Background Profile of Petron Corporation

Petron is known as one of the three main oil refiners in the Philippines.The

company is recognized for its world-class products that fuel the everyday lives of the

Filipinos. From their record, the company has 2,400 retail stations in the Philippines that

serves the Filipino community. Petron also operates an integrated crude oil refinery and

petrochemicals complex with a rated capacity of 180,000 barrels per day located in

Limay, Bataan. From the refinery, they move their products via barges and marine

vessels to 32 International Organi1ation of Standardization (ISO) certified depots and

terminals situated all over the country. Through this vast distribution network, they supply

fuel, oil, diesel, and LPG to various industrial customers. Petron also supplies jet fuel at

key airports or international and domestic carriers.

The company also envision itself to be the leading provider of total customer

solutions in the energy sector and its derivative businesses. Also, they also believe that

they will achieve their vision by being an integral part of their customers’ lives, delivering

consistent customer experience through innovative products and services; Developing

strategic partnerships in pursuit of growth and opportunity; Leveraging on their refining

assets to achieve competitive advantage; Fostering an entrepreneurial culture that

encourages teamwork, innovation, and excellence; Caring for community and the

environment; Conducting themselves with professionalism, integrity, and fairness; and

Promoting the best interest of all their stakeholders.

Tenure in Business Operation

The formation of the Standard Vacuum Oil Company or Stanvac paved the way

for the existence of Petron. Stanvac is formed through the merge of Socony Vacuum Oil
Company of New York and the Standard Oil Company of New Jersey. Stanvac started a

refinery in the province of Limay, Bataan to meet the country’s growing fuel needs. In

1962, the end of the Stanvac partnership gave birth to Esso Philippines.

The Esso Philippines was acquired by the Philippine National Oil Company

(PNOC) in 1973 and was renamed as Petrophil Corporation. In 1985, Petrophil and

Bataan Refinery Corporation were merged, with Petrophil as the surviving corporation. In

1988, Petrophil changed its corporate name as Petron Corporation (PCOR). From that

year up to now, the company is continuously improving its products and services. Also,

the company is located at San Miguel Corp. Head Office Complex, 40 San Miguel

Avenue, Mandaluyong City.

Organizational Structure

Figure 1: Petron Group Structure as of March 31, 2016

Source: Petron
 The figure above shows the affiliates and subsidiaries of Petron Corporation and

their corresponding percentage of ownership. The parent company is San Miguel

Corporation with 68.26%. PCOR's direct subsidiaries include Petron Singapore Trading

Pte. Ltd.; Petron Global Limited; Petron Finance (Labuan) Limited; Petrochemical Asia

(HK) Limited; and Petron Oil & Gas Mauritius Ltd.

On the other hand, the composition of the Board of Directors of Petron for 2018-

2019 are Eduardo M. Cojuangco, Jr., Chairman, Ramon S. Ang, Director Lubin B.

Nepomuceno, Director, Aurora T. Calderon, Director, Estelito P. Mendoza, Director,

Virgilio S. Jacinto, Director, Jose P. De Jesus, Director, Mirzan B. Mahathir, Director, Ron

W. Haddock, Director, Nelly F. Villafuerte, Director, Reynaldo G. David, Lead

Independent Director, Artemio V. Panganiban, Independent Director, Margarito B. Teves,

Independent Director, and Carlos Jericho A. Petilla, Independent Director.

Meanwhile, the Executive Officers are Ramon S. Ang, Chief Executive Officer and

Executive Director, Lubin B. Nepomuceno, General Manager, Emmanuel E. Eraña,

Senior Vice President (SVP) and Chief Finance Officer, Freddie P. Yumang, SVP,

Operations for Refinery Division, Susan Y. Yu, Vice President (VP), Procurement, Maria

Rowena O. Cortez, VP, Supply, Archie B. Gupalor, VP, National Sales, Albertito S. Sarte,

VP and Treasurer, Joel Angelo C. Cruz, VP for General Counsel & Corporate Secretary

and Compliance Officer, Julieta L. Ventigan, VP for Business Planning & Development,

Rolando B. Salonga, VP for Operations and Corporate Technical Services Group.

