JAKARTA: State-owned oil and gas giant PT Pertamina has reported an almost 50 percent drop in its net profits amid a sharp decline in revenues and the company’s massive losses from its fuel distribution business.
According to the company’s financial statement issued here the other day, the company’s total revenues dropped by 41 percent to US$21.79 billion in the first half of this year, from $36.74 billion in the same period, last year.
With the sharp drop in revenues, Pertamina’s net profits plunged about 50 percent to only $0.57 billion from $1.3 billion in the same period last year.
Pertamina president director Dwi Soetjipto said on Wednesday the company’s downstream business, particularly fuel distribution, had eroded revenues during the Jan.-June period because the company had to sell fuel at the government’s prices, which were far below market prices.
Pertamina suffered losses of at least Rp 12.5 trillion from late March until July from the sale of fuel because it had to cover the price gap in the distribution of Premium gasoline and diesel, which are sold at government-mandated prices.
The company has had to sell Premium gasoline at Rp 7,300 per liter, as regulated by the government since late March, although the market price of the fuel has hovered at between Rp 8,150 per liter in April and Rp 9,350 per liter in July.
Earlier this year the government eliminated the subsidy for Premium gasoline and overhauled the subsidy mechanism for diesel to a fixed Rp 1,000 per liter. The fuel prices were also adjusted in accordance with the fluctuation in the global price of oil.
In the first two months this policy worked well as the global oil price fell to low levels. However, as oil prices started inching up, the government opted for a populist policy by not increasing the fuel price. As a consequence, Pertamina have had to plug the price gap.
Pertamina suffered losses of Rp 80 billion a day this week alone from the sales of Premium and diesel, according to Pertamina marketing director Ahmad Bambang.
“The losses will be lower only if crude oil prices decline and the rupiah strengthens. We are trying to ensure that Pertamina won’t lose too much this year,” he said.
Should losses continue, the company will negotiate the dividend payout to the government. Pertamina is currently the biggest dividend contributor to the government. Last year, the company’s dividends accounted for about 30 percent of its profits.
However, finance director Arief Budiman, is hopeful that the government will be able to find a better solution to cope with the price differential in the sales of fuel.
“We hope that this is not only about the dividend. Because it [a reduced dividend] will help the company’s cash flow but not its profit and loss,” he said.
The Energy and Mineral Resources Ministry said earlier that the government would only adjust the fuel price in October or November, stating that a longer period of stable fuel prices was necessary given the current slowdown in economic growth and reduced purchasing power among the population. Pertamina is therefore likely to have to continue shouldering the burden of the fuel price differential.
Recently, Pertamina launched a new gasoline product called Pertalite with a higher octane rating of 90 compared with Premium, which has an octane rating of 88. Ahmad expected that as much as 5 percent of Premium consumers nationwide were expected to change to Pertalite thus reducing losses from selling Premium.
