This is following a 10-fold increase in the fuel subsidy cost that the govt is shouldering

by S BIRRUNTHA / pic by TMR FILE

PETRONAS Dagangan Bhd (PetDag) is in close discussion with the Finance Ministry (MoF) on the increase of fuel subsidy bills amid the rising global crude oil prices.

PetDag MD and CEO Azrul Osman Rani said the group understood the current predicament with the higher crude oil prices impacting Malaysia and other countries.

“If we look at Thailand today, we are seeing the price at RON95 equivalent to RM5 per litre. In Singapore, it is close to RM10 per litre.

“So, there will be a deepening concern with regards to the ballooning fuel subsidy budget that the government will have to shoulder,” he said during a virtual media briefing after the group’s AGM yesterday.

As such, Azrul said PetDag would continue to support and work with the government as well as with the overall oil and gas (O&G) industry that is operating in Malaysia.

He noted that the group is aware that the government is looking at various other initiatives including potential targeted subsidies that will focus on the bottom 40% income segment and possibly expand it into the middle 40% income segment.

“We will support and continue to work with the government as well as the overall O&G industry that is operating in Malaysia.

“I think there are still several discussion points that we need to finalise and iron out, and we will be working closely with MoF to ensure a smooth and sustainable model that the country can adopt,” he said.

Previously, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz told Parliament on March 10 that the government will review its oil product subsidy mechanism following a tenfold increase in the cost to subsidise fuels to RM2 billion in January due to the rise in crude oil prices.

He stressed that if global crude oil prices remain above US$100 (RM436) per barrel, the total subsidy for the whole year of 2022 is expected to reach RM28 billion compared to RM11 billion for 2021.

He said therefore, the government will look into the oil product subsidy mechanism to implement more targeted and focused aid and subsidies on the vulnerable and those who really need help.

Meanwhile, PetDag announced that it will continue to diversify its revenue streams by leveraging on its non-fuel offerings.

The group said it has operationalised seven new stations in the financial year ended Dec 31, 2021 (FY21), and upgraded close to 90% stations with state-of-the-art payment terminals and cloud-based point-of-sale system to enhance operational efficiency for a smoother customer experience.

The group recently incorporated Mesra Retail & Café Sdn Bhd to develop its own branded ready-to-eat and ready-to-drink offerings, and expand its current food and beverage solutions.

Additionally, the group also sought to expand other Mesra-branded products as part of its non-fuel growth strategy.

Commenting on this, Azrul said the group was able to rebound swiftly from the pandemic largely owing to the strong foundation of its core businesses coupled with prudent cost and risk management. “Our robust financial and operational standing has enabled us to pivot our businesses to thrive in the pandemic and the new normal that follows.

“We will continue to future-proof PetDag to prepare better against both anticipated and unexpected market forces by investing in digital solutions as well as diversifying our product portfolio and revenue streams,” he added.

For the fourth quarter ended Dec 31, 2021, PetDag’s net profit climbed 53.78% to RM137.19 million from RM89.21 million previously, underpinned by the reopening of more economic sectors which catalysed the demand for fuel.

Quarterly revenue increased by 60.61% to RM7.06 billion from RM4.39 billion, on the back of higher average selling prices and sales volume.

The group declared an interim dividend of 26 sen per share to be paid on March 24, taking total dividends for FY21 to 70 sen per share.

For FY21, PetDag’s net profit jumped by 91.96% to RM529.75 million compared to RM275.96 million in FY20, while annual revenue rose by 20.28% year-on-year to RM22.51 billion from RM18.71 billion.

Moving forward, PetDag is cautiously optimistic that the group’s current performance will be sustainable in the current year.

This is given that the government would not reinforce any movement restriction despite the spike in Covid-19 cases, as well as the rapid rollout of booster vaccination and easing of restrictions.