Petron applies a top-to-bottom and bottom-to-top approach. The Management

Committee or Mancom, attends a workshop to assess past performance; analyze the

internal and external environment for strengths, weaknesses, opportunities and threats;
evaluate issues that hamper implementation of plans; resolve these issues and concern;,

identify growth drivers; and set targets for the company. The Board of Directors and the

Mancom meet in a Board Strategy Session to engage the Board in developing a roadmap

for the company’s success. These sessions also provide a venue to seek the Board’s

direction regarding new and major initiatives.

Products and Services

Petron offers products such as fuels (automative, industrial, aviation, and

household fuels), automative lubricating oils (diesel engine, gasoline engine, motorcycle,

automative gear oils, automative transmission fluids, other automative oils – STM,

industrial gear, cutting, refrigeration, transformer, slideway, and other industrial

lubricating oils), marine lubricating oils (crosshead engine cylinder, trunk piston engine,

crosshead engine system, and marine outboard 2-stroke oils), greases (multi-purpose,

water resistant, extreme pressure, high temperature, and complex greases), asphalts

(penetration, cutback, emulsified, and blown asphalts, and polymer modified bitumen),

special products (process oils, heat transfer oil, cleaning agent, and protective coatings),

aftermarket specialties (PetroMate specialties), aviation lubricants, and performance

additives.

Additionally, it offers services such as services stations, retail outlets, restaurants,

convenience stores, specialty shops, as well as repair and maintenance, and provides

non-life insurance and reinsurance services.

There is a discount-scheme named Petron Super Driver Card (SDC) for public-

utility jeepneys (PUJs) drivers, offering special bonus points, discounts from merchant
partners, and instant cash back in terms of Philippine peso. Additionally, it offers free

towing and roadside assistance for 24/7, personal accident insurance of ₱ 10,000, and

medical reimbursement of ₱ 1,000. There are 500,000 users who availed this scheme

nationwide.

Business Operation

To distribute their products there are two ways, through marine and road

transportation. From the Petron Bataan Refinery, they deliver their petroleum products to

terminals for storage across the country via barges and vessels. They also have

partnered with the leading marine transport firms in ensuring the quality and continuity of

their primary distribution.

On the other hand, from their 32 storage facilities they transport their premium

fuels by land via tank trucks and delivered to their service stations and industrial clients.

Our trucks are models of safe and efficient product transport. They are equipped with

latest technology to ensure that the quality of their products reach customers in excellent

condition and on time.

Also, they ensure that their trucks undergo safety, security, and quality checks;

pass the strictest environmental regulations; and have necessary operating permits

before being commissioned. Lastly, their truck drivers undergo a rigorous selection

process and training on proper handling of their products before being assigned to drive

their state of the art trucks.

Activities

The company is committed to sustainable development, they have made every

effort to go beyond compliance. All of their major facilities, including the Bataan refinery

and their product terminals are Integrated Management System (IMS)-certified. This

means that their facilities adhere to stringent international standards on process quality,

workplace safety, and environmental management.

As a responsible company, they are aware that their business impacts the

environment. They have systems in place to measure, manager, and minimize our

footprint. From greenhouse gases to energy and water consumption, they are

continuously improving every aspect of their chain.

Petron is also known for giving importance to its Corporate Social Responsibility

(CSR). Since CSR is a strategic thrust, each division includes programs aimed at

promoting CSR. For example, they have the Tulong Aral ng Petron program, a strategic

initiative that helps send poor children to school. Beneficiaries of the program have been

elementary school children in Metro Manila and Mindanao. To take note, it has been

recognized by the DSWD as the only partnership with the private sector that has been

effectively sustained.

Also, they support the Department of Education’s Adopt-A-School Program, the

company helps in building Petron Schools to addressing the scarcity in supply of

classrooms in remote areas of the country. Petron also provides the capability training for

the Parent-Teacher-Community Associations. They also have a Youth IN Enterprise and

Leadership development program that provides students an on-the-job training in

selected Petron service stations. The program also gives Petron employees the

opportunity to serve as mentors to students.

