Shell posts first profit as full-fledged oil importer
MANILA, Philippines — Pilipinas Shell Petroleum Corp.’s decision to shut down its refinery plant last year is finally paying off financially after the company returned to black in the first quarter despite the dampening impact of lower fuel demand.
The plant’s conversion into an import facility helped shift Shell back to profitability with P1 billion net income in the first quarter. That was in stark contrast with the P5.5-billion in net losses same period a year ago when pandemic lockdowns first came into picture.
Excluding movement in working capital, Pilipinas Shell’s cash flow from operation was steady at P3.9 billion.
At the start of the economy’s reopening from lockdowns in August 2020, Shell shut down one of the two remaining oil refineries in the Philippines, leaving Petron Corp. in the business. Cesar Romero, president and chief executive, said that now had saved Shell from incurring “significant losses” especially with oil demand yet to return to pre-pandemic level over a year since the health crisis started.
Indeed, the volume of oil sold shrank 31% year-on-year compared to first quarter 2020 levels, a direct result of quarantine regimes that kept many private cars parked at home, and public transport limited to half their typical capacity. That would remain the case at least until May 31, after President Rodrigo Duterte decided to keep pandemic restrictions in place.
In normal times, transport consumes the most oil locally so lockdowns can easily have a devastating impact on fuel companies, especially Shell which is among the Big Three players. Shares at Shell slumped 5.98% on Friday to end the trading week at P20.45 each.
Without worrying about potential excesses from local production, Shell had since concentrated in importing its entire stockpile, helping control its fuel appetite and lower operating and overhead spending. Theoretically, a stronger peso during the reporting period also helped the company by cutting import costs.
“We have yet to see fuel demand to go back to pre-pandemic levels,” Romero said. “With our refocused and reset strategy, we are well-positioned to meet the country’s energy requirement as the economy recovers from the pandemic.”
Apart from cost-cutting measures, Shell also saw sales of lubricants and asphalts jump 12% and 27% year-on-year, respectively. The company credited “economic activities in some industries” as well as new customers for the increase, a clear indication of benefiting from building activities that have resumed, including the government’s infrastructure push.
With no end in sight yet for mobility prohibitions, Romero said Shell had taken steps to shield the company from further losses, which include gunning for zero carbon emissions across its business by 2050.
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