November 25, 2017 | MANILA, PHILIPPINES

Pilipinas Shell allocates P4B for capex

PILIPINAS SHELL Petroleum Corp. is setting aside P4 billion a year as capital expenditure (capex) for the next three years, with retail expansion cornering about a fifth of the budget as the company targets a “balanced network” in Luzon, Visayas and Mindanao by 2020.

Cesar G. Romero, Pilipinas Shell president and chief executive officer, said on Tuesday that “using a previous” peso-dollar exchange rate, the investment would translate into $100 million of capex each year.

“At least for this year, $20-$25 million will go to retail, another $13 (million) will go to bitumen, and probably another $20-$25 (million) will go to the refinery,” he said in a media briefing at the Manila Golf and Country Club in Makati City before the company’s annual stockholders meeting on the same day.

The budget for refinery would support both an ongoing maintenace and cost of some studies, Mr. Romero said, while the balance would be allotted to general supply chain spending.

Jose Jerome R. Pascual III, Pilipinas Shell chief financial officer, said last year the company’s capital expenditure was more than P3 billion.

“We continue to generate a lot of cash flows so most of our capex programs are funded from internally generated cash,” Mr. Pascual said.

Pilipinas Shell manufactures, markets, supplies and distributes oil products. It serves customers in nearly all field of transport, commerce and industry with its fuels, lubricants, liquefied petroleum gas, aviation fuel, bitumen and other specialty products.

Mr. Romero said normally the company’s “aspiration” is to put up between 50 and 70 stations a year.

“Of course, it could be a little bit more, a little bit less, but that’s more or less the order of magnitude,” he said. “Last year, we built around 48, no embarrassment for being short on two. But we don’t play the numbers game we actually we want a very disciplined expansion, ensuring that the capital is deployed very efficiently.”

Asked about the company’s outlook for 2017, Mr. Romero said: “Our commitment is an improvement in underlying performance of about P1-P2 billion per year.”

The figure is net of inventory gains and other extraordinary one-off items, which Mr. Romero said was “more or less the trajectory we’re trying to pursue.”

In the first quarter of 2017, Pilipinas Shell’s earnings rose by 27% to P2.89 billion from P2.27 billion, driven by “retail sales volume growth, higher premium fuel penetration, and strong refinery performance.”

Inventory holding gains more than offset the impact of lower commercial sales volumes.”

In April, the company declared a cash dividend of P1.65 per share based on the second-half 2016 earnings, resulting in a total payout of around P2.7 billion. It paid out P3.3 billion in August last year as interim dividend based on first-half 2016 audited results.

The total dividend payout attributable to 2016 earnings amounted to P5.96 billion which translates to 80.1% dividend payout ratio, the company said.

Pilipinas Shell, which started operating its first crude distiller in Tabangao, Batangas in 1962. The facility, which is now a refinery, has a rated capacity of 110,000 barrels a day, including 22 oil distribution terminals and depots, 10 lubricants warehouses, two bitumen import facilities and nearly 1,000 retail service stations nationwide.

Shares in Pilipinas Shell slipped by 0.84% on Tuesday to P71 each.