Relative Strength and Competencies

Petron pioneered the introduction of high quality gasoline products compliant to

global emission standards in the country . The completion of the Phase 2 of the Refinery

Master Plan (“RMP-2”), a US$2 billion project for the Limay Refinery, enables the

Company to produce more valuable White Products and increase production of

petrochemicals. The completion of the RMP-2 made the Company the first oil company

in the Philippines capable of producing Euro IV standard fuels, the global standard for

clean air fuels.

The capacity if their crude oil distillation in Limay, Bataan is a great opportunity for

the Petron Corporation because they have been able to supply the growing demands of

the Filipino without sacrificing the quality of the product. It is a competitive advantage of

the company against its competitors in the Oil Industry.

In fact, the company has an effective Research and Development department. The

Research and Development of the company engages in quality control and technical

training which involves development, reformulation and testing of new products. It

develops revolutionary products that meet and exceed the highest industry quality

standards.

Also, it utilizes appropriate technology in developing new fuel and lubricant

products to improve performance, cost-effectiveness, and environment-friendliness of its

products. Moreover, the R&D of the company enhances the quality level of its existing

products.
 Furthermore, the company has an international presence in Malaysia since 2012,

with the third biggest market share of 17.4 percent in the domestic retail market. Another

factor that adds up to their strength is that they have experienced management team, and

employees and strong principal shareholder, San Miguel Corporation.

. Petron ensures that its people have the capability and the competencies in

achieving the goals which they envision. Every employee in Petron is encouraged to take

charge of their own career development. Competency- Based Training and

Organizational Development Curriculum were introduced to enhance the knowledge and

skills of the employees to become competent professionals, and to promote a healthy

work climate in the organization. This program is required for the employees at all levels

of the organization regardless of function. It is a program which ensures that the

employees possess the knowledge and understanding of the company’s business

processes, products and services.

The availability of gasoline stations in the highly urbanized cities within and outside

Metro Manila can also be one of the company’s strength. The aggressive retail expansion

program has brought the retail network count to over 2,400 service stations, the most

extensive in the country. They retail gasoline, diesel to motorists and the public transport

sector. The extensive retail network service stations are to ensure motorists that there is

a Petron station in virtually every town in the Philippines. Encouragingly, their Bulilit

stations are proving an attractive investment option to small- and medium-scale

entrepreneurs and bringing our products and services to barangays and far-flung

communities.
Reputation in the Market

Figure 2: Downstream Industry Market Share in 2017

Source: Department of Energy

Figure 2 shows the total market share of all players who are selling petroleum

products for the Full Year 2017. Petron Corporation has the largest market share in the

industry, with a share of 27.60 percent. Pilipinas Shell Petroleum Corporation has a share

of 19.98 percent, which makes it the second largest in the industry. Chevron Philippines,

Inc. contributes 7.00 percent share, which places him the third largest in the industry.

Other players like Phoenix Petroleum Philippines, Inc., Seaoil, Unioil, Liquigaz, Jetti, Total

Philippines, and PTT Philippines Corporation contributed a share of 36.80 percent, with

Phoenix as the largest at 6.2 percent.

Petron has built its name and reputation on safe, high-quality, reliable products

because their product lines are the foundation of the business and key to its success,

they develop programs that allow them to focus on the safety and quality of the products
at all stages, from the materials and processes, used in manufacturing to the systems

they employ for delivery and distribution.

In connection to its brand reputation, Petron has gasoline stations in urbanized

cities. Highly Urbanized Cities are cities with a minimum population of two hundred

thousand inhabitants as certified by the National Statistics Office. The highly urbanized

cities outside Metro Manila are Cebu City, Davao City, Zamboanga City, Baguio City,

Lapu-lapu City, Bacolod City, Cagayan De Oro City, Mandaue City, Olongapo City,

Lucena City, Puerto Princesa, Iloilo City, Tacloban City, Tarlac City, Angeles City, Iligan

City and General Santos City.

