Petronas Dagangan Bhd (PetDag) has introduced measures to ease the financial burden faced by petrol station operators, including giving sales incentives and guaranteed profit margins.
The retail distribution arm for the national oil company Petroliam Nasional Bhd (Petronas) has 1,045 fuel stations across the country, and many operators have been saddled with margin fluctuation and losses after the introduction of a weekly float fuel price system in April last year.
Operators and related associations have been voicing their dis-pleasure at the weekly managed float fuel price mechanism, putting them at a loss when prices tumbled. An industry source told The Malaysian Reserve (TMR) that PetDag introduced the guaranteed profit margin scheme on Jan 1 and it has been opened to all operators since early this month.
PetDag MD and CEO Datuk Mohd Ibrahimnuddin Mohd Yunus said dealers or “Petronas Rakan Niaga” are an important asset and the initiatives are aimed to eliminate disruptions of the dealers’ business.
“We have introduced immediate initiatives and as a result, none of Petronas dealers have closed down since 2017,” he told reporters after the company’s AGM in Kuala Lumpur yesterday.
He said PetDag has mooted a better loyalty programme for the operators, besides a low volume programme and reducing the licensing fee imposed for its operators.
PetDag is currently working on better sales incentives to ease the pump station operators’ financials.
“We have all this financial assistance in place, and hopefully it will work both ways. There will be better volume for us and improved sales for the dealers,” he said.
TMR had reported that about 300 petrol dealers had abandoned their businesses since the implementation of the weekly fuel mechanism. The dealers complained that the mechanism had created rifts with the oil companies on stock management, as both sides strived to minimise losses or maximise gains, depending on the price movement.
According to Frost & Sullivan, the number of stations dwindled to 3,200 at last count in 2017 from over 3,500 stations nationwide recorded in 2014.
Apart from the margin guarantee, petrol dealers are also seeking a revision of their commission rate. The 12.9 sen per litre commission, mandated by the government since 2008, has become obsolete due to the rise in operational costs in the last 10 years.
The Petrol Dealers Association of Malaysia is now seeking a raise to 18 sen per litre, which is about 40% higher than the current commission.
Meanwhile, Mohd Ibrahimnuddin said PetDag has allocated RM300 million in capital expenditure (capex) this year, lower than the RM400 million fixed for last year.
He said the capex would be utilised, among others, to finance the upgrading of existing stations and other business activities.
On its commercial segment, Mohd Ibrahimnuddin said PetDag had recently secured three new contracts to supply jet fuel to international airlines such as US-Bangla Airlines, Himalaya Airlines and Air Seoul, which will commence this year.
Contracts for airline jet fuel supply are typically for a minimum of six months and can go on up to two years, he added.
Mohd Ibrahimnuddin did not disclose the value of the contracts, except that they were substantial.
“We command about 70% of the local airline jet fuel market share,” he added.
For the financial year ended Dec 31, 2017, 90% of PetDag’s earnings were contributed by the retail and commercial segments, and the remaining 10% came from its liquid petroleum gas and lubricants business.
PetDag registered a 68.7% increase in net profit in 2017 to RM1.59 billion on the back of a revenue of RM26.74 billion, up 24.2% year-on-year.
It is also expected to open between 10 and 15 new stations this year.
To boost its business, Petronas’ loyalty card — Mesra — has been revamped, and users will earn three-time points if they spend in Kedai Mesra, or the stations’ convenience stores.