Too little info from Petronas
When profit falls despite a healthy revenue increase, full explanations are required. However, that has not been forthcoming at Petronas.
By P. GUNASEGARAM, The Star
DESPITE record revenues, the national oil corporation, Petronas’ latest results for the full year to March 31, 2009 released Thursday are decidedly lack-lustre.
Revenue went up a hefty 18.4% to a record RM264.2bil, but earnings went in the opposite direction, shrinking 6.7% at the pre-tax level to RM89.1bil. At the net level, after tax and minority interests, the drop was higher at 13.9% to RM52.5bil.
Only a very hefty increase in costs could have given rise to that. Petronas’ briefing notes to the media does not give the percentage increase in costs, but this can be estimated.
The difference between revenue and pre-tax profit, a rough estimate of costs, was RM175.1bil for the year ended Mar 31, 2009 compared to RM127.6bil for 2008. That’s a difference of 37% which means Petronas’ costs went up twice as fast as revenue.
The relevant question is why was that? Petronas’ analysis in the results brief only show that the RM41.1bil increase in revenue was eliminated by increased costs, of which the main one was a RM33bil increase in production and operating costs.
But it neither makes further analysis nor offers full and meaningful explanations of these cost increases. Other cost increases were RM5.9bil for amortisation, depreciation and impairment, RM3bil for royalties and export duties and RM5.3bil for others, making in all a staggering cost increase of RM47.2bil.
The results leave no doubt in anyone’s mind that Petronas is a major contributor to government coffers. Over the years, its has played a tremendously important role of harnessing the country’s oil and gas revenue, gaining expertise to venture overseas and providing the Government with valuable recurrent revenue.
It has substantial cash and investments in its holdings as well as production sharing contracts around the world. Its international revenue exceeds both exports and domestic production although in terms of profits, the domestic sector is likely to be more important because Petronas owns the production here.
It is its very importance to the country that makes it so essential that nothing ever goes wrong in a big way here. Thus, even as it grows bigger and stronger, the need for it to be transparent and accountable to its ultimate owners – the people of Malaysia – becomes ever more important.
What needs to be done so as to remove any doubts about the latest cost increase is to break them into smaller bits. Are there any write-offs for instance, for investments? Petronas had investments of RM151bil. Were there any other extraordinary costs?
What Petronas is releasing in terms of its results to the public is just too little. For complete transparency and for the public to have enlightened opinions about Petronas’ performance, the national oil corporation needs to disclose its full results – its annual report.
It should also seek to address concerns by disclosing sufficient information to dispel any doubts in the mind of the public. That has to be part of the ongoing transformation that Petronas has to undertake as it matures.
● Managing director P. Gunasegaram feels that there is some truth to the remark that people with better bodies are less shy about shedding their clothes, although there are embarrassing exceptions.