Ensuring the satisfaction of their local and international customers is shared by the

entire organization. Also, the Marketing Department takes the lead in the effort to

guarantee the integrity of their brand. They take pride in their practices for responsible

product labeling and advertising. Through their Corporate Affairs Department, they

communicate Petron’s role in driving economic growth, fueling community and social

development, and growing a business that cares for the environment.

Company Outlook

Petron released its plans to expand its refinery complex in Limay, Bataan, which

would bring a 120,000 barrel per day increase with its original capacity of 180,000 barrels

per day. This increase would bring a total of 300,000 barrel per day increase in the Bataan

refiner, and is estimated to cost more than $2 billion. The expansion would start by early

2018 and it is completion would be by the year 2022. It is said that the expansion would

give rise to higher capacity of production of motor fuels and aromatics by 55 percent,
which will lead to the daily production of 75,000 barrels of refined fuels per day and 1.0

million tons of aromatics per year.

Another petrochemical facility by Petron was set in 2017. The project is planned to

be in the south of Manila and it is estimated to cost from $15 billion to $20 billion, or ₱

745.46 to ₱ 993.95 billion in local currency. It is reported to have a capacity to produce

250,000 barrels of petrochemicals per day, and the project requires having a 1,000

hectare-wide land to build this facility. Such petrochemicals to be produced are mixed

xylene, toluene and benzene.

Also, the company is looking forward to the “Build, Build, Build” program of the

government. The 75 flagship projects consist of six airports, nine railways, three bus rapid

transits, 32 roads and bridges, and four seaports. These projects are an opportunity for

the oil industry, because almost all of these projects will be needing fuel.

First, during the construction of these infrastructures, the trucks will be used to be

able to transport construction materials to the place where it is needed. Thus, the

construction companies will need many trucks that can be the possible consumer of the

gasoline stations, as we all know that trucks are run by fuel. Some of the construction

equipment is run by fuel.

Second, when the Build Build Build Program is finally done, the six airports will

mean an expansion in the airline industry. The Airlines will increase their aircraft so as

the consumption of the aviation and jet fuel. The 32 roads and bridges, will encourage the

people to travel due to the lessen time travel in the provinces in the Philippines. The
seaports will mean an easy transport of the raw materials needed for the production of

fuel.

Weaknesses

Decreasing market share per company basis due to the increasing strength of new

players in the downstream oil industry. Another one is that the company is primarily

dependent on small number of suppliers for the significant portion of crude oil

requirements of Philippines and Malaysia operations. Also, Petron has been involved in

certain court cases which are currently being faced by the company, notably the

Guimaras oil spill. The Guimaras oil spill became the worst environmental accident in the

country. The spill wreaked spread to the southern coastlines of the island and then spread

to the coastlines of Panay, Negros and Bantayan islands

Another oil spill incident was in Barangay Banago following a leakage from a

damaged pipeline of Petron Corp.’s depotlast 2016. It has been inspected by the

Environment Monitoring and Enforcement Division (EMED) of the Department of

Environment and Natural Resources (DENR) in Negros Island Region.

This may be considered as weakness because the DENR may stop the operation

for a while due to the leakage of oil. The disruption in the operation in the depots may

also affect the operation in the service station because the terminal is the provider of the

oil in the nearest respective areas.

Threats

First threat is the increased excise tax on petroleum products.The Tax Reform for

Acceleration and Inclusion (Train) Law provides an increase in the excise tax on the
petroleum products. The government is providing a higher take-home pay to the people

by lowering the income taxes. As well all know, the taxes are important because this is

the fund of the government for the different projects for the good of its people. Thus, in

the lowering of income taxes, the government increases the excise tax on other things

including the petroleum products. This is a threat for the company because the

consumers might look for some products that are more affordable.

Second is the increased excise tax on automobiles. The Tax Reform for

Acceleration and Inclusion (Train) Law provides an increase in the excise tax on the

automobiles. The increase in the excise tax is a threat for the company because some of

the people cannot afford to buy the automobile. They will settle in commuting using the

public vehicle. The other people, will not have the luxury to buy cars. Thus, it will result

to the decrease in the sales of the automobile, and will affect the sales of their product

which is the fuel.

