rides On The Philippines’ Robust Growth, Posts Healthy Numbers In 2017
May 03, 2018
Pilipinas Shell Petroleum Corp.'s (PSPC) strategy to pursue sustainable growth that pays equal attention to economic, environment and social performance is literally paying dividends, with the country's most efficient petroleum distributor recording strong numbers in 2017.
Shell President and CEO Cesar Romero shared that sound business management and prudent corporate practices led to the 39% surge in the company's year-on-year earnings, leading to a net income of P10.4 billion in 2017 from P7.4 billion in 2016, driven mainly by the strength of its marketing business.
This translates to an attractive return on capital of almost 27%, from 24.2% in 2016 and 13.8% in 2015. These numbers allowed the company to have a dividend payout of 80%, exceeding the policy of a minimum of 75% of prior year's income. This made the dividend yield one of the highest in the industry.
“Our dividend payout of 80% exceeds our dividend policy of a minimum of 75% of prior year’s income. Our level of earnings and dividend payout position our dividend yield as one of the highest in the industry. Our gearing also remains healthy at 18%.
And PSPC is committed to register even better numbers in the coming year as it rides on the continuing growth of the Philippine economy.
"The second annual stockholders' meeting is a testament to our continued growth alongside the nation. We have been in the Philippines for the past 103 years, and in our second year as a listed company, we hope to collaborate with shareholders who share the same mindset of sustainability, and long-term commitment. Owning a part of Pilipinas Shell is not only a solid investment; it is a partnership with an organization that seeks to balance short- and long-term interests, with consideration to the triple bottom line - economic, environment, and social performance," Romero said.
The retail business continues to lead the charge, exhibiting continuing growth since 2014.
Retail volumes grew by 4% last year, said Romero, higher than industry, with the average station throughput double that of the industry average. This means that Shell stations sell more fuel products on the average compared to its rivals.
PSPC also continues to benefit from V-Power, the best-selling premium fuel in the world. Last year, sales were buoyed by the launch of V-Power with DYNAFLEX technology.
"The preference for the Shell brand also remains very strong. The brand share preference of Shell in the Philippines remains above 40%," he said.
Non-fuel sales likewise exhibited strong growth in 2017.
"We strengthened our branded non-fuel retail offerings, such as Shell Select and deli2go, to maximize the value we can generate from our retail stations. Today, we have 102 Shell Select convenience stores and 41 deli2go stores nationwide. Due in part to our focus on convenience retailing, our non-fuel retail business enjoyed double-digit growth in 2017," Romero said.
Commercial fuels, however, were affected in part by the lower demand from the power sector last year. However, Romero said the team worked hard to make a strong recovery in the latter half of the year, managing to win new accounts and grow volumes in new commercial sectors.
Shell Aviation, meanwhile, celebrated 55 years of operations in the country. In 2017, PSPC expanded its refueling network to include the Mactan-Cebu International Airport, currently the second busiest terminal in the country.
PSPC is moving to further cement its foothold in the market with the Shell brand through its ambitious expansion program this year, with the capital expenditure program doubling to P2 billion this year from P1 billion in 2017. The target is to put up 70 retail stations and make further inroads into non-fuel retailing through deli2Go and Select.
PSPC is also looking forward to completing its bitumen or asphalt production facility inside the Tabangao refinery in Batangas. The P730-million project is expected to start up by the end of the second quarter this year.
"This should allow us to produce bitumen locally and help us support the government’s infrastructure program. The bitumen production facility positions Pilipinas Shell to participate in public-private partnerships to build the infrastructure necessary for business and economic growth, as well as export some bitumen raw materials, as appropriate to other countries," he said.
The bitumen facility is being developed alongside the ongoing expansion of Tabangao's supply and logistics facilities. The project will cost some P260 million and will reduce gate-to-gate time of delivery trucks by half, thus contributing to cost efficiency. The project is expected to be completed by the last quarter of the year.
Heightened efficiency is vital in PSPC's operations with the increase in the throughput of Shell's Tabangao terminal to as high as 7 million liters a day, following the closure of the Pandacan depot in 2015. The enhanced logistics facilities will also allow independent access to the terminal in case the refinery becomes inaccessible due to traffic or repairs.
PSPC is investing heavily in building a sustainable and responsible business in the Philippines as it is indeed firmly committed to contributing to nation-building.
Another way that PSPC expresses that steadfast commitment is through generating jobs.
PSPC directly employs over 700 people and generates economic activity through its business partners and suppliers such as retailers, haulers, and construction and maintenance contractor companies who employ approximately 25,000 workers.
Then through Pilipinas Shell Foundation, Inc. (PSFI), the social arm of Shell companies in the Philippines (SciP), it has also made significant social investments.
"In its 35 years of existence, PSFI has touched more than 12 million lives. Through Movement Against Malaria, PSFI has helped move the country forward in its fight against the malaria epidemic. Thanks in part to the program, 42 provinces in the country have been declared malaria-free as of 2017, with 92% reduction in the total number of cases and 98% reduction in deaths due to malaria," Romero said.
But despite the milestones that PSPC has reached across the length and breadth of its operations in the Philippines, it is not done yet and is looking forward to achieving even more as it fortifies its leadership position.
"At Pilipinas Shell, sustainability means strengthening our operations to allow us to become a stable and reliable company for the benefit of our stakeholders. Our strategy is to strengthen our leadership in the oil and gas industry to create a world-class investment case for our shareholders. Our ambition is to be able to supply high-quality fuels to serve the needs of our developing nation, as we uplift the lives of its citizens. Moving forward, we will continue to bolster our efforts towards promoting and practicing sustainability," he said.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this press release “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this press release refer to entities over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.
This press release contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this press release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this press release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward looking statements contained in this press release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this press release,19 April 2018. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this press release.
We may have used certain terms, such as resources, in this press release that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.