Petrolimex pockets hefty first-quarter loss as oil takes a plunge

The huge provisioning for unsold stock contributed to the heavy loss Petrolimex suffered in the first quarter

According to its consolidated business results for the first quarter, Petrolimex raked in VND38.5 trillion($1.67 billion) in net revenue from sales and service provision, down 3.5 per cent on-year.

Despite falling revenue, the cost of goods sold did not fall correspondingly and was only slightly down compared to the same period last year at VND38 trillion ($1.65 billion).

This has inevitably led to a sharp plunge in the company’s accrued profit, which shed 88 per cent to total at a mere VND449.8 million ($19,560). This modest figure was not enough to cover Petrolimex’s basic expenses during the period.

Accordingly, the company’s net profit from business activities was minus VND1.703 trillion ($74 million), while it was VND1.516 trillion ($65.9 million) in the same period last year.

In these circumstances, the company posted minus VND1.813 trillion ($78.83 million) in after-tax profit, against last year's VND1.201 trillion ($52.2 million).

One of the reasons behind Petrolimex’s big losses in this first quarter was its VND1.658 trillion ($72 million) expense on provisioning for unsold stock’s falling priceas of March 31, nearly 30 times as much as the VND56 billion ($2.43 million) at the beginning of this year.

Early this month, however, the price of oil started showing signs of a rebound, ushering in opportunities for petroleum importers, including Petrolimex, to improve their performance.

The opportunities, however, remain vague as after several sessions on the rise, oil began inching down again amidst low global demand due to the COVID-19.

As the market remains unpredictable, moderating unsold stock proves very challenging to businesses. For instance, the value of unsold stock based on original price by the end of the first quarter (not including provisioning) stood at VND8.418 trillion ($366 million), down 28.8 per cent compared to the beginning of the year and equal to 21.9 per cent of the company’s net revenue in the first quarter. The unsold stock seems just enough to meet the regulated fuel supply requirements.

Nguyen Quang Dung, deputy general director of Petrolimex, told VIR that the company is encountering multiple issues, including the implications of the plunging price and sinking demand in the wake of the global health crisis.

Petrolimex, therefore, has been keeping tabs on the pandemic and the solutions of the local government to craft a suitable sales policy and maintain unsold stock at a rational level to mitigate risks of another nosedive in oil prices.

“Petrolimex has worked out several scenarios to ensure sufficient supply to serve the economy and people’s demands in all contingencies. We also prioritise buying from local sources and are taking diverse measures to attract more customers in order to increase output,” said Dung.