Thirdly, Philippine inflation spikes at 4.6 percent. A weaker domestic currency

stimulates exports and makes imports more expensive. Conversely, a strong domestic

currency hampers exports and makes imports cheaper. The exchange rates affect the

profitability of the company. A fall in a country’s exchange rate will lower export prices

and raise import prices. Thus, it will increase the value of its exports and lower the amount

spent on imports.

Additionally, the introduction of the Electric and Hybrid Vehicles might be a

problem. Electric cars and trucks use an electric motor powered by electricity from

batteries or a fuel cell. A hybrid car is one that uses more than one means of propulsion

that means combining a petrol or diesel engine with an electric motor.

 The Introduction of the Electric and Hybrid Vehicles would mean a reduction in the

utilization of gas and oil based automobiles since the consumers have the capacity to

utilize an electric vehicle which is powered by electricity without using gasoline. This

vehicle is also eco-friendly, which will be one of the considerations of the consumers.

The increasing number of small players in the industry may be disturbing to the

organization. As the record shows, the three major companies in the oil industry in the

Philippines have been decreasing in terms of their market share. However, the small

players in the oil industry are gaining a higher market share gradually due to the tight

competitions. These players are offering a more affordable fuel prices which the

consumers are taking consideration into. The other players in the industry have been

gaining a higher market share compared before, due to the high increase in the number

of retail stations in the Philippines and giving a lower fuel prices which attract the

customers.

The Public Utility Vehicle Modernization Program (PUVMP) is also a threat for the

industry. The modern PUV are designed to be environment-friendly, safe, secure and

convenient with due consideration to our Persons-with-Disabilities (PWDs) passengers.

The modern PUV are electric vehicles. Thus, the gas and oil based automobiles will

decrease and will directly affect the sales.

Financial Ratios of Petron Corporation

Liquidity Ratios

The Liquidity Ratios is composed of Current Ratio and Quick Assets Ratio.
The Current Ratio is computed by dividing current assets by the current liabilities. It

depicts the ability of the corporation to generate cash to cover its short-term obligations.

The Quick Ratio is computed by dividing the current assets less inventory by the current

liabilities. This ratio shows the ability of an entity to pay its short-term obligations without

relying on the inventory.

2015 2016 2017

Current Ratio 0.91 0.79 1.17

Quick Ratio 0.67 0.51 0.71

Table 1 Liquidity Ratios

The Current Ratio of Petron for 2016 has decreased by 13.19% from the 0.91x

ratio of 2015. However, it has increased by 48.10% from the 0.79x ratio of 2016. The

decrease in the current ratio for 2016 is attributed by the large increase in the current

liabilities of Petron. The increase in the current ratio for 2017 is attributed by an increase

in the current assets and a large decrease in the current liabilities.

The Quick Assets Ratio of Petron for 2016 has decreased by 23.88% from the 0.67x ratio

of 2015. The trend for Petron regarding its ability to settle its short-term obligations without

relying on the inventory has increased by 39.22% from the 0.51x ratio of 2016. It is a good

indication that Petron has the capacity to pay its short-term obligations even without the

inventories.
Solvency Ratios

The Solvency Ratios is composed of Debt-to-Total Assets Ratio, Debt-to-Equity

Ratio, Long Term Debt-to-Equity and Times-Interest Earned. The Debt-to-Total Assets

Ratio is computed by dividing total liabilities to total assets. It is the measure of the

company's assets that are financed by debt.

The Debt-to-Equity Ratio is computed by dividing total liabilities to total

stockholders’ equity. This ratio expresses the relationship between capital contributed by

creditors and that contributed by owners.The Long Term Debt-to-Equity is computed by

dividing the total long term debt to the total stockholders’ equity. It is a method used to

determine the leverage that a business has taken on.

The Times-Interest Earned is computed by dividing profits before interest and

taxes to the total interest charges. It is used to measure a company's ability to meet its

debt obligations.

2015 2016 2017

Debt-to-Total Assets Ratio 71.76% 72.15% 70.53%

Debt-to-Equity Ratio 2.54 2.59 2.39

Long Term Debt-to-Equity 0.87 0.90 1.02

Times-Interest Earned 3.28 3.14 3.26

Table 2 Solvency Ratios

 The Debt-to-Total Assets Ratio of Petron has increased in 2016. It decreased in

2017, a debt-to-total assets ratio that is much lower than the company’s ratio in 2015.

This leverage ratio shows how a company has grown and acquired its assets over time.

It shows that Petron has enough funds to meet its current debt obligations, and has the

ability to pay a return on the investment of the investors.

The Debt-to-Equity Ratio of Petron has a minimal increased in 2016. However, it

has decreased again in 2017, a higher decrease which shows a lower debt-to-equity ratio

for the last three years trend. It shows that Petron is financing its growth with the equity.

It depicts a lower financial risk.

The trend in the Times-Interest Earned of Petron has been stabled for the last

three years. The increased or decreased for the TIE ratio in the last three years is just a

point percent on the other. It shows that the earnings before interest and taxes are 3 times

much better to the total interest charges for the year. It is a good indication for the Petron

because it shows that they are generating consistent earnings. If they sees a history of

generating consistent earnings, the firm is in a better position to make principal and

interest payments on time.

The Long term debt ratio of Petron is increasing for 3 consecutive years. When the

ratio is comparatively high it implies that the business is in a higher risk of bankruptcy due

to the high interest payments on the debt. Having a high long term debt to equity ratio

implies that the company is in a financial risk which means that the company is financed

by creditors instead of the investors.

Profitability Ratios

The Profitability Ratios is composed of Gross Profit Margin, Operating Profit

Margin, Net Profit Margin, Return on Total Assets, and Return on Stockholders’ Equity.

The Gross Profit Margin is computed by dividing the sales after the cost of goods

sold to the total sales. It is used to assess a firm's financial health by revealing the

proportion of money left over from revenues after accounting for the cost of goods sold.

The Operating Profit Margin is computed by dividing the earnings before interest

and taxes to the total sales. It measures how much profit a company makes on sales,

after paying for variable costs of production but before paying interest or tax.

The Net Profit Margin is computed by dividing the net income to the total sales. It

represents how much profit each dollar of sales generates.

The Return on Total Assets is computed by dividing the net income to the total

assets. It is an indicator of how effectively a company is using its assets to generate

earnings before contractual obligations must be paid.

The Return on Stockholders’ Equity is computed by dividing the net income to the

total stockholders’ equity. It measures a corporation's profitability by revealing how much

profit a company generates with the money shareholders have invested.

2015 2016 2017

Gross Profit Margin 8.73% 10.97% 9.81%

 Operating Profit Margin 2.23 1.95 2.45

Net Profit Margin .09% 3.84% 3.82%

Return on Total Assets 1.8% 3.5% 4.3%

Return on Stockholders’ 6.4% 12.6% 15%

Equity

Table 3 Profitability Ratios

The Gross Profit Margin of Petron has increased by 25.68% from 8.73% GPM in

2015. It has decreased by 10.57% from 10.97% GPM in 2016. There might be a decrease

in the GPM in 2017, but it is still higher compared to the gross profit margin in 2015. Thus,

it implies that the company’s profitability is still good.

The Operating Profit Margin of Petron has decreased by 12.57% from 2.23 OPM

in 2015. It has increased by 25.64% from 1.95 OPM in 2016. A not stable or increasing

operating profit margin is not a good indicator for the company because this is a way to

gauge whether a big improvement in earnings is likely to last. This shows the proportion

of revenues that are available to cover non-operating costs like paying interest. In the

table, we can imply that the earnings before interest and taxes of Petron are not stable to

cover non-operating costs like paying interest.

The Net Profit Margin of Petron for the last three years is continuously increasing.

It is a good indicator that the company is earning much profit. Mostly, the investors are

the one focused in the net profit margin of a company.

 The Return on Total Assets of Petron for the last three years is continuously

increasing. This continuous increase is a good indicator that the company is effectively

using its assets to generate earnings before contractual obligations that must be paid.

The Return on Stockholders’ Equity for the last three years is continuously increasing.

This continuous increase is a good indicator that the company is making a high profit

which generates with the money shareholders have invested.

Efficiency Ratios

The Efficiency Ratios is composed of Inventory Turnover, Fixed Assets Turnover,

Total Assets Turnover, Accounts Receivable Turnover, and Average Collection Period.

The Inventory Turnover is computed by dividing the sales to inventory of finished goods.

It is a ratio showing how many times a company has sold and replaced inventory during

a period. The Fixed Assets Turnover is computed by dividing the sales to fixed assets. It

measures a company's ability to generate net sales from fixed-asset investments.

The Total Assets Turnover is computed by dividing the sales to average total assets. It

measures the value of a company’s sales or revenues generated relative to the value of

its assets. The Accounts Receivable Turnover is computed by dividing the annual credit

sales to average accounts receivable. It is used to quantify a firm's effectiveness in

extending credit and in collecting debts on that credit.

The Average Collection Period is computed by dividing the average accounts receivable

to the total credits sales which is divided by 365.

 2015 2016 2017

Inventory Turnover 11.69 7.79 7.68

Fixed Assets Turnover 2.23 1.95 2.45

Total Assets Turnover 1.05 1.12 1.32

Accounts Receivable Turnover 9.11 11.04 12.47

Average Collection Period 31.16 33.07 29.27

Table 4 Efficiency Ratios

The Inventory Turnover of Petron has been continuously decreasing for the last

three years. A high ratio implies a strong amount of sales for the company. The

continuous decrease in the inventory turnover implies a weak sales and a high excess in

the inventory count. In 2017, the sales of Petron have increased for 26.40% and its

inventories have increased for 28.21%. Thus, the increase in the sales is not sufficient

resulting to a high excess in the inventory count.

The Fixed Assets Turnover of Petron has decreased by 12.56% from the 2.23 ratio

of 2015. However, it has increased by 25.64% from the 1.95 ratio of 2016. The increase

in the fixed assets turnover of Petron in 2017 proves that the company has utilized its

investment in the fixed assets in generating higher revenue. It shows that the purchase

of the fixed assets of the company is substantial in order to drive up output.

Growth Ratios

The growth ratios included are for sales and net income. It is derived from present

amount less the past amount then divided by the past amount.

2015 2016 2017

Sales -25.35 -4.54 26.40

Net Income 108.37 72.60 30.17

Table 5 Growth Ratios

The growth for sales has a negative rate from 2015 to 2016. It can also observed

that though 2014 has a negative rate it is still improved as it was from -25.35 to -4.54.

Then by 2017, It can be concluded that the company’s sale grow with 26.40 percentage.

For the net income, The growth has been continuously decreasing. On a good side, it is

still positive with 20.17 percentage for 2017. Therefore, the year 2017 has been a good

year as it has a positive growth for both sales and net income.

Other Ratios

2015 2016 2017

EPS ratio 0.15 0.60 0.86

Price to Earnings Ratio 46.60 16.58 10.66

Price to Book Value Ratio - - 0.76

 Dividend Yield 0.72 1.01 1.17

Table 6 Other Ratios

The price to earnings (P/E) ratio of Petron suffered a large decrease in 2016, and

it continued to decrease in 2017. The main reasons on why the ratio continued to

decrease in 2016 and 2017 are the continuous decrease of last traded price from ₱ 9.95

in 2016 to ₱ 9.17 in 2017, and the continuous increase in the earnings per share from ₱

0.60 in 2016 to ₱ 0.86 in 2017.

For the Price to book value ratio, Petron has 0.76. In the dividend yield, there is a

continuous increase from 0.72 to almost 1.17. Higher yielding dividend stocks provide

more income, but higher yield often comes with greater risk.
COMPARATIVE FINACIAL STATEMENTS OF PETRON CORPORATION

Table 7 Comparative Financial Position of Petron